<PAGE> 1
Registration No. 33-32246
ICA No. 811-5968
AS FILED ON FEBRUARY 24, 1995
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. 7 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 11 [x]
JOHN HANCOCK TAX-FREE BOND FUND
(Formerly Transamerica Tax-Free Bond Fund)
(Exact Name of Registrant as Specified in Articles of Incorporation)
101 Huntington Avenue, Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 375-1760
Thomas H. Drohan, Esq.
John Hancock Advisers, Inc.
101 Huntington Avenue, Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
Copies to:
Jeffrey N. Carp, Esq. Thomas H.Connors, Esq.
Hale and Dorr John Hancock Advisers, Inc.
60 State Street 101 Huntington Avenue
Boston, Massachusetts, 02109 Boston, Massachusetts 02199-7603
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[X] on April 30, 1995 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 Notice on February 23, 1995.
<PAGE> 2
JOHN HANCOCK TAX-FREE BOND FUND
(formerly Transamerica Tax-Free Bond Fund
__________________
CROSS-REFERENCE SHEET
<TABLE>
Caption>
Form N-1A
Item
Part A Caption Prospectus
- ------ ------- ----------
<S> <C> <C>
1... Cover Page Cover Page
2... Synopsis/Summary of Fund Expense Information; The Fund's Expenses;
Expenses Share Price
3... Condensed Financial The Fund's Financial Highlights
Information
4... General Description Investment Objective and Policies;
of Registrant Organization and Management of the Fund
5... Management of the Fund Organization and Management of the Fund;
The Fund's Expenses; Back Cover Page
6... Capital Stock and Organization and Management of the Fund;
Other Securities Dividends and Taxes; How to Buy Shares; How to
Redeem Shares; Additional Services and
Programs
7... Purchase of Securities How To Buy Shares; Share Price; Additional
Being Offered Services and Programs; Alternative Purchase
Arrangements; The Fund's Expenses; Back
Cover Page
8... Redemption or Repurchase How To Redeem Shares
9... Pending Legal Proceedings Not applicable
</TABLE>
<TABLE>
<CAPTION>
Part B Caption Statement of Additional Information
- ------ ------- -----------------------------------
<S> <C> <C>
10... Cover Page Cover Page
11... Table of Contents Table of Contents
12... General Information The Fund and its Management
and History
13... Investment Objectives Investment Objective and Policies;
and Policies Investment Practices; Investment Restrictions;
Special Investment Techniques
14... Management of the Fund The Fund and its Management; Trustees
and Officers of the Fund
15... Control Persons and The Fund and its Management
Principal Holders of
Securities
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
16... Investment Advisory and The Fund and its Management
Other Services
17... Brokerage Allocation Portfolio Transactions and
Brokerage
18... Capital Stock and Additional Information
Other Securities
19... Purchase, Redemption and Purchase of Shares; Determination
Pricing of Securities of Net Asset Value; Shareholder
Being Offered Services; Redemption and Repurchase of Shares
20... Tax Status Dividends, Distributions and Tax Status
21... Underwriters Purchase of Shares-Distributors
22... Calculation of Additional Information Performance Information
Performance Data
23... Financial Statements Financial Statements
</TABLE>
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
iii
<PAGE> 4
JOHN HANCOCK TAX-FREE BOND FUND
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199
CLASS A AND CLASS B SHARES
PROSPECTUS
MAY 1, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Fund's Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Alternative Purchase Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
How to Buy Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Share Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
How to Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Additional Services and Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Organization and Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 28
The Fund's Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Dividends and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Investments, Techniques and Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
This Prospectus sets forth the information about John Hancock Tax-Free
Bond Fund (the "Fund") that you should know before investing. Please read and
retain it for future reference.
Additional information about the Fund has been filed with the
Securities and Exchange Commission (the "SEC"). You can obtain a copy of the
Fund's Statement of Additional Information, dated May 1, 1995 which is
incorporated by reference into this Prospectus, free of charge by writing or
telephoning: John Hancock Investor Services Corporation, P.O. Box 9116, Boston,
Massachusetts 02205-9116, 1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 5
EXPENSE INFORMATION
The purpose of the following information is to help you to understand
the various fees and expenses you will bear, directly or indirectly, when you
purchase shares of the Fund. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Fund's fiscal
year ended December 31, 1994 adjusted to reflect certain current expenses.
Actual fees and expenses may be greater or less than those indicated.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge (as a percentage
of offering price) . . . . . . . . . . . . . . . . . . . . . . . . 4.50% None
Maximum sales charge on
reinvested dividends . . . . . . . . . . . . . . . . . . . . . . . None None
Maximum deferred sales charge . . . . . . . . . . . . . . . . . . . . None* 5.00%
Redemption fees+ . . . . . . . . . . . . . . . . . . . . . . . . . . None None
Exchange fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . None None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average
net assets)
Management fee (net of limitation) . . . . . . . . . . . . . . 0.44% 0.44%
12b-1 fee*** . . . . . . . . . . . . . . . . . . . . . . . . . 0.15% 0.90%
Other expenses** . . . . . . . . . . . . . . . . . . . . . . . 0.26% 0.26%
Total Fund operating expenses
(net of limitation)*** . . . . . . . . . . . . . . . . . . . 0.85% 1.60%
</TABLE>
* No sales charge is payable at the time of purchase on investments of
$1 million or more, but for these investments a contingent deferred
sales charge may be imposed, as described below under the caption
"Share Price," in the event of certain redemption transactions within
one year of purchase.
** Other Expenses include transfer agent, legal, audit, custody and
other expenses.
*** Total Fund operating expenses in the table reflect voluntary and
temporary limitations by the Fund's investment adviser and
distributor. Without such limitations the Management Fee and Total
Fund Operating Expenses of Class A shares would have been estimated
as 0.55% and 0.96%, respectively, and the Management Fee, Rule 12b-1
Fee and Total Fund Operating Expenses of Class B shares would have
been estimated as 0.55%, 1.00% and 1.14%, respectively.
+ Redemption by wire fee (currently $4.00) not included.
-2-
<PAGE> 6
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
EXAMPLE:
You would pay the following expenses for
the indicated period of years on a
hypothetical $1,000 investment,
assuming 5% annual return
Class A Shares . . . . . . . . . . . . . . . . . . . . . . . . . $53 $71 $90 $145
Class B Shares
-- Assuming complete redemption at
end of period . . . . . . . . . . . . . . . . . . . . . . . $66 $80 $107 $170
-- Assuming no redemption . . . . . . . . . . . . . . . . . . . $16 $50 $ 87 $170
</TABLE>
(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.)
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the National Association of Securities
Dealers, Inc.'s Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully
explained in this Prospectus under the caption "The Fund's Expenses" and in the
Statement of Additional Information under the captions "The Fund and Its
Management" and "Purchase of Shares."
-3-
<PAGE> 7
THE FUND'S FINANCIAL HIGHLIGHTS
The following table of financial highlights has been audited by Ernst
& Young LLP, the Fund's independent auditors, whose unqualified report is
included in the Fund's 1994 Annual Report and is included in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to shareholders which may be obtained
free of charge by writing or telephoning John Hancock Investor Services
Corporation ("Investor Services"), at the address or telephone number listed on
the front page of this Prospectus.
Selected data for each class of shares outstanding throughout each
period is as follows:
-4-
<PAGE> 8
<TABLE>
<CAPTION>
Class A Shares Class B Shares
--------------------------------------------------- ----------------------------
Year Ended December 31, Period Ended Year Ended December 31,
------------------------------------- December 31, -----------------------------
1994 (1) 1993 1992 1991 1990 (2) 1994 (1) 1993 1992 (3)
-------- ------- ------- ------ -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per share income and capital changes for
a share outstanding during each period:
Net asset value, beginning
of period . . . . . . . . . . . . . $ 10.96 $ 10.47 $ 10.24 $ 9.90 $ 10.00 $ 10.96 $ 10.47 $ 10.24
INCOME FROM INVESTMENT OPERATIONS
Net investment income . . . . . . . . 0.58 0.62 0.67 0.69 0.71 0.50 0.54 0.59
Net realized and unrealized gain
(loss) on investments . . . . . . . (1.58) 0.93 0.42 0.72 (0.13) (1.58) 0.93 0.42
------- ------- ------- ------ ------- ------- ------- -------
Total from Investment Operations . (1.00) 1.55 1.09 1.41 0.58 (1.08) 1.47 1.01
LESS DISTRIBUTIONS
Dividends from net investment income (0.57) (0.62) (0.68) (0.68) (0.68) (0.50) (0.54) (0.60)
Distributions from realized gains . . - (0.44) (0.18) (0.39) - - (0.44) (0.18)
------- ------- ------- ------ ------- ------- ------- -------
Total Distributions . . . . . . . . (0.57) (1.06) (0.86) (1.07) (0.68) (0.50) (0.98) (0.78)
------- ------- ------- ------ ------- ------- ------- -------
Net asset value, end of period . . . $ 9.39 $ 10.96 $ 10.47 $ 10.24 $ 9.90 $ 9.38 $ 10.96 $ 10.47
======= ======= ======= ====== ======= ======= ======= =======
TOTAL RETURN (4) . . . . . . . . . . (9.28)% 15.15% 10.97% 14.78% 6.04% (10.05) % 14.30% 10.15%
======= ======= ======= ====== ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average net
assets . . . . . . . . . . . . . . 0.96% 0.95% 0.96% 0.98% 1.25% 1.71% 1.70% 1.73%
Ratio of expense reimbursement
to average net assets . . . . . . . (0.11)% (0.17) % (0.30)% (0.38)% (0.85)% (0.11) % (0.17)% (0.30)%
======= ======= ======= ====== ======= ======= ======= =======
Ratio of net expenses to average
net assets . . . . . . . . . . . . 0.85% 0.78% 0.66% 0.60% 0.40% 1.60% 1.53% 1.43%
======= ======= ======= ====== ======= ======= ======= =======
Ratio of net investment income to
average net assets . . . . . . . . . 5.72% 5.57% 6.46% 6.86% 7.09% 4.97% 4.66% 5.57%
Portfolio turnover . . . . . . . . 107% 116% 79% 123% 64% 107% 116% 79%
Net Assets, end of period
(in thousands) . . . . . . . . . $114,539 $136,521 $99,523 $73,393 $45,437 $70,243 $56,384 $18,272
</TABLE>
(1) On December 22, 1994, John Hancock Advisers, Inc. became the
Investment Adviser. Prior to this date, Transamerica Fund
Management Company was the Investment Adviser.
(2) Financial highlights, including total return, are for the period
from January 5, 1990 (date of Fund's initial offering of shares to
the public) to December 31, 1990 and have not been annualized.
(3) Per share information has been calculated using the average number
of shares outstanding.
(4) Total return does not include the effect of the initial sales
charge for Class A Shares nor the contingent deferred sales charge
for Class B Shares. Total return does include the benefit of a
voluntary expense reimbursement by the Investment Adviser. Without
such benefit, the total return would be lower. See Notes to
Financial Statements.
-5-
<PAGE> 9
INVESTMENT OBJECTIVE AND POLICIES
THE FUND SEEKS TO PROVIDE INCOME EXEMPT FROM FEDERAL INCOME TAX.
The Fund's investment objective is to obtain as high a level of
interest income exempt from federal income taxes as is consistent with
preservation of capital. The Fund seeks to achieve its objective by investing
primarily in municipal bonds, notes and commercial paper, the interest on which
is exempt from federal income taxes ("Municipal Obligations"). Municipal
Obligations include debt obligations issued by or on behalf of states,
territories and possessions of the United States; the District of Columbia; and
the political subdivisions, agencies or instrumentalities thereof.
Under normal market conditions, at least 80% of the Fund's total
assets will be invested in Municipal Obligations. At least 65% of the Fund's
assets will normally be invested in municipal bonds. Pending the investment of
Fund assets in Municipal Obligations and to meet redemption requests, the Fund
may invest up to 20% of its total assets in private activity bonds (the
interest on which may be treated as a tax preference item under the Federal
alternative minimum tax) and in certain taxable money market securities,
including: obligations issued or guaranteed by the U.S. government, its
agencies, instrumentalities or authorities; corporate debt securities;
commercial paper; certificates of deposit of domestic banks with assets of $1
billion or more; and repurchase agreements secured by U.S. Government
securities.
When John Hancock Advisers, Inc. (the "Adviser") or Transamerica
Investment Services, Inc. (the "Subadviser") determines that unfavorable
investment conditions warrant a temporary defensive position, the Fund may
invest more than 20% of its assets in taxable money market securities.
THE FUND'S INVESTMENT IN MUNICIPAL OBLIGATIONS INCLUDES MUNICIPAL
BONDS, MUNICIPAL NOTES AND MUNICIPAL COMMERCIAL PAPER.
Municipal bonds generally are classified as either general obligation
bonds or revenue bonds. General obligation bonds are backed by the credit of an
issuer having taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may depend on an appropriation of the
issuer's legislative body. Revenue bonds, by contrast, are payable only from
the revenues derived from a particular project, facility or a specific revenue
source. They are not generally payable from the unrestricted revenues of the
issuer. Municipal notes include tax anticipation
-6-
<PAGE> 10
notes, bond anticipation notes, revenue anticipation notes and project notes.
Municipal commercial paper obligations are unsecured promissory notes issued by
municipalities to meet short-term credit needs.
THE FUND INVESTS IN MUNICIPAL OBLIGATIONS.
At the time of purchase, municipal bonds including private activity
bonds must be rated at least investment grade, i.e., Baa by Moody's Investors
Services, Inc. ("Moody's"), BBB by Standard & Poor's Ratings Group ("S&P") or
Fitch Investors Service ("Fitch") or, if not rated, determined by the Adviser
or Subadviser to be of comparable credit quality. Municipal notes must be rated
at least Aa by Moody's or AA by S&P or Fitch or, if not rated, determined by
the Adviser or Subadviser to be of comparable credit quality. Municipal
commercial paper must be rated at least Prime-2 by Moody's or A-1+ by S&P. The
Fund may retain Municipal Obligations whose ratings are downgraded below
permissible ratings until the Adviser or Subadviser determines that disposing
of such Obligations is in the best interest of the Fund. Municipal bonds rated
BBB or Baa are considered to have some speculative characteristics and can pose
special risks involving the ability of the issuer to make payment of principal
and interest to a greater extent than higher rated securities. See Appendix A
to the Statement of Additional Information for additional discussion of the
ratings assigned to Municipal Obligations.
The Adviser or Subadviser will purchase municipal bonds rated BBB or
Baa where, based upon price, yield and its assessment of quality, investment in
such bonds is determined to be consistent with the Fund's objective of
preservation of capital. They will evaluate and monitor the quality of all
investments, including bonds rated BBB or Baa, and will dispose of such bonds
necessary to assure that the Fund's overall portfolio is constituted in manner
consistent with the goal of preservation of capital. To the extent that the
Fund's investments in municipal bonds rated BBB or Baa includes obligations
believed to be consistent with the goal of preserving capital, such bonds may
not provide yields as high as those of other obligations having such ratings
and the differential in yields between such bonds and obligations with higher
quality ratings may not be as significant as might otherwise be generally
available.
THERE IS NO RESTRICTION ON THE MATURITIES OF THE FUND'S MUNICIPAL
OBLIGATIONS.
Because there is no restriction on the maturities of the Municipal
Obligations in which the Fund may invest, the Fund's average portfolio maturity
is not subject to any limit. Generally, the longer the average portfolio
maturity, the greater
-7-
<PAGE> 11
will be the impact of fluctuations in interest rates on the values of the
Fund's assets and on the net asset value per share.
THE FUND MAY EMPLOY CERTAIN INVESTMENT STRATEGIES TO HELP ACHIEVE ITS
INVESTMENT OBJECTIVE.
The Fund may write (sell) covered call and put options on debt
securities in which it may invest and on indices composed of debt securities in
which it may invest. The Fund may purchase call and put options on these
securities and indices. The Fund may also write straddles, which are
combinations of put and call options on the same security. The Fund may buy and
sell interest rate and municipal bond index futures contracts and options on
such futures contracts to hedge against changes in securities prices and
interest rates.
The Fund may invest in variable rate and floating rate obligations,
including inverse floating rate obligations, on which the interest rate is
adjusted at predesignated periodic intervals or when there is a change in the
market rate of interest on which the interest rate payable on the obligation is
met is based.
Options, futures contracts and variable and floating rate instruments
are generally considered to be "derivative" instruments because they derive
their value from the performance of an underlying asset, index or other
economic benchmark. See "Investments, Techniques and Risk Factors" for
additional discussion of derivative instruments.
The Fund will not concentrate in any one industry (governmental
issuers are not considered to be part of any "industry"). While the Fund may
invest more than 25% of its total assets in industrial development or pollution
control bonds, it may not invest more than 25% of its assets in industrial
development or pollution control bonds which are dependent, directly or
indirectly, on the revenues or credit of private entities in any one industry.
The Fund may purchase tax exempt participation interests and municipal
lease obligations, may lend its portfolio securities, enter into repurchase
agreements, purchase restricted and illiquid securities and purchase securities
on a when-issued or forward commitment basis.
See "Investments, Techniques and Risk Factors" for more information
about the Fund's investments.
THE FUND FOLLOWS CERTAIN POLICIES WHICH MAY HELP TO REDUCE INVESTMENT
RISK.
-8-
<PAGE> 12
The Fund has adopted certain investment restrictions which are
enumerated in detail in the Statement of Additional Information where they are
classified as fundamental or nonfundamental. Those restrictions designated as
fundamental may not be changed without shareholder approval. The Fund's
investment objective and its policy to invest (under normal market conditions)
80% of its assets in Municipal Obligations are fundamental and may not be
changed without the approval of the Fund's shareholders. The Fund's other
investment policies and its nonfundamental restrictions, however, may be
changed by a vote of the Trustees without shareholder approval. There can be no
assurance that the Fund will achieve its investment objective.
RISK FACTORS. An investment in the Fund is intended for long-term
investors who can accept the risks associated with investing primarily in
fixed-income securities. The Fund's investments will be subject to market
fluctuation and other risks inherent in all securities. The yield, return and
price volatility of the Fund depend on the type and quality of its investments
as well as market and other factors. In addition, the Fund's potential
investments and management techniques may entail specific risks. For additional
information about risks associated with an investment in the Fund, see
"Investments, Techniques and Risk Factors."
The primary consideration in choosing brokerage firms to carry out the
Fund's transactions is execution at the most favorable prices, taking into
account the broker's sales of shares of the Fund. Pursuant to procedures
determined by the Trustees, the Adviser may place securities transactions with
brokers affiliated with the Adviser and/or a subadviser. The brokers include
Tucker, Anthony Incorporated, Sutro and Company, Inc. and John Hancock
Distributors, Inc., which are indirectly owned by the John Hancock Mutual Life
Insurance Company, which in turn indirectly owns the Adviser. Fixed-income
securities are generally purchased and sold in transactions directly with
dealers acting as principal and involve a "spread" rather than a commission.
ALTERNATIVE PURCHASE ARRANGEMENTS
AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO CHOOSE THE METHOD OF
PAYMENT THAT IS BEST FOR YOU.
You can purchase shares of the Fund at a price equal to their net
asset value per share plus a sales charge. At your election, this charge may be
imposed either at the time of the purchase (see "Initial Sales Charge
Alternative," Class A shares) or on a
-9-
<PAGE> 13
contingent deferred basis (the "Contingent Deferred Sales Charge Alternative,"
Class B shares). If you do not specify on your account application which class
of shares you are purchasing, it will be assumed that you are investing in
Class A shares.
INVESTMENTS IN CLASS A SHARES ARE SUBJECT TO AN INITIAL SALES CHARGE.
CLASS A SHARES. If you elect to purchase Class A shares, you will
incur an initial sales charge unless the amount of your purchase is $1 million
or more. If you purchase $1 million or more of Class A shares, you will not be
subject to an initial sales charge, but you will incur a sales charge if you
redeem your shares within one year of purchase. Class A shares are subject to
ongoing distribution and service fees at a combined annual rate of up to 0.25%
of the Fund's average daily net assets attributable to the Class A shares.
Certain purchases of Class A shares qualify for reduced initial sales charges.
See "Share Price -- Qualifying for a Reduced Sales Charge."
INVESTMENTS IN CLASS B SHARES ARE SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE.
CLASS B SHARES. You will not incur a sales charge when you purchase
Class B shares, but the shares are subject to a sales charge if you redeem them
within six years of purchase (the "contingent deferred sales charge" or the
"CDSC"). Class B shares are subject to ongoing distribution and service fees at
a combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to the Class B shares. Investing in Class B shares permits all of
your dollars to work from the time you make your investment, but the higher
ongoing distribution fee will cause these shares to have a higher expense ratio
than that of Class A shares. To the extent that any dividends are paid by the
Fund, these higher expenses will also result in lower dividends than those paid
on Class A shares.
Class B shares are not available for full service defined contribution
plans administered by Investor Services or the Company that had more than 100
eligible employees at the inception of the Fund account.
YOU SHOULD CONSIDER WHICH CLASS OF SHARES WILL BE MORE BENEFICIAL TO
YOU.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE
The alternative purchase arrangement allows you to choose the most
beneficial way to buy shares, given the amount of your purchase, the length of
time you expect to hold your shares and
-10-
<PAGE> 14
other circumstances. You should consider whether, during the anticipated life
of your Fund investment, the accumulated CDSC and fees on Class B shares would
be less than the initial sales charge and accumulated fees on Class A shares
purchased at the same time, and to what extent this differential would be
offset by the Class A shares' lower expenses. To help you make this
determination, the table under the caption "Expense Information" on the inside
cover page of this Prospectus shows examples of the charges applicable to each
class of shares. Class A shares will normally be more beneficial if you qualify
for reduced sales charges. See "Share Price--Qualifying for a Reduced Sales
Charge."
Class A shares are subject to lower distribution fees and,
accordingly, pay correspondingly higher dividends per share, to the extent any
dividends are paid. However, because initial sales charges are deducted at the
time of purchase, you would not have all of your funds invested initially and,
therefore, would initially own fewer shares. If you do not qualify for reduced
initial sales charges and expect to maintain your investment for an extended
period of time, you might consider purchasing Class A shares because the
accumulated distribution and service charges on Class B shares may exceed the
initial sales charge and accumulated distribution and service charges on Class
A shares during the life of your investment.
Alternatively, you might determine that it would be more advantageous
to purchase Class B shares in order to have all of your funds invested
initially. However, you would be subject to higher distribution and service
fees and, for a six-year period, a CDSC.
In the case of Class A shares, the distribution expenses that John
Hancock Funds, Inc. ("John Hancock Funds") incurs in connection with the sale
of the shares will be paid from the proceeds of the initial sales charge and
ongoing distribution and service fees. In the case of Class B shares, the
expenses will be paid from the proceeds of the ongoing distribution and service
fees, as well as the CDSC incurred upon redemption within six years of
purchase. The purpose and function of the Class B shares' CDSC and ongoing
distribution and service fees are the same as those of the Class A shares'
initial sales charge and ongoing distribution and service fees. Sales personnel
distributing the Fund's shares may receive different compensation for selling
each class of shares.
Dividends, if any, on Class A and Class B shares will be calculated in
the same manner, at the same time and on the same day and will be in the same
amount, except for differences resulting from the fact that each class will
bear only its own
-11-
<PAGE> 15
distribution and service fees, shareholder meeting expenses and any incremental
transfer agency costs. See "Dividends and Taxes."
HOW TO BUY SHARES
OPENING AN ACCOUNT
The minimum initial investment is $1,000 ($250 for group investments
or $500 for retirement plans). Complete the Account Application attached to
this Prospectus. Indicate whether you are purchasing Class A or Class B shares.
If you do not specify which class of shares you are purchasing, it will be
assumed that you are investing in Class A shares.
BY CHECK
1. Make your check payable to John Hancock Investor Services
Corporation ("Investor Services").
2. Deliver the completed application and check to your registered
representative, a broker with an agreement with John Hancock
Funds ("Selling Broker") or mail it directly to Investor
Services.
BY WIRE
1. Obtain an account number by contacting your registered
representative or Selling Broker, or by calling
1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Tax-Free Bond Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative, Selling Broker or mail it directly to Investor
Services.
BUYING ADDITIONAL CLASS A AND CLASS B SHARES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
1. Complete the "Automatic Investing" and "Bank Information"
sections on the Account Privileges Application designating a
bank account from which funds may be drawn.
2. The amount you elect to invest will be automatically withdrawn
from your bank or credit union account.
-12-
<PAGE> 16
BY TELEPHONE
1. Complete the "Invest-By-Phone" and "Bank Information" sections
on the Account Privileges Application designating a bank
account from which your funds may be drawn. Note that in order
to invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House system
(ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number, and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
BY CHECK
1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class, your account number and the
name(s) in which the account is registered.
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
BY WIRE
Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Tax Free-Bond Fund
(Class A or Class B shares)
Your Account Number
Name(s) under which account is registered
Other Requirements: All purchases must be made in U.S. dollars. Checks written
on foreign banks will delay purchases until U.S. funds are received, and a
collection charge may be imposed. Shares of the Fund are priced at the offering
price based on the net asset value computed after John Hancock Funds receives
notification of the dollar equivalent from the
-13-
<PAGE> 17
Fund's custodian bank. Wire purchases normally take two or more hours to
complete and, to be accepted the same day, must be received by 4:00 P.M., New
York time. Your bank may charge a fee to wire funds. Telephone transactions are
recorded to verify information. Certificates are not issued unless a request is
made to Investor Services.
YOU WILL RECEIVE STATEMENTS REGARDING YOUR ACCOUNT, WHICH YOU SHOULD KEEP TO
HELP WITH YOUR PERSONAL RECORDKEEPING.
You will receive a statement of your account after any transaction
that affects your share balance or registration (statements related to
reinvestment of dividends and automatic investment/withdrawal plans will be
sent to you quarterly). A tax information statement will be mailed to you by
January 31 of each year.
SHARE PRICE
THE OFFERING PRICE OF YOUR SHARES IS THEIR NET ASSET VALUE PLUS A SALES CHARGE,
IF APPLICABLE, WHICH WILL VARY WITH THE PURCHASE ALTERNATIVE YOU CHOOSE.
The net asset value ("NAV") is the value of one share. The NAV per
share is calculated by dividing the net assets of each class by the number of
outstanding shares of that class. The NAV of each class can differ in value.
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or, at fair
value as determined in good faith in accordance with procedures approved by the
Trustees. Short-term debt investments maturing within 60 days are valued at
amortized cost which approximates market value. If quotations are not readily
available, assets are valued by a method that the Trustees believe accurately
reflects fair value.
The NAV is calculated once daily as of the close of regular trading on
the New York Stock Exchange (the "Exchange") (generally at 4:00 P.M., New York
time) on each day that the Exchange is open.
Shares of the Fund are sold at the offering price based on the NAV
computed after your investment request is received in good order by John
Hancock Funds. If you buy shares of the Fund through a Selling Broker, the
Selling Broker must receive your investment before the close of regular trading
on the Exchange and transmit it to John Hancock Funds before its close of
business to receive that day's offering price.
-14-
<PAGE> 18
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:
<TABLE>
<CAPTION>
Combined
Reallow-
ance and Reallowance
Sales Sales Service to Selling
Charge as Charge as a Fee as a Brokers as a
Amount Invested a Percentage Percentage of Percentage Percentage of
(Including Sales of Offering the Amount of Offering the Offering
Charge) Price Invested Price(+) Price(*)
- ------------ ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00% 3.76%
$100,000 to $249,999 3.75% 3.90% 3.25% 3.01%
$250,000 to $499,999 3.00% 3.09% 2.50% 2.26%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%(**) 0.00(**) (***) 0.00(***)
</TABLE>
(*) Upon notice to Selling Brokers with whom it has sales agreements,
John Hancock Funds may reallow an amount up to the full applicable
sales charge. A Selling Broker to whom substantially the entire
sales charge is reallowed or who receives these incentives may be
deemed to be an underwriter under the Securities Act of 1933.
(**) No sales charge is payable at the time of purchase in Class A
shares of $1 million or more, but a CDSC may be imposed in the
event of certain redemption transactions within one year of
purchase.
(***) John Hancock Funds may pay a commission and the first year's
service fee (as described in (_) below) to Selling Brokers who
initiate and are responsible for purchases of $1 million or more in
aggregate as follows: 1 % on sales to $3,000,000, 0.50% on the next
$2 million and 0.25% on amounts over $5 million.
(+) At the time of sale, John Hancock Funds pays to Selling Brokers the
first year's service fee in advance, and thereafter, it pays the
service fee periodically in arrears in an amount up to 0.25% of the
Fund's average. Selling Brokers receive the fee as compensation
for providing personal and account maintenance services to
shareholders.
Sales charges ARE NOT APPLIED to any dividends which are reinvested in
additional Class A shares of the Fund.
-15-
<PAGE> 19
In addition, John Hancock Funds will pay certain affiliated Selling
Brokers at an annual rate of up to 0.05% of the daily net assets of accounts
attributable to these brokers.
In addition to the reallowance allowed to all selling Brokers, John
Hancock Funds will pay the following: Round trip airfare to a resort will be
offered to each registered representative of a Selling Broker (if the Selling
Broker has agreed to participate) who sells certain amounts of shares of John
Hancock funds. John Hancock Funds will make these incentive payments out of its
own resources. Other than distribution and service fees, the Fund does not bear
distribution expenses.
Under certain circumstances described below, investors in Class A
shares may be entitled to pay reduced sales charges. See "Qualifying for a
Reduced Sales Charge."
CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE IN CLASS
A SHARES. Purchases of $1 million or more of Class A shares will be made at net
asset value with no initial sales charge, but if the shares are redeemed within
12 months after the end of the calendar month in which the purchase was made
(the CDSC period), a CDSC will be imposed. The rate of the CDSC will depend on
the amount invested as follows:
<TABLE>
<CAPTION>
AMOUNT INVESTED CDSC RATE
--------------- ---------
<S> <C>
$1 million to $4,999,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Next $5 million to $9,999,999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Amounts of $10 million and over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
</TABLE>
Existing full service clients of John Hancock Mutual Life Insurance
Company who were group annuity contract holders as of September 1, 1994 may
purchase Class A shares with no initial sales charge, but if the shares are
redeemed within 12 months after the end of the calendar year in which the
purchase was made, a CDSC will be imposed at the above rate.
The CDSC will be assessed on an amount equal to the lesser of the
current market value or the original purchase cost of the Class A shares
redeemed. Accordingly, no CDSC will be imposed on increases in account value
above the initial purchase price, including any distributions which have been
reinvested in additional Class A shares.
In determining whether a CDSC applies to a redemption, the calculation
will be determined in a manner that results in the lowest possible rate being
charged. Therefore, if will be assumed that the redemption is first made from
any shares in your account that are not subject to the CDSC. The CDSC is waived
on
-16-
<PAGE> 20
redemptions in certain circumstances. See "Waiver of Contingent Deferred Sales
Charge" below.
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENT IN CLASS A
SHARES.
QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $100,000 in
Class A shares of the Fund or a combination of funds within the John Hancock
family of funds (except money market funds), you may qualify for a reduced
sales charge on your investments in Class A shares through a LETTER OF
INTENTION. You may also be able to use the ACCUMULATION PRIVILEGE and the
COMBINATION PRIVILEGE to take advantage of the value of your previous
investments in Class A shares of the John Hancock funds in meeting the
breakpoints for a reduced sales charge. For the ACCUMULATION PRIVILEGE and
COMBINATION PRIVILEGE, the applicable sales charge will be based on the total
of:
1. Your current purchase of Class A shares of the Fund.
2. The net asset value (at the close of business on the previous
day) of (a) all Class A shares of the Fund you hold, and (b)
all Class A shares of any other John Hancock funds you hold;
and
3. The net asset value of all shares held by another shareholder
eligible to combine his or her holdings with you into a single
"purchase."
EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset
value of $80,000 and, subsequently, invest $20,000 in Class A shares of the
Fund, the sales charge on this subsequent investment would be 3.75% and not
4.50% (the rate that would otherwise be applicable to investments of less than
$100,000. See "Initial Sales Charge alternative -- Class A Shares.)"
If you are in one of the following categories, you may purchase Class
A shares of the Fund without paying a sales charge:
o A Trustee or officer of the Trust; a Director or officer of
the Adviser and its affiliates or Selling Brokers; employees
or sales representatives of any of the foregoing; retired
officers, employees or Directors of any of the foregoing; a
member of the immediate family of any of the foregoing; or any
Fund, pension, profit sharing or other benefit plan for the
individuals described above.
-17-
<PAGE> 21
o Any state, county, city or any instrumentality, department,
authority, or agency of these entities which is prohibited by
applicable investment laws from paying a sales charge or
commission when it purchases shares of any registered
investment management company.*
o A bank, trust company, credit union, savings institution or
other depository institution, its trust departments or common
trust funds if it is purchasing $1 million or more for
non-discretionary customers or accounts.
o A broker, dealer or registered investment adviser that has
entered into an agreement with John Hancock Funds providing
specifically for the use of Fund shares in fee-based
investment products made available to their clients.
o A former participant in an employee benefit plan with John
Hancock funds, when he/she withdraws from his/her plan and
transfers any or all of his/her plan distributions directly to
the Fund.
* For investments made under these provisions, John Hancock Funds may
make a payment out of its own resources to the Selling Broker in an
amount not to exceed 0.25% of the amount invested.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class
B shares are offered at net asset value per share without a sales charge so
that your entire initial investment will go to work at the time of purchase.
However, Class B shares redeemed within six years of purchase will be subject
to a CDSC at the rates set forth below. This charge will be assessed on an
amount equal to the lesser of the current market value or the original purchase
cost of the shares being redeemed. Accordingly, you will not be assessed a CDSC
on increases in account value above the initial purchase price, including
shares derived from dividend reinvestment.
In determining whether a CDSC applies to a redemption, the calculation
will be determined in a manner that results in the lowest possible rate being
charged. It will be assumed that your redemption comes first from shares you
have held beyond the six-year CDSC redemption period or those you acquired
through reinvestment of dividends or distributions, and next from the shares
you have held the longest during the six-year period. The CDSC is waived on
redemptions in certain circumstances. See "Waiver of Contingent Deferred Sales
Charge" below.
-18-
<PAGE> 22
EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after
your purchase, your investment's net asset value per share has increased by $2
to $12, and you have gained 10 additional shares through dividend reinvestment.
If you redeem 50 shares at this time, your CDSC will be calculated as follows:
<TABLE>
<S> <C> <C>
o Proceeds of 50 shares redeemed
at $12 per share $600
o Minus proceeds of 10 shares not subject
to CDSC because they were acquired through
dividend reinvestment (10 x $12) -120
o Minus appreciation on remaining shares,
also not subject to CDSC (40 x $2) -80
----
o Amount subject to CDSC $400
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds. John Hancock
Funds uses all or part of them to defray its expenses related to providing the
Fund with distribution-related services relating to the sale of Class B shares,
such as compensating Selling Brokers for selling these shares. The combination
of the CDSC and the distribution and service fees makes it possible for the
Fund to sell Class B shares without deducting a sales charge at the time of the
purchase.
The amount of the CDSC, if any, will vary depending on the number of
years from the time you purchase your Class B shares until the time you redeem
them. Solely for determining the holding period, any payments you make during
the month will be aggregated and deemed to have been made on the last day of
the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
YEAR IN WHICH CLASS B SHARES CHARGE AS A PERCENTAGE OF
REDEEMED FOLLOWING PURCHASE DOLLAR AMOUNT SUBJECT TO CDSC
- --------------------------- -----------------------------
<S> <C>
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>
A commission equal to 3.75% of the amount invested and a first year's
service fee equal to 0.25% of the amount invested are paid to Selling Brokers.
The initial service fee is paid in advance at the time of sale for the
provision of personal and
-19-
<PAGE> 23
account maintenance services to shareholders during the twelve months following
the sale, and thereafter the service fee is paid in arrears.
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON CLASS B AND CLASS A SHARE
REDEMPTIONS WILL BE WAIVED.
WAIVER OF CONTINGENT SALES CHARGES. The CDSC will be waived on redemptions of
Class B shares and of Class A shares that are subject to a CDSC, unless
indicated otherwise, in the circumstances defined below:
o Redemptions of Class B shares made under Systematic Withdrawal
Plan (see "How to Redeem Shares"), as long as your annual
redemptions do not exceed 10% of your account value at the
time you established your Systematic Withdrawal Plan and 10%
of the value of subsequent investments (less redemptions) in
that account at the time you notify Investor Services. This
waiver does not apply to Systematic Withdrawal Plan
redemptions of Class A shares that are subject to a CDSC.
o Redemptions made to effect distributions from an Individual
Retirement Account either before or after age 59 1/2, as long
as the distributions are based on the life expectancy of the
joint-and-last survivor life expectancy of you and your
beneficiary. These distributions must be free from penalty
under the Code.
o Redemptions made to effect mandatory distributions under the
Code after age 70 1/2 from a tax-deferred retirement plan.
o Redemptions made to effect distributions to participants or
beneficiaries form certain employer- sponsored retirement
plans including those qualified under Section 401(a) of the
Code, custodial accounts under Section 403(b)(7) of the Code
and deferred compensation plans under Section 457 of the Code.
The waiver also applies to certain returns of excess
contributions made to these plans. In all cases, the
distributions must be free from penalty under the Code.
o Redemptions due to death or disability.
o Redemptions made under the Reinvestment Privilege, as
described in "Additional Services and Programs" of this
Prospectus.
-20-
<PAGE> 24
o Redemptions made in connection with certain liquidation,
merger or acquisition transactions involving other investment
companies or personal holding companies.
o Redemptions from certain IRA and retirement plans which
purchased shares prior to October 1, 1992.
If you qualify for a CDSC waiver under one of these situations, you
must notify Investor Services either directly or through your Selling Broker at
the time you make your redemption. The waiver will be granted once Investor
Services has confirmed that you are entitled to the waiver.
CONVERSION TO CLASS B SHARES. Your Class B shares and an appropriate portion of
reinvested dividends on those shares will be converted into Class A shares
automatically at the end of the month eight years after the shares were
purchased, resulting in lower annual distribution fees. If you exchanged Class
B shares into the Fund from another John Hancock fund, the calculation will be
based on the time you purchased the shares in the original fund.
HOW TO REDEEM SHARES
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION REQUEST, PLEASE FOLLOW THESE
PROCEDURES.
You may redeem all or a portion of your shares on any business day.
Your shares will be redeemed at the next NAV calculated after your redemption
request is received in good order by Investor Services, less any applicable
CDSC. The Fund may hold payment until reasonably satisfied that investments
which were recently made by check or Invest-by-Phone have been collected (which
may take up to 10 calendar days).
Once your shares are redeemed, the Fund generally sends you payment on
the next business day. When you redeem your shares, you may realize a taxable
gain or loss depending usually on the difference between what you paid for them
and what you receive for them, subject to certain tax rules. Under unusual
circumstances, the Fund may suspend redemptions or postpone payment for up to
seven days or longer, as permitted by Federal securities laws.
BY TELEPHONE
All Fund shareholders are automatically eligible for the telephone
redemption privilege. Call 1-800-225-5291, from 8:00 A.M. to 4:00 P.M. (New
York time), Monday through Friday, excluding days on which the Exchange is
closed. Investor Services employs
-21-
<PAGE> 25
the following procedures to confirm that instructions received by telephone are
genuine. Your name, the account number, taxpayer identification number
applicable to the account and other relevant information may be requested. In
addition, telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address on the
account must not have changed for the last thirty days. A check will be mailed
to the exact name(s) shown on the account.
If reasonable procedures, such as those described above, are not
followed, the Fund may be liable for any loss due to unauthorized or fraudulent
instructions. In all other cases, neither the Fund nor Investor Services will
be liable for any loss or expense for acting upon telephone instructions made
in accordance with the telephone transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other tax-qualified
retirement plans or shares of the Fund that are in certificate form.
During periods of extreme economic conditions or market changes,
telephone requests may be difficult to implement due to a large volume of
calls. During these times, you should consider placing redemption requests in
writing or use EASI-Line. EASI-Line's telephone number is 1-800-338-8080.
BY WIRE
If you have a telephone redemption form on file with the Fund,
redemption proceeds of $1,000 or more can be wired on the next business day to
your designated bank account, and a fee (currently $4.00) will be deducted. You
may also use electronic funds transfer to your assigned bank account, and the
funds are usually collectable after two business days. Your bank may or may not
charge a fee for this service. Redemptions of less than $1,000 will be sent by
check or electronic funds transfer.
This feature may be elected by completing the "Telephone Redemption"
section on the Account Privileges Application attached to the Prospectus.
IN WRITING
Send a stock power or "letter of instruction" specifying the name of
the Fund, the dollar amount or the number of shares to be redeemed, your name,
class of shares, your account number and the additional requirements listed
below that apply to your particular account.
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
<S> <C>
Individual, Joint Tenants, A letter of instruction signed
Sole Proprietorship, (with titles where applicable)
Custodial (Uniform by all persons authorized to
Gifts or Transfer to sign for the account, exactly
Minors Act), General as it is registered with the
Partners signature(s) guaranteed.
</TABLE>
-22-
<PAGE> 26
<TABLE>
<S> <C>
CORPORATION, ASSOCIATION A LETTER OF INSTRUCTION AND A CORPORATE RESOLUTION, SIGNED BY PERSON(S)
AUTHORIZED TO ACT ON THE ACCOUNT WITH THE SIGNATURE(S) GUARANTEED.
