REGISTRATION NO. 33-29438
REGISTRATION NO. 811-5732
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
----------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 16 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 18
(CHECK APPROPRIATE BOX OR BOXES)
----------
JOHN HANCOCK INVESTMENT TRUST IV (FORMERLY, 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
SUSAN S. NEWTON
VICE PRESIDENT AND SECRETARY
JOHN HANCOCK ADVISERS, INC.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 2, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
Registrant has previously elected, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, to register an indefinite number of its shares
of beneficial interest for sale under the Securities Act of 1933 and filed its
Rule 24f-2 on September 27, 1996.
<PAGE>
<TABLE>
<CAPTION>
Item Number Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Overview; Investor Expenses; *
3 Financial Highlights *
4 Overview; Goal and Strategy; Portfolio *
Securities; Risk Factors; Business
Structure; More About Risk
5 Overview; Business Structure; *
Manager/Subadviser; Investor Expenses
6 Choosing a Share Class; Buying Shares; *
Selling Shares; Transaction Policies;
Dividends and Account Policies;
Additional Investor Services
7 Choosing a Share Class; How Sales Charges *
are Calculated; Sales Charge Deductions
and Waivers; Opening an Account; Buying
Shares; Transaction Policies; Additional
Investor Services
8 Selling Shares; Transaction Policies; *
Dividends and Account Policies
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
16 * Investment Advisory; Subadvisory
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
</TABLE>
<PAGE>
JOHN HANCOCK
GROWTH
FUNDS
[LOGO]
DISCIPLINED GROWTH FUND
DISCOVERY FUND
EMERGING GROWTH FUND
GROWTH FUND
REGIONAL BANK FUND
SPECIAL EQUITIES FUND
SPECIAL OPPORTUNITIES FUND
PROSPECTUS
JULY 1, 1996*
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed to achieve their goal(s)
Like all mutual fund shares, 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.
*DECEMBER 2, 1996 FOR DISCOVERY FUND AND EMERGING GROWTH FUND.
[JOHN HANCOCK FUNDS LOGO]
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
A fund-by-fund look at Disciplined Growth Fund 4
goals, strategies, risks,
expenses and financial Discovery Fund 6
history.
Emerging Growth Fund 8
Growth Fund 10
Regional Bank Fund 12
Special Equities Fund 14
Special Opportunities Fund 16
Policies and instructions for Your account
opening, maintaining and
closing an account in any Choosing a share class 18
growth fund.
How sales charges are calculated 18
Sales charge reductions and waivers 19
Opening an account 19
Buying shares 20
Selling shares 21
Transaction policies 23
Dividends and account policies 23
Additional investor services 24
Details that apply to the Fund details
growth funds as a group.
Business structure 25
Sales compensation 26
More about risk 28
For more information back cover
<PAGE>
OVERVIEW
- --------------------------------------------------------------------------------
GOAL OF THE GROWTH FUNDS
John Hancock growth funds seek long-term growth by investing primarily in common
stocks. Each fund has its own strategy and its own risk/reward profile. Because
you could lose money by investing in these funds, be sure to read all risk
disclosure carefully before investing.
WHO MAY WANT TO INVEST
These funds may be appropriate for investors who:
- - have longer time horizons
- - are willing to accept higher short-term risk along with higher potential
long-term returns
- - want to diversify their portfolios
- - are seeking funds for the growth portion of an asset
allocation portfolio
- - are investing for retirement or other goals that are many years in the future
Growth funds may NOT be appropriate if you:
- - are investing with a shorter time horizon in mind
- - are uncomfortable with an investment that will go up and down in value
THE MANAGEMENT FIRM
All John Hancock growth funds are managed by John Hancock Advisers, Inc. Founded
in 1968, John Hancock Advisers is a wholly owned subsidiary of John Hancock
Mutual Life Insurance Company and manages more than $19 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[GRAPHIC]
GOAL AND STRATEGY The fund's particular investment goals and the strategies it
intends to use in pursuing those goals.
[GRAPHIC]
PORTFOLIO SECURITIES The primary types of securities in which the fund invests.
Secondary investments are described in "More about risk" at the end of the
prospectus.
[GRAPHIC]
RISK FACTORS The major risk factors associated with the fund.
[GRAPHIC]
PORTFOLIO MANAGEMENT The individual or group (including subadvisers, if any)
designated by the investment adviser to handle the fund's day-to-day management.
[GRAPHIC]
EXPENSES The overall costs borne by an investor in the fund, including sales
charges and annual expenses.
[GRAPHIC]
FINANCIAL HIGHLIGHTS A table showing the fund's financial performance for up to
ten years, by share class. A bar chart showing total return allows you to
compare the fund's historical risk level to those of other funds.
<PAGE>
DISCIPLINED GROWTH FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST
TICKER SYMBOL CLASS A: SVAAX CLASS B: FEQVX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
invests in established, growing companies that have demonstrated superior
earnings growth and stability. Under normal circumstances, the fund invests at
least 65% of assets in these companies, without concentration in any one
industry. The fund also looks for the following characteristics:
- - predictability of earnings
- - a low level of debt
- - seasoned management
- - a strong market position
Many of the fund's investments are in medium or large capitalization companies.
The fund invests for income as a secondary goal.
PORTFOLIO SECURITIES
[GRAPHIC]
The fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities. Foreign investments typically have not exceeded 10% of assets.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund also may invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[GRAPHIC]
As with any growth fund, the value of your investment will fluctuate in response
to stock market movements. To the extent that the fund invests in higher-risk
securities, it takes on additional risks that could adversely affect its
performance. Before you invest, please read "More about risk" starting on page
28.
PORTFOLIO MANAGEMENT
[GRAPHIC]
John F. Snyder III and Jere E. Estes are the leaders of the fund's portfolio
management team. Mr. Snyder is an executive vice president of the adviser and
has been a team member since July 1992. He has been an investment manager since
1971. Mr. Estes has been a part of the fund's management team since joining John
Hancock in July 1992. He has been in the investment business since 1967.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
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(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<TABLE>
<S> <C> <C>
Management fee 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.45% 2.15%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over
the various time frames indicated. The example assumes you reinvested all
dividends and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $64 $94 $125 $215
Class B shares
Assuming redemption
at end of period $72 $97 $135 $231
Assuming no redemption $22 $67 $115 $231
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
4 DISCIPLINED GROWTH FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[GRAPHIC]
The figures below have been audited by the fund's independent auditors, Price
Waterhouse LLP.
VOLATILITY, AS INDICATED BY CLASS B YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
(scale varies from fund to fund)
[BAR CHART]
(16.44)(4) 26.69 14.27 (16.46) 30.21 7.22 12.34 0.78 11.51
<TABLE>
<CAPTION>
CLASS A - YEAR ENDED OCTOBER 31, 1992(1) 1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.81 $ 10.99 $ 12.39 $ 12.02
Net investment income (loss) 0.06(2) 0.08(2) 0.10 0.08(2)
Net realized and unrealized gain (loss) on investments (0.06) 1.34 0.07 1.29
Total from investment operations 0.00 1.42 0.17 1.37
Less distributions:
Dividends from net investment income (0.07) (0.02) (0.10) (0.10)
Distributions from net realized gain on investments sold (1.74) -- (0.44) (0.52)
Distributions from capital paid-in (0.01) -- -- --
Total distributions (1.82) (0.02) (0.54) (0.62)
Net asset value, end of period $ 10.99 $ 12.39 $ 12.02 $ 12.77
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 0.19(4) 12.97 1.35 12.21
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 1,771 23,372 23,292 27,692
Ratio of expenses to average net assets (%) 1.73(5) 1.60 1.53 1.46
Ratio of net investment income (loss) to average net assets (%) 0.62(5) 0.64 0.83 0.69
Portfolio turnover rate (%) 246 71 60 65
Average brokerage commission rate(6) ($) N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1987(1) 1988 1989 1990 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.00 $ 8.34 $ 10.29 $ 11.52 $ 9.22
Net investment income (loss) 0.06 0.13 0.19 0.18 0.07
Net realized and unrealized gain (loss) on investments (1.70) 2.05 1.25 (2.00) 2.67
Total from investment operations (1.64) 2.18 1.44 (1.82) 2.74
Less distributions:
Dividends from net investment income (0.02) (0.09) (0.12) (0.20) (0.20)
Distributions from net realized gain on investments sold -- (0.14) (0.09) (0.28) (0.05)
Distributions from capital paid-in -- -- -- -- --
Total distributions (0.02) (0.23) (0.21) (0.48) (0.25)
Net asset value, end of period $ 8.34 $ 10.29 $ 11.52 $ 9.22 $ 11.71
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) (16.44)(4) 26.69 14.27 (16.46) 30.21
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 14,016 14,927 23,813 17,714 21,826
Ratio of expenses to average net assets (%) 2.56(5,7) 2.61(7) 2.30 2.13 2.24
Ratio of net investment income (loss) to average net assets (%) 0.93(5,7) 1.46(7) 1.75 1.64 0.66
Portfolio turnover rate (%) 40(5) 54 94 165 217
Average brokerage commission rate(6) ($) N/A N/A N/A N/A N/A
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.71 $ 10.97 $ 12.31 $ 11.95
Net investment income (loss) 0.01(2) 0.02(2) 0.03 0.01(2)
Net realized and unrealized gain (loss) on investments 1.05 1.33 0.07 1.28
Total from investment operations 1.06 1.35 0.10 1.29
Less distributions:
Dividends from net investment income (0.03) (0.01) (0.02) (0.03)
Distributions from net realized gain on investments sold (1.76) -- (0.44) (0.52)
Distributions from capital paid-in (0.01) -- -- --
Total distributions (1.80) (0.01) (0.46) (0.55)
Net asset value, end of period $ 10.97 $ 12.31 $ 11.95 $ 12.69
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 7.22 12.34 .78 11.51
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 23,525 93,853 94,431 86,178
Ratio of expenses to average net assets (%) 2.27 2.09 2.10 2.11
Ratio of net investment income (loss) to average net assets (%) 0.10 0.17 0.25 0.06
Portfolio turnover rate (%) 246 71 60 65
Average brokerage commission rate(6) ($) N/A N/A N/A N/A
</TABLE>
(1) Class A and Class B shares commenced operations on January 3, 1992 and
April 22, 1987, respectively.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(7) Net of advisory expense reimbursements per share of $0.01 for the fiscal
year ended October 31, 1988 and less than $0.01 for the fiscal year ended
October 31, 1987.
DISCIPLINED GROWTH FUND 5
<PAGE>
DISCOVERY FUND
REGISTRANT NAME: JOHN HANCOCK INVESTMENT TRUST IV
TICKER SYMBOL CLASS A: FRDAX CLASS B: FRDIX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
invests in companies that appear to offer superior growth prospects. Under
normal circumstances, the fund invests at least 65% of assets in these
companies. The fund looks for companies, including small- and medium-sized
companies, that have broad market opportunities and consistent or accelerating
earnings growth. These companies may:
- - occupy a profitable market niche
- - have products or technologies that are new, unique or proprietary
- - be in an industry that has a favorable long-term growth outlook
- - have a capable management team with a significant equity stake
These companies may be in a relatively early stage of development, but will
usually have established a record of profitability and a strong financial
position. The fund does not invest for income.
PORTFOLIO SECURITIES
[GRAPHIC]
The fund invests primarily in common stocks of U.S. companies and may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund may invest up to 25% of assets in foreign securities, which carry
additional risks. The fund also may invest in certain higher-risk securities,
and may engage in other investment practices.
RISK FACTORS
[GRAPHIC]
As with any growth fund, the value of your investment will fluctuate in response
to stock market movements. To the extent that the fund invests in small- and
medium-sized company stocks, foreign securities and other higher-risk
securities, it takes on additional risks that could adversely affect its
performance. The fund may experience higher volatility than many other types of
growth funds. Before you invest, please read "More about risk" starting on page
28.
PORTFOLIO MANAGEMENT
[GRAPHIC]
Bernice S. Behar, leader of the fund's portfolio management team since March
1994, is a senior vice president of the adviser. She joined the adviser in 1991
and has been in the investment business since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
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(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<TABLE>
<S> <C> <C>
Management fee 0.75% 0.75%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.63% 0.63%
Total fund operating expenses 1.68% 2.38%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $66 $100 $137 $239
Class B shares
Assuming redemption
at end of period $74 $104 $147 $254
Assuming no redemption $24 $ 74 $127 $254
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
6 DISCOVERY FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[GRAPHIC]
The figures below for each of the four years in the period ended July 31, 1996
have been audited by the fund's independent auditors, Ernst & Young LLP. Figures
for the year ended July 31, 1992 were audited by other independent auditors.
VOLATILITY, AS INDICATED BY CLASS B YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
(scale varies from fund to fund)
[BAR CHART]
10.88(5) 21.63 (7.18) 54.97 16.85
<TABLE>
<CAPTION>
CLASS A - YEAR ENDED JULY 31, 1992(1,2) 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.40 $ 8.95 $ 10.81 $ 8.56 $ 12.95
Net investment income (loss) (0.05) (0.16) (0.16)(3) (0.17)(3) (0.19)(3)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (0.40) 2.15 (0.43) 4.83 2.46
Total from investment operations (0.45) 1.99 (0.59) 4.66 2.27
Less distributions:
Distributions from net realized gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
Net asset value, end of period $ 8.95 $ 10.81 $ 8.56 $ 12.95 $ 15.09
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) (4.79)(5) 22.33 (6.45) 55.80 17.72
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,866 4,692 3,226 5,075 32,009
Ratio of expenses to average net assets (%) 1.78(6) 2.17 2.01 2.10 1.72
Ratio of net investment income (loss) to average net assets (%) (1.20)(6) (1.61) (1.64) (1.73) (1.26)
Portfolio turnover rate (%) 138 148 108 118 116
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED JULY 31, 1992(1,2) 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.00 $ 8.87 $ 10.65 $ 8.34 $ 12.54
Net investment income (loss) (0.11) (0.23) (0.22)(3) (0.22)(3) (0.27)(3)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 0.98 2.14 (0.43) 4.69 2.36
Total from investment operations 0.87 1.91 (0.65) 4.47 2.09
Less distributions:
Distributions from net realized gain on investments sold -- (0.13) (1.66) (0.27) (0.13)
Net asset value, end of period $ 8.87 $ 10.65 $ 8.34 $ 12.54 $ 14.50
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(4) (%) 10.88(5) 21.63 (7.18) 54.97 16.85
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) ($) 34,636 38,672 26,537 31,645 68,591
Ratio of expenses to average net assets (%) 2.56(6) 2.86 2.62 2.70 2.42
Ratio of net investment income (loss) to average net assets (%) (1.56)(6) (2.26) (2.24) (2.34) (1.96)
Portfolio turnover rate (%) 138 148 108 118 116
Average brokerage commission rate(7) ($) N/A N/A N/A N/A N/A
</TABLE>
(1) Class A and Class B shares commenced operations on January 3, 1992 and
August 30, 1991, respectively.
(2) Covered by report of other independent auditors (not included herein).
(3) Based on the average of the shares outstanding at the end of each month.
(4) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(5) Not annualized.
(6) Annualized.
(7) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
DISCOVERY FUND 7
<PAGE>
EMERGING GROWTH FUND
REGISTRANT NAME: JOHN HANCOCK SERIES TRUST
TICKER SYMBOL CLASS A: TAEMX CLASS B: TSEGX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
invests in emerging companies (market capitalization of less than $1 billion).
Under normal circumstances, the fund invests at least 80% of assets in a
diversified portfolio of these companies. The fund looks for companies that show
rapid growth but are not yet widely recognized. The fund also may invest in
established companies that, because of new management, products or
opportunities, offer the possibility of accelerating earnings. The fund does not
invest for income.
PORTFOLIO SECURITIES
[GRAPHIC]
The fund invests primarily in the common stocks of U.S. and foreign emerging
growth companies, although it may invest up to 20% of assets in other types of
companies. The fund may also invest in warrants, preferred stocks and
investment-grade convertible debt securities.
For liquidity and flexibility, the fund may place up to 20% of assets in cash or
in investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The fund also may
invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[GRAPHIC]
As with any growth fund, the value of your investment will fluctuate in response
to stock market movements. Stocks of emerging growth companies carry higher
risks than stocks of larger companies. This is because emerging growth
companies:
- - may be in the early stages of development
- - may be dependent on a small number of products or services
- - may lack substantial capital reserves
- - do not have proven track records
In addition, stocks of emerging companies are often traded in low volumes, which
can increase market and liquidity risks. Before you invest, please read "More
about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[GRAPHIC]
Bernice S. Behar, leader of the fund's portfolio management team since April
1996, is a senior vice president of the adviser. She joined the adviser in 1991
and has been in the investment business since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
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(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<TABLE>
<S> <C> <C>
Management fee 0.75% 0.75%
12b-1 fee(3) 0.25% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.40% 2.15%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $64 $92 $123 $210
Class B shares
Assuming redemption
at end of period $72 $97 $135 $229
Assuming no redemption $22 $67 $115 $229
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
8 EMERGING GROWTH FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[GRAPHIC]
The figures below have been audited by the fund's independent auditors, Ernst &
Young LLP.
VOLATILITY, AS INDICATED BY CLASS B YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
(scale varies from fund to fund)
[BAR CHART]
0.00 33.59 27.40 (11.82) 73.78 6.19 24.53 2.80 33.60 15.90(6)
<TABLE>
<CAPTION>
CLASS A - YEAR ENDED OCTOBER 31, 1991(1) 1992 1993 1994 1995(2) 1996(3)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 18.12 $ 19.26 $ 20.60 $ 25.89 $ 26.82 $ 36.09
Net investment income (loss)(4) (0.03) (0.20) (0.16) (0.18) (0.25) (0.15)
Net realized and unrealized gain (loss) on investments 1.17 1.60 5.45 1.11 9.52 6.02
Total from investment operations 1.14 1.40 5.29 0.93 9.27 5.87
Less distributions:
Distributions from net realized gain on investments sold -- (0.06) -- -- -- --
Net asset value, end of period $ 19.26 $ 20.60 $ 25.89 $ 26.82 $ 36.09 $ 41.96
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(5) (%) 6.29 7.32 25.68 3.59 34.56 16.26(6)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 38,859 46,137 81,263 131,053 179,481 221,059
Ratio of expenses to average net assets (%) 0.33 1.67 1.40 1.44 1.38 1.30(7)
Ratio of net investment income (loss) to average net assets (%) (0.15) (1.03) (0.70) (0.71) (0.83) (0.79)(7)
Portfolio turnover rate (%) 66 48 29 25 23 14
Average brokerage commission rate(8) ($) N/A N/A N/A N/A N/A 0.06
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1987(1) 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 7.89 $ 7.89 $ 10.54 $ 12.76 $ 11.06
Net investment income (loss)(4) (0.0021) 0.09 (0.08) (0.22) (0.30)
Net realized and unrealized gain (loss) on investments 0.0021 2.56 2.83 (1.26) 8.46
Total from investment operations 0.0000 2.65 2.75 (1.48) 8.16
Less distributions:
Dividends from net investment income -- -- (0.04) -- --
Distributions from net realized gain on investments sold -- -- (0.49) (0.22) --
Total distributions -- -- (0.53) (0.22) --
Net asset value, end of period $ 7.89 $ 10.54 $ 12.76 $ 11.06 $ 19.22
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(5) (%) 0.00 33.59 27.40 (11.82) 73.78
Total adjusted investment return at net asset value(5,9)(%) (0.41) 31.00 27.37 -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 79 3,232 7,877 11,668 52,743
Ratio of expenses to average net assets (%) 0.03 3.05 3.48 3.11 2.85
Ratio of adjusted expenses to average net assets(10) (%) 0.44 5.64 3.51 -- --
Ratio of net investment income (loss) to
average net assets (%) (0.03) 0.81 (0.67) (1.64) (1.83)
Ratio of adjusted net investment income (loss) to
average net assets(10) (%) (0.44) (1.78) (0.70) -- --
Portfolio turnover rate (%) 0 252 90 82 66
Fee reduction per share ($) 0.03 0.29 0.004 -- --
Average brokerage commission rate(8) ($) N/A N/A N/A N/A N/A
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1992 1993 1994 1995(2) 1996(3)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 19.22 $ 20.34 $ 25.33 $ 26.04 $ 34.79
Net investment income (loss)(4) (0.38) (0.36) (0.36) (0.45) (0.27)
Net realized and unrealized gain (loss) on investments 1.56 5.35 1.07 9.20 5.80
Total from investment operations 1.18 4.99 0.71 8.75 5.53
Less distributions:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain on investments sold (0.06) -- -- -- --
Total distributions (0.06) -- -- -- --
Net asset value, end of period $ 20.34 $ 25.33 $ 26.04 $ 34.79 $ 40.32
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(5) (%) 6.19 24.53 2.80 33.60 15.90(6)
Total adjusted investment return at net asset value(5,9)(%) -- -- -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 86,923 219,484 283,435 393,478 468,427
Ratio of expenses to average net assets (%) 2.64 2.28 2.19 2.11 2.00(7)
Ratio of adjusted expenses to average net assets(10) (%) -- -- -- -- --
Ratio of net investment income (loss) to
average net assets (%) (1.99) (1.58) (1.46) (1.55) (1.49)(7)
Ratio of adjusted net investment income (loss) to
average net assets(10) (%) -- -- -- -- --
Portfolio turnover rate (%) 48 29 25 23 14
Fee reduction per share ($) -- -- -- -- --
Average brokerage commission rate(8) ($) N/A N/A N/A N/A 0.06
</TABLE>
(1) Class A and Class B shares commenced operations on August 22, 1991 and
October 26, 1987, respectively. (Not annualized.)
(2) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(3) Six months ended April 30, 1996. (Unaudited.)
(4) Based on the average of the shares outstanding at the end of each month.
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) Not annualized.
(7) Annualized.
(8) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(9) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(10) Unreimbursed, without fee reduction.
EMERGING GROWTH FUND 9
<PAGE>
GROWTH FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II
TICKER SYMBOL CLASS A: JHNGX CLASS B: JHGBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
invests in stocks that are diversified with regard to industries and issuers.
The fund favors stocks of companies whose operating earnings and revenues have
grown more than twice as fast as the gross domestic product over the past five
years, although not all stocks in the fund's portfolio will meet this criterion.
PORTFOLIO SECURITIES
[GRAPHIC]
The portfolio invests primarily in the common stocks of U.S. companies. It may
also invest in warrants, preferred stocks and convertible debt securities.
For liquidity and flexibility, the fund may invest up to 35% of net assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more than 35% in these securities as a defensive tactic. The fund may
also invest in certain higher-risk securities, and may engage in other
investment practices.
RISK FACTORS
[GRAPHIC]
As with any growth fund, the value of your investment will fluctuate in response
to stock market movements. To the extent that the fund invests in higher-risk
securities, it takes on additional risks that could adversely affect its
performance. Before you invest, please read "More about risk" starting on page
28.
PORTFOLIO MANAGEMENT
[GRAPHIC]
Anurag Pandit is leader of the fund's portfolio management team. A second vice
president of the adviser, Mr. Pandit has been a member of the management team
since joining John Hancock Funds in April 1996. He assumed leadership of the
team on January 1, 1997. Mr. Pandit has been in the investment business since
1992.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
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(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<TABLE>
<S> <C> <C>
Management fee 0.80% 0.80%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.40% 0.40%
Total fund operating expenses 1.50% 2.20%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over
the various time frames indicated. The example assumes you reinvested all
dividends and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $65 $95 $128 $220
Class B shares
Assuming redemption
at end of period $72 $99 $138 $236
Assuming no redemption $22 $69 $118 $236
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
10 GROWTH FUND
<PAGE>
FINANCIAL HIGHLIGHTS
[GRAPHIC]
The figures below have been
audited by the fund's
independent auditors,
Ernst & Young LLP.
