<PAGE> 1
As filed with the Securities and Exchange Commission on September 8, 1995.
File Nos. 33-86102; 811-8852
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
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Pre-Effective Amendment No. / /
----
Post-Effective Amendment No. 1 / X /
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
----
Amendment No. 2 / X /
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(Check appropriate box or boxes.)
-------------------
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
----------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(617) 375-1700
-------------------
THOMAS H. DROHAN, ESQ.
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
-----------------------------------------
(Name and Address of Agent for Service)
-------------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
---
X on September 12, 1995 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)
---
on [date] pursuant to paragraph (a) of rule 485
---
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended,
the Registrant has elected to register an indefinite number of shares of the
Registrant and each series thereof.
Page 1 of total pages.
Exhibit index is on page .
<PAGE> 2
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
---------------------------------------
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
<TABLE>
CROSS REFERENCE SHEET
<CAPTION>
ITEM NUMBER FORM N-1A, PROSPECTUS CAPTION STATEMENT OF ADDITIONAL
PART A INFORMATION CAPTION
----------------------------------------------------------------------------------
<S> <C> <C>
1 Front Cover Page *
2 Expense Information; The Fund's *
Expenses; Share Price
3 The Fund's Financial Highlights; *
Performance
4 An Overview of the Funds; *
Investment Policies and
Strategies; Organization and
Management of the Funds;
Performance; Investments,
Techniques and Risk Factors
5 Organization and Management of *
the Funds; The Fund's Expenses
6 Organization and Management of *
the Fund; Dividends and Taxes; o
Redeeming Shares.
7 How to Buy Shares; Shares Price; *
8 Redeeming Shares; Exchange *
Privilege
9 Not Applicable *
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM NUMBER FORM N-1A, PROSPECTUS CAPTION STATEMENT OF ADDITIONAL
PART A INFORMATION CAPTION
----------------------------------------------------------------------------------
<S> <C> <C>
13 * Investment Objectives
and Policies; Certain
Investment Restrictions
14 * Those Responsible for
Management
15 * Those Responsible for
Management
16 * Investment Advisory and
Other Services; Transfer
Agent Services; Custody
of Portfolio;
Independent Auditors
17 * Brokerage Allocation
18 * Description of Trust's
Shares
19 * Net Asset Value; Special
Redemptions
20 * Tax Status
21 * Not Applicable
22 * Calculation of
Performance
23 * Financial Statements
</TABLE>
<PAGE> 4
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
---------------------------------------
JOHN HANCOCK BERKELEY DIVIDEND PERFORMERS FUND
JOHN HANCOCK BERKELEY BOND FUND
JOHN HANCOCK BERKELEY GLOBAL BOND FUND
JOHN HANCOCK BERKELEY SECTOR OPPORTURNITY FUND
JOHN HANCOCK FUNDAMENTAL VALUE FUND
JOHN HANCOCK BERKELEY OVERSEAS GROWTH FUND
<TABLE>
CROSS REFERENCE SHEET
<CAPTION>
<CAPTION>
ITEM NUMBER FORM N-1A, PROSPECTUS CAPTION STATEMENT OF ADDITIONAL
PART A INFORMATION CAPTION
----------------------------------------------------------------------------------
<S> <C> <C>
1 Front Cover Page *
2 Expense Information; The Fund's *
Expenses; Share Price
3 The Fund's Financial Highlights; *
Performance
4 An Overview of the Funds; *
Investment Policies and
Strategies; Organization and
Management of the Funds;
Performance; Investments,
Techniques and Risk Factors
5 Organization and Management of *
the Funds; The Fund's Expenses
6 Organization and Management of *
the Fund; Dividends and Taxes; o
Redeeming Shares.
7 How to Buy Shares; Shares Price; *
8 Redeeming Shares; Exchange *
Privilege
9 Not Applicable *
10 * Front Cover Page
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
ITEM NUMBER FORM N-1A, PROSPECTUS CAPTION STATEMENT OF ADDITIONAL
PART A INFORMATION CAPTION
----------------------------------------------------------------------------------
<S> <C> <C>
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objectives
and Policies; Certain
Investment Restrictions
14 * Those Responsible for
Management
15 * Those Responsible for
Management
16 * Investment Advisory and
Other Services; Transfer
Agent Services; Custody
of Portfolio;
Independent Auditors
17 * Brokerage Allocation
18 * Description of Trust's
Shares
19 * Net Asset Value; Special
Redemptions
20 * Tax Status
21 * Not Applicable
22 * Calculation of
Performance
23 * Financial Statements
</TABLE>
<PAGE> 6
JOHN HANCOCK FUNDS
101 Huntington Avenue
Boston, Massachusetts 02199
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
PROSPECTUS
September 12, 1995
<TABLE>
The John Hancock Institutional Series Trust consists of eleven mutual funds,
five of which are offered in this Prospectus (each a "Fund," and collectively,
the "Funds"):
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
--------------------------------------------------------------------------------------------
<CAPTION>
TABLE OF CONTENTS Page
----
<S> <C>
Expense Information................................................................ 2
The Funds' Financial Highlights.................................................... 3
An Overview of the Funds........................................................... 4
Investment Policies and Strategies................................................. 5
Who May Buy Shares................................................................. 7
Investors' Guide to Services....................................................... 8
How to Buy Shares............................................................. 8
Opening an Account............................................................ 8
Buying Additional Shares...................................................... 9
Reports to Shareholders....................................................... 9
Share Price................................................................... 9
Redeeming Shares.............................................................. 10
Exchange Privilege............................................................ 11
Organization and Management of the Funds........................................... 12
The Funds' Expenses................................................................ 12
Dividends and Taxes................................................................ 13
Performance........................................................................ 14
Risk Factors, Investments and Techniques........................................... 14
</TABLE>
This Prospectus sets forth information about the Funds, which are each a
series of John Hancock Institutional Series Trust (the "Trust"), that you should
know before investing. Please read and retain it for future reference.
Additional information about the Trust and the Funds has been filed with
the Securities and Exchange Commission (the "SEC"). You can obtain a copy of the
Funds' Statement of Additional Information dated September 12, 1995, which is
incorporated by reference into this Prospectus, free of charge by writing or
telephoning: John Hancock Investor Services Corporation, P.O. Box 9277,
Boston, Massachusetts 02205-9277, 1-800-755-4371.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
LOGO LOGO Printed on Recycled Paper.
<PAGE> 7
<TABLE>
EXPENSE INFORMATION
The purpose of the following information is to help you to understand the various costs and expenses that you will bear,
directly or indirectly. Since the Funds have a limited operating history, the costs and expenses included in the table and
hypothetical example below are based on estimated fees and expenses for the Funds' fiscal year ending February 29, 1996 and should
not be considered as representative of future expenses. Actual expenses may be greater or less than those shown.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES ALL FUNDS
---------
<S> <C>
-----------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) NONE
-----------------------------------------------------------------------------------------------------------------
Sales Charge on Reinvested Dividends NONE
-----------------------------------------------------------------------------------------------------------------
Deferred Sales Charge and Redemptions NONE
-----------------------------------------------------------------------------------------------------------------
Redemption Fees NONE*
-----------------------------------------------------------------------------------------------------------------
Exchange Fees NONE
-----------------------------------------------------------------------------------------------------------------
EXAMPLE: You would pay the
following expenses for the
indicated period of years on
a hypothetical $1,000
investment assuming a 5%
annual rate of return and a
voluntary expense limitation
as noted below: +
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
<CAPTION>
MANAGEMENT TOTAL FUND
FEE (NET OPERATING
OF OTHER EXPENSES (NET OF 3
LIMITATION) EXPENSES** LIMITATION)*** 1 YEAR YEARS
---------- ---------- ---------------- ------ ------
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CORE EQUITY FUND II 0.12% 0.58% 0.70% $ 7 $ 22
---------------------------------------------------------------------------------------------------------------------------
VALUE FUND 0.37% 0.58% 0.95% $ 10 $ 30
---------------------------------------------------------------------------------------------------------------------------
GROWTH FUND 0.37% 0.58% 0.95% $ 10 $ 30
---------------------------------------------------------------------------------------------------------------------------
MEDIUM CAPITALIZATION FUND 0.42% 0.58% 1.00% $ 10 $ 32
---------------------------------------------------------------------------------------------------------------------------
BALANCED FUND 0.32% 0.58% 0.90% $ 9 $ 29
---------------------------------------------------------------------------------------------------------------------------
<FN>
---------------
* Redemption by wire fee (currently $4.00) not included.
** Other Expenses include transfer agent, legal, audit, custody and other expenses.
*** Estimated for the Funds based on expenses to have been incurred if shares had been in existence for an entire fiscal year.
Total Fund Operating Expenses in the table reflect a voluntary limitation by the Funds' Adviser. Without such limitation,
the Management Fee would have been, and Total Fund Operating Expenses would have been estimated, respectively, as the
following: Diversified Core Equity Fund II, 0.50% and 1.08%; Value Fund, 0.80% and 1.38%; Growth Fund, 0.80% and 1.38%;
Medium Capitalization Fund, 0.80% and 1.38%; and Balanced Fund, 0.70% and 1.28%.
+ This example should not be considered a representation of the Funds' actual or future expenses, which may be greater or
less than those shown.
</TABLE>
The management fee referred to above is more fully explained in this Prospectus
under the caption "THE FUNDS' EXPENSES" and in the Statement of Additional
Information under the caption "INVESTMENT ADVISORY AND OTHER SERVICES."
2
<PAGE> 8
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS
John Hancock Independence Diversified Core Equity Fund II
The following table includes selected data for a share outstanding throughout the period indicated. Total investment return,
key ratios and supplemental data are listed as follows.
<CAPTION>
FOR THE PERIOD
MARCH 10, 1995
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1995
(UNAUDITED)
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................................................. $ 8.50(b)
--------
Net Investment Income............................................................................. 0.03
Net Realized and Unrealized Gain on Investments................................................... 0.78
--------
Total from Investment Operations........................................................ 0.81
Less Distributions:
Dividends from Net Investment Income......................................................... (0.02)
Net Asset Value, End of Period.................................................................... $ 9.29
========
Total Investment Return at Net Asset Value(d)..................................................... 9.50%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................................................... $ 85,467
Ratio of Expenses to Average Net Assets........................................................... 0.70%*
Ratio of Adjusted Expenses to Average Net Assets(a)(e)............................................ 1.54%*
Ratio of Net Investment Income to Average Net Assets.............................................. 3.87%*
Ratio of Adjusted Net Investment Income to Average Net Assets(a)(e)............................... 3.03%*
Portfolio Turnover Rate........................................................................... 2%
<FN>
---------------
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the voluntary limitation, total investment return would have been lower.
(e) Audited expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as
a percentage of average net assets are expected to increase as the net assets of the fund grow.
</TABLE>
John Hancock Independence Value Fund, John Hancock Independence Growth
Fund, John Hancock Independence Medium Capitalization Fund and John Hancock
Independence Balanced Fund had not begun operations as of June 30, 1995.
3
<PAGE> 9
AN OVERVIEW OF THE FUNDS
JOHN HANCOCK INDEPENDENCE DIVERSIFIED CORE EQUITY FUND II seeks above-average
total return consisting of capital appreciation and income. The Fund's
performance and risk profile benchmark is the Standard and Poor's 500 Composite
Stock Index(R) (the "S&P 500 Index").
JOHN HANCOCK INDEPENDENCE VALUE FUND seeks above-average total return. The Fund
emphasizes relatively undervalued securities and seeks higher dividend yield
than the Diversified Core Equity Fund II. The Fund's performance and risk
profile benchmark portfolio is the Russell 1000 Value Index(R).
JOHN HANCOCK INDEPENDENCE GROWTH FUND seeks above-average total return. The Fund
emphasizes investments in companies whose securities show potential for
relatively high long-term earnings growth rather than current dividend yield.
The Fund's performance and risk profile benchmark is the Russell 1000 Growth
Index(R).
JOHN HANCOCK INDEPENDENCE MEDIUM CAPITALIZATION FUND seeks above-average total
return. The Fund emphasizes investments in securities of medium-sized companies
that tend to be at a stage of development where their growth is higher than the
average of all companies. The Fund's performance and risk profile benchmark is
the Callan Medium Capitalization Index.
JOHN HANCOCK INDEPENDENCE BALANCED FUND seeks above-average total return through
capital appreciation and income. The Fund invests in a balanced portfolio
actively allocated between equity securities and fixed-income securities. The
Fund's performance and risk profile benchmark is a composite of the S&P 500
Index(R) and the Lehman Brothers Government/Corporate Bond Index.
The investment adviser of each Fund is John Hancock Advisers, Inc. (the
"Adviser"), a wholly-owned indirect subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"). The sub-adviser of each Fund is
Independence Investment Associates, Inc. ("IIA" or the "Sub-adviser"), also a
wholly-owned indirect subsidiary of the Life Company.
---------------
(R) "Standard & Poor's 500" and "S&P 500" are registered trademarks of Standard
& Poor's Ratings Group. "Russell 1000 Value Index" and "Russell 1000 Growth
Index" are registered trademarks of Frank Russell Company. None of the Funds,
the Adviser or the Sub-Adviser is affiliated with Standard & Poor's Corporation,
Frank Russell Company, Lehman Brothers (publisher of the Lehman Brothers
Government/Corporate Bond Index) or Callan Associates, Inc. (publisher of the
Callan Medium Capitalization Index and the Callan Broad Market Index).
------------------------
Risk Factors. Each Fund is a recently organized series of the Trust and, either
has no operating history or a limited operating history. There can be no
assurance that the Funds will achieve their investment objectives. An investment
in one or more of the Funds is intended for long-term investors who can accept
the risks associated with investing primarily in equity and fixed-income
securities. The Funds' investments will be subject to market fluctuation and
other risks inherent in all securities. The yield, return and price volatility
of each Fund depend on the type and quality of its investments as well as market
and other factors. In addition, a Fund's potential investments and management
techniques may entail specific risks. For additional information about risks
associated with an investment in one or more of the Funds, see "RISK FACTORS,
INVESTMENTS AND TECHNIQUES" on page 14.
4
<PAGE> 10
INVESTMENT POLICIES AND STRATEGIES
Each Fund invests in common stocks. IIA considers stocks which combine value and
improving fundamentals to be attractive investments for the Funds. In
determining what constitutes "value," IIA seeks stocks with the following
attributes: high growth relative to price/earning ratio, rising dividend stream,
and high asset value. To determine whether a company's stock exhibits improving
fundamentals, IIA looks for accelerating earnings growth, positive earnings
surprises when compared to the market's expectations, and favorable cyclical
timing. Each stock is given a score and ranked from most to least attractive
based on how cheap it is and how much its fundamentals are improving. IIA
selects stocks from the top of this list and observes a mandatory sell policy of
the bottom quintile. IIA calls this strategy of ranking an index of stocks and
nixing out the bottom-ranked issues: "NIXDEX".
-------------------------------------------------------------------------------
EACH FUND INVESTS A PERCENTAGE OF ITS TOTAL
ASSETS IN COMMON STOCKS.
-------------------------------------------------------------------------------
The "Equity Funds" (Diversified Core Equity Fund II, Value Fund, Growth Fund,
and Medium Capitalization Fund) will invest at least 65% of their assets in
common stocks although, under normal market conditions, the Equity Funds will be
substantially fully invested in common stocks. The Balanced Fund will allocate
its investments between common stocks and fixed-income debt securities in
varying ratios. However, under normal market conditions, at least 25% of the
Balanced Fund's portfolio will be invested in common stocks and 25% in fixed-
income senior securities.
Each Fund may invest in fixed-income securities. Although under normal market
conditions each Equity Fund intends to be substantially fully invested in common
stocks, each Equity Fund will normally invest in fixed-income securities for
purposes of managing its cash position and for temporary defensive purposes.
These fixed-income securities will be rated A or better by Moody's Investors
Service, Inc. ("Moody's") or Standard and Poor's Ratings Group ("S&P") or, if
unrated, determined to be of comparable quality by IIA.
-------------------------------------------------------------------------------
EACH FUND MAY INVEST A PORTION OF ITS TOTAL
ASSETS IN CORPORATE AND GOVERNMENTAL FIXED-
INCOME DEBT SECURITIES.
-------------------------------------------------------------------------------
Under normal market conditions, the Balanced Fund will normally invest at least
25% of its total assets in fixed-income senior securities. These fixed-income
securities will be rated investment grade, i.e., Baa by Moody's or BBB by S&P
or, if unrated, determined to be of investment grade quality by IIA.
Fixed-income securities rated Baa or BBB are considered of medium-grade quality
with speculative characteristics. Adverse economic conditions or changing
circumstances may weaken the issuer's capacity to pay interest and repay
principal on these securities.
The Equity Funds may retain fixed-income securities whose ratings are downgraded
below A until IIA determines that disposing of such securities is in the best
interest of the affected Fund. The Balanced Fund may retain fixed-income
securities whose ratings are downgraded below investment grade until IIA
determines that disposing of such securities is in the best interest of the
Fund.
The value of fixed-income securities generally varies inversely with interest
rates. The longer the maturity of the fixed-income security, the more volatile
will be changes in its value resulting from changes in interest rates. The value
of fixed-income securities with conversion features, however, will also be
affected by changes in the value of the common stock into which such
fixed-income securities are convertible.
When, in the opinion of IIA, extraordinary market or economic conditions
warrant, each Fund may, for temporary defensive purposes, hold cash, cash
equivalents or fixed-income securities without limitation.
Each Fund may invest in the securities of foreign issuers in the form of
American Depository Receipts ("ADRs") that are denominated in U.S. dollars and
traded on an exchange in the United States. Each Fund may purchase securities on
a forward commitment or when-issued basis and illiquid securities. In addition,
each Fund may lend portfolio securities and may make temporary investments in
short-term securities, including repurchase agreements and other money market
instruments, in order to receive a return on excess cash. See "RISK FACTORS,
INVESTMENTS AND TECHNIQUES" for more information on the Funds' investments.
-------------------------------------------------------------------------------
EACH FUND MAY EMPLOY CERTAIN INVESTMENT
STRATEGIES AND TECHNIQUES TO HELP ACHIEVE ITS
INVESTMENT OBJECTIVE.
-------------------------------------------------------------------------------
Each Fund has adopted investment restrictions which are enumerated in detail in
the Statement of Additional Information. Some of these restrictions may help to
reduce investment risk. Those restrictions designated as fundamental may not be
changed without shareholder approval. Each Fund's investment objective,
investment policies and nonfundamental restrictions, however, may be changed by
a vote of the Trustees without shareholder approval. If
5
<PAGE> 11
there is a change in a Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their current
financial position and needs.
Each Fund's portfolio of investments is comprised of securities of entities
that, while not identical to those of the particular benchmark index, have
similar performance characteristics and risk profiles. Each Fund will seek to
establish a performance record that exceeds that of the particular benchmark
index. See page 7 for a description of each benchmark index.
-------------------------------------------------------------------------------
EACH FUND'S PORTFOLIO CHARACTERISTICS AND RISK
PROFILE ARE BENCHMARKED TO A SPECIFIC
PERFORMANCE INDEX.
-------------------------------------------------------------------------------
- The Diversified Core Equity Fund II's performance and risk profile benchmark
is the S&P 500 Index(R).
- The Value Fund's performance and risk profile benchmark is the Russell 1000
Value Index(R).
- The Growth Fund's performance and risk profile benchmark is the Russell 1000
Growth Index(R).
- The Medium Capitalization Fund's performance and risk profile benchmark is the
Callan Medium Capitalization Index.
- The Balanced Fund's performance and risk profile benchmark is an
equally-weighted composite of the S&P 500 Index(R) and the Lehman Brothers
Government/Corporate Bond Index.
In attempting to exceed the performance of the S&P 500 Index(R), the DIVERSIFIED
CORE EQUITY FUND II focuses on securities of companies offering capital growth
and/or income potential over both the intermediate and long term.
In attempting to exceed the performance of the Russell 1000 Value Index(R), the
VALUE FUND focuses on common stocks of companies which are undervalued given
current market and economic conditions. IIA selects common stocks of companies
with stock prices which, in its opinion, are undervalued relative to the
securities' intrinsic value and the stock market in general at the time of
purchase based on such measures as the Russell 1000 Value Index(R) and
price/earnings ratios, price/book ratios, and yield.
In attempting to exceed the performance of the Russell 1000 Growth Index(R), the
GROWTH FUND emphasizes investments in companies whose securities show potential
for relatively high long-term earnings growth rather than current dividend yield
and which appear inexpensive relative to the Index. The Growth Fund invests in
the securities of companies whose growth in the areas of earnings or gross sales
measured either in dollars or in unit volume may exceed that of the average of
the companies whose securities are included in the Russell 1000 Growth Index(R).
IIA seeks out companies with above-average growth potential in the future,
typically by investing in companies that have high long-term earnings growth
relative to the securities of other companies. The securities of these companies
generally command high multiples (price/earnings ratios) in the stock markets
over time.
In attempting to exceed the performance of the Callan Medium Capitalization
Index, the MEDIUM CAPITALIZATION FUND consists of a portfolio whose risk profile
matches a portfolio of companies whose market capitalization at the time of
purchase falls within the capitalization range of the Callan Medium
Capitalization Index. Currently, companies with a market capitalization of
between $1 billion and $5 billion fall within this range. Companies whose
capitalization falls outside this range after purchase continue to be considered
medium capitalized companies for purposes of the Fund's investment policies. The
stocks of medium-capitalized companies generally involve more short-term
volatility than stocks of companies with a larger capitalization, but
significantly less volatility and lower trading costs than are usually
associated with stocks of small-capitalization companies. Typically, a medium
capitalization company has passed through its start-up and initial establishment
phase yet is still small enough to react more quickly than large-capitalization
companies to changes in the marketplace that may present opportunities for the
company.
In attempting to exceed the performance of the composite of the S&P 500 Index(R)
and the Lehman Brothers Government/Corporate Bond Index, the BALANCED FUND will
invest in both equity and fixed-income securities. IIA looks at broad market and
economic variables to determine the overall mix of the Fund's assets between
equity and fixed-income securities. IIA expects that, under normal
circumstances, between 25% and 75% of the Fund's assets will be allocated to the
fixed-income class and the balance of the Fund's assets will be invested in
common stocks. At all times, however, at least 25% of the Fund's assets will be
invested in fixed-income senior securities. As market and economic conditions
change, IIA gradually adjusts the asset mix, but has no fixed formula to
determine the timing of any adjustment to the allocation of the asset classes.
IIA considers the following factors in its analysis of market
6
<PAGE> 12
and economic variables: prospective return spreads among stocks, bonds and
bills; the absolute valuation levels of both the stock and bond markets; the
stage of the economic cycle; the direction and intent of the government's
monetary policies; and inflationary trends.
INDEPENDENCE DIVERSIFIED CORE EQUITY FUND II. The S&P 500 Index(R) is comprised
of 500 industrial, utility, transportation and financial companies in the United
States markets. Most of these companies are listed on the New York Stock
Exchange (the "Exchange"). Companies included in the S&P 500 Index(R) represent
about 75% of the Exchange's market capitalization and 30% of the Exchange's
issuers. The S&P 500 Index(R) is a capitalization-weighted index calculated on a
total return basis with dividends reinvested.
-------------------------------------------------------------------------------
EACH FUND'S PERFORMANCE AND RISK BENCHMARK HAS
CERTAIN CHARACTERISTICS.
-------------------------------------------------------------------------------
INDEPENDENCE VALUE FUND. The Russell 1000 Value Index(R) is comprised of stocks
of companies from the Russell 1000 Index(R) with a less-than-average growth
orientation. The Russell 1000 Value Index(R) represents the universe of stocks
from which value managers typically select. It is capitalization weighted and
includes only common stocks belonging to large-capitalization, domestic
corporations.
INDEPENDENCE GROWTH FUND. The Russell 1000 Growth Index(R) is comprised of
stocks of companies from the Russell 1000 Index(R) with a greater-than-average
growth orientation. The Russell 1000 Growth Index(R) represents the universe of
stocks from which growth managers typically select. It is capitalization
weighted and includes only common stocks belonging to large-capitalization
domestic corporations.
INDEPENDENCE MEDIUM CAPITALIZATION FUND. The Callan Medium Capitalization Index
is a subset of the Callan Broad Market Index. The Callan Broad Market Index
includes common stocks of the two thousand largest companies with
capitalizations ranging between $85 million and $75 billion. The Callan Medium
Capitalization Index covers about 25% of the Callan Broad Market Index with
companies that range from approximately $1 billion to $5 billion in
capitalization. The Callan Medium Capitalization Index includes both growth and
value stocks.
INDEPENDENCE BALANCED FUND. The S&P 500 Index(R) is a capitalization-weighted
index comprised of 500 publicly traded industrial, utility, transportation, and
financial companies located in the United States markets. The Diversified Core
Equity Fund II (see above) is benchmarked to this Index. The Lehman Brothers
Government/Corporate Bond Index is composed of all bonds that are investment
grade (i.e., rated Baa or higher by Moody's or BBB or higher by S&P). Issues
must have at least one year to maturity and the Lehman Brothers
Government-Corporate Index is rebalanced monthly by market capitalization.
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 professional ability and quality of service. Consideration may also be
given to the broker's sales of shares of the Funds. Pursuant to procedures
determined by the Trustees, the Adviser may place securities transactions with
brokers affiliated with the Adviser and the Sub-adviser. These brokers include
Tucker, Anthony Incorporated, John Hancock Distributors, Inc. and Sutro and
Company, Inc., which are indirectly owned by the Life Company, which in turn
indirectly owns the Adviser and the Sub-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.
-------------------------------------------------------------------------------
BROKERS ARE CHOSEN FOR FUND TRANSACTIONS ON
THE BASIS OF BEST PRICE AND EXECUTION.
-------------------------------------------------------------------------------
WHO MAY BUY SHARES
INVESTORS ARE LIMITED TO THE QUALIFIED RETIREMENT PLANS ("PLANS") AND
INSTITUTIONS DEFINED BELOW. THERE IS NO SALES CHARGE. John Hancock Funds, Inc.
("JH Funds") may make payment out of its own resources to a Selling Broker who
sells shares of a Fund in an amount not to exceed 0.15% of the amount invested.
PLANS are defined as follows: (a) unaffiliated benefit plans and (b) tax-exempt
retirement plans of the Adviser and its affiliates, including the retirement
plans of the Adviser's affiliated brokers. A PARTICIPANT is an individual
employee participating in a Plan.
INSTITUTIONS are defined as follows: (a) certain trusts, endowment funds and
foundations; (b) banks and insurance companies purchasing for their own account;
(c) investment companies not affiliated with the Adviser; (d) any entity taxed
as a corporation for purposes of federal taxation; and (e) any state, county,
city or any instrumentality, department, authority or agency thereof.