TRUSTS A LETTER OF INSTRUCTION SIGNED BY THE TRUSTEE(S) WITH THE SIGNATURE(S)
GUARANTEED. (IF THE TRUSTEE'S NAME IS NOT REGISTERED ON YOUR ACCOUNT, ALSO
PROVIDE A COPY OF THE TRUST DOCUMENT, CERTIFIED WITHIN THE LAST 60 DAYS.
</TABLE>
IF YOU DO NOT FALL INTO ANY OF THESE REGISTRATION CATEGORIES, PLEASE
CALL 1-800-225-5291 FOR FURTHER INSTRUCTIONS.
WHO MAY GUARANTEE YOUR SIGNATURE.
A signature guarantee is a widely accepted way to protect you and the
Fund by verifying the signature on your request. It may not be provided by a
notary public. If the net asset value of the shares redeemed is $100,000 or
less, John Hancock Funds may guarantee the signature. The following
institutions may provide you with a signature guarantee, provided that the
institution meets credit standards established by Investor Services: (i) a
bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or
meets certain net capital requirements; (iii) a credit union having authority
to issue signature guarantees; (iv) a savings and loan association, a building
and loan association, a cooperative bank, a federal savings bank or
association; or (v) a national securities exchange, a registered securities
exchange or a clearing agency.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
THROUGH YOUR BROKER. Your broker may be able to initiate the
redemption. Contact your broker for instructions.
If you have certificates for your shares, you must submit them with
your stock power or a letter of instructions. Unless you specify to the
contrary, any outstanding Class A shares will be redeemed before Class B
shares. You may not redeem certificated shares by telephone.
Due to the proportionately high cost of maintaining small accounts,
the Fund reserves the right to redeem all shares in an account which holds less
than $100 (except accounts under retirement plans) and to mail the proceeds to
the shareholder, or the transfer agent may impose an annual fee of $10.00. No
account will be involuntarily redeemed or additional fee imposed, if the value
of the account is in excess of the Fund's minimum initial investment. No CDSC
will be imposed on involuntary redemptions of shares.
Shareholders will be notified before these redemptions are to be made
or this fee is imposed and will have 30 days to purchase additional shares to
bring their account balance up to the required minimum. Unless the number of
shares acquired by further purchases and dividend reinvestments, if any,
exceeds the number of shares redeemed, repeated redemptions from a smaller
account may eventually trigger this policy.
-23-
<PAGE> 27
ADDITIONAL SERVICES AND PROGRAMS
EXCHANGE PRIVILEGE
YOU MAY EXCHANGE SHARES OF THE FUND FOR SHARES OF THE SAME CLASS IN ANOTHER
JOHN HANCOCK FUND.
If your investment objective changes, or if you wish to achieve
further diversification, John Hancock offers other funds with a wide range of
investment goals. Contact your registered representative or Selling Broker and
request a prospectus for the John Hancock funds that interest you. Read the
prospectus carefully before exchanging your shares. You can exchange shares of
each class of the Fund only for shares of the same class of another John
Hancock fund. For this purpose, John Hancock funds with only one class of
shares will be treated as Class A, whether or not they have been so designated.
Exchanges between funds with shares which are not subject to a CDSC
are based on their respective net asset values. No sales charge or transaction
charge is imposed. Class B shares of the Fund which are subject to a CDSC may
be exchanged into Class B shares of another John Hancock fund without incurring
the CDSC; however, these shares will be subject to the CDSC schedule of the
shares acquired (except exchanges into John Hancock Short-Term Strategic Income
Fund, John Hancock Limited Term Government Fund and John Hancock Adjustable
Government Securities Fund will be subject to the initial fund's CDSC). For
purposes of computing the CDSC payable upon redemption of shares acquired in an
exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
However, if you exchange Class B shares purchased prior to January 1,
1994 for Class B shares of any other John Hancock Fund, you will be subject to
the CDSC schedule in effect on your initial purchase date.
You may exchange Class B shares of the Fund into shares of John
Hancock Cash Management Fund at net asset value. Shares so acquired will
continue to be subject to a CDSC upon redemption. The rate of the CDSC will be
the rate in effect for the original Fund at the time of exchange.
The Fund reserves the right to require you to keep previously
exchanged shares (and reinvested dividends) in the Fund for 90 days before you
are permitted to execute a new exchange. The Fund may also terminate or alter
the terms of the exchange privilege, upon 60 days' notice to shareholders.
-24-
<PAGE> 28
An exchange of shares is treated as a redemption of shares of one fund
and the purchase of shares in another for Federal income tax purposes. An
exchange may result in a taxable gain or loss.
When you make an exchange, your account registration in both the
existing and new account must be identical. The exchange privilege is
available only in states where the exchange can be made legally.
Pursuant to exchange agreements with John Hancock Funds, certain
dealers, brokers and investment advisers may exchange their clients' Fund
shares, subject to the terms of those agreements and John Hancock Funds' right
to reject or suspend those exchanges at any time. Because of the restrictions
and procedures under those agreements, the exchanges may be subject to timing
limitations and other restrictions that do not apply to exchanges requested by
shareholders directly, as described above.
Because Fund performance and shareholders can be hurt by excessive
trading, the Fund reserves the right to terminate the exchange privilege for
any person or group that, in John Hancock Funds' judgment, is involved in a
pattern of exchanges that coincide with a "market timing" strategy that may
disrupt the Fund's ability to invest effectively according to its investment
objective and policies, or might otherwise affect the Fund and its shareholders
adversely. The Fund may also temporarily or permanently terminate the exchange
privilege for any person who makes seven or more exchanges out of the Fund per
calendar year. Accounts under common control or ownership will be aggregated
for this purpose. Although the Fund will attempt to give you prior notice
whenever it is reasonably able to do so, it may impose these restrictions at
any time.
BY TELEPHONE
1. When you fill out the application for your purchase of Fund
shares, you automatically authorize exchanges by telephone
unless you check the box indicating that you do not wish to
authorize telephone exchanges.
2. Call 1-800-225-5291. Have the account number of your current
fund and the exact name in which it is registered available to
give to the telephone representative.
3. Your name, the account number, taxpayer identification number
applicable to the account and other relevant information may
be requested. In addition, telephone instructions are
recorded.
-25-
<PAGE> 29
IN WRITING
1. In a letter, request an exchange and list the following:
- the name and class of the Fund whose shares you
currently own
- your account number
- the name(s) in which the account is registered
- the name of the fund in which you wish your exchange
to be invested
- the number of shares, all shares or dollar amount
you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
REINVESTMENT PRIVILEGE
IF YOU REDEEM SHARES OF THE FUND, YOU MAY BE ABLE TO REINVEST THE PROCEEDS IN
THIS FUND OR ANOTHER JOHN HANCOCK FUND WITHOUT PAYING AN ADDITIONAL SALES
CHARGE.
1. You will not be subject to a sales charge on Class A shares
reinvested in shares of any John Hancock fund that is
otherwise subject to a sales charge as long as you reinvest
within 120 days from the redemption date. If you paid a CDSC
upon a redemption, you may reinvest at net asset value in the
same class of shares from which you redeemed within 120 days.
Your account will be credited with the amount of the CDSC
previously charged, and the reinvested shares will continue to
be subject to a CDSC. For purposes of computing the CDSC
payable upon a subsequent redemption, the holding period of
the shares acquired through reinvestment will include the
holding period of the redeemed shares.
2. Any portion of your redemption may be reinvested in Fund
shares or in shares of any of the other John Hancock funds,
subject to the minimum investment limit of that fund.
3. To reinvest, you must notify Investor Services in writing.
Include the Fund's name, the account number and class from
which your shares were originally redeemed.
-26-
<PAGE> 30
SYSTEMATIC WITHDRAWAL PLAN
YOU CAN PAY ROUTINE BILLS FROM YOUR ACCOUNT, OR MAKE PERIODIC DISBURSEMENTS
FROM YOUR RETIREMENT ACCOUNT TO COMPLY WITH IRS REGULATIONS.
1. You may elect the Systematic Withdrawal Plan at any time by
completing the Account Privileges Application which is
attached to this Prospectus. You can also obtain this
application by calling your registered representative or by
calling 1-800-225-5291.
2. To be eligible, you must have at least $5,000 in your account.
3. Payments from your account can be made monthly, quarterly,
semi-annually or annually or on a selected monthly basis to
yourself or any other designated payee.
4. There is no limit on the number of payees you may authorize,
but all payments must be made at the same time or intervals.
5. It is not advantageous to maintain a Systematic Withdrawal
Plan concurrently with purchases of additional Class A or
Class B shares, because you may be subject to initial sales
charges on your purchases of Class A shares or to a CDSC on
your redemptions of Class B shares. In addition, your
redemptions are taxable events.
6. Redemptions will be discontinued if the U.S. Postal Service
cannot deliver your checks or if deposits to a bank account
are returned for any reason.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)
YOU CAN MAKE AUTOMATIC INVESTMENTS AND SIMPLIFY YOUR INVESTING.
1. You may authorize an investment to be automatically withdrawn
each month from your bank, for investment in Fund shares under
the "Automatic Investing" and "Bank Information" sections of
the Account Privileges Application.
2. You may also authorize automatic investment through payroll
deduction by completing the "Direct Deposit Investing" section
of the Account Privileges Application.
-27-
<PAGE> 31
3. You may terminate your Monthly Automatic Accumulation Program
plan at any time.
4. There is no charge to you for this program, and there is no
cost to the Fund.
5. If you have payments being withdrawn from a bank account and
we are notified that the account has been closed, your
withdrawals will be discontinued.
GROUP INVESTMENT PROGRAM
1. An individual account will be established for each
participant, but the initial sales charge for Class A shares
will be based on the aggregate dollar amount of all
participants' investments. To determine how to qualify for
this program, contact your registered representative or call
1-800-225-5291.
2. The initial aggregate investment of all participants in the
group must be at least $250.
3. There is no additional charge for this program. There is no
obligation to make investments beyond the minimum, and you may
terminate the program at any time.
ORGANIZATION AND MANAGEMENT OF THE FUND
THE TRUSTEES ELECT OFFICERS AND RETAIN THE INVESTMENT ADVISER WHO IS
RESPONSIBLE FOR THE DAY-TO-DAY OPERATIONS OF THE FUND, SUBJECT TO THE TRUSTEES'
POLICIES AND SUPERVISION.
The Fund is a diversified open-end management investment company
organized as a Massachusetts business trust in 1989. The Trust reserves the
right to create and issue a number of series of shares, or funds or classes
thereof, which are separately managed and have different investment objectives.
The Trust is not required to and does not intend to hold annual meetings of
shareholders, although special meetings may be held for such purposes as
electing or removing Trustees, changing fundamental policies or approving a
management contract. The Fund, under certain circumstances, will assist in
shareholder communications with other shareholders.
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT COMPANIES HAVING TOTAL ASSETS OF
APPROXIMATELY $13 BILLION.
The Adviser was organized in 1968 and is a wholly-owned indirect
subsidiary of the John Hancock Mutual Life Insurance Company, a financial
services company. The Adviser provides the
-28-
<PAGE> 32
Fund, and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. John Hancock Funds
distributes shares for all of the John Hancock mutual funds through Selling
Brokers. The Fund's Subadviser, formed in 1967, is a registered investment
adviser and a wholly-owned subsidiary of Transamerica Corporation. The
Subadviser manages other investment companies with over $2.5 billion in assets
invested in Municipal Obligations. Certain Fund officers are also officers of
the Adviser and John Hancock Funds. All investment decisions are made by the
Adviser's fixed-income portfolio management team and no single person is
primarily responsible for making recommendations to the team.
In order to avoid any conflict with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal securities
trading by personnel of the Adviser and its affiliates. Some of these
restrictions are: preclearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of
the Fund and its shareholders come first.
Pursuant to an order of the SEC, the Fund has adopted a deferred
compensation plan for its independent Trustees which allows Trustees' fees to
be invested by the Fund in other John Hancock funds.
THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a
monthly fee to the Adviser. During the Fund's most recent fiscal year, the
advisory fee was 0.44% of the Fund's average daily net assets reflecting the
agreement by the Fund's previous investment adviser to reduce operating
expenses and not to impose a portion of its management fee during that year.
The Adviser has voluntarily and temporarily agreed to continue to limit the
Fund's operating expenses and not to impose its management fee to the extent
necessary to limit the total of the Fund's management fees and operating
expenses (not including fees payable by the Fund under a Rule 12b-1 plan) to
.70% of the average net assets attributable to Class A and Class B shares. TIS
will continue to act as the Fund's Subadviser for up to one year unless the
subadvisory investment contract is earlier terminated by the Adviser. The
Adviser pays a portion of its fee to TIS for the subadvisary services that TIS
provides to the Fund.
THE FUND PAYS DISTRIBUTION AND SERVICE FEES FOR MARKETING AND SALES
RELATED SHAREHOLDER SERVICING.
-29-
<PAGE> 33
The Class A and Class B shareholders have adopted distribution plans
(each a "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "1940 Act"). Under these Plans, the Fund will pay distribution and service
fees at an aggregate annual rate of up to 0.15% of the Class A shares' average
daily net assets and an aggregate annual rate of 1.00% of the Class B shares'
average daily net assets. John Hancock Funds has temporarily agreed to limit
the distribution and services fees pursuant to the Class B Plan to 0.90% of
average daily net assets, respectively. Up to 0.25% for Class B shares and
0.15% for Class A shares is for service expenses and the remaining amount is
for distribution expenses. The distribution fees will be used to reimburse John
Hancock Funds for its distribution expenses, including but not limited to: (i)
initial and ongoing sales compensation to Selling Brokers and others (including
affiliates of John Hancock Funds) engaged in the sale of Fund shares; (ii)
marketing, promotional and overhead expenses incurred in connection with the
distribution of Fund shares; (iii) unreimbursed distribution expenses under the
Fund's prior distribution plans; (iv) distribution expenses incurred by other
investment companies which sell all or substantially all of its assets to,
merge or otherwise engage in a reorganization transaction with the Fund; and
(v) 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 John Hancock Funds is not fully reimbursed for payments
made or expenses incurred by it under the Class A Plan, these expenses will not
be carried beyond one year from the date they were incurred. Unreimbursed
expenses under the Class B Plan will be carried forward together with interest
on the balance of these unreimbursed expenses. In accordance with generally
accepted accounting principles, the Fund does not treat distribution fees in
excess of 0.75% of the Fund's net assets attributable to Class B Shares as a
liability of the Fund and does not reduce the current net assets of Class B by
such amount although the amount may be payable in the future.
The Fund's total expenses (including the effect of the agreement to
limit expenses and not to impose fees) for the fiscal year ended December 31,
1994, for Class A and Class B shares, respectively, were 0.85% and 1.60% of
average net assets attributable to that class.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund generally declares dividends daily and distributes
dividends monthly, representing all or substantially
-30-
<PAGE> 34
all of its net investment income. The Fund will distribute net realized
long-term and short-term capital gains, if any, annually before the close of
the fiscal year (December 31).
Dividends are reinvested in additional shares of your class unless you
elect the option to receive them in cash. If you elect the cash option and the
U.S. Postal Service cannot deliver your checks, your election will be converted
to the reinvestment option. Because of the higher expenses associated with
Class B shares, any dividends on these shares will be lower than those on the
Class A shares. See "Share Price."
TAXATION. The Fund intends to meet certain federal tax requirements so
that its distributions of the tax-exempt interest it earns may be treated as
"exempt-interest dividends," which you are entitled to treat as tax-exempt
interest. That portion of exempt-interest dividends, if any, attributable to
interest on certain tax-exempt obligations that are "private activity bonds"
may increase certain shareholders' alternative minimum tax.
Shareholders receiving social security benefits and certain railroad
retirement benefits may be subject to Federal income tax on up to 85 percent of
such benefits as a result of receiving investment income, including tax-exempt
income (such as exempt-interest dividends) and other dividends paid by the
Fund. Shares of the Fund may not be an appropriate investment for persons who
are "substantial users" of facilities financed by industrial development or
private activity bonds, or persons related to "substantial users." Consult your
tax adviser if you think this may apply to you.
Dividends from the Fund's net taxable income, if any, including any
market discount included in the Fund's income, and from the Fund's net
short-term capital gains are taxable to you as ordinary income. Dividends from
the Fund's net long-term capital gains are taxable as long-term capital gain.
These dividends are taxable, whether received in cash or reinvested in
additional shares. Certain dividends may be paid by the Fund in January of a
given year but may be treated as if you received them the previous December.
The Fund has qualified and intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As a regulated investment company, the Fund will
not be subject to Federal income tax on any net investment income or net
realized capital gains distributed to its shareholders within the time period
prescribed by the Code.
-31-
<PAGE> 35
When you redeem (sell) or exchange shares, you may realize a taxable
gain or loss.
On the account application you must certify that your social security
or other tax payer identification number is correct and that you are not
subject to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, the Fund may be
required to withhold 31% of your taxable dividends, and 31% of the proceeds of
redemptions or exchanges.
In addition to Federal taxes, you may be subject to state and local
taxes with respect to your investment in and distributions from the Fund. A
state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent the Fund's distributions are
derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations and/or
tax-exempt municipal obligations issued by or on behalf of the particular state
or a political subdivision thereof, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. You will receive tax information each year showing the percentage of
the Fund's exempt-interest dividends attributable to each state. You should
consult your tax adviser for specific advice.
PERFORMANCE
THE FUND MAY ADVERTISE ITS YIELD AND TOTAL RETURN.
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30 day period by the
maximum offering price per share on the last day of that period. Yield is also
calculated according to accounting methods that are standardized for all stock
and bond funds. Because yield accounting methods differ from the methods used
for other accounting purposes, the fund's yield may not equal the income paid
on shares or the income reported in the Fund's financial statements. The Fund
may also utilize tax equivalent yields of its Class A and Class B shares
computed in the same manner, with adjustment for assumed Federal income tax
rates. For a comparison of yields on municipal securities and taxable
securities, see the Taxable Equivalent Yield Table in Appendix A.
The Fund's total return shows the overall dollar or percentage change
in value of a hypothetical investment in the Fund, assuming the reinvestment of
all dividends. Cumulative total return shows the Fund's performance over a
period of time.
-32-
<PAGE> 36
Average annual total return shows the cumulative return divided over the number
of years included in the period. Because average annual total return tends to
smooth out variations in the Fund's performance, you should recognize that it
is not the same as actual year-to-year results.
Both total return calculations for Class A shares generally include
the effect of paying the maximum sales charge (except as shown in "The Fund's
Financial Highlights"). Investments at lower sales charges would result in
higher performance figures. Total return and yield for Class B shares reflects
the deduction of the applicable CDSC imposed on a redemption of shares held for
the applicable period. All calculations assume that all dividends are
reinvested at net asset value on the reinvestment dates during the periods.
Total return and yield of Class A and Class B shares will be calculated
separately and, because each class is subject to different expenses, the total
return may differ with respect to that class for the same period. The relative
performance of the Class A and Class B shares will be affected by a variety of
factors, including the higher operating expenses attributable to the Class B
shares, whether the Fund's investment performance is better in the earlier or
later portions of the period measured and the level of net assets of the
Classes during the period. The Fund will include the total return of Class A
and Class B shares in any advertisement or promotional materials including Fund
performance data. The value of Fund shares, when redeemed, may be more or less
than their original cost. Both yield and total return are historical
calculations, and are not an indication of future performance. See "Factors to
Consider in Choosing an Alternative."
INVESTMENTS, TECHNIQUES AND RISK FACTORS
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of
its net assets in illiquid investments, which include repurchase agreements
maturing in more than seven days, restricted securities and securities not
readily marketable. The Fund may also invest up to 10% of its assets in
restricted securities eligible for resale to certain institutional investors
pursuant to Rule 144A under the Securities Act of 1933. To the extent that the
Fund's holdings of participation interests, COPs and inverse floaters are
determined to be illiquid, such holdings will be subject to the 10% restriction
on illiquid investments.
LENDING OF SECURITIES AND REPURCHASE AGREEMENTS. For the purpose of
realizing additional (taxable) income, the Fund may lend to broker-dealers
portfolio securities amounting to not more than 33% of its total assets taken
at current value or may enter into repurchase agreements. In a repurchase
agreement, the Fund buys a security subject to the right and obligation to sell
it
-33-
<PAGE> 37
back to the issuer at the same price plus accrued interest. These transactions
must be fully collateralized at all times. The Fund may reinvest any cash
collateral in short-term highly liquid debt securities. However, they may
involve some credit risk to the Fund if the other party should default on its
obligation and the Fund is delayed in or prevented from recovering the
collateral. Securities loaned by the Fund will remain subject to fluctuations
of market value.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund may purchase
securities on a forward or "when-issued" basis and may purchase or sell
securities on a forward commitment basis to hedge against anticipated changes
in interest rates and prices. When the Fund engages in such transactions, it
relies on the seller or the buyer, as the case may be, to consummate the
transaction. Failure to consummate the transaction may result in the Fund's
losing the opportunity to obtain an advantageous price and yield. If the Fund
chooses to dispose of the right to acquire a when-issued security prior to its
acquisition or dispose of its right to deliver or receive against a forward
commitment, it can incur a taxable gain or a loss.
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. Short term trading may have the effect of
increasing portfolio turnover and may increase net short-term capital gains,
distributions from which would be taxable to shareholders as ordinary income.
The Fund does not intend to invest for the purpose of seeking short-term
profits. The Fund's portfolio securities may be changed, however, without
regard to the holding period of these securities (subject to certain tax
restrictions), when the Subadviser deems that this action will help achieve the
Fund's objective given a change in an issuer's operations or changes in general
market conditions. The Fund's portfolio turnover rate is set forth in the table
under the caption "Financial Highlights."
OPTIONS AND FUTURES TRANSACTIONS. The Fund may buy and sell options
contracts on securities and debt security indices, interest rate and municipal
bond index futures contracts and options on such futures contracts. Options and
futures contracts are bought and sold to manage the Fund's exposure to changing
interest rates and security prices. Some options and futures strategies,
including selling futures, buying puts and writing calls, tend to hedge a
Fund's investment against price fluctuations. Other strategies, including
buying futures, writing puts, and buying calls, tend to increase market
exposure. Options and futures may be combined with each other or with forward
contracts in order to adjust the risk and return characteristics of the overall
strategy. The Fund may invest in options and
-34-
<PAGE> 38
futures based on debt securities and municipal bond indices (securities
indices).
Options and futures can be volatile investments and involve certain
risks. If the Adviser or the Subadviser applies a hedge at an inappropriate
time or judges market conditions incorrectly, options and futures strategies
may lower the Fund's return. The Fund could also experience losses if the
prices of its options and futures positions were poorly correlated with its
other investments, or if it could not close out its positions because of an
illiquid secondary market. Options and futures do not pay interest, but may
produce taxable capital gains or losses.
The Fund will not engage in a transaction in futures or options on
futures if, immediately thereafter, the sum of initial margin deposits and
premiums required to establish positions in futures contracts and options on
futures would exceed 5% of the Fund's net assets. The loss incurred by the Fund
investing in futures contracts and in writing options on futures is potentially
unlimited and may exceed the amount of any premium received. The Fund's
transactions in options and futures contracts may be limited by the
requirements of the Code for qualification as a regulated investment company.
See the Statement of Additional Information for further discussion of options
and futures transactions, including tax effects and investment risks.
MUNICIPAL LEASE OBLIGATIONS. The Fund may purchase participation
interests which give the Fund an undivided pro rata interest in the tax exempt
security. For certain participation interests, the Fund will have the right to
demand payment, on a specified number of days' notice for all or any part of
the Fund's participation interest in the tax exempt security plus accrued
interest. Participation interests, which are determined to be not readily
marketable, will be considered illiquid for purposes of the Fund's 10%
restriction on investment in securities.
The Fund may also invest in Certificates of Participation ("COP's")
which provide participation interests in lease revenues. Each COP represents a
proportionate interest in or right to the lease-purchase payment made under
municipal lease obligations or installment sales contracts. Municipal lease
obligations are issued by a state or municipal financing authority to provide
funds for the construction of facilities (e.g., schools, dormitories, office
buildings or prisons) or the acquisition of equipment. Certain municipal lease
obligations may trade infrequently. Accordingly, COPs will be purchased and
monitored pursuant to analysis by the Adviser or Subadviser and reviewed
according to procedures by the Board of Trustees which consider various factors
in determining the liquidity risk. COPs will not be considered illiquid for
purposes of the Fund's 10% limitation
-35-
<PAGE> 39
on illiquid securities provided the Adviser determines that there is a readily
available market for such securities. An investment in COPs is subject to the
risk that a municipality may not appropriate sufficient funds to meet payments
on the underlying lease obligation. See the Statement of Additional Information
for additional discussion of participation interests and municipal lease
obligations.
DERIVATIVE INSTRUMENTS
IN GENERAL. The Fund may purchase or enter into derivative instruments
to enhance return, to hedge against fluctuations in interest rates or
securities prices, to change the duration of the Fund's fixed income portfolio
or as a substitute for the purchase or sale of securities. The Fund's
investments in derivative securities may include certain floating rate and
indexed securities. The Fund's transactions in derivative contracts may include
the purchase or sale of futures contracts on securities or indices; options on
futures contracts; and options on securities or indices.
All of the Funds' transactions in derivative instruments involve a
risk of loss or depreciation due to unanticipated adverse changes in interest
rates or securities prices. The loss on derivative contracts may exceed the
Fund's initial investment in these contracts. In addition, the Fund may lose
the entire premium paid for purchased options that expire before they can be
profitably exercised by the Fund.
INDEXED SECURITIES. The Fund may invest in indexed securities,
including floating rate securities that are subject to a maximum interest rate
("capped floaters") and leveraged inverse floating rate securities ("inverse
floaters") (up to 10% of the Fund's total assets). The interest rate or, in
some cases, the principal payable at the maturity of an indexed security may
change positively or inversely in relation to one or more interest rates,
financial indices or other financial indicators ("reference prices"). An
indexed security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on an indexed security is a
multiple of the change in the reference price. Thus, indexed securities may
decline in value due to adverse market changes in interest rates or other
reference prices.
DERIVATIVE CONTRACTS. The Fund may purchase and sell a variety of
derivative contracts, including futures contracts on securities or indices;
options on futures contracts; options on securities or indices and forward
contracts to purchase or sell securities. The Fund incurs liability to a
counterparty in connection with transactions in futures contracts, forward
-36-
<PAGE> 40
contracts and in selling options. The Fund pays a premium for purchased
options. In addition, the Fund incurs transaction costs in opening and closing
positions in derivative contracts. The Fund may realize taxable income or gain
from its transactions in derivative contracts, distributions of which will be
taxable to shareholders.
RISKS ASSOCIATED WITH DERIVATIVE SECURITIES AND CONTRACTS. The risks
associated with the Fund's transactions in derivative securities and contracts
may include some or all of the following: (1) market risk; (2) leverage and
volatility risk; (3) correlation risk; (4) credit risk; and (5) liquidity and
valuation risk.
Market Risk. Investments in floating rate and indexed securities are
subject to the interest rate and other market risks described above. Entering
into a derivative contract involves a risk that the applicable market will move
against the Fund's position and that the Fund will incur a loss. For derivative
contracts other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Fund.
Leverage and Volatility Risk. Derivative instruments may sometimes
increase or leverage the Fund's exposure to a particular market risk. Leverage
enhances the price volatility of derivative instruments held by the Fund. The
Fund may partially offset the leverage inherent in derivative contracts by
maintaining a segregated account consisting of cash and liquid, high grade debt
securities, by holding offsetting portfolio securities or contracts or by
covering written options.
Correlation Risk. A Fund's success in using derivative instruments to
hedge portfolio assets depends on the degree of price correlation between the
derivative instrument and the hedged asset. Imperfect correlation may be caused
by several factors, including temporary price disparities among the trading
markets for the derivative instrument, the assets underlying the derivative
instrument and the Fund's portfolio assets.
Credit Risk. Derivative securities and over-the-counter derivative
contracts involve a risk that the issuer or counterparty will fail to perform
its contractual obligations.
Liquidity and Valuation Risk. Some derivative securities are not
readily marketable or may become illiquid under adverse market conditions. In
addition, during periods of extreme market volatility, a commodity or exchange
may suspend or limit trading in an exchange-traded derivative contract, which
may make the contract temporarily illiquid and difficult to price. The staff of
the Securities and Exchange Commission ("SEC") takes the
-37-
<PAGE> 41
position that certain over-the-counter options are subject to the Fund's 10%
limit on illiquid investments. The Fund's ability to terminate over-the-counter
derivative contracts may depend on the cooperation of the counterparties to
such contracts. For thinly traded derivative securities and contracts, the only
source of price quotations may be the selling dealer or counterparty.
-38-
<PAGE> 42
APPENDIX A
TAXABLE EQUIVALENT YIELD TABLE
(UNDER FEDERAL INCOME TAX LAW AND RATES FOR 1995)
The table below shows the approximate taxable bond yields which are
equivalent to tax-exempt bond yields from 4% to 10% under Federal income tax
laws that apply to 1995. Separate calculations, showing the applicable taxable
income brackets, are provided for investors who file joint returns and for
those investors who file single returns.
EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
(TAXABLE INCOME)* INCOME TAX-EXEMPT YIELD
----------------- TAX --------------------------------------------------------------
SINGLE RETURN JOINT RETURN BRACKET 4% 5% 6% 7% 8% 9% 10%
- ------------- ------------ ------- -- -- -- -- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-23,350 $0-39,000 15.0% 4.71% 5.88% 7.06% 8.24% 9.41% 10.59% 11.76%
$23,351-56,550 $39,001-94,250 28.0% 5.56% 6.94% 8.33% 9.72% 11.11% 12.50% 13.89%
$56,551-117,950 $94,251-143,600 31.0% 5.80% 7.25% 8.70% 10.14% 11.59% 13.04% 14.49%
$117,951-256,500 $143,601-256,500 36.0% 6.25% 7.81% 9.38% 10.94% 12.50% 14.06% 15.63%
Over $256,500 Over $256,500 39.6% 6.62% 8.28% 9.93% 11.59% 13.25% 14.90% 16.56%
</TABLE>
* Net amount subject to Federal income tax after deductions and
exemptions. It is assumed that an investor filing a single return is
not a "head of household," a "married individual filing a separate
return," or a "surviving spouse." The table does not take into
account the effects of reductions in the deductibility of itemized
deductions or the phaseout of personal exemptions for taxpayers with
adjusted gross incomes in excess of specified amounts. Further, the
table does not attempt to show any alternative minimum tax
consequences, which will depend on each shareholder's particular tax
situation and may vary according to what portion, if any, of the
Fund's exempt-interest dividends is attributable to interest on
certain private activity bonds for any particular taxable year. No
assurance can be given that the Fund will achieve any specific
tax-exempt yield or that all of its income distributions will be
tax-exempt. Distributions attributable to any taxable income or
capital gains realized by the Fund will not be tax-exempt.
The information set forth above is as of the date of this Prospectus.
Subsequent tax law changes could result in prospective or retroactive
changes in the tax brackets, tax rates, and tax-equivalent yields set
forth above.
<PAGE> 43
<TABLE>
<S> <C>
JOHN HANCOCK TAX-FREE BOND FUND JOHN HANCOCK TAX-FREE BOND FUND
INVESTMENT ADVISER
John Hancock Advisers, Inc. CLASS A AND CLASS B SHARES
101 Huntington Avenue PROSPECTUS
Boston, Massachusetts 02199-7603 MAY 1, 1995
INVESTMENT SUBADVISER
Transamerica Investment
Services, Inc.
1150 South Olive Street
Los Angeles, California 90015
PRINCIPAL DISTRIBUTOR FOR INVESTORS SEEKING
John Hancock Funds, Inc. TO OBTAIN AS HIGH A LEVEL OF
101 Huntington Avenue INTEREST INCOME EXEMPT FROM FEDERAL
Boston, Massachusetts 02199-7603 INCOME TAXES AS IS CONSISTENT WITH
PRESERVATION OF CAPITAL.
CUSTODIAN
Investors Bank
and Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.0. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
HOW TO OBTAIN INFORMATION
ABOUT THE FUND
For Service Information
For Telephone Exchange
call 1-800-225-5291 101 HUNTINGTON AVENUE
For Investment-by-Phone BOSTON, MASSACHUSETTS 02199-7603
For Telephone Redemption TELEPHONE 1-800-225-5291
For TDD call 1-800-554-6713
</TABLE>
-2-
<PAGE> 44
JOHN HANCOCK TAX-FREE BOND FUND
CLASS A AND CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995
This Statement of Additional Information is not a Prospectus, but is
intended to provide additional information regarding the activities and
operations of the John Hancock Tax-Free Bond Fund (the "Fund") and should be
read in conjunction with the Prospectus.
A Prospectus for the Fund, dated May 1, 1995, which provides the basic
information an investor should know before investing may be obtained without
charge from:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-5291
1-800-225-5291
The Fund's investment adviser is John Hancock Advisers, Inc. (the
"Investment Adviser"). The Investment Adviser has engaged the services of
Transamerica Investment Services, Inc. (the "Sub-Adviser") to assist in the
Fund's portfolio management. John Hancock Funds, Inc. (the "Distributor") acts
as principal distributor of the shares of the Fund.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Special Investment Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trustees and Officers of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Fund and Its Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Redemption and Repurchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Dividends, Distributions and Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Transfer Agent Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Calculation of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
<PAGE> 45
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE. As discussed under "Investment Objective and
Policies" in the Prospectus, the investment objective of the Fund is to obtain
as high a level of income exempt from federal income taxes as is consistent
with preservation of capital. The Fund seeks to achieve its objective by
investing primarily in municipal bonds which are rated at the time of purchase
within the four highest ratings and municipal notes which are rated at the time
of purchase within the two highest ratings assigned by Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch"); municipal bonds and notes which, if unrated,
are determined to be of comparable quality by the Investment Adviser; and
municipal commercial paper rated within the two highest quality ratings
(collectively, "Municipal Obligations"). Securities in which the Fund may
invest may not earn as high a level of current income as lower quality
securities which have greater market risk and more fluctuation in market value.
DESCRIPTION OF MUNICIPAL OBLIGATIONS. In seeking to achieve its
investment objective, the Fund invests in a variety of Municipal Obligations
which consist of Municipal Bonds, Municipal Notes and Municipal Commercial
Paper, the interest on which in the opinion of the bond issuer's counsel (not
the Fund's counsel) is exempt from federal income tax.
Municipal Bonds. Municipal bonds are issued to obtain funds for
various public purposes including the construction of a wide range of public
facilities such as airports, highways, bridges, schools, hospitals, housing,
mass transportation, streets and water and sewer works. Other public purposes
for which Municipal Bonds may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to lend to other public institutions and facilities. In addition, certain types
of industrial development bonds are issued by or on behalf of public
authorities to obtain funds for many types of local, privately operated
facilities. Such debt instruments are considered municipal obligations if the
interest paid on them is exempt from federal income tax. The payment of
principal and interest by issuers of certain obligations purchased by the Fund
may be guaranteed by a letter of credit, note repurchase agreement, insurance
or other credit facility agreement offered by a bank or other financial
institution. Such guarantees and the creditworthiness of guarantors will be
considered by the Investment Adviser in determining whether a Municipal
Obligation meets the Fund's investment quality requirements. No assurance can
be given that a municipality or guarantor will be able to satisfy the payment
of principal or interest on a municipal obligation.
Municipal Notes. Municipal Notes are short-term obligations of
municipalities, generally with a maturity ranging from six months to three
years. The principal types of such Notes include tax, bond and revenue
anticipation notes and project notes.
Municipal Commercial Paper. Municipal Commercial Paper is a short-term
obligation of a municipality, generally issued at a discount with a maturity of
less than one year. Such paper is likely to be issued to meet seasonal working
capital needs of a municipality or interim construction financing. Municipal
Commercial Paper is backed in many cases by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks and other institutions.
Federal tax legislation enacted in the 1980's placed substantial new
restrictions on the issuance of the bonds described above and in some cases
eliminated the ability of state or local governments to issue Municipal
Obligations for some of the above purposes. Such restrictions do
-2-
<PAGE> 46
not affect the Federal income tax treatment of Municipal Obligations in which
the Fund may invest which were issued prior to the effective dates of the
provisions imposing such restrictions. The effect of these restrictions may be
to reduce the volume of newly issued Municipal Obligations.
Issuers of Municipal Obligations are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Act, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations. There is also the possibility that as a result of
litigation or other conditions the power or ability of any one or more issuers
to pay when due the principal of and interest on their Municipal Obligations
may be affected.
The yields of Municipal Bonds depend upon, among other things, general
money market conditions, general conditions of the Municipal Bond market, size
of a particular offering, the maturity of the obligation and rating of the
issue. The ratings of S&P, Moody's and Fitch represent their respective
opinions of the quality of the Municipal Bonds they undertake to rate. It
should be emphasized, however, that ratings are general and not absolute
standards of quality. Consequently, Municipal Bonds with the same maturity,
coupon and rating may have different yields and Municipal Bonds of the same
maturity and coupon with different ratings may have the same yield. See
Appendix A for a description of ratings. Many issuers of securities choose not
to have their obligations rated. Although unrated securities eligible for
purchase by the Fund must be determined to be comparable in quality to
securities having certain specified ratings, the market for unrated securities
may not be as broad as for rated securities since many investors rely on rating
organizations for credit appraisal.
VARIABLE OR FLOATING RATE OBLIGATIONS. As discussed under "Investment
Objective and Policies" in the Prospectus, certain of the obligations in which
the Fund may invest may be variable or floating rate obligations on which the
interest rate is adjusted at predesignated periodic intervals (variable rate)
or when there is a change in the market rate of interest on which the interest
rate payable on the obligation is met is based (floating rate). Variable or
floating rate obligations may include a demand feature which entitles the
purchaser to demand prepayment of the principal amount prior to stated
maturity. Also, the issuer may have a corresponding right to prepay the
principal amount prior to maturity. As with any other type of debt security,
the marketability of variable or floating rate instruments may vary depending
upon a number of factors, including the type of issuer and the terms of the
instruments. The Fund may also invest in more recently developed floating rate
instruments which are created by dividing a municipal security's interest rate
into two or more different components. Typically, one component ("floating rate
component" or "FRC") pays an interest rate that is reset periodically through
an auction process or by reference to an interest rate index. A second
component ("inverse floating rate component" or "IFRC") pays an interest rate
that varies inversely with changes to market rates of interest, because the
interest paid to the IFRC holders is generally determined by subtracting a
variable or floating rate from a predetermined amount (i.e., the difference
between the total interest paid by the municipal security and that paid by the
FRC). The Fund may purchase FRC's without limitation. Up to 10% of the Fund's
total assets may be invested in IFRC's in an attempt to protect against a
reduction in the income earned on the Fund's other investments due to a decline
in interest rates. The extent of increases and decreases in the value of an
IFRC generally will be greater than comparable changes in the value of an equal
principal amount of a fixed-rate municipal security having similar credit
quality, redemption provisions and maturity. To the extent that such
instruments are not readily marketable, as determined by the
-3-
<PAGE> 47
Investment Adviser pursuant to guidelines adopted by the Board of Trustees,
they will be considered illiquid for purposes of the Fund's 10% investment
restriction on investment in non-readily marketable securities.
PARTICIPATION INTERESTS. The Fund may purchase from financial
institutions tax exempt participation interests in tax exempt securities. A
participation interest gives the Fund an undivided interest in the tax exempt
security in the proportion that the Fund's participation interest bears to the
total amount of the tax exempt security. For certain participation interests,
the Fund will have the right to demand payment, on a specified number of days'
notice, for all or any part of the Fund's participation interest in the tax
exempt security plus accrued interest. Participation interests, which are
determined to be not readily marketable, will be considered as such for
purposes of the Fund's 10% investment restriction on investment in non-readily
marketable illiquid securities. The Fund may also invest in Certificates of
Participation (COP's) which provide participation interests in lease revenues.
Each Certificate represents a proportionate interest in or right to the
lease-purchase payment made under municipal lease obligations or installment
sales contracts. Typically, municipal lease obligations are issued by a state
or municipal financing authority to provide funds for the construction of
facilities (e.g., schools, dormitories, office buildings or prisons) or the
acquisition of equipment. The facilities are typically used by the state or
municipality pursuant to a lease with a financing authority. Certain municipal
lease obligations may trade infrequently. Participation interests in municipal
lease obligations will not be considered illiquid for purposes of the Fund's
10% limitation on illiquid securities provided the Investment Adviser
determines that there is a readily available market for such securities. In
reaching liquidity decisions, the Investment Adviser will consider, among
others, the following factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (3) dealer undertakings to make a
market in the security and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer.) With respect to
municipal lease obligations, the Investment Adviser also considers: (1) the
willingness of the municipality to continue, annually or biannually, to
appropriate funds for payment of the lease; (2) the general credit quality of
the municipality and the essentiality to the municipality of the property
covered by the lease; (3) an analysis of factors similar to that performed by
nationally recognized statistical rating organizations in evaluating the credit
quality of a municipal lease obligation, including (i) whether the lease can be
cancelled; (ii) if applicable, what assurance there is that the assets
represented by the lease can be sold; (iii) the strength of the lessee's
general credit (e.g., its debt, administrative, economic and financial
characteristics); (iv) the likelihood that the municipality will discontinue
appropriating funding for the leased property because the property is no longer
deemed essential to the operations of the municipality (e.g., the potential for
an event of nonappropriation); and (v) the legal recourse in the event of
failure to appropriate; and (4) any other factors unique to municipal lease
obligations as determined by the Investment Adviser.