[BAR CHART]
13.83 6.03 11.23 30.96 (8.34) 41.68 6.06 13.03 (7.50) 27.17
VOLATILITY, AS INDICATED BY
CLASS A YEAR-BY-YEAR TOTAL
INVESTMENT RETURN (%)
(scale varies from fund to fund)
<TABLE>
<CAPTION>
Class A - YEAR ENDED DECEMBER 31, 1986 1987 1988 1989 1990 1991 1992 1993 1944 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $14.50 $14.03 $12.34 $13.33 $15.18 $12.93 $17.48 $17.32 $17.40 $15.89
Net investment income (loss) 0.11 0.22 0.23 0.28 0.16 0.04 (0.06) (0.11) (0.10) (0.09)(1)
Net realized and unrealized gain (loss)
on investments 1.79 0.64 1.16 3.81 (1.47) 5.36 1.10 2.33 (1.21) 4.40
Total from investment operations 1.90 0.86 1.39 4.09 (1.31) 5.40 1.04 2.22 (1.31) 4.31
Less distributions:
Dividends from net investment income (0.17) (0.28) (0.23) (0.29) (0.16) (0.04) -- -- -- --
Distributions from net realized gain
on investments sold (2.20) (2.27) (0.17) (1.95) (0.78) (0.81) (1.20) (2.14) (0.20) (0.69)
Total distributions (2.37) (2.55) (0.40) (2.24) (0.94) (0.85) (1.20) (2.14) (0.20) (0.69)
Net asset value, end of period $14.03 $12.34 $13.33 $15.18 $12.93 $17.48 $17.32 $17.40 $15.89 $19.51
Total investment return at net
asset value(2)(%) 13.83 6.03 11.23 30.96 (8.34) 41.68 6.06 13.03 (7.50) 27.17
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 87,468 86,426 101,497 105,014 102,416 145,287 153,057 162,937 146,466 241,700
Ratio of expenses to average net assets (%) 1.03 1.00 1.06 0.96 1.46 1.44 1.60 1.56 1.65 1.48
Ratio of net investment income (loss) to
average net assets (%) 0.77 1.41 1.76 1.73 1.12 0.27 (0.36) (0.67) (0.64) (0.46)
Portfolio turnover rate (%) 62 68 47 61 102 82 71 68 52 68(3)
Average brokerage commission rate(4) ($) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED DECEMBER 31, 1994(5) 1995
PER SHARE OPERATING PERFORMANCE
<S> <C> <C>
Net asset value, beginning of period $17.16 $15.83
Net investment income (loss) (0.20)(1) (0.26)(1)
Net realized and unrealized gain (loss)
on investments (0.93) 4.37
Total from investment operations (1.13) 4.11
Less distributions:
Distributions from net realized gain on
investments sold (0.20) (0.69)
Net asset value, end of period $15.83 $19.25
Total investment return at net asset value(2)(%) (6.56)(6) 26.01
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 3,807 15,913
Ratio of expenses to average net assets (%) 2.38(7) 2.31
Ratio of net investment income (loss) to
average net assets (%) (1.25)(7) (1.39)
Portfolio turnover rate (%) 52 68(3)
Average brokerage commission rate(4) ($) N/A N/A
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) Excludes merger activity.
(4) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(5) Class B shares commenced operations on January 3, 1994.
(6) Not annualized.
(7) Annualized.
GROWTH FUND 11
<PAGE>
REGIONAL BANK FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST TICKER SYMBOL CLASS A: FRBAX
CLASS B: FRBFX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
invests in regional banks and lending institutions, including:
- - commercial and industrial banks
- - savings and loan associations
- - bank holding companies
These financial institutions provide full-service banking, have primarily
domestic assets and are typically based outside of New York City and Chicago.
They may or may not be members of the Federal Reserve, and their deposits may or
may not be FDIC-insured. Under normal circumstances, the fund invests at least
65% of assets in these companies; it may invest up to 35% of assets in other
financial services companies, including lending companies and money center
banks. Because regional banks typically pay regular dividends, moderate income
is an investment goal.
PORTFOLIO SECURITIES
[GRAPHIC]
The fund invests primarily in the common stocks of U.S. companies. It may also
invest in warrants, preferred stocks and investment-grade convertible debt
securities, as well as foreign stocks.
For liquidity and flexibility, the fund may place up to 15% of net assets in
cash or in investment-grade short-term securities. In abnormal market
conditions, it may invest up to 80% in these securities as a defensive tactic.
The fund may also invest in certain higher-risk securities, and may engage in
other investment practices.
RISK FACTORS
[GRAPHIC]
As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. Because the fund concentrates in a single
industry, its performance is largely dependent on the industry's performance,
which may differ in direction and degree from that of the overall stock market.
Falling interest rates or deteriorating economic conditions can adversely affect
the performance of bank stocks, while rising interest rates will cause a decline
in the value of any debt securities the fund holds. Before you invest, please
read "More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[GRAPHIC]
James K. Schmidt joined John Hancock in 1985 and has served as the fund's
portfolio manager since its inception that year. A senior vice president of the
adviser, he has been in the investment business since 1974.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
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(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management fee 0.78% 0.78%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.31% 0.31%
Total fund operating expenses 1.39% 2.09%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over
the various time frames indicated. The example assumes you reinvested all
dividends and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $63 $92 $122 $209
Class B shares
Assuming redemption
at end of period $71 $95 $132 $224
Assuming no redemption $21 $65 $112 $224
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
12 REGIONAL BANK FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC]
The figures below have been audited
by the fund's independent auditors,
Price Waterhouse LLP.
[BAR CHART]
17.44 (17.36)(4) 36.89 20.46 (32.29) 75.35 37.20 36.71 5.69 30.11
VOLATILITY, AS INDICATED BY CLASS B
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
(scale varies from fund to fund)
<TABLE>
<CAPTION>
CLASS A - YEAR ENDED OCTOBER 31, 1992(1) 1993 1944 1995
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $13.47 $17.47 $21.62 $21.52
Net investment income (loss) 0.21 0.26(2) 0.39(2) 0.52(2)
Net realized and unrealized gain (loss)
on investments 3.98 5.84 0.91 5.92
Total from investment operations 4.19 6.10 1.30 6.44
Less distributions:
Dividends from net investment income (0.19) (0.26) (0.34) (0.48)
Distributions from net realized gain on
investments sold -- (1.69) (1.06) (0.34)
Total distributions (0.19) (1.95) (1.40) (0.82)
Net asset value, end of period $17.47 $21.62 $21.52 $27.14
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 31.26(4) 37.45 6.44 31.00
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 31,306 94,158 216,978 486,631
Ratio of expenses to average net assets (%) 1.41(5) 1.35 1.34 1.39
Ratio of net investment income to average
net assets (%) 1.64(5) 1.29 1.78 2.23
Portfolio turnover rate (%) 53 35 13 14
Average brokerage commission rate(6) ($) N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1986(7) 1987(8) 1988 1989 1990 1991 1992 1993 1944 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.51 $12.68 $10.02 $11.89 $13.00 $8.13 $13.76 $17.44 $21.56 $21.43
Net investment income (loss) 0.20 0.05 0.16 0.20 0.30 0.29 0.18 0.15(2) 0.23(2) 0.36(2)
Net realized and unrealized gain (loss)
on investment 1.74 (2.17) 3.12 2.02 (4.19) 5.68 4.56 5.83 0.91 5.89
Total from investment operations 1.94 (2.12) 3.28 2.22 (3.89) 5.97 4.74 5.98 1.14 6.25
Less distributions:
Dividends from net investment income (0.26) (0.04) (0.15) (0.16) (0.19) (0.34) (0.28) (0.17) (0.21) (0.32)
Distributions from net realized gain
on investments sold (1.51) (0.50) (1.26) (0.95) (0.76) -- (0.78) (1.69) (1.06) (0.34)
Distributions from capital paid-in -- -- -- -- (0.03) -- -- -- -- --
Total distributions (1.77) (0.54) (1.41) (1.11) (0.98) (0.34) (1.06) (1.86) (1.27) (0.66)
Net asset value, end of period $12.68 $10.02 $11.89 $13.00 $8.13 $13.76 $17.44 $21.56 $21.43 $27.02
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE(3) (%) 17.44 (17.36)(4) 36.89 20.46 (32.29) 75.35 37.20 36.71 5.69 30.11
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 54,626 38,721 50,965 81,167 38,992 52,098 56,016 171,808 522,207 1,236,447
Ratio of expenses to average net assets(%) 1.48 2.47(5) 2.17 1.99 1.99 2.04 1.96 1.88 2.06 2.09
Ratio of net investment income (loss)
to average net assets (%) 1.62 0.73(5) 1.50 1.67 2.51 2.65 1.21 0.76 1.07 1.53
Portfolio turnover rate (%) 89 58(5) 87 85 56 75 53 35 13 14
Average brokerage commission rate(6) ($) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
(1) Class A shares commenced operations on January 3, 1992.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) Not annualized.
(5) Annualized.
(6) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(7) Year ended March 31, 1987.
(8) For the period April 1, 1987 to October 31, 1987.
REGIONAL BANK FUND 13
<PAGE>
SPECIAL EQUITIES FUND
REGISTRANT NAME: JOHN HANCOCK SPECIAL EQUITIES FUND TICKER SYMBOL CLASS A: JHNSX
CLASS B: SPQBX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
invests in small-capitalization companies and companies in situations offering
unusual or non-recurring opportunities. Under normal circumstances, the fund
invests at least 65% of assets in a diversified portfolio of these companies.
The fund looks for companies that dominate an emerging industry or hold a
growing market share in a fragmented industry, and that have demonstrated annual
earnings and revenue growth of at least 25%, self-financing capabilities and
strong management. The fund does not invest for income.
PORTFOLIO SECURITIES
[GRAPHIC]
The fund invests primarily in the common stocks of U.S. and foreign companies.
It may also invest in warrants, preferred stocks and investment-grade
convertible debt securities.
For liquidity and flexibility, the fund may place up to 35% of assets in cash or
in investment-grade short-term securities. In abnormal market conditions, it may
invest more than 35% in these securities as a defensive tactic. The fund also
may invest in certain higher-risk securities, and may engage in other investment
practices.
RISK FACTORS
[GRAPHIC]
As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. Stocks of small-capitalization and
special-situation companies carry higher risks than stocks of larger companies.
This is because these companies:
- - may lack proven track records
- - may be dependent on a small number of products or services
- - may be undercapitalized
- - may have highly priced stocks that are sensitive to adverse news
In addition, stocks of these companies are often traded in low volumes, which
can increase market and liquidity risks. Before you invest, please read "More
about risk" starting on page 28.
MANAGEMENT/SUBADVISER
[GRAPHIC]
Michael P. DiCarlo is responsible for the fund's day-to-day investment
management. He has served as the fund's portfolio manager since January 1988,
and has been in the investment business since 1984. He is currently one of three
principals in DFS Advisors, LLC, which was founded in 1996 and serves as
subadviser to the fund.
This fund will be closed to new investors at the end of the day its total assets
reach $2.5 billion. Further investments will be limited to existing accounts.
INVESTOR EXPENSES
[GRAPHIC]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
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(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
ANNUAL FUND OPERATING EXPENSES
(AS TO % OF AVERAGE NET ASSETS)
Management fee(3) 0.82% 0.82%
12b-1 fee(4) 0.30% 1.00%
Other expenses 0.38% 0.40%
Total fund operating expenses 1.50% 2.22%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $65 $95 $128 $220
Class B shares
Assuming redemption
at end of period $73 $99 $139 $237
Assuming no redemption $23 $69 $119 $237
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Includes a subadviser fee equal to 0.25% of the fund's net assets.
(4) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
14 SPECIAL EQUITIES FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC]
The figures below have been
audited by the fund's
independent auditors,
Ernst & Young LLP.
[BAR CHART]
17.38 (28.68) 13.72 31.82 (21.89) 95.37 20.25 47.83 (0.12) 37.49
VOLATILITY, AS INDICATED BY
CLASS A YEAR-BY-YEAR TOTAL
INVESTMENT RETURN (%)
(scale varies from fund to fund)
<TABLE>
<CAPTION>
CLASS A - YEAR ENDED OCTOBER 31, 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 5.21 $ 6.08 $ 4.30 $ 4.89 $ 6.38 $ 4.97 $ 9.71 $10.99 $16.13 $16.11
Net investment income (loss) (0.03) (0.03) 0.04 0.01 (0.12) (0.10) (0.19)(1) (0.20)(1) (0.21)(1) (0.18)(1)
Net realized and unrealized gain (loss)
on investments 0.93 (1.26) 0.55 1.53 (1.27) 4.84 2.14 5.43 0.19 6.22
Total from investment operations 0.90 (1.29) 0.59 1.54 (1.39) 4.74 1.95 5.23 (0.02) 6.04
Less distributions:
Dividends from net investment income (0.02) -- -- (0.05) (0.02) -- -- -- -- --
Distributions from net realized gain
on investments sold (0.01) (0.45) -- -- -- -- (0.67) (0.09) -- --
Distributions from capital paid-in -- (0.04) -- -- -- -- -- -- -- --
Total distributions (0.03) (0.49) -- (0.05) (0.02) -- (0.67) (0.09) -- --
Net asset value, end of period $ 6.08 $ 4.30 $ 4.89 $ 6.38 $ 4.97 $ 9.71 $10.99 $16.13 $16.11 $22.15
TOTAL INVESTMENT RETURN AT NET ASSET
VALUE(2)(%) 17.38 (28.68) 13.72 31.82 (21.89) 95.37 20.25 47.83 (0.12) 37.49
Total adjusted investment return at
net asset value(2,3) 15.41 (29.41) 12.28 30.75 (22.21) 95.33 -- -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s
omitted)($) 13,780 10,637 11,714 12,285 8,166 19,713 44,665 296,793 310,625 555,655
Ratio of expenses to average net
assets (%) 1.50 1.50 1.50 1.50 2.63 2.75 2.24 1.84 1.62 1.48
Ratio of adjusted expenses to average net
assets(4) (%) 3.47 2.23 2.94 2.57 2.95 2.79 -- -- -- --
Ratio of net investment income (loss)
to average net assets (%) (0.57) (0.57) 0.82 0.47 (1.58) (2.12) (1.91) (1.49) (1.40) (0.97)
Ratio of adjusted net investment income
(loss) to average net assets(4) (%) (2.54) (1.30) (0.62) (0.60) (1.90) (2.16) -- -- -- --
Portfolio turnover rate (%) 64 93 91 115 113 163 114 33 66 82
Fee reduction per share ($) 0.09 0.04 0.07 0.03 0.02 0.002 -- -- -- --
Average brokerage commission rate(5) ($) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1993(4) 1944 1995
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 12.30 $ 16.08 $ 15.97
Net investment income (loss) (0.18)(1) (0.30)(1) (0.31)(1)
Net realized and unrealized gain
(loss) on investments 3.96 0.19 6.15
Total from investment operations 3.78 (0.11) 5.84
Net asset value, end of period $ 16.08 $ 15.97 $ 21.81
Total investment return at net asset
value(2) (%) 30.73(7) (0.68) 36.57
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 158,281 191,979 454,934
Ratio of expenses to average net assets (%) 2.34(8) 2.25 2.20
Ratio of net investment income (loss) to
average net assets (%) (2.03)(8) (2.02) (1.69)
Portfolio turnover rate (%) 33 66 82
Average brokerage commission rate(5) ($) N/A N/A N/A
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
(6) Class B shares commenced operations on March 1, 1993.
(7) Not annualized.
(8) Annualized.
SPECIAL EQUITIES FUND 15
<PAGE>
SPECIAL OPPORTUNITIES FUND
REGISTRANT NAME: FREEDOM INVESTMENT TRUST II TICKER SYMBOL CLASS A: SPOAX
CLASS B: SPOBX
- -------------------------------------------------------------------------------
GOAL AND STRATEGY
[GRAPHIC]
The fund seeks long-term capital appreciation. To pursue this goal, the fund
invests in those economic sectors that appear to have a higher than average
earning potential.
Under normal circumstances, at least 90% of the fund's equity securities is
invested within five or fewer sectors (e.g., financial services, energy,
technology). At times, the fund may focus on a single sector. The fund first
determines the inclusion and weighting of sectors, using macroeconomic as well
as other factors, then selects portfolio securities by seeking the most
attractive companies. The fund may add or drop sectors. Because the fund may
invest more than 5% of assets in a single issuer, it is classified as a
non-diversified fund.
PORTFOLIO SECURITIES
[GRAPHIC]
The fund invests primarily in common stocks of U.S. and foreign companies of
any size. It may also invest in warrants, preferred stocks, convertible debt
securities, U.S. Government securities and corporate bonds rated at least
BBB/Baa, or equivalent. The fund also may invest in certain higher-risk
securities, and may engage in other investment practices.
For liquidity and flexibility, the fund may place up to 10% of net assets in
cash or investment-grade short-term securities. In abnormal market conditions,
it may invest more than 10% in these securities as a defensive tactic.
RISK FACTORS
[GRAPHIC]
As with any growth fund, the value of your investment will fluctuate in
response to stock market movements. By focusing on a relatively small number of
sectors or issuers, the fund runs the risk that any factor influencing those
sectors or issuers will have a major effect on performance. The fund may invest
in companies with smaller market capitalizations, which represent higher
near-term risks than larger capitalization companies. These factors make the
fund likely to experience higher volatility than most other types of growth
funds. Before you invest, please read "More about risk" starting on page 28.
PORTFOLIO MANAGEMENT
[GRAPHIC]
Kevin R. Baker is leader of the portfolio management team for the fund. A
second vice president of the adviser, he has been a member of the management
team since joining the adviser in January 1994. He has been in the investment
business since 1986.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
[GRAPHIC]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
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(1) 5.00%
Redemption fee(2) none none
Exchange fee none none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management fee 0.80% 0.80%
12b-1 fee(3) 0.30% 1.00%
Other expenses 0.49% 0.49%
Total fund operating expenses 1.59% 2.29%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $65 $ 98 $132 $229
Class B shares
Assuming redemption
at end of period $73 $102 $143 $245
Assuming no redemption $23 $ 72 $123 $245
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Except for investments of $1 million or more; see "How sales charges are
calculated."
(2) Does not include wire redemption fee (currently $4.00).
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
16 SPECIAL OPPORTUNITIES FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[GRAPHIC]
The figures below have been
audited by the fund's
independent auditors,
Price Waterhouse LLP.
[BAR CHART]
(6.71) 17.53
VOLATILITY, AS INDICATED BY CLASS A
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
(scale varies from fund to fund)
<TABLE>
<CAPTION>
CLASS A - YEAR ENDED OCTOBER 31, 1994(4) 1995
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.93
Net investment income (loss) (0.03)(2) (0.07)(2)
Net realized and unrealized gain
(loss) on investments (0.54) 1.46
Total from investment operations (0.57) 1.39
Net asset value, end of period $ 7.93 $ 9.32
TOTAL INVESTMENT RETURN AT NET ASSET
VALUE(3) (%) (6.71) 17.53
Total adjusted investment return at
net asset value(3,4) (%) (6.83) --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted)($) 92,325 101,562
Ratio of expenses to average net assets(%) 1.50 1.59
Ratio of adjusted expenses to average net
assets(5)(%) 1.62 --
Ratio of net investment income (loss) to
average net assets (%) (0.41) (0.87)
Ratio of adjusted net investment (loss) to
average net assets(5) (%) (0.53) --
Portfolio turnover rate (%) 57 155
Fee reduction per share ($) 0.01(2) --
Average brokerage commission rate(6) ($) N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1994(4) 1995
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 8.50 $ 7.87
Net investment income (loss) (0.09)(2) (0.13)(2)
Net realized and unrealized gain (loss)
on investments (0.54) 1.45
Total from investment operations (0.63) 1.32
Net asset value, end of period $ 7.87 $ 9.19
TOTAL INVESTMENT RETURN AT NET ASSET
VALUE(3) (%) (7.41)(4) 16.77
Total adjusted investment return at net
asset value(3,4) (%) (7.53) --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)($) 131,983 137,363
Ratio of expenses to average net assets(%) 2.22 2.30
Ratio of adjusted expenses to average net
assets(5) (%) 2.34 --
Ratio of net investment income (loss) to
average net assets (%) (1.13) (1.55)
Ratio of adjusted net investment (loss) to
average net assets(5) (%) (1.25) --
Portfolio turnover rate (%) 57 155
Fee reduction per share ($) 0.01(2) --
Average brokerage commission rate(6) ($) N/A N/A
</TABLE>
(1) Class A and B shares commenced operations on November 1, 1993.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(4) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(5) Unreimbursed, without fee reduction.
(6) Per portfolio share traded. Required for fiscal years that began September
1, 1995 or later.
SPECIAL OPPORTUNITIES FUND 17
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
All John Hancock growth funds offer two classes of shares, Class A and Class B.
Each class has its own cost structure, allowing you to choose the one that best
meets your requirements. Your financial representative can help you decide.
CLASS A
- - Front-end sales charges, as described below. There are several ways to
reduce these charges, also described below.
- - Lower annual expenses than Class B shares.
CLASS B
- - No front-end sales charge; all your money goes to work for you right away.
- - Higher annual expenses than Class A shares.
- - A deferred sales charge on shares you sell within six years of purchase, as
described below.
- - Automatic conversion to Class A shares after eight years, thus reducing
future annual expenses.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
Special Equities Fund offers Class C shares, which have their own expense
structure and are available to financial institutions only. Call Investor
Services for more information (see the back cover of this prospectus).
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
CLASS A Sales Charges are as follows:
<TABLE>
<CAPTION>
CLASS A SALES CHARGES
AS A % OF AS A % OF YOUR
YOUR INVESTMENT OFFERING PRICE INVESTMENT
<S> <C> <C>
Up to $49,999 5.00% 5.26%
$50,000 - $99,999 4.50% 4.71%
$100,000 - $249,999 3.50% 3.63%
$250,000 - $499,999 2.50% 2.56%
$500,000 - $999,999 2.00% 2.04%
$1,000,000 and over See below
</TABLE>
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no front-end
sales charge. However, there is a contingent deferred sales charge (CDSC) on any
shares sold within one year of purchase, as follows:
CDSC ON $1 MILLION+INVESTMENTS
<TABLE>
<CAPTION>
YOUR INVESTMENT CDSC ON SHARES BEING SOLD
<S> <C>
First $1M - $4,999,999 1.00%
Next $1 - $5M above that 0.50%
Next $1 or more above that 0.25%
</TABLE>
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the LAST day of that month.
The CDSC is based on the lesser of the original purchase cost or the current
market value of the shares being sold, and is not charged on shares you acquired
by reinvesting your dividends. To keep your CDSC as low as possible, each time
you place a request to sell shares we will first sell any shares in your account
that are not subject to a CDSC.