7
<PAGE> 13
INVESTORS' GUIDE TO SERVICES
HOW TO BUY SHARES
Each Plan or Institution must make a minimum initial investment in a Fund of at
least $250,000 unless you invest or have invested at least $1 million in the
aggregate in any of the series of the Trust. There is no minimum initial
investment applicable to employee benefit or retirement plans having 350 or more
eligible employees.
The Trust includes the Funds as well as the following additional funds: John
Hancock Dividend Performers Fund, John Hancock Active Bond Fund, John Hancock
Global Bond Fund, John Hancock Multi-Sector Growth Fund, John Hancock
Fundamental Value Fund, and John Hancock International Equity Fund (the "John
Hancock Series Funds") whose shares are offered by means of a separate
prospectus available by calling 1-800-755-4371. Please read that prospectus
before investing.
<TABLE>
OPENING AN ACCOUNT
PARTICIPANTS
--------------------------------------------------------------------------------------------------------
Through your Sponsor according to your Plan.
--------------------------------------------------------------------------------------------------------
PLANS AND INSTITUTIONS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
BY CHECK 1. Make check payable to John Hancock Investor Services Corporation
("Investor Services").
2. Mail the completed account information package directly to Investor
Services at:
John Hancock Investor Services Corporation
P.O. Box 9277
Boston, MA 02205-9277
--------------------------------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by calling 1-800-755-4371.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900022260
ABA Routing No. 211475000
For credit to: [Full Name of Fund]
Your Account Number
Name(s) under which account is registered
Please note that wires sent in this manner must be for mutual fund investments only.
3. In the case of multiple series purchases made by one wire, include clear
instructions as to the specific allocation of the monies.
4. Mail the completed account information package directly to Investor
Services at P.O. Box 9277, Boston, MA 02205-9277.
5. Plan Sponsors may make arrangements for Automatic Clearing House ("ACH")
transactions and other types of wire transfers by contacting Investor
Services at 1-800-755-4371.
--------------------------------------------------------------------------------------------------------
</TABLE>
Investor Services will open an account when it receives an investment in 'good
order.' A 'good order' is defined as receipt of a completed account information
package and the initial investment amount, if applicable.
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. 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. Share certificates are not issued unless a
request is made to Investor Services.
8
<PAGE> 14
<TABLE>
BUYING ADDITIONAL SHARES
PARTICIPANTS
------------------------------------------------------------------------------------------------------
Through your Sponsor according to your Plan.
------------------------------------------------------------------------------------------------------
PLANS
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
BY CHECK Please follow the procedures as set forth above for opening an account by check.
BY WIRE Please follow the procedures as as set forth above for opening an account by
wire.
------------------------------------------------------------------------------------------------------
INSTITUTIONS
------------------------------------------------------------------------------------------------------
BY CHECK Please follow the procedures as set forth above for opening an account by check.
BY WIRE Please follow the procedures as set forth above for opening an account by wire.
BY TELEPHONE 1. Complete the "Invest-By Phone" and "Bank Information" sections on the
Account Application designating a bank account from which funds may be
drawn. Note that in order to invest by phone, your account must be in a
bank or credit union that is a member of the ACH System.
2. After your authorization form has been processed, you may purchase
additional shares by calling Investor Services toll-free at 1-800-755-4371.
3. Give the Investor Services representative the name(s) in which your account
is registered, the Fund name, your account number, and the amount you wish
to invest.
4. Your investment normally will be credited to your account the business day
following your phone request.
------------------------------------------------------------------------------------------------------
</TABLE>
REPORTS TO SHAREHOLDERS
Participants should direct all inquiries about the Funds to either the Plan
Sponsor or Investor Services at 1-800-755-4371.
The Funds will issue an annual report containing audited financial statements
and a semiannual report to shareholders (i.e., Plans or Institutions). A printed
confirmation for each transaction affecting share balance or account
registration will be provided to shareholders by Investor Services. Statements
related to reinvestment of dividends will be furnished quarterly. A tax
information statement will be mailed by January 31 of each year.
SHARE PRICE
SHARES OF EACH FUND ARE OFFERED AT THE NET ASSET VALUE ("NAV") OF THAT FUND. The
NAV is the value of one share and is calculated by dividing that Fund's net
assets by the number of outstanding shares of a Fund.
Equity securities in a Fund's portfolio that are listed or traded on an exchange
or quoted on the Nasdaq National Market are generally valued at their last sale
price as furnished by a pricing service which utilizes electronic pricing
techniques. If no sale has occurred on the date assets are valued, or if the
security is traded only in the over-the-counter market, it will normally be
valued at its last available bid price. Fixed-income securities are generally
valued by a pricing service which uses electronic pricing techniques based on
general institutional trading. Some securities are valued at fair value based on
procedures approved by the Board of Trustees, and for certain other securities,
the amortized cost method is used if the Trustees determine, in good faith, that
this cost approximates fair value as described more fully in the Statement of
Additional Information. The NAV is calculated once daily as of the close of
regular trading on the Exchange (generally at 4:00 p.m. New York time) on each
day the Exchange is open.
Shares of the Fund are sold at the NAV computed after your investment is
received in 'good order' by Investor Services. The Fund will normally issue
shares for cash consideration only.
9
<PAGE> 15
REDEEMING SHARES
The payment of redemption proceeds will be made by check or electronic credit to
a shareholder's account at a financial institution, generally on the next
business day. When you redeem your shares, you may realize a gain or loss. Under
unusual circumstances a Fund may suspend redemptions or postpone payment as
permitted by the Federal securities laws, which could be up to seven (7) days. A
Fund may hold payment until reasonably satisfied that investments which were
recently made by check have been collected, which may take up to 10 calendar
days.
<TABLE>
PARTICIPANTS
------------------------------------------------------------------------------------------------------
Through your Sponsor according to your Plan.
------------------------------------------------------------------------------------------------------
PLANS
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IN WRITING Send a letter of instruction specifying the name of the Fund, the dollar
amount or the number of shares to be redeemed, your name, your account
number and the additional requirements listed below that apply to your
particular account.
CORPORATION OR Letter of instruction and a corporate resolution, signed by person(s)
ASSOCIATION authorized to act on the account with the signature(s) guaranteed.
TRUST Letter of instruction signed by the Trustee(s) with a signature(s)
guaranteed. (If the Trustee's name is not registered on your account, also
provide a copy of the Trust document, certified within the last 60 days.)
IF YOU DO NOT FALL INTO EITHER OF THESE REGISTRATION CATEGORIES PLEASE
CALL 1-800-755-4371 FOR FURTHER INSTRUCTIONS.
If you have share certificates you must submit them with your letter of
instruction.
BY WIRE Redemption proceeds of $1,000 or more can be wired on the next business
day to your designated bank account and a small fee may be deducted. You
may also use electronic funds transfer to your assigned bank account and
the funds are usually collectable after 2 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.
Wire redemption is not available for Fund shares in certificate form.
------------------------------------------------------------------------------------------------------
INSTITUTIONS
------------------------------------------------------------------------------------------------------
IN WRITING Please follow the instructions as set forth for Plans on how to redeem in
writing.
BY WIRE Please follow the instructions as set forth for Plans on how to redeem by wire.
BY TELEPHONE As an Institution you are automatically eligible for the telephone
redemption privilege. Call 1-800-755-4371, 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 the following procedures to confirm that
instructions received by telephone are genuine. Your name, account number,
taxpayer identification number applicable to the account and other relevant
information may be requested. In addition, telephone instructions are
recorded.
You may redeem up to $100,000 by telephone, but the address on the account
must not have changed for the last 30 days. A check will be mailed to the
exact name(s) and address on the account.
If reasonable procedures, such as those described above, are not followed,
the Funds may be liable for any loss due to unauthorized or fraudulent
instructions. In all other cases, neither the Funds nor Investor Services
will be liable for any loss or expense for acting upon telephone
instructions made in accordance with the procedures mentioned above.
Telephone redemption is not available for Fund shares 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 such times you should consider placing redemption requests in writing
or using EASI-line. EASI-line is a telephone number which is listed on
account statements.
------------------------------------------------------------------------------------------------------
</TABLE>
WHO MAY GUARANTEE YOUR SIGNATURE. A signature guarantee is a widely accepted
way to protect you and the Funds by verifying the signature on your request. It
may not be provided by a notary public. If the net asset value of the shares
redeemed is $100,000 or less or if this is a total redemption of a Plan's
assets, Investor Services 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 clearing
agency.
10
<PAGE> 16
EXCHANGE PRIVILEGE
There is no sales charge for exchanges within the Trust. An exchange is a
redemption of shares in one Fund and the purchase of shares in another Fund
within the Trust. Read the Prospectus of the Fund into which you want to
exchange.
When you make an exchange, your account registration must be identical in both
the existing and new account. The exchange privilege is available only in states
where the exchange can be made legally.
<TABLE>
PARTICIPANTS
--------------------------------------------------------------------------------------------------------
Should your investment objective change or if you wish to achieve further diversification, you
must contact your Plan Sponsor to determine Plan requirements for exchanging shares among the
Funds of the Trust or other investment options available under your Plan.
--------------------------------------------------------------------------------------------------------
PLANS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
IN WRITING 1. In a letter request an exchange and list the following:
-- the name of the Fund to be exchanged out of
-- the account number
-- name(s) in which the account is registered
-- name of the Fund in which to invest the exchanged shares
-- the number of shares or the dollar amount wished to be exchanged.
Sign the request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
Attn: Institutional Services
P.O. Box 9277
Boston, MA 02205-9277
--------------------------------------------------------------------------------------------------------
INSTITUTIONS
--------------------------------------------------------------------------------------------------------
IN WRITING Please follow the instructions as set forth for Plans on how to exchange shares
in writing.
BY TELEPHONE 1. Exchange by telephone is automatically authorized unless the box indicating
that the telephone exchange privilege is not desired is marked.
2. Call 1-800-755-4371. Have the account number of the Fund to be exchanged
out of and the exact name in which it is registered available to give to the
telephone representative.
--------------------------------------------------------------------------------------------------------
</TABLE>
Each Fund reserves the right to require Institutions to keep previously
exchanged shares (and reinvested dividends) in the Fund for 90 days before they
are permitted a new exchange. Participants may exchange shares according to Plan
provisions. The Fund may also terminate or alter the terms of the exchange
privilege upon 60 days' notice to shareholders.
SPECIAL INVESTMENT PRIVILEGE FOR FORMER PLAN PARTICIPANTS. A former Participant
in a Plan may invest the redemption proceeds of Fund shares beneficially owned
by the Participant without a sales charge in other John Hancock funds.
Participants may only invest in the Funds through a Plan. If a Participant
elects or is required to withdraw from a Plan, the shares cannot be transferred
into an account in the name of the Participant. In this circumstance the
Participant may, subject to any other rights or restrictions under the Plan,
cause the Plan Sponsor to redeem shares of the Funds. The proceeds of such
redemption may be either distributed to the Participant or rolled over into an
Individual Retirement Account or other retirement plan.
In either case, such proceeds may be invested at NAV without the imposition of a
sales charge in shares of any other fund (other than those of the Trust) in the
John Hancock family of funds. If the fund selected by the Participant has more
than one class of shares, the privilege of purchasing shares at NAV will only
apply to Class A shares. A Participant should obtain and carefully read the
Prospectus of each John Hancock fund in which the Participant is considering an
investment.
A Participant may obtain a Prospectus, establish an Individual Retirement
Account and arrange the rollover of redemption proceeds by contacting Investor
Services at 1-800-755-4371. Unlike a rollover, the distribution of redemption
proceeds to a Participant may subject the Participant to tax withholding equal
to 20% of the amount of the distribution.
11
<PAGE> 17
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund is organized as a separate portfolio of the Trust, which is an
open-end investment management company organized as a Massachusetts business
trust in 1994. The Trust has an unlimited number of authorized shares and
currently has eleven distinct funds. The John Hancock Series Funds are offered
through a separate prospectus.
-------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS AND RETAIN THE
ADVISER AND THE SUB-ADVISER WHO ARE
RESPONSIBLE FOR THE DAY-TO-DAY OPERATIONS OF
THE FUNDS, SUBJECT TO THE TRUSTEES' POLICIES
AND SUPERVISION.
-------------------------------------------------------------------------------
Each Fund currently has one class of shares with equal rights as to voting,
redemption, dividends, and liquidation within their respective Fund. The
Trustees also have the authority without further shareholder approval to
establish additional funds within the Trust and to classify and reclassify the
shares of the Funds, or any new fund of the Trust, into one or more classes. The
Trust is not required to hold annual shareholder meetings, although special
meetings may be called for such purposes as electing or removing Trustees,
changing fundamental restrictions or approving a management contract.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Fund. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Trust. The Declaration of Trust also provides for indemnification out of a
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is therefore
limited to circumstances in which a Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote. Liabilities
attributable to one Fund are not charged against the assets of any other Fund.
-------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS, INC. ADVISES INVESTMENT
COMPANIES HAVING TOTAL ASSETS OF OVER $13
BILLION.
-------------------------------------------------------------------------------
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the Life Company, a financial services company. The Adviser provides the Fund,
and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. The Sub-adviser was
formed in 1982 as an indirect wholly-owned subsidiary of the Life Company and
provides investment advice and advisory services to other investment companies
and various additional clients, primarily institutional clients. Total assets
managed by the Sub-adviser amount to approximately $19 billion. The organization
of the Sub-adviser is such that all investment decisions are made by the
portfolio management team and no single person is primarily responsible for
making recommendations to the team.
JH Funds distributes shares for all of the John Hancock mutual funds directly
and through selected broker-dealers ("Selling Brokers"). Certain officers of the
Trust are also officers of the Adviser and JH Funds.
In order to avoid conflicts with portfolio trades for the Funds, the Adviser,
the Sub-Adviser and the Funds have adopted extensive restrictions on personal
securities trading by personnel of the Adviser and its affiliates. In the case
of the Adviser, some of these restrictions are: pre-clearance for all personal
trades and a ban on the purchase of initial public offerings as well as
contributions to specified charities of profits on securities held for less than
91 days. The Sub-Adviser has adopted similar restrictions which may differ where
appropriate, as long as they have the same intent. These restrictions are a
continuation of the basic principle that the interests of the Funds and their
shareholders come before those of management.
<TABLE>
THE FUNDS' EXPENSES
Each Fund pays a monthly fee to the Adviser for managing the Fund's investment
and business affairs, which is equal on an annual basis to a percentage of the
Fund's average daily net assets. The Adviser (not the Fund) pays a monthly fee
to the Sub-adviser for sub-advisory services provided to each Fund. These fees
are as follows:
<CAPTION>
ADVISORY FEE
FUND PAID BY FUND
---- ------------
<S> <C>
Diversified Core Equity Fund II .50% of the average daily net assets.
Value Fund, Growth Fund and Medium .80% of the average daily net assets up to $500
Capitalization Fund million; .75% of such assets in excess of $500 million.
Balanced Fund .70% of the average daily net assets up to $500
million; .65% of such assets in excess of $500 million.
</TABLE>
While higher than the investment advisory fees paid by other investment
companies in general, the advisory fees paid by Value Fund, Growth Fund and
Medium Capitalization Fund are comparable to those paid by many investment
companies with similar investment objectives and policies. The Adviser pays a
portion of its advisory fee from each Fund to IIA as follows:
12
<PAGE> 18
Diversified Core Equity Fund II, 80% of the advisory fee payable on the Fund's
average daily net assets; Value Fund, Growth Fund and Medium Capitalization
Fund, 55% of the advisory fee payable on the Fund's average daily net assets;
and Balanced Fund, 60% of the advisory fee payable on the Fund's average daily
net assets.
-------------------------------------------------------------------------------
EACH FUND PAYS CERTAIN ADDITIONAL EXPENSES.
-------------------------------------------------------------------------------
Each Fund pays fees to the Independent Trustees of the Trust, the expenses of
the continuing registration and qualification of its shares for sale, the
charges of custodians and transfer agents, and auditing and legal expenses. The
Adviser may, from time to time, agree that all or a portion of its fee will not
be imposed for specific periods or make other arrangements to limit a Fund's
expenses to not more than a specified percentage of average net assets. The
Adviser retains the right to impose such fee and recover any other payments to
the extent annual expenses fall below the limit at the end of the fiscal year.
The Adviser has voluntarily agreed to limit each Fund's expenses until further
notice to the percentages of each Fund's average net assets specified under
"EXPENSE INFORMATION."
DIVIDENDS AND TAXES
Dividends from net investment income of the Value Fund, Growth Fund and Medium
Capitalization Fund are declared annually and paid annually. Dividends from net
investment income of Diversified Core Equity Fund II and Balanced Fund are
declared quarterly and paid quarterly.
Capital gains distributions are generally declared annually. Dividends are
reinvested in additional shares unless you elect the option to receive them
entirely in cash. If you elect the cash option and the U.S. Postal Service
cannot deliver your checks, your election will be converted to reinvestment in
additional shares.
TAXATION. Each Fund intends to elect to be treated and qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As a regulated investment company, each Fund will
not be subject to Federal income taxes on any net investment income and net
realized capital gains that are distributed to its shareholders at least
annually. For institutional investors who are not exempt from federal income
taxes, dividends from a Fund's net investment income and net short-term capital
gains are taxable to you as ordinary income. Dividends from a Fund's net
long-term capital gains are taxable as long-term capital gains. These dividends
and capital gains are taxable whether they are reinvested in additional shares
or received in cash unless you are exempt from taxation or entitled to tax
deferral. Certain dividends may be paid by a Fund in January of a given year but
may be taxable to shareholders as if received on December 31 of the prior year.
Each Fund will send you a statement by January 31 showing the tax status of the
distributions you received for the prior year. Plan participants should consult
their Plan sponsor for tax information.
When you redeem (sell) or exchange shares you may realize a gain or loss.
On the account application you must certify that the social security or other
taxpayer identification number you provide is correct and that you are not
subject to back-up withholding of federal income tax unless you are a
corporation or other entity that is exempt from backup withholding. If you do
not provide this information or are otherwise subject to such withholding, the
applicable Fund may be required to withhold 31% of your dividends, redemptions
and exchanges.
In addition to Federal taxes, you may be subject to state and local or foreign
taxes with respect to your investment in and distributions from a Fund. In many
states, a portion of the Fund's dividends that represent interest received by
the Fund on direct U.S. Government obligations may be exempt from tax. The
foregoing discussion relates to investors that are subject to tax. Different tax
consequences will apply to Plan participants, tax-exempt investors and investors
that are subject to tax deferral. Under the Code, a tax-exempt investor holding
shares in the Funds for investment will not generally recognize unrelated
business taxable income from its investment in the Funds unless the tax-exempt
investor incurred indebtedness to acquire or continue to hold Fund shares and
such indebtedness remains unpaid during the relevant periods. You should consult
your tax adviser for specific advice.
13
<PAGE> 19
PERFORMANCE
-------------------------------------------------------------------------------
EACH FUND MAY ADVERTISE ITS TOTAL RETURN.
-------------------------------------------------------------------------------
Total return is based on the overall change in value of a hypothetical
investment in a Fund. A Fund's total return shows the overall dollar or
percentage change in value, assuming the reinvestment of all dividends.
Cumulative total return shows a Fund's performance over a period of time.
Average annual total return shows the cumulative return divided over the number
of years included in the period. Because average annual total return tends to
smooth out variations in a Fund's performance, you should recognize that it is
not the same as actual year-to-year results. Total return calculations are at
net asset value because no sales charges are incurred by institutions eligible
to buy the Funds.
-------------------------------------------------------------------------------
BALANCED FUND MAY ALSO ADVERTISE ITS YIELD.
-------------------------------------------------------------------------------
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 net
asset value 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 value of a Fund's shares, when redeemed, may be more or less than their
original cost. Total return and yield are historical calculations and are not
indications of future performance.
RISK FACTORS, INVESTMENTS AND TECHNIQUES
COMMON STOCKS. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other shareholder or class of shareholders,
including holders of such entity's preferred stock and other senior equity.
Ownership of common stock usually carries with it the right to vote and,
frequently, an exclusive right to do so. Each Fund will diversify its
investments in common stocks of companies in a number of industry groups without
concentrating in any particular industry. Common stocks have the potential to
outperform fixed-income securities over the long term. Common stocks provide the
most potential for growth, yet are the more volatile of the two asset classes.
DEBT OBLIGATIONS. Debt securities of corporate and governmental issuers in
which the Fund may invest are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and general
market liquidity (market risk). Particular debt securities will be selected
based upon credit risk analysis of potential issuers, the characteristics of the
security and the interest rate sensitivity of the various debt issues available
with respect to a particular issuer, and analysis of the anticipated volatility
and liquidity of the particular debt instruments.
PREFERRED STOCKS. Preferred stock generally has a preference to dividends and,
upon liquidation, over an issuer's common stock but ranks junior to debt
securities in an issuer's capital structure. Preferred stock generally pays
dividends in cash (or additional shares of preferred stock) at a defined rate
but, unlike interest payments on debt securities, preferred stock dividends are
payable only if declared by the issuer's board of directors. Dividends on
preferred stock may be cumulative, meaning that, in the event the issuer fails
to make one or more dividend payments on the preferred stock, no dividends may
be paid on the issuer's common stock until all unpaid preferred stock dividends
have been paid. Preferred stock also may be subject to optional or mandatory
redemption provisions.
CONVERTIBLE SECURITIES. The Balanced Fund may invest in convertible securities
which may include corporate notes or preferred stock but are ordinarily
long-term debt obligations of the issuer convertible at a stated exchange rate
into common stock of the same or another issuer. The Balanced Fund's investments
in convertible securities are not subject to the rating criteria with respect to
non-convertible debt obligations. As with all debt securities, the market value
of convertible securities tends to decline as interest rates increase and,
conversely, to increase as interest rates decline. The market value of
convertible securities can also be heavily dependent upon the changing value of
the equity securities into which such securities are convertible, depending on
whether the market price of the underlying security exceeds the conversion
price. Convertible securities generally rank senior to common stocks in an
issuer's capital structure and consequently entail less risk than the issuer's
common stock. However, the extent to
14
<PAGE> 20
which such risk is reduced depends upon the degree to which the convertible
security sells above its value as a fixed-income security. In evaluating a
convertible security, the Sub-Adviser will give primary emphasis to the
attractiveness of the underlying common stock.
DEPOSITARY RECEIPTS. Each Fund may invest in securities of foreign issuers in
the form of American Depositary Receipts ("ADRs"). ADRs (sponsored and
unsponsored) are receipts typically issued by an American bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation and are designed for trading in United States securities markets.
Issuers of the shares underlying unsponsored ADRs are not contractually
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
the unsponsored ADR.
SMALLER CAPITALIZATION COMPANIES. Each Fund may invest in
smaller-capitalization companies. These companies may have limited product lines
and market and financial resources, or they may be dependent upon smaller or
less experienced management groups. In addition, trading volume for these
securities may be limited. Historically, the market price for these securities
has been more volatile than for securities of companies with greater
capitalization. However, securities of companies with smaller capitalization may
offer greater potential for capital appreciation since they may be overlooked
and, thus, undervalued by investors.
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net
assets in illiquid investments which include repurchase agreements maturing in
more than seven days, restricted securities and securities not readily
marketable. Each Fund may also invest up to 15% of its assets in restricted
securities eligible for resale to certain institutional investors pursuant to
Rule 144A under the Securities Act of 1933.
LENDING OF SECURITIES AND REPURCHASE AGREEMENTS. For the purpose of realizing
additional income, each Fund may lend to broker-dealers portfolio securities
amounting to not more than 33 1/3% of their respective total assets taken at
current value. Each Fund may also enter into repurchase agreements. In a
repurchase agreement, the Fund buys a security subject to the right and
obligation to sell it back to the issuer at the same price plus accrued
interest. These transactions must be fully collateralized at all times. However,
they may involve some credit risk to a Fund if the other party should default on
its obligation and that Fund is delayed in or prevented from recovering the
collateral. Securities loaned by a Fund will remain subject to fluctuations of
market value.
WHEN-ISSUED SECURITIES. Each Fund may purchase securities on a forward or
"when-issued" basis. When a Fund engages in when-issued 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.
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. The Funds do not intend to invest for the purpose
of seeking short-term profits. Each Fund's particular portfolio securities may
be changed, however, without regard to the holding period of these securities
(subject to certain tax restrictions) when the Adviser 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 portfolio turnover rate for Diversified Core Equity Fund II is shown in the
section captioned "The Funds' Financial Highlights." The estimated portfolio
turnover rate of Value Fund, Growth Fund and Medium Capitalization Fund, which
had no operating history as of June 30, 1995, is expected to be less than 100%.
The portfolio turnover rate of the fixed-income portion of Balanced Fund is
expected to be 150% and the equity portion of that Fund is expected to be 65%. A
higher rate of portfolio turnover (100% or greater) involves correspondingly
higher transaction expenses and may make it more difficult for a Fund to qualify
as a regulated investment company for federal income tax purposes.
15
<PAGE> 21
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISER
Independence Investment Associates, Inc.
53 State Street
Boston, Massachusetts 02109
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
One International Place
Boston, Massachusetts 02110-2640
HOW TO OBTAIN INFORMATION
ABOUT THE FUNDS
For Service Information
For Telephone Exchange 101 HUNTINGTON AVENUE
For Investment-by-Phone BOSTON, MASSACHUSETTS 02199-7603
For Telephone Redemption TELEPHONE 1-800-755-4371
call 1-800-755-4371
KI00P 9/95
<PAGE> 22
JOHN HANCOCK FUNDS
101 Huntington Avenue
Boston, Massachusetts 02199
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
PROSPECTUS
September 12, 1995
The John Hancock Institutional Series Trust consists of eleven mutual funds, six
of which are offered in this Prospectus (each, a "Fund" and collectively, the
"Funds"):
JOHN HANCOCK DIVIDEND PERFORMERS FUND
JOHN HANCOCK ACTIVE BOND FUND
JOHN HANCOCK GLOBAL BOND FUND
JOHN HANCOCK MULTI-SECTOR GROWTH FUND
JOHN HANCOCK FUNDAMENTAL VALUE FUND
JOHN HANCOCK INTERNATIONAL EQUITY FUND
<TABLE>
--------------------------------------------------------------------------------------------
<CAPTION>
TABLE OF CONTENTS Page
----
<S> <C>
Expense Information................................................................ 2
The Funds' Financial Highlights.................................................... 3
An Overview of the Funds........................................................... 6
Investment Objectives and Policies................................................. 7
Who May Buy Shares................................................................. 15
Investors' Guide to Services....................................................... 16
How to Buy Shares............................................................. 16
Opening an Account............................................................ 16
Buying Additional Shares...................................................... 17
Reports to Shareholders....................................................... 17
Share Price................................................................... 17
Redeeming Shares.............................................................. 18
Exchange Privilege............................................................ 19
Organization and Management of the Funds........................................... 20
The Funds' Expenses................................................................ 22
Dividends and Taxes................................................................ 22
Performance........................................................................ 23
Risk Factors, Investments and Techniques........................................... 24
</TABLE>
This Prospectus sets forth information about the Funds, which are each a
series of John Hancock Institutional Series Trust (the "Trust"), that you should
know before investing. Please read and retain it for future reference.