FUND CHARACTERISTICS AND OTHER POLICIES. The Fund may engage in
short-term trading consistent with its investment objective. Securities may be
sold in anticipation of a market decline (a rise in interest rates) or
purchased in anticipation of a market rise (a decline in interest rates). In
addition, a security may be sold and another security of comparable quality
purchased at approximately the same time to take advantage of what the
Investment Adviser believes to be a temporary disparity in the normal yield
relationship between the two securities. These yield disparities may occur for
reasons not directly related to the investment quality of particular issues or
the general movement of interest rates, such as changes in the overall demand
for, or supply of, various types of tax-exempt securities.
-4-
<PAGE> 48
In general, purchases and sales may also be made to restructure the
portfolio in terms of average maturity, quality, coupon yield or
diversification for any one or more of the following purposes: (a) to increase
income, (b) to improve portfolio quality, (c) to minimize capital depreciation,
(d) to realize gains or losses, or (e) for such other reasons as the Investment
Adviser deems relevant in light of economic market conditions.
The Fund is a "diversified" management investment company under the
Investment Company Act of 1940 (the "Act"). This means that with respect to
75% of its total assets: (1) the Fund may not invest more than 5% of its total
assets in the securities of any one issuer other than U.S. government
securities and securities of other investment companies and (2) the Fund may
not own more than 10% of the outstanding voting securities of any one issuer.
In applying these limitations, a guarantee of a security will not be considered
a security of the guarantor, provided that the value of all securities issued
or guaranteed by that guarantor, and owned by the Fund, does not exceed 10% of
Fund's total assets. Since Municipal Obligations ordinarily purchased by the
Fund are not voting securities (notwithstanding the 75% limitation described
above), there is generally no limit on the percentage of a single issuer's
obligations which the Fund may own so long as it does not invest more than 5%
of its total assets in the securities of that issuer. Consequently, the Fund
may invest in a greater percentage of the outstanding securities of a single
issuer than would an investment company which invests in voting securities. In
determining the issuer of a security, each state and each political subdivision
agency, and instrumentality of each state and each multi-state agency of which
such state is a member is a separate issuer. Where securities are backed only
by assets and revenues of a particular instrumentality, facility or
subdivision, such entity is considered the issuer.
INVESTMENT PRACTICES
LENDING OF PORTFOLIO SECURITIES. In order to generate additional
income, the Fund may, from time to time, lend securities from its portfolios to
brokers, dealers and financial institutions such as banks and trust companies.
Such loans will be secured by collateral consisting of cash or U.S. Government
securities which will be maintained in an amount equal to at least 100% of the
current market value of the loaned securities. During the period of the loan,
the Fund will receive the income on both the loaned securities and the
collateral and thereby increase its return. Cash collateral will be invested in
short-term high quality debt securities, which will increase the current income
of the Fund. The loans will be terminable by the Fund at any time and by the
borrower on one day's notice. The Fund will have the right to regain record
ownership of loaned securities to exercise beneficial rights such as rights to
interest or other distributions or voting rights on important issues. The Fund
may pay reasonable fees to persons unaffiliated with the Fund for services in
arranging such loans. Lending of portfolio securities involves a risk of
failure by the borrower to return the loaned securities, in which event the
Fund may incur a loss.
WHEN-ISSUED AND FORWARD COMMITMENT 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.
-5-
<PAGE> 49
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 losing the opportunity to obtain a price and yield considered to be
advantageous. The purchase of securities on a when-issued and 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.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
A repurchase agreement is a contract under which the Fund would acquire a
security for a relatively short period (generally not more than 7 days) subject
to the obligation of the seller to repurchase and the Fund to resell such
security at a fixed time and price (representing the Fund's cost plus
interest). The Fund will enter into repurchase agreements only with member
banks of the Federal Reserve System and with securities dealers. The Investment
Adviser will continuously monitor the creditworthiness of the parties with whom
the Fund enters into repurchase agreements. The Fund has established a
procedure providing that the securities serving as collateral for each
repurchase agreement must be delivered to the Fund's custodian either
physically or in book-entry form and that the collateral must be marked to
market daily to ensure that each repurchase agreement is fully collateralized
at all times. In the event of bankruptcy or other default by a seller of a
repurchase agreement, the Fund could experience delays in liquidating the
underlying securities and could experience losses, including the possible
decline in the value of the underlying securities during the period which the
Fund seeks to enforce its rights thereto, possible subnormal levels of income
and lack of access to income during this period, and the expense of enforcing
its rights.
SPECIAL INVESTMENT TECHNIQUES
The Fund is permitted to engage in certain hedging techniques
involving options and futures transactions in order to reduce the effect of
interest rate movements affecting the market values of the investments held, or
intended to be purchased, by the Fund.
OPTIONS ON DEBT SECURITIES. The Fund may purchase and write put and
call options on debt securities which are traded on a national securities
exchange (an "Exchange") to protect its holdings in municipal bonds against a
substantial decline in market value. Securities are considered related if their
price movements generally correlate to one another. The purchase of put options
on debt securities which are related to securities held in its portfolio will
enable the Fund to protect, at least partially, unrealized gains in an
appreciated security in its portfolio without actually selling the security. In
However, under certain circumstances the Fund may not be treated as
the tax owner of a security held subject to a put option, in which case
interest with respect to such security would not be tax-exempt for the Fund.
The purchase of call options on
-6-
<PAGE> 50
debt securities may help to protect against substantial increases in prices of
securities the Fund intends to purchase pending its ability to invest in such
securities in an orderly manner.
The Fund may sell put and call options it has previously purchased,
which could result in a net gain or loss depending on whether the amount
realized on the sale is more or less than the premium and other transaction
costs paid in connection with the option which is sold.
In order to protect partially against declines in the value of its
portfolio securities, the Fund may sell (write) call options on debt
securities. A call option gives the purchaser of such option in return for a
premium paid, the right to buy, and the seller has the obligation to sell, the
underlying security at the exercise price if the option is exercised during the
option period. The writer of the call option who receives the premium has the
obligation to sell the underlying security to the purchaser at the exercise
price during the option period if assigned an exercise notice. The Fund will
write call options only on a covered basis, which means that it will own the
underlying security subject to a call option at all times during the option
period. The exercise price of a call option may be below, equal to or above the
current market value of the underlying security at the time the option is
written.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier point in time when the writer effects a closing
purchase transaction.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, in conjunction with the sale of the underlying security or to
enable the Fund to write another call option on the underlying security with a
different exercise price or different expiration date or both.
The Fund will write cash secured put options in order to facilitate
its ability to purchase a security at a price lower than the current market
price of such security. The Fund will write put options only on a "cash
secured" basis which means that if the Fund writes a "put" it will segregate
cash obligations in the event the "put" is exercised. "Puts" will only be
written in furtherance of the basic investment objectives of the Fund relating
to the acquisition of tax exempt securities and will not be written with the
primary intent of generating income from premiums paid to the Fund in
connection with the sale of the "put".
The purchase and writing of put and call options involves certain
risks. During the option period, the covered call writer has, in return for the
premium on the option, given up the opportunity to profit from a price increase
in the underlying securities above the exercise price, but, as long as its
obligation as a writer continues, has retained the risk of loss in the event
the price of the underlying security declines. A secured put writer assumes the
risk that the underlying security will fall below the exercise price in which
case the writer could be required to purchase the security at a higher price
than the then current market price of the security. In either instance, the
writer has no control over the time when it may be required to fulfill its
obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the underlying
securities, in the case of a call, or acquire the contract securities, in the
case of a put, at the exercise price. If a put or call option purchased by the
Fund is not sold when it has remaining value, and if the market price of the
underlying security remains equal to or greater
-7-
<PAGE> 51
than the exercise price, in the case of a put, or equal to or less than the
exercise price, in the case of a call, the Fund will lose its entire investment
in the option. Also, where a put or a call option on a particular security is
purchased to hedge against price movements in a related security, the price of
the put or call option may move more or less than the price of the related
security.
The Fund will not invest in a put or a call option if as a result the
amount of premiums paid for such options then outstanding, when added to the
premiums paid for financial and index futures and put and call options on such
futures, would exceed 10% of the Fund's total assets.
FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may engage in the
purchase and sale of interest rate futures contracts ("financial futures") and
tax-exempt bond index futures contracts ("index futures") and the purchase and
writing of put and call options thereon, as well as put and call options on
tax-exempt bond indexes (if and when they are traded) only as a hedge against
changes in the general level of interest rates in accordance with strategies
more specifically described below.
The purchase of a financial futures contract obligates the buyer to
accept and pay for the specific type of debt security called for in the
contract at a specified future time and at a specified price. The Fund would
purchase a financial futures contract when it is not fully invested in
long-term debt securities but wishes to defer its purchases for a time until it
can invest in such securities in an orderly manner or because short-term yields
are higher than long-term yields. Such purchases would enable the Fund to earn
the income on a short-term security while at the same time minimizing the
effect of all or part of an increase in the market price of the long-term debt
security which the Fund intends to purchase in the future. A rise in the price
of the long-term debt security prior to its purchase either would generally be
offset by an increase in the value of the futures contract purchased by the
Fund or avoids by taking delivery of the debt securities under the futures
contract.
The sale of a financial futures contract obligates the seller to
deliver the specific type of debt security called for in the contract at a
specified future time and at a specified price. The Fund would sell a financial
futures contract in order to continue to receive the income from a long-term
debt security, while endeavoring to avoid part or all of the decline in market
value of that security which would accompany an increase in interest rates. If
interest rates did rise, a decline in the value of the debt security held by
the Fund would be substantially offset by an increase in the value of the
futures contract sold by the Fund. While the Fund could sell a long-term debt
security and invest in a short-term security, ordinarily the Fund would give up
income on its investment, since long-term rates normally exceed short-term
rates.
In addition, the Fund may purchase and write put and call options on
financial futures contracts which are traded on an Exchange or a Board of Trade
and enter into closing transactions with respect to such options to terminate
an existing position. Options on financial futures contracts are similar to
options on securities except that a put option on a financial futures contract
gives the purchaser the right in return for the premium paid to assume a short
position in a financial futures contract and a call option on a financial
futures contract gives the purchaser the right in return for the premium paid
to assume a long position in a financial futures contract.
The Fund anticipates purchasing and selling tax-exempt bond index
futures as a hedge against changes in the market value of the tax exempt bonds
which it holds. A tax-exempt bond index fluctuates with changes in the market
values of the tax-exempt bonds included in the index. An index future has
similar characteristics to a financial future except that settlement is made
-8-
<PAGE> 52
through delivery of cash rather than the underlying securities. The sale of an
index future obligates the seller to deliver at settlement an amount of cash
equal to a specified dollar amount multiplied by the difference between the
value of the index at the close of the last trading day of the contract and the
price at which the future was originally written.
The Fund may also purchase and write put and call options on
tax-exempt bond indexes (if and when such options are traded) and enter into
closing transactions with respect to such options. An option on an index future
is similar to an option on a debt security except that an option on an index
future gives the holder the right to assume a position in an index future. The
Fund will use options on futures contracts and options on tax-exempt bond
indexes (if and when they are traded) in connection with hedging strategies.
Generally, these strategies would be employed under the same market conditions
in which the Fund would use put and call options on debt securities.
The Fund may hedge up to the full value of its portfolio through the
use of options and futures. At the time the Fund purchases a futures contract,
an amount of cash or U.S. Government securities at least equal to the market
value of the futures contract will be deposited in a segregated account with
the Fund's Custodian to collateralize the position and thereby insure that such
futures contract is unleveraged. The Fund may not purchase or sell futures
contracts or purchase or write related put or call options if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures and related options positions and the amount of premiums paid for
related options (measured at the time of investment) would exceed 5% of the
Fund's total assets.
While the Fund's hedging transactions may protect the Fund against
adverse movements in the general level of interest rates, such transactions
could also preclude the opportunity to benefit from favorable movements in the
level of interest rates. Due to the imperfect correlation between movements in
the prices of futures contracts and movements in the prices of the related
securities being hedged, the price of a futures contract may move more than or
less than the price of the securities being hedged. There is an increased
likelihood that this will occur when a tax-exempt security is hedged by a
futures contract on a taxable security. Options on futures contracts are
generally subject to the same risks applicable to all option transactions. In
addition, the Fund's ability to use this technique will depend in part on the
development and maintenance of a liquid secondary market for such options. For
a discussion of the inherent risks involved with futures contracts and options
thereon, see "Risks Relating to Transactions in Futures Contracts and Related
Options" below.
The Fund's policies permitting the purchase and sale of futures
contracts and the purchase and writing of related put or call options for
hedging purposes only may not be changed without the approval of shareholders
holding a majority of the Fund's outstanding voting securities. The Board of
Directors may authorize procedures, including numerical limitations, with
regard to such transactions in furtherance of the Fund investment objectives.
Such procedures are not deemed to be fundamental and may be changed by the
Board of Trustees without the vote of the Fund's shareholders.
RISKS RELATING TO TRANSACTIONS IN FUTURES CONTRACTS AND RELATED
OPTIONS. Positions in futures contracts may be closed out only on an exchange
or board of trade which provides a market for such futures. Although the Fund
intends to purchase or sell futures contracts only on exchanges or boards of
trade where there appears to be an active market, there is no assurance that a
liquid market on an exchange or board of trade will exist for any particular
contract or at any particular time. In the event a liquid market does not
exist, it may not be possible to close a
-9-
<PAGE> 53
futures position, and in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of maintenance margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Fund from closing out a contract
which may result in reduced gain or increased loss to the Fund. The absence of
a liquid market in futures contracts might cause the Fund to make or take
delivery of the underlying securities at a time when it may be disadvantageous
to do so. The purchase of put options on futures contracts involves less
potential dollar risk to the Fund than an investment of equal amount in futures
contracts, since the premium is the maximum amount of risk the purchaser of the
option assumes. The entire amount of the premium paid for an option can be lost
by the purchaser, but no more than that amount.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions upon
its investments as set forth below which may not be changed without the
approval of the holders of a majority of the outstanding shares of the Fund. A
majority for this purpose means: (a) more than 50% of the outstanding shares of
the Fund or (b) 67% or more of the shares represented at a meeting where more
than 50% of the outstanding shares of the Fund are represented, whichever is
less. Under these restrictions, the Fund may not:
1. Borrow money except from banks for temporary or emergency (not
leveraging) purposes, including the meeting of redemption
requests that might otherwise require the untimely disposition
of securities, in an amount up to 15% of the value of the
Fund's total assets (including the amount borrowed) valued at
market less liabilities (not including the amount borrowed) at
the time the borrowings was made. While borrowing exceed 5% of
the value of the Fund's total assets, the Fund will not
purchase any additional securities. Interest paid on borrowing
will reduce the Fund's net investment income.
2. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except in an amount up to 10% of the value of its
total assets but only to secure borrowing for temporary or
emergency purposes or as may be necessary in connection with
maintaining collateral in connection with writing put and call
options or making initial margin deposits in connection with
the purchase or sale of financial futures, index futures
contracts and related options.
3. With respect to 75% of its total assets, purchase securities
(other than obligations issued or guaranteed by the United
States government, its agencies of instrumentalities and
shares of other investment companies) of any issuer if the
purchase would cause immediately thereafter more than 5% of
the value of the Fund's total assets invested in the
securities of such issuer or the Fund would own more than 10%
of the outstanding voting securities of such issuer.
4. Make loans to others, except through the purchase of
obligations in which the Fund is authorized to invest,
entering in repurchase agreements and lending portfolio
securities in an amount not exceeding one third of its total
assets.
5. Purchase illiquid securities, including securities subject to
restrictions on disposition under the Securities Act of 1933,
repurchase agreements maturing in
-10-
<PAGE> 54
more than seven days, and securities which do not have readily
available market quotations, if such purchase would cause the
Fund to have more than 10% of its net assets invested in such
types of securities.
6. Purchase or retain the securities of any issuer, if those
officers and Trustees of the Fund or the Investment Adviser
who own beneficially more than of 1% of the securities of such
issuer, together own more than 5% of the securities of such
issuer.
7. Write, purchase or sell puts, calls or combinations thereof,
except put and call options on debt securities, futures
contracts based on debt securities, indices of debt securities
and futures contracts based on indices of debt securities,
sell securities on margin or make short sales of securities or
maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or
securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short, and
unless not more than 10% of the Fund's net assets (taken at
current value) is held as collateral for such sales at any one
time.
8. Underwrite the securities of other issuers, except insofar as
the Fund may be deemed an underwriter under the Securities Act
of 1933 in disposing of a portfolio security.
9. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, except
commodities and commodities contracts which are necessary to
enable the Fund to engage in permitted futures and options
transactions necessary to implement hedging strategies, or oil
and gas interests. This limitation shall not prevent the Fund
from investing in municipal securities secured by real estate
or interests in real estate or holding real estate acquired as
a result of owning such municipal securities.
10. Invest in common stock or in securities of other investment
companies, except that securities of investment companies may
be acquired as part of a merger, consolidation or acquisition
of assets and units of registered unit investment trusts whose
assets consist substantially of tax-exempt securities may be
acquired to the extent permitted by Section 12 of the Act or
applicable rules.
11. Invest more than 25% of its assets in the securities of
"issuers" in any single industry; provided that there shall be
no limitation on the purchase of obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities or by any state or political subdivision
thereof. For purposes of this limitation when the assets and
revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the
government creating the issuing entity and a security is
backed only by the assets and revenues of the entity, the
entity would be deemed to be the sole issuer of the security.
Similarly, in the case of an industrial development or
pollution control bond, if that bond is backed only by the
assets and revenues of the nongovernmental user, then such
nongovernmental user would be deemed to be the sole issuer.
If, however, in either case, the creating government or some
other entity guarantees a security, such a guarantee would be
considered a separate
-11-
<PAGE> 55
security and would be treated as an issue of such government
or other entity unless all securities issued or guaranteed by
the government or other entity owned by the Fund does not
exceed 10% of the Fund's total assets.
12. Invest more than 5% of its total assets in securities of any
issuers if the party responsible for payment, together with
any predecessor, has been in operation for less than three
years (except U.S. government and agency obligations and
obligations backed by the faith, credit and taxing power of
any person authorized to issue tax exempt securities).
13. Issue any senior securities, except insofar as the Fund may be
deemed to have issued a senior security by: entering into a
repurchase agreement; purchasing securities in a when-issued
or delayed delivery basis; purchasing or selling any options
or financial futures contract; borrowing money or lending
securities in accordance with applicable investment
restrictions.
In order to comply with certain state regulatory policies, the Fund
has adopted a non-fundamental policy prohibiting the purchase of warrants. The
Fund's Board of Trustees has approved the following non-fundamental investment
policy pursuant to an order of the SEC: 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.
TRUSTEES AND OFFICERS OF THE FUND
The overall direction and supervision of the Fund is the
responsibility of the Board of Trustees which has the primary duty of seeing
that the Fund's general investment policies and programs are carried out and
properly administered. The officers of the Fund are responsible for the
day-to-day administration of the Fund. Several of the officers and Trustees of
the Fund are also officers and directors of the Investment Adviser or officers
and directors of the Fund's Distributor.
Set forth below is information with respect to each of the Fund's
officers and Trustees. The officers and Trustees may be contacted at 101
Huntington Avenue, Boston, MA 02199-7603. Their affiliations represent their
principal occupations during the past five years. An asterisk indicates those
Trustees who are interested persons within the meaning of the 1940 Act.
EDWARD J. BOUDREAU, JR.,* Trustee, Chairman and Chief Executive Officer.
Chairman and Chief Executive Officer, the Investment Adviser and The
Berkeley Financial Group ("The Berkeley Group"); Chairman, NM Capital
Management, Inc. ("NM Capital"); John Hancock Advisers International
Limited ("Advisers International"); John Hancock Funds, Inc; John
Hancock Investor Services Corporation ("Investor Services"); and
Sovereign Asset Management Corporation ("SAMCorp"); (hereinafter the
Investment Adviser, the Berkeley Group, NM Capital, Advisers
International, John Hancock Funds, Inc., Investor Services and SAMCorp
are collectively referred to as the "Affiliated Companies");
-12-
<PAGE> 56
Chairman, First Signature Bank & Trust; Director, John Hancock Freedom
Securities Corporation, John Hancock Capital Corporation, New
England/Canada Business Council; Member, Investment Company Institute
Board of Governors; Trustee, Museum of Science; President, the
Investment Adviser (until July 1992); Trustee or Director of other
investment companies managed by the Investment Adviser; and Chairman,
John Hancock Distributors, Inc. (until April, 1994).
JAMES F. CARLIN, Trustee. Chairman and CEO, Carlin Consolidated, Inc.
(insurance); Director, Arbella Mutual Insurance Company (insurance),
Consolidated Group Trust (group health plan), Carlin Insurance Agency,
Inc. and West Insurance Agency, Inc.; Receiver, the City of Chelsea
(until August 1992); and Trustee or Director of other investment
companies managed by the Investment Adviser.
WILLIAM H. CUNNINGHAM, Trustee. Chancellor, University of Texas System and
former President of the University of Texas, Austin, Texas; Regents
Chair in Higher Education Leadership; James L. Bayless Chair for Free
Enterprise; Professor of Marketing and Dean College of Business
Administration/Graduate School of Business (1983-1985); Centennial
Chair in Business Education Leadership, 1983-1985; Director, LaQuinta
Motor Inns, Inc. (hotel management company); Director, Jefferson-Pilot
Corporation (diversified life insurance company); Director,
Freeport-McMoran Inc. (oil and gas company); Director, Barton Creek
Properties, Inc. (1988-1990) (real estate development) and LBJ
Foundation Board (education foundation); and Advisory Director, Texas
Commerce Bank-Austin.
CHARLES L. LADNER, Trustee. Director, Energy North, Inc. (public utility
holding company); Senior Vice President, Finance UGI Corp (public
utility holding company) (until 1992); and Trustee or Director of
other investment companies managed by the Investment Adviser.
LEO E. LINBECK, JR., Trustee. Chairman, President, Chief Executive Officer and
Director, Linbeck Corporation (a holding company engaged in various
phases of the construction industry and warehousing interests);
Director and Chairman, Federal Reserve Bank of Dallas; Chairman of the
Board and Chief Executive Officer, Linbeck Construction Corporation;
Director, Panhandle Eastern Corporation (a diversified energy
company); Director, Daniel Industries, Inc. (manufacturer of gas
measuring products and energy related equipment); Director, GeoQuest
International, Inc. (a geophysical consulting firm); and Director,
Greater Houston Partnership.
PATRICIA P. MCCARTER, Trustee. Director and Secretary, the McCarter Corp.
(machine manufacturer); and Trustee or Director of other investment
companies managed by the Investment Adviser.
STEVEN R. PRUCHANSKY, Trustee. Director and Treasurer, Mast Holdings, Inc.;
Director, First Signature Bank & Trust Company (until August 1991);
General Partner, Mast Realty Trust; President, Maxwell Building Corp.
(until 1991); and Trustee or Director of other investment companies
managed by the Investment Adviser.
NORMAN H. SMITH, Trustee. Lieutenant General, USMC, Deputy Chief of Staff for
Manpower and Reserve Affairs, Headquarters Marine Corps; Commanding
General III Marine Expeditionary Force/3rd Marine Division (retired
1991); and Trustee or Director of other investment companies managed
by the Investment Adviser.
-13-
<PAGE> 57
JOHN P. TOOLAN, Trustee. Director, The Smith Barney Muni Bond Funds, The Smith
Barney Tax-Free Money Fund, Inc., Vantage Money Market Funds (mutual
funds), The Inefficient-Market Fund, Inc. (closed-end investment
company) and Smith Barney Trust Company of Florida; Chairman, Smith
Barney Trust Company (retired December, 1991); Director, Smith Barney,
Inc., Mutual Management Company and Smith, Barney Advisers, Inc.
(investment advisers) (retired 1991); and Senior Executive Vice
President, Director and member of the Executive Committee, Smith
Barney, Harris Upham & Co, Incorporated (investment bankers) (until
1991); and Trustee or Director of other investment companies managed
by the Investment Adviser.
ROBERT G. FREEDMAN, Vice Chairman and Chief Investment Officer. President and
Chief Investment Officer, the Investment Adviser.
THOMAS M. SIMMONS, President. Executive Vice President, the Investment
Adviser. Formerly, President and Chief Executive Officer, Transamerica
Fund Management, and Director, Transamerica Fund Distributors, Inc.
ANNE C. HODSDON, Executive Vice President. Executive Vice President, the
Investment Adviser.
JAMES B. LITTLE, Senior Vice President and Chief Financial Officer. Senior Vice
President, the Investment Adviser.
THOMAS H. DROHAN, Senior Vice President and Secretary. Senior Vice President
and Secretary, the Investment Adviser.
MICHAEL P. DICARLO, Senior Vice President. Senior Vice President, the
Investment Adviser.
EDGAR LARSEN, Senior Vice President. Senior Vice President, the Investment
Adviser.
B.J. WILLINGHAM, Senior Vice President. Senior Vice President, the Investment
Adviser. Formerly, Director and Chief Investment Officer of
Transamerica Fund Management Company.
JAMES J. STOKOWSKI, Vice President and Treasurer. Vice President, the
Investment Adviser.
SUSAN S. NEWTON, Vice President and Compliance Officer. Vice President and
Assistant Secretary, the Investment Adviser.
JOHN A. MORIN, Vice President. Vice President, the Investment Adviser.
THOMAS J. PRESS, Vice President and Assistant Secretary. Vice President and
Assistant Secretary, the Investment Adviser. Formerly, General Counsel
and Secretary, Transamerica Management Company; Secretary and
Treasurer, Transamerica Asset Management Group, Inc.; and Secretary,
Transamerica Funds Distributors, Inc.
As of January 31, 1995, there were 19,454,101 shares of the Fund
outstanding and officers and trustees of the Fund as a group beneficially owned
less than 1% of these outstanding shares. At such date, no person owned of
record or was known by the Fund to own beneficially as much as 5% of the
outstanding shares of the Fund.
-14-
<PAGE> 58
As of December 22, 1994, the Trustees have established an Advisory
Board which acts to facilitate a smooth transition of management over a
two-year period (between Transamerica Fund Management Company ("TFMC"), the
prior investment adviser, and the Investment Adviser). The members of the
Advisory Board are distinct from the Board of Trustees, do not serve the Fund
in any other capacity and are persons who have no power to determine what
securities are purchased or sold and behalf of the Fund. Each member of the
Advisory Board may be contacted at 101 Huntington Avenue, Boston, Massachusetts
02199.
Members of the Advisory Board and their respective principal occupations during
the past five years are as follows:
R. Trent Campbell, President, FMS, Inc. (financial and management services);
former Chairman of the Board, Mosher Steel Company.
Mrs. Lloyd Bentsen, Formerly National Democratic Committeewoman from Texas;
co-founder, Houston Parents' League; former board member of various
civic and cultural organizations in Houston, including the Houston
Symphony, Museum of Fine Arts and YWCA. Mrs. Bentsen is presently
active in various civic and cultural activities in the Washington,
D.C. area, including membership on the Area Board for The March of
Dimes and is a National Trustee for the Botanic Gardens of Washington,
D. C.
Thomas R. Powers, Formerly Chairman of the Board, President and Chief Executive
Officer, TFMC; Director, West Central Advisory Board, Texas Commerce
Bank; Trustee, Memorial Hospital System; Chairman of the Board of
Regents of Baylor University; Member, Board of Governors, National
Association of Securities Dealers, Inc.; Formerly, Chairman,
Investment Company Institute; formerly, President, Houston Chapter of
Financial Executive Institute.
Thomas B. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation);
Member, Board of Managers, Harris County Hospital District; Advisory
Director, Commercial State Bank, El Campo; Advisory Director, First
National Bank of Bryan; Advisory Director, Sterling Bancshares; Former
Director and Vice Chairman, Texas Commerce Bancshares; and Vice
Chairman, Texas Commerce Bank.
COMPENSATION OF THE BOARD OF TRUSTEES AND ADVISORY BOARD. Each
Independent Trustee receives an annual retainer of $44,000, a meeting fee of
$4,000 for each of the four regularly scheduled meetings held during the year
and a fee of $25 per day or actual travel expenses, whichever is greater. This
compensation is apportioned among the John Hancock funds, including the Fund,
on which such Trustees serve based on the net asset value of such funds.
Advisory Board Members receive from the Fund an annual retainer of $40,000 and
a meeting fee of $7,000 for each of the two regularly scheduled meetings to be
held in 1995 and the one in 1996.
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 and the Advisory Board members for their
services. Mr. Boudreau, a non-Independent Trustee, and each of the officers of
the Funds are interested persons of the Investment Adviser, are
-15-
<PAGE> 59
compensated by the Investment Adviser and received no compensation from the
Funds for their services.
<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement from all Funds in
Aggregate Benefits Accrued John Hancock
Compensation as Part of the Fund Complex to
Trustees from the Fund Fund's Expenses Trustees**
- -------- ------------- --------------- ------------------
<S> <C> <C> <C>
James F. Carlin $ 0 $0 $ 60,452
William H. Cunningham $ 4,495 * $0 $ 0
Charles L. Ladner $ 0 $0 $ 60,450
Leo E. Linbeck, Jr. $ 4,495 * $0 $ 0
Patricia P. McCarter $ 0 $0 $ 60,200
Steven R. Pruchansky $ 0 $0 $ 62,450
Norman H. Smith $ 0 $0 $ 62,450
John P. Toolan $ 0 $0 $ 62,450
Total $ 8,990 $0 $ 366,450
</TABLE>
* Compensation made pursuant to different compensation arrangements then
in effect.
** The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31,
1994. (The Fund was not part of the John Hancock Fund Complex until
December 22, 1994 and Messrs. Cunningham and Linbeck were not trustees
or directors of any funds in the John Hancock Fund Complex prior to
December 22, 1994.)
<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement from all Funds in
Aggregate Benefits Accrued John Hancock
Compensation as Part of the Fund Complex to
Advisory Board*** from the Fund Fund's Expenses Trustees***
- -------------- ------------- --------------- ------------------
<S> <C> <C> <C>
R. Trent Campbell $ 54,000 $0 $ 54,000
Mrs. Lloyd Bentsen $ 54,000 $0 $ 54,000
Thomas R. Powers $ 54,000 $0 $ 54,000
Thomas B. McDade $ 54,000 $0 $ 54,000
TOTAL $ 216,000 $0 $ 216,000
</TABLE>
*** Estimated for the Fund's current fiscal year ending December 31, 1995.
-16-
<PAGE> 60
THE FUND AND ITS MANAGEMENT
Each of the Trustees and principal officers affiliated with the Fund
who is also an affiliated person of the Investment Adviser or the Sub-Adviser
is named above, together with the capacity in which such person is affiliated
with the Fund, the Investment Adviser or Sub-Adviser.
The Investment Adviser, located at 101 Huntington Avenue, Boston,
Massachusetts 02199-7603, was organized in 1968 and has over $13 billion in
assets under management in its capacity as investment adviser to the Fund and
the other mutual funds and publicly traded investment companies in the John
Hancock group of funds having a combined total of over 800,000 shareholders.
The Investment Adviser is a wholly-owned subsidiary of The Berkeley Financial
Group, which is in turn a wholly-owned subsidiary of John Hancock Subsidiaries,
Inc., which is in turn a wholly-owned subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"), one of the nation's oldest and largest
financial services companies. With total assets under management of over $63
billion, the Life Company is one of the ten largest life insurance companies in
the United States, and carries Standard & Poor's and A.M. Best's highest
ratings. Founded in 1862, the Life Company has been serving clients for over
130 years.
The Fund has entered into an investment management contract with the
Investment Adviser. Under the investment management contract, the Investment
Adviser provides the Fund with (i) a continuous investment program, consistent
with the Fund's stated investment objective and policies, (ii) supervision of
all aspects of the Fund's operations except those that are delegated to a
custodian, transfer agent or other agent and (iii) such executive,
administrative and clerical personnel, officers and equipment as are necessary
for the conduct of its business. The Investment Adviser has entered into a
sub-investment management contract with the Sub-Adviser, Transamerica
Investment Services, Inc., 1150 South Olive Street, Los Angeles, California
90015. The Sub-Adviser was organized in 1967 and is a wholly-owned subsidiary
of Transamerica Corporation. Under the sub-investment management contract, the
Sub-Adviser, subject to the review of the Trustees and the over all supervision
of the Investment Adviser, is responsible for managing the investment
operations of the Fund and the composition of the Fund's portfolio and
furnishing the Fund with advice and recommendations with respect to
investments, investment policies and the purchase and sale of securities. See
"Organization and Management of the Fund" and "The Fund's Expenses" in the
Prospectus for a description of certain information concerning the Fund's
investment management contract and the sub-investment management contracts.
No person other than the Investment Adviser and the Sub-Adviser and
their directors and employees regularly furnishes advice to the Fund with
respect to the desirability of the Fund investing in, purchasing or selling
securities. The Investment Adviser and Sub-Adviser may from time to time
receive statistical or other similar factual information, and information
regarding general economic factors and trends, from the Life Company and its
affiliates.
Under the terms of the investment management contract with the Fund,
the Investment Adviser provides the Fund with office space, equipment and
supplies and other facilities and personnel required for the business of the
Fund. The Investment Adviser pays the compensation of all officers and
employees of the Fund and Trustees of the Fund affiliated with the Investment
Adviser, the office expenses of the Fund, including those of the Fund's
Treasurer and Secretary, and other expenses incurred by the Investment Adviser
in connection with the performance of its duties. All expenses which are not
specifically paid by the Investment Adviser and which are incurred in the
operation of the Fund including, but not limited to, (i) the fees of the
Trustees of the Fund who are not "interested persons," as such term is defined
in the 1940 Act (the
-17-
<PAGE> 61
"Independent Trustees"), (ii) the fees of the members of the Fund's Advisory
Board (described above) and (iii) the continuous public offering of the shares
of the Fund are borne by the Fund.
As provided by the investment management contract, the Fund pays the
Investment Adviser an investment management fee, which is accrued daily and
paid monthly in arrears, equal on an annual basis to a 0.55% of the Fund's
average daily net asset value. The Investment Adviser, not the Fund, pays the
subadvisory fee as described in the Prospectus. See "Organization and
Management of the Fund" in the Prospectus.
The Investment Adviser may voluntarily and temporarily reduce its
advisory fee or make other arrangements to limit the Fund's expenses to a
specified percentage of average daily net assets. The Investment Adviser
retains the right to re-impose the advisory 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.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any state limit
where the Fund is registered to sell shares of beneficial interest, the fee
payable to the Investment Adviser will be reduced to the extent required by
law. At this time, the most restrictive limit on expenses imposed by a state
requires that expenses charged to the Fund in any fiscal year not exceed 2.5%
of the first $30,000,000 of the Fund's average daily net asset value, 2% of the
next $70,000,000 and 1.5% of the remaining average daily net asset value. When
calculating the limit above, the Fund may exclude interest, brokerage
commissions and extraordinary expenses.
Pursuant to the investment management contract and sub-investment
management contract, the Investment Adviser and Sub-Adviser are not liable to
the Fund or its shareholders for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which their
respective contracts relate, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Investment Adviser or
Sub-Adviser in the performance of their duties or from their reckless disregard
of the obligations and duties under the applicable contract.
The investment management contract and sub-investment management
contract initially expire on December 22, 1996 and December 22, 1995,
respectively, and will continue in effect from year to year thereafter if
approved annually by a vote of a majority of the Trustees of the Fund who are
not interested persons of one of the parties to the contract, cast in person at
a meeting called for the purpose of voting on such approval, and by either a
majority of the Trustees or the holders of a majority of the Fund's outstanding
voting securities. The management contract may, on 60 days' written notice, be
terminated at any time without the payment of any penalty bo the Fund by vote
of a majority of the outstanding voting securities of the Fund, by the Trustees
or by the Investment Adviser. The management contract terminates automatically
in the event of its assignment. The sub-investment management contract may be
terminated by the Fund at any time, without the payment of any penalty, by the
Trustees of the Fund or by vote of a majority of the outstanding shares of the
Fund, or by the Investment Adviser or the Sub-Adviser at any time, without the
payment of any penalty, on not less that 60 days' written notice to the other
party and the Fund, or to each party. The sub-investment management contract
terminates automatically in the event of its assignment.
Securities held by the Fund may also be held by other funds or
investment advisory clients for which the Investment Adviser, the Sub-Adviser
or their respective affiliates provide
-18-
<PAGE> 62
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 Investment Adviser or Sub-Adviser or for other funds or
clients for which the Investment Adviser or Sub-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 Investment Adviser,
Sub-Adviser or their respective affiliates may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price.
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 investment management contract or any extension, renewal or amendment
thereof remains in effect. If the Fund's investment management contract is no
longer in effect, the Fund (to the extent that it lawfully can) will cease to
use such name or any other name indicating that it is advised by or otherwise
connected with the Investment Adviser. In addition, the Investment Adviser or
the Life Company may grant the non-exclusive 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.
For the fiscal years ended December 31, 1992, 1993 and 1994 advisory
fees payable by the Fund to TFMC, the Fund's former investment adviser,
amounted to $515,297, $888,791 and $1,136,532, respectively; however, a portion
of such fees were not imposed pursuant to the voluntary fee and expense
assumption and fee waiver then in effect (see "The Fund's Expenses" in the
Prospectus). For the period from December 22, 1994 to December 31, 1994,
advisory fees payable by the Fund were paid to the Investment Adviser.
During the fiscal years ended December 31, 1992, 1993 and 1994, TFMC
paid subadvisory fees to the Sub-Adviser of $96,858, $34,536 and $ ,
respectively. During the period from December 22, 1994 to December 31, 1994,
the Investment Adviser paid the subadvisory fees to the Sub-Adviser. The Fund
made no payments of subadvisory fees during these periods to the Sub-Adviser.
ADMINISTRATIVE SERVICES AGREEMENT. The Fund was a party to an
administrative services agreement with TFMC (the "Services Agreement"),
pursuant to which TFMC performed bookkeeping and accounting services and
functions, including preparing and maintaining various accounting books,
records and other documents and keeping such general ledgers and portfolio
accounts as are reasonably necessary for the operation of the Fund. Other
administrative services included communications in response to shareholder
inquiries and certain printing expenses of various financial reports. In
addition, such staff and office space, facilities and equipment was provided as
necessary to provide administrative services to the Fund. The Services
Agreement was amended in connection with the appointment of the Investment
Adviser as adviser to the Fund to permit services under the Agreement to be
provided to The Fund by the Investment Adviser and its affiliates. The Services
Agreement was terminated during the current fiscal year.
For the fiscal years ended December 31, 1992, 1993 and 1994, the Fund
paid to TFMC (pursuant to the Services Agreement) $68,225, $94,272 and
$116,742, respectively, of which $43,681, $62,855 and $81,515, respectively,
was paid to TFMC and $24,544, $31,417 and $35,227, respectively, were paid for
certain data processing and pricing information services.
-19-
<PAGE> 63
PURCHASE OF 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 only will be issued for full shares. The Board of Trustees reserves
the right to change or waive the minimum investment requirements and to reject
any order to purchase shares (including purchase by exchange) when in the
judgment of the Investment Adviser such rejection is in the Fund's best
interest.
INITIAL SALES CHARGE ON CLASS A SHARES. The sales charges applicable
to purchases of Class A Shares of the Fund are described in the Fund's Class A
and Class B Prospectus. Methods of obtaining reduced sales charges referred to
generally in the Prospectus are described in detail below. In calculating the
sales charge applicable to current purchases of Class A Shares, the investor is
entitled to cumulate current purchases with the greater of the current value
(at offering price) of the Class A Shares of the Fund, or if Investor Services
is notified by the investor's dealer or the investor at the time of the
purchase, the cost of the Class A Shares owned.
COMBINED PURCHASES. In calculating the sales charge applicable to
purchases of Class A Shares made at one time, the purchases will be combined if
made by (a) an individual, his or her spouse and their children under the age
of 21 purchasing securities for his or her own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
certain groups of four or more individuals making use of salary deductions or
similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
certain restrictions on combined group purchases, is available from Investor
Services or a Selling Broker's representative.
WITHOUT SALES CHARGE. As described in the Class A and Class B
Prospectus, Class A Shares of the Fund may be sold without a sales charge to
John Hancock affiliates and certain government authorities. Sales to John
Hancock affiliates are made without a sales charge to promote goodwill among
employees and others with whom the Fund has business relationships, and because
the sales efforts, if any, involved in making such sales are negligible. Such
sales may be registered solely in the name of the eligible party or the
eligible party in conjunction with immediate family members. Class A Shares may
be purchased without a sales charge by (1) banks, trust companies, credit
unions, savings institutions and other types of depository institutions, their
trust departments and their common trust funds if they are purchasing $1
million or more for non-discretionary customers or accounts; (2) by former
participants in an employee benefit plan with John Hancock mutual funds who
withdraw from their respective plans and transfer any or all Fund shares
representing their plan distributions directly to an account with the Fund; (3)
by dealers, brokers or registered investment advisers that have entered into an
agreement with the Distributor providing specifically for the use of Fund
shares in fee-based investment products made available to their clients; and
(4) in connection with certain liquidation, acquisition and merger 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
the reduced sales charge by taking into account not only the amount then being
invested but also the purchase price or value of the Class A Shares already
held by such person.