CLASS B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a contingent deferred sales charge
(CDSC) on shares you sell within six years of buying them. There is no CDSC on
shares acquired through reinvestment of dividends. The CDSC is based on the
original purchase cost or the current market value of the shares being sold,
whichever is less. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:
CLASS B DEFERRED CHARGES
<TABLE>
<CAPTION>
YEARS AFTER PURCHASE CDSC ON SHARES BEING SOLD
<S> <C>
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6 years None
</TABLE>
For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the FIRST day of that month.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
18 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES There are several ways you can combine
multiple purchases of Class A shares of John Hancock funds to take advantage of
the breakpoints in the sales charge schedule. The first three ways can be
combined in any manner.
- - Accumulation Privilege -- lets you add the value of any Class A shares
you already own to the amount of your next Class A investment for
purposes of calculating the sales charge.
- - Letter of Intention -- lets you purchase Class A shares of a fund over
a 13-month period and receive the same sales charge as if all shares
had been purchased at once.
- - Combination Privilege -- lets you combine Class A shares of multiple
funds for purposes of calculating the sales charge.
To utilize: complete the appropriate section of your application, or contact
your financial representative or Investor Services to add these options to an
existing account.
GROUP INVESTMENT PROGRAM Allows established groups of four or more investors to
invest as a group. Each investor has an individual account, but for sales charge
purposes, the group's investments are lumped together making the investors
potentially eligible for reduced sales charges. There is no charge, no
obligation to invest (although initial aggregate investments must be at least
$250) and you may terminate the program at any time.
To utilize: contact your financial representative or Investor Services to find
out how to qualify.
CDSC WAIVERS As long as Investor Services is notified at the time you sell, the
CDSC for either share class will generally be waived in the following cases:
- - to make payments through certain systematic withdrawal plans
- - to make certain distributions from a retirement plan
- - because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Investor Services, or consult the SAI (see the back
cover of this prospectus).
REINSTATEMENT PRIVILEGE If you sell shares of a John Hancock fund, you may
invest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
To utilize: contact your financial representative or Investor Services.
WAIVERS FOR CERTAIN INVESTORS Class A shares may be offered without front-end
sales charges or CDSCs to various individuals and institutions, including:
- - government entities that are prohibited from paying mutual fund sales charges
- - financial institutions or common trust funds investing $1 million or more for
non-discretionary accounts
- - selling brokers and their employees and sales representatives
- - financial representatives utilizing fund shares in fee-based investment
products under agreement with John Hancock Funds
- - fund trustees and other individuals who are affiliated with these or other
John Hancock funds
- - individuals transferring assets to a John Hancock growth fund from an
employee benefit plan that has John Hancock funds
- - members of an approved affinity group financial services program
- - certain insurance company contract holders (one-year CDSC usually applies)
- - participants in certain retirement plans with at least 100 members (one-year
CDSC applies)
To utilize: if you think you may be eligible for a sales charge waiver, contact
your financial representative or Investor Services, or consult the SAI.
- -------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The
minimum initial investments for the John Hancock funds are as follows:
- non-retirement account: $1,000
- retirement account: $250
- group investments: $250
- Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must invest
at least $25 a month
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Investor Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges section of the
application. By applying for privileges now, you can avoid the delay and
inconvenience of having to file an additional application if you want to add
privileges later.
5 Make your initial investment using the table on the next page. You can
initiate any purchase, exchange or sale of shares through your financial
representative.
YOUR ACCOUNT 19
<PAGE>
BUYING SHARES
<TABLE>
<CAPTION>
<S> <C> <C>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY CHECK
[GRAPHIC] - Make out a check for the investment amount, payable to - Make out a check for the investment amount payable
"John Hancock Investor Services Corporation." to "John Hancock Investor Services Corporation."
- Deliver the check and your completed application to - Fill out the detachable investment slip from an account
your financial representative, or mail them to Investor statement. If no slip is available, include a note
Services (address on next page). specifying the fund name, your share class, your account
number, and the name(s) in which the account is
registered.
- Deliver the check and your investment slip or note to
your financial representative, or mail them to Investor
Services (address on next page).
BY EXCHANGE
[GRAPHIC] - Call your financial representative or Investor Services - Call Investor Services to request an exchange.
to request an exchange.
BY WIRE
[GRAPHIC] - Deliver your completed application to your financial - Instruct your bank to wire the amount of your
representative, or mail it to Investor Services. investment to:
First Signature Bank & Trust
- Obtain your account number by calling your financial Account # 900000260
representative or Investor Services. Routing # 211475000
Specify the fund name, your share class, your account
- Instruct your bank to wire the amount of your number and the name(s) in which the account is
investment to: registered. Your bank may charge a fee to wire funds.
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your choice of share class, the
new account number and the name(s) in which the account
is registered. Your bank may charge a fee to wire funds.
BY PHONE
[GRAPHIC] See "By wire" and "By exchange." - Verify that your bank or credit union is a member of the
Automated Clearing House (ACH) system.
- Complete the "Invest-By-Phone" and "Bank Information"
sections on your account application.
- Call Investor Services to verify that these features
are in place on your account.
- Tell the Investor Services representative the fund name,
your share class, your account number, the name(s) in
which the account is registered and the amount of
your investment.
</TABLE>
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
20 YOUR ACCOUNT
<PAGE>
SELLING SHARES
<TABLE>
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C> <C>
BY LETTER
[GRAPHIC] - Accounts of any type. - Write a letter of instruction or complete a stock power indicating the fund
- Sales of any amount. name, your share class, your account number, the name(s) in which the account
is registered and the dollar value or number of shares you wish to sell.
- Include all signatures and any additional documents that may be required
(see next page).
- Mail the materials to Investor Services.
- A check will be mailed to the name(s) and address in which the account is
registered, or otherwise according to your letter of instruction.
BY PHONE
[GRAPHIC] - Most accounts. - For automated service 24 hours a day using your touch-tone phone, call the
- Sales of up to $100,000. EASI-Line at 1-800-338-8080.
- To place your order with a representative at John Hancock Funds, call
Investor Services between 8 A.M. and 4 P.M. Eastern Time on most business
days.
BY WIRE OR ELECTRONIC FUNDS TRANSFER (EFT)
[GRAPHIC] - Requests by letter to sell - Fill out the "Telephone Redemption" section of your new account application.
any amount (accounts of any - To verify that the telephone redemption privilege is in place on an account,
type). or to request the forms to add it to an existing account, call Investor
- Requests by phone to sell up Services.
to $100,000 (accounts with - Amounts of $1,000 or more will be wired on the next business day. A $4 fee
telephone redemption will be deducted from your account.
privileges). - Amounts of less than $1,000 may be sent by EFT or by check. Funds from EFT
transactions are generally available by the second business day. Your bank
may charge a fee for this service.
BY EXCHANGE
[GRAPHIC] - Accounts of any type. - Obtain a current prospectus for the fund into which you are exchanging by
- Sales of any amount. calling your financial representative or Investor Services.
- Call Investor Services to request an exchange.
</TABLE>
Address
John Hancock Investor Services Corporation
PO Box 9116 Boston, MA 02205-9116
Phone
1-800-275-6291
Or contact your financial representative
for instructions and assistance.
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
YOUR ACCOUNT 21
<PAGE>
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You will need
a signature guarantee if:
- - your address of record has changed within the past 30 days
- - you are selling more than $100,000 worth of shares
- - you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
- - a broker or securities dealer
- - a federal savings, cooperative or other type of bank
- - a savings and loan or other thrift institution
- - a credit union
- - a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
<TABLE>
<CAPTION>
SELLER REQUIREMENTS FOR WRITTEN REQUESTS [GRAPHIC]
- ------ -------------------------------------------
<S> <C>
Owners of individual, joint, sole proprietorship, UGMA/UTMA - Letter of instruction.
(custodial accounts for minors) or general partner accounts. - On the letter, the signatures and titles of all persons
authorized to sign for the account, exactly as the account is
registered.
- Signature guarantee if applicable (see above).
Owners of corporate or association accounts. - Letter of instruction.
- Corporate resolution, certified within the past 90 days.
- On the letter and the resolution, the signature of the
person(s) authorized to sign for the account.
- Signature guarantee if applicable (see above).
Owners or trustees of trust accounts. - Letter of instruction.
- On the letter, the signature(s) of the trustee(s).
- If the names of all trustees are not registered on the account,
please also provide a copy of the trust document certified
within the past 60 days.
- Signature guarantee if applicable (see above).
Joint tenancy shareholders whose co-tenants are deceased. - Letter of instruction signed by surviving tenant.
- Copy of death certificate.
- Signature guarantee if applicable (see above).
Executors of shareholder estates. - Letter of instruction signed by executor.
- Copy of order appointing executor.
- Signature guarantee if applicable (see above).
Administrators, conservators, guardians and other sellers or - Call 1-800-225-5291 for instructions.
account types not listed above.
</TABLE>
22 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each fund and class
is determined each business day at the close of regular trading on the New York
Stock Exchange (typically 4 P.M. Eastern Time) by dividing a class's net assets
by the number of its shares outstanding.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable deferred sales charges.
EXECUTION OF REQUESTS Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after your request is accepted by
Investor Services.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, Investor Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, Investor Services is
responsible for any losses that may occur to any account due to an unauthorized
telephone call. Also for your protection, telephone transactions are not
permitted on accounts whose names or addresses have changed within the past 30
days. Proceeds from telephone transactions can only be mailed to the address of
record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
Class B shares will continue to age from the original date and will retain the
same CDSC rate as they had before the exchange, except that the rate will change
to that of the new fund if the new fund's rate is higher. A CDSC rate that has
increased will drop again with a future exchange into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may change or cancel its exchange
privilege at any time, upon 60 days' notice to its shareholders. A fund may also
refuse any exchange order.
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Investor Services. Certificated
shares can only be sold by returning the certificates to Investor Services,
along with a letter of instruction or a stock power and a signature guarantee.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten calendar days after
the purchase.
ELIGIBILITY BY STATE You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - after every transaction (except a dividend reinvestment) that affects your
account balance
- - after any changes of name or address of the registered owner(s)
- - in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS The funds generally distribute most or all of their net earnings in
the form of dividends. Any capital gains are distributed annually. Most of the
funds do not typically pay income dividends, with the exception of Disciplined
Growth Fund and Regional Bank Fund, which typically pay income dividends
semi-annually and quarterly, respectively.
YOUR ACCOUNT 23
<PAGE>
DIVIDEND REINVESTMENTS Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend record date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a fund, whether reinvested or taken as
cash, are generally considered taxable. Dividends from a fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Investor Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
- - Complete the appropriate parts of your account application.
- - If you are using MAAP to open an account, make out a check ($25 minimum) for
your first investment amount payable to "John Hancock Investor Services
Corporation." Deliver your check and application to your financial
representative or Investor Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payment or
periodic withdrawals from your account. To establish:
- - Make sure you have at least $5,000 worth of shares in your account.
- - Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
- - Specify the payee(s). The payee may be yourself or any other party, and there
is no limit to the number of payees you may have, as long as they are all on
the same payment schedule.
- - Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
- - Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Investor Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, 401(k) plans, 403(b) plans (including TSAs) and
other pension and profit-sharing plans. Using these plans, you can invest in any
John Hancock fund (except tax-free income funds) with a low minimum investment
of $250 or, for some group plans, no minimum investment at all. To find out
more, call Investor Services at 1-800-225-5291.
24 YOUR ACCOUNT
<PAGE>
FUND DETAILS
- -------------------------------------------------------------------------------
BUSINESS STRUCTURE
HOW THE FUNDS ARE ORGANIZED Each John Hancock growth fund is an open-end
management investment company or a series of such a company.
Each fund is supervised by a board of trustees, an independent body that has
ultimate responsibility for the fund's activities. The board retains various
companies to carry out the fund's operations, including the investment adviser,
custodian, transfer agent and others (see diagram). The board has the right, and
the obligation, to terminate the fund's relationship with any of these companies
and to retain a different company if the board believes it is in the
shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the fund's board. Thereafter, the board and the shareholders determine
the board's membership. The boards of the John Hancock growth funds may include
individuals who are affiliated with the investment adviser. However, the
majority of board members must be independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving a management contract or approving a 12b-1 plan (12b-1 fees
are explained in "Sales compensation").
--------------
| |
| SHAREHOLDERS |
| |
--------------
----------------------------------------------
| FINANCIAL SERVICES FIRMS AND |
| THEIR REPRESENTATIVES |
| |
DISTRIBUTION | Advise current and prospective share- |
AND SHAREHOLDER | holders on their fund investments, often |
SERVICES | in the context of an overall financial plan. |
----------------------------------------------
- ------------------------------- ---------------------------------------------
| PRINCIPAL DISTRIBUTOR | | TRANSFER AGENT |
| | | |
| John Hancock Funds, Inc. | | John Hancock Investor Service Corporation |
| 101 Huntington Avenue | | P.O. Box 9116 |
| Boston, MA 02199-7603 | | Boston, MA 02205-9116 |
| | | |
| Markets the funds and | | Handles shareholder services, including |
| distributes shares through | | recordkeeping and statements, |
| selling brokers, financial | | distribution of dividends, and processing |
| planners and other | | of buy and sell requests. |
| financial representatives. | | |
- ------------------------------ ---------------------------------------------
- --------------------- ----------------------- ---------------------
| SUBADVISER | | INVESTMENT ADVISER | | CUSTODIAN |
| DFS Advisers LLC | | John Hancock | | Investors Bank |
| 75 State Street | | Advisers, Inc. | | & Trust Co. | ASSET
| Boston, MA 02109 | |101 Huntington Avenue| | 89 South Street | MANAGEMENT
| | |Boston, MA 02199-7603| | Boston, MA 02111 |
| Provides portfolio | | | | |
| management services| | Manages the funds' | | Holds the funds' |
| to Special | | business and | | assets, settles |
| Equities Fund. | | investment | | all portfolio |
| | | activities. | |trades and collects|
| | | | | most of the |
| | | | | valuation data |
| | | | | required for |
| | | | | calculating each |
| | | | | fund's NAV. |
- --------------------- ----------------------- ---------------------
-------------------------------------
| TRUSTEES |
| |
| Supervise the funds' activities. |
| |
-------------------------------------
FUND DETAILS 25
<PAGE>
ACCOUNTING COMPENSATION The funds compensate the adviser for performing tax and
financial management services. Annual compensation for 1996 will not exceed
0.02% of each fund's average net assets.
PORTFOLIO TRADES In placing portfolio trades, the adviser may use brokerage
firms that market the fund's shares or are affiliated with John Hancock Mutual
Life Insurance Company, but only when the adviser believes no other firm offers
a better combination of quality execution (i.e., timeliness and completeness)
and favorable price.
INVESTMENT GOALS Except for Discovery Fund, Special Opportunities Fund and
Emerging Growth Fund, each fund's investment goal is fundamental and may only be
changed with shareholder approval.
DIVERSIFICATION Except for Special Opportunities Fund, all of the growth funds
are diversified.
- --------------------------------------------------------------------------------
SALES COMPENSATION
As part of their business strategies, the funds, along with John Hancock Funds,
pay compensation to financial services firms that sell the funds' shares. These
firms typically pass along a portion of this compensation to your financial
representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the funds' assets ("12b-1" refers to the federal
securities regulation authorizing annual fees of this type). The 12b-1 fee rates
vary by fund and by share class, according to Rule 12b-1 plans adopted by the
funds. The sales charges and 12b-1 fees paid by investors are detailed in the
fund-by-fund information. The portions of these expenses that are reallowed to
financial services firms are shown on the next page.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
CLASS B UNREIMBURSED DISTRIBUTION EXPENSES(1)
<TABLE>
<CAPTION>
UNREIMBURSED AS A % OF
FUND EXPENSES NET ASSETS
<S> <C> <C>
Disciplined Growth $ 3,620,687 3.99%
Discovery $ 772,708 1.81%
Emerging Growth $ 9,697,401 3.02%
Growth $ 165,787 2.01%
Regional Bank $ 41,492,867 5.90%
Special Equities $ 15,131,619 5.42%
Special Opportunities $ 6,051,842 4.49%
</TABLE>
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
INITIAL COMPENSATION Whenever you make an investment in a fund or funds, the
financial services firm receives either a reallowance from the initial sales
charge or a commission, as described below. The firm also receives the first
year's service fee at this time.
ANNUAL COMPENSATION Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.25% of its total
eligible net assets. This fee is paid quarterly in arrears.
Financial services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock Funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
26 FUND DETAILS
<PAGE>
CLASS A INVESTMENTS
<TABLE>
<CAPTION>
MAXIMUM
SALES CHARGE REALLOWANCE FIRST YEAR MAXIMUM
PAID BY INVESTORS OR COMMISSION SERVICE FEE TOTAL COMPENSATION(1)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C> <C>
Up to $49,999 5.00% 4.01% 0.25% 4.25%
$50,000 - $99,999 4.50% 3.51% 0.25% 3.75%
$100,000 - $249,999 3.50% 2.61% 0.25% 2.85%
$250,000 - $499,999 2.50% 1.86% 0.25% 2.10%
$500,000 - $999,999 2.00% 1.36% 0.25% 1.60%
REGULAR INVESTMENTS OF
$1 MILLION OR MORE
First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1 - $5M above that -- 0.25% 0.25% 0.50%
Next $1 and more above that -- 0.00% 0.25% 0.25%
Waiver investments(2) -- 0.00% 0.25% 0.25%
</TABLE>
<TABLE>
<CAPTION>
CLASS B INVESTMENTS
MAXIMUM
REALLOWANCE FIRST YEAR MAXIMUM
OR COMMISSION SERVICE FEE TOTAL COMPENSATION
(% of offering price) (% of net investment) (% of offering price)
<S> <C> <C> <C>
All amounts 3.75% 0.25% 4.00%
</TABLE>
(1) Reallowance/commission percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition.
(2) Refers to any investments made by municipalities, financial institutions,
trusts and affinity group members that take advantage of the sales charge
waivers described earlier in this prospectus.
CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.
FUND DETAILS 27
<PAGE>
- --------------------------------------------------------------------------------
MORE ABOUT RISK
A fund's risk profile is largely defined by the fund's primary securities and
investment practices. You may find the most concise description of each fund's
risk profile in the fund-by-fund information.
The funds are permitted to utilize -- within limits established by the trustees
- -- certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent that a fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following page are brief descriptions of these
securities and practices, along with the risks associated with them. The funds
follow certain policies that may reduce these risks.
As with any mutual fund, there is no guarantee that the performance of a John
Hancock growth fund will be positive over any period of time -- days, months or
years. However, stock funds as a category have historically performed better
over the long term than bond or money market funds.
- --------------------------------------------------------------------------------
TYPES OF INVESTMENT RISK
CORRELATION RISK The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments and may widen any losses.
INFORMATION RISK The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE risk The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
LEVERAGE RISK Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value.
- - HEDGED When a derivative (a security whose value is based on another security
or index) is used as a hedge against an opposite position that the fund also
holds, any loss generated by the derivative should be substantially offset by
gains on the hedged investment, and vice versa. While hedging can reduce or
eliminate losses, it can also reduce or eliminate gains.
- - SPECULATIVE To the extent that a derivative is not used as a hedge, the fund
is directly exposed to the risks of that derivative. Gains or losses from
speculative positions in a derivative may be substantially greater than the
derivative's original cost.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance.
MANAGEMENT RISK The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
MARKET RISK The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy or the market as a whole. Common to all stocks and bonds and the
mutual funds that invest in them.
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISK The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
28 FUND DETAILS
<PAGE>
HIGHER-RISK SECURITIES AND PRACTICES
This table shows each fund's investment limitations as a percentage of portfolio
assets. In each case the principal types of risk are listed (see previous page
for definitions). Numbers in this table show allowable usage only; for actual
usage, consult the fund's annual/semi-annual reports.
10 Percent of total assets (roman type in brackets)
10 Percent of net assets (roman type)
+ No policy limitation on usage; fund may be using currently
* Permitted, but has not typically been used
- -- Not permitted
<TABLE>
<CAPTION>
DISCIPLINED EMERGING REGIONAL SPECIAL SPECIAL
GROWTH DISCOVERY GROWTH GROWTH BANK EQUITIES OPPORTUNITIES
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICES
BORROWING; REVERSE REPURCHASE AGREEMENTS
The borrowing of money from banks or through
reverse repurchase agreements. Leverage, credit
risks. 5 5 [33.3] [33.3] 5 [33.3] [33.3]
REPURCHASE AGREEMENTS The purchase of a security
that must later be sold back to the seller at
the same price plus interest. Credit risk. + + + + + + +
SECURITIES LENDING The lending of securities to
financial institutions, which provide cash or
government securities as collateral. Credit risk. 5 [33.3] 30 [33.3] -- [33.3] [33.3]
SHORT SALES The selling of securities which have
been borrowed on the expectation that the market
price will drop.
- - Hedged. Hedged leverage, market, correlation,
liquidity, opportunity risks. -- * * * -- * *
- - Speculative. Speculative leverage, market,
liquidity risks. -- * -- * -- * *
SHORT-TERM TRADING Selling a security soon after
purchase. A portfolio engaging in short-term
trading will have higher turnover and transaction
expenses. Market risk. + + + + + + +
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The purchase or sale of securities for delivery
at a future date; market value may change before
delivery. Market, opportunity, leverage risks. + + + + + + +
- ----------------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
NON-INVESTMENT-GRADE SECURITIES Securities rated
below BBB/Baa are considered junk bonds. Credit,
market, interest rate, liquidity, valuation,
information risks. -- -- [10] 5 5 -- --
FOREIGN EQUITIES
- - Stocks issued by foreign companies. Market,
currency, information, natural event, political
risks. -- [25] + [15] * + +
- - American or European depository receipts, which
are dollar-denominated securities typically
issued by American or European banks and are based
on ownership of securities issued by foreign
companies. Market, currency, information, natural
event, political risks. [10] [25] + [15] * + +
RESTRICTED AND ILLIQUID SECURITIES Securities not
traded on the open market. May include illiquid
Rule 144A securities. Liquidity, valuation, market
risks. 15 15 10 15 15 15 15
- ----------------------------------------------------------------------------------------------------------------------------------
LEVERAGED DERIVATIVE SECURITIES
FINANCIAL FUTURES AND OPTIONS; SECURITIES AND INDEX
OPTIONS Contracts involving the right or obligation
to deliver or receive assets or money depending on
the performance of one or more assets or an economic
index.
- - Futures and related options. Interest rate,
currency, market, hedged or speculative leverage,
correlation, liquidity, opportunity risks. + * + * * * +
- - Options on securities and indices. Interest rate,
currency, market, hedged or speculative leverage,
correlation, liquidity, credit, opportunity risks. + 5(1) + * 5(1) * +
CURRENCY CONTRACTS Contracts involving the right or
obligation to buy or sell a given amount of foreign
currency at a specified price and future date.
- - Hedged. Currency, hedged leverage, correlation,
liquidity, opportunity risks. -- [25] + + * * +
- - Speculative. Currency, speculative leverage,
liquidity risks. -- -- -- -- * * --
</TABLE>
- ----------------
(1) Applies to purchased options only.
FUND DETAILS 29
<PAGE>
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock
growth funds:
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from portfolio management and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/ semi-annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (is legally a part of this prospectus).