Additional information about the Trust and the Funds has been filed with
the Securities and Exchange Commission (the "SEC"). You can obtain a copy of the
Funds' Statement of Additional Information, dated
September 12, 1995, which is incorporated by reference into this Prospectus,
free of charge by writing or telephoning: John Hancock Investor Services
Corporation, P.O. Box 9277, Boston, Massachusetts 02205-9277, 1-800-755-4371.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
LOGO LOGO Printed on Recycled Paper.
<PAGE> 23
<TABLE>
EXPENSE INFORMATION
The purpose of the following information is to help you to understand the various costs and expenses that you will bear,
directly or indirectly. Since the Funds have a limited operating history, the costs and expenses included in the table and
hypothetical example below are based on estimated fees and expenses for the Funds' fiscal year ending February 29, 1996 and should
not be considered as representative of future expenses. Actual expenses may be greater or less than those shown.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES ALL FUNDS
---------
<S> <C>
--------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) NONE
--------------------------------------------------------------------------------------------------------------
Sales Charge on Reinvested Dividends NONE
--------------------------------------------------------------------------------------------------------------
Deferred Sales Charge and Redemptions NONE
--------------------------------------------------------------------------------------------------------------
Redemption Fees NONE*
--------------------------------------------------------------------------------------------------------------
Exchange Fees NONE
--------------------------------------------------------------------------------------------------------------
EXAMPLE: You would pay the
following expenses for the
indicated period of years on
a hypothetical $1,000
investment assuming a 5%
annual rate of return and a
voluntary expense limitation
as noted below:+
</TABLE>
<TABLE>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
<CAPTION>
MANAGEMENT TOTAL FUND
FEE (NET OPERATING
OF OTHER EXPENSES (NET OF
LIMITATION) EXPENSES** LIMITATION)*** 1 YEAR 3 YEARS
---------- ---------- ---------------- ------ -------
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------- -------------------------
DIVIDEND PERFORMERS FUND 0.15% 0.55% 0.70% $ 7 $ 22
----------------------------------------------------------------------------------- -------------------------
ACTIVE BOND FUND 0.05% 0.55% 0.60% $ 6 $ 19
----------------------------------------------------------------------------------- -------------------------
GLOBAL BOND FUND 0.30% 0.55% 0.85% $ 9 $ 27
----------------------------------------------------------------------------------- -------------------------
MULTI-SECTOR GROWTH FUND 0.40% 0.50% 0.90% $ 9 $ 29
----------------------------------------------------------------------------------- -------------------------
FUNDAMENTAL VALUE FUND 0.25% 0.55% 0.80% $ 8 $ 26
----------------------------------------------------------------------------------- -------------------------
INTERNATIONAL EQUITY FUND 0.45% 0.55% 1.00% $ 10 $ 32
----------------------------------------------------------------------------------- -------------------------
<FN>
---------------
* Redemption by wire fee (currently $4.00) not included.
** Other Expenses include transfer agent, legal, audit, custody and other expenses.
*** Estimated for the Funds based on expenses to have been incurred if shares had been in existence for the entire fiscal year.
Total Fund Operating Expenses in the table reflect a voluntary limitation by the Funds' Adviser. Without such limitation,
the Management Fee and Total Fund Operating Expenses, respectively, would have been estimated at the following: Dividend
Performers Fund -- 0.60% and 1.15%; Active Bond Fund -- 0.50% and 1.05%; Global Bond Fund -- 0.75% and 1.30%; Multi-Sector
Growth Fund -- 0.80% and 1.30%; Fundamental Value Fund -- 0.70% and 1.25%; and International Equity Fund -- 0.90% and 1.45%.
+ This example should not be considered a representation of the Funds' actual or future expenses, which may be greater or less
than those shown.
</TABLE>
The management fee referred to above is more fully explained in this Prospectus
under the caption "THE FUNDS' EXPENSES" and in the Statement of Additional
Information under the caption "INVESTMENT ADVISORY AND OTHER SERVICES."
2
<PAGE> 24
<TABLE>
THE FUNDS' FINANCIAL HIGHLIGHTS
The following tables include selected data for a share outstanding throughout the period indicated. Total investment return,
key ratios and supplemental data are listed as follows:
<CAPTION>
JOHN HANCOCK DIVIDEND PERFORMERS FUND FOR THE PERIOD APRIL 3, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................................................... $ 8.50(b)
------
Net Investment Income.......................................................................... 0.08
Net Unrealized Gain on Investments............................................................. 0.24
------
Total from Investment Operations....................................................... 0.32
------
Less Distributions
Dividends from Net Investment Income....................................................... (0.08)
------
Net Asset Value, End of Period................................................................. $ 8.74
======
Total Investment Return at Net Asset Value(d).................................................. 3.73%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)...................................................... $3,173
Ratio of Expenses to Average Net Assets........................................................ 0.80%*
Ratio of Adjusted Expenses to Average Net Assets(a)(e)......................................... 4.10%*
Ratio of Net Investment Income to Average Net Assets........................................... 3.86%*
Ratio of Adjusted Net Investment Income to Average Net Assets(a)(e)............................ 0.56%*
Portfolio Turnover Rate........................................................................ 0%
</TABLE>
<TABLE>
<CAPTION>
JOHN HANCOCK ACTIVE BOND FUND FOR THE PERIOD APRIL 3, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................................................... $ 8.50(b)
------
Net investment income.......................................................................... 0.11
------
Less Distributions:
Dividends from net investment income....................................................... (0.11)
------
Net asset value, end of period................................................................. $ 8.50
======
Total investment return at net asset value(d).................................................. 1.29%(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...................................................... $1,146
Ratio of expenses to average net assets........................................................ 0.70%*
Ratio of adjusted expenses to average net assets(a)(e)......................................... 6.04%*
Ratio of net investment income to average net assets........................................... 5.43%*
Ratio of adjusted net investment income to average net assets(a)(e)............................ 0.09%*
Portfolio Turnover Rate........................................................................ 0%
<FN>
---------------
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the voluntary limitation, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as
a percentage of average net assets is expected to increase as the net assets of the Fund grow.
</TABLE>
3
<PAGE> 25
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
The following tables include selected data for a share outstanding throughout the period indicated. Total investment return,
key ratios and supplemental data are listed as follows:
<CAPTION>
JOHN HANCOCK GLOBAL BOND FUND FOR THE PERIOD APRIL 20, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................................................... $ 8.50(b)
------
Net investment income.......................................................................... 0.07
------
Less Distributions
Dividends from net investment income....................................................... (0.07)
------
Net asset value, end of period................................................................. $ 8.50
======
Total investment return at net asset value(d).................................................. 0.81%(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...................................................... $ 18
Ratio of expenses to average net assets........................................................ 1.10%*
Ratio of adjusted expenses to average net assets(a)(e)......................................... N/M
Ratio of net investment income to average net assets........................................... 4.28%*
Ratio of adjusted net investment income to average net assets(a)(e)............................ N/M
Portfolio turnover rate........................................................................ 0%
</TABLE>
<TABLE>
<CAPTION>
JOHN HANCOCK MULTI-SECTOR GROWTH FUND FOR THE PERIOD APRIL 12, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................................................... $ 8.50(b)
------
Net investment income.......................................................................... 0.03
Net realized and unrealized gain on investments and foreign currency transactions.............. 0.04
------
Total from investment operations....................................................... 0.07
------
Net asset value, end of period................................................................. $ 8.57
======
Total investment return at net asset value(d).................................................. 0.82%(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...................................................... $1,901
Ratio of expenses to average net assets........................................................ 1.00%*
Ratio of adjusted expenses to average net assets(a)(e)......................................... 11.33%*
Ratio of net investment income to average net assets........................................... 3.74%*
Ratio of adjusted net investment income (loss) to average net assets(a)(e)..................... (6.59%)*
Portfolio turnover rate........................................................................ 9%
<FN>
---------------
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the voluntary limitation, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as
a percentage of average net assets is expected to increase as the net assets of the Fund grow.
(N/M) Not meaningful.
</TABLE>
4
<PAGE> 26
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
The following tables include selected data for a share outstanding throughout the period indicated. Total investment return,
key ratios and supplemental data are listed as follows:
<CAPTION>
JOHN HANCOCK FUNDAMENTAL VALUE FUND FOR THE PERIOD APRIL 20, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................................................... $ 8.50(b)
------
Net investment income.......................................................................... 0.05
Net unrealized gain on investments............................................................. 0.09
------
Total from investment operations....................................................... 0.14
------
Less Distributions
Dividends from net investment income....................................................... (0.05)
------
Net asset value, end of period................................................................. $ 8.59
======
Total investment return at net asset value(e).................................................. 1.62%(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...................................................... $ 579
Ratio of expenses to average net assets........................................................ 0.95%*
Ratio of adjusted expenses to average net assets(a)(f)......................................... 14.54%*
Ratio of net investment income to average net assets........................................... 3.18%*
Ratio of adjusted net investment income (loss) to average net assets(a)(f)..................... (10.41%)*
Portfolio turnover rate........................................................................ 0%
</TABLE>
<TABLE>
<CAPTION>
JOHN HANCOCK INTERNATIONAL EQUITY FUND FOR THE PERIOD APRIL 3, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................................................... $ 8.50(b)
------
Net investment income.......................................................................... 0.08(d)
Net realized and unrealized gain on investments and foreign currency transactions.............. 0.06
------
Total from investment operations....................................................... 0.14
------
Net asset value, end of period................................................................. $ 8.64
======
Total investment return at net asset value(e).................................................. 1.65%(c)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...................................................... $ 911
Ratio of expenses to average net assets........................................................ 1.15%*
Ratio of adjusted expenses to average net assets(a)(f)......................................... 8.74%*
Ratio of net investment income to average net assets........................................... 3.49%*
Ratio of adjusted net investment income (loss) to average net assets(a)(f)..................... (5.25%)*
Portfolio Turnover Rate........................................................................ 0%
<FN>
---------------
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) On average month end shares outstanding.
(e) Without the voluntary limitation, total investment return would have been lower.
(f) Adjusted expenses as a percentage of average net assets are expected to decrease and adjusted net investment income as
a percentage of average net assets is expected to increase as the net assets of the Fund grow.
</TABLE>
5
<PAGE> 27
AN OVERVIEW OF THE FUNDS
JOHN HANCOCK DIVIDEND PERFORMERS FUND seeks long-term growth of capital and of
income without assuming undue market risk. The Fund invests primarily in common
stocks of seasoned companies in sound financial condition with a long-term
record of paying increasing dividends.
JOHN HANCOCK ACTIVE BOND FUND seeks a high level of current income consistent
with prudent investment risk. The Fund invests primarily in a diversified
portfolio of investment grade debt securities of U.S. and foreign issuers.
JOHN HANCOCK GLOBAL BOND FUND seeks a competitive total investment return,
consisting of current income and capital appreciation. The Fund invests
primarily in a global portfolio of high grade, fixed income debt securities.
JOHN HANCOCK MULTI-SECTOR GROWTH FUND seeks long-term capital appreciation. The
Fund invests primarily in equity securities of domestic and foreign issuers in
various economic sectors, selected according to both macroeconomic factors and
the outlook for each sector.
JOHN HANCOCK FUNDAMENTAL VALUE FUND seeks capital appreciation, with income as a
secondary objective. The Fund invests primarily in equity securities that are
believed to be undervalued relative to alternative equity investments.
JOHN HANCOCK INTERNATIONAL EQUITY FUND seeks long-term growth of capital. The
Fund invests primarily in equity securities of foreign issuers.
The investment adviser of each Fund is John Hancock Advisers, Inc. (the
"Adviser"), a wholly-owned indirect subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company").
------------------------
Risk Factors. Each Fund is a recently organized series of the Trust and,
therefore, has a limited operating history. There can be no assurance that the
Funds will achieve their investment objectives. An investment in one or more of
the Funds is intended for long-term investors who can accept the risks
associated with investing primarily in equity and fixed-income securities. The
Funds' investments will be subject to market fluctuations and other risks
inherent in all securities. The yield, return and price volatility of each Fund
depend on the type and quality of its investments as well as market and other
factors. In addition, a Fund's potential investments and management techniques
may entail specific risks. For additional information about risks associated
with an investment in one or more of the Funds, see "RISK FACTORS, INVESTMENTS
AND TECHNIQUES" on page 24.
6
<PAGE> 28
INVESTMENT OBJECTIVES AND POLICIES
JOHN HANCOCK DIVIDEND PERFORMERS FUND
The investment objective of the John Hancock Dividend Performers Fund ("Dividend
Performers Fund") is long-term growth of capital and of income without undue
market risk. At times, however, because of market conditions, the Fund may find
it advantageous to invest primarily for current income. The Fund believes that
its shares are suitable for investment by persons who are in search of long-term
above-average reward.
-------------------------------------------------------------------------------
JOHN HANCOCK DIVIDEND PERFORMERS FUND SEEKS
LONG-TERM GROWTH OF CAPITAL AND INCOME
WITHOUT UNDUE MARKET RISK.
-------------------------------------------------------------------------------
Under normal circumstances, the Fund invests at least 65% of its total assets in
dividend paying securities. The Adviser expects that common stocks will
ordinarily offer the greatest dividend paying potential and will constitute a
majority of the Fund's assets. The Fund may also invest a smaller portion of its
assets in corporate and U.S. Government fixed-income securities. For defensive
purposes, however, the Fund may temporarily hold a larger percentage of high
grade liquid preferred stock or debt securities. The Adviser and the Fund's
subadviser, Sovereign Asset Management Corp. ("SAMCorp"), will select securities
for the Fund's portfolio mainly for their investment character based upon
generally accepted elements of intrinsic value, including industry position,
management, financial strength, earning power, marketability and prospects for
future growth. The distribution of the Fund's assets among various types of
investments is based on general market conditions, the level of interest rates,
business and economic conditions and the availability of investments in the
equity or fixed-income markets. The amount of the Fund's assets that may be
invested in either equity or fixed-income securities is not restricted and is
based upon the judgment of the Adviser or SAMCorp of what might best achieve the
Fund's investment objective.
-------------------------------------------------------------------------------
DIVIDEND PERFORMERS FUND INVESTS PRIMARILY IN
COMMON STOCKS, ALTHOUGH IT MAY RESPOND TO
MARKET CONDITIONS BY INVESTING IN OTHER TYPES
OF SECURITIES.
-------------------------------------------------------------------------------
While there is considerable flexibility in the investment grade and type of
security in which the Fund may invest, the Fund invests only in companies that
have (together with their predecessors) been in continuous business for at least
five years and have total assets of at least $10 million. The Fund currently
uses a strategy of investing only in those common stocks that have a record of
having increased their dividends in each of the preceding ten or more years.
This "dividend performers" strategy can be changed at any time.
-------------------------------------------------------------------------------
THE DIVIDEND PERFORMERS FUND GENERALLY INVESTS
IN SEASONED COMPANIES IN SOUND FINANCIAL
CONDITION WITH A LONG RECORD OF PAYING
DIVIDENDS.
-------------------------------------------------------------------------------
The Fund's investments in corporate fixed-income securities may be in bonds,
convertible debentures and convertible or non-convertible preferred stocks.
Fixed income securities eligible for purchase by the Fund may have stated
maturities of one to thirty years. The value of fixed-income securities varies
inversely with interest rates. See "FIXED-INCOME SECURITIES." Although
fixed-income securities in the Fund's portfolio may include securities rated, at
the time of investment, as low as C by Standard & Poor's Ratings Group ("S&P")
or Moody's Investors Service, Inc. ("Moody's") or their respective equivalent
ratings and unrated securities determined to be of comparable credit quality by
the Adviser or SAMCorp, no more than 5% of the Fund's net assets will be
invested in debt securities rated lower than BBB by S&P or Baa by Moody's or
their respective equivalent ratings or unrated securities of comparable credit
quality. Bonds rated BBB or Baa are subject to certain risks. See "INVESTMENT
GRADE SECURITIES." Bonds rated lower than BBB or Baa are high risk securities
commonly known as "junk bonds." Bonds rated as low as C can be regarded as
having extremely poor prospects of attaining investment standing. See "LOWER
RATED SECURITIES" for a discussion of risks inherent in the Fund's investments
in lower rated securities and Appendix A to the Statement of Additional
Information for a description of the characteristics of obligations in the
various rating categories. If any security in the Fund's portfolio falls below
the Fund's minimum credit quality standards as a result of a rating downgrade or
the Adviser's or SAMCorp's determination, the Fund will dispose of the security
as promptly as possible while attempting to minimize any loss.
-------------------------------------------------------------------------------
THE FUND MAY ALSO INVEST IN CORPORATE AND U.S.
GOVERNMENT FIXED-INCOME SECURITIES.
-------------------------------------------------------------------------------
The Fund may also invest in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These may include mortgage-backed
securities. See "GOVERNMENT SECURITIES."
The Fund may also buy and sell options contracts, financial futures contracts
and options on such futures contracts for hedging and non-hedging purposes.
These contracts may be based on securities and securities indices. All of the
Fund's futures contracts and options on futures contracts will be traded on a
U.S. commodity exchange or board of trade. See "OPTIONS AND FUTURES
TRANSACTIONS."
7
<PAGE> 29
The Fund may invest to a limited extent in restricted and illiquid securities.
The Fund may also lend its portfolio securities and purchase securities on a
when-issued or forward commitment basis. In addition, the Fund may make
temporary investments in short-term securities, including repurchase agreements
and other money market instruments, in order to receive a return on excess cash.
See "RISK FACTORS, INVESTMENTS AND TECHNIQUES" for more information on the
Fund's investments.
JOHN HANCOCK ACTIVE BOND FUND
The investment objective of John Hancock Active Bond Fund ("Active Bond Fund")
is a high level of current income, consistent with prudent investment risk,
through investment primarily in a diversified portfolio of freely marketable
investment grade debt securities of U.S. and foreign issuers.
-------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF
JOHN HANCOCK ACTIVE BOND
FUND IS A HIGH LEVEL OF CURRENT INCOME
CONSISTENT WITH PRUDENT INVESTMENT RISK.
-------------------------------------------------------------------------------
Under normal market conditions, the Fund invests at least 65% of the value of
its total assets in bonds and/or debentures. In addition, at least 75% of the
value of the Fund's total investments in debt securities (other than commercial
paper) is normally represented by securities which have, at the time of
purchase, a rating within the four highest grades as determined by S&P (AAA, AA,
A, or BBB) or Moody's (Aaa, Aa, A or Baa) or their respective equivalent ratings
and debt securities of banks, the U.S. Government and its agencies or
instrumentalities and other issuers which, although not rated as a matter of
policy by either S&P or Moody's, are considered by the Adviser to have
investment quality comparable to securities receiving ratings within the four
highest grades. Debt securities rated BBB or Baa and unrated debt securities of
comparable credit quality are subject to certain risks. The Fund's investments
in commercial paper will, at the time of purchase, be rated A-2 or P-2 or better
by S&P or Moody's, respectively. See "INVESTMENT GRADE SECURITIES."
-------------------------------------------------------------------------------
ACTIVE BOND FUND INVESTS
PRIMARILY IN INVESTMENT
GRADE SECURITIES.
-------------------------------------------------------------------------------
The Fund may also invest up to 25% of the value of its total assets in
fixed-income securities rated below BBB by S&P or below Baa by Moody's or their
respective equivalent ratings or in securities which are unrated. The Fund may
invest in securities rated as low as CC by S&P or Ca by Moody's and unrated
securities of comparable credit quality as determined by the Adviser. These
ratings indicate obligations that are speculative to a high degree and often in
default. Securities rated lower than Baa or BBB are high risk securities
generally referred to as "junk bonds." See "LOWER RATED SECURITIES." See
Appendix A to the Statement of Additional Information for a description of the
characteristics of obligations in the various rating categories. The Fund is not
obligated to dispose of securities whose issuers subsequently are in default or
which are downgraded below the above-stated ratings.
-------------------------------------------------------------------------------
THE FUND MAY INVEST TO A
LIMITED EXTENT IN
LOWER RATED SECURITIES.
-------------------------------------------------------------------------------
The Fund may acquire individual securities of any maturity and is not subject to
any limits as to the average maturity of its overall portfolio. The longer the
Fund's average portfolio maturity, the more the value of the portfolio and the
net asset value of the Fund's shares will fluctuate in response to changes in
interest rates. An increase in interest rates will generally decrease the value
of the Fund's portfolio securities and its shares, while a decline in interest
rates will generally increase their value.
-------------------------------------------------------------------------------
THE FUND'S INVESTMENTS MAY BE OF ANY MATURITY.
-------------------------------------------------------------------------------
The Fund may invest in securities of United States and foreign issuers. It is
anticipated that under normal conditions, the Fund will not invest more than 25%
of its total assets in foreign securities (excluding U.S. dollar-denominated
Canadian securities). Securities of foreign issuers involve special risks. See
"SECURITIES OF FOREIGN ISSUERS."
-------------------------------------------------------------------------------
THE FUND MAY INVEST IN SECURITIES OF BOTH
DOMESTIC AND FOREIGN ISSUERS.
-------------------------------------------------------------------------------
The Fund may invest to a limited extent in restricted and illiquid securities,
and enter into repurchase agreements. It may also lend its portfolio securities
and purchase securities on a forward commitment or when-issued basis.
-------------------------------------------------------------------------------
ACTIVE BOND FUND MAY EMPLOY CERTAIN INVESTMENT
STRATEGIES TO HELP ACHIEVE ITS INVESTMENT
OBJECTIVE.
-------------------------------------------------------------------------------
The Fund may engage in short-term trading in response to changes in interest
rates or other economic trends or developments and for certain other purposes.
See "SHORT TERM TRADING AND PORTFOLIO TURNOVER."
8
<PAGE> 30
The Fund may also buy and sell options contracts, financial futures contracts
and options on these futures contracts for hedging and non-hedging purposes.
These contracts may be based on securities, indices and currencies. All of the
Fund's futures contracts and options on futures contracts will be traded on a
U.S. commodity exchange or board of trade. See "OPTIONS AND FUTURES
TRANSACTIONS."
The Fund may enter into forward foreign currency exchange contracts to attempt
to hedge against changes in foreign currency exchange rates. See "FOREIGN
CURRENCY TRANSACTIONS."
See "RISK FACTORS, INVESTMENTS AND TECHNIQUES" for more information on the
Fund's investments.
JOHN HANCOCK GLOBAL BOND FUND
The investment objective of the John Hancock Global Bond Fund ("Global Bond
Fund") is a competitive total investment return, consisting of current income
and capital appreciation. The Fund invests primarily in a global portfolio of
high grade, fixed-income debt securities. Normally, the Fund will invest in
fixed-income debt securities denominated in at least three currencies or
multi-currency units, including the U.S. Dollar.
Under normal circumstances, Global Bond Fund invests primarily (at least 65% of
total assets) in fixed-income debt securities issued or guaranteed by: (i) the
U.S. Government, its agencies or instrumentalities; (ii) foreign governments
(including foreign states, provinces and municipalities) or their political
subdivisions, authorities, agencies or instrumentalities; (iii) international
organizations backed or jointly owned by more than one national government, such
as the International Bank for Reconstruction and Development, European
Investment Bank, Asian Development Bank and European Coal and Steel Community;
and (iv) foreign corporations or financial institutions. The term "fixed-income
debt securities" encompasses debt obligations of all types, including bonds,
debentures and notes. A fixed-income debt security may itself be convertible
into or exchangeable for equity securities, or may carry with it the right to
acquire equity securities evidenced by warrants attached to the security or
acquired as part of a unit with a security. The Fund also invests in stocks,
such as preferred stocks, that provide the Fund with current income or capital
appreciation.
-------------------------------------------------------------------------------
JOHN HANCOCK GLOBAL BOND FUND'S INVESTMENT
OBJECTIVE IS A COMPETITIVE TOTAL INVESTMENT
RETURN, CONSISTING OF CURRENT INCOME AND
CAPITAL APPRECIATION. THE FUND INVESTS
PRIMARILY IN A GLOBAL PORTFOLIO OF HIGH GRADE,
FIXED-INCOME DEBT SECURITIES.
-------------------------------------------------------------------------------
The Fund has registered as a "non-diversified" fund so that it may invest more
than 5% of its total assets in the obligations of a single foreign government or
other issuer. This may make the Fund more susceptible to certain risks. See
"NON-DIVERSIFIED STATUS." The Fund will not, however, invest more than 25% of
its total assets in securities issued by any one foreign government.
-------------------------------------------------------------------------------
THE FUND IS "NON-DIVERSIFIED."
-------------------------------------------------------------------------------
Global Bond Fund's investments in fixed-income debt securities consist primarily
of fixed income debt securities which are rated, at the time of investment,
either A or better by either S&P or Moody's or their respective equivalent
ratings or in securities that the Adviser has determined to be of comparable
credit quality. The Fund may, however, invest up to 25% of its total assets in
fixed-income debt securities rated, at the time of investment, as low as CC by
S&P or Ca by Moody's or their respective equivalent ratings and unrated
securities of comparable credit quality. In the event a fixed-income debt
security is subsequently downgraded below these ratings, the Adviser will
consider this event in its determination of whether the Fund should continue to
hold the security. Securities rated lower than BBB or Baa and unrated securities
of comparable credit quality are high risk securities generally referred to as
"junk bonds." See "LOWER RATED SECURITIES." See Appendix A to the Statement of
Additional Information for a description of the characteristics of obligations
in the various rating categories.
-------------------------------------------------------------------------------
THE FUND INVESTS PRIMARILY IN
HIGH GRADE SECURITIES.
-------------------------------------------------------------------------------
Global Bond Fund may invest in fixed-income debt securities denominated in any
currency or a multi-national currency unit. The European Currency Unit ("ECU")
is a composite currency consisting of specified amounts of each of the
currencies of the ten member countries of the European Economic Community. The
Fund may also invest in fixed-income debt securities denominated in the currency
of one country although issued by a governmental entity, corporation or
financial institution of another country. For example, the Fund may invest in a
Japanese yen-denominated fixed-income debt security issued by a United States
corporation. This type of investment involves credit risks associated with the
issuer of the obligation and currency risks associated with the currency in
which the obligation is denominated.