-20-
<PAGE> 64
COMBINATION PRIVILEGE. Reduced sales charges (according to the
schedule set forth in the Class A and Class B Prospectus) also are available to
an investor based on the aggregate amount of his concurrent and prior
investments in Class A Shares of the Fund and shares of all other John Hancock
funds which carry a sales charge.
LETTER OF INTENTION. Reduced sales charges are also applicable to
investments 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.
Such an investment (including accumulation and combinations) must aggregate
$100,000 or more invested during a period of thirteen months from the date of
the LOI or from a date within ninety days prior thereto, upon written request
to the Distributor. 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 thirteen-month period the sales charge
applicable will not be higher than that which would have applied (including
accumulations and combinations) had the LOI been for the amount actually
invested.
The LOI authorizes Investor Services to hold in escrow sufficient
Class A Shares (approximately 5% of the aggregate) to make up any difference in
sales charges on the amount intended to be invested and the amount actually
invested, until such investment is completed within the thirteen-month period,
at which time the escrow shares will be released. If the total investment
specified in the LOI is not completed, the Class A Shares held in escrow may be
redeemed and the proceeds used as required to pay such sales charge as may be
due. By signing the LOI, the investor authorizes Investor Services to act as
his or her attorney-in-fact to redeem any escrowed shares and adjust the sales
charge, if necessary. An LOI does not constitute a binding commitment by an
investor to purchase, or by the Fund to sell, any additional Class A Shares and
may be terminated at any time.
ACQUISITION OF CERTAIN INVESTMENT COMPANIES. The public offering price
may be reduced to net asset value per share in connection with the acquisition
of the assets of, or merger or consolidation with, a personal holding company
or a public or private investment company.
PRICE MAKEUP. The following is an illustration of the calculation of
the net asset value, redemption price and offering price per share at December
31, 1994.
CLASS A: Net asset value and redemption price per share as of December
31, 1994 ($114,538,733 -:-12,203,457 shares outstanding):
$9.39*
Offering price per share as of December 31, 1994 = 100/95.25
of $9.39 (on sales of $100,000 or more the offering price is
reduced): $9.86
CLASS B: Net asset value and offering price to public per share as of
December 31, 1994 ($70,242,909 -:- 7,485,326 shares
outstanding): $9.38*
* Redemption price will reflect any applicable contingent deferred sales
charge. (See "Share Price--Initial Sales Charge Alternative-Class A
Shares" and "How to Buy Shares --Contingent Deferred Sales Alternative
-- Class B Shares" in the Prospectus.)
-21-
<PAGE> 65
DISTRIBUTION AGREEMENT. As discussed in the Prospectus, the Fund's
shares are sold on a continuous basis at the public offering price. The
Distributor, a wholly-owned subsidiary of the Investment Adviser, has the
exclusive right, pursuant to the Distribution Agreement dated December 22, 1994
(the "Distribution Agreement"), to purchase shares from the Fund at net asset
value for resale to the public or to broker-dealers at the public offering
price. Upon notice to all broker-dealers ("Selling Brokers") with whom it has
sales agreements, the Distributor may allow such Selling Brokers up to the full
applicable sales charge during periods specified in such notice. During these
periods, such Selling Brokers may be deemed to be underwriters as that term is
defined in the Securities Act of 1933.
The Distribution Agreement was initially adopted by the affirmative
vote of the Fund's Board of Trustees including the vote a majority of Trustees
who are not parties to the agreement or interested persons of any such party,
cast in person at a meeting called for such purpose. The Distribution Agreement
shall continue in effect until December 22, 1994 and from year to year if
approved by either the vote of the Fund's shareholders or the Board of Trustees
including the vote of a majority of Trustees who are not parties to the
agreement or interest persons of any such party, cast in person at a meeting
called for such purpose. The Distribution Agreement may be terminated at any
time, without penalty, by either party upon sixty (60) days' written notice or
by a vote of a majority of the outstanding voting securities of the Fund and
terminates automatically in the case of an assignment by the Distributor.
Total underwriting commissions for sales of the Fund's Class A Shares
for the fiscal years ended December 31, 1992, 1993 and 1994, respectively, were
$1,430,272, $1,224,810 and $149,847, respectively. Of such amounts $121,373,
$108,653 and $47,967, respectively, were retained by the Fund's former
distributor, Transamerica Fund Distributors, Inc. and the remainder was
reallowed to dealers. For the period from December 22, 1994 to December 31,
1994, underwriting commissions were paid to the Distributor.
DISTRIBUTION PLAN. The Board of Trustees, including the Independent
Trustees of the Fund, approved new distribution plans pursuant to Rule 12b-1
under the 1940 Act for Class A Shares ("Class A Plan") and Class B Shares
("Class B Plan"). Such Plans were approved by a majority of the outstanding
shares of each respective class on December 16, 1994 and became effective on
December 22, 1994.
Under the Class A Plan, the distribution or services fee will not
exceed an annual rate of 0.15% of the average daily net asset value of the
Class A Shares of the Fund (determined in accordance with such Fund's
Prospectus as from time to time in effect). Any expenses under the Class A Plan
not reimbursed within 12 months of being presented to the Fund for repayment
are forfeited and not carried over to future years. Under the Class B Plan, the
distribution or services fee to be paid by the Fund will not exceed an annual
rate of 1.00% of the average daily net assets of the Class B Shares of the Fund
(determined in accordance with such Fund's prospectus as from time to time in
effect); provided that the portion of such fee used to cover Service Expenses
(described below) shall not exceed an annual rate of 0.25% of the average daily
net asset value of the Class B Shares of the Fund. The Distributor has agreed
to limit the payment of expenses pursuant to the Class B Plan to 0.90% of the
average daily net assets of the Class B Shares of the Fund. Under the Class B
Plan, the fee covers the Distribution and Service Expenses (described below)
and interest expenses on unreimbursed distribution expenses. At December 31,
1994, the aggregate amount of distribution expenses reimbursable under the
former Class B Rule 12b-1 plan between the Fund and the Fund's former
distributor (in effect until December 22, 1994) that had
-22-
<PAGE> 66
not been reimbursed under the former Class B Rule 12b-1 plan or through
contingent deferred sales charges was $3,316,138.
Under the Plans, expenditures shall be calculated and accrued daily
and paid monthly or at such other intervals as the Trustees shall determine.
The fee may be spent by the Distributor on Distribution Expenses or Service
Expenses. "Distribution Expenses" include any activities or expenses primarily
intended to result in the sale of shares of the relevant class of the Fund,
including, but not limited to: (i) initial and ongoing sales compensation
payable out of such fee as such compensation is received by the Distributor or
by Selling Brokers, (ii) direct out-of-pocket expenses incurred in connection
with the distribution of shares, including expenses related to printing of
prospectuses and reports; (iii) preparation, printing and distribution of sales
literature and advertising material; (iv) an allocation of overhead and other
branch office expenses of the Distributor related to the distribution of Fund
Shares (v) distribution expenses that were incurred by the Fund's former
distributor and not recovered through payments under the Class A or Class B
former plans or through receipt of contingent deferred sales charges; and (vi)
in the event that any other investment company (the "Acquired Fund") sells all
or substantially all of its assets, merges or otherwise engages in a
combination with the Fund, distribution expenses originally incurred in
connection with the distribution of the Acquired Fund's shares. Service
Expenses under the Plans include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of the Distributor)
and others who furnish personal and shareholder account maintenance services to
shareholders of the relevant class of the Fund.
During the fiscal year ended December 31, 1994, total payments made by
the Fund under the former Class A Rule 12b-1 plan to the former distributor
amounted to $200,118, and of such amount $417, $2,068, $555, $26,800 and
$170,278 represented payments for (1) the cost of printing and distribution
prospectuses and financial reports to investors, (2) various sales literature,
(3) advertising expenses, (4) distribution and/or administrative services and
(5) service fees, respectively. During the period from December 22, 1994 to
December 31, 1994, payment under the Class A Plan was made to the Distributor.
During the fiscal year ended December 31, 1994, total payments made by
the Fund under the former Class B Rule 12b-1 plan to the former distributor
amounted to $658,933 of which:
** (1) $109,829 represented service fees which were comprised of
$29,408 for distribution and/or administrative services
provided by the Fund's former distributor and $80,421 for
service fees paid to broker/dealers.
(2) $549,104 represented as the total of distribution fees paid to
the former distributor which are comprised of:
a) $232,594 for dealer commission payments;
b) $58,148 for underwriting fees; and
c) $258,362 for interest or the carrying charges.
For the fiscal year ended December 31, 1994, the former distributor
received $209,200 in contingent deferred sales charges from redemption of the
Fund's Class B shares. For the period from December 22, 1994 to December 31,
1994, the Distributor received fees under the Class B Plan and contingent
deferred sales charges from redemptions of Class B shares.
-23-
<PAGE> 67
Each of the Plans provides that it will continue in effect only so
long as its continuance is approved at least annually by a majority of both the
Trustees and the Independent Trustees. Each of the Plans provides that it may
be terminated (a) at any time by vote of a majority of the Trustees, a majority
of the Independent Trustees, or a majority of the respective Class' outstanding
voting securities or (b) by the Distributor on 60 days' notice in writing to
the Fund. Each of the Plans further provides that it may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of
the Fund which has voting rights with respect to the Plan. Each of the Plans
provides that no material amendment to the Plan will, in any event, be
effective unless it is approved by a majority vote of the Trustees and the
Independent Trustees of the Fund. The holders of Class A Shares and Class B
Shares have exclusive voting rights with respect to the Plan applicable to
their respective class of shares. The Board of Trustees, including the Trustees
who are not interested in the Fund and have no direct or indirect interest in
the Plans, has determined that, in their judgment, there is a reasonable
likelihood that the Plans will benefit the holders of the applicable class of
shares of the Fund.
Information regarding the services rendered under the Plans and the
Distribution Agreement and the amounts paid therefore by the respective Class
of the Fund are provided to, and reviewed by, the Board of Trustees on a
quarterly basis. In its quarterly review, the Board of Trustees considers the
continued appropriateness of the Plans and the Distribution Agreement and the
level of compensation provided therein.
REDEMPTION AND REPURCHASE OF SHARES
CONTINGENT DEFERRED SALES CHARGE. Investments in Class B shares are
purchased at net asset value per share without the imposition of a sales charge
so that the Fund will receive the full amount of the purchase payment. Class B
Shares which are redeemed within six years of purchase will be subject to a
contingent deferred sales charge ("CDSC") at the rates set forth in the Class A
and Class B Prospectus as a percentage of the dollar amount subject to the
CDSC. The charge will be assessed on an amount equal to the lesser of the
current market value or the original purchase cost of the Class B Shares being
redeemed. Accordingly, no CDSC will be imposed on increases in account value
above the initial purchase prices, including Class B Shares derived from
reinvestment of dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B Shares until the
time of redemption of such shares. Solely for purposes of determining the
number of years from the time of any payment for the purchases of shares, all
payments during a month will be aggregated and deemed to have been made on the
last day of the month.
Proceeds from the CDSC are paid to the Distributor and are used in
whole or in part by the Distributor to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B Shares, such as the payment of compensation to select Selling Brokers
for selling Class B Shares. The combination of the CDSC and the distribution
and service fees facilitates the ability of the Fund to sell the Class B Shares
without a sales charge being deducted at the time of the purchase. See the
Class A and Class B Prospectus for additional information regarding the CDSC.
-24-
<PAGE> 68
SPECIAL REDEMPTIONS. Although it is the Fund's present policy to make
payment of redemption proceeds in cash, if the Board of Trustees determines
that a material adverse effect would otherwise be experienced by remaining
investors, redemption proceeds may be paid in whole or in part by a
distribution in kind of securities from the Fund in conformity with rules of
the Securities and Exchange Commission, valuing such securities in the same
manner they are valued in determining NAV, and selecting the securities in such
manner as the Board may deem fair and equitable. If such a distribution occurs,
investors receiving securities and selling them before their maturity could
receive less than the redemption value of such securities and, in addition,
could incur certain transaction costs. Such a redemption is not as liquid as a
redemption paid in cash or federal funds. The Fund has elected to be governed
by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund during any 90 day period for any one account.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE. As described more fully in the Prospectus, the
Fund permits exchanges of shares of any class of the Fund for shares of the
same class in any other John Hancock fund offering that class.
Exchanges between funds with shares which are not subject to a CDSC
are based on their respective net asset values. No sales charge or transaction
charge is imposed. Shares of the Fund which are subject to a CDSC may be
exchanged into shares of any of the other John Hancock funds which are subject
to a CDSC without incurring the CDSC; however, the shares acquired in an
exchange will be subject to the CDSC schedule of the shares acquired if and
when such shares are redeemed (except that shares exchanged into the John
Hancock Short-Term Strategic Income Fund and John Hancock Limited Term
Government Fund will retain the exchanged fund's CDSC schedule). For purposes
of computing the CDSC payable upon redemption of shares acquired in an
exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
Shares of each class may be exchanged only for shares of the same
class in another John Hancock mutual fund and for shares of John Hancock Cash
Management Fund, a money market fund. A shareholder may exchange Class B Shares
of the Fund into shares of the John Hancock Cash Management Fund at net asset
value. Shares so acquired will continue to be subject to a CDSC upon
redemption. The rate of the CDSC will be the rate in effect on the original
fund at the time of the exchange.
If a shareholder exchanges Class B Shares purchased prior to January
1, 1994 (except John Hancock Short-Term Strategic Income Fund) for Class B
Shares of any other John Hancock fund, the acquired shares will continue to by
subject to the CDSC schedule that was in effect when the exchanged shares were
purchased.
The Fund reserves the right to require that previously exchanged
shares (and reinvested dividends) be in the Fund for 90 days before a
shareholder is permitted a new exchange. The Fund may also terminate or alter
the terms of the exchange privilege upon 60 days' notice to shareholders.
-25-
<PAGE> 69
An exchange of shares is treated as a redemption of shares of one fund
and the purchase of shares of another for Federal income tax purposes. An
exchange may result in a taxable gain or loss. See "Tax Status."
To make an exchange, the account registration must be identical in
both the existing and new account. The exchange privilege is available only in
states where the exchange can be made legally.
SYSTEMATIC WITHDRAWAL PLAN. As described briefly in the Class A and
Class B Prospectus, the Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares. Since the redemption price of 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 such purchases of Class A Shares and the
CDSC imposed on redemptions of Class B Shares and because redemptions are
taxable events. Therefore, a shareholder should not purchase Fund 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 Fund Services.
MONTHLY AUTOMATIC ACCUMULATION PROGRAM ("MAAP"). This program is
explained fully in the Fund's Class A and Class B Prospectus and the Account
Privileges Application. The program, as it relates to automatic investment
checks, is subject to the following conditions;
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice
if any investment is not honored by the shareholder's bank. The bank shall be
under no obligation to notify the shareholder as to the non-payment of any
check.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the 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 mutual 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 another John Hancock mutual
fund. If a CDSC was paid upon a redemption, a shareholder may reinvest the
proceeds from that redemption at net asset value in additional shares of the
class from which the redemption was made. The shareholder's account will be
credited with the amount of any CDSC charged upon the prior redemption and the
new shares will continue to be subject to the CDSC. The holding period of the
shares acquired through reinvestment will, for purposes of computing the CDSC
payable upon a subsequent
-26-
<PAGE> 70
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 "Dividends, Distributions and Tax Status."
DETERMINATION OF NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of a Fund's
shares, the following procedures are utilized wherever applicable. Debt
investment securities are valued on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally utilize
electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.
Short-term debt investments which have a remaining maturity of 60 days
or less are generally valued at amortized cost which approximates market value.
If market quotations are not readily available or if in the opinion of the
Adviser any quotation or price is not representative of true market value, the
fair value of the security may be determined in good faith in accordance with
procedures approved by the Trustees. The Fund will not price its securities on
the following national holidays: New Year's Day; President's Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The Fund has qualified and elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and intends to continue to so qualify in the future. As
such and by complying with the applicable provisions of the Code regarding the
sources of its income, the timing of its distributions, and the diversification
of its assets, the Fund will not be subject to Federal income tax on taxable
income (including net short-term and long-term capital gains from the
disposition of portfolio securities or the right to when-issued securities
prior to issuance, or from the lapse, exercise, delivery under or closing out
of options or futures contracts, income from repurchase agreements and other
taxable securities, income attributable to accrued market discount, income from
securities lending, and a portion of the discount from certain stripped
tax-exempt obligations or their coupons) which is distributed to shareholders
at least annually in accordance with the timing requirements of the Code.
The Fund will be subject to a 4% non-deductible Federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and
profits ("E&P"), as computed for Federal income tax purposes, will be taxable
as described in the Fund's Prospectus whether taken in shares or in cash.
Amounts that are not allowable as a deduction in computing taxable income,
including expenses associated with earning tax-exempt interest income, do not
reduce current E&P for this purpose. Distributions, if any, in excess of E&P
will constitute a return of capital, which will first reduce an investor's tax
basis in Fund shares and thereafter (after
-27-
<PAGE> 71
such basis is reduced to zero) will generally give rise to capital gains.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for Federal income tax purposes in each share so
received equal to the amount of cash they would have received had they elected
to receive the distributions in cash, divided by the number of shares received.
The Fund's distributions of tax-exempt interest ("exempt-interest
dividends") timely designated as such will be treated as tax-exempt interest
under the Code, provided that the Fund qualifies as a regulated investment
company and at least 50% of the value of its assets at the end of each quarter
of its taxable year is invested in tax-exempt obligations. Shareholders are
required to report their receipt of tax-exempt interest, including such
distributions, on their Federal income tax returns. The portion of the Fund's
distributions designated as exempt-interest dividends may differ from the
actual percentage that its tax-exempt income comprised of its total income
during the period of any particular shareholder's investment. The Fund will
report to shareholders the amount designated as exempt-interest dividends for
each year.
Interest income from certain types of tax-exempt bonds that are
private activity bonds in which the Fund may invest is treated as an item of
tax preference for purposes of the Federal alternative minimum tax. To the
extent that the Fund invests in these types of tax-exempt bonds, shareholders
will be required to treat as an item of tax preference for Federal alternative
minimum purposes that part of the Fund's exempt-interest dividends which is
derived from interest on these tax-exempt bonds. Exempt-interest dividends
derived from interest income from all tax-exempt bonds may be included in
corporate "adjusted current earnings" for purposes of computing the alternative
minimum tax liability, if any, of corporate shareholders of the Fund.
The amount of the Fund's net short-term and long-term capital gains,
if any, in any given year will vary depending upon the Adviser's current
investment strategy and whether the Adviser believes it to be in the best
interest of the Fund to dispose of portfolio securities or enter into options
or futures transactions that will generate capital gains. At the time of an
investor's purchase of Fund shares, a portion of the purchase price is often
attributable to realized or unrealized appreciation in the Fund's portfolio or,
less frequently, to undistributed taxable income of the Fund. Consequently,
subsequent distributions from such appreciation or income may be taxable to
such investor even if the net asset value of the investor's shares is, as a
result of the distributions, reduced below the investor's cost for such shares,
and the distributions in reality represent a return of a portion of the
purchase price.
Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period
for the shares. A sales charge paid in purchasing Class A shares of the Fund
cannot be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of the Fund or another John Hancock Fund are subsequently
acquired without payment of a sales charge pursuant to the reinvestment or
exchange privilege. Such disregarded load will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Also, any loss
realized on a redemption or exchange will be disallowed to the extent the
shares disposed of are replaced with identical or substantially identical
securities within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of, such as pursuant to an election to
reinvest dividends in additional shares. 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
-28-
<PAGE> 72
disallowed to the extent of all exempt-interest dividends paid with respect to
such shares and, if not thus disallowed, will be treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term capital
gain with respect to such shares.
Although its present intention is to distribute all net short-term and
long-term capital gains, if any, the Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain," which is the excess, as
computed for Federal income tax purposes, of net long-term capital gain over
net short-term capital loss in any year. The Fund will not in any event
distribute net 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 carryforward of prior years'
capital losses, it would be subject to Federal income tax in the hands of the
Fund. Each shareholder would be treated for Federal income tax purposes as if
the Fund had distributed to him on the last day of its taxable year his pro
rata share of such excess, and he had paid his pro rata share of the taxes paid
by the Fund and reinvested the remainder in the Fund. Accordingly, each
shareholder would (a) include his pro rata share of such excess as long-term
capital gain income in his return for his taxable year in which the last day of
the Fund's taxable year falls, (b) be entitled either to a tax credit on his
return for, or to a refund of, his pro rata share of the taxes paid by the
Fund, and (c) be entitled to increase the adjusted tax basis for his shares in
the Fund by the difference between his pro rata share of such excess and his
pro rata share of such taxes.
For Federal income tax purposes, the Fund is generally permitted to
carry forward a net capital loss in any year to offset its net capital gains,
if any, during the eight years following the year of the loss. To the extent
subsequent net capital gains are offset by such losses, they would not result
in Federal income tax liability to the Fund and, as noted above, would not be
distributed as such to shareholders. The Fund has $7,349,795 of capital loss
carry forwards, which expire in 2002, available to offset future net capital
gains.
Interest on indebtedness incurred by a shareholder to purchase or
carry shares of the Fund will not be deductible for Federal income tax purposes
to the extent it is deemed related to exempt-interest dividends paid by the
Fund. Pursuant to published guidelines, the Internal Revenue Service may deem
indebtedness to have been incurred for the purpose of purchasing or carrying
shares of the Fund even though the borrowed funds may not be directly traceable
to the purchase of shares.
Dividends paid by the Fund to its corporate shareholders will not
qualify for the corporate dividends received deduction in their hands.
If the Fund invests in zero coupon securities or, in general, any
other securities with original issue discount (or with market discount if the
Fund elects to include accrued market discount in income currently), the Fund
must accrue income on such investments prior to the receipt of the
corresponding cash payments. However, the Fund must distribute, at least
annually, all or substantially all of its net income, including such accrued
income, to shareholders to qualify as a regulated investment company under the
Code and avoid Federal income and excise taxes. Therefore, the Fund may have
to dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to satisfy
distribution requirements.
Limitations imposed by the Code on regulated investment companies like
the Fund may restrict the Fund's ability to enter into futures and options
transactions.
-29-
<PAGE> 73
Certain options and futures transactions undertaken by the Fund may
cause the Fund to recognize gains or losses from marking to market even though
its positions have not been sold or terminated and affect the character as
long-term or short-term and timing of some capital gains and losses realized by
the Fund. Also, certain of the Fund's losses on its transactions involving
options or futures contracts and/or offsetting portfolio positions may be
deferred rather than being taken into account currently in calculating the
Fund's gains. These transactions may therefore affect the amount, timing and
character of the Fund's distributions to shareholders. Certain of the
applicable tax rules may be modified if the Fund is eligible and chooses to
make one or more of certain tax elections that may be available. The Fund will
take into account the special tax rules (including consideration of available
elections) applicable to options and futures contracts in order to minimize any
potential adverse tax consequences.
The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and
ownership of or gains realized on the redemption (including an exchange) of
Fund shares may also be subject to state and local taxes. Shareholders should
consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from, the
Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Fund is effectively connected will be subject to U.S.
Federal income tax treatment that is different from that described above.
These investors may be subject to nonresident alien withholding tax at the rate
of 30% (or a lower rate under an applicable tax treaty) on amounts treated as
ordinary dividends from the Fund and, unless an effective IRS Form W-8 or
authorized substitute is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company under
the Code, it will also not be required to pay any Massachusetts income tax.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Decisions concerning the purchase and sale of portfolio securities and
the allocation of brokerage commissions are made by the Investment Adviser and
officers of the Fund pursuant to recommendations made by an investment
committee of the Investment Adviser, which consists of officers and directors
of the Investment Adviser and affiliates and officers and Trustees who are
interested persons of the Fund. Orders for purchases and sales of securities
are placed in a manner which, in the opinion of the officers of the Fund, will
offer the best price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
makers reflect a "spread." Investments in debt securities are generally traded
on a net basis through dealers acting for their own account as principals and
not as brokers; no brokerage commissions are payable on such transactions.
-30-
<PAGE> 74
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 NASD and other policies that
the Trustees may determine, the Investment 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
Investment 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 Investment Adviser. The
receipt of research information is not expected to reduce significantly the
expenses of the Investment Adviser. The research information and statistical
assistance furnished by brokers and dealers may benefit the Life Company or
other advisory clients of the Investment Adviser, and conversely, brokerage
commissions and spreads paid by other advisory clients of the Investment
Adviser may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitments to allocate portfolio
transactions upon any prescribed basis. While the Fund's officers will be
primarily responsible for the allocation of the Fund's brokerage business,
their policies and practices in this regard must be consistent with the
foregoing and will at all times be subject to review by the Trustees. For the
fiscal years ended December 31, 1994, 1993 and 1992, no negotiated brokerage
commissions were paid on portfolio transactions.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Fund may pay 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 the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time. During the fiscal year ended December 31, 1994,
the Fund did not pay commissions as compensation to any brokers for research
services such as industry, economic and company reviews and evaluations of
securities.
The Investment 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 ("Tucker
Anthony") John Hancock Distributors, Inc. ("John Hancock Distributors") and
Sutro & Company, Inc. ("Sutro"), are broker-dealers ("Affiliated Brokers").
Pursuant to procedures determined by the Trustees and consistent with the above
policy of obtaining best net results, the Fund may execute portfolio
transactions with or through Tucker Anthony or Sutro. During the year ended
December 31, 1994, the Fund did not execute any portfolio transactions with
then 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 1940
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
-31-
<PAGE> 75
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 a clearing broker for another brokerage firm, and any customers
of the Affiliated Broker not comparable to the Fund as determined by a majority
of the Trustees who are not interested persons (as defined in the 1940 Act) of
the Fund, the Investment Adviser or the Affiliated Brokers. Because the
Investment Adviser, which is affiliated with the Affiliated Brokers, has, as an
investment adviser to the Fund, the obligation to provide investment management
services, which includes elements of research and related investment skills,
such research and related skills will not be used by the Affiliated Brokers as
a basis for negotiating commissions at a rate higher than that determined in
accordance with the above criteria. The Fund will not effect principal
transactions with Affiliated Brokers.
The Fund's portfolio turnover rates for the fiscal years ended
December 31, 1993 and 1994 were 116% and 107%, respectively.
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 Investor
Services a monthly transfer agent fee of $19 per account for the Class A Shares
and $22.50 per account for the Class B Shares, plus out-of- pocket expenses.
ADDITIONAL INFORMATION
SHARES OF THE FUND. Ownership of the Fund is represented by
transferable shares of beneficial interest. The Declaration of Trust permits
the Trustees to create an unlimited number of series and classes of shares of
the Fund and, with respect to each series and class, to issue an unlimited
number of full or fractional shares and to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interests of the Fund.
Each share of each series or class of the Fund represents an equal
proportionate interest with each other in that series or class, none having
priority or preference over other shares of the same series or class. The
interest of investors in the various series or classes of the Fund is separate
and distinct. All consideration received for the sales of shares of a
particular series or class of the Fund, all assets in which such consideration
is invested and all income, earnings and profits derived from such investments
will be allocated to and belong to that series or class. As such, each such
share is entitled to dividends and distributions out of the net income
belonging to that series or class as declared by the Board of Trustees. Shares
of the Fund have a par value of $0.01 per share. The assets of each series are
segregated on the Fund's books and are charged with the liabilities of that
series and with a share of the Fund's general liabilities. The Board of
Trustees determines those assets and liabilities deemed to be general assets or
liabilities of the Fund, and these items are allocated among each series in
proportion to the relative total net assets of each series. In the unlikely
event that the liabilities allocable to a series exceed the assets of that
series, all or a portion of such liabilities may have to be borne by the other
series.
Pursuant to the Declaration of Trust, the Trustees may authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed
-32-
<PAGE> 76
portfolios) and additional classes within any series (which would be used to
distinguish among the rights of different categories of shareholders, as might
be required by future regulations or other unforeseen circumstances). 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. Class A and Class B Shares of the Fund represent an equal
proportionate interest in the aggregate net asset values attributable to that
class of the Fund. Holders of Class A Shares and Class B Shares each have
certain exclusive voting rights on matters relating to the Class A Plan and the
Class B Plan, respectively. 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 caused by the fact
that (i) Class B Shares will pay higher distribution and service fees than
Class A Shares and (ii) each of Class A Shares and Class B Shares will bear any
class expenses properly allocable to such class of shares, subject to the
conditions set forth in a private letter ruling that the Fund has received from
the Internal Revenue Service relating to its multiple- class structure.
Similarly, the net asset value per share may vary depending whether Class A
Shares or Class B Shares are purchased.
VOTING RIGHTS. Shareholders are entitled to a full vote for each full
share held. The Trustees themselves have the power to alter the number and the
terms of office of Trustees, and they may at any time lengthen their own terms
or make their terms of unlimited duration (subject to certain removal
procedures) and appoint their own successors, provided that at all times at
least a majority of the Trustees have been elected by shareholders. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees. Although the Fund need not hold annual meetings of shareholders,
the trustees may call special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or the Declaration of
Trust. Also, a shareholder's meeting must be called if so requested in writing
by the holders of record of 10% or more of the outstanding shares of the Fund.
In addition, the Trustees may be removed by the action of the holders of record
of two-thirds or more of the outstanding shares.
SHAREHOLDER LIABILITY. The Declaration of Trust provides that no
Trustee, officer, employee or agent of the Fund is liable to the Fund or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of the Fund, except as such liability
may arise from his or its own bad faith, willful misfeasance, gross negligence
or reckless disregard of his duties. It also provides that all third persons
shall look solely to the Fund's property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.
As a Massachusetts business trust, the Fund is not required to issue
share certificates. The Fund shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning termination by action
of the shareholders.
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
-33-
<PAGE> 77
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.
CUSTODIAN. Investor Bank and Trust ("IBT") 24 Federal Street, Boston,
Massachusetts, serves as custodian of the cash and investment securities of the
Fund. IBT is also responsible for, among other things, receipt and delivery of
the Fund's investment securities in accordance with procedures and conditions
specified in the custody agreement.
REPORTS TO SHAREHOLDERS. Shareholders of the Fund will receive annual
and semi-annual reports showing diversification of investments, securities
owned and other information regarding the Fund's activities. The financial
statements of the Fund are audited at least once a year by the Fund's
independent auditors.
REGISTRATION STATEMENT. This Statement of Additional Information and
the Prospectus do not contain all of the information set forth in the Fund's
Registration Statement filed with the Securities and Exchange Commission. The
complete Registration Statement may be obtained from the Securities and
Exchange Commission upon payment of the fee prescribed by the rules and
regulations of the Commission.
CALCULATION OF PERFORMANCE
For the 30-day period ended December 31, 1994, the annualized yields
of the Fund's Class A Shares and Class B Shares were 6.13% and 5.68%,
respectively. As of December 31, 1994 the average annual total returns of the
Class A Shares of the Fund for the one year period and since inception on
January 1, 1990 were 6.11% and 13.61%, respectively (5.74% and -13.71%,
respectively, without taking into account the expense limitation arrangements).
As of December 31, 1994, the average annual returns for the Fund's Class B
Shares for the one year period and since inception o December 31, 1991 since
inception were 3.31% and -15.05%, respectively (3.11% and -15.15%,
respectively, without taking into account the expense limitation arrangements).
The Fund's yield is computed by dividing net investment income per
share determined for a 30-day period by the maximum offering price per share
(which includes the full sales charge) on the last day of the period, according
to the following standard formula:
Yield = 2 [ (a-b + 1 )6 -1]
---
cd
Where:
a= dividends and interest earned during the period.
b= net expenses accrued during the period.
c= the average daily number of fund shares outstanding during the
period that would be entitled to receive dividends.
d= the maximum offering price per share on the last day of the
period (NAV where applicable).
The Fund may advertise a tax-equivalent yield, which is computed by
dividing that portion of the yield of the Fund which is tax-exempt by one minus
a stated income tax rate and adding the product to that portion, if any, of the
yield of the Fund that is not tax-exempt. The tax equivalent
-34-
<PAGE> 78
yields for the Fund's Class A and Class B Shares at the maximum 36% tax rate
for the 30-day period ended December 31, 1994 were 9.70% and 9.40%,
respectively.
The Fund's total return is computed by finding the average annual
compounded rate of return over the 1-year, 5- year, and 10-year periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula:
T = \ n / ERV/P - 1
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.
In the case of Class A Shares 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. This calculation also 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.
In addition to average annual total returns, the Fund may quote
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, and/or a series of redemptions, over any
time period. Total returns may be quoted with or without taking the Fund's
maximum 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
yield and total return will be compared to indices of mutual funds and bank
deposit vehicles such as Lipper Analytical Services, Inc.'s "Lipper -- Fixed
Income Fund Performance Analysis," a monthly publication which tracks net
assets, total return, and yield on approximately 1,700 fixed income mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and F.C.
Towers are also used for comparison purposes, as well a the Russell and
Wilshire Indices.
Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S, etc. will
also be utilized.
The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Fund for any period in the future. The performance of the Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.
-35-
<PAGE> 79
ADDITIONAL PERFORMANCE INFORMATION. The Fund may use comparative
performance information from certain industry research materials and/or
published in various periodicals. The characteristics of the investments in
such comparisons may be different from those investments of the Fund's
portfolio. In addition, the formula used to calculate the performance
statistics of such investments may not be identical to the formula used by the
Fund to calculate its performance figures. From time to time, advertisements or
information for the Fund may include a discussion of certain attributes or
benefits to be derived by an investment in the Fund. Such advertisements or
information may include symbols, headlines or other material which highlight or
summarize the information discussed in more detail in the communication.
The following publications, indexes, averages and investments which
may be used in advertisements or information concerning the Fund for
dissemination to investors or shareholders, include, but are not limited, to:
a) Dow Jones Composite Average or its component averages -an
unmanaged index composed of 30 blue-chip industrial corporation stocks
(Dow Jones Industrial Average), 15 utilities company stocks (Dow Jones
Utilities Average), and 20 transportation company stocks. Comparisons
of performance assume reinvestment of dividends.
b) Standard & Poor's 500 Stock Index or its component indices -
an unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividends.
c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation, and
finance stocks listed on the New York Stock Exchange.
d) Wilshire 5000 Equity Index - represents the return on the
market value of all common equity securities of which daily pricing is
available. Comparisons of performance assume reinvestment of
dividends.
e) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed
Income Analysis, and Lipper Mutual Fund indices - measure total return
and average current yield for the mutual fund industry. Ranks
individual mutual fund performance over specified time periods
assuming reinvestment of all distributions, exclusive of any
applicable sales charges.
f) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk, total
return, and average rate of return (average annual compounded growth
rate) over specified time periods for the mutual fund industry.
g) Mutual Fund Source Book and other similar rating publications
by Morningstar, Inc. - independent performance monitor of equity and
fixed income mutual funds. Morningstar ratings (ranging from one star
for lowest and five stars for highest) are based on analysis of a
fund's ratio, i.e., price yield, risk (volatility) and total return,
including all loads and fees, compared with similar funds for three-,
five-and ten-year periods.
h) Financial publications: Barrons, Business Week, Personal
Finance, Financial World, Forbes, Fortune, "The Wall Street Journal",
"New York Times", Weisenberger Investment Companies Service,
Institutional Investor, and Money - rate fund performance
-36-
<PAGE> 80
over specified time periods and provide other relative performance or
industry information.
i) Consumer Price Index (or Cost of Living Index), published by
the U. S. Bureau of Labor Statistics - a statistical measure of
change, over time, in the price of goods and services in major
expenditure groups.
j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson
Associates - historical measure of yield, price, and total return for
common and small company stock, long-term government bonds, Treasure
bills, and inflation.
k) Savings and Loan Historical Interest Rates - as published in
the U. S. Savings & Loan League Fact Book.
l) Salomon Brothers Broad Bond Index or its component indices -
The Broad Index measures yield, price and total return for Treasury,
Agency, Corporate, and Mortgage bonds.
m) Salomon Brothers Composite High Yield Index or its component
indices - The High Yield Index measures yield, price and total return
for Long-Term High-Yield Index, Intermediate-Term High-Yield index and
Long-Term Utility High-Yield Index.
n) Shearson Lehman Brothers Aggregate Bond index or its component
indices (including Municipal Bond Index) - The Aggregate Bond Index
measures yield, price and total return for Treasury, Agency,
Corporate, Mortgage, and Yankee bonds.
o) Standard & Poor's Bond Indices - measure yield and price of
Corporate, Municipal, and government bonds.
p) Other taxable investments, including certificates of deposit
(CDs), money market deposit accounts (MMDAs), checking accounts,
savings accounts, money market mutual funds, and repurchase
agreements.
q) Historical data supplied by the research departments of
Shearson Lehman Hutton, First Boston Corporation, Morgan Stanley,
Salomon Brothers, Merrill Lynch, and Donaldson Lufkin and Jenrette.
r) Donoghues's Money Fund Report - industry averages for 7-day
annualized and compounded yields of taxable, tax-free and government
money funds.
s) Russell 2000 (small capitalization stock index), Bond Buyer 25
Revenue Bond Index and other indices as may from time to time become
available.
t) The Value Line Mutual Fund Survey, published by Value Line,
assigns rankings of 1 (best) to 5 (worst) in terms of risk adjusted
performance covering more than 2,000 equity and fixed income mutual
funds.
From time to time, in reports and promotional literature, the Fund's
performance will be compared to other mutual funds and investment vehicles such
as F.C. Towers.
-37-
<PAGE> 81
In addition, advertisements and sales materials may from time to time,
contain hypothetical performance examples for purposes of illustrating
reinvestment (or "compounding") of dividends at fixed rates of return or tax
advantages to be derived from deferring payment of federal (and state) income
taxes (at maximum rates) as compared to taxable investments assuming fixed
rates of return. Illustrations may also include (1) hypothetical investments in
various retirement plans, such as IRAs, made by investors of various ages or
(2) comparisons to retirement plans funded by annuity or bank products.
In assessing such comparisons, an investor should consider the
following factors:
a) It is generally either not possible or not practicable to
invest in an average or index of certain investments.
b) Certificates of deposit issued by banks and other depository
institutions represent an alternative income producing product.
Certificates of deposit may offer fixed or variable interest rates and
principal is guaranteed and may be insured. Withdrawal of deposits
prior to maturity will normally be subject to a penalty. Rates
offered by banks and other depository institutions are subject to
change at any time specified by the issuing institution.
The Fund may from time to time advertise its comparative performance
as measured or refer to results published by various periodicals including, but
not limited to, Lipper Analytical Services, Inc. Barron's, "The Wall Street
Journal", "New York Times", Weisenberger Investment Companies Service,
Donoghue's Money Fund Report, Stanger's Investment Advisor, Financial Planning,
Money, Fortune, Personal Finance, Muni Week, Institutional Investor, Business
Week, Financial World and Forbes. In addition, the Fund may from time to time
advertise its performance relative to certain indexes and benchmark
investments, including: (a) the Shearson Lehman Municipal Bond Index, (b) Bond
Buyer 25 Review Bond Index, (c) the Consumer Price Index, and (d) taxable
investments such as certificates of deposit, money market deposit accounts,
checking accounts, savings accounts, money market mutual funds.
The composition of the investments in such indexes and the
characteristics of such benchmark investments are not identical to, and in some
cases are very different from, those of the Fund's portfolio. These indexes and
averages are generally unmanaged and the items included in the calculations of
such indexes and averages may not be identical to the formulas used by the Fund
to calculate its performance figures.
-38-
<PAGE> 82
APPENDIX A
CORPORATE AND TAX-EXEMPT BOND RATINGS
Moody's Investors Service, Inc. ("Moody's)
Aaa, Aa, A and Baa - Tax-exempt bonds rated Aaa are judged to be of
the "best quality." The rating of Aa is assigned to bonds that are of "high
quality by all standards," but long-term risks appear somewhat larger than Aaa
rated bonds. The Aaa and Aa rated bonds are generally known as "high grade
bonds." The foregoing ratings for tax-exempt bonds are rated conditionally.
Bonds for which the security depends upon the completion of some act or upon
the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals that begin when
facilities are completed, or (d) payments to which some other limiting
condition attaches. Such parenthetical ratings denotes the probable credit
stature upon completion of construction or elimination of the basis of the
condition. Bonds rated A are considered as upper medium grade obligations.
Principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. Bonds
rated Baa are considered a medium grade obligations; i.e., they are neither
highly protected or 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.
STANDARD & POOR'S CORPORATION ("S&P")
AAA, AA, A AND BBB - Bonds rated AAA bear the highest rating assigned
to debt obligations and indicates an extremely strong capacity to pay principal
and interest. Bonds rated AA are considered "high grade," are only slightly
less marked than those of AAA ratings and have the second strongest capacity
for payment of debt service. Bonds rated A have a strong capacity to pay
principal and interest, although they are somewhat susceptible to the adverse
effects or changes in circumstances and economic conditions. The foregoing
ratings are sometimes followed by a "p" indicating that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by 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. Although a provisional rating addresses
credit quality subsequent of completion of the project, it makes no comment on
the likelihood of, or the risk of default upon failure of, such completion.
Bonds rated BBB are regarded as having an adequate capacity to repay principal
and pay interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in the A category.