To request a free copy of the current annual/semi-annual report or SAI, please
write or call:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, MA 02205-9116
Telephone: 1-800-225-5291
EASI-Line: 1-800-338-8080
TDD: 1-800-544-6713
[letterhead logo]
<PAGE>
JOHN HANCOCK DISCOVERY FUND
Class A and Class B Shares
Statement of Additional Information
December 2, 1996
This Statement of Additional Information provides information about John Hancock
Discovery Fund (the "Fund") in addition to the information that is contained in
the combined Growth Funds' Prospectus dated December 2, 1996 (the "Prospectus").
The Fund is a diversified series of John Hancock Investment Trust IV (the
"Trust"), formerly Freedom Investment Trust III.
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
Page
Organization of the Fund............................................... 2
Investment Objective and Policies...................................... 2
Investment Restrictions................................................ 7
Those Responsible for Management....................................... 11
Investment Advisory and Other Services................................. 20
Distribution Contracts................................................. 21
Net Asset Value........................................................ 23
Initial Sales Charge on Class A Shares................................. 24
Deferred Sales Charge on Class B Shares................................ 26
Special Redemptions.................................................... 29
Additional Services and Programs....................................... 29
Description of the Fund's Shares....................................... 30
Tax Status............................................................. 31
Calculation of Performance............................................. 35
Brokerage Allocation................................................... 37
Transfer Agent Services................................................ 38
Custody of Portfolio................................................... 39
Independent Auditors................................................... 39
Financial Statements................................................... 40
Appendix A - Description of Bond
and Commercial Paper Ratings........................................ A-1
<PAGE>
ORGANIZATION OF THE FUND
The Fund is a series of the Trust, an open-end investment management company
organized as a Massachusetts business trust on June 16, 1989. The Trustees have
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.
John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser.
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
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. 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/health care, 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.
Investment in Foreign Securities. The Fund may invest up to 25% of its total
assets in the securities of foreign issuers, including securities in the form of
sponsored or unsponsored American Depository Receipts (ADRs), European
Depository 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.
Investments in foreign securities may involve a greater degree of risk than
those in domestic securities. There is generally less publicly available
information about foreign companies in the form of reports and ratings similar
to those that are published about issuers in the United States. Also, foreign
issuers are generally not subject to uniform accounting, auditing and financial
reporting requirements comparable to those applicable to United States issuers.
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, so that the Fund's investments on
foreign exchanges may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement.
2
<PAGE>
Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. 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,
nationalization 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 terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
The dividends, in some cases, capital gains, and interest payable on certain of
the Fund's foreign portfolio securities, may be subject to foreign withholding
or other foreign taxes, thus reducing the net amount of income 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. In a repurchase agreement the Fund buys a security for a
relatively short period (usually not more than 7 days) subject to the obligation
to sell it back to the issuer at a fixed time and price plus accrued interest.
The Fund will enter into repurchase agreements only with member banks of the
Federal Reserve System and with "primary dealers" in U.S. Government securities.
The Adviser will continuously monitor the creditworthiness of the parties with
whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income decline in
value of the underlying securities or lack of access to income during this
period as well as the expense of enforcing its rights.
Reverse Repurchase Agreements. The Fund may also enter into reverse purchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain with the
Fund's custodian a separate account consisting of highly liquid, marketable
securities in an amount at least equal to the repurchase prices of the
securities (plus any accrued interest thereon) under such agreements. In
3
<PAGE>
addition, the Fund will not enter into reverse repurchase agreements and other
borrowings exceeding in the aggregate 5% of the market value of its total
assets. The Fund will enter into reverse repurchase agreements only with
federally insured banks or savings and loan associations which are approved in
advance as being creditworthy by the Board of Trustees. Under the procedures
established by the Board of Trustees, the Adviser will monitor the
creditworthiness of the banks involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. However, the Fund will not invest more than 15% of its
net assets in illiquid investments. If the Trustees determines, based upon a
continuing review of the trading markets for specific Section 4(2) paper or Rule
144A securities, that they are liquid, they will not be subject to the 15%
limit. The Trustees may adopt guidelines and delegate to the Adviser the daily
function of determining the monitoring and liquidity of restricted securities.
The Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations. The Trustees will carefully monitor the
Fund's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of illiquidity
in the Fund if qualified institutional buyers become for a time uninterested in
purchasing these restricted securities.
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. The Fund may invest up
to 15% of its net assets in short-term investment grade (i.e., rated at the time
of purchase AAA, AA, A or BBB by S&P or Aaa, Aa, A or Baa by Moody's) debt
securities. 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 these events will require the sale of the securities by the
Fund, but the Adviser will consider event in its determination of whether the
Fund should continue to hold the securities.
Foreign Currency Transactions. The foreign currency transactions of the Fund may
be conducted on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market. The Fund may enter
into forward foreign currency contracts involving currencies of the different
countries in which it will invest as a hedge against possible variations in the
foreign exchange rate between these currencies. This is accomplished through
contractual agreements to purchase or sell a specified currency at a specified
future date and price set at the time of the contract. The Fund 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. The Fund's dealings in
forward foreign currency contracts will be limited to hedging either specific
transactions or portfolio positions. The Fund will not attempt to hedge all of
its foreign portfolio positions. The Fund will not engage in speculative forward
currency transactions.
If the Fund enters into a forward contract to purchase foreign currency, its
custodian bank will segregate cash or liquid high-grade debt securities (i.e.
securities rated in one of the top three rating categories by Moody's or S&P) in
a separate account of the Fund in an amount necessary to complete the forward
contract. These assets will be marked to market daily and if the value of the
assets in the separate account declines, additional cash or liquid assets will
4
<PAGE>
be added so that the value of the account will equal the amount of the Fund's
commitments in forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. These transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates.
The cost to the Fund of engaging in foreign currency transactions varies with
such factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Since transactions in foreign currency are
usually conducted on a principal basis, no fees or commissions are involved.
Future 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 future 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.
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. 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.
5
<PAGE>
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.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities and money market
funds. 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.
Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price subject to the Fund's Fundamental
Investment Restriction. Generally, warrants and stock purchase rights do not
carry with them the right to receive dividends or exercise voting rights with
respect to the underlying securities, and they do not represent any rights in
the assets of the issuer. As a result, an investment in warrants and rights may
be considered to entail greater investment risk than certain other types of
investments. In addition, the value of warrant and rights does not necessarily
change with the value of the underlying securities, and they cease to have value
if they are not exercised on or prior to their expiration date. Investment in
6
<PAGE>
warrants and rights increases the potential profit or loss to be realized from
the investment of a given amount of the Fund's assets as compared with investing
the same amount in the underlying stock.
Short Sales. The Fund may engage in short sales in order to profit from an
anticipated decline in the value of a security. The Fund may also engage in
short sales to attempt to limit its exposure to a possible market decline in the
value of its portfolio securities through short sales of securities which the
Adviser believes possess volatility characteristics similar to those being
hedged. To effect such a transaction, the Fund must borrow the security sold
short to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. Until the security is replaced the Fund is required to pay to the
lender any accrued interest and may be required to pay a premium.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid, high grade debt securities equal in value to the Fund's
commitment. These assets will be valued daily at market, and additional cash or
securities will be segregated in a separate account to the extent that the total
value of the assets in the account declines below the amount of the when-issued
commitments. Alternatively, the Fund may enter into offsetting contracts for the
forward sale of other securities that it owns.
Short Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments, or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income.
Short-term trading may have the effect of increasing portfolio turnover rate. A
high rate of portfolio turnover (100% or greater) involves correspondingly
greater brokerage expenses and may make it more difficult for the Fund to
qualify as a regulated investment company for federal income tax purposes. The
Fund's portfolio turnover rate is set forth in the table under the caption
"Financial Highlights" in the Prospectus.
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 by the lesser of (1) the holders of 67% or more of
the Fund's shares represented at a meeting if at least 50% of the Fund's
outstanding shares are present in person or by proxy at that meeting or (2) more
than 50% of the Fund's outstanding shares.
7
<PAGE>
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.
8
<PAGE>
(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 Trustees without shareholder approval.
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
15% 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 1933 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,
9
<PAGE>
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 securities
trading account (except for a joint account with other funds managed by
the Adviser for repurchase agreements permitted by the Securities and
Exchange Commission pursuant to an exemptive order).
(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. The Fund has agreed with a states
securities administrator that it will not purchase the following securities:
The Fund will not invest more than 15% of its total assets in the
aggregate in securities of issuers which, together with any
predecessors, have a record of less than three years continuous
operation, and in securities of issuers which are restricted as to
disposition, including securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933.
The Fund will not, with respect to 75% of its total assets, acquire
more than 10% of the outstanding voting securities of any issuer.
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.
10
<PAGE>
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Trustees of the Trust 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 Trustee
of the Trust are also Officers and Directors of the Adviser or Officers and
Directors of the Fund's principal distributor, John Hancock Funds, Inc. ("John
Hancock Funds").
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1, 2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
October 1944 Group"); Chairman, NM Capital
Management, Inc. ("NM Capital") and
John Hancock Advisers International
Limited ("Advisers International");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds"), John
Hancock Investor Services
Corporation ("Investor Services"),
First Signature Bank and Trust
Company and Sovereign Asset
Management Corporation
("SAMCorp."); Director, John
Hancock Freedom Securities
Corporation, John Hancock Insurance
Agency, Inc. ("Insurance Agency,
Inc."), John Hancock Capital
Corporation and New England/Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science; Vice
Chairman and President, the Adviser
(until July 1992); Chairman, John
Hancock Distributors, Inc. (until
April, 1994).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
11
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dennis S. Aronowitz Trustee (3) Professor of Law, Boston University
Boston University School of Law; Trustee, Brookline
Boston, Massachusetts Savings Bank.
June 1931
Richard P. Chapman, Jr. Trustee (1, 3) President, Brookline Savings Bank;
160 Washington Street Director, Federal Home Loan Bank of
Brookline, MA 02147 Boston (lending); Director, Lumber
February 1935 Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University
(education); Director, Depositors
Insurance Fund, Inc. (insurance).
William J. Cosgrove Trustee (3) Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.; EVP
Resource Evaluation, Inc.
(consulting) (until October 1993);
Trustee, the Hudson City Savings
Bank (since 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
12
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Douglas M. Costle Trustee (1, 3) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow,
Woodstock, VT 05091 Institute for Sustainable
July 1939 Communities, Montpelier, Vermont
(since 1991); Dean Vermont Law
School (until 1991); Director, Air
and Water Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
Mitretek Systems (governmental
consulting services).
Leland O. Erdahl Trustee (3) Director, Santa Fe Ingredients
8046 Mackenzie Court Company of California, Inc. and
Las Vegas, NV 89129 Santa Fe Ingredients Company, Inc.
December 1928 (private food processing
companies), Uranium Resources,
Inc.; President, Stolar, Inc.
(1987-1991); President, Albuquerque
Uranium Corporation (1985-1992);
Director, Freeport-McMoRan Copper &
Gold Company, Inc., Hecla Mining
Company, Canyon Resources
Corporation and Original Sixteen to
One Mines, Inc. (1984-1987 and
1991-1995) (management consultant).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
13
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard A. Farrell Trustee(3) President of Farrell, Healer & Co.,
Venture Capital Partners (venture capital management firm)
160 Federal Street (since 1980); Prior to 1980, headed
23rd Floor the venture capital group at Bank
Boston, MA 02110 of Boston Corporation.
November 1932
Gail D. Fosler Trustee (3) Vice President and Chief Economist,
4104 Woodbine Street The Conference Board (non-profit
Chevy Chase, MD 20815 economic and business research).
December 1947
William F. Glavin Trustee (3) President, Babson College; Vice
Babson College Chairman, Xerox Corporation (until
Horn Library June 1989); Director, Caldor Inc.,
Babson Park, MA 02157 Reebok, Ltd. (since 1994) and Inco
March 1931 Ltd.
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser;
Boston, MA 02199 Director, The Berkeley Group, John
April 1953 Hancock Funds, Investor Services
(since October 1996); Director,
Advisers International; Executive
Vice President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
14
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dr. John A. Moore Trustee (3) President and Chief Executive
Institute for Evaluating Health Risks Officer, Institute for Evaluating
1629 K Street NW Health Risks, (nonprofit
Suite 402 institution) (since September 1989).
Washington, DC 20006-1602
February 1939
Patti McGill Peterson Trustee (3) Cornell Institute of Public Affairs,
Cornell University Cornell University (since August
Institute of Public Affairs 1996); President Emeritus of Wells
364 Upson Hall College and St. Lawrence University;
Ithica, NY 14853 Director, Niagara Mohawk Power
May 1943 Corporation (electric utility) and
Security Mutual Life (insurance).
John W. Pratt Trustee (3) Professor of Business Administration
2 Gray Gardens East at Harvard University Graduate
Cambridge, MA 02138 School of Business Administration
September 1931 (since 1961).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
15
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, Investor Services, John
August 1937 Hancock Distributors, Inc.,
Insurance Agency, Inc., John Hancock
Subsidiaries, Inc., SAMCorp. and NM
Capital; Trustee, The Berkeley
Group; Director, JH Networking
Insurance Agency, Inc.; Director,
John Hancock Property and Casualty
Insurance and its affiliates (until
November, 1993)
Edward J. Spellman, CPA Trustee (3) Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL 33308
November 1932
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, Investor
Services, SAMCorp., Insurance
Agency, Inc., Southeastern Thrift &
Bank Fund and NM Capital; Senior
Vice President, The Berkeley Group;
President, the Adviser (until
December 1994);
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
16
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds and Investor Services.
February 1935
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Investor Services and John Hancock
July 1950 Funds; Counsel, John Hancock Mutual
Life Insurance Company.
Susan S. Newton Vice President and Secretary Vice President and Assistant
101 Huntington Avenue Secretary, the Adviser; Vice
Boston, MA 02199 President, John Hancock Funds,
March 1950 Investor Services; Secretary,
SAMCorp; Vice President, The
Berkeley Group, John Hancock
Distributors, Inc. (until 1994).
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
</TABLE>
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
17
<PAGE>
All of the officers listed are officers or employees of the Adviser or
Affiliated Companies. Some of the Trustees and officers may also be officers
and/or directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
As of October 31, 1996, the officers and trustees of the Fund as a group
beneficially owned less than 1% of the outstanding shares.
As of October 31, 1996, the following shareholder beneficially owned 5% of the
outstanding shares of the Fund listed below:
<TABLE>
<CAPTION>
Number of Shares Percentage of total
Name and Address of of beneficial outstanding shares of
Shareholder Class of Shares interest owned the class of the Fund
- ----------- --------------- -------------- ---------------------
<S> <C> <C> <C>
MLPF&S For the B 633,754 10.19%
Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Drive East
Jacksonville FL 32246-6484
</TABLE>
18
<PAGE>
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. Messrs. Boudreau, Scipione and Ms.
Hodsdon each a non-independent Trustee, and each of the officers of the Fund are
interested persons of the Adviser, and/or affiliates are compensated by the
Adviser and receive no compensation from the Fund for their services.
<TABLE>
<CAPTION>
Total Compensation From
Aggregate Compensation the Fund and John Hancock
Independent Trustees From the Fund(1) Fund Complex to Trustees(2)
- -------------------- ---------------- ---------------------------
<S> <C> <C>
Dennis S. Aronowitz $ - $ 61,050
William A. Barron, III* $ 107 $ 41,750
Richard P. Chapman, Jr.+ $ - $ 62,800
William J. Cosgrove+ $ - $ 61,050
Douglas M. Costle $ 876 $ 41,750
Leland O. Erdahl $ 876 $ 41,750
Richard A. Farrell $ 876 $ 43,250
Gail D. Fosler $ - $ 60,800
William F. Glavin+ $ 821 $ 37,500
Patrick Grant* $ 107 $ 43,750
Ralph Lowell, Jr.* $ 107 $ 41,750
Dr. John A. Moore $ 876 $ 41,750
Patti McGill Peterson $ 876 $ 41,750
John W. Pratt $ 876 $ 41,750
Edward J. Spellman $ - $ 61,050
------ --------
$6,398 $723,500
</TABLE>
(1) For the fiscal year ended July 31, 1996.
(2) The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1995.
* Messrs. Barron, Grant and Lowell retired from their respective positions as
Trustees effective January 1, 1996.
+ On December 31, 1995, the value of the aggregate deferred compensation from
all funds in the John Hancock Fund Complex for Mr. Chapman was $54,681, for
Mr. Cosgrove was $54,243 and for Mr. Glavin was $32,061 under the John
Hancock Deferred Compensation Plan for Independent Trustees.
19
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603
was organized in 1968 and presently has more than $19 billion in assets under
management in its capacity as investment adviser to the Fund and the other
mutual funds and publicly traded investment companies in the John Hancock group
of funds having a combined total of over 1,080,000 shareholders. The Adviser is
an affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of $80
billion, the Life 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 130
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 Adviser
(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 and (b) provide supervision over all aspects of the Fund's
operations except those which are delegated to a custodian, transfer agent or
other agent.
As compensation for its services under the Advisory Agreement, the Adviser
receives from the Fund a fee computed and paid monthly based upon the following
annual rates: 0.75% of the Fund's first $750 million of average daily net
assets, and 0.70% of average daily net assets in excess of that amount.
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 transfer agents and dividend disbursing
agents; legal, accounting, financial, management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of the
Adviser's employees rendering such services to the Fund; 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.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser for the Fund or for other funds or clients for which
the Adviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made insofar as feasible, for
the respective funds or clients in a manner deemed equitable to all of them. To
the extent that transactions on behalf of more than one client of the Adviser or
20
<PAGE>
its affiliates may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
Pursuant to the investment management contract, the Adviser is not liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which its contract relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless disregard of the
obligations and duties under the contract.
Under the investment management contract, the Fund may use the name "John
Hancock" or any name derived from or similar to it only for so long as the
contract or any extension, renewal or amendment thereof remains in effect. If
the contract is no longer in effect, the Fund (to the extent that it lawfully
can) will cease to use such a name or any other name indicating that it is
advised by or otherwise connected with the Adviser. In addition, the Adviser or
the Life Company may grant the nonexclusive right to use the name "John Hancock"
or any similar name to any other corporation or entity, including but not
limited to any investment company of which the Life Company or any subsidiary or
affiliate thereof or any successor to the business of any subsidiary or
affiliate thereof shall be the investment adviser.
The continuation of the Advisory Agreement was last approved on August 27, 1996
by all of the Trustees; and on November 15, 1995 by the Fund's shareholders. 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 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, 1994, 1995 and 1996, the Fund paid the
Adviser investment advisory fees, respectively, of $383,127, $294,993 and
$455,664.
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal year ended July 31, 1996, the Fund paid the
Adviser $1,800 for services under this agreement from the effective date of July
1, 1996.
DISTRIBUTION CONTRACTS
The Fund has a Distribution Agreement with John Hancock Funds and Freedom
Distributors Corporation (together the "Distributors").
Under the agreement, 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, 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 Prospectus.
The Fund's Trustees adopted Distribution Plans with respect to Class A and Class
B shares (the "Plans"), pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Under the Plans the Fund will pay distribution and service fees at an
aggregate annual rate of 0.30% and 1.00%, respectively, of the Fund's daily net
21
<PAGE>
assets attributable to shares of that class. However, the service fee will not
exceed 0.25% of the Fund's average daily net assets attributable to each class
of shares. In each case, up to 0.25% is for service expenses and the remaining
amount is for distribution expenses. The distribution fees will be used to
reimburse the Distributors for their distribution expenses, including but not
limited to: (i) initial and ongoing sales compensation to Selling Brokers and
others (including affiliates of the Distributors) engaged in the sale of Fund
shares; (ii) marketing, promotional and overhead expenses incurred in connection
with the distribution of Fund shares; and (iii) with respect to Class B shares
only, interest expenses on unreimbursed distribution expenses.
The service fees will be used to compensate Selling Brokers for providing
personal and account maintenance services to shareholders. In the event the
Distributors are not fully reimbursed for payments or expenses they incur under
the Class A 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. The Fund does not treat unreimbursed expenses under the Class B Plan
as a liability of the Fund. For the fiscal year ended July 31, 1996 an aggregate
of $772,708 of distribution expenses or 1.81% of the average net assets of the
Class B shares of the Fund, was not reimbursed or recovered by the Distributors
through the receipt of deferred sales charges or 12b-1 fees in prior periods.
The Plans were approved by a majority of the voting securities of the Fund. The
Plans and all amendments were approved by the Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plans (the "Independent
Trustees"), by votes cast in person at meetings called for the purpose of voting
on such Plans.
Pursuant to the Plans, at least quarterly, the Distributors provide the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
The Plans provide that they will continue in effect only so long as their
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. The Plans provide that they may be terminated without
penalty, (a) by a 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 Distributors, and (c) automatically in the event of
assignment. The Plans further provide that they 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 that Plan. Each Plan provides that no material
amendment to the Plan will, in any event, be effective unless it is approved by
a vote of a majority of the Trustees and the Independent Trustees of the Fund.
The holders of Class A and Class B shares have exclusive voting rights with
respect to the Plan applicable to their respective class of shares. In adopting
the Plans, the Trustees concluded that, in their judgment, there is a reasonable
likelihood that the 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.
22
<PAGE>
For the fiscal year ended July 31, 1996, the Distributors received $41,850 and
$426,103 from the Fund with respect to Class A shares and Class B shares,
respectively. During the fiscal year ended July 31, 1996, the Distributors paid
the following amounts of expenses in connection with their services for the
Fund:
<TABLE>
<CAPTION>
Expense Items Class A Class B
- ------------- ------- -------
<S> <C> <C>
Advertising and Promotion Expense $ 7,962 $ 60,874
Printing and Mailing of Prospectuses to New $ 5,028 $ 31,313
Shareholders
Trail Payments to Underwriters and Selling Brokers $ 4,001 $100,185
and Compensation to Sales Personnel $24,859 $198,673
Interest, Carrying or other Finance Charges $ -0- $ 35,058
</TABLE>
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
Debt investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices. Equity securities traded on a principal exchange or NASDAQ
National Market Issues are generally valued at last sale price on the day of
valuation. Securities in the aforementioned category for which no sales are
reported and other securities traded over-the-counter are generally valued at
the mean between the current closing bid and asked prices. Short-term debt
investments which have a remaining maturity of 60 days or less are generally
valued at amortized cost which approximates market value. If market quotations
are not readily available or if in the opinion of the Adviser any quotation or
price is not representative of true market value, the fair value of the security
may be determined in good faith in accordance with procedures approved by the
Trustees.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. 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 the Fund's NAV. If quotations
are not readily available, or the value has been materially affected by the
events occurring after closing of a foreign market, assets are valued by a
method that Trustees believed accurately reflects fair value. The NAV for each
fund and class is determined each business day at the close of regular trading
on the New York Stock Exchange (typically 4:00 p.m. Eastern Time) by dividing a
class's net asset by the number of its shares outstanding. On any day an
international market is closed and the New York Stock Exchange is open, any
foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which the Fund's NAV is not calculated.
Consequently, the Fund's portfolio securities may trade and the NAV of the
Fund's redeemable securities may be significantly affected on days when a
shareholder has no access to the Fund.
23
<PAGE>
INITIAL SALES CHARGE ON CLASS A SHARES
Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). Share certificates
will not be issued unless requested by the shareholder in writing, and then they
will only be issued for full shares. The Trustees reserve the right to change or
waive the Fund's minimum investment requirements and to reject any order to
purchase shares (including purchase by exchange) when in the judgment of the
Adviser such rejection is in the Fund's best interest.