9
<PAGE> 31
Global Bond Fund will maintain a flexible investment policy, and its portfolio
assets may be shifted among fixed-income debt securities denominated in various
foreign currencies that the Adviser expects to provide relatively high rates of
income or potential capital appreciation in U.S. Dollars. As with all debt
securities, the prices of the Fund's portfolio securities will generally
increase when interest rates decline and decrease when interest rates rise.
Similarly, if the foreign currency in which a portfolio security is denominated
appreciates against the U.S. Dollar, the total investment return from the
security would be enhanced. Conversely, if the foreign currency in which a
portfolio security is denominated depreciates against the U.S. Dollar, total
investment return from that security would be adversely affected.
In selecting fixed-income debt securities for Global Bond Fund's portfolio, the
Adviser ordinarily considers such factors as the strengths and weaknesses of the
currency in which the securities are denominated; expected levels of inflation
and interest rates; government policies influencing business conditions; the
financial condition of the issuer; and other pertinent financial, tax, social,
political and national factors. The Fund's investments in securities of foreign
issuers involves risks not associated with U.S. securities. In addition, the
Fund may invest in foreign countries with limited or developing capital markets,
including emerging markets. Investments in these countries involve additional
risks. See "SECURITIES OF FOREIGN ISSUERS."
The average maturity of the Fund's portfolio securities may vary based upon the
Adviser's assessment of economic and market conditions.
-------------------------------------------------------------------------------
THE FUND'S AVERAGE PORTFOLIO
MATURITY MAY VARY.
-------------------------------------------------------------------------------
When the Adviser determines that adverse market conditions are present, the Fund
may establish and maintain cash reserves for temporary defensive purposes,
without limitation. The Fund's cash reserves may be invested in domestic as well
as foreign money market instruments, including but not limited to governmental
obligations, certificates of deposit, bankers' acceptances, commercial paper,
short-term corporate debt securities and repurchase agreements.
-------------------------------------------------------------------------------
FOR TEMPORARY DEFENSIVE PURPOSES, THE FUND MAY
INVEST IN A VARIETY OF DOMESTIC AND FOREIGN
MONEY MARKET INSTRUMENTS.
-------------------------------------------------------------------------------
Global Bond Fund's portfolio turnover rate may vary widely from year to year and
may be higher than that of many other mutual funds a total return objective. A
high rate of portfolio turnover involves correspondingly higher expenses than a
lower rate, and these expenses must be borne by the Fund. See "SHORT TERM
TRADING AND PORTFOLIO TURNOVER."
The Fund may deal in options listed for trading on national securities or
foreign exchanges or traded over-the-counter. The Fund may invest up to 10% of
its total assets, taken at market value at the time of investment, in call and
put options on domestic and foreign securities and foreign currencies. In
addition, it may write (sell) covered call options and put options to the extent
that the cover for these options does not exceed 25% of the Fund's total assets.
The Fund may also invest in interest rate futures contracts (including futures
contracts on foreign debt securities) and foreign currency futures contracts to
hedge against the effects of fluctuations in interest rates, currency exchange
rates and other market conditions. The Fund may purchase and write (sell)
options on interest rate futures contracts and foreign currency futures
contracts that are traded on a U.S. exchange or board of trade. See "OPTIONS AND
FUTURES TRANSACTIONS."
-------------------------------------------------------------------------------
THE FUND MAY EMPLOY CERTAIN INVESTMENT
STRATEGIES AND TECHNIQUES TO HELP ACHIEVE ITS
INVESTMENT OBJECTIVE.
-------------------------------------------------------------------------------
As a means of hedging its exposure to interest rate and currency fluctuations,
the Fund may enter into interest rate swaps, currency swaps, and other types of
swap agreements, such as caps, collars and floors. See "SWAP AGREEMENTS."
The Fund may enter into forward foreign currency exchange contracts to attempt
to hedge against changes in foreign currency exchange rates. See "FOREIGN
CURRENCY TRANSACTIONS."
The Fund may also lend its portfolio securities, enter into repurchase
agreements, purchase securities on a forward commitment or when-issued basis,
purchase restricted or illiquid securities, and purchase foreign securities in
the form of American Depositary Receipts, European Depositary Receipts and
similar instruments.
See "RISK FACTORS, INVESTMENTS AND TECHNIQUES" for more information about the
Fund's investments.
10
<PAGE> 32
JOHN HANCOCK MULTI-SECTOR GROWTH FUND
The investment objective of John Hancock Multi-Sector Growth Fund ("Multi-Sector
Growth Fund") is long-term capital appreciation. The Fund seeks to achieve its
objective by emphasizing investments in equity securities of issuers in various
economic sectors.
-------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF THE JOHN HANCOCK
MULTI-SECTOR GROWTH FUND IS LONG-TERM CAPITAL
APPRECIATION.
-------------------------------------------------------------------------------
The equity securities in which the Fund invests consist primarily of common
stocks of U.S. and foreign issuers but may also include preferred stocks,
convertible debt securities and warrants. The Fund seeks to achieve its
investment objective by varying the relative weighting of its portfolio
securities among various economic sectors based upon both macroeconomic factors
and the outlook for each particular sector. The Adviser selects equity
securities for the Fund from various economic sectors, including, but not
limited to, the following: automotive and housing, consumer goods and services,
defense and aerospace, energy, financial services, health care, heavy industry,
leisure and entertainment, machinery and equipment, precious metals, retailing,
technology, transportation, utilities, foreign and environmental. The Fund may
modify these sectors if the Adviser believes that they no longer represent
appropriate investments for the Fund, or if other sectors offer better
opportunities for investment. SEE APPENDIX B TO THE STATEMENT OF ADDITIONAL
INFORMATION FOR A FURTHER DESCRIPTION OF THE SECTORS IN WHICH THE FUND INVESTS.
-------------------------------------------------------------------------------
THE FUND EMPHASIZES ISSUERS IN CERTAIN
ECONOMIC SECTORS BELIEVED TO PRESENT "SECTOR
OPPORTUNITIES."
-------------------------------------------------------------------------------
The Adviser will adjust the Fund's relative weighting among the sectors in
response to changes in economic and market conditions. The Fund may focus on as
many as five of the foregoing economic sectors at any time. Under normal market
conditions, at least 90% of the Fund's investment in equity securities consists
of the equity securities of issuers in five or fewer of the sectors. Subject to
the Fund's policy of investing not more than 25% of its total assets in any one
industry, issuers on any one sector may represent all of the Fund's net assets.
Due to the Fund's emphasis on a few sectors, the Fund may be subject to a
greater degree of volatility than a fund that is structured in a more
diversified manner. However, the Fund retains the flexibility to invest its
assets in a broader group of sectors if a narrower range of investments is not
desirable. This flexibility may offer greater diversification than a fund that
is limited to investing in a single sector or industry. The Fund may not hold
securities of issuers in all of the sectors at any given time.
In selecting securities for the Fund's portfolio, the Adviser will determine the
allocation of assets among equity securities, fixed-income securities and cash,
the sectors that will be emphasized at any given time, the distribution of
securities among the various sectors, the specific industries within each sector
and the specific securities within each industry. In making the sector analysis,
the Adviser considers the general economic environment, the outlook for real
economic growth in the United States and abroad, trends and developments within
specific sectors and the outlook for interest rates and the securities markets.
A sector is considered a "sector opportunity" when, in the opinion of the
Adviser, the issuers in that sector have a high earnings potential. In selecting
particular issuers, the Adviser considers price/earnings ratios, ratios of
market to book value, earnings growth, product innovation, market share,
management quality and capitalization.
The Fund's investments may include securities of both large, widely traded
companies and smaller, less well-known issuers. The Fund seeks growth companies
that either occupy a dominant position in an emerging or established industry or
have a significant and growing market share in a large, fragmented industry. The
Fund seeks to invest in those companies with potential for high growth, stable
earnings, ability to self-finance, a position of industry leadership, and strong
visionary management. Higher risks are often associated with investments in
companies with smaller market capitalizations. See "SMALLER CAPITALIZATION
COMPANIES."
The Fund may also invest in the following types of fixed-income securities: U.S.
Government securities and convertible and non-convertible corporate preferred
stocks and debt securities of U.S. and foreign issuers. See "SECURITIES OF
FOREIGN ISSUERS." The market value of fixed-income securities varies inversely
with changes in the prevailing levels of interest rates. The market value of
convertible securities, while influenced by the prevailing level of interest
rates, is also affected by the changing value of the equity into which they are
convertible. The Fund may purchase fixed-income debt securities with stated
maturities of up to thirty years. The Fund's investments in fixed-income
securities may include mortgage-backed securities.
-------------------------------------------------------------------------------
THE FUND MAY ALSO INVEST IN FIXED-INCOME
SECURITIES IN PURSUING ITS INVESTMENT
OBJECTIVE OR FOR TEMPORARY DEFENSIVE PURPOSES.
-------------------------------------------------------------------------------
11
<PAGE> 33
The corporate fixed-income securities in which the Fund may invest will be
rated, at the time of investment, at least BBB by S&P or Baa by Moody's or their
respective equivalent ratings or, if unrated, determined to be of comparable
credit quality by the Adviser. Securities in the lowest investment grade (BBB or
Baa) involve certain risks. See "INVESTMENT GRADE SECURITIES." If the rating of
a debt security is reduced below Baa or BBB, the Adviser will consider whatever
action is appropriate consistent with the Fund's investment objectives and
policies. See Appendix A to the Statement of Additional Information for a
description of the characteristics of obligations in the various rating
categories.
The Fund has registered as a "non-diversified" fund so that it may invest more
than 5% of its total assets in the securities of any one issuer. This may make
the Fund susceptible to certain risks. See "NON-DIVERSIFIED STATUS."
-------------------------------------------------------------------------------
THE FUND IS "NON-DIVERSIFIED."
-------------------------------------------------------------------------------
In connection with its investments in foreign securities, the Fund may hold a
portion of its assets in foreign currency and enter into forward foreign
currency exchange contracts to hedge against changes in foreign currency
exchange rates. See "FOREIGN CURRENCY TRANSACTIONS."
-------------------------------------------------------------------------------
THE FUND MAY EMPLOY CERTAIN INVESTMENT
STRATEGIES AND TECHNIQUES TO HELP ACHIEVE ITS
INVESTMENT OBJECTIVE.
-------------------------------------------------------------------------------
The Fund may write listed and over-the-counter covered call and put options on
securities in which it may invest and on indices composed of securities in which
it may invest. The Fund may also purchase put and call options on these
securities and indices. The Fund may also buy and sell stock index and other
financial futures contracts, and options on futures contracts, to hedge against
changes in securities prices, interest rates and currency exchange rates or for
speculative purposes. The futures contracts may be based upon various
securities, securities indices, foreign currencies and other financial
instruments and indices. See "OPTIONS AND FUTURES TRANSACTIONS."
The Fund may engage in short sales "against the box," as well as short sales for
hedging purposes and to profit from an anticipated decline in a security's
value. Short sales other than "against the box" involve special risks. See
"SHORT SALES."
The Fund may also lend its portfolio securities, enter into repurchase
agreements, purchase securities on a forward commitment or when-issued basis,
engage in short-term trading, purchase restricted and illiquid securities and
invest in foreign issuers in the form of American Depositary Receipts.
See "RISK FACTORS, INVESTMENTS AND TECHNIQUES" for more information about the
Fund's investments.
JOHN HANCOCK FUNDAMENTAL VALUE FUND
The investment objective of John Hancock Fundamental Value Fund ("Fundamental
Value Fund") is capital appreciation with income as a secondary consideration.
The Fund seeks to achieve its objective by investing primarily in equity
securities that are undervalued relative to alternative equity investments. The
equity securities in which the Fund invests consist of common stocks, preferred
stocks, convertible debt securities and warrants of U.S. and foreign issuers.
-------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF
JOHN HANCOCK FUNDAMENTAL
VALUE FUND IS CAPITAL
APPRECIATION WITH INCOME AS
A SECONDARY OBJECTIVE.
-------------------------------------------------------------------------------
In selecting equity securities for the Fund, the Adviser and the Fund's
subadviser, NM Capital Management, Inc. ("NM Capital"), emphasize issuers whose
equity securities trade at market-to-book value ratios lower than comparable
issuers or the Standard & Poor's Composite Index. The Fund's portfolio will also
include securities that the Adviser and NM Capital consider to have the
potential for capital appreciation, due to potential recognition of earnings
power or asset value which is not fully reflected in the securities' current
market value. The Adviser and NM Capital attempt to identify investments which
possess characteristics, such as high relative value, intrinsic value, going
concern value, net asset value and replacement book value, which are believed to
limit sustained downside price risk, generally referred to as the "margin of
safety" concept. The Adviser and NM Capital also consider an issuer's financial
strength, competitive position, projected future earnings and dividends and
other investment criteria. These securities are collectively referred to as
"fundamental value" securities.
-------------------------------------------------------------------------------
FUNDAMENTAL VALUE FUND EMPHASIZES "FUNDAMENTAL
VALUE" SECURITIES, WHICH ARE EQUITY SECURITIES
THAT ARE UNDERVALUED RELATIVE TO ALTERNATIVE
EQUITY INVESTMENTS.
-------------------------------------------------------------------------------
The Fund's investment policy reflects the Adviser's and NM Capital's belief that
while the securities markets tend to be efficient, sufficiently persistent price
anomalies exist which the strategically disciplined active equity manager can
exploit in seeking to achieve an above-
12
<PAGE> 34
average rate of return. Based on this premise, the Adviser and NM Capital have
adopted a strategy of investing in low market to book value, out of favor,
stocks.
The Fund's investments may include securities of both large, widely traded
companies and smaller, less well known issuers. Higher risks are often
associated with investments in companies with smaller market capitalizations.
See "SMALLER CAPITALIZATION COMPANIES."
-------------------------------------------------------------------------------
THE FUNDAMENTAL VALUE FUND MAY INVEST IN THE
SECURITIES OF SMALLER, LESS WELL-KNOWN
ISSUERS, WHICH MAY INVOLVE CERTAIN RISKS.
-------------------------------------------------------------------------------
The Fund's investments in fixed-income securities may include U.S. Government
securities and convertible and non-convertible corporate preferred stocks and
debt securities of U.S. and foreign issuers. Under normal market conditions, the
Fund's investments in fixed-income securities are not expected to exceed 10% of
the Fund's net assets. The market value of fixed-income securities varies
inversely with changes in the prevailing levels of interest rates. The market
value of convertible securities, while influenced by the prevailing level of
interest rates, is also affected by the changing value of the equity securities
into which they are convertible. The Fund may purchase fixed-income debt
securities with stated maturities of up to thirty years.
-------------------------------------------------------------------------------
THE FUNDAMENTAL VALUE FUND MAY ALSO INVEST IN
FIXED-INCOME SECURITIES IN PURSUING ITS
INVESTMENT OBJECTIVE OR FOR TEMPORARY
DEFENSIVE PURPOSES.
-------------------------------------------------------------------------------
The corporate fixed-income securities in which the Fund may invest, including
convertible debt securities and preferred stock, will be rated, at the time of
investment, at least BBB by S&P or Baa by Moody's or their respective equivalent
ratings or, if unrated, determined to be of comparable credit quality by the
Adviser or NM Capital. Debt securities rated BBB or Baa or their equivalent are
subject to certain risks. See "INVESTMENT GRADE SECURITIES." If the rating of a
debt security is reduced below BBB or Baa, the Adviser or NM Capital will sell
it when it is appropriate consistent with the Fund's investment objective and
policies. See Appendix A to the Statement of Additional Information for a
description of the characteristics of obligations in the various rating
categories.
The Fund may invest up to 50% of its assets in securities of foreign issuers,
including American Depositary Receipts. These investments involve special risks.
See "SECURITIES OF FOREIGN ISSUERS."
When the Adviser or NM Capital believes unfavorable investment conditions exist
requiring the Fund to assume a temporary defensive investment posture, the Fund
may hold cash or invest all or a portion of its assets in short-term instruments
which are rated A-1 by S&P or P-1 by Moody's.
In connection with its investments in foreign securities, the Fund may hold a
portion of its assets in foreign currencies and may enter into forward foreign
currency exchange contracts to protect against changes in foreign currency
exchange rates. See "FOREIGN CURRENCY TRANSACTIONS."
-------------------------------------------------------------------------------
THE FUND MAY EMPLOY CERTAIN INVESTMENT
STRATEGIES AND TECHNIQUES TO HELP ACHIEVE ITS
INVESTMENT OBJECTIVE.
-------------------------------------------------------------------------------
The Fund may write listed and over-the-counter covered call and put options on
up to 100% of its net assets on securities in which it may invest and on indices
composed of securities in which it may invest. The Fund may also purchase put
and call options on such securities and indices. The Fund may also buy and sell
stock index and other financial futures contracts and options on such futures
contracts to hedge against changes in securities prices, interest rates and
currency exchange rates or for speculative purposes. These contracts may be
based on various securities indices and currencies. See "OPTIONS AND FUTURES
TRANSACTIONS."
The Fund may also lend its portfolio securities, enter into repurchase
agreements, purchase securities on a forward commitment or when-issued basis and
purchase restricted and illiquid securities.
See "RISK FACTORS, INVESTMENTS AND TECHNIQUES" for more information about the
Fund's investments.
JOHN HANCOCK INTERNATIONAL EQUITY FUND
The investment objective of John Hancock International Equity Fund
("International Equity Fund") is long-term growth of capital. The Fund seeks to
achieve its investment objective by investing primarily in foreign equity
securities.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of issuers located outside the United States in
various countries around the world.
-------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF
JOHN HANCOCK INTERNATIONAL
EQUITY FUND IS LONG-TERM
GROWTH OF CAPITAL.
-------------------------------------------------------------------------------
13
<PAGE> 35
Generally, the Fund's portfolio will contain securities of issuers from at
least three countries other than the United States. Although the Fund may
invest in both equity and debt securities, the Adviser and the Fund's
Subadviser, John Hancock Advisers International Ltd. ("JHAI"), expect that
equity securities, such as common stock, preferred stock and securities
convertible into common and preferred stock, will ordinarily offer the greatest
potential for long-term growth of capital and will constitute substantially all
the Fund's assets. However, the Fund may invest in any other types of
securities that the Adviser or JHAI believe offer long-term capital
appreciation due to favorable credit quality, interest rates or currency
exchange rates. These securities include warrants, bonds, notes and other debt
securities (including Euro-dollar securities) or obligations of domestic or
foreign governments and their political subdivisions, or domestic or foreign
corporations.
The Fund maintains a flexible investment policy and invests in a diversified
portfolio of securities of companies and governments located throughout the
world. In making the allocation of assets among various countries and geographic
regions, the Adviser and JHAI ordinarily consider such factors as prospects for
relative economic growth between foreign countries; expected levels of inflation
and interest rates; governmental policies influencing business conditions; and
other pertinent financial, tax, social, political and national factors -- all in
relation to the prevailing prices of the securities in each country or region.
-------------------------------------------------------------------------------
THE INTERNATIONAL ALLOCATION OF
ASSETS IS NOT FIXED, AND WILL VARY FROM TIME
TO TIME BASED ON THE JUDGMENT OF THE ADVISER
AND JHAI.
-------------------------------------------------------------------------------
In choosing specific investments for the Fund, the Adviser and JHAI generally
look for companies whose earnings show a strong growth trend or for companies
whose current market value per share is undervalued. The Fund will not restrict
its investments to any particular size company and, consequently, the portfolio
may include the securities of small and relatively less well-known companies.
The securities of small and, in some cases, medium-sized companies may be
subject to more volatile market movements than the securities of larger, more
established companies or the stock market averages in general. See "SMALLER
CAPITALIZATION COMPANIES."
The Fund intends generally to invest in debt securities only for temporary
defensive purposes. Accordingly, when the Adviser or JHAI believes that
unfavorable investment conditions exist requiring the Fund to assume a temporary
defensive investment posture, the Fund may hold cash or invest all or a portion
of its assets in short-term domestic as well as foreign instruments, including:
short-term U.S. Government securities (including mortgage-backed securities) and
repurchase agreements in connection with such instruments; bank certificates of
deposit, bankers' acceptances, time deposits and letters of credit; and
commercial paper (including so called Section 4(2) paper rated at least A-1 or
A-2 by S&P or P-1 or P-2 by Moody's or if unrated considered by the Adviser or
JHAI to be of comparable credit quality). The Fund's temporary defensive
investments may also include: debt obligations of U.S. companies rated at least
BBB or Baa by S&P or Moody's, respectively, or, if unrated, of comparable
quality in the opinion of the Adviser or JHAI; commercial paper and corporate
debt obligations not satisfying the above credit standards if they are (a)
subject to demand features or puts or (b) guaranteed as to principal and
interest by a domestic or foreign bank having total assets in excess of $1
billion, by a corporation whose commercial paper may be purchased by the Fund,
or by a foreign government having an existing debt security rated at least BBB
or Baa by S&P or Moody's, respectively; and other short-term investments which
are determined by the Trustees of the Trust to present minimal credit risks and
which are of "high quality" as determined by any major rating service or, in the
case of an instrument that is not rated, of comparable quality as determined by
the Adviser and JHAI. Securities which are convertible may be rated as low as
BBB or Baa by S&P or Moody's, respectively. Debt securities and convertible
securities rated BBB or Baa are subject to certain risks. See "INVESTMENT GRADE
SECURITIES." If the rating of a debt security or a convertible security is
reduced below BBB or Baa, the Adviser and JHAI will consider whatever action is
appropriate consistent with the Fund's investment objectives and policies. See
Appendix A to the Statement of Additional Information for a description of the
characteristics of obligations in the various rating categories.
The Fund will invest in securities of foreign and United States issuers which
are issued in or outside of the U.S., including American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") or other securities convertible
into securities of corporations in which the Fund is permitted to invest. See
"DEPOSITARY RECEIPTS."
14
<PAGE> 36
Although the Fund's investments in foreign securities generally are subject to
special risks, these risks may be intensified in the case of investments in
emerging markets or countries with limited or developing capital markets. These
countries are located in the Asia-Pacific region, Eastern Europe, Latin and
South America and Africa. See "SECURITIES OF FOREIGN ISSUERS."
-------------------------------------------------------------------------------
THE FUND'S INVESTMENTS IN SECURITIES OF
FOREIGN ISSUERS
MAY INCLUDE INVESTMENTS IN
EMERGING MARKETS.
-------------------------------------------------------------------------------
The Fund will not speculate in foreign currencies, but may enter into forward
foreign currency contracts to seek to hedge against changes in currency exchange
rates. See "FOREIGN CURRENCY TRANSACTIONS."
The Fund may deal in options listed for trading on national securities or
foreign exchanges or those traded over the counter. The Fund may write listed
and over the counter covered call and put options on securities in which it may
invest and on indices composed of securities in which it may invest. The Fund
may also purchase put and call options on these securities and indices. The Fund
may engage in transactions in futures contracts and options on futures contracts
for hedging and speculative purposes. All of the Fund's futures contracts and
options on futures contracts will be traded on a U.S. commodity exchange or
board of trade. See "OPTIONS AND FUTURES TRANSACTIONS."
-------------------------------------------------------------------------------
THE FUND MAY EMPLOY CERTAIN INVESTMENT
STRATEGIES AND TECHNIQUES TO HELP ACHIEVE ITS
INVESTMENT OBJECTIVE.
-------------------------------------------------------------------------------
The Fund may engage in short sales "against the box," as well as short sales for
hedging purposes and to profit from an anticipated decline in a security's
value. Short sales other than "against the box" involve special risks. See
"SHORT SALES."
The Fund may also lend its portfolio securities, enter into repurchase
agreements, purchase securities on a forward commitment or when-issued basis,
purchase restricted and illiquid securities and engage in short-term trading.
See "RISK FACTORS, INVESTMENTS AND TECHNIQUES" for more information on the
Fund's investments.
------------------------
Each Fund has adopted certain investment restrictions which are enumerated in
detail in the Statement of Additional Information where they are classified as
fundamental or nonfundamental. Those restrictions designated as fundamental may
not be changed without shareholder approval. Each Fund's investment objective,
investment policies and nonfundamental restrictions, however, may be changed by
a vote of the Trustees without shareholder approval. If there is a change in a
Fund's investment objective, you should consider whether the Fund remains an
appropriate investment in light of your current financial position and needs.
-------------------------------------------------------------------------------
EACH FUND HAS ADOPTED INVESTMENT RESTRICTIONS
WHICH ARE ENUMERATED IN DETAIL IN THE
STATEMENT OF ADDITIONAL INFORMATION. SOME OF
THESE RESTRICTIONS MAY HELP TO REDUCE
INVESTMENT RISK.
-------------------------------------------------------------------------------
The primary consideration in choosing brokerage firms to carry out the Funds'
transactions is execution at the most favorable prices, taking into account the
broker's professional ability and quality of service. Consideration may also be
given to the broker's sales of shares of the Funds. Pursuant to procedures
determined by the Trustees, the Adviser may place securities transactions with
brokers affiliated with the Adviser and/or a subadviser. These brokers include
Tucker, Anthony Incorporated, Sutro and Company, Inc., and John Hancock
Distributors, Inc., which are indirectly owned by the Life 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. Commission rates on many foreign
securities exchanges are fixed and are generally higher than U.S. commission
rates, which are negotiable.
-------------------------------------------------------------------------------
BROKERS ARE CHOSEN FOR FUND TRANSACTIONS ON
THE BASIS OF BEST PRICE AND EXECUTION.
-------------------------------------------------------------------------------
WHO MAY BUY SHARES
INVESTORS ARE LIMITED TO THE QUALIFIED RETIREMENT PLANS ("PLANS") AND
INSTITUTIONS DEFINED BELOW. THERE IS NO SALES CHARGE. John Hancock Funds, Inc.
("JH Funds") may make payment out of its own resources to a Selling Broker who
sells shares of a Fund in an amount not to exceed 0.15% of the amount invested.
PLANS are defined as follows: (a) unaffiliated benefit plans and (b) tax-exempt
retirement plans of the Adviser and its affiliates, including the retirements
plans of the Adviser's affiliated brokers. A PARTICIPANT is an individual
employee participating in a Plan.
INSTITUTIONS are defined as follows: (a) certain trusts, endowment funds and
foundations; (b) banks and insurance companies purchasing for their own account;
(c) investment companies not affiliated with the Adviser; (d) any entity taxed
as a corporation for purposes of federal taxation; and (e) any state, county,
city or any instrumentality, department, authority or agency thereof.
15
<PAGE> 37
INVESTORS' GUIDE TO SERVICES
HOW TO BUY SHARES
Each Plan or Institution must make a minimum initial investment in a Fund of at
least $250,000 unless you invest or have invested at least $1 million in the
aggregate in any of the series of the Trust. There is no minimum initial
investment applicable to employee benefit or retirement plans having 350 or more
eligible employees.