FITCH INVESTORS SERVICE ("FITCH")
AAA, AA, A, BBB - Bonds rated AAA are considered to be investment
grade and of the highest quality. The obligor has an extraordinary ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events. Bonds rated AA are consider red to be investment
grade and of high quality. The obligor's ability to pay interest and repay
principal, while very strong, is somewhat less than for AAA rated securities or
more subject to possible change over the term of the issue. Bonds rated A are
considered to be investment grade and of
A-1
<PAGE> 83
good quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB are considered to be investment grade and of satisfactory quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to weaken this ability than bonds with higher ratings.
TAX-EXEMPT NOTE RATINGS
MOODY'S - MIG-1 AND MIG-2. Notes rated MIG-1 are judged to be of the
best quality, enjoying strong protection from established cash flow or funds
for their services or from established and broad-based access to the market for
refinancing or both. Notes rated MIG-2 are judged to be of high quality with
ample margins of protection, though not as large as MIG-1.
S&P - SP-1 AND SP-2. SP-1 denotes a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+). SP-2 denotes a
satisfactory capacity to pay principal interest.
FITCH - FIN-1 AND FIN-2. Notes assigned FIN-1 are regarded as having
the strongest degree of assurance for timely payment. A plus symbol may be used
to indicate relative standing. Notes assigned FIN-2 reflect a degree of
assurance for timely payment only slightly less in degree than the highest
category.
CORPORATE AND TAX-EXEMPT COMMERICAL 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. Prime-1, indicates highest quality repayment
capacity of rated issue and Prime-2 indicates higher quality.
S&P - Commercial Paper ratings are a current assessment of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Issues rated A have the greatest capacity for a timely payment
and the designation 1, 2 and 3 indicates the relative degree of safety. Issues
rated "A-1+" are those with an "overwhelming degree of credit protection."
FITCH - Commercial Paper ratings reflect current appraisal of the
degree of assurance of timely payment. F-1 issues are regarded as having the
strongest degree of assurance for timely payment. (+) is used to designate the
relative position of an issuer within the rating category. F-2 issues reflect
an assurance of timely payment only slightly less in degree than the strongest
issues. The symbol (LOC) may follow either category and indicates that a letter
of credit issued by a commercial bank is attached to the commercial paper note.
OTHER CONSIDERATIONS - The ratings of S&P, Moody's, and Fitch
represent their respective opinions of the quality of the municipal securities
they undertake to rate. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, municipal
securities with the same maturity, coupon and ratings may have different yields
and municipal securities of the same maturity and coupon with different ratings
may have the same yield.
A-2
<PAGE> 84
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
Face
Issuer Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM MUNICIPAL
OBLIGATIONS-96.51%
ALABAMA-0.50%
Moundville Industrial
Development Board
Revenue Refunding Bonds
6.750% due 12/01/11 . . . . . . . . . . . . $ 1,000,000 $ 920,000
ARIZONA-1.18%
Arizona Health Facilities
Authority Hospital
System Revenue
Refunding Bonds
8.200% due 06/01/21 . . . . . . . . . . . 2,150,000 2,179,563
CALIFORNIA-6.99%
California Statewide
Community Development
Corp. Revenue
Certificates of
Participation
6.500% due 08/01/22 . . . . . . . . . . . 2,750,000 2,440,625
Duarte City of Hope
Medical Center
Certificates of
Participation
6.250% due 04/01/23 . . . . . . . . . . . 4,060,000 3,379,950
Fontana Special Tax
Community Facilities
District Bonds
8.400% due 04/01/15 . . . . . . . . . . . 500,000 411,875
Saddleback Valley Unified
School District
Community Facilities
District Bonds
7.750% due 09/01/16 . . . . . . . . . . . 2,000,000 1,952,500
San Bernardino County
Certificates of
Participation
5.500% due 08/01/17 . . . . . . . . . . . 5,000,000 3,875,000
Santa Cruz County Public
Financing Revenue Bonds
6.100% due 09/01/15 . . . . . . . . . . . 1,000,000 850,000
-------------------
12,909,950
COLORADO-2.53%
Denver City & County
Airport Revenue Bonds
Series A
7.250% due 11/15/25 . . . . . . . . . . . 2,000,000 1,815,000
7.500% due 11/15/23 . . . . . . . . . . . 3,100,000 2,855,875
-------------------
4,670,875
DISTRICT OF
COLUMBIA-0.54%
District of Columbia
National Public Radio
Revenue Bonds
7.700% due 01/01/23 . . . . . . . . . . . 1,000,000 1,006,250
FLORIDA-5.07%
Jacksonville Electric
Authority Revenue
Refunding Bonds
5.250% due 10/01/28 . . . . . . . . . . . . 9,000,000 7,323,750
Northern Palm Beach
County Water Control
District Bonds
6.625% due 11/01/13 . . . . . . . . . . . 1,470,000 1,354,237
6.750% due 11/01/07 . . . . . . . . . . . 725,000 687,844
-------------------
9,365,831
</TABLE>
B-1
<PAGE> 85
SCHEDULE OF INVESTMENTS
Continued
<TABLE>
<CAPTION>
Face
Issuer Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
GEORGIA-9.42%
Georgia Municipal Electric
Authority Power Revenue
Refunding Bonds
5.500% due 01/01/20 . . . . . . . . . . . 5,840,000 4,964,000
5.700% due 01/01/19 . . . . . . . . . . . 5,000,000 4,381,250
7.250% due 01/01/24 . . . . . . . . . . . 2,000,000 2,150,000
Monroe County
Development Authority
Pollution Control
Revenue Bonds
6.800% due 01/01/12 . . . . . . . . . . . 1,000,000 981,250
Savannah Hospital
Authority Revenue
Refunding Bonds
7.000% due 01/01/23 . . . . . . . . . . . 5,470,000 4,923,000
-------------------
17,399,500
ILLINOIS-14.86%
Chicago Skyway Toll Bridge
Revenue Refunding Bonds
6.750% due 01/01/17 . . . . . . . . . . . 2,000,000 1,857,500
Du Page County
General Obligation Bonds
5.600% due 01/01/21 . . . . . . . . . . . 10,000,000 8,575,000
Illinois Development
Finance Authority
Pollution Control
Revenue Refunding Bonds
5.850% due 01/15/14 . . . . . . . . . . . 3,000,000 2,512,500
Illinois Development
Finance Authority
Revenue Refunding Bonds
8.500% due 02/01/15 . . . . . . . . . . . 2,150,000 2,233,313
Illinois Educational
Facilities Authority
Revenue Bonds
6.125% due 12/01/18 . . . . . . . . . . . 3,065,000 2,620,575
6.875% due 12/01/17 . . . . . . . . . . . 1,300,000 1,213,875
Illinois Health Facilities
Authority Revenue
Refunding Bonds
6.000% with various
maturities to 09/01/19 . . . . . . . . . 3,800,000 3,237,250
6.125% due 08/15/20 . . . . . . . . . . . 4,565,000 3,657,706
6.750% due 12/01/08 . . . . . . . . . . . 1,640,000 1,553,900
-------------------
27,461,619
IOWA-0.73%
Ottumwa Hospital Facility
Revenue Refunding and
Improvement Bonds
6.000% due 10/01/18 . . . . . . . . . . . 1,700,000 1,357,875
LOUISIANA-1.41%
LaFourche Parish Hospital
Service Revenue Bonds
6.000% due 10/01/23 . . . . . . . . . . . 1,000,000 775,000
West Feliciana Parish
Pollution Control
Revenue Bonds
7.000% due 11/01/15 . . . . . . . . . . . 2,000,000 1,840,000
-------------------
2,615,000
MAINE-1.71%
Skowhegan Pollution
Control Revenue
Refunding Bonds
5.900% due 11/01/13 3,710,000 3,158,137
MASSACHUSETTS-1.97%
Health & Educational
Facilities Authority
Revenue Bonds
6.625% due 04/01/12 4,000,000 3,640,000
</TABLE>
B-2
<PAGE> 86
SCHEDULE OF INVESTMENTS
Continued
<TABLE>
<CAPTION>
Face
Issuer Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
MICHIGAN-7.01%
Dickinson County
Economic Development
Corp. Pollution Control
Revenue Bonds
5.850% due 10/01/18 . . . . . . . . . . . 3,000,000 2,497,500
Kalamazoo Hospital
Finance Authority
Hospital Facility Revenue
Refunding Bonds
6.375% due 05/15/17 . . . . . . . . . . . 2,000,000 1,837,500
Michigan State Hospital
Finance Authority
Revenue Refunding Bonds
6.500% due 08/15/18 . . . . . . . . . . . 3,500,000 3,163,125
8.250% due 07/01/12 . . . . . . . . . . . 2,250,000 2,337,188
Michigan State Housing
Development Authority
Rental Housing
Revenue Bonds
Zero coupon due
10/01/13 (A) . . . . . . . . . . . . . . 5,100,000 3,111,000
-------------------
12,946,313
MISSISSIPPI-2.55%
Washington County
Pollution Control
Revenue Refunding Bonds
7.000% due 04/01/22 . . . . . . . . . . . 5,000,000 4,712,500
NEVADA-4.54%
Clark County Industrial
Development
Revenue Bonds
6.500% due 12/01/33 . . . . . . . . . . . 10,000,000 8,387,500
HAMPSHIRE HAMPSHIRE-0.60%
New Hampshire Higher
Educational & Health
Facilities Authority
Revenue Refunding Bonds
5.375% due 01/01/15 . . . . . . . . . . . 1,300,000 1,105,000
NEW JERSEY-2.40%
New Jersey Turnpike
Authority Revenue
Refunding Bonds
6.500% due 01/01/16 . . . . . . . . . . . 4,500,000 4,438,125
NEW YORK-1.02%
New York State
Local Government
Assistance Corp. General
Obligation Bonds
6.250% due 04/01/18 . . . . . . . . . . . 2,000,000 1,882,500
NORTH CAROLINA-0.93%
North Carolina Eastern
Municipal Power Agency
Power System Revenue
Refunding Bonds
6.000% due 01/01/22 . . . . . . . . . . . 2,000,000 1,720,000
OHIO-3.04%
Ohio State Air
Quality Development
Authority Revenue Bonds
6.250% due 12/01/20 . . . . . . . . . . . 4,500,000 3,976,875
Student Loan Funding Corp.
of Cincinnati
Revenue Bonds
8.875% due 08/01/08 . . . . . . . . . . . 1,620,000 1,632,150
-------------------
5,609,025
</TABLE>
B-3
<PAGE> 87
SCHEDULE OF INVESTMENTS
Continued
<TABLE>
<CAPTION>
Face
Issuer Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA-10.09%
Allegheny County
Industrial Development
Authority Revenue
Refunding Bonds
6.700% due 12/01/20 . . . . . . . . . . . . . . 5,000,000 4,556,250
Cumberland County
Municipal Authority
First Mortgage
Revenue Bonds
6.800% due 11/15/14 . . . . . . . . . . . . . . 3,000,000 2,636,250
Montgomery County
Redevelopment Authority
Multi-Family Housing
Revenue Bonds
6.375% due 07/01/12 . . . . . . . . . . . . . . 2,000,000 1,782,500
Philadelphia Hospitals &
Higher Education
Facilities Authority
Revenue Bonds
7.000% due 08/15/12 . . . . . . . . . . . . . . 1,250,000 1,162,500
8.625% due 07/01/21 . . . . . . . . . . . . . . 2,700,000 2,598,750
Philadelphia Water & Sewer
Revenue Bonds Series 16
7.500% due 08/01/10 . . . . . . . . . . . . . . 3,000,000 3,120,000
Scranton-Lackawanna
Health & Welfare
Authority Revenue Bonds
7.600% due 07/15/20 . . . . . . . . . . . . . . 3,000,000 2,786,250
-------------------
18,642,500
SOUTH CAROLINA-0.36%
Lee County Industrial
Revenue Bonds
7.000% due 09/15/13 . . . . . . . . . . . . . . 750,000 671,250
TEXAS-11.71%
Dallas-Fort Worth
international Airport
Facility Improvement
Corp. Revenue Bonds
7.250% due 11/01/30 . . . . . . . . . . . . . 10,250,000 9,378,750
Ector County Hospital
District Revenue Bonds
7.300% due 04/15/12 . . . . . . . . . . . . . 4,000,000 3,945,000
El Paso International
Airport Revenue
Refunding Bonds
7.750% due 03/01/12 . . . . . . . . . . . . . 1,410,000 1,357,125
Harris County Industrial
Development Corp.
Revenue Refunding Bonds
6.625% due 02/01/24 . . . . . . . . . . . . . 1,000,000 920,000
Sam Rayburn Municipal
Power Agency Power
Supply System Revenue
Refunding Bonds
6.250% due 10/01/17 . . . . . . . . . . . . . 7,100,000 6,043,875
-------------------
21,644,750
UTAH-1.01%
Carbon County Solid Waste
Disposal Revenue
Refunding Bonds
9.000% due 07/01/12 . . . . . . . . . . . . . 1,000,000 1,023,750
Davis County Solid Waste
Management & Energy
Recovery Revenue
Refunding Bonds
6.125% due 06/15/09 . . . . . . . . . . . . . 1,000,000 838,750
-------------------
1,862,500
</TABLE>
B-4
<PAGE> 88
SCHEDULE OF INVESTMENTS
Continued
<TABLE>
<CAPTION>
Face
Issuer Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
VIRGINIA-2.38%
Pittsylvania County
Industrial Development
Authority Revenue Bonds
7.550% due 01/01/19 4,500,000 4,393,125
WASHINGTON-0.88%
Washington State Public
Power Supply System
Nuclear Project #3
Revenue Refunding Bonds
5.500% due 07/01/18 2,000,000 1,625,000
WISCONSIN-1.08%
Wisconsin Health &
Educational Facilities
Authority Revenue
Refunding Bonds
7.000% due 02/15/22 . . . . . . . . . . . 2,115,000 2,003,962
-------------------
TOTAL LONG-TERM
MUNICIPAL OBLIGATIONS
(Cost $194,770,622) . . . . . . . . . . . . 178,328,650
-------------------
TOTAL INVESTMENTS-96.51%
(Cost $194,770,622) . . . . . . . . . . . . 178,328,650
CASH AND OTHER ASSETS,
LESS LIABILITIES-3.49% . . . . . . . . . . 6,452,992
-------------------
NET ASSETS, at value,
equivalent to $9.39
per share for 12,203,457
Class A Shares ($.01
par value) outstanding
and $9.38 per share
for 7,485,326 Class B
Shares ($.01 par value)
outstanding-100.00% . . . . . . . . . . . 184,781,642
===================
</TABLE>
(A) LIBOR RANGE FLOATER.
See Notes to Financial Statements
B-5
<PAGE> 89
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $194,770,622) . . . . . . . . . $178,328,650
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,707
Receivable for:
Investments sold . . . . . . . . . . . . . . . . . . . . $7,132,365
Interest . . . . . . . . . . . . . . . . . . . . . . . . 4,038,531
Shares sold . . . . . . . . . . . . . . . . . . . . . . . 52,268 11,223,164
----------
Other assets . . . . . . . . . . . . . . . . . . . . . . . 60,206
------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . 189,853,727
LIABILITIES
Payable for:
Investments purchased . . . . . . . . . . . . . . . . . . 4,092,571
Dividends . . . . . . . . . . . . . . . . . . . . . . . . 387,780
Shares repurchased . . . . . . . . . . . . . . . . . . . 342,380 4,822,731
----------
Payable to Investment Adviser for:
Distribution expenses . . . . . . . . . . . . . . . . . . 117,109
Management fees . . . . . . . . . . . . . . . . . . . . . 74,327
Administrative service fees . . . . . . . . . . . . . . . 12,556 203,992
----------
Other liabilities . . . . . . . . . . . . . . . . . . . . . 45,362
------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . 5,072,085
------------
NET ASSETS, at value, equivalent to $9.39 per share for
12,203,457 Class A Shares ($.01 par value) outstanding
and $9.38 per share for 7,485,326 Class B Shares ($.01
par value) outstanding . . . . . . . . . . . . . . . . . $184,781,642
============
</TABLE>
See Notes to Financial Statements
B-6
<PAGE> 90
STATEMENT OF OPERATIONS / STATEMENTS OF CHANGES IN NET ASSETS
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,590,420
EXPENSES
Management fees . . . . . . . . . . . . . . . . . . . . . . $1,136,532
Distribution expenses
(see Note D) . . . . . . . . . . . . . . . . . . . . . . 859,051
Transfer agent fees . . . . . . . . . . . . . . . . . . . . 189,396
Administrative service fees . . . . . . . . . . . . . . . . 116,742
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 67,118
Registration fees . . . . . . . . . . . . . . . . . . . . . 57,702
Audit and legal fees . . . . . . . . . . . . . . . . . . . 34,502
Trustees' fees and expenses . . . . . . . . . . . . . . . . 26,968
Shareholder reports . . . . . . . . . . . . . . . . . . . . 18,343
Organization costs . . . . . . . . . . . . . . . . . . . . 4,937
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 26,680
Less: Expense
reimbursement . . . . . . . . . . . . . . . . . . . . . . (232,531) 2,305,440
--------- ------------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . 11,284,980
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS
Net realized loss on
investments . . . . . . . . . . . . . . . . . . . . . . . (7,349,795)
Net change in unrealized
depreciation of
investments . . . . . . . . . . . . . . . . . . . . . . . (25,666,689)
------------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS . . . . . . . . . . . . . . . . . . . (33,016,484)
------------
DECREASE IN NET ASSETS
RESULTING FROM
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . $(21,731,504)
------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income . . . . . . . . . . . . . . . . . . . $ 11,284,980 $ 8,664,655
Net realized gain (loss) on investments . . . . . . . . . . (7,349,795) 7,465,369
Net change in unrealized appreciation
(depreciation) of investments . . . . . . . . . . . . . . (25,666,689) 5,108,175
------------ ------------
Increase (decrease) in net assets
resulting from operations . . . . . . . . . . . . . . . . (21,731,504) 21,238,199
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income-
Class A . . . . . . . . . . . . . . . . . . . . . . . . . (7,588,474) (6,933,021)
Class B . . . . . . . . . . . . . . . . . . . . . . . . . (3,611,510) (1,725,276)
Net realized gain on investments-
Class A . . . . . . . . . . . . . . . . . . . . . . . . . - (5,248,953)
Class B . . . . . . . . . . . . . . . . . . . . . . . . . - (2,162,925)
------------ ------------
Total distributions to shareholders . . . . . . . . . . . . (11,199,984) (16,070,175)
SHARE TRANSACTIONS
Increase in shares outstanding . . . . . . . . . . . . . 24,808,198 69,942,033
------------ ------------
Increase (decrease) in net assets . . . . . . . . . . . . (8,123,290) 75,110,057
NET ASSETS
Beginning of year . . . . . . . . . . . . . . . . . . . . . 192,904,932 117,794,875
------------ ------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . $184,781,642 $192,904,932
============ ============
Undistributed Net Investment Income . . . . . . . . . . . . $ 84,996 $ 0
============ ============
</TABLE>
See Notes to Financial Statements.
B-7
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A-SIGNIFICANT ACCOUNTING POLICIES
John Hancock Tax-Free Bond Fund (the "Fund"), formerly Transamerica Tax-Free
Bond Fund, is a diversified, open-end management investment company registered
under the Investment Company Act of 1940, as amended. On December 16, 1994, the
shareholders of each of the mutual funds managed by Transamerica Fund
Management Company (TFMC) voted to approve new Investment Advisory contracts
with John Hancock Advisers, Inc. Each such approval was subject to the
acquisition of TFMC by The Berkeley Financial Group (known beginning January 1,
1995 as John Hancock Funds), the parent company of John Hancock Advisers, Inc.
The aquisition became effective on December 22, 1994. The Fund's name change
was also effective on this date.
The Fund offers two classes of shares to the public. Class A Shares
are subject to an initial sales charge of up to 4.75% and a 12b-1 distribution
plan. Class B Shares are subject to a contingent deferred sales charge and a
separate 12b-1 distribution plan. The following is a summary of significant
accounting policies consistently followed by the Fund.
(1) The Fund values its investments by using quotations provided by
market makers, estimates of market value, or values received from an
independent pricing service. Securities for which market quotations are not
readily available are valued at a fair value as determined in good faith by the
Fund's Board of Trustees. Short-term investments are valued at amortized cost
(original cost plus amortized discount or accrued interest).
(2) Security transactions are accounted for on the trade date.
Interest income is accrued daily. Debt premiums and original issue discounts
are amortized using the yield-to-maturity method. Discounts other than original
issue are not amortized. Realized gains and losses from security transactions
are determined on the basis of identified cost for both financial reporting and
federal income tax purposes.
(3) Income dividends are declared daily by the Fund and paid to
shareholders or reinvested at net asset value monthly. Other distributions are
recorded on the ex-dividend date and may be reinvested at net asset value.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
(4) No provision for federal income taxes has been made since it is
the Fund's intention to distribute all of its taxable income and profits to its
shareholders and to comply with the requirements applicable to regulated
investment companies and the minimum distribution requirements of the Internal
Revenue Code. At December 31, 1994, the Fund had a realized capital loss
carryforward of approximately $7,350,000, which will expire in 2002.
(5) The Fund reports custodian fees net of credits and charges
resulting from cash positions in the custodial accounts greater than or less
than the amounts required to settle portfolio transactions. For the year ended
December 31, 1994, these amounts were $11,511 and $21,380, respectively.
(6) On a daily basis, income, unrealized and realized gains and
losses, and expenses which are not class specific are allocated to each class
based on their respective relative net assets. Class specific expenses, such as
distribution expenses, are applied to the class to which they are attributed.
NOTE B-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
From January 1, 1994 through December 21, 1994, TFMC acted as the Investment
Adviser to the Fund. On December 22, 1994, John Hancock Advisers, Inc., a
wholly-owned subsidiary of John Hancock Funds, became Investment Adviser
following the approval of the Fund's shareholders. Throughout these financial
statement notes, TFMC and John Hancock Advisers, Inc. are referred to
collectively as the "Investment Adviser", as each acted in this capacity during
the time periods noted above. The Investment Adviser has a sub-advisory
agreement with, and pays a fee to, Transamerica Investment Services, Inc. (the
"Sub-Adviser"). TFMC was, prior to December 22, 1994, and the Sub-Adviser is
presently a subsidiary of Transamerica Corporation.
The Fund's management fee is payable monthly and is calculated based
on the monthly average daily net assets of the Fund at an annual rate of 0.55%.
The Investment Adviser also provided administrative services to the
Fund pursuant to an administrative service agreement. During the year ended
December 31, 1994, the Fund paid or accrued $81,515 to the Investment Adviser
for these services.
The Investment Adviser voluntarily agreed to reimburse the Fund for
all normal operating expenses, excluding distribution expenses, in excess of
0.70%, on an annual basis, of the Fund's average daily net assets through
December 31, 1994. For the year ended December 31, 1994, the Investment Adviser
reimbursed the Fund $232,531 pursuant to this agreement.
During the year ended December 31, 1994, Transamerica Fund
Distributors, Inc., an affiliate of TFMC and
B-8
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS
Continued
NOTE B (Continued)
principal underwriter of the Fund through December 21, 1994, and John Hancock
Funds, Inc., an affiliate of John Hancock Advisers, Inc. and principal
underwriter since December 22, 1994, retained $47,967 as their portion of the
commissions charged on sales of Class A Shares of the Fund. Throughout these
financial statement notes, Transamerica Fund Distributors, Inc. and John
Hancock Funds, Inc. are referred to collectively as the "Distributor", as each
acted in this capacity during the time periods noted above.
The Fund paid no compensation directly to any officer. Certain
officers of the Fund are affiliated with the Investment Adviser.
During the year ended December 31, 1994, the Fund paid legal fees of
$6,000 to Baker & Botts. A partner with Baker & Botts was an officer of the
Fund until December 22, 1994.
NOTE C-COST, PURCHASES AND SALES OF INVESTMENT SECURITIES
During the year ended December 31, 1994, purchases and sales of securities,
other than short-term obligations, aggregated $239,868,213 and $214,753,366,
respectively.
At December 31, 1994, the identified cost of investments owned was the
same for both financial reporting and federal income tax purposes. At December
31, 1994, the gross unrealized appreciation and gross unrealized depreciation
of investments for federal income tax purposes were $432,034 and $16,874,006,
respectively.
NOTE D-PLAN OF DISTRIBUTION
Pursuant to Rule 12b-1 of the Investment Company Act of 1940, the Fund is
authorized under separate distribution plans to finance activities related to
the distribution of its Class A and Class B Shares (the "Class A Plan" and the
"Class B Plan," respectively). The distribution plans, together with the
initial sales charge on Class A Shares and the contingent deferred sales charge
on Class B Shares, comply with the regulations covering maximum sales charges
assessed by mutual funds distributed through securities dealers that are NASD
members.
The Class A Plan and the Class B Plan permit each class to make
payments to the Distributor up to 0.15% annually of average daily net assets
for certain distribution costs such as service fees paid to dealers, production
and distribution of prospectuses to prospective investors, services provided to
new and existing shareholders and other distribution related activities. During
the year ended December 31, 1994, the Fund made payments to the Distributor of
$200,118 or 0.15% for Class A and $109,829 or 0.15% for Class B, related to the
above activities.
The Class B Plan also permits Class B to reimburse the Distributor up
to 0.75% annually of average daily net assets for costs related to compensation
paid to securities dealers, in place of an initial sales charge to investors,
on the sale of Class B Shares. These costs are based upon a commission payment
charge of 5% of the value of Class B Shares sold (excluding shares acquired
through reinvestment), reduced by the amount of contingent deferred sales
charges (CDSC) that have been received by the Distributor on redemptions of
Class B Shares. These costs also include a charge of interest (carrying charge)
at an annual rate of 1% over the prevailing prime rate to the extent cumulative
commission payment charges, plus any previous carrying charges, less CDSC
received by the Distributor, have not been paid in full by the Fund. For the
year ended December 31, 1994, Class B reimbursed the Distributor $549,104 or
0.75% for such costs. For the year ended December 31, 1994, the Distributor
received $209,200 in CDSC.
At December 31, 1994, Class A had $46,863 and Class B had $70,246
payable to the Distributor pursuant to the above distribution plans.
NOTE E-ORGANIZATION
The Fund was organized as a Massachusetts business trust on November 13, 1989.
The Fund had no transactions between that date and January 5, 1990, the date of
the Fund's initial offering of shares to the public, other than the sale at
$10.00 per share (net asset value) of 10,000 shares to TFMC.
The organization expenses of the Fund have been deferred and are being
amortized over a period during which it is expected that a benefit will be
realized, but not longer than five years from the date of commencement of
operations.
B-9
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS
Continued
NOTE F-SHARE AND RELATED TRANSACTIONS
A summary of share transactions follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1994 1993
----------------------- --------------------------
Shares Dollars Shares Dollars
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold-Class A . . . . . . . . . . . . . . . . . . . 2,973,332 31,232,536 4,470,385 49,282,506
Shares sold-Class B . . . . . . . . . . . . . . . . . . . 3,736,809 39,155,237 3,409,810 37,871,570
Shares issued in reinvestment of distributions-Class A . 430,837 4,303,072 676,087 7,438,972
Shares issued in reinvestment of distributions-Class B . 212,691 2,116,235 243,976 2,684,089
Shares redeemed-Class A . . . . . . . . . . . . . . . . . (3,655,146) (36,242,204) (2,199,859) (24,479,013)
Shares redeemed-Class B . . . . . . . . . . . . . . . . . (1,608,678) (15,756,678) (254,950) (2,856,091)
Net increase in shares outstanding . . . . . . . . . . . 2,089,845 24,808,198 6,345,449 69,942,033
The components of net assets at December 31, 1994, are as follows:
Capital paid-in (unlimited number of shares authorized) . . . . . . . . . . . . . . . . . . . . 208,427,624
Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,996
Accumulated net realized loss on investments . . . . . . . . . . . . . . . . . . . . . . . . . (7,289,006)
Net unrealized depreciation of investments . . . . . . . . . . . . . . . . . . . . . . . . . . (16,441,972)
------------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $184,781,642
============
</TABLE>
B-10
<PAGE> 94
(ERNST & YOUNG LLP LETTERHEAD)
Shareholders and Board of Trustees
of John Hancock Tax-Free Bond Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of John Hancock Tax-Free Bond Fund, formerly
Transamerica Tax-Free Bond Fund, as of December 31, 1994, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of John
Hancock Tax-Free Bond Fund at December 31, 1994, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
February 3, 1995
B-11
<PAGE> 95
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in the Prospectus:
Financial Highlights
Included in Part B are as follows:
Schedule of Investments as of December 31, 1994.
Statement of Assets and Liabilities as of December
31, 1994. Statements of Operations for the year
ended December 31, 1994. Statements of Changes in
Net Assets for each of the two years in the period
ended December 31, 1994.
Included in Part C:
None
All other schedules for which provision is made in
the applicable accounting regulation of the
Securities and Exchange Commission are either not
required under the related instructions or are
inapplicable and therefore have been omitted.
(b) Exhibits:
(1) (a) Declaration of Trust *
(b) Amended and Restated Declaration of Trust**
(c) Amendment to Declaration of Trust dated October 25,
1991.***
(d) Amendment to Declaration of Trust dated December 23,
1994
(2) Bylaws of Registrant
(3) Not Applicable
(4) Specimen Share Certificates for Class A Shares and
Class B Shares to be filed by Post-effective
Amendment
(5)(a) Investment Advisory Agreement between John Hancock
Advisers, Inc. and the Registrant.
(b) Sub-Advisory Agreement between John Hancock Advisers,
Inc. and Transamerica Investment Services, Inc.
(c) Administrative Services Agreement between John
Hancock Advisers, Inc. and the Registrant.
__________________
* Previously filed with Registration Statement on November 20, 1989 and
incorporated herein by reference.
** Previously filed with Pre-Effective Amendment No. 1 on December 22, 1989 and
incorporated herein by reference.
*** Previously filed with Post-Effective Amendment No. 3 on November 1, 1991 and
incorporated herein by reference.
C-1
<PAGE> 96
(6)(a) Distribution Agreement between John Hancock Funds,
Inc. and the Registrant.
(b) Form of Soliciting Dealer Agreement between John
Hancock Funds, Inc and the John Hancock funds.
(c) Form of Financial Institution Sales and Service
Agreement between John Hancock Funds, Inc. and the
John Hancock funds.
(7) Not Applicable
(8) Form of Master Custodian Agreement between the John Hancock funds
and State Street Bank.
(9) Transfer Agency Agreement*
(10) Opinion and consent of counsel was filed with the Securities and
Exchange Commission on February 23, 1995, pursuant to Rule 24f-2
and incorporated herein by reference.
(11) Consent of Independent Auditors.
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) (a) Form of 12b-1 Plan for Class A Shares.
(b) Form of 12b-1 Plan for Class B Shares.
(16) Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22.*
Item 25. Persons Controlled by or Under Common Control with Registrant
No person is presently controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Shares of Beneficial Interest As of December 31, 1994
----------------------------- ------------------------
<C> <C>
Transamerica Tax-Free Bond Fund - Class A 3,179
Transamerica Tax-Free Bond Fund - Class B 2,105
</TABLE>
Item 27. Indemnification of Trustees, Officers, Employees and Agents.
Indemnification provisions relating to the Registrant's Trustees,
officers, employees and agents is set forth in Article VII of the
Registrant's By Laws included as Exhibit 2 herein.
___________________
* Previously filed with Post-Effective Amendment #4 on April 15, 1992 and
incorporated herein by reference.
C-2
<PAGE> 97
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.
Item 28. Business and Other Connections of Investment Adviser
See "The Fund and Its Management" in the Prospectus and Statement of
Additional Information for information regarding the business of the
Investment Adviser and the Sub-Adviser. For information as to the
business, profession, vocation or employment of a substantial nature
of each of the officers and directors of the Investment Adviser and
the Sub-Adviser, is set forth in the Adviser's Form ADV (File No.
8018124 and the Sub- Aviser's Form ADV (File No. 801-7740). The
following sections of each such Form ADV are incorporated herein by
reference:
(a) Items 1 and 2 of Part 2; and
(b) Section IV, Business Background of each Schedule D.
Item 29. Principal Underwriter
(a) John Hancock Funds, Inc. acts as principal underwriter for the
Registrant and also serves as principal underwriter or
distributor of shares for John Hancock Cash Reserve, Inc.,
John Hancock Bond Fund, John Hancock Capital Growth Fund, John
Hancock Current Interest, John Hancock Series, Inc., John
Hancock Tax-Free Bond Fund, John Hancock California Tax-Free
Income Fund, John Hancock Capital Series, John Hancock Limited
Term Government Fund, John Hancock Tax-Exempt Fund, John
Hancock Sovereign Investors Fund, John Hancock Cash Management
Fund, John Hancock Special Equities Fund, John Hancock Bond
Fund, John Hancock Tax-Exempt Series Fund, John Hancock
Strategic Series, John Hancock Technology Series and World
Fund, John Hancock Freedom Investment Trust, John Hancock
Freedom Investment Trust II and John Hancock Investment Trust
III.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ ------------------ -----------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman Chairman
101 Huntington Avenue
Boston, Massachusetts
Robert H. Watts Director and Sr. Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
C-3
<PAGE> 98
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ -------------------- ---------------------
<S> <C> <C>
C. Troy Shaver, Jr. President, Chief Executive None
101 Huntington Avenue Officer and Director
Boston, Massachusetts
Robert G. Freedman Director Chief Investment
101 Huntington Avenue Officer
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Stephen M. Blair Senior Vice President - Sales None
101 Huntington Avenue
Boston, Massachusetts
Thomas H. Drohan Senior Vice President Senior Vice President
101 Huntington Avenue and Secretary
Boston, Massachusetts
David A. King Senior Vice President None
101 Huntington Avenue Operations
Boston, Massachusetts
James B. Little Senior Vice President Senior vice president
101 Huntington Avenue and Chief Financial
Boston, Massachusetts Officer
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Secretary Vice President,
101 Huntington Avenue Compliance Officer and
Boston, Massachusetts Assistant Secretary
Arthur J. Holzman, Jr. Second Vice President Second Vice President
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
C-4
<PAGE> 99
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ ------------------ -----------------
<S> <C> <C>
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Stephen L. Brown 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
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
</TABLE>
C-5
<PAGE> 100
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) Registrant hereby undertakes to assist shareholders with any
communication by them in accordance with the provision of
Section 16 of the Investment Company Act of 1940.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
C-6
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement 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 day of February 1995.
JOHN HANCOCK TAX FREE BOND FUND
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
______________________ (Principal Executive Officer)
Edward J. Boudreau, Jr.
Senior Vice President and Chief
JAMES B. LITTLE Financial Officer (Principal February , 1995
______________________ Financial and Accounting Officer)
James B. Little
*
______________________ Trustee
James F. Carlin
*
______________________ Trustee
William H. Cunningham
*
______________________ Trustee
Charles L. Ladner
*
______________________ Trustee
Leo E. Linbeck, Jr.
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
______________________ Trustee
Patricia P. McCarter
*
______________________ Trustee
Steven R. Pruchansky
*
______________________ Trustee
Norman H. Smith
*
______________________ Trustee
John P. Toolan
*By: THOMAS H. DROHAN February , 1995
______________________
Thomas H. Drohan
(Attorney-in-Fact)
</TABLE>
<PAGE> 103
INDEX TO EXHIBITS
(1)(a) Declaration of Trust *
(b) Amended and Restated Declaration of Trust**
(c) Amendment to Declaration of Trust dated October 25,
1991.***
(d) Amendment to Declaration of Trust dated December 23,
1994
(2) Bylaws of Registrant
(3) Not Applicable
(4) Specimen Share Certificates for Class A Shares and
Class B Shares to be filed by Post-effective
Amendment
(5)(a) Investment Advisory Agreement between John Hancock
Advisers, Inc. and the Registrant.
(b) Sub-Advisory Agreement between John Hancock Advisers,
Inc. and Transamerica Investment Services, Inc.
(c) Administrative Services Agreement between John
Hancock Advisers, Inc. and the Registrant.
(6)(a) Distribution Agreement between John Hancock Funds,
Inc. and the Registrant.
(b) Form of Soliciting Dealer Agreement between John
Hancock Funds, Inc and the John Hancock funds.
(c) Form of Financial Institution Sales and Service
Agreement between John Hancock Funds, Inc. and the
John Hancock funds.
(7) Not Applicable
(8) Form of Master Custodian Agreement between the John Hancock funds
and State Street Bank.
(9) Transfer Agency Agreement*
(10) Opinion and consent of counsel was filed with the Securities and
Exchange Commission on February 23, 1995, pursuant to Rule 24f-2
and incorporated herein by reference.
(11) Consent of Independent Auditors.
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15)(a) Form of 12b-1 Plan for Class A Shares.
(b) Form of 12b-1 Plan for Class B Shares.
(16) Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22.*
__________________
* Previously filed with Registration Statement on November 20, 1989 and
incorporated herein by reference.
** Previously filed with Pre-Effective Amendment No. 1 on December 22, 1989 and
incorporated herein by reference.
*** Previously filed with Post-Effective Amendment No. 3 on November 1, 1991 and
incorporated herein by reference.
<PAGE> 1
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Thomas H. Drohan, Robert G. Freedman 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 or
the Corporation 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 its shares of beneficial interest 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 or the Corporation
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
the 22nd day of December, 1994.
/s/Edward J. Boudreau, Jr.
____________________________________
Edward J. Boudreau, Jr.
<PAGE> 2
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Leo E. Linbeck, Jr.
_______________________________
Leo E. Linbeck, Jr.
<PAGE> 3
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Patricia P. McCarter
___________________________________
Patricia P. McCarter
<PAGE> 4
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 13th day of December, 1994.
/s/William H. Cunningham
___________________________________
William H. Cunningham
<PAGE> 5
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Norman H. Smith
_____________________________
Norman H. Smith
<PAGE> 6
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/James F. Carlin
________________________________
James F. Carlin
<PAGE> 7
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Charles L. Ladner
_________________________________
Charles L. Ladner
<PAGE> 8
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/John P. Toolan
________________________________
John P. Toolan
<PAGE> 9
POWER OF ATTORNEY
The undersigned Trustee of John Hancock Current Interest, John Hancock
Capital Growth Fund, John Hancock Investment Trust, John Hancock California
Tax-Free Income Fund, John Hancock Tax-Free Bond Fund and John Hancock Bond
Fund, (each a "Trust"), and Director of John Hancock Series, Inc. and John
Hancock Cash Reserve, Inc. (each a "Corporation"), does hereby severally
constitute and appoint Edward J. Boudreau, Jr., Thomas H. Drohan, Robert G.
Freedman 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 or the Corporation 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 its shares of beneficial interest
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 or the Corporation 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
the 22nd day of December, 1994.
/s/Steven R. Pruchansky
________________________________
Steven R. Pruchansky
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6.A
<CIK> 0000857769
<NAME> JOHN HANCOCK TAX-FREE BOND FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 194,771
<INVESTMENTS-AT-VALUE> 178,329
<RECEIVABLES> 11,223
<ASSETS-OTHER> 60
<OTHER-ITEMS-ASSETS> 242
<TOTAL-ASSETS> 189,854
<PAYABLE-FOR-SECURITIES> 4,093
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 979
<TOTAL-LIABILITIES> 5,072
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 208,428
<SHARES-COMMON-STOCK> 12,204
<SHARES-COMMON-PRIOR> 12,454
<ACCUMULATED-NII-CURRENT> 85
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,289)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16,442)
<NET-ASSETS> 184,782
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,590
<OTHER-INCOME> 0
<EXPENSES-NET> 2,305
<NET-INVESTMENT-INCOME> 11,285
<REALIZED-GAINS-CURRENT> (7,350)
<APPREC-INCREASE-CURRENT> (25,667)
<NET-CHANGE-FROM-OPS> (21,732)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,588
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70,388
<NUMBER-OF-SHARES-REDEEMED> 51,999
<SHARES-REINVESTED> 6,419
<NET-CHANGE-IN-ASSETS> 24,808
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,137
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,538
<AVERAGE-NET-ASSETS> 133,412
<PER-SHARE-NAV-BEGIN> 10.96
<PER-SHARE-NII> .58
<PER-SHARE-GAIN-APPREC> (1.58)
<PER-SHARE-DIVIDEND> .57
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.39
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6.B
<CIK> 0000857769
<NAME> JOHN HANCOCK TAX-FREE BOND FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 194,771
<INVESTMENTS-AT-VALUE> 178,329
<RECEIVABLES> 11,223
<ASSETS-OTHER> 60
<OTHER-ITEMS-ASSETS> 242
<TOTAL-ASSETS> 189,854
<PAYABLE-FOR-SECURITIES> 4,093
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 979
<TOTAL-LIABILITIES> 5,072
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 208,428
<SHARES-COMMON-STOCK> 7,485
<SHARES-COMMON-PRIOR> 5,145
<ACCUMULATED-NII-CURRENT> 85
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,289)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (16,442)
<NET-ASSETS> 184,782
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,590
<OTHER-INCOME> 0
<EXPENSES-NET> 2,305
<NET-INVESTMENT-INCOME> 11,285
<REALIZED-GAINS-CURRENT> (7,350)
<APPREC-INCREASE-CURRENT> (25,667)
<NET-CHANGE-FROM-OPS> (21,732)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,612
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70,388
<NUMBER-OF-SHARES-REDEEMED> 51,999
<SHARES-REINVESTED> 6,419
<NET-CHANGE-IN-ASSETS> 24,808
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,137
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,538
<AVERAGE-NET-ASSETS> 73,215
<PER-SHARE-NAV-BEGIN> 10.96
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> (1.58)
<PER-SHARE-DIVIDEND> .50
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.38
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 1(d)
TRANSAMERICA TAX-FREE BOND FUND
AMENDMENT TO THE DECLARATION OF TRUST
Amendment To Declaration Of Trust To change the name of the Trust.