The sales charges applicable to purchases of Class A shares of the Fund are
described in the 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
of the Fund, 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, owned by the investor, or if John Hancock Investor Services Corporation
("Investor Services") is notified by the investor's dealer or the investor at
the time of the purchase, the cost of the Class A shares owned.
Combined Purchases. In calculating the sales charge applicable to purchases of
Class A shares made at one time, the purchases will be combined if made by (a)
an individual, his or her spouse and their children under the age of 21,
purchasing securities for his or their own account, (b) a trustee or other
fiduciary purchasing for a single 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 Investor
Services or a Selling Broker's representative.
Without Sales Charge. Class A shares may be offered without a front-end sales
charge or CDSC to various individuals and institutions as follows:
* Any state, county or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment
laws from paying a sales charge or commission when it purchases shares
of any registered investment management company.
* A bank, trust company, credit union, savings institution or other
depository institution, its trust departments or common trust funds if
it is purchasing $1 million or more for non-discretionary customers or
accounts.
* A Trustee or officer of the Trust; a Director or officer of the Adviser
and its affiliates or Selling Brokers; employees or sales
representatives of any of the foregoing; retired officers, employees or
Directors of any of the foregoing; a member of the immediate family
(spouse, children, mother, father, sister, brother, mother-in-law,
father-in-law) of any of the foregoing; or any fund, pension, profit
sharing or other benefit plan for the individuals described above.
* A broker, dealer, financial planner, consultant or registered
investment advisor that has entered into an agreement with John Hancock
Funds providing specifically for the use of Fund shares in fee-based
investment products or services made available to their clients.
* A former participant in an employee benefit plan with John Hancock
funds, when he or she withdraws from his or her plan and transfers any
or all of his or her plan distributions directly to the Fund.
* A member of an approved affinity group financial services plan.
* A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.
24
<PAGE>
* 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 following rate:
Amount Invested CDSC Rate
- --------------- ---------
$1 to $4,999,999 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%
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.
Accumulation Privilege. Investors (including investors combining purchases) who
are already Class A shareholders may also obtain the benefit of a reduced sales
charge by taking into account not only the amount then being invested but also
the purchase price or current account value of the Class A shares already held
by such person.
Combination Privilege. Reduced sales charges (according to the schedule set
forth in the Prospectus) also are available to an investor based on the
aggregate amount of his concurrent and prior investments in Class A shares of
the Fund and shares of all other John Hancock funds which carry a sales charge.
Letter of Intention. Reduced sales charges are also applicable to investments
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 IRAs, SEP, SARSEP, 401(k),
403(b), (including TSAs) and Section 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 Investor Services. The sales charge
applicable to all amounts invested under the LOI is computed as if the aggregate
amount intended to be invested had been invested immediately. If such aggregate
amount is not actually invested, the difference in the sales charge actually
paid and the sales charge payable had the LOI not been in effect is due from the
investor. However, for the purchases actually made within the specified period
(within 13 or 48 months) 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 specified period, at which time the
escrowed Class A shares will be released. If the total investment specified in
the LOI is not completed, the Class A shares held in escrow may be redeemed and
the proceeds used as required to pay such sales charge as may be due. By signing
the LOI, the investor authorizes Investor Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
25
<PAGE>
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 the Fund will receive the full
amount of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the Prospectus as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
shares being redeemed. No CDSC will be imposed on increases in account value
above the initial purchase prices, including Class B shares derived from
reinvestment of dividends or capital gains distributions. No CDSC will be
imposed on shares derived from reinvestment of dividends or capital gains
distributions.
Class B shares are not available to full-service defined contribution plans
administered by Investor Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.
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 purposes 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 first day
of the month.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend and capital gain reinvestment, and next from the shares you have held
the longest during the six-year period. For this purpose, the amount of any
increase in a share's value above its initial purchase price is not regarded as
a share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price. Upon redemption, appreciation is effective only on a per share basis for
those shares being redeemed. Appreciation of shares cannot be redeemed CDSC free
at the account level.
When requesting a redemption for a specific dollar amount, please indicate if
you require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $12 per share $600
* Minus proceeds of 10 shares not subject to CDSC
(dividend reinvestment) -120
* Minus appreciation on remaining shares (40 shares X $2) - 80
----
* Amount subject to CDSC $400
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<PAGE>
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the
Prospectus for additional information regarding the CDSC.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a CDSC,
unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account
if you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in
"Sales Charge Reductions and Waivers" of the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 12% of your account
value, including reinvested dividends, at the time you established your
periodic withdrawal plan and 12% of the value of subsequent investments
(less redemptions) in that account at the time you notify Investor
Services. (Please note, this waiver does not apply to periodic
withdrawal plan redemptions of Class A shares that are subject to a
CDSC.)
For Retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b), 401(k),
Money Purchase Pension Plan, Profit-Sharing Plan and other qualified plans as
described in the Internal Revenue Code) unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions
under the Internal Revenue Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans under Section
401(a) of the Code (such as 401(k), Money Purchase Pension Plan,
Profit-Sharing Plan).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares
prior to May 15, 1995.
27
<PAGE>
Please see matrix for reference.
CDSC Waiver Matrix for Class B Funds
<TABLE>
<CAPTION>
Type of 401(a) Plan 403(b) 457 IRA, IRA Non-Retirement
Distribution (401(k), MPP, Rollover
PSP)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Death or Waived Waived Waived Waived Waived
Disability
- ------------------------------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account value
mandatory annually in periodic
distributions payments
or 12% of account
value annually
in periodic
payments
- ------------------------------------------------------------------------------------------------------------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account value
and 70 1/2 Expectancy or 12% of annually in periodic
account payments
value annually
in periodic
payments
- ------------------------------------------------------------------------------------------------------------------
Under 59 1/2 Waived Waived for Waived for Waived for annuity 12% of account value
annuity annuity payments (72t) or 12% annually in periodic
payments payments of account value payments
(72t) or 12% (72t) or annually in periodic
of account 12% of payments
value account
annually in value
periodic annually in
payments periodic
payments
- ------------------------------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Termination of Plan Not Waived Not Waived Not Waived Not Waived N/A
- ------------------------------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Return of Excess Waived Waived Waived Waived N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services at the time you make your redemption. The waiver will be
granted once Investor Services has confirmed that you are entitled to the
waiver.
28
<PAGE>
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, he/she will incur a brokerage charge. Any
such securities would be valued for the purposes of making such payment at the
same value as used in determining net asset value. The Fund has, however,
elected to be governed by Rule 18f-1 under the Investment Company Act. Under
that rule, the Fund must redeem its shares for cash except to the extent that
the redemption payments to any shareholder during any 90-day period would exceed
the lesser of $250,000 or 1% of the Fund's net asset value at the beginning of
such period.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. 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. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares. Since the redemption price of the Fund shares 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 the purchases of Class A shares and the CDSC
imposed on redemptions of Class B shares and because redemptions are taxable
events. Therefore, a shareholder should not purchase Class A or Class B shares
at the same time as a Systematic Withdrawal Plan is in effect. The Fund reserves
the right to modify or discontinue the Systematic Withdrawal Plan of any
shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Investor Services.
Monthly Automatic Accumulation Program (MAAP). The program is explained in the
Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice if
any investment is not honored by the shareholder's bank. The bank shall be under
no obligation to notify the shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the due date of any investment.
Reinvestment Privilege. A shareholder who has redeemed Fund shares may, within
120 days after the date of redemption, reinvest without payment of a sales
charge any part of the redemption proceeds in shares of the same class of the
Fund or another John Hancock fund, subject to the minimum investment limit in
that fund. The proceeds from the redemption of Class A shares may be reinvested
at net asset value without paying a sales charge in Class A shares of the Fund
or in Class A shares of any John Hancock fund. If a CDSC was paid upon a
redemption, a shareholder may reinvest the proceeds from this redemption at net
29
<PAGE>
asset value in additional shares of the class from which the redemption was
made. The shareholder's account will be credited with the amount of any CDSC
charged upon the prior redemption and the new shares will continue to be subject
to the CDSC. The holding period of the shares acquired through reinvestment
will, for purposes of computing the CDSC payable upon a subsequent redemption,
include the holding period of the redeemed shares. The Fund may modify or
terminate the reinvestment privilege at any time.
A redemption or exchange of Fund shares is a taxable transaction for
Federal income tax purposes even if the reinvestment privilege is exercised, and
any gain or loss realized by a shareholder on the redemption or other
disposition of Fund shares will be treated for tax purposes as described under
the caption "TAX STATUS."
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund, without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have authorized shares of the Fund and one other
series. Additional series may be added in the future. The Declaration of Trust
also authorizes the Trustees to classify and reclassify the shares of the Fund
or any new series of the Trust, 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. Holders of
Class A 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 of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts 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 and Class B
shares will bear any class expenses properly allocable to that class of shares,
subject to the conditions the Internal Revenue Services imposes with respect to
the multiple-class structures. Similarly, the net asset value per share may vary
depending on whether Class A or Class B shares are purchased.
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
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 below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with 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.
30
<PAGE>
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 Declaration of Trust contains an express disclaimer
of shareholder liability for acts, obligations or affairs of the Fund. The
Declaration of Trust also provides for indemnification out of the Fund's assets
for all losses and expenses of any shareholder held personally liable by reason
of being or having been a shareholder. The Declaration of Trust also provides
that no series of the Trust shall be liable for the liabilities of any other
series. Furthermore, no fund included in this Fund's prospectus shall be liable
for the liabilities of any other John Hancock Fund. 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.
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.
A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.
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 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 in accordance with the timing requirements of the
Code.
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.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss, and investment company taxable income is all taxable
income and capital gains, other than net capital gain, after reduction by
deductible expenses.) The tax treatment described above will apply without
regard to whether distributions are received in cash or reinvested in additional
shares of the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
31
<PAGE>
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions involving foreign currency-denominated debt securities,
foreign currency forward contracts, foreign currencies, or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. Any such transactions that are not
directly-related to the Fund's investment in stock or securities, possibly
including any such transaction not used for hedging purposes, may increase the
amount of gain it is deemed to recognize from the sale of certain investments or
derivatives held for less than three months, which gain is limited under the
Code to less than 30% of its gross income for each taxable year, 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 gross income for
each taxable year. 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 the resulting overall
ordinary loss for such year would not be deductible by the Fund or its
shareholders in future years.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Investors may be entitled to claim U.S. foreign tax credits or deductions with
respect to foreign income taxes or certain other foreign taxes ("qualified
foreign taxes"), subject to certain provisions and limitations contained in the
Code. Specifically, if more than 50% of the value of the Fund's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to (i) include in
ordinary gross income (in addition to taxable dividends and distributions
actually received) their pro rata shares of qualified foreign taxes paid by the
Fund even though not actually received by them, and (ii) treat such respective
pro rata portions as qualified foreign taxes paid by them.
If the Fund makes this election, shareholders may then deduct such pro rata
portions of qualified foreign taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. Federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of qualified foreign taxes paid by the Fund,
although such shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit for such foreign
taxes may be required to treat a portion of dividends received from the Fund as
a separate category of income for purposes of computing the limitations on the
foreign tax credit. Tax-exempt shareholders will ordinarily not benefit from
this election. Each year (if any) that the Fund files the election described
above, its shareholders will be notified of the amount of (i) each shareholder's
pro rata share of qualified foreign taxes paid by the Fund and (ii) the portion
of Fund dividends which represents income from each foreign country. If the Fund
does not satisfy the 50% requirement described above or otherwise does not make
the election, the Fund will deduct the foreign taxes it pays in determining the
amount it has available for distribution to shareholders, and shareholders will
not include these foreign taxes in their income, nor will they be entitled to
any tax deductions or credits with respect to such taxes.
If the Fund invests in stock of certain non-U.S. corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, rents, royalties or capital gain) or hold at least 50% of their
assets in investments producing such passive income ("passive foreign investment
companies"), the Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Fund would
not be able to pass through to its shareholders any credit or deduction for such
a tax. Certain elections may, if available, ameliorate these adverse tax
consequences, but any such election would require the Fund to recognize taxable
32
<PAGE>
income or gain without the concurrent receipt of cash. The Fund may limit and/or
manage its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
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 seek 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 and the use of certain other transactions or
derivatives 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. The
resulting gains or losses may therefore vary considerably from year to year. At
the time of an investor's purchase of shares of the Fund, a portion of the
purchase price may be attributable to by realized or unrealized appreciation in
the Fund's portfolio or undistributed taxable income of the Fund. Consequently,
subsequent distributions on those shares from such appreciation or income may be
taxable to such investor even if the net asset value of the investor's shares
is, as a result of the distributions, reduced below the investor's cost for such
shares and the distributions in reality represent a return of a portion of the
purchase price.
Upon a redemption of shares of the Fund (including by exercise of the exchange
privilege) a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's 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 tax holding period for the shares
and subject to the special rules described below. 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 may
be disallowed for tax purposes to the extent the shares disposed of are replaced
with other shares of the Fund within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of, such as pursuant to
automatic dividend reinvestments. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized upon
the redemption of shares with a tax holding period of six months or less will be
treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares.
Although its present intention is to distribute, at least annually, all net
capital gain, 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 capital gain 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
33
<PAGE>
forward of prior years' capital losses, it would be subject to Federal income
tax in the hands of the Fund. Upon proper designation by 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
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in Federal income tax liability
to the Fund and, as noted above, would not be distributed as such to
shareholders. The Fund has no capital loss carry forward available to offset
future net 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 properly 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 have any debt that is
deemed under the Code directly attributable to 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 is required to accrue income on any debt securities that have more than
a de minimus amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market rules applicable to certain options, futures and forward contracts may
also require the Fund to recognize income or gain without a concurrent receipt
of cash. However, the Fund must distribute to shareholders for each taxable year
substantially all of its net income and net capital gains, including such income
or gain, to qualify as a regulated investment company and avoid liability for
any federal income or excise tax. Therefore, the Fund may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
may have to leverage itself by borrowing the cash, to satisfy these distribution
requirements.
34
<PAGE>
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Fund will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing
jurisdictions, although it may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the Fund with their correct taxpayer
identification number or if the IRS or a broker notifies the Fund that the
number furnished by the shareholder is incorrect or that the shareholder is
subject to backup withholding as a result of failure to report interest or
dividend income. A fund may refuse to accept an application that does not
contain any required taxpayer identification number or certification that the
number provided is correct. If the backup withholding provisions are applicable,
any such distributions and proceeds, whether taken in cash or reinvested in
shares, will be reduced by the amounts required to be withheld. Any amounts
withheld may be credited against a shareholder's U.S. federal income tax
liability. Investors should consult their tax advisers about the applicability
of the backup withholding provisions.
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 redemption (including an exchange) 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, and receipt of distributions from, the Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to nonresident alien withholding tax at the rate of 30% (or a lower rate
under an applicable tax treaty) on amounts treated as ordinary dividends from
the Fund and, unless an effective IRS Form W-8 or authorized substitute is on
file, to 31% backup withholding on certain other payments from the Fund.
Non-U.S. investors should consult their tax advisers regarding such treatment
and the application of foreign taxes to an investment in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
Provided that the Fund qualifies as a regulated investment company under the
Code, it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
The average annual total return on Class A and Class B shares of the Fund,
respectively, for the 1 year and life of that Class periods ended July 31, 1996
was 11.84% and 15.05% for Class A shares (since inception on January 3, 1992)
and 11.85% and 17.88% for Class B shares (since inception on August 30, 1991).
35
<PAGE>
Total return is 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:
n _____
T = \ /ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment
made at the beginning of the 1 year and life-of-fund periods.
Because each share has its own sales charge and fee structure, the classes have
different performance results. In the case of Class A or Class B shares, this
calculation assumes the maximum sales charge is included in the initial
investment or the CDSC is applied at the end of the period, respectively. This
calculation assumes that all dividends and distributions are reinvested at net
asset value on the reinvestment dates during the period. 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 from the
distribution rate produces a higher rate.
In addition to average annual total returns, the Fund may quote unavereaged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period. Total returns
may be quoted with or without taking the Fund's sales charge on Class A shares
or the CDSC on Class B shares into account. Excluding the Fund's sales charge on
Class A shares and the CDSC on Class B shares from a total return calculation
produces a higher total return figure.
From time to time, in reports and promotional literature, the Fund's total
return and/or yield will be compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper-Mutual Fund Performance Analysis," a monthly
publication which tracks net assets, total return and yield on mutual funds in
the United States. Ibottson and Associates, CDA Weisenberger and F.C. Towers are
also used for comparison purposes, as well as the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL STREET
JOURNAL, MICROPAL, INC., MORNINGSTAR, STRANGER'S, BARRON'S, etc. will also be
utilized. The Fund's promotional and sales literature may make reference to the
Fund's "beta". Beta is a reflection of the market related risk of the Fund by
showing how responsive the Fund is to the market.
36
<PAGE>
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 Adviser 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 Trust. Orders for purchases and sales of securities
are placed in a manner which, in the opinion of the Adviser, will offer the best
price and market for the execution of each such transaction. Purchases from
underwriters of portfolio securities may include a commission or commissions
paid by the issuer and transactions with dealers serving as market makers
reflect a "spread." Debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on these transactions.
In the U.S. and in some other countries, debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and other policies 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
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 Adviser'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, 1994, 1995 and 1996, the
Fund paid brokerage commissions in the amount of $97,167, $57,084 and $60,178,
respectively.
37
<PAGE>
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,
1996, the Fund paid $3,990 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 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,
1996, 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 Trustees believe to be contemporaneously charged by
other brokers in connection with comparable transactions involving similar
securities being purchased or sold. A transaction would not be placed with an
Affiliated Broker if the Fund would have to pay a commission rate less favorable
than the Affiliated Broker's contemporaneous charges for comparable transactions
for its other most favored, but unaffiliated, customers except for accounts for
which the Affiliated Broker acts as clearing broker and comparable to the Fund
as determined by a majority of the Trustees who are not interested persons (as
defined in the Investment Company Act) of the Fund, the Adviser, or the
Affiliated Broker. Because the Adviser, which is affiliated with the Affiliated
Brokers, has, as an investment adviser to the Fund, the obligation to provide
investment management services, which includes elements of research and related
investment skills, such research and related skills will not be used by the
Affiliated Brokers as a basis for negotiating commissions at a rate higher than
that determined in accordance with the above criteria.
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, P.O. Box 9116, Boston, MA
02205-9116, a wholly-owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$19.00 for each Class A shareholder and $21.50 for each Class B shareholder,
plus certain out-of-pocket expenses. These expenses are charged to the Fund and
allocated to each class on the basis of their relative net asset values.
38
<PAGE>
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 89 South Street, Boston,
Massachusetts 02111. Under the custodian agreement, Investors Bank & Trust
Company performs custody, portfolio and Fund accounting services.
INDEPENDENT AUDITORS
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.
39
<PAGE>
FINANCIAL STATEMENTS
40
<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-1
<PAGE>
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:
AIssues 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-1This 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
A-2
<PAGE>
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.
A-3
<PAGE>
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements listed below are included in and incorporated by
reference into Part B of the Registration Statement from the July 31, 1996
Annual Report to Shareholders (filed electronically on September 19, 1996;
accession number 0001010521-96-00186) (File Nos. 811-5732 and 33-29438):
John Hancock Discovery Fund
Statement of Assets and Liabilities as of July 31, 1996.
Statement of Operations of the year ended July 31, 1996.
Statement of Changes in Net Asset for each of the two years ended July 31,
1996.
Financial Highlights for each of the years ended July 31, 1996.
Notes to Financial Statements.
Schedule of Investments as of July 31, 1996.
Report of Independent Auditors.
(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 October 31, 1996, the number of record holders of shares of
Registrant was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Class A Class B
------- -------
John Hancock Discovery Fund - 7,138 10,803
<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.
C-2
<PAGE>
Article IX of the respective By-Laws of John Hancock Funds and the Adviser
provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and the liability was not
incurred by reason of gross negligence or reckless disregard of the duties
involved in the conduct of his office, and expenses in connection therewith may
be advanced by the Corporation, all to the full extent authorized by the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such as person."
C-3
<PAGE>
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 Trust, John
Hancock Current Interest, John Hancock Series, Inc., John Hancock Tax-Free Bond
Trust, John Hancock California Tax-Free Income Fund, John Hancock Capital
Series, John Hancock Limited Term Government Fund, John Hancock Tax-Exempt
Income Fund, John Hancock Sovereign Investors Fund, Inc., John Hancock Special
Equities Fund, John Hancock Sovereign Bond Fund, John Hancock Tax-Exempt Series,
John Hancock Strategic Series, John Hancock Technology Series, Inc., John
Hancock World Fund, John Hancock Investment Trust, John Hancock Institutional
Series Trust, Freedom Investment Trust, Freedom Investment Trust II and John
Hancock Investment Trust IV.
(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.
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Edward J. Boudreau, Jr. Director, Chairman, President and Chairman
101 Huntington Avenue Chief Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
Robert G. Freedman Director Vice Chairman, Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
David A. King Director None
101 Huntington Avenue
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Charles H. Womack Senior Vice President None
6501 Americas Parkway
Suite 950
Albuquerque, New Mexico
Anthony P. Petrucci Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
John A. Morin Vice President and Secretary Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President and Secretary
101 Huntington Avenue
Boston, Massachusetts
Keith Harstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts
Christopher M. Meyer Second Vice President and None
101 Huntington Avenue Treasurer
Boston, Massachusetts
Karen Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
C-6
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
Anne C. Hodsdon Director President
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
C-7
<PAGE>
(b) The name of each director and officer of Freedom, together with the
offices held by such person with Freedom and the Registrant, are set forth
below.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
John J. Danello President, Director None
One Beacon Street and Clerk
Boston, Massachusetts
Thomas J. Brown Treasurer and Director None
One Beacon Street
Boston, Massachusetts
Dexter A. Dodge Vice President None
One Beacon Street
Boston, Massachusetts
</TABLE>
(b) None
(c) None
C-8
<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.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities and Exchange Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Boston, and the Commonwealth of
Massachusetts on the 22nd day of November, 1996 .
JOHN HANCOCK INVESTMENT TRUST IV
By: *
-----------------------
Edward J. Boudreau, Jr.
Chairman
Pursuant to the requirements of the Securities Act of 1933, the
Registration has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- ------------------------ Chairman
Edward J. Boudreau, Jr. (Principal Executive Officer)
/s/James B. Little
- ------------------------ Senior Vice President and Chief November 22, 1996
James B. Little Financial Officer (Principal
Financial and Accounting Officer)
*
- ------------------------ Trustee
Dennis S. Aronowitz
*
- ------------------------ Trustee
Richard P. Chapman, Jr.
*
- ------------------------ Trustee
William J. Cosgrove
*
- ------------------------ Trustee
Douglas M. Costle
*
- ------------------------ Trustee
Leland O. Erdahl
C-10
<PAGE>
Signature Title Date
--------- ----- ----
*
- ------------------------ Trustee
Richard A. Farrell
*
- ------------------------ Trustee
Gail D. Fosler
*
- ------------------------ Trustee
William F. Glavin
*
- ------------------------ Trustee
Anne C. Hodsdon
*
- ------------------------ Trustee
John A. Moore
*
- ------------------------ Trustee
Patti McGill Peterson
*
- ------------------------ Trustee
John W. Pratt
*
- ------------------------ Trustee
Richard S. Scipione
*
- ------------------------ Trustee
Edward J. Spellman
*By: /s/Susan S. Newton
-------------------
Susan S. Newton, Attorney-in-Fact November 22, 1996
under Powers of Attorney dated May 21, 1996
and dated August 27, 1996, filed herewith.