The Trust includes the Funds as well as the following additional funds: John
Hancock Independence Diversified Core Equity Fund II, John Hancock Independence
Growth Fund, John Hancock Independence Value Fund, John Hancock Independence
Medium Capitalization Fund, and John Hancock Independence Balanced Fund (the
"Independence Funds"). Shares of the Independence Funds are offered by means of
a separate prospectus available by calling 1-800-755-4371. Please read the
Independence Funds' prospectus before investing.
<TABLE>
OPENING AN ACCOUNT
PARTICIPANTS
------------------------------------------------------------------------------------------------------
Through your Sponsor according to your Plan.
------------------------------------------------------------------------------------------------------
PLANS AND INSTITUTIONS
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
BY CHECK 1. Make check payable to John Hancock Investor Services Corporation
("Investor Services").
2. Mail the completed account information package directly to Investor
Services at:
John Hancock Investor Services Corporation
P.O. Box 9277
Boston, MA 02205-9277
------------------------------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by calling 1-800-755-4371.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900022260
ABA Routing No. 211475000
For credit to: [Full Name of Fund]
Your Account Number
Name(s) under which account is registered
Please note that wires sent in this manner must be for mutual fund investments
only.
3. In the case of multiple series purchases made by one wire, include clear
instructions as to the specific allocation of the monies.
4. Mail the completed account information package directly to Investor
Services at P.O. Box 9277, Boston, MA 02205-9277.
5. Plan Sponsors may make arrangements for Automatic Clearing House ("ACH")
transactions and other types of wire transfers by contacting Investor
Services at 1-800-755-4371.
------------------------------------------------------------------------------------------------------
</TABLE>
Investor Services will open an account when it receives an investment in 'good
order.' 'Good order' is defined as receipt of a completed account information
package and the initial investment amount, if applicable.
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. 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. Share certificates are not issued unless a
request is made to Investor Services.
16
<PAGE> 38
<TABLE>
BUYING ADDITIONAL SHARES
PARTICIPANTS
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
Through your Sponsor according to your Plan.
------------------------------------------------------------------------------------------------------
PLANS
------------------------------------------------------------------------------------------------------
BY CHECK Please follow the procedures set forth above for opening an account by check.
BY WIRE Please follow the procedures set forth above for opening an account by wire.
------------------------------------------------------------------------------------------------------
INSTITUTIONS
--------------------------------------------------------------------------------
BY CHECK Please follow the procedures set forth above for opening an account by check.
BY WIRE Please follow the procedures set forth above for opening an account by wire.
BY TELEPHONE 1. Complete the "Invest-By Phone" and "Bank Information" sections on the
Account Application designating a bank account from which funds may be
drawn. Note that in order to invest by phone, your account must be in a
bank or credit union that is a member of the ACH System.
2. After your authorization form has been processed, you may purchase
additional shares by calling Investor Services toll-free at 1-800-755-4371.
3. Give the Investor Services representative the name(s) in which your account
is registered, the Fund name and your account number, and the amount you
wish to invest.
4. Your investment normally will be credited to your account the business day
following your phone request.
------------------------------------------------------------------------------------------------------
</TABLE>
REPORTS TO SHAREHOLDERS
Participants should direct all inquiries about the Funds to either the Plan
Sponsor or Investor Services at 1-800-755-4371.
The Funds will issue an annual report containing audited financial statements
and a semiannual report to shareholders (i.e., Plans or Institutions). A printed
confirmation for each transaction affecting share balance or account
registration will be provided to shareholders by Investor Services. Statements
related to reinvestment of dividends will be furnished quarterly. A tax
information statement will be mailed by January 31 of each year.
SHARE PRICE
SHARES OF EACH FUND ARE OFFERED AT THE NET ASSET VALUE ("NAV") OF THAT
FUND. The NAV is the value of one share and is calculated by dividing a Fund's
net assets by the number of outstanding shares of that Fund.
Equity securities in a Fund's portfolio that are listed or traded on an exchange
or quoted on the Nasdaq National Market are generally valued at their last sale
price as furnished by a pricing service which utilizes electronic pricing
techniques. If no sale has occurred on the date assets are valued, or if the
security is traded only in the over-the-counter market, it will normally be
valued at its last available bid price. Fixed-income securities are generally
valued by a pricing service which uses electronic pricing techniques based on
general institutional trading. Some securities are valued at fair value based on
procedures approved by the Board of Trustees, and for certain other securities,
the amortized cost method is used if the Trustees determine, in good faith, that
this cost approximates fair value as described more fully in the Statement of
Additional Information. The NAV is calculated once daily as of the close of
regular trading on the New York Stock Exchange (generally at 4:00 p.m., New York
time) on each day the Exchange is open. On any day an international market is
closed and the New York Stock Exchange is open, the foreign securities will be
valued at the prior day's close with the current day's exchange rate.
Shares of the Fund are sold at the NAV computed after your investment is
received in 'good order' by Investor Services. The Fund will normally issue
shares for cash consideration only.
17
<PAGE> 39
REDEEMING SHARES
The payment of redemption proceeds will be made by check or electronic credit to
a shareholder's account at a financial institution, generally on the next
business day. When you redeem your shares, you may realize a gain or loss. Under
unusual circumstances a Fund may suspend redemptions or postpone payment as
permitted by the Federal securities laws, which could be up to seven (7) days. A
Fund may hold payment until reasonably satisfied that investments which were
recently made by check have been collected, which may take up to 10 calendar
days.
<TABLE>
PARTICIPANTS
-----------------------------------------------------------------------------------------------------
Through your Sponsor according to your Plan
-----------------------------------------------------------------------------------------------------
PLANS
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
IN WRITING Send a letter of instruction specifying the name of the Fund, the dollar
amount or the number of shares to be redeemed, your name, your account
number and the additional requirements listed below that apply to your
particular account.
CORPORATION OR Letter of instruction and a corporate resolution, signed by person(s)
ASSOCIATION authorized to act on the account, with the signature(s) guaranteed.
TRUST
Letter of instruction signed by the Trustee(s) with a signature(s)
guaranteed. (If the Trustee's name is not registered on your account, also
provide a copy of the Trust document, certified within the last 60 days.)
IF YOU DO NOT FALL INTO EITHER OF THESE REGISTRATION CATEGORIES PLEASE CALL
1-800-755-4371 FOR FURTHER INSTRUCTIONS.
If you have share certificates you must submit them with your letter of
instruction.
BY WIRE Redemption proceeds of $1,000 or more can be wired on the next business day
to your designated bank account and a small fee may be deducted. You may
also use electronic funds transfer to your assigned bank account and the
funds are usually collectable after 2 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.
Wire redemption is not available for Fund shares in certificate form.
-----------------------------------------------------------------------------------------------------
INSTITUTIONS
-----------------------------------------------------------------------------------------------------
IN WRITING Please follow the instructions as set forth for Plans on how to redeem in
writing.
BY WIRE Please follow the instructions as set forth for Plans on how to redeem by
wire.
BY TELEPHONE As an Institution you are automatically eligible for the telephone
redemption privilege. Call
1-800-755-4371, 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 the following procedures to confirm that instructions received by
telephone are genuine. Your name, account number, taxpayer identification
number applicable to the account and other relevant information may be
requested. In addition, telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address on the account
must not have changed for the last 30 days. A check will be mailed to the
exact name(s) and address on the account.
If reasonable procedures, such as those described above, are not followed,
the Funds may be liable for any loss due to unauthorized or fraudulent
instructions. In all other cases, neither the Funds nor Investor Services
will be liable for any loss or expense for acting upon telephone
instructions made in accordance with the procedures mentioned above.
Telephone redemption is not available for Fund shares 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 such times you should consider placing redemption requests in writing
or using EASI-line. EASI-line is a telephone number which is listed on
account statements.
-----------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 40
WHO MAY GUARANTEE YOUR SIGNATURE. A signature guarantee is a widely accepted
way to protect you and the Funds by verifying the signature on your request. It
may not be provided by a notary public. If the net asset value of the shares
redeemed is $100,000 or less or if this is a total redemption of a Plan's
assets, Investor Services 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 clearing
agency.
EXCHANGE PRIVILEGE
There is no sales charge for exchanges within the Trust. An exchange is a
redemption of shares in one Fund and the purchase of shares in another Fund
within the Trust. Read the Prospectus of the Fund into which you want to
exchange.
When you make an exchange, your account registration must be identical in both
the existing and new account. The exchange privilege is available only in states
where the exchange can be made legally.
PARTICIPANTS
<TABLE>
--------------------------------------------------------------------------------------------------------
Should your investment objective change or if you wish to achieve further diversification, you
must contact your Plan Sponsor to determine Plan requirements for exchanging shares among the
Funds of the Trust or other investment options available under your Plan.
--------------------------------------------------------------------------------------------------------
PLANS
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
IN WRITING 1. In a letter request and exchange and list the following:
-- the name of the Fund to be exchanged out of
-- the account number
-- name(s) in which the account is registered
-- name of the Fund in which to invest the exchanged shares
-- the number of shares or the dollar amount wished to be exchanged.
Sign the request exactly as the account is registered.
2. Mail the request and information to:
John Hancock Investor Services Corporation
Attn: Institutional Services
P.O. Box 9277
Boston, MA 02205-9277
--------------------------------------------------------------------------------------------------------
INSTITUTIONS
--------------------------------------------------------------------------------------------------------
IN WRITING Please follow the instructions as set forth for Plans on how to exchange shares
in writing.
BY TELEPHONE 1. Exchange by telephone is automatically authorized unless the box indicating
that the telephone exchange privilege is not desired is marked.
2. Call 1-800-755-4371. Have the account number of the Fund to be exchanged
out of and the exact name in which it is registered available to give to the
telephone representative.
--------------------------------------------------------------------------------------------------------
</TABLE>
Each Fund reserves the right to require Institutions to keep previously
exchanged shares (and reinvested dividends) in the Fund for 90 days before they
are permitted a new exchange. Participants may exchange shares according to Plan
provisions. The Fund may also terminate or alter the terms of the exchange
privilege upon 60 days' notice to shareholders.
SPECIAL INVESTMENT PRIVILEGE FOR FORMER PLAN PARTICIPANTS. A former Participant
in a Plan may invest the redemption proceeds of Fund shares beneficially owned
by the Participant without a sales charge in other John Hancock funds.
Participants may only invest in the Funds through a Plan. If a Participant
elects or is required to withdraw from a Plan, the shares cannot be transferred
into an account in the name of the Participant. In this circumstance, the
Participant may, subject to any other rights or restrictions
19
<PAGE> 41
under the Plan, cause the Plan Sponsor to redeem shares of the Funds. The
proceeds of such redemption may be either distributed to the Participant or
rolled over into an Individual Retirement Account or other retirement plan.
In either case, such proceeds may be invested at NAV without the imposition of a
sales charge in shares of any other fund (other than those of the Trust) in the
John Hancock family of funds. If the fund selected by the Participant has more
than one class of shares, the privilege of purchasing shares at NAV will only
apply to Class A shares. A Participant should obtain and carefully read the
Prospectus of each John Hancock fund in which the Participant is considering an
investment.
A Participant may obtain a Prospectus, establish an Individual Retirement
Account and arrange the rollover of redemption proceeds by contacting Investor
Services at 1-800-755-4371. Unlike a rollover, the distribution of redemption
proceeds to a Participant may subject the Participant to tax withholding equal
to 20% of the amount of the distribution.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
Each Fund is organized as a separate portfolio of the Trust, which is an
open-end investment management company organized as a Massachusetts business
trust in 1994. The Trust has an unlimited number of authorized shares, and
currently has eleven distinct funds. The Independence Funds are offered through
a separate prospectus.
-------------------------------------------------------------------------------
THE TRUSTEES ELECT OFFICERS AND RETAIN THE
INVESTMENT ADVISER AND THE SUBADVISERS, WHICH
ARE RESPONSIBLE FOR THE DAY-TO- DAY OPERATIONS
OF THE FUNDS, SUBJECT TO THE TRUSTEES' POLICIES
AND SUPERVISION.
-------------------------------------------------------------------------------
Each Fund currently has one class of shares with equal rights as to voting,
redemption, dividends and liquidation within their respective Fund. The Trustees
also have the authority, without further shareholder approval, to establish
additional funds and to classify and reclassify the shares of the Funds, or any
new fund of the Trust, into one or more classes. The Trust is not required to
hold annual shareholder meetings, although special meetings may be called for
such purposes as electing or removing Trustees, changing fundamental
restrictions or approving a management contract.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Funds. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Trust. The Declaration of Trust also provides for indemnification out of a
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is, therefore,
limited to circumstances in which a Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote. Liabilities
attributable to one Fund are not charged against the assets of any other Fund.
-------------------------------------------------------------------------------
JOHN HANCOCK ADVISERS, INC. ADVISES
INVESTMENT COMPANIES HAVING TOTAL
ASSETS OF OVER $13 BILLION.
-------------------------------------------------------------------------------
The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the Life Company, a financial services company. It provides the Funds, and other
investment companies in the John Hancock group of funds, with investment
research and portfolio management services.
JH Funds distributes shares of all of the John Hancock Mutual funds directly and
through selected broker-dealers ("Selling Brokers"). Certain officers of the
Trust are also officers of the Adviser, the Subadvisers and JH Funds.
-------------------------------------------------------------------------------
TO ASSIST IN MANAGING THE INVESTMENTS OF
DIVIDEND PERFORMERS FUND, FUNDAMENTAL VALUE
FUND AND INTERNATIONAL EQUITY FUND, THE
ADVISER HAS ENGAGED SUBADVISERS.
-------------------------------------------------------------------------------
SAMCorp serves as subadviser to Dividend Performers Fund pursuant to a
subadvisory agreement with that Fund and the Adviser. It was organized in 1992
and is an indirect wholly-owned subsidiary of the Life Company. It provides
investment advice and advisory services to investment companies and private and
institutional accounts totalling approximately $1.5 billion.
NM Capital serves as subadviser to Fundamental Value Fund pursuant to a
subadvisory agreement with that Fund and the Adviser. It was organized in 1977
and is an indirect wholly-owned subsidiary of the Life Company. It provides
investment advice and advisory services to investment companies and private and
institutional accounts totalling approximately $875 million.
JHAI serves as subadviser to International Equity Fund pursuant to a subadvisory
agreement with that Fund and the Adviser. Formed in 1987, JHAI is a wholly-owned
subsidiary of the
20
<PAGE> 42
Adviser. It provides international investment research and advisory services to
investment companies and institutional clients representing over $182 million in
assets.
The person or persons primarily responsible for the day-to-day management of
each Fund are listed below:
DIVIDEND PERFORMERS FUND
John F. Snyder III is primarily responsible for the management of Dividend
Performers Fund. He is assisted by a team of co-portfolio managers and analysts
in the day-to-day management of the Fund. Mr. Snyder is Executive Vice President
of SAMCorp and Senior Vice President of the Fund. He has been associated with
the Adviser since 1991. Prior to 1991, Mr. Snyder was Vice President and
portfolio manager for Sovereign Advisers, Inc. He is also co-portfolio manager
of John Hancock Sovereign Achievers Fund, John Hancock Sovereign Investors Fund
(which has investment objectives and policies substantially identical to those
of Dividend Performers Fund), and John Hancock Sovereign Balanced Fund.
ACTIVE BOND FUND
James Ho is a Senior Vice President and the portfolio manager of the Active Bond
Fund. Mr. Ho is assisted in the day-to-day management of the Fund's investment
portfolio by a co-manager and a team of credit analysts. Mr. Ho, an Executive
Vice President of the Adviser, also directs all taxable fixed-income investment
management and has been associated with the Adviser since 1985.
GLOBAL BOND FUND
The Global Bond Fund is managed by the Advisers' global fixed-income team. All
investment decisions are made by the portfolio management team, and no single
person is primarily responsible for making recommendations to the team.
MULTI-SECTOR GROWTH FUND
Day-to-day management of the Multi-Sector Growth Fund is carried out by Michael
P. DiCarlo, supported by an investment team of sector and global specialists
from the Adviser's equity group. Mr. DiCarlo also manages John Hancock Special
Equities Fund and John Hancock Special Opportunities Fund (which has investment
objectives and policies substantially identical to those of Multi-Sector Growth
Fund) in addition to overseeing the Adviser's equity management operation. Mr.
DiCarlo is an Executive Vice President of the Adviser and has been associated
with the Adviser since 1984.
FUNDAMENTAL VALUE FUND
The organization of NM Capital, the Subadviser of Fundamental Value Fund, is
such that all investment decisions for that Fund are made by a portfolio
management team consisting of three people. Thomas S. Christopher has over
twenty-five years of experience in investment management, including trust and
investment counseling and has been with NM Capital since 1985. Charles H. Womack
also has over twenty years of investment management experience and a background
in investment counselling, portfolio analysis and institutional sales and has
been with NM Capital since 1986. Angela J. Bristow serves as Senior Equity
Analyst and Equity Strategist. She has been with NM Capital since 1991 and has
over thirteen years of investment experience.
INTERNATIONAL EQUITY FUND
International Equity Fund is managed by the Adviser's and JHAI's international
equities team. All investment decisions are made by the portfolio management
team, and no single person is primarily responsible for making recommendations
to the team.
In order to avoid any conflict with portfolio trades for the Fund, the Adviser,
the Subadvisers and the Fund have adopted extensive restrictions on personal
securities trading by personnel of the Adviser and its affiliates. Some of these
restrictions are: pre-clearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of the
Fund and its shareholders come first.
21
<PAGE> 43
<TABLE>
THE FUNDS' EXPENSES
Each Fund pays a monthly fee to the Adviser for managing the Fund's investment and business
affairs, which is equal on an annual basis to a percentage of the Fund's average daily net
assets. These fees are as follows:
<CAPTION>
FUND RATE
---- ----
<S> <C>
Dividend Performers Fund .60% of average daily net assets up to $500 million
.55% of such assets in excess of $500 million
Active Bond Fund .50% of average daily net assets up to $1.5 billion
.45% of such assets in excess of $1.5 billion
Global Bond Fund .75% of average daily net assets up to $250 million
.70% of such assets in excess of $250 million
Multi-Sector Growth Fund .80% of average daily net assets up to $500 million
.75% of such assets in excess of $500 million
Fundamental Value Fund .70% of average daily net assets up to $500 million
.65% of such assets in excess of $500 million
International Equity Fund .90% of average daily net assets up to $500 million
.65% of such assets in excess of $500 million
</TABLE>
The Adviser pays a portion of its advisory fee from Dividend Performers Fund and
Fundamental Value Fund to SAMCorp and NM Capital, respectively, at the following
rates: 20% of the advisory fee payable on the Fund's average daily net assets up
to $100 million and 55% of the advisory fee payable on the Fund's assets
exceeding $100 million.
The Adviser pays a portion of its fee from International Equity Fund to JHAI at
the following rate: 70% of the advisory fee payable on the Fund's average daily
net assets up to $500 million and 90% of the advisory fee payable on the Fund's
assets exceeding $500 million.
The Funds are not responsible for payment of these subadvisory fees. The
advisory fees paid by Global Bond Fund, Multi-Sector Growth Fund and
International Equity Fund are greater than those paid by most funds. Due to the
added complexity of managing funds with investment strategies similar to these
Funds, advisory fees of similar funds tend to be higher than those paid by most
funds.
-------------------------------------------------------------------------------
EACH FUND PAYS CERTAIN ADDITIONAL EXPENSES.
-------------------------------------------------------------------------------
Each Fund pays fees to the independent Trustees of the Trust, the expenses of
the continuing registration and qualification of its shares for sale, the
charges of custodians and transfer agents, and auditing and legal expenses. The
Adviser may, from time to time, agree that all or a portion of its fee will not
be imposed for specific periods or make other arrangements to limit the Funds'
expenses to not more than a specified percentage of average net assets. The
Adviser retains the right to reimpose the fee and recover any other payments to
the extent annual expenses fall below the limit at the end of the fiscal year.
The Adviser has voluntarily agreed to limit the Funds' expenses until further
notice to the percentages of each Fund's average net assets specified under
"EXPENSE INFORMATION."
<TABLE>
DIVIDENDS AND TAXES
Dividends from net investment income are declared and paid as follows:
<CAPTION>
FUND DECLARED PAID
---- -------- ----
<S> <C> <C>
Dividend Performers Fund............................................ Quarterly Quarterly
Active Bond Fund.................................................... Daily Monthly
Global Bond Fund.................................................... Daily Monthly
Multi-Sector Growth Fund............................................ Annually Annually
Fundamental Value Fund.............................................. Quarterly Quarterly
International Equity Fund........................................... Annually Annually
</TABLE>
Capital gains distributions are generally declared annually. Dividends are
reinvested in additional shares unless you elect the option to receive them
entirely in cash. If you elect the cash option and the U.S. Postal Service
cannot deliver your checks, your election will be converted to reinvestment in
additional shares.
TAXATION. For institutional investors who are not exempt from Federal income
taxes, dividends from a Fund's net investment income, certain net foreign
currency gains, gains on certain foreign corporations, and net short-term
capital gains are taxable to you as ordinary income. Dividends from a Fund's net
long-term capital gains are taxable as long-term capital gains. These dividends
from net investment income and capital gains are taxable whether they
22
<PAGE> 44
are reinvested or received in cash. Certain dividends may be paid by a Fund in
January of a given year but may be taxable to shareholders as if received on
December 31 of the prior year. Each Fund will send you a statement by January 31
showing the tax status of the distributions you received for the prior year.
Plan participants should consult their plan sponsor for tax information.
Each Fund intends to elect to be treated and qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a regulated investment company, each Fund will not be
subject to Federal income taxes on any net investment income and net realized
capital gains that are distributed to its shareholders at least annually.
When you redeem (sell) or exchange shares, you may realize a gain or loss.
On the account application, you must certify that the social security or other
taxpayer identification number you provide is correct and that you are not
subject to back-up withholding of federal income tax, unless you are a
corporation or other entity that is exempt from backup withholding. If you do
not provide this information or are otherwise subject to such withholding, the
applicable Fund may be required to withhold 31% of your dividends, redemptions
and exchanges.
Funds investing in foreign securities may be subject to foreign withholding or
other foreign taxes on certain of their foreign investments, which will reduce
the yield on these investments. However, if more than 50% of a Fund's total
assets at the close of its taxable year consists of stock or securities of
foreign corporations (as may be the case with Global Bond Fund and International
Equity Fund) and if the Fund so elects, shareholders will include in their gross
incomes (in addition to the dividends they receive) their pro-rata shares of
qualified foreign taxes paid by the Fund and may be entitled to claim a Federal
income tax credit or deduction for such taxes, subject to certain conditions and
limitations under the Code.
In addition to Federal taxes, you may be subject to state and local or foreign
taxes with respect to your investment in and distributions from a Fund. In many
states, a portion of the Fund's dividends that represent interest received by
the Fund on direct U.S. Government obligations may be exempt from tax. The
foregoing discussion relates to investors that are subject to tax. Different tax
consequences will apply to plan participants, tax exempt investors and investors
that are subject to tax deferral. You should consult your tax adviser for
specific advice. Under the Code, a tax-exempt investor in the Funds will not
generally recognize unrelated business taxable income from its investment in the
Funds unless the tax-exempt investor incurred indebtedness to acquire or
continue to hold Fund shares and such indebtedness remains unpaid.
PERFORMANCE
Total return is based on the overall change in value of a hypothetical
investment in the Fund. A Fund's total return shows the overall dollar or
percentage change in value, assuming the reinvestment of all dividends.
Cumulative total return shows a Fund's performance over a period of time.
Average annual total return shows the cumulative return divided over the number
of years included in the period. Because average annual total return tends to
smooth out variations in a Fund's performance, you should recognize that it is
not the same as actual year-to-year results.
-------------------------------------------------------------------------------
EACH FUND MAY ADVERTISE ITS TOTAL RETURN.
-------------------------------------------------------------------------------
Total return calculations are at net asset value because no sales charges are
incurred by those eligible to buy the Funds.
-------------------------------------------------------------------------------
SOME FUNDS ALSO ADVERTISE YIELD.
-------------------------------------------------------------------------------
Dividend Performers Fund, Active Bond Fund and Global Bond Fund may also
advertise their respective yields. Yield reflects a Fund's rate of income on
portfolio investments as a percentage of its share price. Yield is computed by
annualizing the result of dividing the net investment income per share over a
30-day period by the maximum offering price per share on the last day of that
period. Yield is also calculated according to accounting methods that are
standardized for all stock and bond funds. Because yield accounting methods
differ from the methods used for other accounting purposes, a Fund's yield may
not equal the income paid on shares or the income reported in the Fund's
financial statements.
The value of a Fund's shares when redeemed may be more or less than their
original cost. Total return and yield are historical calculations, and are not
indications of future performance.
23
<PAGE> 45
RISK FACTORS, INVESTMENTS AND TECHNIQUES
SECURITIES OF FOREIGN ISSUERS. Each Fund except Dividend Performers Fund may
invest in securities of foreign issuers. Investments in foreign securities may
involve a greater degree of risk than those in domestic securities due to
exchange controls, less publicly available information, more volatile or less
liquid securities markets, and the possibility of expropriation, confiscatory
taxation or political, economic or social instability. There may be difficulty
in enforcing legal rights outside the United States. Some foreign companies are
not generally subject to the same uniform accounting, auditing and financial
reporting requirements as domestic companies; also foreign regulation may differ
considerably from domestic regulation of stock exchanges, brokers and
securities. Security trading practices abroad may offer less protection to
investors such as the Funds. Additionally, because foreign securities may be
denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect the Funds' net asset value, the value of
dividends and interest earned, gains and losses realized on the sale of
securities, and net investment income and gains, if any, that the Funds
distribute to shareholders. Securities transactions undertaken in some foreign
markets may not be settled promptly. Therefore, the Funds' investments in
foreign securities may be less liquid and subject to the risk of fluctuating
currency exchange rates pending settlement. The expense ratios of Funds
investing significant amounts of their assets in foreign securities can be
expected to be higher than those of mutual funds investing solely in domestic
securities since the expenses of these Funds, such as the cost of maintaining
custody of foreign securities and advisory fees, are higher.
These risks of foreign investing may be intensified in the case of Global Bond
Fund and International Equity Fund's investments in emerging markets or
countries with limited or developing capital markets. These countries are
located in the Asia-Pacific region, Eastern Europe, Latin and South America and
Africa. Security prices in these markets can be significantly more volatile than
in more developed countries, reflecting the greater uncertainties of investing
in less established markets and economies. Political, legal and economic
structures in many of these emerging market countries may be undergoing
significant evolution and rapid development, and they may lack the social,
political, legal and economic stability characteristic of more developed
countries. Emerging market countries may have failed in the past to recognize
private property rights. They may have relatively unstable governments, present
the risk of nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of property
rights than more developed countries. Their economies may be predominantly based
on only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates. Local securities markets may trade a small number of securities
and may be unable to respond effectively to increases in trading volume,
potentially making prompt liquidation of substantial holdings difficult or
impossible at times. The Global Bond Fund and International Equity Fund may be
required to establish special custodial or other arrangements before making
certain investments in those countries. Securities of issuers located in these
countries may have limited marketability and may be subject to more abrupt or
erratic price movements.