I.
Pursuant to Article XI, Section 11.3(a) of the Declaration of Trust,
each of the undersigned hereby executes this instrument in connection with a
change in the name of the Trust and for that purpose adopts the following
resolution:
RESOLVED, that pursuant to Article XI, Section 11.3 of the Declaration
of Trust, the name of the Trust is hereby changed to "John Hancock Tax-Free
Bond Fund".
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to be executed this 16th of December , 1994.
/s/ R. TRENT CAMPBELL /s/ THOMAS R. POWERS
- ------------------------------------- -------------------------------------
R. Trent Campbell, as Trustee Thomas R. Powers, as Trustee
5005 Riverway, Ste #240 1000 Louisiana
Houston, TX 77027 Houston, TX 77002
/s/ MR. LLOYD BENTSEN /s/ THOMAS B. McDADE
- ------------------------------------- -------------------------------------
Mr. Lloyd Bentsen, as Trustee Thomas B. McDade, as Trustee
1810 Kalorama Square, N.W. 5276 Cedar Creek
Washington, D.C. 20008 Houston, TX 77056
/s/ WILLIAM H. CUNNINGHAM /s/ LEO E. LINBECK, JR.
- ------------------------------------- -------------------------------------
William H. Cunningham, as Trustee Leo E. Linbeck, Jr., as Trustee
601 Colorado Street P.O. Box 22500
O. Henry Hall Houston, TX 77027
Austin, TX 78701
/s/ THOMAS M. SIMMONS
- -------------------------------------
Thomas M. Simmons, as Trustee
1000 Louisiana Street
Houston, TX 77002
<PAGE> 1
EXHIBIT 2
BY-LAWS
OF
JOHN HANCOCK TAX-FREE BOND FUND
ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the
Declaration of Trust of John Hancock Tax-Free Bond Fund, as amended or
restated from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the
principal office of the Trust shall be in Boston, Massachusetts.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within The Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders of the Trust or a
Series or Class thereof shall be held as provided in the Declaration of Trust
at such place within or without The Commonwealth of Massachusetts as the
Trustees shall designate. The holders of a majority the Outstanding Shares of
the Trust or a Series or Class thereof present in person or by proxy and
entitled to vote shall constitute a quorum at any meeting of the Shareholders
of the Trust or a Series or Class thereof.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail or telegraphic means to each Shareholder at his
address as recorded on the register of the Trust mailed at least (10) days and
not more than sixty (60) days before the meeting, provided, however, that
notice of a meeting need not be given to a Shareholder to whom such
<PAGE> 2
notice need not be given under the proxy rules of the Commission under the 1940
Act and the Securities Exchange Act of 1934, as amended. Only the business
stated in the notice of the meeting shall be considered at such meeting. Any
adjourned meeting may be held as adjourned without further notice. No notice
need be given to any Shareholder who shall have failed to inform the Trust of
his current address or if a written waiver of notice, executed before or after
the meeting by the Shareholder or his attorney thereunto authorized, is filed
with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the
purpose of determining the Shareholders who are entitled to notice of and to
vote at any meeting, or to participate in any distribution, or for the purpose
of any other action, the Trustees may from time to time close the transfer
books for such period, not exceeding thirty (30) days, as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date
not more than sixty (60) days prior to the date of any meeting of Shareholders
or distribution or other action as a record date for the determination of the
persons to be treated as Shareholders of record for such purposes.
Section 4. Proxies. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary
may direct, for verification prior to the time at which such vote shall be
taken. A proxy shall be deemed signed if the shareholder's name is placed on
the proxy (whether by manual signature, typewriting or telegraphic
transmission) by the shareholder or the shareholder's attorney-in-fact.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. 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, but if more
than one of them 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 to be
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. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
-2-
<PAGE> 3
Section 5. 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 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Outstanding Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law) consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the President,
the Chairman or by any one of the Trustees, at the time being in office.
Notice of the time and place of each meeting other than regular or stated
meetings shall be given by the Secretary or an Assistant Secretary or by the
officer or Trustee calling the meeting and shall be mailed to each Trustee at
least two days before the meeting, or shall be given by telephone, cable or
wireless to each Trustee at his business address, or personally delivered to
him at least one day before the meeting. Such notice may, however, be waived
by any Trustee. 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 notice or waiver of notice need not specify the purpose of any meeting.
The Trustees may meet by means of a telephone conference circuit or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall be deemed to have been held at a place designated by the Trustees at the
meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be
taken at any meeting of the Trustees may be taken by the Trustees without a
meeting if a majority of the Trustees consent to the action in writing and the
written consents are filed with the records of the Trustees' meetings. Such
consents shall be treated as a vote for all purposes.
-3-
<PAGE> 4
Section 2. Quorum and Manner of Acting. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting
and (except as otherwise required by law, the Declaration of Trust or these
By-laws) the act of a majority of the Trustees present at any such meeting, at
which a quorum is present, shall be the act of the Trustees. In the absence of
a quorum, a majority of the Trustees present may adjourn the meeting from time
to time until a quorum shall be present. Notice of an adjourned meeting need
not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than two (2) members to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust or a Series thereof, and such
other powers of the Trustees as the Trustees may, from time to time, delegate
to them except those powers which by law, the Declaration of Trust or these
By-laws they are prohibited from delegating. The Trustees may also elect from
their own number other Committees from time to time; the number composing such
Committees, the powers conferred upon the same (subject to the same limitations
as with respect to the Executive Committee) and the term of membership on such
Committees to be determined by the Trustees. The Trustees may designate a
chairman of any such Committee. In the absence of such designation the
Committee may elect its own Chairman.
Section 2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investments shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
may receive compensation for their services and may be allowed such fees and
expenses for the attendance at such meeting as the Trustees may from time to
time determine to be appropriate.
-4-
<PAGE> 5
Section 3. Meetings, Quorum and Manner of Acting. The Trustees may
(1) provide for stated meetings of any Committee, (2) specify the manner of
calling and notice required for special meetings of any Committee, (3) specify
the number of members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified powers
delegated to such Committee, (4) authorize the making of decisions to exercise
specified powers by written assent of the requisite number of members of a
Committee without a meeting, and (5) authorize the members of a Committee to
meet by means of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be
Chairman, a President, a Treasurer and a Secretary, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as
the business of the Trust may require, including one or more Vice Presidents,
one or more Assistant Secretaries, and one or more Assistant Treasurers. The
Trustees may delegate to any officer or committee the power to appoint any
subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration of Trust or these By-laws, the President, the
Treasurer, the Secretary and any other officer shall each hold office at the
pleasure of the Board of Trustees or until his successor shall have been duly
elected and qualified. The Secretary and the Treasurer may be the same person.
A Vice President and the Treasurer or a Vice President and the Secretary may be
the same person, but the offices of Vice President, Secretary and Treasurer
shall not be held by the same person. The President shall hold no other
office. Except as above provided, any two offices may be held by the same
person. Any officer may be but none need be a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting
of the Trustees, may remove any officer with or without cause, by a vote of a
majority of the Trustees then in office. Any officer or agent appointed by an
officer or committee may be removed with or without cause by such appointing
officer or committee.
-5-
<PAGE> 6
Section 4. Powers and Duties of the Chairman. The Trustees may, but
need not, appoint from among their number a Chairman and chief executive
officer. When present he shall preside at the meetings of the Shareholders and
of the Trustees. He may call meetings of the Trustees and of any committee
thereof whenever he deems it necessary. He shall be an executive officer of
the Trust and shall have, with the President, general supervision over the
business and policies of the Trust, subject to the limitations imposed upon the
President, as provided in Section 5 of this Article VI. The Chairman shall
have the authority to appoint officers of the Trust.
Section 5. Powers and Duties of the Vice Chairman. The Trustees may,
but need not, appoint a Vice Chairman of the Trust. The Vice Chairman may, but
need not, be a Trustee. The Vice Chairman shall have such powers and duties as
the Trustees shall determine from time to time. In the absence of any such
determination, the Vice Chairman shall have the same powers as a vice
president.
Section 6. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to
the control of the Trustees and to the control of any Committees of the
Trustees, within their respective spheres, as provided by the Trustees, he
shall at all times exercise a general supervision and direction over the
affairs of the Trust. He shall have the power to employ attorneys and counsel
for the Trust or any Series or Class thereof and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust or any Series or Class thereof. He shall also have the
power to grant, issue, execute or sign such powers of attorney, proxies or
other documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust or any Series thereof. The President shall have such
other powers and duties, as from time to time may be conferred upon or assigned
to him by the Trustees.
Section 7. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees, shall perform
all the duties and may exercise any of the powers of the President, subject to
the control of the Trustees. Each Vice President shall perform such other
duties as may be assigned to him from time to time by the Trustees and the
President.
-6-
<PAGE> 7
Section 8. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. He shall deliver
all funds of the Trust or any Series or Class thereof which may come into his
hands to such Custodian as the Trustees may employ. He shall render a
statement of condition of the finances of the Trust or any Series or 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 a Treasurer and such
other duties as from time to time may be assigned to him by the Trustees. The
Treasurer shall give a bond for the faithful discharge of his duties, if
required so to do by the Trustees, in such sum and with such surety or sureties
as the Trustees shall require.
Section 9. Powers and Duties of the Secretary. The Secretary shall
keep the minutes of all meetings of the Trustees and of the Shareholders in
proper books provided for that purpose; he shall have custody of the seal of
the Trust; he shall have charge of the Share transfer books, lists and records
unless the same are in the charge of a transfer agent. He shall attend to the
giving and serving of all notices by the Trust in accordance with the
provisions of these By-laws and as required by law; and subject to these
By-laws, he shall in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Trustees.
Section 10. Powers and Duties of Assistant Officers. In the absence
or disability of the Treasurer, any officer designated by the Trustees shall
perform all the duties, and may exercise any of the powers, of the Treasurer.
Each officer shall perform such other duties as from time to time may be
assigned to him by the Trustees. Each officer performing the duties and
exercising the powers of the Treasurer, if any, and any Assistant Treasurer,
shall give a bond for the faithful discharge of his duties, if required so to
do by the Trustees, in such sum and with such surety or sureties as the
Trustees shall require.
Section 11. Powers and Duties of Assistant Secretaries. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
Section 12. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration of
Trust, the compensation of the officers and Trustees and members of an advisory
board shall be fixed from time to time by the Trustees or, in the case of
officers, by any Committee or officer upon whom such power may be
-7-
<PAGE> 8
conferred by the Trustees. No officer shall be prevented from receiving such
compensation as such officer by reason of the fact that he is also a Trustee.
ARTICLE VII
INDEMNIFICATIONS
Section 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, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties with respect to such Person; and all such Persons shall
look solely to the Trust Property, or to the 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 1 of Article VII 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.
-8-
<PAGE> 9
Section 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 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 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;
-9-
<PAGE> 10
(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
(C) 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 3 of Article VII 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 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
-10-
<PAGE> 11
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 3 of Article VII, 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. 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 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 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.
-11-
<PAGE> 12
Section 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 VIII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of January
in each year and shall end on the last day of December in each year, provided,
however, that the Trustees may from time to time change the fiscal year. The
taxable year of each Series of the Trust shall be as determined by the Trustees
from time to time.
ARTICLE IX
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe
but the absence of a seal shall not impair the validity or execution of any
document.
ARTICLE X
SUFFICIENCY AND WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration of Trust or these By-laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed
to have been sent by mail, telegraph, cable or wireless for the purposes of
these By-laws when it has been delivered to a representative of any company
holding itself out as capable of sending notice by such means with instructions
that it be so sent.
-12-
<PAGE> 13
ARTICLE XI
AMENDMENTS
These By-laws may be amended, altered or repealed or new By-laws may
be adopted (a) by a Majority Shareholder Vote (as defined in the Declaration of
Trust), or by the Trustees; provided, however, that no By-Law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration of Trust or the By-Laws, a vote of
the Shareholders. The Trustees shall in no event adopt By-Laws which are in
conflict with the Declaration of Trust, and any apparent inconsistency shall be
construed in favor of the related provisions of the Declaration of Trust.
END OF BY-LAWS
-13-
<PAGE> 1
EXHIBIT 5(a)
JOHN HANCOCK TAX-FREE BOND FUND
Investment Management Contract
Dated: December __, 1994
<PAGE> 2
JOHN HANCOCK TAX-FREE BOND FUND
Boston, Massachusetts
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
Ladies and Gentlemen:
John Hancock Tax-Free Bond Fund (the "Fund") has been organized as a
business trust under the laws of The Commonwealth of Massachusetts to engage in
the business of an investment company. The Fund's shares of beneficial
interest may be classified in the future into series representing the entire
undivided interest in separate portfolios operated as separate investment
companies.
The Trustees of the Fund (the "Trustees") have selected John Hancock
Advisers, Inc. (the "Adviser") to provide overall investment advice and
management for the Fund, and to provide certain other services, as more fully
set forth below, and you are willing to provide such advice, management and
services under the terms and conditions hereinafter set forth. Accordingly,
the Fund agrees with you as follows:
1. Delivery of Documents. The Fund has furnished you with copies,
properly certified or otherwise authenticated, of each of the following:
(a) Declaration of Trust, dated November 13, 1989, as amended from
time to time (the "Declaration of Trust");
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as
investment adviser for the Fund and approving the form of this
Agreement; and
(d) Commitments, limitations and undertakings made by the Fund to
state securities or "blue sky" authorities for the purpose of
qualifying shares of the Fund for sale in such states. The
Fund will furnish you from time to time with copies, properly
certified or otherwise authenticated, of all
<PAGE> 3
amendments of or supplements to the foregoing, if any.
2. Investment and Management Services. You will use your best efforts to
provide to the Fund continuing and suitable investment programs with respect to
investments, consistent with the investment policies, objectives and
restrictions of the Fund. In the performance of the Adviser's duties
hereunder, subject always (x) to the provisions contained in the documents
delivered to the Adviser pursuant to Section 1, as each of the same may from
time to time be amended or supplemented, and (y) to the limitations set forth
in the registration statement of the Fund as in effect from time to time under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended (the "1940 Act"), the Adviser will, at its own expense:
(a) furnish the Fund with advice and recommendations, consistent
with the investment policies, objectives and restrictions of
the Fund, with respect to the purchase, holding and
disposition of portfolio securities;
(b) advise the Fund in connection with policy decisions to be made
by the Trustees or any committee thereof with respect to the
Fund's investments and, as requested, furnish the Fund with
research, economic and statistical data in connection with the
Fund's investments and investment policies;
(c) provide administration of the day-to-day investment operations
of the Fund;
(d) submit such reports relating to the valuation of the Fund's
securities as the Trustees may reasonably request;
(e) assist the Fund in any negotiations relating to the Fund's
investments with issuers, investment banking firms, securities
brokers or dealers and other institutions or investors;
(f) consistent with the provisions of Section 6 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by you, provided
that in connection with the placing of such orders and the
selection of such brokers or dealers you shall seek to obtain
execution and pricing within the policy guidelines determined
by the Trustees and set forth in the Prospectus and Statement
of Additional Information of the Fund as in effect from time
to time;
(g) provide office space and equipment and supplies, the use of
accounting equipment when required, and necessary executive,
clerical and secretarial personnel for the administration of
the affairs of the Fund;
(h) from time to time or at any time requested by the Trustees,
make reports to the Trust of your performance of the foregoing
services and furnish advice and recommendations with respect
to other aspects of the business and affairs of the Fund;
<PAGE> 4
(i) maintain and preserve the records required by the Investment
Company Act of 1940, as amended (the "1940 Act"), to be
maintained and preserved by the Fund (you agree that such
records are the property of the Fund and will be surrendered
to the Fund promptly upon request therefor);
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as
you may deem necessary or useful in the discharge of your
duties hereunder;
(k) oversee, and use your best efforts to assure the performance
of the activities and services of the custodian, transfer
agent or other similar agents retained by the Fund; and
(l) give instructions to the Fund's custodian as to deliveries of
securities to and from such custodian and transfer of payment
of cash for the account of the Fund.
The Adviser may engage one or more investment advisers which are
either registered as such or specifically exempt from registration under the
Investment Advisers Act of 1940, as amended, to act as subadvisers to provide
with respect to the Fund certain services set forth in Section 2 of this
Agreement, all as shall be set forth in a written contract, which contract
shall be subject to approval by the vote of a majority of the Trustees of the
Fund who are not interested persons of the Adviser, the subadviser or the Fund,
cast in person at a meeting called for the purpose of voting on such approval
and by the vote of a majority of the outstanding voting securities of the Fund
and otherwise consistent with the terms of the 1940 Act. Any fee, compensation
or expense to be paid to any subadviser shall be paid by the Adviser, and no
obligation to the subadviser shall be incurred on the Fund's behalf, except as
agreed upon by the Trustees of the Fund and otherwise consistent with the terms
of the 1940 Act.
3. Expenses of the Fund. You will pay:
(a) the compensation and expenses of all officers and employees of
the Fund;
(b) the expenses of office rent, telephone and other utilities,
office furniture, equipment, supplies and other office
expenses of the Fund;
(c) any other expenses incurred by you in connection with the
performance of your duties hereunder; and
(d) premiums for such insurance as may be agreed upon by you and
the Trustees.
4. Expenses of the Fund Not Paid by You. You will not be required to pay
any expenses which this Agreement does not expressly make payable by you. In
particular,
<PAGE> 5
and without limiting the generality of the foregoing but subject to the
provisions of Section 3, you will not be required to pay:
(a) any and all expenses, taxes and governmental fees incurred by
the Fund prior to the effective date of this Agreement;
(b) without limiting the generality of the foregoing clause (a),
the expenses of organizing the Fund (including without
limitation, legal, accounting and auditing fees and expenses
incurred in connection with the matters referred to in this
clause (b)), of initially registering the shares of the Fund
under the Securities Act of 1933, as amended, and of
qualifying the shares for sale under state securities laws for
the initial offering and sale of shares;
(c) the compensation and expenses of Trustees who are not
interested persons (as used in this Agreement, such term shall
have the meaning specified in the 1940 Act) of you, and of
independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through you;
(d) legal, accounting and auditing fees and expenses of the Fund;
(e) the fees or disbursements of custodians and depositories of
the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(f) taxes and governmental fees assessed against the Fund's assets
and payable by the Fund;
(g) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the
Fund;
(h) brokers' commissions and underwriting fees; and
(i) the expense of periodic calculations of the net asset value of
the shares of the Fund.
5. Compensation of the Adviser. For all services to be rendered,
facilities furnished and expenses paid or assumed by you as herein provided,
the Fund will pay you monthly, a fee at the annual rate of 0.55% of the Fund's
average daily net assets.
In the event that normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any limitation
imposed by a state where the Fund is registered to sell shares of common stock,
the fee payable to the Adviser will be reduced to the extent of such excess and
the Adviser will make any arrangements necessary to eliminate any remaining
excess expenses.
6. Avoidance of Inconsistent Position. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither your nor any
investment management subsidiary of yours, nor any of your or their directors,
officers or employees
<PAGE> 6
will act as principal or agent or receive any commission. If any occasion
shall arise in which you advise persons concerning the shares of the Fund, you
will act solely on your own behalf and not in any way on behalf of the Fund.
7. No Partnership or Joint Venture. The Fund and you are not partners of
or joint venturers with each other and nothing herein shall be construed so as
to make them such partners or joint venturers or impose any liability as such
on any of them.
8. Name of the Fund. The Fund may use the name "John Hancock" or any
name derived from or similar to the name "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" only for so long as this Agreement
remains in effect. At such time as this Agreement shall no longer be in
effect, the Fund will (to the extent they lawfully can) cease to use such a
name or any other name indicating that the Fund is advised by or otherwise
connected with you. The Fund acknowledges that it has adopted the name "John
Hancock Tax-Free Bond Fund" through permission of John Hancock Mutual Life
Insurance Company, a Massachusetts insurance company, and agrees that John
Hancock Mutual Life Insurance Company reserves to itself and any successor to
its business the right to grant the non-exclusive 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 John Hancock Mutual Life
Insurance Company or any subsidiary or affiliate thereof shall be the
investment adviser.
9. Limitation of Liability of the Adviser. You shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the the
Fund in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on your
part in the performance of your duties or from reckless disregard by you of
your obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Fund shall
be deemed, when acting within the scope of his employment by the Fund, to be
acting in such employment solely for the Fund and not as your employee or
agent.
10. Duration and Termination of this Agreement. This Agreement shall
remain in force until the second anniversary of the date upon which this
Agreement was executed by the parties hereto, and from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by (a) a majority of the Trustees who are not interested persons of you or
(other than as trustees) of the Fund, cast in person at a meeting called for
the purpose of voting on such approval, and (b) either (i) the Trustees or (ii)
a majority of the outstanding voting securities of the Fund. This Agreement
may, on 60 days' written notice, be terminated at any time without the payment
of any penalty by the Fund by vote of a majority of the outstanding voting
securities of the Fund, by the Trustees or by you. Termination of this
Agreement with respect to the Fund shall not be deemed to terminate or
otherwise invalidate any provisions of any contract between you and any other
series of the Fund. This Agreement shall automatically terminate in the event
of its assignment. In interpreting
<PAGE> 7
the provisions of this Section 10, the definitions contained in Section 2(a) of
the 1940 Act (particularly the definitions of "assignment," "interested person"
and "voting security") shall be applied.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of you or (other than as Trustees) of the Fund, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
a majority of the outstanding voting securities of the Fund, as defined in the
1940 Act.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The name John Hancock Tax-Free Bond Fund is the
designation of the Trustees under the Declaration of Trust, dated November 13,
1989 as amended from time to time. The Declaration of Trust and all amendments
thereto have been filed with the Secretary of State of The Commonwealth of
Massachusetts. The obligations of the Fund are not personally binding upon,
nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Fund, but only the Fund's
property shall be bound. The Fund shall not be liable for the obligations of
any other future series, if any, of the Fund.
Very truly yours,
JOHN HANCOCK TAX-FREE BOND FUND
By:______________________________
Thomas M. Simmons
President
The foregoing contract
is hereby agreed to as
of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By:_______________________
Anne C. Hodsdon
Executive Vice President
<PAGE> 1
EXHIBIT 5(b)
JOHN HANCOCK TAX-FREE BOND FUND
SUB-ADVISORY AGREEMENT
Agreement made as of December __, 1994 between John Hancock Advisers,
Inc., (the "Investment Manager"), and Transamerica Investment Services, Inc., a
Delaware corporation (the "Sub-adviser").
WHEREAS, the Investment Manager has entered into an Investment
Management Agreement dated December __, 1994 (the "Investment Management
Agreement"), with John Hancock Tax-Free Bond Fund (the "Fund"), pursuant to
which the Investment Manager will act as Investment Manager of the Fund.
WHEREAS, the Investment Manager desires to retain the Sub-adviser to
provide investment advisory services to the Fund in connection with the
management of the Fund and the Sub-adviser is willing to render such investment
advisory services.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Investment Manager
and of the Trustees of the Fund, the Sub-adviser shall manage the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention and disposition thereof, in accordance with the Fund's
investment objectives, policies and restrictions as stated in the Prospectus
(such Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from time to time, being herein called the
"Prospectus"), and subject to the following understandings:
(i) The Sub-adviser shall provide supervision of
the Fund's investments and shall determine from time to time what
investments and securities will be purchased, retained, sold or loaned
by the Fund, and what portion of the assets will be invested or held
uninvested as cash.
(ii) In the performance of its duties and
obligations under this Agreement, the Sub-adviser shall act in
conformity with the Declaration of Trust, By-Laws and Prospectus of
the Fund and with the instructions and directions of the Investment
Manager and of the Trustees of the Fund and will conform to and comply
with the requirements of the Investment Company Act of 1940 (the "1940
Act"), the Internal Revenue Code, as amended, and all other applicable
federal and state laws and regulations.
(iii) The Sub-adviser shall determine the
securities to be purchased or sold by the Fund and will place orders
with or through such persons, brokers or dealers in the manner as set
forth in the Fund's Registration Statement and Prospectus or as the
Trustees may direct from time to time.
<PAGE> 2
(iv) The Sub-adviser shall provide both the Fund's
Custodian and the Investment Manager on each business day with
information relating to all transactions concerning the Fund's assets.
(v) The investment management services provided
by the Sub-adviser hereunder are not to be deemed exclusive, and the
Sub-adviser shall be free to render similar services to others.
(b) The Sub-adviser shall authorize and permit any of its
directors, officers and employees who may be elected as Trustees or officers of
the Fund to serve in the capacities in which they are elected. Services to be
furnished by the Sub-adviser under this Agreement may be furnished through the
medium of any of such directors, officers or employees.
(c) The Sub-adviser shall keep the Fund's books and
records required to be maintained by the Sub-adviser pursuant to Paragraph
1(a) hereof and as required by Rule 31a-1 (pursuant to subsections (b)(5),
(b)(9), (b)(10), (b)(11) and (f)) and shall timely furnish to the Investment
Manager all information relating to the Sub- adviser's services hereunder
needed by the Investment Manager to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The Sub-adviser agrees that
all records which it maintains for the Fund are the property of the Fund and
the Sub-adviser will surrender promptly to the Fund any of such records upon
the Fund's request, provided however that the Sub-adviser may retain a copy of
such records. The Sub-adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Securities and Exchange Commission under the
1940 Act any such records as are required to be maintained by it pursuant to
paragraph 1(a) hereof.
2. The Investment Manager shall continue to have responsibility
for all services to be provided to the Fund pursuant to the Investment
Management Agreement and shall oversee and review the Sub-adviser's performance
of its duties under this Agreement.
3. The Investment Manager shall reimburse the Sub-adviser for
reasonable costs and expenses incurred by the Sub-adviser in furnishing the
services described in paragraph 1 hereof, such costs and expenses to be
determined in a manner acceptable to the Investment Manager and Sub-adviser.
4. The Sub-adviser shall not be liable for any error of judgment
or for any loss suffered by the Fund or the Investment Manager in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the Sub-adviser's part in
the performance of its duties or from its reckless disregard of its obligations
and duties under this Agreement.
5. This Agreement shall continue in effect for a period of more
than one year from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
1940 Act; provided, however, that this Agreement may be terminated by the Fund
at any time, without the payment of any penalty, by the Trustees of the Fund or
by vote of a majority of the outstanding voting
<PAGE> 3
securities (as defined in the 1940 Act) of the Fund, or by the Investment
Manager or the Sub-adviser at any time, without the payment of any penalty, on
not less than 60 days' written notice to the other party and the Fund (in the
case of termination by a party), or to each party (in the case of termination
by the Fund). This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).
6. Nothing in this Agreement shall limit or restrict the right of
any of the Sub-adviser's directors, officers or employees who may also be a
Trustee, officer or employee of the Fund to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any business, whether of a similar or a dissimilar nature, nor limit nor
restrict the Sub-adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
7. This Agreement may be amended by mutual consent, but the
consent of the Fund must be obtained in conformity with the requirements of the
1940 Act.
8. This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts and the applicable provisions of the 1940
Act. To the extent the applicable laws of the Commonwealth of Massachusetts or
any of the provisions herein conflict with the applicable provisions of the
1940 Act, the latter shall control
9. The obligations of the Fund are not personally binding upon,
nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Fund, but only the Fund's
property shall be bound.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
JOHN HANCOCK ADVISERS, INC.
By:__________________________________
Anne C. Hodsdon
Executive Vice President
TRANSAMERICA INVESTMENT SERVICES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 1
EXHIBIT 5(c)
AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of December,
1994 by and between John Hancock Tax-Free Bond Fund, a Massachusetts business
trust (the "Trust"), and Transamerica Fund Management Company, a Delaware
corporation (the "Investment Adviser"), and Transamerica Fund Distributors,
Inc., a Maryland corporation (the "Distributor"):
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, each of the Investment Adviser and the Distributor are
registered as an investment adviser under the Investment Advisers Act of 1940,
and engages in the business of acting as Investment Adviser or Distributor and
providing certain other services to certain investment companies, including the
Trust; and
WHEREAS, each of the Investment Adviser and the Distributor are
registered as broker dealers under the Securities Exchange Act of 1934, as
amended, and serves as the principal underwriter of the shares of each of the
investment companies for which the Investment Adviser and the Distributor serve
as investment advisers; and
WHEREAS, the Trust desires to retain the Investment Adviser and the
Distributor to render certain additional services to the Trust regarding
certain bookkeeping, accounting and administrative services (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, each of the Investment Adviser and the Distributor desires to
be retained to perform such services on said terms and conditions;
Now, Therefore, this agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Trust and each of the Investment Adviser and the Distributor
agree as follows:
1. The Trust hereby retains each of the Investment Adviser and the
Distributor, as the case may be, to provide to the Trust:
A) such accounting and bookkeeping services and functions
as are reasonably necessary for the operation of the Trust. Such
services shall include, but shall not be limited to, preparation and
maintenance of the following books, records and other documents: (1)
journals containing daily itemized records of all purchases and sales,
and receipts and deliveries of securities and all receipts and
disbursements of cash and all other debits and credits, in the form
required by Rule 31a-1(b)(1)
<PAGE> 2
under the Act; (2) general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts, in the form
required by Rules 31a-1(b)(2)(i)-(iii) under the Act; (3) a securities
record or ledger reflecting separately for each portfolio security as
of trade date all "long" and "short" positions carried by the Trust for
the account of the Trust, if any, and showing the location of all
securities long and the off-setting position to all securities short,
in the form required by Rule 31a-1(b)(3) under the Act; (4) a record of
all portfolio purchases or sales, in the form required by Rule
31a-1(b)(6) under the Act; (5) a record of all puts, calls, spreads,
straddles and all other options, if any, in which the Trust has any
direct or indirect interest or which the Trust has granted or
guaranteed, in the form required by Rule 31a-1(b)(7) under the Act; (6)
a record of the proof of money balances in all ledger accounts
maintained pursuant to this Agreement, in the form required by Rule
31a-1(b)(8) under the Act; and (7) price make-up sheets and such
records as are necessary to reflect the determination of the Trust's
net asset value. The foregoing books and records shall be maintained by
the Investment Adviser in accordance with and for the time periods
specified by applicable rules and regulations, including Rule 31a-2
under the Act. All such books and records shall be the property of the
Trust and upon request therefor, the Investment Adviser shall surrender
to the Trust such of the books and records so requested; and B) certain
administrative services including, but not limited to, administrative
services to shareholders of the Trust to respond to inquiries related
to shareholder accounts, processing confirmed purchase and redemption
transactions, processing certain shareholder transactions, and
maintaining dealer information related to shareholder accounts and
typesetting and other financial printing services for the Trust.
2. Each of the Investment Adviser and the Distributor shall, at
its own expense, maintain such staff and employ or retain such personnel and
consult with such other persons as it shall from time to time determine to be
necessary or useful to the performance of its obligations under this Agreement.
Without limiting the generality of the foregoing, such staff and personnel
shall be deemed to include officers of the Investment Adviser, the Distributor
and persons employed or otherwise retained by the Investment Adviser and the
Distributor to provide or assist in providing of the services to the Trust.
3. Each of the Investment Adviser and the Distributor, as the case
may be, shall provide such office space, facilities and equipment (including,
but not limited to, telecommunication equipment and general office supplies)
and such clerical help and other services as shall be necessary to provide the
services to the Trust. In addition, each of the Investment Adviser and the
Distributor, as the case may be, may arrange on behalf of the Trust to obtain:
(1) data processing or other services, subject to approval by a majority of the
Trust's Board of Trustees, as necessary to assist it in providing the Services
to the Trust, (2) pricing information regarding the Trust's investment
securities from such company or companies as are approved by a majority of the
Trust's Board of Trustees and (3) computer and telecommunication lines and
equipment used to provide the aforementioned services to the Trust, subject to
approval by a majority of the Trust's Board of Trustees and the Trust shall be
financially responsible to such company or companies as aforesaid, for the
reasonable cost of such services.
4. The Trust will, from time to time, furnish or otherwise make
available to each
<PAGE> 3
of the Investment Adviser and the Distributor, as the case may be, such
information relating to the business and affairs of the Trust as the Investment
Adviser and the Distributor, as the case may be, may each reasonably require in
order to discharge its duties and obligations hereunder.
5. The Trust shall reimburse the Investment Adviser and the
Distributor, as the case may be, for: (1) a portion of the compensation,
including all benefits, of officers and employees of the Investment Adviser and
the Distributor, as the case may be, based upon the amount of time that such
persons actually spend in providing or assisting in providing the Services to
the Trust (including necessary supervision and review); and (2) such other
direct expenses, including, but not limited to, those listed in paragraph 3
above, incurred on behalf of the Trust that are associated with the providing
of the Services. In addition the Company will pay the Investment Adviser and
the Distributor a per account Administrative Fee based on the shareholder
service and recordkeeping duties performed. Such fees will be approved by a
majority of the Trust's Board of Trustees (See Schedule A). In no event,
however, shall such reimbursement exceed levels that are fair and reasonable in
light of the usual and customary charges made by others for services of the
same nature and quality. Compensation under this Agreement shall be calculated
and paid monthly.
6. The Investment Adviser and the Distributor will each permit
representatives of the Trust, including the Trust's independent auditors, to
have reasonable access to the personnel and records of the Investment Adviser
and the Distributor in order to enable such representatives to monitor the
quality of services being provided and the determination of reimbursements due
the Investment Adviser and the Distributor pursuant to this Agreement. In
addition, the Investment Adviser and the Distributor shall promptly deliver to
the Board of Trustees of the Trust such information as may reasonably be
requested from time to time to permit the Board of Trustees to make an informed
determination regarding continuation of this Agreement and the payments
contemplated to be made hereunder.
7. The Investment Adviser and the Distributor each will use its
best efforts in providing the Services, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, neither the Investment Adviser nor the Distributor shall
be liable to the Trust or any of the Trust investors for any error or judgment
or mistake of law or any act of omission either by the Investment Adviser or
the Distributor or for any losses sustained by the Trust or the Trust
investors.
8. The Investment Adviser and the Distributor each may assign all
or any part of their respective obligations under this Agreement, and any such
assignment will not cause this Agreement to terminate. Notwithstanding any such
assignment, the Investment Adviser and the Distributor shall remain responsible
for the performance of their respective obligations hereunder.
9. This Agreement shall remain in effect until no later than
December 20, 1996 and from year to year thereafter provided such continuance is
approved at least annually by the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested persons" (as defined
in the Act) of any such party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval; and further provided,
however, that (a) the Trust may, at any time and without the payment of any
penalty, terminate this
<PAGE> 4
Agreement upon thirty days written notice to the Investment Adviser or the
Distributor and (b) either the Investment Adviser or the Distributor may
terminate this Agreement without payment of penalty on sixty days' written
notice to the Trust. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed post-paid, to the other party at
the principal office of such party.
10. This Agreement shall be construed in accordance with the laws
of The Commonwealth of Massachusetts and the applicable provisions of the Act.
To the extent the applicable law of The Commonwealth of Massachusetts or any of
the provisions herein conflict with the applicable provisions of the Act, the
latter shall control.
11. The Trustees have authorized the execution of this Agreement in
their capacity as Trustees and not individually and the Investment Adviser and
the Distributor agree that neither the shareholders of the Trust nor the
Trustees nor any officer, employee, representative or agent of the Trust shall
be personally liable upon, nor shall resort be had to their private property
for the satisfaction of, obligations given, executed or delivered on behalf of
or by the Trust; that the shareholders, Trustees, officers, employees,
representatives and agents of the Trust shall not be personally liable
hereunder; and that they shall look solely to the property of that Trust for
the satisfaction of any claim hereunder.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
TRANSAMERICA FUND MANAGEMENT JOHN HANCOCK TAX-FREE BOND FUND
COMPANY
By: By:
----------------------- ------------------------
Anne C. Hodsdon Thomas M. Simmons
President President
TRANSAMERICA FUND DISTRIBUTORS, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
<PAGE> 5
Schedule A
Reimbursement for shareholder and other activities under Section 1.B of the
Administrative Services Agreements.
<TABLE>
<CAPTION>
Reimbursement
Amount per
Fund Account per Year
- ---- ----------------
<S> <C>
John Hancock Capital Growth Fund $4
John Hancock California Tax-Free Income Fund,
Class A & Class B $4
John Hancock Cash Reserve, Inc. $3
John Hancock Tax-Free Bond Fund, Class A &
Class B $4
John Hancock Bond Fund
- ----------------------
John Hancock Investment Quality Bond Fund $4
John Hancock Government Securities Trust $4
John Hancock U.S. Government Trust $4
John Hancock Intermediate Government Trust $4
John Hancock Adjustable U.S. Government Fund $4
John Hancock Adjustable U.S. Government Trust,
Class A & Class B $4
John Hancock Investment Trust
- -----------------------------
John Hancock Growth and Income Fund,
Class A & Class B $4
John Hancock Series. Inc.
- -------------------------
John Hancock Money Market Fund B $4
John Hancock Government Income Fund $4
John Hancock High Yield Tax-Free Fund $4
John Hancock High Yield Bond Fund $4
John Hancock Emerging Growth Fund,
Class A & Class B $4
John Hancock Global Resources Fund $4
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve $3
- -----------------------------
</TABLE>
Additional Duties to be Performed Under Section 1.B of the Administrative
Services Agreement:
In addition to responding to inquiries related to shareholder accounts,
Transamerica Fund Management Co. ("TFMC") or Transamerica Fund Distributors,
Inc. ("TFD"), as the case may be, will also process shareholder telephone
requests for exchanges, Fed wire purchases and telephone redemptions. TFMC and
TFD, as the case may be, will also process shareholder wire order purchases and
redemption requests placed through dealers. In addition, TFMC and TFD, as the
case may be, will maintain dealer, branch, and representative data on the
transfer agency system for all shareholder accounts.
<PAGE> 6
John Hancock U.S. Government Cash Reserve $3
Additional Duties to be Performed Under Section 1.B of the Administrative
Services Agreement:
In addition to responding to inquiries related to shareholder accounts,
Transamerica Fund Management Co. ("TFMC") or Transamerica Fund Distributors,
Inc. ("TFD"), as the case may be, will also process shareholder telephone
requests for exchanges, Fed wire purchases and telephone redemptions. TFMC and
TFD, as the case may be, will also process shareholder wire order purchases and
redemption requests placed through dealers. In addition, TFMC and TFD, as the
case may be, will maintain dealer, branch, and representative data on the
transfer agency system for all shareholder accounts.
<PAGE> 1
EXHIBIT 6(a)
December __, 1994
John Hancock Broker Distribution Services, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Distribution Agreement
Dear Sir:
JOHN HANCOCK TAX-FREE BOND FUND (the "Fund") has been organized as a business
trust under the laws of The Commonwealth of Massachusetts to engage in the
business of an investment company. The Fund's Board of Trustees has selected
you to act as principal underwriter (as such term is defined in Section
2(a)(29) of the Investment Company Act of 1940, as amended) of the shares of
beneficial interest ("shares") of the Fund and you are willing, as agent for
the Fund, to sell the shares to the public, to broker-dealers or to both, in
the manner and on the conditions hereinafter set forth. Accordingly, the Fund
hereby agrees with you as follows:
1. Delivery of Documents. The Fund will furnish you promptly with
copies, properly certified or otherwise authenticated, of any registration
statements filed by it with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, together with any financial statements and exhibits included therein,
and all amendments or supplements thereto hereafter filed.
2. Registration and Sale of Additional Shares. The Fund will from time
to time use its best efforts to register under the Securities Act of 1933, as
amended, such shares not already so registered as you may reasonably be
expected to sell as agent on behalf of the Fund. This Agreement relates to the
issue and sale of shares that are duly authorized and registered and available
for sale by the Fund if, but only if, the Fund sees fit to sell them. You and
the Fund will cooperate in taking such action as may be necessary from time to
time to qualify shares for sale in Massachusetts and in any other states
mutually agreeable to you and the Fund, and to maintain such qualification if
and so long as such shares are duly registered under the Securities Act of
1933, as amended.
3. Solicitation of Orders. You will use your best efforts (but only in
states in which you may lawfully do so) to obtain from investors unconditional
orders for shares authorized for issue by the Fund and registered under the
Securities Act of 1933, as amended, provided that you may in your discretion
refuse to accept orders for such shares from any particular applicant.
4. Sale of Shares. Subject to the provisions of Sections 5 and 6 hereof
and to such minimum purchase requirements as may from time to time be currently
indicated in the Fund's prospectus, you are authorized to sell as agent on
behalf of the Fund authorized and issued shares registered under the Securities
Act of 1933, as amended. Such sales may be made by you on behalf of the Fund
by accepting unconditional orders to purchase such shares placed with your
investors. The sales price to the public of such shares shall be the public
offering
<PAGE> 2
price as defined in Section 6 hereof.