</TABLE>
C-11
<PAGE>
<TABLE>
<S> <C>
John Hancock Capital Series John Hancock Strategic Series
John Hancock Income Securities Trust John Hancock Tax-Exempt Series Fund
John Hancock Investors Trust John Hancock World Fund
John Hancock Limited Term Government Fund Freedom Investment Trust
John Hancock Sovereign Bond Fund Freedom Investment Trust II
John Hancock Special Equities Fund Freedom Investment Trust III
</TABLE>
POWER OF ATTORNEY
The undersigned Trustee of each of the above listed Trusts, each a
Massachusetts business trust, does hereby severally constitute and appoint
EDWARD J. BOUDREAU, JR., SUSAN S. NEWTON, AND JAMES B. LITTLE, and each acting
singly, to be my true, sufficient and lawful attorneys, with full power to each
of them, and each acting singly, to sign for me, in my name and in the capacity
indicated below, any Registration Statement on Form N-1A and any Registration
Statement on Form N-14 to be filed by the Trust under the Investment Company Act
of 1940, as amended (the "1940 Act"), and under the Securities Act of 1933, as
amended (the "1933 Act"), and any and all amendments to said Registration
Statements, with respect to the offering of shares and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated to enable the Trust to comply
with the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any such Registration
Statements and any and all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as of
the 21st day of May, 1996.
/s/Dennis S. Aronowitz /s/William F. Glavin
- ----------------------------- -----------------------------
Dennis S. Aronowitz William F. Glavin
/s/Edward J. Boudreau, Jr. /s/Anne C. Hodsdon
- ----------------------------- -----------------------------
Edward J. Boudreau, Jr. Anne C. Hodsdon
/s/Richard P. Chapman, Jr. /s/Patti McGill Peterson
- ----------------------------- -----------------------------
Richard P. Chapman, Jr. Patti McGill Peterson
/s/William J. Cosgrove
- ----------------------------- -----------------------------
William J. Cosgrove John A. Moore
/s/Douglas M. Costle /s/John W. Pratt
- ----------------------------- -----------------------------
Douglas M. Costle John W. Pratt
/s/Leland O. Erdahl /s/Richard S. Scipione
- ----------------------------- -----------------------------
Leland O. Erdahl Richard S. Scipione
/s/Richard A. Farrell /s/Edward J. Spellman
- ----------------------------- -----------------------------
Richard A. Farrell Edward J. Spellman
/s/Gail D. Fosler
- -----------------------------
Gail D. Fosler
C-12
<PAGE>
<TABLE>
<S> <C>
John Hancock Capital Series John Hancock Strategic Series
John Hancock Declaration Trust John Hancock Tax-Exempt Series Fund
John Hancock Income Securities Trust John Hancock World Fund
John Hancock Investors Trust Freedom Investment Trust
John Hancock Limited Term Government Fund Freedom Investment Trust II
John Hancock Sovereign Bond Fund Freedom Investment Trust III
John Hancock Special Equities Fund
</TABLE>
POWER OF ATTORNEY
The undersigned Trustee of each of the above listed Trusts, each a
Massachusetts business trust, does hereby severally constitute and appoint
EDWARD J. BOUDREAU, JR., SUSAN S. NEWTON, AND JAMES B. LITTLE, and each acting
singly, to be my true, sufficient and lawful attorneys, with full power to each
of them, and each acting singly, to sign for me, in my name and in the capacity
indicated below, any Registration Statement on Form N-1A and any Registration
Statement on Form N-14 to be filed by the Trust under the Investment Company Act
of 1940, as amended (the "1940 Act"), and under the Securities Act of 1933, as
amended (the "1933 Act"), and any and all amendments to said Registration
Statements, with respect to the offering of shares and any and all other
documents and papers relating thereto, and generally to do all such things in my
name and on my behalf in the capacity indicated to enable the Trust to comply
with the 1940 Act and the 1933 Act, and all requirements of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by said attorneys or each of them to any such Registration
Statements and any and all amendments thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as of
the 27th day of August, 1996.
/s/ John A. Moore
----------------------
John A. Moore
C-13
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
99.B1 Amended and Restated Declaration of Trust of Freedom Investment
Trust III dated July 1, 1996.+
99.B2 Amended and Restated By-Laws of Freedom Investment Trust III dated
March 6, 1996.+
99.B3 None
99.B4 Specimen share certificate for the Discovery Fund Classes A & B.*
99.B5 Advisory Agreement dated August 29, 1989 as restated July 1 1992.*
99.B5.1 Transfer and Assumption Agreement between Freedom Capital
Management Corporation and John Hancock Advisers, Inc.*
99.B6 Distribution Agreement by and among Freedom Distributions
Corporation and John Hancock Broker Distribution Corporation.*
99.B6.1 Form of Soliciting Dealer Agreement between John Hancock Broker
Distribution Services, Inc. and Selected Dealers.*
99.B6.2 Form of Financial Institution Sales and Service Agreement.*
99.B7 None
99.B8 Master Custodian Agreement with Investors Bank & Trust Company
dated December 15, 1992.*
C-14
<PAGE>
Exhibit No. Description
99.B9 Transfer Agency and Service Agreement with John Hancock Fund
Services, Inc.*
99.B10 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.*
99.B11 Consent of Auditor.+
99.B12 Not Applicable
99.B13 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.*
99.B14 None
99.B15 Plan of Distribution pursuant to Rule 12b-1 as amended and
restated.*
99.B16 Schedule for Computation of Total Return.*
99.27.1A Annual+
99.27.1B Annual+
* Previously filed electronically with post-effective amendment number 14 (file
nos. 811-5738; 33-29438) on September 29, 1995, accession number
0000950156-95-000724.
+ Filed herewith.
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
FREEDOM INVESTMENT TRUST III
101 Huntington Avenue
Boston, Massachusetts 02199
Dated July 1, 1996
AMENDED AND RESTATED DECLARATION OF TRUST made this 1st day of July,
1996 by the undersigned (together with all other persons from time to time duly
elected, qualified and serving as Trustees in accordance with the provisions of
Article II hereof, the "Trustees");
WHEREAS, pursuant to a declaration of trust executed and delivered on
June 16, 1989 (the "Original Declaration"), the Trustees established a trust for
the investment and reinvestment of funds contributed thereto;
WHEREAS, the Trustees divided the beneficial interest in the trust
assets into transferable shares of beneficial interest, as provided therein;
WHEREAS, the Trustees declared that all money and property contributed
to the trust established thereunder be held and managed in trust for the benefit
of the holders, from time to time, of the shares of beneficial interest issued
thereunder and subject to the provisions thereof;
WHEREAS, the Trustees desire to amend and restate the Original
Declaration;
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements contained herein, the undersigned, being all of the Trustees of the
trust, hereby amend and restate the Original Declaration as follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is "Freedom
Investment Trust III" (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to the
contract described in Section 3.3 hereof.
(b) "By-laws" means the By-laws referred to in Section 2.8 hereof, as
amended from time to time.
<PAGE>
(c) "Class" means any division of shares within a Series in accordance
with the provisions of Article V.
(d) The terms "Commission" and "Interested Person" have the meanings
given them in the 1940 Act. Except as such term may be otherwise defined by the
Trustees in conjunction with the establishment of any Series, the term "vote of
a majority of the Outstanding Shares entitled to vote" shall have the same
meaning as is assigned to the term "vote of a majority of the outstanding voting
securities" in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has custody
of any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(g) "Distributor" means the party, other than the Trust, to the
contract described in Section 3.1 hereof.
(h) "Fund" or "Funds" individually or collectively, means the separate
Series of the Trust, together with the assets and liabilities assigned thereto.
(i) "Fundamental Restrictions" means the investment restrictions set
forth in the Prospectus and Statement of Additional Information for any Series
and designated as fundamental restrictions therein with respect to such Series.
(j) "His" shall include the feminine and neuter, as well as the
masculine, genders.
(k) "Investment Adviser" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(l) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(m) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(n) "Prospectus" means the Prospectuses and Statements of Additional
Information included in the Registration Statement of the Trust under the
Securities Act of 1933, as amended, as such Prospectuses and Statements of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
(o) "Series" individually or collectively means the separately managed
component(s) of the Trust (or, if the Trust shall have only one such component,
then that one) as may be established and designated from time to time by the
Trustees pursuant to Section 5.11 hereof.
2
<PAGE>
(p) "Shareholder" means a record owner of Outstanding Shares.
(q) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series or of any Class within any Series (as
the context may require) which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. "Outstanding" Shares means those
Shares shown from time to time on the books of the Trust or its Transfer Agent
as then issued and outstanding, but shall not include Shares which have been
redeemed or repurchased by the Trust and which are at the time held in the
treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust who
maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(s) "Trust" means Freedom Investment Trust III.
(t) "Trustees" means the persons who have signed this Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who now serve or may from time to time be duly elected,
qualified and serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in this capacity or their capacities as trustees hereunder.
(u) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including any and all assets of or allocated to any
Series or Class, as the context may require.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
3
<PAGE>
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, cash;
securities, including common, preferred and preference stocks; warrants;
subscription rights; profit-sharing interests or participations and all other
contracts for or evidence of equity interests; bonds, debentures, bills, time
notes and all other evidences of indebtedness; negotiable or non-negotiable
instruments; government securities, including securities of any state,
municipality or other political subdivision thereof, or any governmental or
quasi-governmental agency or instrumentality; and money market instruments
including bank certificates of deposit, finance paper, commercial paper,
bankers' acceptances and all kinds of repurchase agreements, of any corporation,
company, trust, association, firm or other business organization however
established, and of any country, state, municipality or other political
subdivision, or any governmental or quasi-governmental agency or
instrumentality; any other security, instrument or contract the acquisition or
execution of which is not prohibited by any Fundamental Restriction; and the
Trustees shall be deemed to have the foregoing powers with respect to any
additional securities in which the Trust may invest should the Fundamental
Restrictions be amended.
(c) To acquire (by purchase, subscription or otherwise), to hold, to
trade in and deal in, to acquire any rights or options to purchase or sell, to
sell or otherwise dispose of, to lend and to pledge any such securities, to
enter into repurchase agreements, reverse repurchase agreements, firm commitment
agreements, forward foreign currency exchange contracts, interest rate, mortgage
or currency swaps, and interest rate caps, floors and collars, to purchase and
sell options on securities, indices, currency, swaps or other financial assets,
futures contracts and options on futures contracts of all descriptions and to
engage in all types of hedging, risk management or income enhancement
transactions.
(d) To exercise all rights, powers and privileges of ownership or
interest in all securities and repurchase agreements included in the Trust
Property, including the right to vote thereon and otherwise act with respect
thereto and to do all acts for the preservation, protection, improvement and
enhancement in value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; and to endorse, guarantee,
or undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
4
<PAGE>
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related agreements
whereby the Trust may finance directly or indirectly any activity which is
primarily intended to result in the distribution and/or servicing of Shares.
(i) To adopt on behalf of the Trust or any Series thereof an
alternative purchase plan providing for the issuance of multiple Classes of
Shares (as authorized herein at Section 5.11).
(j) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or arising out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have
full power in their discretion as contemplated in Section 8.5, without any
requirement of approval by Shareholders, to invest part or all of the Trust
Property (or part or all of the assets of any Series), or to dispose of part or
all of the Trust Property (or part or all of the assets of any Series) and
invest the proceeds of such disposition, in securities issued by one or more
other investment companies registered under the 1940 Act. Any such other
investment company may (but need not) be a trust (formed under the laws of any
state) which is classified as a partnership or corporation for federal income
tax purposes.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided that the interest of the Trust therein is
deemed appropriately protected. The right, title and interest of the Trustees in
the Trust Property and the Property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office, resignation, removal or death of a Trustee he
5
<PAGE>
shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.11 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust or of the particular
Series with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of The
Commonwealth of Massachusetts governing business corporations.
Section 2.5. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or any
Series of the Trust or the names of the Trustees or otherwise as the Trustees
may deem expedient, to the same extent as such delegation is permitted by the
1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise provided
herein or in the By-laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees, including any
meeting held by means of a conference telephone circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, or by written consents of a majority of Trustees
then in office. The Trustees may adopt By-laws not inconsistent with this
Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
6
<PAGE>
Section 2.9. Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust or any Series thereof; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees, fill vacancies in, add to or subtract from
their number, elect and remove such officers and appoint and terminate such
agents or employees as they consider appropriate, and appoint from their own
number, and terminate, any one or more committees which may exercise some or all
of the power and authority of the Trustees as the Trustees may determine; (d)
purchase, and pay for out of Trust Property or the property of the appropriate
Series of the Trust, insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, administrators, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (e) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust or any Series thereof has dealings,
including the Investment Adviser, Administrator, Distributor, Transfer Agent and
selected dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year and taxable year of the Trust or any Series thereof and the method
by which its or their accounts shall be kept; and (i) adopt a seal for the
Trust, but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except for transactions not
permitted by the 1940 Act or rules and regulations adopted, or orders issued, by
the Commission thereunder, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the Trust or
any Series thereof to any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor or Transfer Agent or with any
Interested Person of such Person; and the Trust or a Series thereof may employ
any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 2.11. Litigation. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust.
Section 2.12. Number of Trustees. The initial Trustees shall be the
persons initially signing the Original Declaration. The number of Trustees
(other than the initial Trustees) shall be such number as shall be fixed from
time to time by vote of a majority of the Trustees, provided, however, that the
number of Trustees shall in no event be less than one (1).
7
<PAGE>
Section 2.13. Election and Term. Except for the Trustees named herein
or appointed to fill vacancies pursuant to Section 2.15 hereof, the Trustees may
succeed themselves and shall be elected by the Shareholders owning of record a
plurality of the Shares voting at a meeting of Shareholders on a date fixed by
the Trustees. Except in the event of resignations or removals pursuant to
Section 2.14 hereof, each Trustee shall hold office until such time as less than
a majority of the Trustees holding office has been elected by Shareholders. In
such event the Trustees then in office shall call a Shareholders' meeting for
the election of Trustees. Except for the foregoing circumstances, the Trustees
shall continue to hold office and may appoint successor Trustees.
Section 2.14. Resignation and Removal. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees or by action of two-thirds of
the outstanding Shares of the Trust (for purposes of determining the
circumstances and procedures under which any such removal by the Shareholders
may take place, the provisions of Section 16(c) of the 1940 Act (or any
successor provisions) shall be applicable to the same extent as if the Trust
were subject to the provisions of that Section). Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.15. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of his death, retirement,
resignation, removal, bankruptcy, adjudicated incompetence or other incapacity
to perform the duties of the office of a Trustee. No such vacancy shall operate
to annul the Declaration or to revoke any existing agency created pursuant to
the terms of the Declaration. In the case of an existing vacancy, including a
vacancy existing by reason of an increase in the number of Trustees, subject to
the provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall
fill such vacancy by the appointment of such other person as they in their
discretion shall see fit, made by vote of a majority of the Trustees then in
office. Any such appointment shall not become effective, however, until the
person named in the vote approving the appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.15, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
The vote by a majority of the Trustees in office, fixing the number of Trustees
shall be conclusive evidence of the existence of such vacancy.
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Section 2.16. Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two (2) Trustees personally exercise the powers granted to
the Trustees under this Declaration except as herein otherwise expressly
provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
distribution contract or contracts providing for the sale of the Shares to net
the Trust or the applicable Series of the Trust not less than the amount
provided for in Section 7.1 of Article VII hereof, whereby the Trustees may
either agree to sell the Shares to the other party to the contract or appoint
such other party as their sales agent for the Shares, and in either case on such
terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trustees.
Section 3.2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts or, if the Trustees establish multiple Series, separate
investment advisory or management contracts with respect to one or more Series
whereby the other party or parties to any such contracts shall undertake to
furnish the Trust or such Series management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers, or any of them, under any such contracts
(subject to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities and other investments of the Trust on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of such Investment Advisers, or
any of them (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees. The Trustees may, in their sole discretion, call a meeting
of Shareholders in order to submit to a vote of Shareholders at such meeting the
approval or continuance of any such investment advisory or management contract.
If the Shareholders of any one or more of the Series of the Trust should fail to
approve any such investment advisory or management contract, the Investment
Adviser may nonetheless serve as Investment Adviser with respect to any Series
whose Shareholders approve such contract.
Section 3.3. Administration Agreement. The Trustees may in their
discretion from time to time enter into an administration agreement or, if the
Trustees establish multiple Series or Classes, separate administration
agreements with respect to each Series or Class, whereby the other party to such
agreement shall undertake to manage the business affairs of the Trust or of a
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Series or Class thereof and furnish the Trust or a Series or a Class thereof
with office facilities, and shall be responsible for the ordinary clerical,
bookkeeping and recordkeeping services at such office facilities, and other
facilities and services, if any, and all upon such terms and conditions as the
Trustees may in their discretion determine.
Section 3.4. Service Agreement. The Trustees may in their discretion
from time to time enter into Service Agreements with respect to one or more
Series or Classes thereof whereby the other parties to such Service Agreements
will provide administration and/or support services pursuant to administration
plans and service plans, and all upon such terms and conditions as the Trustees
in their discretion may determine.
Section 3.5. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
Section 3.6. Custodian. The Trustees may appoint or otherwise engage
one or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least two
million dollars ($2,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-laws of the Trust. The Trustees may also authorize
the Custodian to employ one or more sub-custodians, including such foreign banks
and securities depositories as meet the requirements of applicable provisions of
the 1940 Act, and upon such terms and conditions as may be agreed upon between
the Custodian and such sub-custodian, to hold securities and other assets of the
Trust and to perform the acts and services of the Custodian, subject to
applicable provisions of law and resolutions adopted by the Trustees.
Section 3.7. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust or any Series thereof is a shareholder, director, officer,
partner, trustee, employee, manager, adviser or distributor of or for
any partnership, corporation, trust, association or other organization
or of or for any parent or affiliate of any organization, with which a
contract of the character described in Sections 3.1, 3.2, 3.3 or 3.4
above or for services as Custodian, Transfer Agent or disbursing agent
or for providing accounting, legal and printing services or for related
services may have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a Shareholder of
or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in
Sections 3.1, 3.2, 3.3 or 3.4 above or for services as Custodian,
Transfer Agent or disbursing agent or for related services may have
been or may hereafter be made also has any one or more of such
contracts with one or more other partnerships, corporations, trusts,
associations or other organizations, or has other business or
interests,
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shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
Section 3.8. Compliance with 1940 Act. Any contract entered into
pursuant to Sections 3.1 or 3.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable Act of Congress hereafter enacted), as modified by any
applicable order or orders of the Commission, with respect to its continuance in
effect, its termination and the method of authorization and approval of such
contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust or any Series thereof. No Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its Shareholders, in connection with
Trust Property or the affairs of the Trust, except to the extent arising from
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties with respect to such Person; and all such Persons shall look solely to
the Trust Property, or to the Property of one or more specific Series of the
Trust if the claim arises from the conduct of such Trustee, officer, employee or
agent with respect to only such Series, for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust or any Series
thereof, is made a party to any suit or proceeding to enforce any such liability
of the Trust or any Series thereof, he shall not, on account thereof, be held to
any personal liability. The Trust shall indemnify and hold each Shareholder
harmless from and against all claims and liabilities, to which such Shareholder
may become subject by reason of his being or having been a Shareholder, and
shall reimburse such Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) out of
the Trust Property for all legal and other expenses reasonably incurred by him
in connection with any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made only out of
assets of the one or more Series whose Shares were held by said Shareholder at
the time the act or event occurred which gave rise to the claim against or
liability of said Shareholder. The rights accruing to a Shareholder under this
Section 4.1 shall not impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained restrict the right of the
Trust or any Series thereof to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer,
employee or agent of the Trust or any Series thereof shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without
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limitation the failure to compel in any way any former or acting Trustee to
redress any breach of trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions
and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee, officer,
employee or agent of the Trust (including any individual who serves at
its request as director, officer, partner, trustee or the like of
another organization in which it has any interest as a shareholder,
creditor or otherwise) shall be indemnified by the Trust, or by one or
more Series thereof if the claim arises from his or her conduct with
respect to only such Series, to the fullest extent permitted by law
against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust, a Series thereof or
the Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust or a
Series thereof;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(ii)
resulting in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the settlement or
other disposition;
(B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote of a
majority of the Non-interested Trustees acting on the matter
(provided that a majority of the Non-interested Trustees
then in office act on the matter) or (y) written opinion of
independent legal counsel; or
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(C) by a vote of a majority of the Shares outstanding and
entitled to vote (excluding Shares owned of record or
beneficially by such individual).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust or any Series thereof other
than Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust or a Series thereof prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the Trust or
Series thereof shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Non-interested Trustees acting on the
matter (provided that a majority of the Non-interested Trustees act on
the matter) or an independent legal counsel in a written opinion shall
determine, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who (i)
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) is not involved in the claim, action, suit or
proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments,
Etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or a Series thereof or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as officers, employees or
agents of the Trust or a Series thereof. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or a Series thereof
or undertaking made or issued by the Trustees may recite that the same is
executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations
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of the Trust or a Series thereof under any such instrument are not binding upon
any of the Trustees or Shareholders individually, but bind only the Trust
Property or the Trust Property of the applicable Series, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to bind the Trustees individually. The Trustees shall
at all times maintain insurance for the protection of the Trust Property or the
Trust Property of the applicable Series, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee, officer or
employee of the Trust or a Series thereof shall, in the performance of his
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or a Series thereof, upon an opinion of
counsel, or upon reports made to the Trust or a Series thereof by any of its
officers or employees or by the Investment Adviser, the Administrator, the
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such Shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the exclusive authority without
the requirement of Shareholder approval to establish and designate one or more
Series of shares and one or more Classes thereof as the Trustees deem necessary
or desirable. Each Share of any Series shall represent an equal proportionate
Share in the assets of that Series with each other Share in that Series. Subject
to the provisions of Section 5.11 hereof, the Trustees may also authorize the
creation of additional Series of Shares (the proceeds of which may be invested
in separate, independently managed portfolios) and additional Classes of Shares
within any Series. All Shares issued hereunder including, without limitation,
Shares issued in connection with a dividend in Shares or a split in Shares,
shall be fully paid and nonassessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to share or assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any Series or Class of Shares.
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Section 5.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may,
from time to time without a vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, including
cash or property, at such time or times and on such terms as the Trustees may
deem best, except that only Shares previously contracted to be sold may be
issued during any period when the right of redemption is suspended pursuant to
Section 6.9 hereof, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares of the Trust or, if
the Shares be divided into Series or Classes, of any Series or any Class thereof
of the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as provided
herein or in the By-laws, until he has given his address to the Transfer Agent
or such other officer or agent of the Trustees as shall keep the said register
for entry thereon. It is not contemplated that certificates will be issued for
the Shares; however, the Trustees, in their discretion, may authorize the
issuance of share certificates and promulgate appropriate rules and regulations
as to their use.
Section 5.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to
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the Trustees or the Transfer Agent, but until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer or agent of the Trust shall be affected by any notice of such
death, bankruptcy or incompetence, or other operation of law.