Certain realized gains or losses on the sale of international bonds and debt
held by a Fund, to the extent attributable to fluctuations in foreign currency
exchange rates, as well as certain other gains or losses attributable to
exchange rate fluctuations, may be treated as ordinary income or loss. Such
income or loss may increase or decrease (or possibly eliminate) the Fund's
income available for distribution to shareholders.
DEPOSITARY RECEIPTS. Each Fund may invest in securities of foreign issuers in
the form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other securities convertible into securities of corporations in
which the Fund is permitted to invest. ADRs (sponsored and unsponsored) are
receipts typically issued by an American bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation, and are
designed for trading in United States securities markets. Issuers of the shares
underlying unsponsored ADRs are not contractually obligated to disclose material
information in the United States and, therefore, there may not be a correlation
between such information and the market value of the unsponsored ADR.
24
<PAGE> 46
FOREIGN CURRENCY TRANSACTIONS. Each of the Funds except Dividend Performers
Fund, and particularly Global Bond Fund and International Equity Fund, may
purchase securities denominated in foreign currencies. The value of investments
in these securities and the value of dividends and interest earned may be
significantly affected by changes in currency exchange rates. Some foreign
currency values may be volatile, and there is the possibility of governmental
controls on currency exchange or governmental intervention in currency markets,
which could adversely affect a Fund. As a result, these Funds may enter into
forward foreign currency exchange contracts to protect against changes in
foreign currency exchange rates. These Funds will not speculate in foreign
currencies or in forward foreign currency exchange contracts, but will enter
into these transactions only in connection with their hedging strategies. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date at a price set at the time of the
contract. Although certain strategies could minimize the risk of loss due to a
decline in the value of the hedged foreign currency, they could also limit any
potential gain which might result from an increase in the value of the currency.
SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR FURTHER DISCUSSION OF THE USES
AND RISKS OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS.
SMALLER CAPITALIZATION COMPANIES. Multi-Sector Growth Fund, Fundamental Value
Fund and International Equity Fund may invest in smaller capitalization
companies. These companies may have limited product lines, market and financial
resources, or they may be dependent on smaller or less experienced management
groups. In addition, trading volume for these securities may be limited.
Historically, the market price for these securities has been more volatile than
for securities of companies with greater capitalization. However, securities of
companies with smaller capitalization may offer greater potential for capital
appreciation since they may be overlooked and thus undervalued by investors.
NON-DIVERSIFIED STATUS. Global Bond Fund and Multi-Sector Growth Fund are
"non-diversified" funds in order to permit them to invest more than 5% of their
total assets in the obligations of any one issuer. Since a relatively high
percentage of these Funds' assets may be invested in the obligations of a
limited number of issuers, the value of these Funds' shares may be more
susceptible to any single economic, political or regulatory event, and to the
credit and market risks associated with a single issuer, than would the shares
of a diversified fund. However, these Funds must satisfy certain tax
diversification requirements in order to qualify as regulated investment
companies under the Code.
SHORT SALES. Each Fund may engage in short sales "against the box," as well as
short sales for hedging purposes. Multi-Sector Growth Fund and International
Equity Fund may engage in short sales to profit from the anticipated decline in
a security's value. When a Fund engages in a short sale other than "against the
box," it will place cash or U.S. government securities in a segregated account
and mark them to market daily in accordance with applicable regulatory
requirements. Except for short sales against the box, the Fund is limited in the
amount of the Fund's net assets that may be committed to short sales and the
securities in which short sales are made must be listed on a national securities
exchange. A short sale is "against the box" to the extent that the Fund
contemporaneously owns or has the right to obtain, at no added cost, securities
identical to those sold short. Short sales other than "against the box" may
involve an unlimited exposure to loss. SEE THE STATEMENT OF ADDITIONAL
INFORMATION.
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net
assets in illiquid investments, which include repurchase agreements maturing in
more than seven days, certain over-the-counter options, privately-issued
stripped mortgage-backed securities, all interest rate swaps, caps, collars and
floors, certain restricted securities and securities not readily marketable.
Each Fund may also invest up to 15% of its net assets in restricted securities
eligible for resale to certain institutional investors pursuant to Rule 144A
under the Securities Act of 1933 and, to the extent consistent with its
investment policies, foreign securities acquired in accordance with Regulation S
under the Securities Act of 1933.
GOVERNMENT SECURITIES. Each Fund may invest in securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. Certain U.S.
Government securities, including U.S. Treasury bills, notes and bonds and
Government National Mortgage Association certificates ("Ginnie Maes"), are
supported by the full faith and credit of the United States. Certain other U.S.
Government securities, issued or guaranteed by federal agencies or government
sponsored enterprises, are not supported by the full faith and credit of the
United States, but
25
<PAGE> 47
may be supported by the right of the issuer to borrow from the U.S. Treasury.
These securities include obligations of the Federal Home Loan Mortgage
Corporation ("Freddie Macs") and Federal National Mortgage Association ("Fannie
Maes"), and obligations supported by the credit of the instrumentality, such as
Student Loan Marketing Association Bonds ("Sallie Maes").
The Funds, and particularly Active Bond Fund, may invest in mortgage-backed
securities. A mortgage-backed security may be an obligation of the issuer backed
by a mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as collateralized mortgage
obligations (CMOs), make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate and
repay principal at maturity (like a typical bond). Mortgage-backed securities
are based on different types of mortgages including those on commercial real
estate or residential properties. Mortgage-backed securities often have stated
maturities of up to thirty years when they are issued, depending upon the length
of the mortgages underlying the securities. In practice, however, unscheduled or
early payments of principal and interest on the underlying mortgages may make
the securities' effective maturity shorter than this, and the prevailing
interest rates may be higher or lower than the current yield of a Fund's
portfolio at the time the Fund receives the payments for reinvestment.
Mortgage-backed securities may have less potential for capital appreciation than
comparable fixed-income securities, due to the likelihood of increased
prepayments of mortgages as interest rates decline. If a Fund buys
mortgage-backed securities at a premium, mortgage foreclosures and prepayments
of principal by mortgagors (which may be made at any time without penalty) may
result in some loss of the Fund's principal investment to the extent of the
premium paid.
The value of mortgage-backed securities may also change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues.
"Stripped" mortgage-backed securities are created when a U.S. government agency
or a financial institution separates the interest and principal components of a
mortgage-backed security and sells them as individual securities. The holder of
the "principal-only" security ("PO") receives the principal payments made by the
underlying mortgage-backed security, while the holder of the "interest-only"
security ("IO") receives interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly affected
by changes in interest rates. As interest rates fall, prepayment rates tend to
increase, which tends to reduce prices of IOs and increase prices of POs. Rising
interest rates can have the opposite effect. Although the market for such
securities is increasingly liquid, the Adviser or appropriate Subadviser may, in
accordance with guidelines adopted by the Board of Trustees, determine that
certain stripped mortgage-backed securities issued by the U.S. Government, its
agencies or instrumentalities are not readily marketable. If so, these
securities, together with privately-issued stripped mortgage-backed securities,
will be considered illiquid for purposes of the Funds' limitation of investments
in illiquid securities.
Other types of mortgage-backed securities will likely be developed in the
future, and a Fund may invest in them if the Adviser determines they are
consistent with a Fund's investment objectives and policies.
SHORT TERM TRADING AND PORTFOLIO TURNOVER. Short-term trading means the
purchase and subsequent sale of a security after it has been held for a
relatively brief period of time. The Active Bond Fund, Multi-Sector Growth Fund
and International Equity Fund engage in short-term trading in response to
changes in interest rates or other economic trends and developments, or to take
advantage of yield disparities between various fixed-income securities in order
to realize capital gains or improve income. Short term trading may have the
effect of increasing portfolio turnover rate.
The Dividend Performers Fund, Global Bond Fund and Fundamental Value Fund do not
intend to invest for the purpose of seeking short-term profits. These Funds'
particular portfolio securities may be changed, however, without regard to the
holding period of these securities (subject to certain tax restrictions), when
the Adviser deems that this action will help achieve
26
<PAGE> 48
the Funds' objective given a change in an issuer's operations or changes in
general market conditions.
The portfolio turnover rates for the Funds are shown in the section captioned
"The Funds' Financial Highlights." A high rate of portfolio turnover (100% or
greater) involves correspondingly higher transaction expenses and may make it
more difficult for a Fund to qualify as a regulated investment company for
federal income tax purposes.
OPTIONS AND FUTURES TRANSACTIONS. Each Fund may buy and sell options contracts,
financial futures contracts and options on futures contracts. Options and
futures contracts are bought and sold to manage a Fund's exposure to changing
interest rates, security prices, and currency exchange rates. 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. Subject to their individual investment policies, the Funds may
invest in options and futures based on securities, indices, or currencies,
including options and futures traded on foreign exchanges and options not traded
on exchanges.
Options and futures can be volatile investments and involve certain risks. If
the Adviser or a Subadviser applies a hedge at an inappropriate time or judges
market conditions incorrectly, options and futures strategies may lower a Fund's
return. A 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 capital gains.
A Fund will not engage in a transaction in futures or options on futures for
non-hedging purposes if, immediately thereafter, the sum of initial margin
deposits and premiums required to establish speculative positions in futures
contracts and options on futures would exceed 5% of the Fund's net assets. The
loss incurred by a Fund investing in futures contracts and in writing options on
futures is potentially unlimited and may exceed the amount of any premium
received. Each Fund's transactions in options and futures contracts may be
limited by the requirements of the Code for qualification as a regulated
investment company.
No Fund, except Global Bond Fund, will hedge more than 25% of its total assets
by selling futures, buying puts, and writing calls under normal conditions.
Global Bond Fund may hedge up to 50% of its total assets by selling futures,
buying puts, and writing calls under normal conditions. In addition, no Fund
will buy futures or write puts whose underlying value exceeds 25% of its total
assets or buy calls with a value exceeding 5% of its total assets. SEE THE
STATEMENT OF ADDITIONAL INFORMATION FOR FURTHER DISCUSSION OF OPTIONS AND
FUTURES TRANSACTIONS, INCLUDING TAX EFFECTS AND INVESTMENT RISKS.
SWAP AGREEMENTS. As one way of managing its exposure to different types of
investments, Global Bond Fund may enter into interest rate swaps, currency
swaps, and other types of swap agreements such as caps, collars and floors. In a
typical interest rate swap, one party agrees to make regular payments equal to a
floating interest rate times a "notional principal amount," in return for
payments equal to a fixed rate times the same amount, for a specified period of
time. If a swap agreement provides for payments in different currencies, the
parties might agree to exchange the notional principal amount as well. Swaps may
also depend on other prices or rates, such as the value of an index or mortgage
prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift Global Bond Fund's investment exposure from
one type of investment to another. For example, if the Fund agreed to exchange
payments in dollars for payments in a foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are
27
<PAGE> 49
used, swap agreements may increase or decrease the overall volatility of a
Fund's investments and its share price and yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on
Global Bond Fund's performance. Swap agreements are subject to risks related to
the counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. Global Bond Fund may also suffer
losses if it is unable to terminate outstanding swap agreements or reduce its
exposure through offsetting transactions. Global Bond Fund will maintain in a
segregated account with its custodian, cash or liquid, high grade debt
securities equal to the net amount, if any, of the excess of the Fund's
obligations over its entitlements with respect to swap, cap, collar or floor
transactions.
FIXED-INCOME SECURITIES. Each Fund, and particularly Active Bond Fund and
Global Bond Fund, may invest in fixed-income securities, including debt
obligations of corporate and governmental issuers, and preferred stocks. The
value of fixed-income securities generally varies inversely with interest rates.
The longer the maturity of the fixed-income security, the more volatile will be
changes in its value resulting from changes in interest rates.
INVESTMENT GRADE SECURITIES. Each Fund may invest in securities that are rated
in the lowest category of "investment grade" (BBB by S&P or Baa by Moody's) or
unrated securities of comparable quality. Securities in the lowest investment
grade are considered medium grade obligations and normally exhibit adequate
protection parameters. However, these securities also have speculative
characteristics. Adverse changes in economic conditions or other circumstances
are more likely to lead to weakened capacity to make principal and interest
payments than in the case of higher grade obligations.
LOWER RATED SECURITIES. Dividend Performers Fund, Active Bond Fund and Global
Bond Fund may invest in lower rated securities. Debt obligations rated in the
lower ratings categories, or which are unrated, involve greater volatility of
price and risk of loss of principal and income. In addition, lower ratings
reflect a greater possibility of an adverse change in financial condition
affecting the ability of the issuer to make payments of interest and principal.
The market price and liquidity of lower rated fixed-income securities generally
respond to short-term economic, corporate and market developments to a greater
extent than do the price and liquidity of higher rated securities, because these
developments are perceived to have a more direct relationship to the ability of
an issuer of lower rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield bond market or the reduced
availability of market quotations will make it more difficult to dispose of the
bonds and to value accurately the assets of Dividend Performers Fund, Global
Bond Fund and Active Bond Fund. The reduced availability of reliable, objective
data may increase these Funds' reliance on management's judgment in valuing the
high yield bonds. To the extent that these Funds invest in lower rated
securities, achieving the Funds' objective will depend more on the Adviser's or
Subadviser's judgment and analysis than would otherwise be the case. In
addition, these Funds' investments in high yield securities may be susceptible
to adverse publicity and investor perceptions, whether or not justified by
fundamental factors. In the past, economic downturns and increases in interest
rates have caused a higher incidence of default by the issuers of these
securities and may do so in the future, particularly with respect to highly
leveraged issuers. The market prices of zero coupon and payment-in-kind bonds
are affected to a greater extent by interest rate changes, and thereby tend to
be more volatile than securities which pay interest periodically and in cash.
Increasing rate note securities are typically refinanced by the issuers within a
short period of time. A Fund accrues income on these securities for tax and
accounting purposes, and this income is required to be distributed to
shareholders. Because no cash is received at the time and income accrues on
these securities, the Fund may be forced to liquidate other investments to make
distributions.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities.
Convertible securities include bonds and preferred stocks that are convertible
for shares of common stock of the same issuer. Because convertible securities
are fixed-income securities, their value is influ-
28
<PAGE> 50
enced inversely by changes in interest rates. However, due to their conversion
feature, their value often changes with the value of the common stock into which
they are convertible.
WARRANTS. Warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Warrants tend to be more volatile than
their underlying securities. Also, the value of the warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to the expiration date.
LENDING OF SECURITIES AND REPURCHASE AGREEMENTS. For the purpose of realizing
additional income, each Fund may lend to broker-dealers portfolio securities
amounting to not more than 33 1/3% of its respective total assets taken at
current value. Each Fund may also enter into repurchase agreements. In a
repurchase agreement, the Fund buys a security subject to the right and
obligation to sell it back to the issuer at the same price plus accrued
interest. These transactions must be fully collateralized at all times. However,
they may involve some credit risk to a Fund if the other party should default on
its obligation and that Fund is delayed in or prevented from recovering the
collateral. Securities loaned by a Fund will remain subject to fluctuations of
market value.
WHEN-ISSUED SECURITIES. Each Fund may purchase securities on a forward or
"when-issued" basis. When a Fund engages in when-issued 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.
29
<PAGE> 51
NOTES
<PAGE> 52
NOTES
<PAGE> 53
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISERS
Sovereign Asset Management Corp. (Dividend
Performers Fund)
1235 Westlakes Drive
Berwyn, Pennsylvania 19312
NM Capital Management, Inc. (Fundamental
Value Fund)
6501 Americas Parkway, Suite 950
Albuquerque, New Mexico 87110-5372
John Hancock Advisers International Ltd. (International Equity Fund)
34 Dover Street
London, England WIX 3RA
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIANS
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02205-9116
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9277
Boston, Massachusetts 02205-9277
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110
HOW TO OBTAIN INFORMATION
ABOUT THE FUNDS
For Service Information
For Telephone Exchange 101 HUNTINGTON AVENUE
For Investment-by-Phone BOSTON, MASSACHUSETTS 02199-7603
For Telephone Redemption TELEPHONE 1-800-755-4371
call 1-800-755-4371
KBOOP 9/95
<PAGE> 54
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
101 Huntington Avenue
Boston, Massachusetts 02199
consisting of eleven series,
JOHN HANCOCK DIVIDEND PERFORMERS FUND
JOHN HANCOCK ACTIVE BOND FUND
JOHN HANCOCK GLOBAL BOND FUND
JOHN HANCOCK MULTI-SECTOR GROWTH FUND
JOHN HANCOCK FUNDAMENTAL VALUE FUND
JOHN HANCOCK INTERNATIONAL EQUITY 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
(each, a "Fund" and collectively, the "Funds")
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 12, 1995
This Statement of Additional Information ("SAI") provides information
about the Funds in addition to the information that is contained in the Funds'
Prospectuses, each dated September 12, 1995 (together, the "Prospectuses").
This SAI is not a prospectus. It should be read in conjunction with
the Funds' Prospectuses, copies of which can be obtained free of charge by
writing or telephoning:
John Hancock Investor Services Corporation
P.O. Box 9277
Boston, Massachusetts 02205-9277
1-800-755-4371
<PAGE> 55
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Cross-Referenced
Statement of to John Hancock Cross-Referenced
Additional Information Series Funds to Independence
Page Prospectus Page Funds Prospectus
Page
<S> <C> <C> <C> <C>
I. Organization of the Trust 3 20 12
II. Investment Objectives and
Policies 3
John Hancock Series Funds 4 7 -
Independence Funds 7 - 5
III. Certain Investment
Practices
8 24 14
IV. Investment Restrictions 23 7 5
V. Those Responsible for
Management 28 20 12
VI. Investment Advisory and
Other Services
37 20 12
VII. Net Asset Value 40 17 9
VIII. Special Redemptions 40 - -
IX. Tax Status 40 22 13
X. Description of the Trust's
Shares 45 17 9
XI. Calculation of Performance 46 23 14
XII. Brokerage Allocation 47 20 12
XIII. Transfer Agent Services 49 Back Cover Back Cover
XIV. Custody of Portfolio 49 Back Cover Back Cover
XV. Independent Auditors 50 Back Cover Back Cover
XVI. Financial Statements
</TABLE>
2
<PAGE> 56
Appendix A--Description of Securities Ratings
Appendix B-- Economic sectors in which Sector Opportunity Fund Invests
I. ORGANIZATION OF THE TRUST
John Hancock Institutional Series Trust (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust under a
Declaration of Trust dated October 31, 1994, as amended from time to time. The
Trust currently has eleven series of shares designated as: John Hancock
Dividend Performers Fund ("Dividend Performers Fund") (formerly John Hancock
Berkeley Dividend Performers Fund), John Hancock Active Bond Fund ("Active Bond
Fund") (formerly John Hancock Berkeley Bond Fund), John Hancock Global Bond
Fund ("Global Bond Fund") (formerly John Hancock Berkeley Global Bond Fund),
John Hancock Multi-Sector Growth Fund ("Multi-Sector Growth Fund") (formerly
John Hancock Berkeley Sector Opportunity Fund), John Hancock Fundamental Value
Fund ("Fundamental Value Fund") (formerly John Hancock Berkeley Fundamental
Value Fund), John Hancock International Equity Fund ("International Equity
Fund") (formerly John Hancock Berkeley overseas Growth Fund), John Hancock
Independence Diversified Core Equity Fund II ("Diversified Core Equity Fund
II"), John Hancock Independence Value Fund ("Value Fund"), John Hancock
Independence Growth Fund ("Growth Fund"), John Hancock Independence Medium
Capitalization Fund ("Medium Capitalization Fund") and John Hancock
Independence Balanced Fund ("Balanced Fund").
Dividend Performers Fund, Active Bond Fund, Global Bond Fund, Multi-Sector
Growth Fund, Fundamental Value Fund and International Diversified
CoresEquityeFundfII,eValuehFund, GrowthtFund, Medium
CapitalizationSFundsandnBalanced Fund are sometimes referred to herein
collectively as the "Independence Funds."
The investment adviser of each Fund is John Hancock Advisers, Inc. (the
"Adviser"), a wholly-owned indirect subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"). The investment subadviser of Dividend
Performers Fund is Sovereign Asset Management Corp. ("SAMCorp"). The
subadviser of International Equity Fund is John Hancock Advisers International
Limited ("JHAI"). The subadviser of Fundamental Value Fund is NM Capital
Management, Inc. ("NM Capital"). The investment subadviser of each
Independence Fund is Independence Investment Associates, Inc. ("IIA").
Together, SAMCorp, JHAI, NM Capital and IIA are sometimes referred to herein
collectively as the "Subadvisers" or, individually, as the "Subadviser." The
Subadvisers are affiliates of the Life Company.
II. INVESTMENT OBJECTIVES AND POLICIES
See "Investment Objectives and Policies" in the Prospectuses. There can be no
assurance that the objective of any Fund will be realized.
3
<PAGE> 57
Each Fund has adopted certain investment restrictions which are enumerated in
detail under "Investment Restrictions" in this SAI where they are classified as
fundamental or nonfundamental. Those restrictions designated as fundamental
may not be changed without shareholder approval. Each Fund's investment
objective, investment policies and nonfundamental restrictions, however, may be
changed by a vote of the Board of Trustees of the Trust (the "Board") without
shareholder approval. If there is a change in a Fund's investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs.
A. THE JOHN HANCOCK SERIES FUNDS.
------------------------------
For a further description of the John Hancock Series Funds' investment
objectives, policies and restrictions see "Investment Objectives and Policies"
in the John Hancock Series Funds' Prospectus and "Investment Restrictions" in
this SAI. See Appendix A to this SAI for a description of the quality
categories of corporate bonds in which certain of the John Hancock Series Funds
may invest.
DIVIDEND PERFORMERS FUND
------------------------
Dividend Performers Fund's investment objective is long-term growth of capital
and income without assuming undue market risk. At times, however, because of
market conditions, the Fund may invest primarily for current income. The Fund
will make investments in different types and classes of securities in
accordance with the Board's and the Adviser's appraisal of economic and market
conditions. The securities held by the Fund are under continuous study by the
Adviser. Securities are selected for the Fund's portfolio if they are
considered by the Adviser to contribute to the possible achievement of the
Fund's objective. They are held or disposed of in accordance with the results
of a continuing examination of their investment merit.
The Fund may invest 100% of its total assets in common stocks or, for defensive
purposes, it may hold cash or liquid, high grade preferred stocks or debt
securities. In addition, temporary investments in short-term debt securities
may be made so as to receive a return on excess cash.
The Fund endeavors to achieve its objectives by utilizing experienced
management and generally investing in securities of seasoned companies in sound
financial condition. A company or its predecessors must have been in
continuous business for at least five years and must have total assets of at
least $10,000,000 before its securities can be purchased by the Fund.
ACTIVE BOND FUND
----------------
Active Bond Fund's investment objective is a high level of current income,
consistent with prudent investment risk, through investment primarily in a
diversified portfolio of freely marketable investment grade debt securities of
U.S. and foreign issuers. The Fund will invest primarily in debt securities
within the four highest investment ratings and unrated securities considered by
the Adviser to be of comparable investment quality. The Fund will, when
feasible, purchase debt securities which are non-callable.
The Fund may purchase corporate debt securities bearing fixed, floating or
variable interest as well as those which carry certain equity features, such as
conversion or exchange rights or warrants for the
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acquisition of stock of the same or a different issuer, or participations based
on revenues, sales or profits. The Fund will not exercise any such conversion,
exchange or purchase rights if, at the time, the value of all equity interests
so owned would exceed 10% of the Fund's total assets taken at market value.
The market value of debt securities which carry no equity participation usually
reflects yields generally available on securities of similar quality and type.
When such yields decline, the market value of a portfolio already invested at
higher yields can be expected to rise if such securities are protected against
early call. Similarly, when such yields increase, the market value of a
portfolio already invested can be expected to decline. The Fund's portfolio may
include debt securities which sell at substantial discounts from par. These
securities are low coupon bonds which, during periods of high interest rates,
because of their lower acquisition cost tend to sell on a yield basis
approximating current interest rates.
GLOBAL BOND FUND
----------------
Global Bond Fund's investment objective is a competitive total investment
return, consisting of current income and capital appreciation. The Fund
invests primarily in a global portfolio of high grade, fixed income securities.
Normally, the Fund will invest in fixed income securities denominated in at
least three currencies or multi-currency units, including the U.S. Dollar.
Under normal circumstances, Global Bond Fund invests primarily (at least 65% of
total assets) in fixed income securities issued or guaranteed by: (i) the U.S.
Government, its agencies or instrumentalities; (ii) foreign governments
(including foreign states, provinces and municipalities) or their political
subdivisions, authorities, agencies or instrumentalities; (iii) international
organizations backed or jointly owned by more than one national government,
such as the International Bank for Reconstruction and Development, European
Investment Bank, Asian Development Bank and European Coal and Steel Community;
and (iv) foreign corporations or financial institutions. The term "fixed
income securities" encompasses debt obligations of all types, including bonds,
debentures, notes and stocks, such as preferred stocks. A fixed income
security may itself be convertible into or exchangeable for equity securities,
or may carry with it the right to acquire equity securities evidenced by
warrants attached to the security or acquired as part of a unit with a
security.
MULTI-SECTOR GROWTH FUND
------------------------
Multi-Sector Growth Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve its objective by emphasizing
investments in equity securities of issuers in various economic sectors.
The equity securities in which the Fund invests consist primarily of common
stocks of U.S. and foreign issuers but may also include preferred stocks,
convertible debt securities and warrants. The Fund seeks to achieve its
investment objective by varying the relative weighting of its portfolio
securities among various economic sectors based upon both macroeconomic factors
and the outlook for each particular sector. The Adviser selects equity
securities for the Fund from various economic sectors, including, but not
limited to, the following: automotive and housing, consumer goods and
services, defense and aerospace, energy, financial services, health care, heavy
industry, leisure and entertainment, machinery
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<PAGE> 59
and equipment, precious metals, retailing, technology, transportation,
utilities, foreign and environmental. The Fund may modify these sectors if the
Adviser believes that they no longer represent appropriate investments for the
Fund, or if other sectors offer better opportunities for investment. See
APPENDIX B to this SAI for a further description of the sectors in which the
Fund invests.