5. Sale of Shares to Investors by the Fund. Any right granted to you to
accept orders for shares or make sales on behalf of the Fund will not apply to
shares issued in connection with the merger or consolidation of any other
investment company with the Fund or the Fund's acquisition, by purchase or
otherwise, of all or substantially all the assets of any investment company or
substantially all the outstanding shares of any such company, and such right
shall not apply to shares that may be offered or otherwise issued by the Fund
to shareholders by virtue of their being shareholders of the Fund.
6. Public Offering Price. All shares sold by you as agent for the Fund
will be sold at the public offering price, which will be determined in the
manner provided in the Fund's prospectus or statement of additional
information, as now in effect or as it may be amended.
7. No Sales Discount. The Fund shall receive the applicable net asset
value on all sales of shares by you as agent of the Fund.
8. Delivery of Payments. You will deliver to the Fund's transfer agent
all payments made pursuant to orders accepted by you, and accompanied by proper
applications for the purchase of shares, no later than the first business day
following the receipt by you in your home office of such payments and
applications.
9. Suspension of Sales. If and whenever a suspension of the right of
redemption or a postponement of the date of payment or redemption has been
declared pursuant to the Fund's Declaration of Trust and has become effective,
then, until such suspension or postponement is terminated, no further orders
for shares shall be accepted by you except such unconditional orders placed
with you before you have knowledge of the suspension. The Fund reserves the
right to suspend the sale of shares and your authority to accept orders for
shares on behalf of the Fund if in the judgment of a majority of the Fund's
Board of Trustees, it is in the best interests of the Fund to do so, such
suspension to continue for such period as may be determined by such majority;
and in that event, no shares will be sold by the Fund or by you on behalf of
the Fund while such suspension remains in effect except for shares necessary to
cover unconditional orders accepted by you before you had knowledge of the
suspension.
10. Expenses. The Fund will pay (or will enter into arrangements
providing that persons other than you will pay) all fees and expenses in
connection with the preparation and filing of any registration statement and
prospectus or amendments thereto under the Securities Act of 1933, as amended,
covering the issue and sale of shares and in connection with the qualification
of shares for sale in the various states in which the Fund shall determine it
advisable to qualify such shares for sale. It will also pay the issue taxes or
(in the case of shares redeemed) any initial transfer taxes thereon. You will
pay all expenses of printing prospectuses and other sales literature, all fees
and expenses in connection with your qualification as a dealer in various
states, and all other expenses in connection with the sale and offering for
sale of the shares of the Fund which have not been herein specifically
allocated to the Fund.
11. Conformity with Law. You agree that in selling the shares you will
duly conform in all respects with the laws of the United States and any state
in which such shares may be offered for sale by you pursuant to this Agreement.
<PAGE> 3
12. Indemnification. You agree to indemnify and hold harmless the Fund
and each of its Trustees and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the Securities Act of 1933, as
amended, against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses) to which the Fund or such Trustees,
officers or controlling person may become subject under such Act, under any
other statute, at common law or otherwise, arising out of the acquisition of
any shares by any person which (a) may be based upon any wrongful act by you or
any of your employees or representatives or (b) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus or statement of additional information
covering shares of a Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon information furnished or
confirmed in writing to the Fund by you, or (c) may be incurred or arise by
reason of your acting as the Fund's agent instead of purchasing and reselling
shares as principal in distributing shares to the public, provided that in no
case is your indemnity in favor of a Trustee or officer of the Fund or any
other person deemed to protect such Trustee or officer of the Fund or other
person against any liability to which any such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties or by reason of his reckless disregard of obligations
and duties under this Agreement.
You are not authorized to give any information or to make any
representations on behalf of the Fund or in connection with the sale of shares
other than the information and representations contained in a registration
statement, prospectus, or statement of additional information covering shares,
as such registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time. No person other
than you is authorized to act as principal underwriter for the Fund.
13. Duration and Termination of this Agreement. This Agreement shall
remain in force until two years from the date hereof and from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) a majority of the Board of Trustees of the Fund who are
not interested persons of you (other than as Trustees) or of the Fund, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
either (i) the Board of Trustees of the Fund, or (ii) a majority of the
outstanding voting securities of the Fund. This Agreement may, on 60 days'
written notice, be terminated at any time, without the payment of any penalty,
by the Board of Trustees of the Fund, by a vote of a majority of the
outstanding voting securities of the Fund, or by you. This Agreement will
automatically terminate in the event of its assignment by you. In interpreting
the provisions of this Section 13, the definitions contained in Section 2(a) of
the Investment Company Act of 1940, as amended (particularly the definitions of
"interested person," "assignment" and "voting security"), shall be applied.
14. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. If the Fund should at any time deem it
necessary or advisable in the best interests of the Fund that any amendment of
this agreement be made in order to comply with the recommendations or
<PAGE> 4
requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under state or federal tax laws and should
notify you of the form of such amendment, and the reasons therefor, and if you
should decline to assent to such amendment, the Fund may terminate this
Agreement forthwith. If you should at any time request that a change be made
in the Fund's Declaration of Trust or By-Laws, or in its methods of doing
business, in order to comply with any requirements of federal law or
regulations of the Securities and Exchange Commission or of a national
securities association of which you are or may be a member, relating to the
sale of shares, and the Fund should not make such necessary change within a
reasonable time, you may terminate this Agreement forthwith.
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Fund, but only the
Fund's property shall be bound.
Very truly yours,
JOHN HANCOCK TAX-FREE BOND FUND
By:___________________________________
Thomas M. Simmons
President
The foregoing Agreement is hereby
accepted as of the date hereof
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
By:__________________________________________
C. Troy Shaver, Jr.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 6(b)
SOLICITING DEALER AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
Boston -- Massachusetts -- 02199-7603
<PAGE> 2
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
SOLICITING DEALER AGREEMENT
Date
------------------------------
John Hancock Funds, Inc. ("the Distributor" or "Distributor") is the
principal distributor of the shares of beneficial interest (the "securities")
of each of the John Hancock Funds, ("We" or "us"), (the "Funds"). Such Funds
are those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You represent that you are a member
of the National Association of Securities Dealers, Inc., (the "NASD") and,
accordingly, we invite you to become a non-exclusive soliciting dealer to
distribute the securities of the Funds and you agree to solicit orders for the
purchase of the securities on the following terms. Securities are offered
pursuant to each Fund's prospectus and statement of additional information, as
such prospectus and statement of additional information may be amended from
time to time. To the extent that the prospectus or statement of additional
information contains provisions that are inconsistent with the terms of this
Agreement, the terms of the prospectus or statement of additional information
shall be controlling.
OFFERINGS
1. You agree to abide by the Rules of Fair Practice of the NASD and to all
other rules and regulations that are now or may become applicable to
transactions hereunder.
2. As principal distributor of the Funds, we shall have full authority to
take such action as we deem advisable in respect of all matters pertaining to
the distribution. This offer of shares of the Funds to you is made only in
such jurisdictions in which we may lawfully sell such shares of the Funds.
3. You shall not make any representation concerning the Funds or their
securities except those contained in the then- current prospectus or
statement of additional information for each Fund.
4. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by the Distributor or the
Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
5. You are not authorized to act as our agent. Nothing shall constitute you
as a syndicate, association, joint venture, partnership, unincorporated
business, or other separate entity or otherwise partners with us, but you shall
be liable for your proportionate share of any tax, liability or expense based
on any claim arising from the sale of shares of the Funds under this Agreement.
We shall not be under any liability to you, except for obligations expressly
assumed by us in this Agreement and liabilities under Section 11(f) of the
Securities Act of 1933, and no obligations on our part shall be implied or
inferred herefrom.
-2-
<PAGE> 3
6. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All dealers offering shares of
the Funds and their associated persons agree to comply with these general
suitability and compliance standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your registered representatives in light of all the facts and circumstances, to
ascertain that the class of shares to be purchased by each investor is
appropriate and suitable. These recommendations should be based on several
factors, including but not limited to:
(A) the amount of money to be invested initially and over a period of
time;
(B) the current level of front-end sales load or back-end sales load
imposed by the Fund;
(C) the period of time over which the client expects to retain the
investment;
(D) the anticipated level of yield from fixed income funds' Class A and
Class B shares;
(E) any other relevant circumstances such as the availability of
reduced sales charges under letters of intent and/or rights of
accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Soliciting Dealer Agreement for compliance with the foregoing standards.
In certain instances, it may be appropriate to discuss the purchase with the
registered representatives involved or to review the advantages and
disadvantages of selecting one class of shares over another with the client.
The Distributor will not accept orders for Class B Shares in any Fund from you
for accounts maintained in street name. Trades for Class B Shares will only be
accepted in the name of the shareholder.
7. CLASS C SHARES - Certain mutual funds distributed by the Distributor may be
offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
8. Orders for securities received by you from investors will be for the sale
of the securities at the public offering price, which will be the net asset
value per share as determined in the manner provided in the relevant Fund's
prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then- current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
-3-
<PAGE> 4
In addition to the foregoing, you acknowledge and agree to the initial
and subsequent investment minimums, which may vary from year to year, as
described in the then-current prospectus for each Fund.
9. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
10. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then-current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
11. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by a registered representative in your employ and remitted to us
promptly by you, (b) where a subsequent investment is made to an account
established by a registered representative in your employ or (c) where a
subsequent investment is made to an account established by a broker/dealer
other than you and is accompanied by a signed request from the account
shareholder that your registered representative receive the Reallowance for
that investment and/or for subsequent investments made in such account. If for
any reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
12. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the the prospectus). To the
extent you provide distribution and marketing services in the promotion of the
sale of shares of these Funds, including furnishing services and assistance to
your customers who invest in and own shares of such Funds and including, but
not limited to, answering routine inquiries regarding such Funds and assisting
in changing distribution options, account designations and addresses, you may
be entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
13. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
14. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
15. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
-4-
<PAGE> 5
INDEMNIFICATION
16. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
17. NSCC INDEMNITY - SHAREHOLDER AND HOUSE ACCOUNTS - In consideration of the
Distributor and John Hancock Investor Services Corporation ("Investor
Services") liquidating, exchanging, and/or transferring unissued shares of the
Funds for your customers without the use of original or underlying
documentation supporting such instructions (e.g., a signed stock power or
signature guarantee), you hereby agree to indemnify the Distributor, Investor
Services and each respective Fund against any losses, including reasonable
attorney's fees, that may arise from such liquidation exchange, and/or
transfer of unissued shares upon your direction. This indemnification shall
apply only to the liquidation, exchange and/or transfer of unissued shares in
shareholder and house accounts executed as wire orders transmitted via NSCC's
Fund/SERVsystem. You represent and warrant to the Funds, the Distributor and
Investor Services that all such transactions shall be properly authorized by
your customers.
The indemnification in this Section 16 shall not apply to any losses
(including attorney's fees) caused by a failure of the Distributor, Investor
Services or a Fund to comply with any of your instructions governing any of the
above transactions, or any negligent act or omission of the Distributor,
Investor Services or a Fund, or any of their directors, officers, employees or
agents. All transactions shall be settled upon your confirmation through NSCC
transmission to Investor Services.
The Distributor, Investor Services or you may revoke the indemnity
contained in this Section 16 upon prior written notice to each of the other
parties hereto, and in the case of such revocation, this indemnity agreement
shall remain effective as to trades made prior to such revocation.
MISCELLANEOUS
18. We will supply to you at our expense additional copies of the prospectus
and statement of additional information for each of the Funds and any printed
information supplemental to such material in reasonable quantities upon
request.
19. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
20. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
21. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE> 6
SOLICITING DEALER
-------------------------------------------------
Name of Organization
By:-------------------------------------------------
Authorized Signature of Soliciting Dealer
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the following
information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
-------------------------------- ------------------------------
<TABLE>
<S> <C>
TO BE COMPLETED BY: TO BE COMPLETED BY:
JOHN HANCOCK FUNDS, INC. JOHN HANCOCK INVESTOR
SERVICES CORPORATION
BY: BY:
------------------------------------------- -------------------------------------------
- ---------------------------------------------- ----------------------------------------------
TITLE TITLE
</TABLE>
DEALER NUMBER:
------------------------------------
-6-
<PAGE> 7
JOHN HANCOCK
MUTUAL FUNDS
John Hancock Broker Distrubution Services, Inc.
101 Huntington Avenue Boston, MA 02199-7608 1-800-225-5291
/s/ John Hancock
<PAGE> 8
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Resources Fund
John Hancock Limited-Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government Securities Fund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Government Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, Inc., as principal distributor of the
John Hancock funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
*Closed to new investors as of 9/30/94
<PAGE> 9
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to the selling Brokers for sales of John Hancock
Funds is set forth in each Fund's then- current prospectus. No Commission will
be paid on sales of John Hancock Cash Management Fund or any John Hancock Fund
that is without a sales charge. Purchases of Class A shares of $1 million or
more, or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no initial
sales charge. On purchases of this type, John Hancock Funds, Inc. will pay a
commission as set forth in each Fund's then-current prospectus. John Hancock
Funds, Inc. will pay Brokers for sales of Class B shares of the Funds a
marketing fee as set forth in each Fund's then-current prospectus.
<PAGE> 10
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DATED JANUARY 1, 1995 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEES
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, John Hancock Funds, Inc. will advance to you a First Year
Service Fee related to the purchase of Class A shares (only if subject to sales
charge) or Class B shares of any of the Funds, as the case may be, sold by your
firm. This Service Fee will be compensation for your personal service and/or
the maintenance of shareholder accounts ("Customer Servicing") during the
twelve-month period immediately following the purchase of such shares, in the
amount not to exceed .25 of 1% of net assets invested in Class A shares or
Class B shares of the Fund, as the case may be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your firm has under management
with the Funds combined average daily net assets for the preceding quarter of
no less than $1 million, or an individual representative of your firm has under
management with the Funds combined average daily net assets for the preceding
quarter of no less than $250,000 (an "Eligible Firm").
<PAGE> 11
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
SCHEDULE D
DATED JULY 1, 1992 TO THE
SOLICITING DEALER AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK MUTUAL FUNDS
No broker/dealer shall represent the FUnds or Distribution Services in any
written communications without prior receipt of written approval from John
Hancock Broker Distribution Services, Inc. This includes but is not limited to
all advertising, public relations, marketing and sales literature, and media
contacts.
Further, subsequent to the creation of such materialsbefore written
approval from JHBDS will be given, a copy of the NASD review document
applicable to such materials must be furnished to John Hancock Broker
Distribution Services, Inc. for its review and files.
FOR PURPOSES OF THIS SCHEDULE D, THE FOLLOWING TERMS ARE DEFINED:
Advertising:
materials designed for the mass market, e.g. print ads, radio and tv
commercials, billboards, etc.
Sales literature:
materials designed for a directed market, e.g. prospecting letters,
brochures, mailers, stuffers, etc.
Coop Advertising:
advertising materials (as defined above) used by selling group members
for which John Hancock pays some or all of the costs of publication
whether the materials were developed by JHBDS Marketing or not.
John Hancock Broker Distribution Services, Inc. Approval of Advertising:
Approval has four meanings:approval of the material itself from a
marketing perspective (JHBDS product managers), proactive compliance
officer), parent company corporate advertising approval (John Hancock
Mutual Life Insurance Company Advertising Dept. personnel) and
approval for use and related cost-sharing arrangements (national sales
coordinators).
NASD Filing:
Materials created by JHBDS will be filed with the NASD by the JHBDS
Compliance Department. Materials not created by JHBDS but to be
included in the coop program will be filed with the NASD by the
broker-dealer creating the materials. However, prior to use of the
materials in our coop program, we will need a copy of the final
version of the material as well as the NASD comment letter. When this
is received, the above approvals can be obtained.
<PAGE> 1
EXHIBIT 6(c)
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
[LOGO]
JOHN HANCOCK FUNDS, INC.
Boston - Massachusetts - 02199-7603
<PAGE> 2
JOHN HANCOCK FUNDS, INC.
101 HUNTINGTON AVENUE
BOSTON, MA 02199-7603
FINANCIAL INSTITUTION
SALES AND SERVICE AGREEMENT
Date
--------------------------------
John Hancock Funds, Inc. ("The Distributor", or "Distributor"), ("We" or
"us"), is the principal distributor of the shares of beneficial interest (the
"securities") of each of the John Hancock Funds (the "Funds"). Such Funds are
those listed on Schedule A hereto which may be amended or supplemented from
time to time by the Distributor to include additional Funds for which the
Distributor is the principal distributor. You hereby represent that you are a
"bank" as defined in Section 3(a)(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and at the time of each transaction in shares of
the Funds, are not required to register as a broker/dealer under the Exchange
Act or regulations thereunder. We invite you to become a non-exclusive
soliciting financial institution ("Financial Institution") to distribute the
securities of the Funds and you agree to solicit orders for the purchase of the
securities on the following terms. Securities are offered pursuant to each
Fund's prospectus and statement of additional information, as such prospectus
and statement of additional information may be amended from time to time. To
the extent that the prospectus or statement of additional information contains
provisions that are inconsistent with the terms of this Agreement, the terms of
the prospectus or statement of additional information shall be controlling.
OFFERINGS
1. You represent and warrant that you will use your best efforts to ensure
that any purchase of shares of the Funds by your customers constitutes a
suitable investment for such customers. You acknowledge that you will base
such a decision of suitability on all the facts you have gathered about your
customer's financial situation, investment objectives, risk tolerance and
sophistication.
2. You represent and warrant that a copy of the then-current prospectus of a
Fund will be delivered to your customer before any purchase of shares of that
Fund are effected for that customer. You shall not effect any transaction in,
or induce any purchase or sale of, any shares of the Funds by means of any
manipulative, deceptive or other fraudulent device or contrivance, and shall
otherwise deal equitably and fairly with your customers with respect to
transactions in shares of a Fund.
3. You represent and warrant that you will not make shares of any Fund
available to your customers, including your fiduciary customers, except in
compliance with all Federal and state laws and rules and regulations of
regulatory agencies or authorities applicable to you, or any of your affiliates
engaging in such activity, which may affect your business practices. You
confirm that you are not in violation of any banking law or regulations as to
which you are subject. You agree that you will comply with the requirements of
Banking Circular 274 issued by the Office of the Comptroller of the Currency in
offering shares of the Funds to your customers. We agree that we will comply
with all Federal and state laws and rules and regulations of regulatory
agencies or authorities applicable to us. We and you acknowledge and agree
that the offering of shares of the Funds pursuant to this agreement is subject
to the oversight of your management and the regulatory authorities by which you
are subject to review, and that appropriate records and materials relating to
any activity by you or us undertaken pursuant to this agreement may be accessed
by bank examiners in the due course of any regulatory review to which you may
be subject.
4. As principal distributor of the Funds, we shall have full authority to take
such action as we deem advisable in respect of all matters pertaining to the
distribution. This offer of shares of the Funds to you is made only in such
jurisdictions in which we may lawfully sell such shares of the Funds.
-2-
<PAGE> 3
5. You shall not make any representation concerning the Funds or their
securities except those contained in the then-current prospectus or statement
of additional information for each Fund.
6. We will supply to you at our expense additional copies of the then-current
prospectus and statement of additional information for each of the Funds and
any printed information supplemental to such material in reasonable quantities
upon request. It shall be your obligation to ensure that all such information
and materials are distributed to your customers who own or seek to own shares
of the Funds in accordance with securities and/or banking law and regulations
and any other applicable regulations.
7. With the exception of listings of product offerings, you agree not to
furnish or cause to be furnished to any person or display, or publish any
information or materials relating to any Fund (including, without limitation,
promotional materials, sales literature, advertisements, press releases,
announcements, posters, signs and other similar materials), except such
information and materials as may be furnished to you by us the Distributor or
the Fund. All other materials must receive written approval by the Distributor
before distribution or display to the public. Use of all approved advertising
and sales literature materials is restricted to appropriate distribution
channels.
8. You are not authorized to act as our agent. In making available shares of
the Funds under this Financial Institution Sales and Service Agreement, nothing
herein shall be construed to constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or employee of the
Funds, and you shall not make any representations to the contrary. Nothing
shall constitute you as a syndicate, association, unincorporated business, or
other separate entity or partners with us, but you shall be liable for your
proportionate share of any tax, liability or expense based on any claim arising
from the sale of shares of the Funds under this Agreement. We shall not be
under any liability to you, except for obligations expressly assumed by us in
this Agreement and liabilities under Section 11(f) of the Securities Act of
1933, and no obligations on our part shall be implied or inferred herefrom.
9. DEALER COMPLIANCE/SUITABILITY STANDARDS (CLASS A AND CLASS B SHARES) -
Certain mutual funds distributed by the Distributor are being offered with two
or more classes of shares of the same investment portfolio ("Fund") - refer to
each Fund prospectus for availability and details. It is essential that the
following minimum compliance/suitability standards be adhered to in offering
and selling shares of these Funds to investors. All soliciting financial
institutions offering shares of the Funds and their agents, employees and
representatives agree to comply with these general suitability and compliance
standards.
SUITABILITY
With two classes of shares of certain funds available to individual
investors, (Class A and Class B), it is important that each investor purchases
not only the fund that best suits his or her investment objective but also the
class of shares that offers the most beneficial distribution financing method
for the investor based upon his or her particular situation and preferences.
Fund share recommendations and orders must be carefully reviewed by you and
your agents, employees and representatives in light of all the facts and
circumstances, to ascertain that the class of shares to be purchased by each
investor is appropriate and suitable. These recommendations should be based on
several factors, including but not limited to:
(A) the amount of money to be invested initially and over
a period of time;
(B) the current level of front-end sales load or back-end
sales load imposed by the Fund;
(C) the period of time over which the customer expects to
retain the investment;
(D) the anticipated level of yield from fixed income
funds' Class A and Class B shares;
(E) any other relevant circumstances such as the
availability of reduced sales charges under letters
of intent and/or rights of accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to a front-end sales
charge may be more appropriate than shares subject to a contingent deferred
sales charge for large investors who qualify for a significant quantity
discount on the front-end sales charge. In addition, shares subject to a
contingent deferred sales charge may be more appropriate for investors whose
orders would not qualify for quantity discounts and who, therefore, may prefer
to defer sales charges and also for investors who determine it to be
advantageous to have all of their funds invested without deduction of a
front-end sales commission. However, if it is anticipated that an investor may
redeem his or her shares within a short period of time, the investor may,
depending on the amount of his or her purchase, bear higher distribution
expenses by purchasing contingent deferred sales charge shares than if he or
she had purchased shares subject to a front-end sales charge.
-3-
<PAGE> 4
COMPLIANCE
Your supervisory procedures should be adequate to assure that an
appropriate person reviews and approves transactions entered into pursuant to
this Financial Institution Sales and Service Agreement for compliance with the
foregoing standards. In certain instances, it may be appropriate to discuss
the purchase with the agents, employees and representatives involved or to
review the advantages and disadvantages of selecting one class of shares over
another with the client. The Distributor will not accept orders for Class B
Shares in any Fund from you for accounts maintained in your name or in the name
of your nominee for the benefit of certain of your customers. Trades for Class
B Shares will only be accepted in the name of the shareholder.
10. CLASS C SHARES - Certain mutual funds distributed by the Distributor may
be offered with Class C shares. Refer to each Fund prospectus for availability
and details. Class C shares are designed for institutional investors and
qualified benefit plans, including pension funds, and are sold without a sales
charge or 12b-1 fee. If a commission is paid to you for transactions in Class
C shares, it will be paid by the Distributor out of its own resources.
SALES
11. With respect to any and all transactions in the shares of any Fund
pursuant to this Financial Institution Sales and Service Agreement it is
understood and agreed in each case that: (a) you shall be acting solely as
agent for the account of your customer; (b) each transaction shall be initiated
solely upon the order of your customer; (c) we shall execute transactions only
upon receiving instructions from you acting as agent for your customer or upon
receiving instructions directly from your customer; (d) as between you and your
customer, your customer will have full beneficial ownership of all shares; (c)
each transaction shall be for the account of your customer and not for your
account; and (f) unless otherwise agreed in writing we will serve as a clearing
broker for you on a fully disclosed basis, and you shall serve as the
introducing agent for your customers' accounts. Subject to the foregoing,
however, and except for Class B shares, as described in Section 8 above, you
may maintain record ownership of such customers' shares in an account
registered in your name or the name of your nominee, for the benefit of such
customers. Each transaction shall be without recourse to you provided that you
act in accordance with the terms of this Financial Institution Sales and
Service Agreement. You represent and warrant to us that you will have full
right, power and authority to effect transactions (including, without
limitation, any purchases and redemptions) in shares of the Funds on behalf of
all customer accounts provided by you.
12. Orders for securities received by you from your customers will be for the
sale of the securities at the public offering price, which will be the net
asset value per share as determined in the manner provided in the relevant
Fund's prospectus, as now in effect or as amended from time to time, next after
receipt by us (or the relevant Fund's transfer agent) of the purchase
application and payment for the securities, plus the relevant sales charges set
forth in the relevant Fund's then-current prospectus (the "Public Offering
Price"). The procedures relating to the handling of orders shall be subject to
our instructions which we will forward from time to time to you. All orders
are subject to acceptance by us, and we reserve the right in our sole
discretion to reject any order.
In addition to the foregoing, you acknowledge and agree to the initial and
subsequent investment minimums, which may vary from year to year, as described
in the then-current prospectus for each Fund.
13. You agree to sell the securities only (a) to your customers at the public
offering price then in effect, or (b) back to the Funds at the currently quoted
net asset value.
14. The amount of sales charge to be reallowed to you (the "Reallowance") as a
percentage of the offering price is set forth in the then-current prospectus of
each Fund.
If a sales charge on the purchase is reduced in accordance with the
provisions of the relevant Fund's then- current prospectus pertaining to
"Methods of Obtaining Reduced Sales Charges," the Reallowance shall be reduced
pro rata.
15. We shall pay a Reallowance subject to the provisions of this agreement as
set forth in Schedule B hereto on all purchases made by your customers pursuant
to orders accepted by us (a) where an order for the purchase of securities is
obtained by you and remitted to us promptly by you, (b) where a subsequent
investment is made to an account established by you or (c) where a subsequent
investment is made to an account established by a financial institution or
-4-
<PAGE> 5
registered broker/dealer other than you and is accompanied by a signed request
from the account shareholder that you receive the Reallowance for that
investment and/or for subsequent investments made in such account. If for any
reason, a purchase transaction is reversed, you shall not be entitled to
receive or retain any part of the Reallowance on such purchase and shall pay to
us on demand in full the amount of the Reallowance received by you in
connection with any such purchase. We may withhold and retain from the amount
of the Reallowance due you a sum sufficient to discharge any amount due and
payable by you to us.
16. Certain of the Funds have adopted a plan under Investment Company Act
Rule 12b-1 ("Distribution Plan" as described in the prospectus). To the extent
you provide distribution and marketing services in the promotion of the sale of
shares of these Funds, including furnishing services and assistance to your
customers who invest in and own shares of such Funds and including, but not
limited to, answering routine inquiries regarding such Funds and assisting in
changing distribution options, account designations and addresses, you may be
entitled to receive compensation from us as set forth in Schedule C hereto.
All compensation, including 12b-1 fees, shall be payable to you only to the
extent that funds are received and in the possession of the Distributor.
17. We will advise you as to the jurisdictions in which we believe the shares
have been qualified for sale under the respective securities or "blue sky" laws
of such jurisdictions, but we assume no responsibility or obligations as to
your right to sell the shares of the Funds in any state or jurisdiction.
18. Orders may be placed through:
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
1-800-338-4265
SETTLEMENT
19. Settlements for wire orders shall be made within five business days after
our acceptance of your order to purchase shares of the Funds. Certificates,
when requested, will be delivered to you upon payment in full of the sum due
for the sale of the shares of the Funds. If payment is not so received or
made, we reserve the right forthwith to cancel the sale, or, at our option, to
liquidate the shares of the Fund subject to such sale at the then prevailing
net asset value, in which latter case you will agree to be responsible for any
loss resulting to the Funds or to us from your failure to make payments as
aforesaid.
INDEMNIFICATION
20. The parties to this agreement hereby agree to indemnify and hold harmless
each other, their officers and directors, and any person who is or may be
deemed to be a controlling person of each other, from and against any losses,
claims, damages, liabilities or expenses (including reasonable fees of
counsel), whether joint or several, to which any such person or entity may
become subject insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) arise out of or are based upon, (a) any untrue
statement or alleged untrue statement of material fact, or any omission or
alleged omission to state a material fact made or omitted by it herein, or, (b)
any willful misfeasance or gross misconduct by it in the performance of its
duties and obligations hereunder.
MISCELLANEOUS
21. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as most recently furnished to us by you.
22. Miscellaneous provisions, if any, are attached hereto and incorporated
herein by reference.
23. This agreement, which shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, may be terminated by any party hereto at any
time upon written notice.
-5-
<PAGE> 6
FINANCIAL INSTITUTION
-------------------------------------------------
Financial Institution
By:
-------------------------------------------------
Authorized Signature of Financial Institution
-------------------------------------------------
Please Print or Type Name
-------------------------------------------------
Title
-------------------------------------------------
Print or Type Address
-------------------------------------------------
Telephone Number
Date:
-------------------------------------------------
In order to service you efficiently, please provide the
following information on your Mutual Funds Operations Department:
OPERATIONS MANAGER:
---------------------------------------------
ORDER ROOM MANAGER:
---------------------------------------------
OPERATIONS ADDRESS:
---------------------------------------------
---------------------------------------------
TELEPHONE: FAX:
--------------------- ----------------------------
TO BE COMPLETED BY: JOHN HANCOCK INVESTOR
JOHN HANCOCK FUNDS, INC. SERVICES CORPORATION
By: By:
--------------------------------- ------------------------------------
- ------------------------------------ ------------------------------------
Title Title
TO BE COMPLETED BY:
FINANCIAL INSTITUTION NUMBER:
----------------------------------------------
-6-
<PAGE> 7
JOHN HANCOCK FUNDS, INC.
SCHEDULE A
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
<TABLE>
<S> <C>
John Hancock Sovereign Achievers Fund John Hancock National Aviation & Technology Fund
John Hancock Sovereign Investors Fund John Hancock Regional Bank Fund
John Hancock Sovereign Balanced Fund John Hancock Gold and Government Fund
John Hancock Sovereign Bond Fund John Hancock Global Rx Fund
John Hancock Sovereign U.S. Government Income Fund John Hancock Global Technology Fund
John Hancock Special Equities Fund* John Hancock Global Fund
John Hancock Special Opportunities Fund John Hancock Pacific Basin Equities Fund
John Hancock Discovery Fund John Hancock Global Income Fund
John Hancock Growth Fund John Hancock International Fund
John Hancock Strategic Income Fund John Hancock Global Rescources Fund
John Hancock Limited Term Government Fund John Hancock Emerging Growth Fund
John Hancock Cash Management Fund John Hancock Capital Growth Fund
John Hancock Managed Tax-Exempt Fund John Hancock Growth & Income Fund
John Hancock Tax-Exempt Income Fund John Hancock High Yield Bond Fund
John Hancock Tax-Exempt Series Fund John Hancock Investment Quality Bond Fund
John Hancock Special Value Fund John Hancock Government SecurritiesFund
John Hancock Strategic Short-Term Income Fund John Hancock U.S. Government Fund
John Hancock CA Tax-Free Fund John Hancock Governtment Income Fund
John Hancock High Yield Tax-Free Fund John Hancock Intermediate Government Fund
John Hancock Tax-Free Bond Fund John Hancock Adjustable U.S. Government Fund
John Hancock U.S. Government Cash Reserve Fund John Hancock Cash Reserve Money Market B Fund
</TABLE>
From time to time John Hancock Funds, as principal distributor of the
John Hancock Funds, will offer additional funds for sale. These funds will
automatically become part of this Agreement and will be subject to all its
provisions unless otherwise directed by John Hancock Funds, Inc.
* Closed to new invstors as of 9/30/94.
<PAGE> 8
JOHN HANCOCK FUNDS, INC.
SCHEDULE B
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
I. REALLOWANCE
The Reallowance paid to Financial Institutions for sales of John Hancock
Funds is the same as that paid to Selling Brokers described and set forth
in each Fund's then-current prospectus. No Commission will be paid on
sales of John Hancock Cash Management Fund or any John Hancock Fund that is
without a sales charge. Purchases of Class A shares of $1 million or more,
or purchases into an account or accounts whose aggregate value of fund
shares is $1 million or more will be made at net asset value with no
initial sales charge. On purchases of this type, the Distributor will pay a
commission as set forth in each Fund's then-current prospectus. John
Hancock Funds, Inc. will pay Financial Institutions for sales of Class B
shares of the Funds a marketing fee as set forth in each Fund's then-
current prospectus for Selling Brokers.
<PAGE> 9
JOHN HANCOCK FUNDS, INC.
SCHEDULE C
DISTRIBUTION PLAN SCHEDULE OF COMPENSATION
DATED JANUARY 1, 1995 TO THE
FINANCIAL INSTITUTION SALES AND SERVICE
AGREEMENT RELATING TO SHARES OF
JOHN HANCOCK FUNDS
FIRST YEAR SERVICE FEE
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will advance to you a First Year Service
Fee related to the purchase of Class A shares (only if subject to sales charge)
or Class B shares of any of the Funds, as the case maybe, sold by your firm on
or after July 1, 1993. This Service Fee will be compensation for your personal
service and/or the maintenance of shareholder accounts ("Customer Servicing")
during the twelve-month period immediately following the purchase of such
shares, in an amount not to exceed .25 of 1% of the average daily net assets
attributable to Class A shares or Class B shares of the Fund, as the case may
be, purchased by your customers.
SERVICE FEE SUBSEQUENT TO THE FIRST YEAR
Pursuant to the Distribution Plan applicable to each of the Funds
listed in Schedule A, the Distributor will pay you quarterly, in arrears, a
Service Fee commencing at the end of the twelve-month period immediately
following the purchase of Class A shares (only if subject to sales charge) or
Class B shares, as the case may be, sold by your firm, for Customer Servicing,
in an amount not to exceed .25 of 1% of the average daily net assets
attributable to the Class A shares or Class B shares of the Fund, as the case
may be, purchased by your customers, provided your Financial Institution has
under management with the Funds combined average daily net assets for the
preceding quarter of no less than $1 million, or an individual representative
of your Financial Institution has under management with the Funds combined
average daily net assets for the preceding quarter of no less than $250,000 (an
"Eligible Financial Institution").
<PAGE> 1
EXHIBIT 8
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be held by it . . . . . . . . . . . . . . . 3-4
3. Duties of the Custodian with Respect toProperty of the Fund . . . . . . . . . . . . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . . . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8
C. Registration of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9
E. Payments for Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 9
F. Investment and Availability of Federal Funds . . . . . . . . . . . . . . . . . . 9
G. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10
H. Payment of Fund Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12
I. Liability for Payment in Advance of Receipt of Securities Purchased . . . . 12-13
J. Payments for Repurchases of Redemptions of Shares of the Fund . . . . . . . . 13
K. Appointment of Agents by the Custodian . . . . . . . . . . . . . . . . . . . . 13
L. Deposit of Fund Portfolio Securities in Securities Systems . . . . . . . . . 13-16
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . . . . . . . . . . . 16-18
N. Segregated Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19
O. Ownership Certificates for Tax Purposes . . . . . . . . . . . . . . . . . . . 19
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Q. Communications Relating to Fund Portfolio Securities . . . . . . . . . . . . 19-20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
R. Exercise of Rights; Tender Offers . . . . . . . . . . . . . . . . . . . . . . 20
S. Depository Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-21
T. Interest Bearing Call or Time Deposits . . . . . . . . . . . . . . . . . . . . 21
U. Options, Futures Contracts and Foreign Currency Transactions . . . . . . . . 21-23
V. Actions Permitted Without Express Authority . . . . . . . . . . . . . . . . 23-24
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5. Records and Miscellaneous Duties . . . . . . . . . . . . . . . . . . . . . . . . . 24-25
6. Opinion of Fund`s Independent Public Accountants . . . . . . . . . . . . . . . . . . 25
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . . . . . . . . . . . 25-26
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-27
9. Persons Having Access to Assets of the Fund . . . . . . . . . . . . . . . . . . . . 27
10. Effective Period, Termination and Amendment; Successor Custodian . . . . . . . . . 27-28
11. Interpretive and Additional Provisions . . . . . . . . . . . . . . . . . . . . . . 28-29
12. Certification as to Authorized Officers . . . . . . . . . . . . . . . . . . . . . . 29
13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15. Adoption of the Agreement by the Fund . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
<PAGE> 4
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of December 15, 1992 between each investment
company advised by John Hancock Advisers, Inc. which has adopted this Agreement
in the manner provided herein and Investors Bank & Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under the
laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement and is listed on Appendix A hereto. If the Fund is a Massachusetts
business trust or Maryland corporation, it may in the future establish and
designate other separate and distinct series of shares, each of which may be
called a "portfolio"; in such case, the term "Fund" shall also refer to each
such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Authorized Officer", shall mean any of the following officers of
the Trust: The Chairman of the Board of Trustees, the President, a Vice
President, the Secretary, the Treasurer or Assistant Secretary or Assistant
Treasurer, or any other officer of the Trust duly authorized to sign by
appropriate resolution of the Board of Trustees of the Trust.
(e) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
<PAGE> 5
(f) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository
but only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(g) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
United States and federal agency securities (i.e., as provided in Subpart O of
Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the
book-entry regulations of federal agencies substantially in the form of Subpart
O).
(h) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(i) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant to
Section 2 hereof for the holding of commercial paper in book-entry form but
only if the Custodian has received a certified copy of a vote of the Board
approving the participation by the Fund in such system.
(j) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this Agreement
upon receipt of written or facsimile instructions signed by such one or more
person or persons as the Board shall have from time to time authorized to give
the particular class of instructions in question. Electronic instructions for
the purchase and sale of securities which are transmitted by John Hancock
Advisers, Inc. to the Custodian through the John Hancock equity trading system
and the John Hancock fixed income trading system shall be deemed to be proper
instructions; the Fund shall cause all such instructions to be confirmed in
writing. Different persons may be authorized to give instructions for
different purposes. A certified copy of a vote of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of any
such person to act and may be considered as in full force and effect until
receipt of written notice to the contrary. Such instructions may be general or
specific in terms and, where appropriate, may be standing instructions. Unless
the vote delegating authority to any person or persons to give a particular
class of instructions specifically requires that the approval of any person,
persons or committee shall first have been obtained before the Custodian may
act on instructions of that class, the Custodian shall be under no obligation
to question the right of the person or persons giving such instructions in so
doing. Oral instructions will be considered proper instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund
shall cause all oral
<PAGE> 6
instructions to be confirmed in writing. The Fund authorizes the Custodian to
tape record any and all telephonic or other oral instructions given to the
Custodian. Upon receipt of a certificate signed by two officers of the Fund as
to the authorization by the President and the Treasurer of the Fund accompanied
by a detailed description of the communication procedures approved by the
President and the Treasurer of the Fund, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Fund and the Custodian
are satisfied that such procedures afford adequate safeguards for the Fund's
assets. In performing its duties generally, and more particularly in
connection with the purchase, sale and exchange of securities made by or for
the Fund, the Custodian may take cognizance of the provisions of the governing
documents and registration statement of the Fund as the same may from time to
time be in effect (and votes, resolutions or proceedings of the shareholders or
the Board), but, nevertheless, except as otherwise expressly provided herein,
the Custodian may assume unless and until notified in writing to the contrary
that so-called proper instructions received by it are not in conflict with or
in any way contrary to any provisions of such governing documents and
registration statement, or votes, resolutions or proceedings of the
shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
The Fund hereby appoints and employs the Bank as its Custodian and Agent
in accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), by-laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Fund held by such subcustodian.
Any foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the
Board and shall be in accordance with and subject to the provisions of said
Rule. For the
<PAGE> 7
purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Fund and on behalf of the Fund shall
from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Fund all property of
the Fund, including all securities, participation interests and
other assets of the Fund (1) physically held by the Custodian, (2)
held by any subcustodian referred to in Section 2 hereof or by any
agent referred to in Paragraph K hereof, (3) held by or maintained
in The Depository Trust Company or in Participants Trust Company
or in an Approved Clearing Agency or in the Federal Book-Entry
System or in an Approved Foreign Securities Depository, each of
which from time to time is referred to herein as a "Securities
System", and (4) held by the Custodian or by any subcustodian
referred to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or
deemed to be held) by the Custodian or maintained in a Securities
System account or in an Approved Book-Entry System for Commercial
Paper account only upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities or participation interests
for the account of the Fund, but only against receipt of
payment therefor; if delivery is made in Boston or New
York City, payment therefor shall be made in accordance
with generally accepted clearing house procedures or by
use of Federal Reserve Wire System procedures; if delivery
is made elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in
accordance with such procedures agreed to in writing from
time to time by the parties hereto; if the sale is
effected through a Securities System, delivery and payment
therefor shall be made in accordance with the provisions
of Paragraph L hereof; if the sale of commercial paper is
to be effected through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph M
hereof; if the securities are to be sold outside the
United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the
parties hereto; for the purposes of this subparagraph, the
term "sale" shall include the disposition of a portfolio
<PAGE> 8
security (i) upon the exercise of an option written by the
Fund and (ii) upon the failure by the Fund to make a
successful bid with respect to a portfolio security, the
continued holding of which is contingent upon the making
of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different number
of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided
that, in any such case, the new securities or
participation interests are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the Fund
from time to time shall approve to ensure their prompt
return to the Custodian by the broker in the event the
broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion of
such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
<PAGE> 9
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender
of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
9) For delivery in connection with any loans of securities
made by the Fund (such loans to be made pursuant to the
terms of the Fund's current registration statement), but
only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities.