Section 5.7. Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
resold pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.13; (ii) with
respect to any investment advisory contract entered into pursuant to Section
3.2; (iii) with respect to termination of the Trust or a Series or Class thereof
as provided in Section 8.2; (iv) with respect to any amendment of this
Declaration to the limited extent and as provided in Section 8.3; (v) with
respect to a merger, consolidation or sale of assets as provided in Section 8.4;
(vi) with respect to incorporation of the Trust to the extent and as provided in
Section 8.5; (vii) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or a Series thereof or the Shareholders of either; (viii)
with respect to any plan adopted pursuant to Rule 12b-1 (or any successor rule)
under the 1940 Act, and related matters; and (ix) with respect to such
additional matters relating to the Trust as may be required by this Declaration,
the By-laws or any registration of the Trust as an investment company under the
1940 Act with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. As determined by the Trustees without the vote
or consent of shareholders, on any matter submitted to a vote of Shareholders
either (i) each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote or (ii) each dollar of net asset value (number of
Shares owned times net asset value per share of such Series or Class, as
applicable) shall be entitled to one vote on any matter on which such Shares are
entitled to vote and each fractional dollar amount shall be entitled to a
proportionate fractional vote. The Trustees may, in conjunction with the
establishment of any further Series or any Classes of Shares, establish
conditions under which the several Series or Classes of Shares shall have
separate voting rights or no voting rights. There shall be no cumulative voting
in the election of Trustees. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration or the By-laws to be taken by Shareholders. The By-laws may include
further provisions for Shareholders' votes and meetings and related matters.
Section 5.10. Meetings of Shareholders. No annual or regular meetings
of Shareholders are required. Special meetings of the Shareholders, including
meetings involving only the holders of Shares of one or more but less than all
Series or Classes thereof, may be called at any time by the Chairman of the
Board, President, or any Vice-President of the Trust, and shall be called by the
President or the Secretary at the request, in writing or by resolution, of a
majority of the Trustees, or at the written request of the holder or holders of
ten percent (10%) or more of the
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total number of Outstanding Shares of the Trust entitled to vote at such
meeting. Meetings of the Shareholders of any Series shall be called by the
President or the Secretary at the written request of the holder or holders of
ten percent (10%) or more of the total number of Outstanding Shares of such
Series of the Trust entitled to vote at such meeting. Any such request shall
state the purpose of the proposed meeting.
Section 5.11. Series or Class Designation. (a) Without limiting the
authority of the Trustees set forth in Section 5.1 to establish and designate
any further Series or Classes, the Trustees hereby establish the following
Series, each of which consists of two Classes of Shares: John Hancock Discovery
Fund(the "Existing Series").
(b) The Shares of the Existing Series and Class thereof herein
established and designated and any Shares of any further Series and Classes
thereof that may from time to time be established and designated by the Trustees
shall be established and designated, and the variations in the relative rights
and preferences as between the different Series shall be fixed and determined,
by the Trustees (unless the Trustees otherwise determine with respect to further
Series or Classes at the time of establishing and designating the same);
provided, that all Shares shall be identical except that there may be variations
so fixed and determined between different Series or Classes thereof as to
investment objective, policies and restrictions, purchase price, payment
obligations, distribution expenses, right of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, exchange rights,
and conditions under which the several Series or Classes shall have separate
voting rights, all of which are subject to the limitations set forth below. All
references to Shares in this Declaration shall be deemed to be Shares of any or
all Series or Classes as the context may require.
(c) As to any Existing Series and Classes herein established and
designated and any further division of Shares of the Trust into additional
Series or Classes, the following provisions shall be applicable:
(i) The number of authorized Shares and the number of Shares
of each Series or Class thereof that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any Series or Class into one or more Series or one or
more Classes that may be established and designated from time to time. The
Trustees may hold as treasury shares (of the same or some other Series or
Class), reissue for such consideration and on such terms as they may determine,
or cancel any Shares of any Series or Class reacquired by the Trust at their
discretion from time to time.
(ii) All consideration received by the Trust for the issue or
sale of Shares of a particular Series or Class, together with all assets in
which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors of such Series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series,
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the Trustees shall allocate them among any one or more of the Series established
and designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes. No holder of Shares of any Series shall have any claim on or right
to any assets allocated or belonging to any other Series.
(iii) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that Series or the
appropriate Class or Classes thereof and all expenses, costs, charges and
reserves attributable to that Series or Class or Classes thereof, and any
general liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series and Classes for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items are capital; and each
such determination and allocation shall be conclusive and binding upon the
Shareholders. The assets of a particular Series of the Trust shall under no
circumstances be charged with liabilities attributable to any other Series or
Class thereof of the Trust. All persons extending credit to, or contracting with
or having any claim against a particular Series or Class of the Trust shall look
only to the assets of that particular Series for payment of such credit,
contract or claim.
(iv) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 7.2 of this Declaration. With respect
to any Series or Class, dividends and distributions on Shares of a particular
Series or Class may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series or Class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Series, as the Trustees may determine, after providing for actual and accrued
liabilities belonging to that Series or Class. All dividends and distributions
on Shares of a particular Series or Class shall be distributed pro rata to the
Shareholders of that Series or Class in proportion to the number of Shares of
that Series or Class held by such Shareholders at the time of record established
for the payment of such dividends or distribution.
(v) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each holder of Shares of a
Series or Class thereof shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such Series or
Class net of expenses. Upon redemption of his Shares or indemnification for
liabilities incurred by reason of his being or having been a Shareholder of a
Series or Class, such Shareholder shall be paid solely out of the funds and
property of such Series of the Trust. Upon liquidation or termination of a
Series or Class thereof of the Trust, Shareholders of such Series or Class
thereof shall be entitled to receive a pro rata share of the net assets of such
Series. A Shareholder of a particular Series of the Trust shall not be entitled
to participate in a derivative or class action on behalf of any other Series or
the Shareholders of any other Series of the Trust.
(vi) On each matter submitted to a vote of Shareholders, all
Shares of all Series and Classes shall vote as a single class; provided,
however, that (1) as to any matter with respect to which a separate vote of any
Series or Class is required by the 1940 Act or is required by
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attributes applicable to any Series or Class or is required by any Rule 12b-1
plan, such requirements as to a separate vote by that Series or Class shall
apply, (2) to the extent that a matter referred to in clause (1) above, affects
more than one Class or Series and the interests of each such Class or Series in
the matter are identical, then, subject to clause (3) below, the Shares of all
such affected Classes or Series shall vote as a single Class; (3) as to any
matter which does not affect the interests of a particular Series or Class, only
the holders of Shares of the one or more affected Series or Classes shall be
entitled to vote; and (4) the provisions of the following sentence shall apply.
On any matter that pertains to any particular Class of a particular Series or to
any Class expenses with respect to any Series which matter may be submitted to a
vote of Shareholders, only Shares of the affected Class or that Series, as the
case may be, shall be entitled to vote except that: (i) to the extent said
matter affects Shares of another Class or Series, such other Shares shall also
be entitled to vote, and in such cases Shares of the affected Class, as the case
may be, of such Series shall be voted in the aggregate together with such other
Shares; and (ii) to the extent that said matter does not affect Shares of a
particular Class of such Series, said Shares shall not be entitled to vote
(except where otherwise required by law or permitted by the Trustees acting in
their sole discretion) even though the matter is submitted to a vote of the
Shareholders of any other Class or Series.
(vii) Except as otherwise provided in this Article V, the
Trustees shall have the power to determine the designations, preferences,
privileges, payment obligations, limitations and rights, including voting and
dividend rights, of each Class and Series of Shares. Subject to compliance with
the requirements of the 1940 Act, the Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have the right
to convert or exchange said Shares into Shares of one or more Series or Classes
of Shares in accordance with such requirements, conditions and procedures as may
be established by the Trustees.
(viii) The establishment and designation of any Series or
Classes of Shares shall be effective upon the execution by a majority of the
then Trustees of an instrument setting forth such establishment and designation
and the relative rights and preferences of such Series or Classes, or as
otherwise provided in such instrument. At any time that there are no Shares
outstanding of any particular Series or Class previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish that Series or Class and the establishment and designation
thereof. Each instrument referred to in this section shall have the status of an
amendment to this Declaration.
Section 5.12. Assent to Declaration of Trust. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a) All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust. The
Trust may require any Shareholder to pay a sales charge
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to the Trust, the underwriter, or any other person designated by the Trustees
upon redemption or repurchase of Shares in such amount and upon such conditions
as shall be determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or
Class thereof at the price determined as hereinafter set forth, upon the
appropriately verified written application of the record holder thereof (or upon
such other form of request as the Trustees may determine) at such office or
agency as may be designated from time to time for that purpose by the Trustees.
The Trustees may from time to time specify additional conditions, not
inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective Prospectus.
Section 6.2. Price. Shares shall be redeemed at a price based on their
net asset value determined as set forth in Section 7.1 hereof as of such time as
the Trustees shall have theretofore prescribed by resolution. In the absence of
such resolution, the redemption price of Shares deposited shall be based on the
net asset value of such Shares next determined as set forth in Section 7.1
hereof after receipt of such application. The amount of any contingent deferred
sales charge or redemption fee payable upon redemption of Shares may be deducted
from the proceeds of such redemption.
Section 6.3. Payment. Payment of the redemption price of Shares of the
Trust or any Series or Class thereof shall be made in cash or in property to the
Shareholder at such time and in the manner, not inconsistent with the 1940 Act
or other applicable laws, as may be specified from time to time in the Trust's
then effective Prospectus(es), subject to the provisions of Section 6.4 hereof.
Notwithstanding the foregoing, the Trustees may withhold from such redemption
proceeds any amount arising (i) from a liability of the redeeming Shareholder to
the Trust or (ii) in connection with any Federal or state tax withholding
requirements.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series or Class thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 6.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series or Class thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any Share certificates
on deposit. The redemption price of Shares for which redemption applications
have not been revoked shall be based on the net asset value of such Shares next
determined as set forth in Section 7.1 after the termination of such suspension,
and payment shall be made within seven (7) days after the date upon which the
application was made plus the period after such application during which the
determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
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Section 6.6. Redemption of Shareholder's Interest. The Trustees, in
their sole discretion, may cause the Trust to redeem all of the Shares of one or
more Series or Class thereof held by any Shareholder if the value of such Shares
held by such Shareholder is less than the minimum amount established from time
to time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. (a) If the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal Revenue Code of 1986, then
the Trustees shall have the power by lot or other means deemed equitable by them
(i) to call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust or any Series of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust or any Series of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust or any Series of the
Trust in question would result in such disqualification. The redemption shall be
effected at the redemption price and in the manner provided in Section 6.1.
(b) The holders of Shares or other securities of the Trust or any
Series of the Trust shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of Shares or other
securities of the Trust or any Series of the Trust as the Trustees deem
necessary to comply with the provisions of the Internal Revenue Code of 1986, as
amended, or to comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series of the Trust pursuant to the provisions of Section
7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Series
thereof of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Trust or a Series thereof fairly to determine the
value of its net assets, or (iv) during any other period when the Commission may
for the protection of Shareholders of the Trust by order permit suspension of
the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in clauses (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which
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in the absence of an official ruling by the Commission, the determination of the
Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each outstanding
Share of the Trust or of each Series or Class thereof shall be determined on
such days and at such time or times as the Trustees may determine. The value of
the assets of the Trust or any Series thereof may be determined (i) by a pricing
service which utilizes electronic pricing techniques based on general
institutional trading, (ii) by appraisal of the securities owned by the Trust or
any Series of the Trust, (iii) in certain cases, at amortized cost, or (iv) by
such other method as shall be deemed to reflect the fair value thereof,
determined in good faith by or under the direction of the Trustees. From the
total value of said assets, there shall be deducted all indebtedness, interest,
taxes, payable or accrued, including estimated taxes on unrealized book profits,
expenses and management charges accrued to the appraisal date, net income
determined and declared as a distribution and all other items in the nature of
liabilities which shall be deemed appropriate, as incurred by or allocated to
the Trust or any Series or Class of the Trust. The resulting amount which shall
represent the total net assets of the Trust or Series or Class thereof shall be
divided by the number of Shares of the Trust or Series or Class thereof
outstanding at the time and the quotient so obtained shall be deemed to be the
net asset value of the Shares of the Trust or Series or Class thereof. The net
asset value of the Shares shall be determined at least once on each business
day, as of the close of regular trading on the New York Stock Exchange or as of
such other time or times as the Trustees shall determine. The power and duty to
make the daily calculations may be delegated by the Trustees to the Investment
Adviser, the Administrator, the Custodian, the Transfer Agent or such other
Person as the Trustees by resolution may determine. The Trustees may suspend the
daily determination of net asset value to the extent permitted by the 1940 Act.
It shall not be a violation of any provision of this Declaration if Shares are
sold, redeemed or repurchased by the Trust at a price other than one based on
net asset value if the net asset value is affected by one or more errors
inadvertently made in the pricing of portfolio securities or in accruing income,
expenses or liabilities.
Section 7.2. Distributions to Shareholders. (a) The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or of a
Series or Class thereof such proportion of the net profits, surplus (including
paid-in surplus), capital, or assets of the Trust or such Series held by the
Trustees as they may deem proper. Such distributions may be made in cash or
property (including without limitation any type of obligations of the Trust or
Series or Class or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust or Series or Class thereof additional Shares
of the Trust or Series or Class thereof issuable hereunder in such manner, at
such times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of the Trust or Series or Class
thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding
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Shares shall exclude Shares for which orders have been placed subsequent to a
specified time on the date the distribution is declared or on the next preceding
day if the distribution is declared as of a day on which Boston banks are not
open for business, all as described in the then effective Prospectus under the
Securities Act of 1933. The Trustees may always retain from the net profits such
amount as they may deem necessary to pay the debts or expenses of the Trust or a
Series or Class thereof or to meet obligations of the Trust or a Series or Class
thereof, or as they may deem desirable to use in the conduct of its affairs or
to retain for future requirements or extensions of the business. The Trustees
may adopt and offer to Shareholders such dividend reinvestment plans, cash
dividend payout plans or related plans as the Trustees shall deem appropriate.
The Trustees may in their discretion determine that an account administration
fee or other similar charge may be deducted directly from the income and other
distributions paid on Shares to a Shareholder's account in each Series or Class.
(b) Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or a Series or Class thereof to avoid or reduce liability for
taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares. Subject to Section 5.11 hereof, the net income
of the Series and Classes thereof of the Trust shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the Trust or of
a Series or Class thereof, including the advisory or management fee, shall be
accrued each day. Each Class shall bear only expenses relating to its Shares and
an allocable share of Series expenses in accordance with such policies as may be
established by the Trustees from time to time and as are not inconsistent with
the provisions of this Declaration or of any applicable document filed by the
Trust with the Commission or of the Internal Revenue Code of 1986, as amended.
Such net income may be determined by or under the direction of the Trustees as
of the close of regular trading on the New York Stock Exchange on each day on
which such market is open or as of such other time or times as the Trustees
shall determine, and, except as provided herein, all the net income of any
Series or Class, as so determined, may be declared as a dividend on the
Outstanding Shares of such Series or Class. If, for any reason, the net income
of any Series or Class determined at any time is a negative amount, or for any
other reason, the Trustees shall have the power with respect to such Series or
Class (i) to offset each Shareholder's pro rata share of such negative amount
from the accrued dividend account of such Shareholder, or (ii) to reduce the
number of Outstanding Shares of such Series or Class by reducing the number of
Shares in the account of such Shareholder by that number of full and fractional
Shares which represents the amount of such excess negative net income, or (iii)
to cause to be recorded on the books of the Trust an asset account in the amount
of such negative net income, which account may be reduced by the amount,
provided that the same shall thereupon become the property of the Trust with
respect to such Series or Class and shall not be paid to any Shareholder, of
dividends declared thereafter upon the Outstanding Shares of such Series or
Class on the day such negative net income is experienced, until such asset
account is reduced to zero. The Trustees shall have full discretion to determine
whether any cash or property received shall be treated as income or as principal
and whether any item of expense shall be charged to the income or the principal
account, and their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much if any of the value thereof shall be treated as income, the balance, if
any, to be treated as principal.
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Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VII, but subject to Section 5.11
hereof, the Trustees may prescribe, in their absolute discretion, such other
bases and times for determining the per Share net asset value of the Shares of
the Trust or a Series or Class thereof or net income of the Trust or a Series or
Class thereof, or the declaration and payment of dividends and distributions as
they may deem necessary or desirable. Without limiting the generality of the
foregoing, the Trustees may establish several Series or Classes of Shares in
accordance with Section 5.11, and declare dividends thereon in accordance with
Section 5.11(d)(iv).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES OR CLASS;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII.
Section 8.2. Termination of the Trust or a Series or a Class. The Trust
or any Series or Class thereof may be terminated by (i) the affirmative vote of
the holders of not less than two-thirds of the Outstanding Shares entitled to
vote and present in person or by proxy at any meeting of Shareholders of the
Trust or the appropriate Series or Class thereof, (ii) by an instrument or
instruments in writing without a meeting, consented to by the holders of
two-thirds of the Outstanding Shares of the Trust or a Series or Class thereof;
provided, however, that, if such termination as described in clauses (i) and
(ii) is recommended by the Trustees, the vote or written consent of the holders
of a majority of the Outstanding Shares of the Trust or a Series or Class
thereof entitled to vote shall be sufficient authorization, or (iii) notice to
Shareholders by means of an instrument in writing signed by a majority of the
Trustees, stating that a majority of the Trustees has determined that the
continuation of the Trust or a Series or a Class thereof is not in the best
interest of such Series or a Class, the Trust or their respective shareholders
as a result of factors or events adversely affecting the ability of such Series
or a Class or the Trust to conduct its business and operations in an
economically viable manner. Such factors and events may include (but are not
limited to) the inability of a Series or Class or the Trust to maintain its
assets at an appropriate size, changes in laws or regulations governing the
Series or Class or the Trust or affecting assets of the type in which such
Series or Class or the Trust invests or economic developments or trends having a
significant adverse impact on the business or operations of such Series or Class
or the Trust. Upon the termination of the Trust or the Series or Class,
(i) The Trust, Series or Class shall carry on no business except
for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust, Series or Class and all of the powers of the Trustees under
this Declaration shall continue until the affairs of the Trust, Series
or Class shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, Series or Class, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose
of all or any part of the remaining Trust Property or Trust Property
allocated or belonging to such Series or Class to one or more persons
at public or private sale for consideration which may consist in whole
or in
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part of cash, securities or other property of any kind, discharge or
pay its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property or Trust Property allocated or belonging to such Series or
Class that requires Shareholder approval in accordance with Section 8.4
hereof shall receive the approval so required.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property or the remaining
property of the terminated Series or Class, in cash or in kind or
partly each, among the Shareholders of the Trust or the Series or
Class according to their respective rights.
(b) After termination of the Trust, Series or Class and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust and file with the Office of the
Secretary of The Commonwealth of Massachusetts an instrument in writing setting
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties with respect to the Trust or
the terminated Series or Class, and the rights and interests of all Shareholders
of the Trust or the terminated Series or Class shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended
by a vote of the holders of a majority of the Shares outstanding and entitled to
vote or by any instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by the holders of a majority of the Shares
outstanding and entitled to vote.
(b) This Declaration may be amended by a vote of a majority of
Trustees, without approval or consent of the Shareholders, except that no
amendment can be made by the Trustees to impair any voting or other rights of
shareholders prescribed by Federal or state law. Without limiting the foregoing,
the Trustees may amend this Declaration without the approval or consent of
Shareholders (i) to change the name of the Trust or any Series, (ii) to add to
their duties or obligations or surrender any rights or powers granted to them
herein; (iii) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to make any
other provisions with respect to matters or questions arising under this
Declaration which will not be inconsistent with the provisions of this
Declaration; and (iv) to eliminate or modify any provision of this Declaration
which (a) incorporates, memorializes or sets forth an existing requirement
imposed by or under any Federal or state statute or any rule, regulation or
interpretation thereof or thereunder or (b) any rule, regulation, interpretation
or guideline of any Federal or state agency, now or hereafter in effect,
including without limitation, requirements set forth in the 1940 Act and the
rules and regulations thereunder (and interpretations thereof), to the extent
any change in applicable law liberalizes, eliminates or modifies any such
requirements, but the Trustees shall not be liable for failure to do so.
(c) The Trustees may also amend this Declaration without the approval
or consent of Shareholders if they deem it necessary to conform this Declaration
to the requirements of applicable Federal or state laws or regulations or the
requirements of the regulated investment
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company provisions of the Internal Revenue Code of 1986, as amended, or if
requested or required to do so by any Federal agency or by a state Blue Sky
commissioner or similar official, but the Trustees shall not be liable for
failing so to do.
(d) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Trustees or by the
Shareholders as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series may merge or consolidate into any other corporation, association, trust
or other organization or may sell, lease or exchange all or substantially all of
the Trust Property or Trust Property allocated or belonging to such Series,
including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by the affirmative vote of the holders of two-thirds of the Shares
of the Trust or such Series outstanding and entitled to vote and present in
person or by proxy at a meeting of Shareholders, or by an instrument or
instruments in writing without a meeting, consented to by the holders of
two-thirds of the Shares of the Trust or such Series; provided, however, that,
if such merger, consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of a majority of the
Outstanding Shares of the Trust or such Series entitled to vote shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to Massachusetts law.
Section 8.5. Incorporation. The Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell, convey and
transfer all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series to any such corporation, trust,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring all or a portion of the Trust Property to such organization or
entities.
26
<PAGE>
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders of
each Series a written financial report of the transactions of the Trust and
Series thereof, including financial statements which shall at least annually be
certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Execution and Filing. This Declaration and any amendment
hereto shall be filed in the office of the Secretary of The Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee stating that such action was
duly taken in a manner provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its execution. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and filed with the Secretary of The Commonwealth of
Massachusetts. A restated Declaration shall, upon execution, be conclusive
evidence of all amendments contained therein and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 10.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying (a) the number or identity of Trustees or Shareholders,
(b) the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact
that the number of Trustees or Shareholders present at any meeting or executing
any written instrument satisfies the requirements of this Declaration, (e) the
form of any By-laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
27
<PAGE>
Section 10.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 1st of July, 1996.
/s/ Edward J. Boudreau, Jr.
------------------------------------
Edward J. Boudreau, Jr.
as Trustee and not individually,
34 Swan Road
Winchester, Massachusetts 01890
/s/ Dennis S. Aronowitz
------------------------------------
Dennis S. Aronowitz
as Trustee and not individually,
1216 Falls Boulevard
Fort Lauderdale, Florida 33327
/s/ Richard P. Chapman, Jr.