FUNDAMENTAL VALUE FUND
----------------------
Fundamental Value Fund's investment objective is capital appreciation, with
income as a secondary consideration. The Fund will seek to achieve its
objective by investing primarily in equity securities that are undervalued
relative to alternative equity investments.
The equity securities in which the Fund will invest include common stocks,
preferred stocks, convertible debt securities and warrants of U.S. and foreign
issuers. In selecting equity securities for the Fund, the Adviser and the
Fund's investment subadviser, NM Capital, emphasize issuers whose equity
securities trade at market to book value ratios lower than comparable issuers
or the Standard & Poor's Composite Index. The Fund's portfolio securities will
also include equity securities considered by the Adviser or NM Capital to have
the potential for capital appreciation due to potential recognition of earnings
power or asset value which is not fully reflected in such securities' current
market value. The Adviser or NM Capital attempts to identify investments which
possess characteristics, such as high relative value, intrinsic value, going
concern value, net asset value and replacement book value, which are believed
to limit sustained downside price risk, generally referred to as the "margin of
safety" concept. The Adviser or NM Capital also considers an issuer's
financial strength, competitive position, projected future earnings and
dividends and other investment criteria. These securities are collectively
referred to as "Fundamental Value" securities.
The Fund's investment policy reflects the Adviser's and NM Capital's belief
that while the securities markets tend to be efficient, sufficiently persistent
price anomalies exist which the strategically disciplined active equity manager
can exploit in seeking to achieve an above average rate of return. Based on
this premise, the Adviser and NM Capital have adopted a strategy for the Fund
of investing in low market to book value, out of favor, stocks.
The Fund's investments may include securities of both large, widely traded
companies and smaller, less well known issuers. Higher risks are often
associated with investments in companies with smaller market capitalizations.
See "Smaller Capitalization Companies" in the John Hancock Series Funds'
Prospectus.
INTERNATIONAL EQUITY FUND
-------------------------
International Equity Fund's investment objective is long-term growth of
capital. The Fund seeks to achieve its investment objective by investing
primarily in foreign equity securities.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of issuers located outside the United States in
various countries around the world. Generally, the Fund's portfolio will
contain securities of issuers from at least three countries other than the
United States. The Fund normally invests substantially all of its assets in
equity securities, such as common stock, preferred
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<PAGE> 60
stock and securities convertible into common and preferred stock. However, if
deemed advisable by the Adviser or the Fund's investment subadviser, JHAI, the
Fund may invest in any other types of securities including warrants, bonds,
notes and other debt securities (including Euro-dollar securities) or
obligations of domestic or foreign governments and their political
subdivisions, or domestic or foreign corporations.
B. THE INDEPENDENCE FUNDS.
-----------------------
For a further description of the Independence Funds' investment objectives,
policies and restrictions see "Investment Objectives and Policies" in the
Independence Funds' Prospectus and "Investment Restrictions" in this SAI.
IIA serves as the investment subadviser to each of the Independence Funds. In
selecting common stocks for the Independence Funds' portfolios, IIA uses an
investment strategy it calls "NIXDEX." To produce a NIXDEX portfolio, IIA
excludes ("nixes") from consideration stocks contained in the bottom two
quintiles of its ranked stock universe and optimizes the remaining stocks to
produce a portfolio whose risk exposure is similar to that of each of the
Independence Fund's respective performance and risk profile benchmark
portfolio. By avoiding stocks which are not ranked within the top three
quintiles of IIA's ranked stock universe, IIA seeks to construct a NIXDEX
portfolio whose performance will exceed, under all market environments, the
performance of the respective Independence Fund's performance and risk profile
benchmark portfolio.
IIA uses a quantitative, multifactor proprietary stock-ranking model called
"Cybercode" to produce a list of stocks for consideration which are ranked from
most to least attractive. IIA's in-house team of professional securities
analysts generate the data necessary to produce a Cybercode ranked list. For
each Independence Fund, IIA's analysts concentrate their research and analysis
on those stocks from IIA's unbiased universe of 3,000 stocks which satisfy the
Fund's performance and risk profile benchmark. The analysts focus on
fundamental research such as: projecting current year and next year's earnings
and cash flows; developing five-year growth forecasts; and understanding the
strategic plan of the companies they follow, and how this plan might affect
capital expenditures and stock dividends. IIA's most senior investment
professionals determine the macroeconomic assumptions needed to forecast an
individual company's progress. These macroeconomic assumptions are integrated
into the analysts' research and analysis. IIA's investment process is
distinguished by its focus an evaluation of risk and, in particular, its
avoidance of stocks that do not score above a certain benchmark with respect to
price and fundamentals.
Using the analysts' research and analysis, Cybercode evaluates each stock in
the stock selection universe on ten discrete criteria and scores each stock
based on its inherent value relative to its cost (price) and the stock's
fundamental prospects for improvement. Cybercode produces a list of the
selection universe ranked from most to least attractive. The top stock on the
ranked list exhibits the most favorable combination of inherent value and
fundamental prospects for improvement; the bottom stock is the least favorable.
Through this process, IIA seeks to construct a NIXDEX portfolio whose
performance will exceed, under all market environments, the performance of the
respective Independence Fund's performance and risk profile benchmark
portfolio. For a further description of each Fund's performance
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<PAGE> 61
and risk profile benchmark portfolio, see "Investment Objectives and Policies"
in the Independence Funds' Prospectus.
DIVERSIFIED CORE EQUITY FUND II
-------------------------------
Diversified Core Equity Fund II's investment objective is above-average total
return, consisting of capital appreciation and income. The Fund's performance
and risk profile benchmark is the capitalization weighted Standard and Poor's
500 Composite Stock Index[R] (the "S&P 500 Index").
VALUE FUND
----------
Value Fund's investment objective is above-average total return. The Fund will
emphasize relatively undervalued securities and seek higher dividend yield than
Diversified Core Equity Fund II. The Fund's performance and risk profile
benchmark is the Russell 1000 Value Index[R].
GROWTH FUND
-----------
Growth Fund's investment objective is above-average total return. The Fund
will emphasize investments in companies whose securities show potential for
relatively high long-term earnings growth rather than current dividend yield.
The Fund's performance and risk profile benchmark is the Russell 1000 Growth
Index[R].
MEDIUM CAPITALIZATION FUND
--------------------------
Medium Capitalization Fund's investment objective is above-average total
return. The Fund will emphasize investment in securities of faster growing,
medium sized companies than those companies included in the other Independence
Funds. The Fund's performance and risk profile benchmark is the Callan Medium
Capitalization Index.
BALANCED FUND
-------------
Balanced Fund's investment objective is above-average total return through
capital appreciation and income. The Fund will invest in a balanced portfolio
allocated between equity securities and fixed-income securities. The Fund's
performance and risk profile benchmark is a composite of the S&P 500 Index and
the Lehman Brothers Government/Corporate Bond Index.
III. CERTAIN INVESTMENT PRACTICES
FOREIGN SECURITIES AND EMERGING COUNTRIES. Active Bond Fund, Multi-Sector
Growth Fund, Fundamental Value Fund and, in particular, International Equity
Fund and Global Bond Fund may invest in securities of foreign issuers.
International Equity Fund and Global Bond Fund may also invest in debt and
equity securities of corporate and governmental issuers of countries with
emerging economies or securities markets.
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<PAGE> 62
Investing in securities of non-U.S. issuers, and in particular those located in
emerging countries, may entail greater risks than investing in securities of
issuers in the U.S. These risks include (i) less social, political and
economic stability; (ii) the small current size of the markets for many such
securities and the currently low or nonexistent volume of trading, which result
in a lack of liquidity and in greater price volatility; (iii) certain national
policies which may restrict a Fund's investment opportunities, including
restrictions on investment in issuers or industries deemed sensitive to
national interests; (iv) foreign taxation; and (v) the absence of developed
structures governing private or foreign investment or allowing for judicial
redress for injury to private property.
Investing in securities of non-U.S. companies may entail additional risks due
to the potential political and economic instability of certain countries and
the risks of expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation by any
country, a Fund could lose its entire investment in any such country.
In addition, even though opportunities for investment may exist in foreign
countries, and in particular emerging markets, any change in the leadership or
policies of the governments of those countries or in the leadership or policies
of any other government which exercises a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and thereby eliminate any investment
opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which may be represented by the securities purchased by the Funds.
The claims of property owners against those governments were never finally
settled. There can be no assurance that any property represented by foreign
securities purchased by a Fund will not also be expropriated, nationalized, or
otherwise confiscated. If such confiscation were to occur, a Fund could lose a
substantial portion of its investments in such countries. A Fund's investments
would similarly be adversely affected by exchange control regulation in any of
those countries.
Certain countries in which the Funds may invest may have vocal minorities that
advocate radical religious or revolutionary philosophies or support ethnic
independence. Any disturbance on the part of such individuals could carry the
potential for wide-spread destruction or confiscation of property owned by
individuals and entities foreign to such country and could cause the loss of a
Fund's investment in those countries.
Certain countries prohibit or impose substantial restrictions on investments in
their capital markets, particularly their equity markets, by foreign entities
such as the Funds. As illustrations, certain countries require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit the investment
by foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries
may restrict investment opportunities in issuers or industries deemed sensitive
to national interests. In addition, some countries require governmental
approval for the repatriation of investment income, capital or the proceeds of
securities sales by foreign investors. A Fund could be adversely affected by
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<PAGE> 63
delays in, or a refusal to grant, any required governmental approval for
repatriation, as well as by the application to it of other restrictions on
investments.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and
profits appearing on the financial statements of such a company may not reflect
its financial position or results of operations in the way they would be
reflected had such financial statements been prepared in accordance with U.S.
generally accepted accounting principles. Most foreign securities held by the
Funds will not be registered with the Securities and Exchange Commission (the
"SEC") and the issuers thereof will not be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning
foreign issuers of securities held by the Funds than is available concerning
U.S. issuers. If the financial statements of an issuer are not deemed to
reflect accurately the financial situation of the issuer, the Adviser or
Subadviser will take appropriate steps to evaluate the proposed investment,
which may include on-site inspection of the issuer, interviews with its
management and consultations with accountants, bankers and other specialists.
There is substantially less publicly available information about foreign
companies than there are reports and ratings published about U.S. companies and
the U.S. government. In addition, even if public information is available, it
may be less reliable than such information regarding U.S. issuers.
Because the Funds may invest, and Global Bond Fund and International Equity
Fund will (under normal circumstances) invest a substantial portion of their
total assets, in securities which are denominated or quoted in foreign
currencies, the strength or weakness of the U.S. dollar against such currencies
may account for part of the Funds' investment performance. A decline in the
value of any particular currency against the U.S. dollar will cause a decline
in the U.S. dollar value of a Fund's holdings of securities denominated in such
currency and, therefore, will cause an overall decline in the Fund's net asset
value and any net investment income and capital gains to be distributed in U.S.
dollars to shareholders of the Fund.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Funds value their respective assets daily in terms of U.S.
dollars, the Funds do not intend to convert their holdings of foreign
currencies into U.S. dollars on a daily basis. However, the Funds may do so
from time to time, and investors should be aware of the costs of currency
conversion. Although currency dealers do not charge a fee for conversion, they
do realize a profit based on the difference ("spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to sell that currency to the dealer.
Securities of foreign issuers, and in particular many emerging country issuers,
may be less liquid and their prices more volatile than securities of comparable
U.S. issuers. Foreign securities exchanges and brokers are generally subject to
less governmental supervision and regulation than in the U.S., and foreign
securities exchange transactions are usually subject to fixed commissions,
which are generally
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<PAGE> 64
higher than negotiated commissions on U.S. transactions. Foreign securities
exchange transactions may also be subject to difficulties associated with the
settlement of such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to a Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
The Funds' investment income or, in some cases, capital gains from foreign
issuers may be subject to foreign withholding or other taxes, thereby reducing
the Funds' net investment income and/or net realized capital gains. See "Tax
Status."
RESTRICTED AND ILLIQUID SECURITIES. Each Fund may invest in restricted
securities eligible for resale to certain institutional investors pursuant to
Rule 144A under the Securities Act of 1933, as amended (the "1933 Act"), and
foreign securities acquired in accordance with Regulation S under the 1933 Act.
No Fund will invest more than 15% of its net assets in illiquid investments,
which include repurchase agreements maturing in more than seven days,
securities that are not readily marketable, restricted securities, purchased
over-the-counter ("OTC") options, certain assets used to cover written OTC
options, and privately issued stripped mortgage-backed securities. However, if
the Board determines, based upon a continuing review of the trading markets for
specific Rule 144A securities, that such securities are liquid, then these
securities may be purchased without regard to the 15% limit. The Board may
adopt guidelines and delegate to the Adviser or respective Subadviser the daily
function of determining and monitoring the liquidity of restricted securities.
The Board, however, will retain sufficient oversight and be ultimately
responsible for the determinations. The Board will carefully monitor each
Fund's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of
illiquidity in the Funds if qualified institutional buyers become for a time
uninterested in purchasing these restricted securities.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements. A
repurchase agreement is a contract under which a 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 Funds
will enter into repurchase agreements only with member banks of the Federal
Reserve System and with "primary dealers" in U.S. Government securities. The
Adviser or respective Subadviser will continuously monitor the creditworthiness
of the parties with whom the Funds enter into repurchase agreements. Each 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, a 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.
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<PAGE> 65
FORWARD COMMITMENT AND WHEN-ISSUED SECURITIES. Each 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. A 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, a Fund contracts to purchase WhenratFundfengagesxin
forwardtcommitmentdand whennissuedotransactions,nittrelies on the seller to
consummate the transaction. The failure of the issuer or seller to consummate
the transaction may result in the Funds 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 a 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, a Fund may enter into offsetting
contracts for the forward sale of other securities that it owns.
SHORT-TERM TRADING. Active Bond Fund, Multi-Sector Growth Fund, Global Bond
Fund and International Equity Fund may engage in short- term trading. These
Funds intend to use short-term trading of securities as a means of managing
their portfolio to achieve their respective investment objective. In reaching
a decision to sell one security and purchase another security at approximately
the same time, the Funds will take into account a number of factors, including
the quality ratings, interest rates, yields, maturity dates, call prices, and
refunding and sinking fund provisions of the securities under consideration, as
well as historical yield spreads and current economic information. The success
of short-term trading will depend upon the ability of the Funds to evaluate
particular securities, to anticipate relevant market factors, including trends
of interest rates and earnings and variations from such trends, to obtain
relevant information, to evaluate it promptly, and to take advantage of its
evaluations by completing transactions on a favorable basis. It is expected
that the expenses involved in short-term trading, which would not be incurred
by an investment company which does not use this portfolio technique, will be
less than the profits and other benefits which will accrue to shareholders.
The Funds' portfolio turnover rates will depend on a number of factors,
including the fact that each Fund intends to elect to be treated and to qualify
as a regulated investment company under the Internal Revenue Code.
Accordingly, the Funds intend to limit short-term trading so that less than 30%
of each Fund's respective gross annual income (including all dividend and
interest income and gross realized capital gains, both short and long-term,
without being offset for realized capital losses) will be derived from gross
realized gains on the sale or other disposition of securities and certain other
investments held for less than three months. This limitation, which must be
met by all regulated investment companies in order to obtain such Federal tax
treatment, at certain times may prevent the Funds from realizing capital gains
on some securities held for less than three months.
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<PAGE> 66
SHORT SALES. International Equity Fund and Multi-Sector Growth Fund may engage
in short sales in order to profit from an anticipated decline in the value of a
security. All of the Funds may also engage in short sales to attempt to limit
their exposure to a possible market decline in the value of their portfolio
securities through short sales of securities which the Adviser believes possess
volatility characteristics similar to those being hedged. To effect such a
transaction, a Fund must borrow the security sold short to make delivery to the
buyer. The Fund then is obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. Until the
security is replaced, the Fund is required to pay to the lender any accrued
interest and may be required to pay a premium.
A Fund will realize a gain if the security declines in price between the date
of the short sale and the date on which the Fund replaces the borrowed
security. On the other hand, the Fund will incur a loss as a result of the
short sale if the price of the security increases between those dates. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium or interest or dividends the Fund may be required to
pay in connection with a short sale. The successful use of short selling as a
hedging device may be adversely affected by imperfect correlation between
movements in the price of the security sold short and the securities being
hedged.
Under applicable guidelines of the staff of the SEC, if a Fund engages in short
sales of the type referred to in Fundamental Investment Restriction No. (2)
below, it must put in a segregated account (not with the broker) an amount of
cash or U.S. Government securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short and
(b) any cash or U.S. Government securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). In addition, until the Fund replaces the
borrowed security, it must daily maintain the segregated account at such a
level that (1) the amount deposited in it plus the amount deposited with the
broker as collateral will equal the current market value of the securities sold
short, and (2) the amount deposited in it plus the amount deposited with the
broker as collateral will not be less than the market value of the securities
at the time they were sold short. Except for short sales against the box, the
amount of the Fund's net assets that may be committed to short sales is limited
and the securities in which short sales are made must be listed on a national
securities exchange
Short selling may produce higher than normal portfolio turnover which may
result in increased transaction costs to a Fund and may result in gains from
the sale of securities deemed to have been held for less than three months,
which gains must be less than 30% of the Fund's gross income in order for the
Fund to qualify as a regulated investment company under the Internal Revenue
Code of 1986, as amended.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, each
Fund may, from time to time, lend securities from their respective 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, a 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.
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<PAGE> 67
Such loans will not be for more than 60 days and will be terminable at any time
upon five days' notice. The Funds 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
Funds may pay reasonable fees to persons unaffiliated with the Funds 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
a Fund may incur a loss.
FINANCIAL FUTURES CONTRACTS. Each John Hancock Series Fund may buy and sell
futures contracts (and related options) on debt securities, currencies,
interest rate indices, and other instruments. These Funds may buy and sell
futures contracts (and related options) on stocks and stock indices. Each of
these Funds may hedge its portfolio by selling or purchasing financial futures
contracts as an offset against the effects of changes in interest rates or in
security or foreign currency values. Although other techniques could be used
to reduce exposure to interest rate fluctuations, a Fund may be able to hedge
its exposure more effectively and perhaps at a lower cost by using financial
futures contracts. These Funds may enter into financial futures contracts for
hedging and speculative purposes to the extent permitted by regulations of the
Commodity Futures Trading Commission ("CFTC").
Financial futures contracts have been designed by boards of trade which have
been designated "contract markets" by the CFTC. Futures contracts are traded on
these markets in a manner that is similar to the way a stock is traded on a
stock exchange. The boards of trade, through their clearing corporations,
guarantee that the contracts will be performed. Currently, financial futures
contracts are based on interest rate instruments such as long-term U.S.
Treasury bonds, U.S. Treasury notes, Government National Mortgage Association
("GNMA") modified pass-through mortgage-backed securities, three-month U.S.
Treasury bills, 90-day commercial paper, bank certificates of deposit and
Eurodollar certificates of deposit. It is expected that if other financial
futures contracts are developed and traded the Funds may engage in transactions
in such contracts.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts (same exchange, underlying security and delivery
month). Other financial futures contracts, such as futures contracts on
securities indices, by their terms call for cash settlements. If the
offsetting purchase price is less than a Fund's original sale price, the Fund
realizes a gain, or if it is more, the Fund realizes a loss. Conversely, if
the offsetting sale price is more than a Fund's original purchase price, the
Fund realizes a gain, or if it is less, the Fund realizes a loss. The
transaction costs must also be included in these calculations. Each Fund will
pay a commission in connection with each purchase or sale of financial futures
contracts, including a closing transaction. For a discussion of the Federal
income tax considerations of trading in financial futures contracts, see the
information under the caption "Tax Status" below.
At the time a Fund enters into a financial futures contract, it is required to
deposit with its custodian a specified amount of cash or U.S. Government
securities, known as "initial margin," ranging upward from 1.1% of the value of
the financial futures contract being traded. The margin required for a
financial futures contract is set by the board of trade or exchange on which
the contract is traded and may be modified during the term of the contract.
The initial margin is in the nature of a performance bond or good faith deposit
on the financial futures contract which is returned to the Fund upon
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termination of the contract, assuming all contractual obligations have been
satisfied. The Funds expect to earn interest income on their initial margin
deposits. Each day, the futures contract is valued at the official settlement
price of the board of trade or exchange on which it is traded. Subsequent
payments, known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract fluctuates.
This process is known as "mark to market." Variation margin does not represent
a borrowing or lending by the Funds but is instead settlement between the Funds
and the broker of the amount one would owe the other if the financial futures
contract expired. In computing net asset value, the Funds will mark to market
their respective open financial futures positions.
Successful hedging depends on a strong correlation between the market for the
underlying securities and the futures contract market for those securities.
There are several factors that will probably prevent this correlation from
being a perfect one, and even a correct forecast of general interest rate
trends may not result in a successful hedging transaction. There are
significant differences between the securities and futures markets which could
create an imperfect correlation between the markets and which could affect the
success of a given hedge. The degree of imperfection of correlation depends on
circumstances such as: variations in speculative market demand for financial
futures and debt securities, including technical influences in futures trading
and differences between the financial instruments being hedged and the
instruments underlying the standard financial futures contracts available for
trading in such respects as interest rate levels, maturities and
creditworthiness of issuers. The degree of imperfection may be increased where
the underlying debt securities are lower-rated and, thus, subject to greater
fluctuation in price than higher-rated securities.
A decision as to whether, when and how to hedge involves the exercise of skill
and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected interest rate trends. The
Funds will bear the risk that the price of the securities being hedged will not
move in complete correlation with the price of the futures contracts used as a
hedging instrument. Although the Adviser or Subadviser believes that the use
of financial futures contracts will benefit the Funds, an incorrect prediction
could result in a loss on both the hedged securities in the respective Fund's
portfolio and the hedging vehicle so that the Fund's return might have been
better had hedging not been attempted. However, in the absence of the ability
to hedge, the Adviser or Subadviser might have taken portfolio actions in
anticipation of the same market movements with similar investment results but,
presumably, at greater transaction costs. The low margin deposits required for
futures transactions permit an extremely high degree of leverage. A relatively
small movement in a futures contract may result in losses or gains in excess of
the amount invested.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount the price of a futures contract may vary either
up or down from the previous day's settlement price, at the end of the current
trading session. Once the daily limit has been reached in a futures contract
subject to the limit, no more trades may be made on that day at a price beyond
that limit. The daily limit governs only price movements during a particular
trading day and, therefore, does not limit potential losses because the limit
may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
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Finally, although the Funds engage in financial futures transactions only on
boards of trade or exchanges where there appears to be an adequate secondary
market, there is no assurance that a liquid market will exist for a particular
futures contract at any given time. The liquidity of the market depends on
participants closing out contracts rather than making or taking delivery. In
the event participants decide to make or take delivery, liquidity in the market
could be reduced. In addition, the Funds could be prevented from executing a
buy or sell order at a specified price or closing out a position due to limits
on open positions or daily price fluctuation limits imposed by the exchanges or
boards of trade. If a Fund cannot close out a position, it will be required to
continue to meet margin requirements until the position is closed.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. Each John Hancock Series Fund may buy
and sell options on financial futures contracts on debt securities, currencies,
interest rate indices, and other instruments. These Funds may buy and sell
options on financial futures contracts on stocks and stock indices. An option
on a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract at a specified exercise price
at any time during the period of the option. Upon exercise, the writer of the
option delivers the futures contract to the holder at the exercise price. The
Funds would be required to deposit with their custodian initial and variation
margin with respect to put and call options on futures contracts written by
them. Options on futures contracts involve risks similar to the risks relating
to transactions in financial futures contracts. Also, an option purchased by a
Fund may expire worthless, in which case the Fund would lose the premium it
paid for the option.
OTHER CONSIDERATIONS. Each John Hancock Series Fund will engage in futures and
options transactions for bona fide hedging or speculative purposes, if
consistent with a Fund's investment policies, to the extent permitted by CFTC
regulations. A Fund will determine that the price fluctuations in the futures
contracts and options on futures used for hedging purposes are substantially
related to price fluctuations in securities held by the Fund or which it
expects to purchase. Except as stated below, the Funds' futures transactions
will be entered into for traditional hedging purposes -- i.e., futures
contracts will be sold to protect against a decline in the price of securities
that the Funds own, or futures contracts will be purchased to protect the Funds
against an increase in the price of securities, or the currency in which they
are denominated, the Fund intends to purchase. As evidence of this hedging
intent, the Funds expect that on 75% or more of the occasions on which they
take a long futures or option position (involving the purchase of futures
contracts), the Funds will have purchased, or will be in the process of
purchasing equivalent amounts of related securities or assets denominated in
the related currency in the cash market at the time when the futures contract
or option position is closed out. However, in particular cases, when it is
economically advantageous for a Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to literal compliance with the bona fide hedging definition,
a CFTC regulation permits the Funds to elect to comply with a different test,
under which the aggregate initial margin and premiums required to establish
speculative positions in futures contracts and options on futures will not
exceed 5% of the net asset value of the respective Fund's portfolio, after
taking into account unrealized profits and losses on any such positions and
excluding the amount by which such options were in-the-money at the time of
purchase. The Funds will engage in transactions in futures contracts only to
the
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extent such transactions are consistent with the requirements of the Internal
Revenue Code for maintaining their qualifications as regulated investment
companies for Federal income tax purposes.
When the Funds purchase financial futures contracts, or write put options or
purchase call options thereon, cash or liquid, high grade debt securities will
be deposited in a segregated account with the Funds' custodian in an amount
that, together with the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contracts.
OPTIONS TRANSACTIONS. Each John Hancock Series Fund may write listed and
over-the-counter covered call options and covered put options on securities in
order to earn additional income from the premiums received. In addition, these
Funds may purchase listed and over-the-counter call and put options on
securities and indices. The extent to which covered options will be used by
the Funds will depend upon market conditions and the availability of
alternative strategies. The Funds may write listed and over-the-counter call
and put options on up to 100% of their respective net assets.
A Fund will write listed and over-the-counter call options only if they are
"covered," which means that the Fund owns or has the immediate right to acquire
the securities underlying the options without additional cash consideration
upon conversion or exchange of other securities held in its portfolio. A call
option written by a Fund may also be "covered" if the Fund holds on a
share-for- share basis a covering call on the same securities where (i) the
exercise price of the covering call held is equal to or less than the exercise
price of the call written if the difference is maintained by the Fund in cash,
or high grade liquid debt obligations in a segregated account with the Fund's
custodian, and (ii) the covering call expires at the same time as the call
written. If a covered call option is not exercised, a Fund would keep both the
option premium and the underlying security. If the covered call option written
by a Fund is exercised and the exercise price, less the transaction costs,
exceeds the cost of the underlying security, the Fund would realize a gain in
addition to the amount of the option premium it received. If the exercise
price, less transaction costs, is less than the cost of the underlying
security, a Fund's loss would be reduced by the amount of the option premium.