10) For delivery as security in connection with any borrowings
by the Fund requiring a pledge or hypothecation of assets
by the Fund (if then permitted under circumstances
described in the current registration statement of the
Fund), provided, that the securities shall be released
only upon payment to the Custodian of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made, further
securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such
loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of Shares of the Fund in
accordance with the provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a broker-dealer
registered under the Securities Exchange Act of 1934 and,
if necessary, the Fund, relating to compliance with the
rules of The Options Clearing Corporation or of any
registered national securities exchange, or of any similar
organization or organizations, regarding deposit or escrow
or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian (or a subcustodian
employed pursuant to Section 2 hereof), and a futures
commission merchant, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or
of any
<PAGE> 10
contract market or commodities exchange or similar
organization, regarding futures margin account deposits or
payments in connection with futures transactions by the
Fund;
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose
to be proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Fund shall
be registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian, or in the
name or nominee name of any agent appointed pursuant to Paragraph
K hereof, or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, or in the name or nominee
name of The Depository Trust Company or Participants Trust Company
or Approved Clearing Agency or Federal Book-Entry System or
Approved Book-Entry System for Commercial Paper; provided, that
securities are held in an account of the Custodian or of such
agent or of such subcustodian containing only assets of the Fund
or only assets held by the Custodian or such agent or such
subcustodian as a custodian or subcustodian or in a fiduciary
capacity for customers. All certificates for securities accepted
by the Custodian or any such agent or subcustodian on behalf of
the Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only to
draft or order by the Custodian acting in pursuant to the terms of
this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or
for the account of the Fund other than cash maintained by the Fund
in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each
such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved in writing by two
officers of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be subject to
withdrawal only by the Custodian in that capacity.
<PAGE> 11
E. Payment for Shares of the Fund The Custodian shall make
appropriate arrangements with the Transfer Agent and the principal
underwriter of the Fund to enable the Custodian to make certain it
promptly receives the cash or other consideration due to the Fund
for such new or treasury Shares as may be issued or sold from time
to time by the Fund, in accordance with the governing documents
and offering prospectus and statement of additional information of
the Fund. The Custodian will provide prompt notification to the
Fund of any receipt by it of payments for Shares of the Fund.
F. Investment and Availability of Federal Funds Upon agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Fund.
G. Collections The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall promptly
collect all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian account.
The Custodian shall do all things necessary and proper in connection with such
prompt collections and, without limiting the generality of the foregoing, the
Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial
Paper at the time funds become available to the Custodian;
in the case of securities maintained in The Depository
Trust Company funds shall be deemed available to the Fund
not later than the opening of business on the first
business day after receipt of such funds by the Custodian.
<PAGE> 12
The Custodian shall notify the Fund as soon as reasonably practicable whenever
income due on any security is not promptly collected. In any case in which the
Custodian does not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await instructions from
the Fund; the Custodian shall in no case have any liability for any nonpayment
of such income provided the Custodian meets the standard of care set forth in
Section 8 hereof. The Custodian shall not be obligated to take legal action
for collection unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends, rights and
other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. Payment of Fund Moneys Upon receipt of proper instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of the Fund in the
following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options
on futures contracts purchased for the account of the Fund
but only (a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for
transfer or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed pursuant
to Section 2 hereof or by a clearing corporation of a
national securities exchange of which the Custodian is a
member or by any bank, banking institution or trust
company doing business in the United States or abroad
which is qualified under the Investment Company Act of
1940 to act as a custodian and which has been designated
by the Custodian as its agent for this purpose or by the
agent specifically designated in such instructions as
representing the purchasers of a new issue of privately
placed securities); (b) in the case of a purchase effected
through a Securities System, upon receipt of the
securities by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c) in the
case of a purchase of commercial paper effected through an
Approved Book-Entry System for Commercial Paper, upon
<PAGE> 13
receipt of the paper by the Custodian or subcustodian in
accordance with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements entered
into between the Fund and another bank or a broker-
dealer, against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate
form or through an entry crediting the Custodian's
segregated, non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with written
evidence of the agreement by the bank or broker-dealer to
repurchase such securities from the Fund; or (e) with
respect to securities purchased outside of the United
States, in accordance with written procedures agreed to
from time to time in writing by the parties hereto;
2) When required in connection with the conversion, exchange
or surrender of securities owned by the Fund as set forth
in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of Paragraph
J hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: advisory fees,
distribution plan payments, interest, taxes, management
compensation and expenses, accounting, transfer agent and
legal fees, and other operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions to
holders of Shares declared or authorized by the Board; and
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board, specifying the
amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian in
advance of receipt of the securities purchased in the absence of
specific written instructions signed by two officers of the Fund
to so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the
securities had been received by the Custodian; except that in the
case of a repurchase agreement
<PAGE> 14
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Custodian may transfer funds to the
account of such bank prior to the receipt of (i) the securities in
certificate form subject to such repurchase agreement or (ii)
written evidence that the securities subject to such repurchase
agreement have been transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with the
Federal Reserve Bank of Boston or (iii) the safekeeping receipt,
provided that such securities have in fact been so transferred by
book-entry and the written repurchase agreement is received by the
Custodian in due course; and except that if the securities are to
be purchased outside the United States, payment may be made in
accordance with procedures agreed to from time to time by the
parties hereto.
J. Payments for Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose, but subject
to any applicable votes of the Board and the current redemption
and repurchase procedures of the Fund, the Custodian shall, upon
receipt of written instructions from the Fund or from the Fund's
transfer agent or from the principal underwriter, make funds
and/or portfolio securities available for payment to holders of
Shares who have caused their Shares to be redeemed or repurchased
by the Fund or for the Fund's account by its transfer agent or
principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding
Shares for which certificates have not been issued. Such checking
account and such special checks shall be subject to such rules and
regulations as the Custodian and the Fund may from time to time
adopt. The Custodian or the Fund may suspend or terminate use of
such checking account or such special checks (either generally or
for one or more shareholders) at any time. The Custodian and the
Fund shall notify the other immediately of any such suspension or
termination.
K. Appointment of Agents by the Custodian The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company Act
of 1940 to act as a custodian or is itself an eligible foreign
custodian within the meaning of Rule 17f-5 under said Act) as the
agent of the Custodian to carry out such of the duties and
functions of the Custodian described in this Section 3 as the
Custodian may from time to time direct; provided, however, that
the appointment of any such agent shall not relieve the Custodian
of any of its responsibilities or liabilities hereunder, and as
between the Fund and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent. For the
purposes of this Agreement, any property of the Fund held by any
such agent shall be deemed to be held by the Custodian hereunder.
<PAGE> 15
L. Deposit of Fund Portfolio Securities in Securities Systems The
Custodian may deposit and/or maintain securities owned by the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities of
the Fund in a Securities System provided that such securities are
maintained in a non-proprietary account ("Account") of the
Custodian or such subcustodian in the Securities System which
shall not include any assets of the Custodian or such subcustodian
or any other person other than assets held by the Custodian or
such subcustodian as a fiduciary, custodian, or otherwise for its
customers.
(b) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund, and the
Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and
currently stating the Fund's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of notice
or advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of any entry
on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund only upon (i)
receipt of notice or advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund.
Copies of all notices or advises from the Securities System of
transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be
promptly provided to the Fund at its request.
<PAGE> 16
The Custodian shall promptly send to the Fund confirmation of each
transfer to or from the account of the Fund in the form of a
written advice or notice of each such transaction, and shall
furnish to the Fund copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the account
of the Fund on the next busines day.
(d) The Custodian shall promptly send to the Fund any report or other
communication received or obtained by the Custodian relating to
the Securities System's accounting system, system of internal
accounting controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall promptly
send to the Fund any report or other communication relating to the
Custodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System; and
the Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any Securities
System. The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times during
regular business hours be open to the inspection of the Fund's
authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the absence
of receipt of a certificate of an officer of the Fund that the
Board has approved the use of a particular Securities System; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board has annually reviewed and
approved the continued use by the Fund of each Securities System,
so long as such review and approval is required by Rule 17f-4
under the Investment Company Act of 1940, and the Fund shall
promptly notify the Custodian if the use of a Securities System is
to be discontinued; at the request of the Fund, the Custodian will
terminate the use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or subcustodians or of any of its or their employees
or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have
against the Securities System or any other person; at the election
of the Fund, it shall be entitled to be
<PAGE> 17
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if
and to the extent that the Fund has not been made whole for any
such loss or damage.
M. Deposit of Fund Commercial Paper in an Approved Book-Entry System for
Commercial Paper Upon receipt of proper instructions with respect to
each issue of direct issue commercial paper purchased by the Fund, the
Custodian may deposit and/or maintain direct issue commercial paper
owned by the Fund in any Approved Book-Entry System for Commercial
Paper, in each case only in accordance with applicable Securities and
Exchange Commission rules, regulations, and no-action correspondence,
and at all times subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or subcustodian
on behalf of an issuer with which the Custodian or
subcustodian has entered into a book-entry agreement and
provided further that such paper is maintained in a
non-proprietary account ("Account") of the Custodian or
such subcustodian in an Approved Book-Entry System for
Commercial Paper which shall not include any assets of the
Custodian or such subcustodian or any other person other
than assets held by the Custodian or such subcustodian as
a fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System and
shall at all times during regular business hours be open
for inspection by authorized officers, employees or agents
of the Fund. The Custodian shall be fully and completely
responsible for maintaining a recordkeeping system capable
of accurately and currently stating the Fund's holdings of
commercial paper maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased in
book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice from the
issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Fund. The Custodian shall transfer such commercial
<PAGE> 18
paper which is sold or cancel such commercial paper which
is redeemed for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer or redemption and
payment for the account of the Fund. Copies of all
notices, advises and confirmations of transfers of
commercial paper for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be promptly provided to the Fund at its
request. The Custodian shall promptly send to the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice of each
such transaction, and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's
transactions in the System for the account of the Fund on
the next business day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System; the
Custodian shall promptly send to the Fund any report or
other communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
commercial paper deposited in any Approved Book-Entry
System for Commercial Paper; and the Custodian shall
ensure that any agent appointed pursuant to Paragraph K
hereof or any subcustodian employed pursuant to Section 2
hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to
such agent's or subcustodian's internal accounting
controls and procedures for safeguarding securities
deposited in any Approved Book-Entry System for Commercial
Paper.
(e) The Custodian shall not act under this Paragraph M in the
absence of receipt of a certificate of an officer of the
Fund that the Board has approved the use of a particular
Approved Book-Entry System for Commercial Paper; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board has annually reviewed
and approved the continued use by the Fund of each
Approved Book-Entry System for Commercial Paper, so long
as such review and approval is required by Rule 17f-4
under the Investment Company Act of 1940, and the Fund
shall promptly notify the Custodian if the use of an
Approved Book-Entry System for Commercial Paper is to
be discontinued; at the request of the Fund, the Custodian
will terminate the use of any such System as promptly as
practicable.
<PAGE> 19
(f) The Custodian (or subcustodian, if the Approved Book-Entry
System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or
promissory notes whenever requested to do so by the Fund
or in the event of an electronic system failure which
impedes issuance, transfer or custody of direct issue
commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund
for any loss or damage to the Fund resulting from use of
any Approved Book-Entry System for Commercial Paper by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any
of its or their employees or from any failure of the
Custodian or any such agent or subcustodian to enforce
effectively such rights as it may have against the System,
the issuer of the commercial paper or any other person; at
the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial
paper or any other person which the Custodian may have as
a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such
loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation and
of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market or
commodities exchange), or of any similar
organization or organizations, regarding escrow or deposit or
other arrangements in connection with transactions by the Fund,
(ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or written
by the Fund or futures contracts or options thereon purchased or
sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper purposes, but only, in the case of clause (iv), upon
receipt of, in addition to proper instructions, a certificate
signed by two officers of the Fund, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
<PAGE> 20
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Fund
held by it and in connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities held
by it hereunder, cause to be promptly delivered to the Fund all
forms of proxies and all notices of meetings and any other notices
or announcements or other written information affecting or
relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its nominee to
execute and deliver such proxies or other authorizations as may be
required. Neither the Custodian nor its nominee shall vote upon
any of the securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except
as otherwise herein provided) unless ordered to do so by proper
instructions.
Q. Communications Relating to Fund Portfolio Securities The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons relating
to the securities and participation interests being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall deliver promptly to the Fund all written information
received by the Custodian from issuers and other persons relating
to the securities and participation interests whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender offers,
similar offers to purchase or exercise rights (including, without
limitation, pendency of calls and maturities of securities and
participation interests and expirations of rights in connection
therewith and notices of exercise of call and put options and the
maturity of futures contracts) affecting or relating to securities
and participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for promptly
notifying the Fund of all such offers in accordance with the
standard of reasonable care set forth in Section 8 hereof. For
all such offers for which the Custodian is responsible as provided
in this Paragraph R, the Fund shall have responsibility for
providing the Custodian with all necessary instructions in timely
fashion. Upon receipt of proper instructions, the Custodian shall
timely deliver to the issuer or trustee thereof, or to the agent
of either, warrants, puts, calls, rights or similar
<PAGE> 21
securities for the purpose of being exercised or sold upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon receipt
of proper instructions, the Custodian shall timely deposit
securities upon invitations for tenders of securities upon proper
receipt therefor and upon receipt of assurances satisfactory to
the Custodian that the consideration to be paid or delivered or
the tendered securities are to be returned to the Custodian or
subcustodian employed pursuant to Section 2 hereof.
Notwithstanding any provision of this Agreement to the contrary,
the Custodian shall take all necessary action, unless otherwise
directed to the contrary by proper instructions, to comply with
the terms of all mandatory or compulsory exchanges, calls,
tenders, redemptions, or similar rights of security ownership, and
shall thereafter promptly notify the Fund in writing of such
action.
S. Depository Receipts The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts, European Depository Receipts or International
Depository Receipts (hereinafter collectively referred to as
"ADRs") for such securities,
against a written receipt therefor adequately describing such
securities and written evidence satisfactory to the Custodian that
the depository has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of a nominee of
the Custodian or in the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof, for delivery to the
Custodian or such subcustodian at such place as the Custodian or
such subcustodian may from time to time designate. The Custodian
shall, upon receipt of proper instructions, surrender ADRs to the
issuer thereof against a written receipt therefor adequately
describing the ADRs surrendered and written evidence satisfactory
to the Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian or to a
subcustodian employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall, upon
receipt of proper instructions, place interest bearing fixed term
and call deposits with the banking department of such banking
institution (other than the Custodian) and in such amounts as the
Fund may designate. Deposits may be denominated in U.S. Dollars
or other currencies. The Custodian shall include in its records
with respect to the assets of the Fund appropriate notation as to
the amount and currency of each such deposit, the accepting
banking institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Custodian by the banking
<PAGE> 22
institution. Such deposits shall be deemed portfolio securities
of the applicable Fund for the purposes of this Agreement, and the
Custodian shall be responsible for the collection of income from
such accounts and the transmission of cash to and from such
accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations, receive
and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a
security, securities index, currency or other financial
instrument or index by the Fund; deposit and maintain in
a segregated account for each Fund separately, either
physically or by book-entry in a Securities System,
securities subject to a covered call option written by
the Fund; and release and/or transfer such securities or
other assets only in accordance with a notice or other
communication evidencing the expiration, termination or
exercise of such covered option furnished by the Options
Clearing Corporation, the securities or options exchange
on which such covered option is traded or such other
organization as may be responsible for handling such o
ptions transactions. The Custodian and the broker-dealer
shall be responsible for the sufficiency of assets held
in each Fund's segregated account in compliance with
applicable margin maintenance requirements.
2. Futures Contracts The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations and
other documents, if any, evidencing the purchase or sale
of a futures contract or an option on a futures contract
by the Fund; deposit and maintain in a segregated account,
for the benefit of any futures commission merchant, assets
designated by the Fund as initial, maintenance or
variation "margin" deposits (including mark-to-market
payments) intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold
or any options on futures contracts written by Fund, in
accordance with the provisions of any agreement or
agreements among the Fund, the Custodian and such futures
commission merchant, designed to comply with the rules of
the Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin accounts
only in
<PAGE> 23
accordance with any such agreements or rules. The
Custodian and the futures commission merchant shall be
responsible for the sufficiency of assets held in the
segregated account in compliance with the applicable
margin maintenance and mark-to-market payment
requirements.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts,
currency swaps or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for
the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts, swaps and options shall be deemed to
be portfolio securities of the Fund; and accordingly, the
responsibility of the Custodian therefor shall be the same
as and no greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund. The
Custodian shall be responsible for the transmittal to and
receipt of cash from the currency broker or banking or
financial institution with which the contract or option is
made, the maintenance of proper records with respect to
the transaction and the maintenance of any segregated
account required in connection with the transaction. The
Custodian shall have no duty with respect to the selection
of the currency brokers or banking or financial
institutions with which the Fund deals or for their
failure to comply with the terms of any contract or
option. Without limiting the foregoing, it is agreed that
upon receipt of proper instructions and insofar as funds
are made available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian to
consummate a particular transaction on behalf and for the
account of the Fund) make free outgoing payments of cash
in the form of U.S. dollars or foreign currency before
receiving confirmation of a foreign exchange contract or
swap or confirmation that the countervalue currency
completing the foreign exchange contract or swap has been
delivered or received. The Custodian shall not be
responsible for any costs and interest charges which may
be incurred by the Fund or the Custodian as a result of
the failure or delay of third parties to deliver foreign
exchange; provided that the Custodian shall nevertheless
be held to the standard of care set forth in, and shall be
liable to the Fund in accordance with, the provisions of
Section 8.
V. Actions Permitted Without Express Authority The Custodian may in its
discretion, without express authority from the Fund:
<PAGE> 24
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided, that all such
payments shall be accounted for by the Custodian to the
Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Fund except as otherwise directed by
the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations of Net
Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such books
of account and render as at the close of business on each day a detailed
statement of the amounts received or paid out and of securities received or
delivered for the account of the Fund during said day and such other
statements, including a daily trial balance and inventory of the Fund's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Treasurer or any authorized officer
of the Fund; and shall compute and determine, as of the close of regular
trading on the New York Stock Exchange, or at such other time or times as the
Board may determine, the net asset value of a Share in the Fund, such
computation and determination to be made in accordance with the governing
documents of the Fund and the votes and instructions of the Board at the time
in force and applicable, and promptly notify the Fund and its investment
adviser and such other persons as the Fund may request of the result of such
computation and determination. In computing the net asset value the Custodian
may rely upon security quotations received by telephone or otherwise from
sources or pricing services designated by the Fund by proper instructions, and
may further rely upon information furnished to it by any authorized officer of
the Fund relative (a) to liabilities of the Fund not appearing on its books of
account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Board regarding the
valuation of portfolio securities, and (d) to the value to be assigned to any
bond, note, debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interest or other asset or property for which market
quotations are not readily available.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund
<PAGE> 25
under the Investment Company Act of 1940, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal and state
tax laws and any other law or administrative rules or procedures which may be
applicable to the Fund. All books of account and records maintained by the
Bank in connection with the performance of its duties under this Agreement
shall be the property of the Fund, shall at all times during the regular
business hours of the Bank be open for inspection by authorized officers,
employees or agents of the Fund, and in the event of termination of this
Agreement shall be delivered to the Fund or to such other person or persons as
shall be designated by the Fund. Disposition of any account or record after
any required period of preservation shall be only in accordance with specific
instructions received from the Fund. The Bank shall assist generally in the
preparation of reports to shareholders, audits of accounts, and other
ministerial matters of like nature; and, upon request, shall furnish the Fund's
auditors with an attested inventory of securities held with appropriate
information as to securities in transit or in the process of purchase or sale
and with such other information as said auditors may from time to time request.
The Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof, and
shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for which it
is responsible under this Agreement in such manner as the Custodian shall
determine from time to time to be advisable in order to verify the accuracy of
such inventory. The Bank shall not disclose or use any books or records it has
prepared or maintained by reason of this Agreement in any manner except as
expressly authorized herein or directed by the Fund, and the Bank shall keep
confidential any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to enable the Fund to obtain from year to year favorable opinions
from the Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement and Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its services as
Custodian and Agent, as agreed upon from time to time between the Fund and the
Bank. The Bank shall entitled to receive from the Fund on demand reimbursement
for its cash disbursements, expenses and charges, including counsel fees, in
connection with its duties as Custodian and Agent hereunder, but excluding
salaries and usual overhead expenses.
<PAGE> 26
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable care, the
Bank as Custodian and Agent shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to
such advice.
The Bank as Custodian and Agent shall be held to the exercise of reasonable
care in carrying out the provisions of this Agreement but shall be liable only
for its own negligent or bad faith acts or failures to act. Notwithstanding
the foregoing, nothing contained in this paragraph is intended to nor shall it
be construed to modify the standards of care and responsibility set forth in
Section 2 hereof with respect to subcustodians and in subparagraph f of
Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in Section 2 hereof, provided that, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from,
or caused by, the direction of or authorization by the Fund to maintain custody
of any securities or cash of the Fund in a foreign county including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, revolution,
military or usurped powers, nuclear fission, fusion or radiation, earthquake,
storm or other disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with respect
to securities, which action involves the payment of money or which action may,
in the opinion of the Bank, result in the Bank or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some other
form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
9. Persons Having Access to Assets of the Fund
(i) No trustee, director, general partner, officer, employee
or agent of the Fund shall have physical access to the
assets of the Fund held by the Custodian or be authorized
or permitted to withdraw any investments of the Fund, nor
shall the Custodian deliver any assets of the Fund to any
such person. No officer or director, employee or agent of
the Custodian who holds any similar position with the Fund
or the
<PAGE> 27
investment adviser of the Fund shall have access to the
assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only be
available to duly authorized officers, employees,
representatives or agents of the Custodian or other
persons or entities for whose actions the Custodian shall
be responsible to the extent permitted hereunder, or to
the Fund's independent public accountants in connection
with their auditing duties performed on behalf of the
Fund.
(iii) Nothing in this Section 9 shall prohibit any officer,
employee or agent of the Fund or of the investment adviser
of the Fund from giving instructions to the Custodian or
executing a certificate so long as it does not result in
delivery of or access to assets of the Fund prohibited by
paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid
to the other party, such termination to take effect not sooner than sixty (60)
days after the date of such delivery or mailing; provided, that the Fund may at
any time by action of its Board, (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Federal Deposit Insurance
Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of the
Agreement, the Fund shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding Shares of the Fund vote to
have the securities, funds and other properties held hereunder delivered and
paid over to some other bank or trust company, specified in the vote, having
not less than $2,000,000 of aggregate capital, surplus and undivided profits,
as shown by its last published report, and meeting such other qualifications
for custodians set forth in the Investment Company Act of 1940, the Board
shall, forthwith, upon giving or receiving notice of termination of this
Agreement, appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been
<PAGE> 28
adopted by the shareholders and that no written order designating a successor
custodian shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative
thereto. Thereafter such bank or trust company shall be the successor of the
Custodian under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition
to the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
governing instruments of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment
of this Agreement.
12. Certification as to Authorized Officers
The Secretary of the Fund shall at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of
the names and signatures of the authorized officers of each fund, it being
understood that upon the occurence of any change in the information set forth
in the most recent certification on file (including without limitation any
person named in the most recent certification who has ceased to hold the office
designated therein), the Secretary of the Fund shall sign a new or amended
certification setting forth the change and the new, additional or ommitted
names or signatures. The Bank shall be entitled to rely and act upon any
officers named in the most recent certification.
13. Notices
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to Thomas H. Drohan, John Hancock Advisers, Inc., 101 Huntington
Avenue, Boston, Massachusetts 02199, or to such other address as the Fund may
have designated to the Bank, in writing, or to Investors Bank & Trust Company,
24 Federal Street, Boston, Massachusetts 02110, shall be deemed to have been
properly delivered or given hereunder to the respective addressees.
<PAGE> 29
14. Massachusetts Law to Apply; Limitations on Liability
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund.
Each Fund, and each series or portfolio of a Fund, shall be liable only for its
own obligations to the Custodian under this Agreement and shall not be jointly
or severally liable for the obligations of any other Fund, series or portfolio
hereunder.
<PAGE> 30
15. Adoption of the Agreement by the Fund
The Fund represents that its Board has approved this Agreement and has duly
authorized the Fund to adopt this Agreement. This Agreement shall be deemed to
supersede and terminate, as of the date first written above, all prior
agreements between the Fund and the Bank relating to the custody of the Fund's
assets.
* * * *
<PAGE> 31
In Witness Whereof, the parties hereto have caused this agreement to be
executed in duplicate as of the date first written above by their respective
officers thereunto duly authorized.
John Hancock Mutual Funds
by: /s/ Robert G. Freedman
---------------------------
Attest:
/s/Avery P. Maher
- -------------------
Investors Bank & Trust Company
by: /s/ Henry M. Joyce
---------------------------
Attest:
/s/ JM Keenan
- -------------------
<PAGE> 32
Page 1 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Limited Term Government Fund
John Hancock Capital Series
John Hancock Special Value Fund
John Hancock Growth Fund
John Hancock Income Securities Trust
John Hancock Investors Trust
John Hancock Sovereign Bond Fund
John Hancock Sovereign Investors Fund, Inc.
John Hancock Sovereign Investors Fund
John Hancock Sovereign Balanced Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
John Hancock Independence Diversified Core Equity Fund
John Hancock Strategic Income Fund
John Hancock Utilities Fund
John Hancock Tax-Exempt Income Fund
John Hancock Tax-Exempt Series Fund
California Portfolio
Massachusetts Portfolio
New York Portfolio
John Hancock Technology Series, Inc.
John Hancock National Aviation & Technology Fund
John Hancock Global Technology Fund
Freedom Investment Trust
John Hancock Gold & Government Fund
John Hancock Regional Bank Fund
John Hancock Sovereign U.S. Government Income Fund
John Hancock Managed Tax-Exempt Fund
John Hancock Sovereign Achievers Fund
Freedom Investment Trust II
John Hancock Special Opportunities Fund
Freedom Investment Trust III
John Hancock Discovery Fund
<PAGE> 33
Page 2 of 2
INVESTORS BANK & TRUST COMPANY
APPENDIX A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Series, Inc.
John Hancock Emerging Growth Fund
John Hancock Global Resources Fund
John Hancock Government Income Fund
John Hancock High Yield Bond Fund
John Hancock High Yield Tax-Free Fund
John Hancock Money Market Fund B
John Hancock Cash Reserve, Inc.
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve
John Hancock Capital Growth Fund
John Hancock Investment Trust
John Hancock Growth and Income Fund
John Hancock California Tax-Free Income Fund
John Hancock Tax-Free Bond Fund
John Hancock Bond Fund
John Hancock Investment Quality Bond Fund
John Hancock Government Securities Trust
John Hancock U.S. Government Trust
John Hancock Adjustable U.S. Government Trust
John Hancock Adjustable U.S. Government Fund
John Hancock Intermediate Government Trust
John Hancock Institutional Series Trust
John Hancock Berkeley Dividend Performers Fund
John Hancock Berkeley Bond Fund
John Hancock Berkeley Fundamental Value Fund
John Hancock Berkeley Sector Opportunity Fund
John Hancock Independence Diversified Core Equity Fund II
John Hancock Independence Value Fund
John Hancock Independence Growth Fund
John Hancock Independence Medium Capitalization Fund
John Hancock Independence Balanced Fund
<PAGE> 1
EXHIBIT 11
(ERNST & YOUNG LLP LETTERHEAD)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references made to our firm under the captions Financial
Highlights and Independent Auditors and to the use of our report dated
February 3, 1995 in Post-Effective Amendment No. 7 to the Registration
Statement (Form N-1A No. 33-32246) of John Hancock Tax-Free Bond Fund.
ERNST & YOUNG LLP
February 20, 1995
<PAGE> 1
EXHIBIT 15(a)
JOHN HANCOCK TAX-FREE BOND FUND
Distribution Plan
Class A Shares
December __, 1994
ARTICLE I. THIS PLAN
This Distribution Plan (the "Plan") sets forth the terms and
conditions on which John Hancock Tax-Free Bond Fund (the "Fund") will, after
the effective date hereof, pay certain amounts to John Hancock Broker
Distribution Services, Inc. ("Broker Services") in connection with the
provision by Broker Services of certain services to the Fund and its Class A
shareholders, as set forth herein. Certain of such payments by the Trust may,
under Rule 12b-1 of the Securities and Exchange Commission, as from time to
time amended (the "Rule"), under the Investment Company Act of 1940, as amended
(the "Act"), be deemed to constitute the financing of distribution by the Fund
of its shares. This Plan describes all material aspects of such financing as
contemplated by the Rule and shall be administered and interpreted, and
implemented and continued, in a manner consistent with the Rule. The Fund and
Broker Services have entered into a Distribution Agreement of even date
herewith, as amended from time to time (the "Agreement"), the terms of which,
as heretofore and from time to time continued, are incorporated herein by
reference.
ARTICLE II. DISTRIBUTION AND SERVICE EXPENSES
The Fund shall pay to Broker Services a fee in the amount specified in
Article III hereof. Such fee may be spent by Broker Services on any activities
or expenses primarily intended to result in the sale of Class A shares of the
Fund, including, but not limited to the payment of Distribution Expenses (as
defined below) and Service Expenses (as defined below). Distribution Expenses
include, but are not limited to, (a) initial and ongoing sales compensation
payable out of such fee as it is received by Broker Services or other
broker-dealers ("Selling Brokers") that have entered into an agreement with
Broker Services for the sale of Class A shares of the Fund, (b) direct
out-of-pocket expenses incurred in connection with the distribution of Class A
shares of the Fund, including expenses related to printing of prospectuses and
reports to other than existing Class A shareholders of the Fund, and
preparation, printing and distribution of sales literature and advertising
materials, (c) an allocation of overhead and other branch office expenses of
Broker Services related to the distribution of Class A shares of the Fund, (d)
distribution expenses incurred by Transamerica Fund Distributors, Inc. in
connection with the Class A shares of the Fund, and (e) distribution expenses
incurred in connection with the distribution
<PAGE> 2
of a corresponding class of any open-end, registered investment company which
sells all or substantially all of its assets to the Fund or which merges or
otherwise combines with the Fund.
Service Expenses include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of Broker Services)
and others who furnish personal and shareholder account maintenance services to
Class A shareholders of the Fund.
ARTICLE III. MAXIMUM EXPENDITURES
The expenditures to be made by the Fund, pursuant to this Plan, and
the basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed an annual rate of 0. % of
the average daily net asset value of the Class A shares of the Fund (determined
in accordance with the Fund's prospectus as from time to time in effect) to
cover Distribution Expenses and Service Expenses, provided that the portion of
such fee used to cover Service Expenses may only constitute up to an annual
rate of 0. % of the average daily net asset value of the Class A shares of the
Fund payable annually pursuant to the Plan. Such expenditures shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Trustees shall determine. In the event Broker Services is not fully reimbursed
for payments made or other expenses incurred by it under this Plan, such
expenses will not be carried beyond one year from the date such expenses were
incurred. Any fees paid to Broker Services under this Plan during any fiscal
year of the Fund and not expended or allocated by Broker Services for actual or
budgeted Distribution Expenses and Service Expenses during such fiscal year
will be promptly returned to the Fund.
ARTICLE IV. EXPENSES BORNE BY THE FUND
Notwithstanding any other provision of this Plan, the Fund and its
investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall bear the
respective expenses to be borne by them under the Investment Management
Contract dated December __, 1994, as from time to time continued and amended
(the "Management Contract"), and under the Fund's current prospectus as it is
from time to time in effect. Except as otherwise contemplated by this Plan,
the Fund shall not, directly or indirectly, engage in financing any activity
which is primarily intended to or should reasonably result in the sale of
shares of the Fund.
ARTICLE V. APPROVAL BY TRUSTEES
This Plan shall not take effect until it has been approved, together
with any related agreements, by votes, cast in person at a meeting called for
the purpose of voting on this Plan or such agreements, of a majority (or
whatever greater percentage may,
<PAGE> 3
from time to time, be required by Section 12(b) of the Act or the rules and
regulations thereunder) of (a) all of the Trustees of the Fund and (b) those
Trustees of the Fund who are not "interested persons" of the Fund, as such term
may be from time to time defined under the Act, and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to
it (the "Independent Trustees").
ARTICLE VI. CONTINUANCE
This Plan and any related agreements shall continue in effect for so
long as such continuance is specifically approved at least annually in advance
in the manner provided for the approval of this Plan in Article V.
ARTICLE VII. INFORMATION
Broker Services shall furnish the Fund and its Trustees quarterly, or
at such other intervals as the Fund shall specify, a written report of amounts
expended or incurred for Distribution Expenses and Service Expenses pursuant to
this Plan and the purposes for which such expenditures were made and such other
information as the Trustees may request.
ARTICLE VIII. TERMINATION
This Plan may be terminated (a) at any time by vote of a majority of
the Trustees, a majority of the Independent Trustees, or a majority of the
Fund's outstanding voting Class A shares, or (b) by Broker Services on 60 days'
notice in writing to the Fund.
ARTICLE IX. AGREEMENTS
Each agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be
terminated at any time, without payment of any penalty, by
vote of a majority of the Independent Trustees or by vote of a
majority of the Fund's then outstanding voting Class A shares.
(b) That such agreement shall terminate automatically in the event
of its assignment.
ARTICLE X. AMENDMENTS
This Plan may not be amended to increase the maximum amount of the
fees payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class A shares of the Fund. No material amendment to the
Plan shall, in any event, be
<PAGE> 4
effective unless it is approved in the same manner as is provided for approval
of this Plan in Article V.
ARTICLE XI. LIMITATION OF LIABILITY
The obligations of the Fund are not personally binding upon, nor shall
resort be had to the private property of, any of the Trustees, shareholders,
officers, employees or agents of the Fund, but only the Fund's property shall
be bound.
<PAGE> 5
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan
effective as of the __ day of December, 1994 in Boston, Massachusetts.
JOHN HANCOCK TAX-FREE BOND FUND
By: ____________________________________________
Thomas M. Simmons
President
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
By: ____________________________________________
C. Troy Shaver, Jr.
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 15(b)
JOHN HANCOCK TAX-FREE BOND FUND
Distribution Plan
Class B Shares
December __, 1994
ARTICLE I. THIS PLAN
This Distribution Plan (the "Plan") sets forth the terms and
conditions on which John Hancock Tax-Free Bond Fund (the "Fund"), on behalf of
its Class B shares, will, after the effective date hereof, pay certain amounts
to John Hancock Broker Distribution Services, Inc. ("Broker Services") in
connection with the provision by Broker Services of certain services to the
Fund and its Class B shareholders, as set forth herein. Certain of such
payments by the Fund may, under Rule 12b-1 of the Securities and Exchange
Commission, as from time to time amended (the "Rule"), under the Investment
Company Act of 1940, as amended (the "Act"), be deemed to constitute the
financing of distribution by the Fund of its shares. This Plan describes all
material aspects of such financing as contemplated by the Rule and shall be
administered and interpreted, and implemented and continued, in a manner
consistent with the Rule. The Fund and Broker Services have entered into a
Distribution Agreement of even date herewith, as amended from time to time (the
"Agreement"), the terms of which, as heretofore and from time to time
continued, are incorporated herein by reference.
ARTICLE II. DISTRIBUTION AND SERVICE EXPENSES
The Fund shall pay to Broker Services a fee in the amount specified in
Article III hereof. Such fee may be spent by Broker Services on any activities
or expenses primarily intended to result in the sale of Class B shares of the
Fund, including, but not limited to the payment of Distribution Expenses (as
defined below) and Service Expenses (as defined below). Distribution Expenses
include but are not limited to, (a) initial and ongoing sales compensation out
of such fee as it is received by Broker Services or other broker-dealers
("Selling Brokers") that have entered into an agreement with Broker Services
for the sale of Class B shares of the Fund, (b) direct out-of-pocket expenses
incurred in connection with the distribution of Class B shares of the Fund,
including expenses related to printing of prospectuses and reports to other
than existing Class B shareholders of the Fund, and preparation, printing and
distribution of sales literature and advertising materials, (c) an allocation
of overhead and other branch office expenses of Broker Services related to the
distribution of Class B shares of the Fund, (d) distribution expenses incurred
by Transamerica Fund Distributors, Inc. in connection with the Class B shares
of the
<PAGE> 2
Fund, (e) distribution expenses incurred in connection with the distribution
of a corresponding class of any open-end, registered investment company which
sells all or substantially all of its assets to the Fund or which merges or
otherwise combines with the Fund and (f) interest expenses on unreimbursed
distribution expenses related to Class B shares as described in Article III
hereof.
Service Expenses include payments made to, or on account of, account
executives of selected broker-dealers (including affiliates of Broker Services)
and others who furnish personal and shareholder account maintenance services to
Class B shareholders of the Fund.
ARTICLE III. MAXIMUM EXPENDITURES
The expenditures to be made by the Fund pursuant to this Plan, and the
basis upon which such expenditures will be made, shall be determined by the
Fund, and in no event shall such expenditures exceed an annual rate of 1.00% of
the average daily net asset value of the Class B shares of the Fund (determined
in accordance with the Fund's prospectus as from time to time in effect) to
cover Distribution Expenses and Service Expenses, provided that the portion of
such fee used to cover service expenses shall not exceed an annual rate of up
to 0.25% of the average daily net asset value of the Class B shares of the
Fund. Such expenditures shall be calculated and accrued daily and paid monthly
or at such other intervals as the Trustees shall determine. In the event
Broker Services is not fully reimbursed for payments made or other expenses
incurred by it under this Plan, Broker Services shall be entitled to carry
forward such expenses to subsequent fiscal years for submission to the Class B
shares of the Fund for payment, subject always to the annual maximum
expenditures set forth in this Article III; provided, however, that nothing
herein shall prohibit or limit the Trustees from terminating this Plan and all
payments hereunder at any time pursuant to Article VIII hereof.
ARTICLE IV. EXPENSES BORNE BY THE FUND
Notwithstanding any other provision of this Plan, the Fund and its
investment adviser, John Hancock Advisers, Inc. (the "Adviser"), shall bear the
respective expenses to be borne by them under the Investment Management
Contract dated December __, 1994, as from time to time continued and amended
(the "Management Contract"), and under the Fund's current prospectus as it is
from time to time in effect. Except as otherwise contemplated by this Plan,
the Fund shall not, directly or indirectly, engage in financing any activity
which is primarily intended to or should reasonably result in the sale of Class
B shares of the Fund.
<PAGE> 3
ARTICLE V. APPROVAL BY TRUSTEES
This Plan shall not take effect until it has been approved, together
with any related agreements, by votes, cast in person at a meeting called for
the purpose of voting on this Plan or such agreements, of a majority (or
whatever greater percentage may, from time to time, be required by Section
12(b) of the Act or the rules and regulations thereunder) of (a) all of the
Trustees of the Fund and (b) those Trustees of the Fund who are not "interested
persons" of the Fund, as such term may be from time to time defined under the
Act, and have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Independent Trustees").
ARTICLE VI. CONTINUANCE
This Plan and any related agreements shall continue in effect for so
long as such continuance is specifically approved at least annually in advance
in the manner provided for the approval of this Plan in Article V.
ARTICLE VII. INFORMATION
Broker Services shall furnish the Fund and its Trustees quarterly, or
at such other intervals as the Fund shall specify, a written report of amounts
expended or incurred for Distribution Expenses and Service Expenses pursuant to
this Plan and the purposes for which such expenditures were made and such other
information as the Trustees may request.
ARTICLE VIII. TERMINATION
This Plan may be terminated (a) at any time by vote of a majority of
the Trustees, a majority of the Independent Trustees, or a majority of the
Fund's outstanding voting Class B shares, or (b) by Broker Services on 60 days'
notice in writing to the Fund.
ARTICLE IX. AGREEMENTS
Each agreement with any person relating to implementation of this Plan
shall be in writing, and each agreement related to this Plan shall provide:
(a) That, with respect to the Fund, such agreement may be
terminated at any time, without payment of any penalty, by
vote of a majority of the Independent Trustees or by vote of a
majority of the Fund's then outstanding voting Class B shares.
(b) That such agreement shall terminate automatically in the event
of its assignment.
<PAGE> 4
ARTICLE X. AMENDMENTS
This Plan may not be amended to increase the maximum amount of the
fees payable by the Fund hereunder without the approval of a majority of the
outstanding voting Class B shares of the Fund. No material amendment to the
Plan shall, in any event, be effective unless it is approved in the same manner
as is provided for approval of this Plan in Article V.
ARTICLE XI. LIMITATION OF LIABILITY
The obligations of the Fund are not personally binding upon, nor shall
resort be had to the private property of, any of the Trustees, shareholders,
officers, employees or agents of the Fund, but only the Fund's property shall
be bound.
<PAGE> 5
IN WITNESS WHEREOF, the Fund has executed this Distribution Plan
effective as of the ___ day of December, 1994 in Boston, Massachusetts.
JOHN HANCOCK TAX-FREE BOND FUND
By: ____________________________________________
Thomas M. Simmons
President
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
By: ____________________________________________
C. Troy Shaver, Jr.
President and Chief Executive Officer