------------------------------------
Richard P. Chapman, Jr.
as Trustee and not individually,
107 Upland Road
Brookline, Massachusetts 02146
/s/ William J. Cosgrove
------------------------------------
William J. Cosgrove
as Trustee and not individually,
20 Buttonwood Place
Saddle River, New Jersey 07458
28
<PAGE>
/s/ Gail D. Fosler
------------------------------------
Gail D. Fosler
as Trustee and not individually,
4104 Woodbine Street
Chevy Chase, Maryland 20815
/s/ Anne C. Hodsdon
------------------------------------
Anne C. Hodsdon
as Trustee and not individually,
135 Woodland Road
Hampton, New Hampshire 03842
------------------------------------
Richard S. Scipione
as Trustee and not individually,
4 Sentinel Road
Hingham, Massachusetts 02043
/s/ Edward J. Spellman
------------------------------------
Edward J. Spellman
as Trustee and not individually,
259C Commercial Boulevard
Suite 200
Lauderdale by the Sea, Florida 33308
/s/ Douglas M. Costle
------------------------------------
Douglas M. Costle
as Trustee and not individually,
RR2 Box 480
Woodstock, Vermont 05091
/s/ Leland O. Erdahl
------------------------------------
Leland O. Erdahl
as Trustee and not individually,
8046 MacKenzie Court
Las Vegas, Nevada 89129
29
<PAGE>
/s/ Richard A. Farrell
------------------------------------
Richard A. Farrell
as Trustee and not individually,
50 Beacon Street
Marblehead, Massachusetts 01945
------------------------------------
Dr. John A. Moore
as Trustee and not individually,
P.O. Box 474
Wicomico, Virginia 22579
/s/ William F. Glavin
------------------------------------
William F. Glavin
as Trustee and not individually,
56 Whiting Road
Wellesley, Massachusetts 02181
/s/ Patti McGill Peterson
------------------------------------
Patti McGill Peterson
as Trustee and not individually,
54 E. Main Street
Canton, New York 13617
/s/ John W. Pratt
------------------------------------
John W. Pratt
as Trustee and not individually,
2 Gray Gardens East
Cambridge, Massachusetts 02138
30
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK COUNTY, MASSACHUSETTS
May 21, 1996
Then personally appeared the above-named persons, Edward J.
Boudreau, Jr., Dennis S. Aronowitz, Richard P. Chapman, Jr., William J.
Cosgrove, Gail D. Fosler, Anne C. Hodsdon, Edward J. Spellman, Douglas M.
Costle, Leland O. Erdahl, Richard A. Farrell, William F. Glavin, Patti McGill
Peterson and John W. Pratt, who acknowledged the foregoing instrument to be his
free act and deed.
Before me,
/s/ Carmen M. Pelissier
------------------------------
Notary Public
My commission expires: July 28, 2000
31
AMENDED AND RESTATED
BY-LAWS
OF
FREEDOM INVESTMENT TRUST III
MARCH 6, 1996
<PAGE>
Table of Contents
<TABLE>
Page
<S> <C> <C>
ARTICLE I -- Definitions 1
ARTICLE II -- Offices and Seal.............................................................................1
Section 2.1 Principal Office.........................................................1
Section 2.2 Other Offices............................................................1
Section 2.3 Seal.....................................................................1
ARTICLE III -- Shareholders................................................................................2
Section 3.1 Meetings.................................................................2
Section 3.2 Place of Meeting.........................................................2
Section 3.3 Notice of Meetings.......................................................2
Section 3.4 Shareholders Entitled to Vote............................................2
Section 3.5 Quorum...................................................................2
Section 3.6 Treatment of Abstentions.................................................3
Section 3.7 Voting of Shares Held in Street Name.....................................3
Section 3.8 Adjournment..............................................................3
Section 3.9 Proxies..................................................................3
Section 3.10 Inspection of Records....................................................3
Section 3.11 Record Dates.............................................................3
ARTICLE IV -- Meetings of Trustees.........................................................................4
Section 4.1 Regular Meetings.........................................................4
Section 4.2 Special Meetings.........................................................4
Section 4.3 Notice...................................................................4
Section 4.4 Waiver of Notice.........................................................4
Section 4.5 Quorum, Adjournment and Voting...........................................4
Section 4.6 Compensation.............................................................4
ARTICLE V -- Executive Committee and Other Committees......................................................5
Section 5.1 How Constituted..........................................................5
Section 5.2 Powers of the Executive Committee........................................5
Section 5.3 Other Committees of Trustees.............................................5
-i-
<PAGE>
Section 5.4 Proceedings, Quorum and Manner of Acting.................................5
Section 5.5 Other Committees.........................................................5
ARTICLE VI -- Officers.....................................................................................6
Section 6.1 General..................................................................6
Section 6.2 Election, Term of Office and Qualifications..............................6
Section 6.3 Resignations and Removals................................................6
Section 6.4 Vacancies and Newly Created Offices......................................6
Section 6.5 Chairman of the Board....................................................6
Section 6.5A Powers and Duties of the Vice Chairman...................................7
Section 6.6 President................................................................7
Section 6.7 Vice President...........................................................7
Section 6.8 Chief Financial Officer, Treasurer and Assistant Treasurers..............7
Section 6.9 Secretary and Assistant Secretaries......................................8
Section 6.10 Subordinate Officers.....................................................8
Section 6.11 Remuneration.............................................................8
Section 6.12 Surety Bonds.............................................................8
ARTICLE VII -- Execution of Instruments; Voting of Securities..............................................9
Section 7.1 Execution of Instruments.................................................9
Section 7.2 Voting of Securities.....................................................9
ARTICLE VIII -- Fiscal Year, Accountants...................................................................9
Section 8.1 Fiscal Year..............................................................9
Section 8.2 Accountants..............................................................9
ARTICLE IX -- Amendments..................................................................................10
Section 9.1 General.................................................................10
</TABLE>
-ii-
<PAGE>
BY-LAWS
OF
FREEDOM INVESTMENT TRUST III
ARTICLE I
Definitions
The terms "Class," "Commission," "Declaration," "Interested Person,"
"1940 Act," "Series," "Shareholder," "Shares," "Trust," "Trust Property" and
"Trustees" have the meanings given them in the Amended and Restated Master Trust
Agreement of Freedom Investment Trust III dated May 14, 1991, as amended and
restated from time to time.
ARTICLE II
Offices and Seal
Section 2.1. Principal Office. The principal office of the Trust shall be
located in the City of Boston, The Commonwealth of Massachusetts.
Section 2.2. Other Offices. The Trust may establish and maintain such other
offices and places of business within or without The Commonwealth of
Massachusetts as the Trustees may from time to time determine.
Section 2.3. Seal. The seal of the Trust shall be circular in form and
shall bear the name of the Trust, the year of its organization, and the words
"Massachusetts Business Trust". The form of the seal shall be subject to
alteration by the Trustees and the seal may be used by causing it or a facsimile
to be impressed or affixed or printed or otherwise reproduced. Any officer or
Trustee of the Trust shall have authority to affix the seal of the Trust to any
document requiring the same but, unless otherwise required by the Trustees, the
seal shall not be necessary to be placed on, and its absence shall not impair
the validity of, any document, instrument or other paper executed and delivered
by or on behalf of the Trust.
1
<PAGE>
ARTICLE III
Shareholders
Section 3.1. Meetings. A Shareholders' meeting for the election of Trustees
and the transaction of other proper business shall be held when authorized or
required by the Declaration.
Section 3.2. Place of Meeting. All Shareholders' meetings shall be held at
such place within or without The Commonwealth of Massachusetts as the Trustees
shall designate.
Section 3.3. Notice of Meetings. Notice of all Shareholders' meetings,
stating the time, place and purpose of the meeting, shall be given by the
Secretary or an Assistant Secretary of the Trust by mail to each Shareholder
entitled to notice of and to vote at such meeting at his address as recorded on
the register of the Trust. Such notice shall be mailed at least 10 days and not
more than 60 days before the meeting. Such notice shall be deemed to be given
when deposited in the United States mail, with postage thereon prepaid. Any
adjourned meeting may be held as adjourned without further notice. No notice
need be given (A) to any Shareholder if a written waiver of notice, executed
before or after the meeting by such Shareholder or his attorney thereunto duly
authorized, is filed with the records of the meeting, or (B) to any Shareholder
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A waiver of notice need not specify the purposes of
the meeting.
Section 3.4. Shareholders Entitled to Vote. If, pursuant to Section 3.11
hereof, a record date has been fixed for the determination of Shareholders
entitled to notice of and to vote at any Shareholders' meeting, each Shareholder
of the Trust shall be entitled to vote, in accordance with the applicable
provisions of the Declaration, in person or by proxy, each Share or fraction
thereof standing in his name on the register of the Trust at the time of
determining net asset value on such record date. If the Declaration or the 1940
Act requires that Shares be voted by Series or Class, each Shareholder shall
only be entitled to vote, in person or by proxy, each Share or fraction thereof
of such Series or Class standing in his name on the register of the Trust at the
time of determining net asset value on such record date. If no record date has
been fixed for the determination of Shareholders so entitled, the record date
for the determination of Shareholders entitled to notice of and to vote at a
Shareholders' meeting shall be at the close of business on the day on which
notice of the meeting is mailed or, if notice is waived by all Shareholders, at
the close of business on the tenth day next preceding the day on which the
meeting is held.
Section 3.5. Quorum. The presence at any Shareholders' meeting in person or
by proxy, of Shareholders entitled to cast a majority of the votes thereat shall
be a quorum for the transaction of business.
2
<PAGE>
Section 3.6. Treatment of Abstentions. Shares represented in person or by
proxy, including Shares which abstain or do not vote with respect to one or more
proposals presented for shareholder approval, will be counted for purposes of
determining whether a quorum is present. Abstentions will be treated as Shares
that are present and entitled to vote with respect to any particular proposal,
but will not be counted as a vote in favor of such proposal. An abstention from
voting on a proposal will have the same effect as a vote against such proposal.
Section 3.7. Voting of Shares Held in Street Name. If a broker or nominee
holding Shares in "street name" indicates on a proxy that it does not have
discretionary authority to vote those Shares as to a particular proposal
presented for shareholder approval, those Shares will be considered to be
outstanding, but will not be considered as present and entitled to vote with
respect to such proposal.
Section 3.8. Adjournment. The holders of a majority of the Shares entitled
to vote at the meeting and present thereat, in person or by proxy, whether or
not constituting a quorum, or, if no Shareholder entitled to vote is present
thereat, in person or by proxy, any Trustee or officer present thereat entitled
to preside or act as Secretary of such meeting, may adjourn the meeting sine die
or from time to time. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
Section 3.9. Proxies. Shares may be voted in person or by proxy. When any
Share is held jointly by several persons, any one of them may vote at any
meeting, in person or by proxy in respect of such Share unless at or prior to
exercise of the vote the Trustees receive a specific written notice to the
contrary from any one of them. If more than one such joint owner shall be
present at such meeting, in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote cast, such vote shall not be received
in respect of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger.
Section 3.10. Inspection of Records. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted shareholders of
a Massachusetts business corporation.
Section 3.11. Record Dates. The Trustees may fix in advance a date as a
record date for the purpose of determining the Shareholders who are entitled to
notice of and to vote at any meeting or any adjournment thereof, or to express
consent in writing without a meeting to any action of the Trustees, or who shall
receive payment of any dividend or of any other distribution, or for the purpose
of any other lawful action, provided that such record date shall be not more
than 60 days before the date on which the particular action requiring such
determination of Shareholders is to be taken. In such case, subject to the
provisions of Section 3.4, each eligible Shareholder of record on such record
date shall be entitled to notice of, and to vote at, such meeting or
adjournment, or to express such consent, or to receive payment of such dividend
or distribution or to take such other action, as the case may be,
notwithstanding any transfer of Shares on the register of the Trust after the
record date.
3
<PAGE>
ARTICLE IV
Meetings of Trustees
Section 4.1. Regular Meetings. The Trustees from time to time shall provide
by resolution for the holding of regular meetings for the election of officers
and the transaction of other proper business and shall fix the place and time
for such meetings to be held within or without The Commonwealth of
Massachusetts.
Section 4.2. Special Meetings. Special meetings of the Trustees shall be
held whenever called by the Chairman of the Board, the President (or, in the
absence or disability of the President, by any Vice President), the Treasurer,
the Secretary or two or more Trustees, at the time and place within or without
The Commonwealth of Massachusetts specified in the respective notices or waivers
of notice of such meetings.
Section 4.3. Notice. Notice of regular and special meetings, stating the
time and place, shall be (a) mailed to each Trustee at his residence or regular
place of business at least five days before the day on which the meeting is to
be held or (b) caused to be delivered to him personally or to be transmitted to
him by telegraph, cable or wireless at least two days before the day on which
the meeting is to be held. Unless otherwise required by law, such notice need
not include a statement of the business to be transacted at, or the purpose of,
the meeting. No notice of adjournment of a meeting of the Trustees to another
time or place need be given if such time and place are announced at such
meeting.
Section 4.4. Waiver of Notice. Notice of a meeting need not be given to any
Trustee if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Trustee who attends
the meeting without protesting prior thereto or at its commencement the lack of
notice to him. A waiver of notice need not specify the purposes of the meeting.
Section 4.5. Quorum, Adjournment and Voting. At all meetings of the
Trustees, the presence of a majority of the total number of Trustees authorized,
but not less than two, shall constitute a quorum for the transaction of
business. A majority of the Trustees present, whether or not constituting a
quorum, may adjourn the meeting, from time to time. The action of a majority of
the Trustees present at a meeting at which a quorum is present shall be the
action of the Trustees unless the concurrence of a greater proportion is
required for such action by law, by the Declaration or by these By-Laws.
Section 4.6. Compensation. Each Trustee may receive such remuneration for
his services as such as shall be fixed from time to time by resolution of the
Trustees.
4
<PAGE>
ARTICLE V
Executive Committee and Other Committees
Section 5.1. How Constituted. The Trustees may, by resolution, designate
one or more committees, including an Executive Committee, an Audit Committee and
an Administration Committee, each consisting of at least two Trustees. The
Trustees may, by resolution, designate one or more alternate members of any
committee to serve in the absence of any member or other alternate member of
such committee. Each member and alternate member of a committee shall be a
Trustee and shall hold office at the pleasure of the Trustees. The Chairman of
the Board shall be a member of the Executive Committee.
Section 5.2. Powers of the Executive Committee. Unless otherwise provided
by resolution of the Trustees, the Executive Committee shall have and may
exercise all of the power and authority of the Trustees, provided that the power
and authority of the Executive Committee shall be subject to the limitations
contained in the Declaration.
Section 5.3. Other Committees of Trustees. To the extent provided by
resolution of the Trustees, other committees shall have and may exercise any of
the power and authority that may lawfully be granted to the Executive Committee.
Section 5.4. Proceedings, Quorum and Manner of Acting. In the absence of
appropriate resolution of the Trustees, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that the quorum shall not be less than two
Trustees. In the absence of any member or alternate member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a Trustee to act in the place of such absent
member or alternate member. Members and alternate members of a committee may
participate in a meeting of such committee by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5.5. Other Committees. The Trustees may appoint other committees,
each consisting of one or more persons who need not be Trustees. Each such
committee shall have such powers and perform such duties as may be assigned to
it from time to time by the Trustees, but shall not exercise any power which may
lawfully be exercised only by the Trustees or a committee thereof.
5
<PAGE>
ARTICLE VI
Officers
Section 6.1. General. The officers of the Trust shall be a Chairman of the
Board, a President, a Secretary, and a Treasurer, and may include one or more
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 6.10 of this Article VI.
Section 6.2. Election, Term of Office and Qualifications. The officers of
the Trust and any Series thereof (except those appointed pursuant to Section
6.10) shall be elected by the Trustees. Except as provided in Sections 6.3 and
6.4 of this Article VI, each officer elected by the Trustees shall hold office
at the pleasure of the Trustees. Any two or more offices may be held by the same
person. The Chairman of the Board shall be selected from among the Trustees and
may hold such office only so long as he/she continues to be a Trustee. Any
Trustee or officer may be but need not be a Shareholder of the Trust.
Section 6.3. Resignations and Removals. Any officer may resign his office
at any time by delivering a written resignation to the Trustees, the President,
the Secretary or any Assistant Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery. Any officer may be removed
from office with or without cause by the vote of a majority of the Trustees at
any regular meeting or any special meeting. Except to the extent expressly
provided in a written agreement with the Trust, no officer resigning and no
officer removed shall have any right to any compensation for any period
following his resignation or removal or any right to damages on account of such
removal.
Section 6.4. Vacancies and Newly Created Offices. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Trustees at any regular or special meeting
or, in the case of any office created pursuant to Section 6.10 of this Article
VI, by any officer upon whom such power shall have been conferred by the
Trustees.
Section 6.5. Chairman of the Board. The Chairman of the Board shall be the
chief executive officer of the Trust and each Series thereof, shall preside at
all Shareholders' meetings and at all meetings of the Trustees and shall be ex
officio a member of all committees of the Trustees and each Series thereof,
except the Audit Committee. Subject to the supervision of the Trustees, he shall
have general charge of the business of the Trust and each Series thereof, the
Trust Property and the officers, employees and agents of the Trust and each
Series thereof. He shall have such other powers and perform such other duties as
may be assigned to him from time to time by the Trustees.
6
<PAGE>
Section 6.5A. Powers and Duties of the Vice Chairman. The Trustees may, but
need not, appoint one or more Vice Chairmen of the Trust. A Vice Chairman shall
be an executive officer of the Trust and shall have the powers and duties of a
Vice President of the Trust, as provided in Section 6.7 of this Article VI. The
Vice Chairman shall perform such duties as may be assigned to him or her from
time to time by the Trustees or the Chairman.
Section 6.6. President. The President shall be the chief operating officer
of the Trust and each Series thereof and, at the request of or in the absence or
disability of the Chairman of the Board, he shall preside at all Shareholders'
meetings and at all meetings of the Trustees and shall in general exercise the
powers and perform the duties of the Chairman of the Board. Subject to the
supervision of the Trustees and such direction and control as the Chairman of
the Board may exercise, he shall have general charge of the operations of the
Trust and each Series and Class thereof and its officers, employees and agents.
He shall exercise such other powers and perform such other duties as from time
to time may be assigned to him by the Trustees.
Section 6.7. Vice President. The Trustees may, from time to time, designate
and elect one or more Vice Presidents who shall have such powers and perform
such duties as from time to time may be assigned to them by the Trustees or the
President. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior in
length of time in office of the Vice Presidents present and able to act) may
perform all the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the President.
Section 6.8 Chief Financial Officer, Treasurer and Assistant Treasurers.
The Chief Financial Officer shall be the principal financial and accounting
officer of the Trust and each Series thereof and shall have general charge of
the finances and books of account of the Trust and each Series and Class
thereof. Except as otherwise provided by the Trustees, he shall have general
supervision of the funds and property of the Trust and each Series thereof and
of the performance by the Custodian, appointed pursuant to Section 3.6 of the
Declaration of its duties with respect thereto. The Chief Financial Officer
shall render a statement of condition of the finances of the Trust and each
Series and Class thereof to the Trustees as often as they shall require the same
and he shall in general perform all the duties incident to the office of the
Chief Financial Officer and such other duties as from time to time may be
assigned to him by the Trustees.
The Treasurer or any Assistant Treasurer may perform such duties of the
Chief Financial Officer as the Chief Financial Officer or the Trustees may
assign. In the absence of the Chief Financial Officer, the Treasurer may perform
all duties of the Chief Financial Officer. In the absence of the Chief Financial
Officer and the Treasurer, any Assistant Treasurer may perform all duties of the
Chief Financial Officer.
7
<PAGE>
Section 6.9. Secretary and Assistant Secretaries. The Secretary shall
attend to the giving and serving of all notices of the Trust and each Series and
Class thereof and shall record all proceedings of the meetings of the
Shareholders and Trustees in one or more books to be kept for that purpose. He
shall keep in safe custody the seal of the Trust, and shall have charge of the
records of the Trust and each Series and Class thereof, including the register
of shares and such other books and papers as the Trustees may direct and such
books, reports, certificates and other documents required by law to be kept, all
of which shall at all reasonable times be open to inspection by any Trustee. He
shall perform such other duties as appertain to his office or as may be required
by the Trustees.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Trustees may assign, and, in the absence of the Secretary, he
may perform all the duties of the Secretary.
Section 6.10. Subordinate Officers. The Trustees from time to time may
appoint such other subordinate officers or agents as they may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Trustees may determine. The Trustees
from time to time may delegate to one or more officers or agents the power to
appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 6.11. Remuneration. The salaries or other compensation of the
officers of the Trust and any Series thereof shall be fixed from time to time by
resolution of the Trustees, except that the Trustees may by resolution delegate
to any person or group of persons the power to fix the salaries or other
compensation of any subordinate officers or agents appointed in accordance with
the provisions of Section 6.10 hereof.
Section 6.12. Surety Bonds. The Trustees may require any officer or agent
of the Trust or any Series thereof to execute a bond (including, without
limitation, any bond required by the 1940 Act and the rules and regulations of
the Commission) to the Trustees in such sum and with such surety or sureties as
the Trustees may determine, conditioned upon the faithful performance of his
duties to the Trust, including responsibility for negligence and for the
accounting of any of the Trust Property that may come into his hands. In any
such case, a new bond of like character shall be given at least every six years,
so that the date of the new bond shall not be more than six years subsequent to
the date of the bond immediately preceding.
8
<PAGE>
ARTICLE VII
Execution of Instruments, Voting of Securities
Section 7.1. Execution of Instruments. All deeds, documents, transfers,
contracts, agreements, requisitions or orders, promissory notes, assignments,
endorsements, checks and drafts for the payment of money by the Trust or any
Series thereof, and other instruments requiring execution either in the name of
the Trust or the names of the Trustees or otherwise may be signed by the
Chairman, the President, a Vice President or the Secretary and by the Chief
Financial Officer, Treasurer or an Assistant Treasurer, or as the Trustees may
otherwise, from time to time, authorize, provided that instructions in
connection with the execution of portfolio securities actions may be signed by
one such officer. Any such authorization may be general or confined to specific
instances.
Section 7.2. Voting of Securities. Unless otherwise ordered by the
Trustees, the Chairman, the President or any Vice President shall have full
power and authority on behalf of the Trustees to attend and to act and to vote,
or in the name of the Trustees to execute proxies to vote, at any meeting of
stockholders of any company in which the Trust or any Series thereof may hold
stock. At any such meeting such officer shall possess and may exercise (in
person or by proxy) any and all rights, powers, and privileges incident to the
ownership of such stock. The Trustees may by resolution from time to time confer
like powers upon any other person or persons.
ARTICLE VIII
Fiscal Year; Accountants
Section 8.1. Fiscal Year. The fiscal year of the Trust and any Series
thereof shall be established by resolution of the Trustees.
Section 8.2. Accountants.
(a) The Trustees shall employ a public accountant or firm of independent
public accountants as their accountant to examine the accounts of the Trust and
to sign and certify at least annually financial statements filed by the Trust.
The accountant's certificates and reports shall be addressed both to the
Trustees and to the Shareholders.
(b) A majority of the Trustees who are not Interested Persons of the Trust
shall select the accountant at any meeting held before the initial registration
statement of the Trust becomes effective, and thereafter shall select the
accountant annually by votes, cast in person, at a meeting held within 30 days
before or after the beginning of the fiscal year of the Trust.
9
<PAGE>
(c) Any vacancy occurring due to the death or resignation of the
accountant, may be filled at a meeting called for the purpose by the vote, cast
in person, of a majority of those Trustees who are not Interested Persons of the
Trust.
ARTICLE IX
Amendments
Section 9.1. General. These By-Laws may be amended or repealed, in whole or
in part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
10
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" for Discovery Fund in the Growth Funds' Prospectus and "Independent
Auditors" in the John Hancock Discovery Fund Class A and Class B Statement of
Additional Information and to the incorporation by reference in Post-Effective
Amendment No. 16 to Registration Statement (Form N-1A No. 33-29438) of our
report dated September 6, 1996 on the financial statements and financial
highlights of John Hancock Discovery Fund, the portfolio of John Hancock
Investment Trust IV.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
November 20, 1996
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