As the writer of a covered put option, each Fund will write a put option only
with respect to securities it intends to acquire for its portfolio and will
maintain in a segregated account with its custodian bank cash or high-grade
liquid debt securities with a value equal to the price at which the underlying
security may be sold to the Fund in the event the put option is exercised by
the purchaser. The Funds may also write a "covered" put option by purchasing
on a share-for-share basis a put on the same security as the put written by the
Fund if the exercise price of the covering put held is equal to or greater than
the exercise price of the put written and the covering put expires at the same
time or later than the put written.
When writing listed and over-the-counter covered put options on securities, the
Funds would earn income from the premiums received. If a covered put option is
not exercised, the Funds would keep the option premium and the assets
maintained to cover the option. If the option is exercised and the exercise
price, including transaction costs, exceeds the market price of the underlying
security, a Fund would realize a loss, but the amount of the loss would be
reduced by the amount of the option premium.
If the writer of an exchange-traded option wishes to terminate its obligation
prior to its exercise, it may effect a "closing purchase transaction." This is
accomplished by buying an option of the same series as
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the option previously written. The effect of the purchase is that a Fund's
position will be offset by the Options Clearing Corporation. The Funds may not
effect a closing purchase transaction after they have been notified of the
exercise of an option. There is no guarantee that a closing purchase
transaction can be effected. Although the Funds will generally write only
those options for which there appears to be an active secondary market, there
is no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular option or at any particular time, and for some
options no secondary market In theecasenof aawritten.call option, effecting a
closing transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price, expiration date or
both. In the case of a written put option, it will permit a Fund to write
another put option to the extent that the exercise price thereof is secured by
deposited cash or short-term securities. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any securities
subject to the option to be used for other investments. If a Fund desires to
sell a particular security from its portfolio on which it has written a call
option, it will effect a closing transaction prior to or concurrent with the
sale of the security.
The Funds will realize a gain from a closing transaction if the cost of the
closing transaction is less than the premium received from writing the option.
The Funds will realize a loss from a closing transaction if the cost of the
closing transaction is more than the premium received for writing the option.
However, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by appreciation of the underlying security owned by the Fund.
OVER-THE-COUNTER OPTIONS. Funds may engage in options transactions on
exchanges and in the over-the-counter markets. In general, exchange-traded
options are third-party contracts (i.e., performance of the parties'
obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. Over-the-counter ("OTC")
transactions are two-party contracts with price and terms negotiated by the
buyer and seller. A Fund will acquire only those OTC options for which
management believes the Fund can receive on each business day at least two
separate bids or offers (one of which will be from an entity other than a party
to the option) or those OTC options valued by an independent pricing service.
The Funds will write and purchase OTC options only with member banks of the
Federal Reserve System and primary dealers in U.S. Government securities or
their affiliates which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
The SEC has taken the position that OTC options are illiquid securities subject
to the restriction that illiquid securities are limited to not more than 15% of
the respective Fund's net assets. The SEC, however, has a partial exemption
from the above restrictions on transactions in OTC options. The SEC allows a
Fund to exclude from the 15% limitation on illiquid securities a portion of the
value of the OTC options written by the Fund, provided that certain conditions
are met. First, the other party to the OTC options has to be a primary U.S.
Government securities dealer designated as such by the Federal Reserve Bank.
Second, the Fund must have an absolute contractual right to repurchase the OTC
options at a formula price. If the above conditions are met, a Fund may treat
as illiquid only that portion of the OTC option's value (and the value of its
underlying securities) which is equal to the formula price for repurchasing the
OTC option, less the OTC option's intrinsic value.
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Although Diversified Core Equity Fund II may invest in certain types of
derivative securities, it has no current plans to do so. However, this policy
could change at any time in the future.
GOVERNMENT SECURITIES. Certain U.S. Government securities, including U.S.
Treasury bills, notes and bonds, and Government National Mortgage Association
certificates ("Ginnie Maes"), are supported by the full faith and credit of the
United States. Certain other U.S. Government securities, issued or guaranteed
by Federal agencies or government sponsored enterprises, are not supported by
the full faith and credit of the United States, but may be supported by the
right of the issuer to borrow from the U.S. Treasury. These securities include
obligations of the Federal Home Loan Mortgage Corporation ("Freddie Macs"), and
obligations supported by the credit of the instrumentality, such as Federal
National Mortgage Association Bonds ("Fannie Maes"). No assurance can be given
that the U.S. Government will provide financial support to such Federal
agencies, authorities, instrumentalities and government sponsored enterprises
in the future.
MORTGAGE-BACKED SECURITIES. Each Fund that may invest in U.S. Government
securities, and in particular Dividend Performers Fund and Active Bond Fund,
may invest in mortgage pass-through certificates and multiple-class
pass-through securities, such as real estate mortgage investment conduits
("REMIC") pass-through certificates, collateralized mortgage obligations
("CMOs") and stripped mortgage-backed securities ("SMBS"), and other types of
"Mortgage-Backed Securities" that may be available in the future.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. Guaranteed mortgage pass-through
securities represent participation interests in pools of residential mortgage
loans and are issued by U.S. Governmental or private lenders and guaranteed by
the U.S. Government or one of its agencies or instrumentalities, including but
not limited to the Government National Mortgage Association ("Ginnie Mae"), the
Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed
by the full faith and credit of the U.S. Government for timely payment of
principal and interest on the certificates. Fannie Mae certificates are
guaranteed by Fannie Mae, a federally chartered and privately owned
corporation, for full and timely payment of principal and interest on the
certificates. Freddie Mac certificates are guaranteed by Freddie Mac, a
corporate instrumentality of the U.S. Government, for timely payment of
interest and the ultimate collection of all principal of the related mortgage
loans.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on
all classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through
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Securities. Debt service on CMO's is provided from payments of principal and
interest on collateral of mortgaged assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property
and other permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts although the
Funds do not intend to invest in residual interests.
STRIPPED MORTGAGE-BACKED SECURITIES. SMBS are derivative multiple-class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of interest and principal distributions on a pool
of mortgage assets. A typical SMBS will have one class receiving some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class) while the other
class will receive all of the principal (the "principal only" class). The
yields and market risk of interest only and principal only SMBS, respectively,
may be more volatile than those of other fixed income securities. The staff of
the SEC considers privately issued SMBS to be illiquid.
STRUCTURED OR HYBRID NOTES. Funds that may invest in mortgage-backed
securities may invest in "structured" or "hybrid" notes. The distinguishing
feature of a structured or hybrid note is that the amount of interest and/or
principal payable on the note is based on the performance of a benchmark asset
or market other than fixed-income securities or interest rates. Examples of
these benchmarks include stock prices, currency exchange rates and physical
commodity prices. Investing in a structured note allows a Fund to gain
exposure to the benchmark market while fixing the maximum loss that the Fund
may experience in the event that market does not perform as expected.
Depending on the terms of the note, a Fund may forego all or part of the
interest and principal that would be payable on a comparable conventional note;
a Fund's loss cannot exceed this foregone interest and/or principal. An
investment in structured or hybrid notes involves risks similar to those
associated with a direct investment in the benchmark asset.
RISK FACTORS ASSOCIATED WITH MORTGAGE-BACKED SECURITIES. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of
interest rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental, agency or other guarantee. When a Fund reinvests amounts
representing payments and
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unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass- through securities in particular, may be less effective than other types
of U.S. Government securities as a means of "locking in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment rate
will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.
RISK ASSOCIATED WITH SPECIFIC TYPES OF DERIVATIVE DEBT SECURITIES. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities.
The risk of early prepayments is the primary risk associated with interest only
debt securities ("IOs"), super floaters, other leveraged floating rate
instruments and Mortgage-Backed Securities purchased at a premium to their par
value. In some instances, early prepayments may result in a complete loss of
investment in certain of these securities. The primary risks associated with
certain other derivative debt securities are the potential extension of average
life and/or depreciation due to rising interest rates.
These securities include floating rate securities based on the Cost of Funds
Index ("COFI floaters"), other "lagging rate" floating rate securities,
floating rate securities that are subject to a maximum interest rate ("capped
floaters"), Mortgage-Backed Securities purchased at a discount, leveraged
inverse floating rate securities ("inverse floaters"), principal only debt
securities ("POs"), certain residual or support tranches of CMOs and index
amortizing notes. Index amortizing notes are not Mortgage-Backed Securities,
but are subject to extension risk resulting from the issuer's failure to
exercise its option to call or redeem the notes before their stated maturity
date. Leveraged inverse IOs combine several elements of the Mortgage-Backed
Securities described above and thus present an especially intense combination
of prepayment, extension and interest rate risks.
Planned amortization class ("PAC") and target amortization class ("TAC") CMO
bonds involve less exposure to prepayment, extension and interest rate risk
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches
of PAC and TAC CMOs assume the extra prepayment, extension and interest rate
risk associated with the underlying mortgage assets.
Other types of floating rate derivative debt securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates.
X-reset floaters have a coupon that remains fixed for more than one
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accrual period. Thus, the type of risk involved in these securities depends on
the terms of each individual X-reset floater.
FORWARD FOREIGN CURRENCY TRANSACTIONS. Each John Hancock Series Fund, other
than Dividend Performers Fund, may engage in forward foreign currency
transactions. Foreign currency exchange transactions may be conducted on a
spot (i.e., cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market. The Funds may also deal in forward
foreign currency exchange contracts involving currencies of the different
countries in which they may invest as a hedge against possible variations in
the foreign exchange rate between these currencies. This is accomplished
through contractual agreements to purchase or sell a specified currency at a
specified future date and price set at the time of the contract. The Funds'
dealings in forward foreign currency exchange contracts will be limited to
hedging either specified transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward foreign currency contracts with
respect to specific receivables or payables of a Fund accruing in connection
with the purchase and sale of its portfolio securities denominated in foreign
currencies. Portfolio hedging is the use of forward foreign currency contracts
to offset portfolio security positions denominated or quoted in such foreign
currencies. A Fund will not attempt to hedge all of its foreign portfolio
positions and will enter into such transactions only to the extent, if any,
deemed appropriate by the Adviser or Subadviser. The Funds will not engage in
speculative forward foreign currency exchange transactions.
If a Fund purchases a forward contract, its custodian bank will segregate cash
or high grade liquid debt securities in a separate account of the Fund in an
amount equal to the value of the Fund's total assets committed to the
consummation of such forward contract. Those assets will be valued at market
daily and if the value of the securities in the separate account declines,
additional cash or securities will be placed in the account so that the value
of the account will be equal to the amount of the Fund's commitment with
respect to such contracts.
Hedging against a decline in the value of currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it
may not be possible for the Funds to hedge against a devaluation that is so
generally anticipated that the Funds are not able to contract to sell the
currency at a price above the devaluation level they anticipate.
The cost to the Funds of engaging in foreign currency exchange transactions
varies with such factors as the currency involved, the length of the contract
period and the market conditions then prevailing. Since transactions in
foreign currency are usually conducted on a principal basis, no fees or
commissions are involved.
LOWER RATED HIGH YIELD DEBT OBLIGATIONS. Dividend Performers Fund, Active Bond
Fund and Global Bond Fund may invest in high yielding, fixed income securities
rated below investment grade (e.g., rated Baa or lower by Moody's Investors
Service, Inc. ("Moody's") or BBB or lower by Standard & Poor's Ratings Group
("S&P")). Dividend Performers Fund will not invest in securities rated below C
by Moody's or by S&P. In addition, no more than 5% of Dividend Performers
Fund's net assets will be invested in securities rated below investment grade
and no more than 5% of the Fund's net assets will be invested in securities
rated BBB by S&P or Baa by Moody's and their equivalents. Active Bond Fund
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will not invest in securities rated below Ca by Moody's or CC by S&P. Global
Bond Fund may invest up to 25% of its net assets in securities rated as low as
Ca by Moody's or CC by S&P and their equivalents.
Ratings are based largely on the historical financial condition of the issuer.
Consequently, the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which may be better
or worse than the rating would indicate.
See Appendix A to this SAI which describes the characteristics of corporate
bonds in the various ratings categories. The Funds may invest in comparable
quality unrated securities which, in the opinion of the Adviser or Subadviser,
offer comparable yields and risks to those securities which are rated.
Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income.
In addition, lower ratings reflect a greater possibility of an adverse change
in financial condition affecting the ability of the issuer to make payments of
interest and principal. The high yield fixed income market is relatively new
and its growth occurred during a period of economic expansion. The market has
not yet been fully tested by an economic recession.
The market price and liquidity of lower rated fixed income securities generally
respond to short term corporate and market developments to a greater extent
than do the price and liquidity of higher rated securities because such
developments are perceived to have a more direct relationship to the ability of
an issuer of such lower rated securities to meet its ongoing debt obligations.
Reduced volume and liquidity in the high yield bond market or the reduced
availability of market quotations will make it more difficult to dispose of the
bonds and to value accurately the Funds' assets. The reduced availability of
reliable, objective data may increase the Funds' reliance on management's
judgment in valuing high yield bonds. In addition, the Funds' investments in
high yield securities may be susceptible to adverse publicity and investor
perceptions, whether or not justified by fundamental factors. A Fund's
investments, and consequently its net asset value, will be subject to the
market fluctuations and risks inherent in all securities.
IV. INVESTMENT RESTRICTIONS
A. Fundamental Investment Restrictions.
------------------------------------
Each Fund has adopted the following fundamental investment restrictions which
may not be changed without approval of a majority of the applicable Fund's
outstanding voting securities. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), and as used in the Prospectuses and this SAI, a
"majority of the outstanding voting securities" requires the approval of the
lesser of (1) the holders of 67% or more of the shares of a Fund represented at
a meeting if the holders of more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) the holders of more than 50% of the
outstanding shares of the Fund.
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A Fund may not:
1. Issue senior securities, except as permitted by paragraphs 3, 6 and 7
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of
trustees' fees, the purchase or sale of options, futures contracts,
forward commitments and repurchase agreements entered into in
accordance with the Fund's investment policies or within the meaning
of paragraph 6 below, are not deemed to be senior securities.
2. Purchase securities on margin or make short sales, or unless, by
virtue of its ownership of other securities, the Fund has the right to
obtain securities equivalent in kind and amount to the securities sold
and, if the right is conditional, the sale is made upon the same
conditions, except (i) in connection with arbitrage transactions, (ii)
for hedging the Fund's exposure to an actual or anticipated market
decline in the value of its securities, (iii) to profit from an
anticipated decline in the value of a security, and (iv) obtaining
such short-term credits as may be necessary for the clearance of
purchases and sales of securities.
3. Borrow money, except for the following extraordinary or emergency
purposes: (i) from banks for temporary or short-term purposes or for
the clearance of transactions in amounts not to exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed) taken
at market value; (ii) in connection with the redemption of Fund shares
or to finance failed settlements of portfolio trades without
immediately liquidating portfolio securities or other assets; and
(iii) in order to fulfill commitments or plans to purchase additional
securities pending the anticipated sale of other portfolio securities
or assets, but only if after each such borrowing there is asset
coverage of at least 300% as defined in the 1940 Act. A Fund may not
borrow money for the purpose of leveraging the Funds' assets. For
purposes of this investment restriction, the deferral of Trustees'
fees and transactions in short sales, futures contracts, options on
futures contracts, securities or indices and forward commitment
transactions shall not constitute borrowing.
4. Act as an underwriter, except to the extent that in connection with
the disposition of portfolio securities, the Fund may be deemed to be
an underwriter for purpose of the 1933 Act.
5. Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities and (v) hold and
sell real estate acquired by the Fund as a result of the ownership of
securities.
6. Invest in commodities, except the Fund may purchase and sell options
on securities, securities indices and currency, futures contracts on
securities, securities indices and currency and options on such
futures, forward foreign currency exchange contracts, forward
commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment
policies.
24
<PAGE> 78
7. Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the
Fund's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of debt
securities, bank loan participation interests, bank certificates of
deposit, bankers' acceptances, debentures or other securities, whether
or not the purchase is made upon the original issuance of the
securities.
8. Purchase the securities of issuers conducting their principal activity
in the same industry if, immediately after such purchase, the value of
its investments in such industry would exceed 25% of its total assets
taken at market value at the time of such investment. This limitation
does not apply to investments in obligations of the U.S. Government or
any of its agencies, instrumentalities or authorities.
9. For each Fund other than Global Bond Fund and Multi-Sector Growth
Fund, with respect to 75% of total assets, purchase securities of an
issuer (other than the U.S. Government, its agencies,
instrumentalities or authorities), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities of
such issuer; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by
the Fund.
B. Non-Fundamental Investment Restrictions.
----------------------------------------
The following restrictions are designated as non-fundamental and may be changed
by the Board of Trustees without the approval of shareholders.
A Fund may not:
1. Pledge, mortgage or hypothecate its assets, except to secure permitted
borrowings and then only if such pledging, mortgaging or hypothecating
does not exceed 33 1/3% of the Fund's total assets taken at market
value. Collateral arrangements with respect to margin, option, short
sale and other risk management and when-issued and forward commitment
transactions are not deemed to be pledges or other encumbrances for
purposes of this restriction.
2. Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the
management of the Adviser or any Subadviser to save commissions or to
average prices among them is not deemed to result in a joint
securities trading account.
3. Purchase or retain securities of an issuer if one or more of the
Trustees or officers of the Trust or directors or officers of the
Adviser, any Subadviser or any investment management subsidiary of the
Adviser individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer.
25
<PAGE> 79
4. Purchase a security if, as a result, (i) more than 10% of the Fund's
assets would be invested in securities of other investment companies,
(ii) such purchase would result in more than 3% of the total
outstanding voting securities of any one such investment company being
held by the Fund or (iii) more than 5% of the Fund's assets would be
invested in any one such investment company. The Fund will not
purchase the securities of any open-end investment company except when
such purchase is part of a plan of merger, consolidation,
reorganization or purchase of substantially all of the assets of any
other investment company, or purchase the securities of any closed-end
investment company except in the open market where no commission or
profit to a sponsor or dealer results from the purchase, other than
customary brokerage fees. The Fund has no current intention of
investing in other investment companies. Notwithstanding the
foregoing, each 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.
5. Invest more than 15% of its total assets in the aggregate in (1)
securities of any issuer which, together with its predecessors, has
been in operation for less than three years and (2) restricted
securities, excluding securities eligible for resale pursuant to Rule
144A under the 1933 Act or foreign securities which are offered or
sold outside the United States in accordance with Regulation S under
the 1933 Act; provided, however, that the Fund may not invest more
than 15% of its net assets in restricted securities including those
eligible for resale under Rule 144A.
6. Invest in securities which are illiquid if, as a result, more than 15%
of its net assets would consist of such securities, including
repurchase agreements maturing in more than seven days, securities
that are not readily marketable, restricted securities not eligible
for resale pursuant to Rule 144A under the 1933 Act, purchased OTC
options, certain assets used to cover written OTC options, and
privately issued stripped mortgage-backed securities.
7. Purchase securities while outstanding borrowings exceed 5% of the
Fund's total assets.
8. Invest in real estate limited partnership interests.
9. Purchase warrants of any issuer, if, as a result of such purchase,
more than 2% of the value of the Fund's total assets would be invested
in warrants which are not listed on an exchange or more than 5% of the
value of the total assets of the Fund would be invested in warrants
generally, whether or not so listed. For these purposes, warrants are
to be valued at the lesser of cost or market, but warrants acquired by
the Fund in units with or attached to debt securities shall be deemed
to be without value.
10. Purchase interests in oil, gas, or other mineral exploration programs
or mineral leases; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or
transmission of oil, gas, or other minerals.
26
<PAGE> 80
11. Write covered call or put options with respect to more than 25% of the
value of its total assets, invest more than 25% of its total assets in
protective put options or invest more 5% of its total assets in puts,
calls, spreads or straddles, or any combination thereof, other than
protective put options. The aggregate value of premiums paid on all
options, other than protective put options, held by the Fund at any
time will not exceed 20% of the Fund's total assets.
12. Invest for the purpose of exercising control over or management of any
company.
If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the values of a Fund's assets will not be
considered a violation of the Insorderito.permit the sale of shares of the
Funds in certain states, the Board may, in its sole discretion, adopt
restrictions on investment policy more restrictive than those described above.
Should the Board determine that any such more restrictive policy is no longer
in the best interest of a Fund and its shareholders, the Fund may cease
offering shares in the state involved and the Board may revoke such restrictive
policy. Moreover, if the states involved shall no longer require any such
restrictive policy, the Board may, in its sole discretion, revoke such policy.
International Equity Fund and Multi-Sector Growth Fund agree that, in
accordance with Texas Blue Sky Regulations, until such regulations no longer
require, they will not engage in short sales (other than short sales against
the box) unless (i) the dollar amount of the short sales does not exceed 25%
of the net assets of the Fund; (ii) the value of the securities of any one
issuer in which the Fund maintains a short position does not exceed the lesser
of (a) 2% of the net asset value of the Fund or (b) 2% of the securities of
any class of any issuer; and (iii) the securities in which short sales are
made are listed on a national securities exchange. The Independence Funds have
no current intent to engage in short sales.
27
<PAGE> 81
V. THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Funds is managed by the Trustees of the Trust who elect
officers who are responsible for the day-to-day operations of the Funds and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also officers or directors of the Funds' Adviser
and/or one or more or the Subadvisers, or officers or directors of the Funds'
principal distributor, John Hancock Funds, Inc. ("JH Funds").
The following table sets forth the principal occupation or employment of the
Trustees and principal officers of the Trust during the past five years.
28
<PAGE> 82
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE TRUST DURING THE PAST FIVE YEARS
---------------- -------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr.* Chairman (1,2) Chairman and Chief Executive Officer, the Adviser and The
101 Huntington Avenue Berkeley Financial Group ("The Berkeley Group"); Chairman,
Boston, MA 02199 NM Capital Management, Inc. ("NM Capital"); John Hancock
Advisers International Limited; ("JHAI"); John Hancock
Funds, Inc., ("JH Funds"), John Hancock Investor Services
Corporation ("Investor Services") and Sovereign Asset
Management Corporation ("SAMCorp"); (hereinafter the
Adviser, the Berkeley Group, NM Capital, JHAI, JH Funds,
Investor Services and SAMCorp collectively referred to as
the "Affiliated Companies"); Chairman, Transamerica Fund
Management Company ("TFMC") and First Signature Bank &
Trust; Director, John Hancock Freedom Securities Corp.,
John Hancock Capital Corp., New England/Canada Business
Council; Member, Investment Company Institute Board of
Governors; Director, Asia Strategic Growth Fund, Inc.;
Trustee, Museum of Science; President, the Adviser (until
July 1990); Chairman, John Hancock Distributors, Inc.
("Distributors") (until April 1994).
Thomas W.L. Cameron Trustee Chairman and Director, Sovereign Advisers, Inc.; Senior
Interstate/Johnson Lane Vice President, Interstate/Johnson Lane Corp. (securities
1892 Andell Bluff Blvd. dealer).
Johns Island, SC 29455
Charles F. Fretz Trustee (4) Consultant, self employed; Vice President and Director,
RD #5, Box 300B Towers, Perrin, Forster & Crosby, Inc. (international
Clothier Springs Road management consultants) (until 1985).
Malvern, PA 19355
<FN>
-------------------
* An "interested person" of the Funds, as such term is defined in the 1940 Act.
(1) A Member of the Trust's Executive Committee.
(2) A Member of the Investment Policy Committee of the Adviser.
(3) An Alternate Member of the Trust's Executive Committee.
(4) A Member of the Audit and the Administration and Nominating Committees.
</TABLE>
29
<PAGE> 83
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE TRUST DURING THE PAST FIVE YEARS
---------------- -------------- --------------------------
<S> <C> <C>
Charles L. Ladner Trustee (4) Director, Energy North, Inc. (public utility holding
UGI Corporation company) (until 1992); Senior Vice President, Finance of
P.O. Box 858 UGI Corp. (gas distribution utility).
Valley Forge, PA 19482
Patricia P. McCarter Trustee (4) Director and Secretary of the McCarter Corp. (machine
Swedesford Road manufacturer).
RD #3, Box 121
Malvern, PA 19355
Steven R. Pruchansky Trustee (3, 4) Director and Treasurer, Mast Holdings, Inc.; Director,
6920 Daniel Road First Signature Bank & Trust Company (until August 1991);
Naples, FL 33942 General Partner, Mast Realty Trust; President, Maxwell
Building Corp. (until 1991).
Richard S. Scipione* Trustee (1) General Counsel, the Life Company; Director, the Adviser,
John Hancock Place JH Funds, Investor Services, Distributors, John Hancock
P.O. Box 111 Subsidiaries , Inc., John Hancock Property and Casualty
Boston, MA 02117 Insurance and its affiliates, SAMCorp and NM Capital;
Trustee, The Berkeley Group; Director, JH Networking
Insurance Agency, Inc.; Director, John Hancock Home
Mortgage Corporation and John Hancock Financial Access,
Inc. (until July, 1990).
Norman H. Smith Trustee (4) Retired. Lieutenant General, United States Marine Corps;
Rt. 1, Box 249 E Deputy Chief of Staff for Manpower and Reserve Affairs,
Linden, VA 22642 Headquarters Marine Corps; Commanding General, III Marine
Expeditionary Force/3rd Marine Division (retired 1991).
<FN>
-------------------
* An "interested person" of the Funds, as such term is defined in the 1940 Act.
(1) A Member of the Trust's Executive Committee.
(2) A Member of the Investment Policy Committee of the Adviser.
(3) An Alternate Member of the Trust's Executive Committee.
(4) A Member of the Audit and the Administration and Nominating Committees.
</TABLE>
30
<PAGE> 84
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE TRUST DURING THE PAST FIVE YEARS
---------------- -------------- --------------------------
<S> <C> <C>
John P. Toolan Trustee (4) Director, The Muni Bond Funds, National Liquid
13 Chadwell Place Reserves, Inc., The Tax Free Money Fund, Inc.
Morristown, NJ 07960 and Vantage Money Market Funds (mutual funds),
and The Inefficient-Market Fund, Inc. (closed-
end investment company; Chairman, Smith Barney
Trust Company (retired December, 1991);
Director, Smith Barney, Inc., Mutual Management
Company and Smith Barney Advisers, Inc.
(investment advisers) (until December 1991).
James F. Carlin Trustee (4) Chairman and Chief Executive Officer, Carlin
233 West Central Street Consolidated, Inc. (insurance); Director,
Natick, MA 01760 Arabella Mutual Insurance Company; Receiver,
City of Chelsea, Massachusetts (until August
1992).
Harold R. Hiser, Jr. Trustee (4) Executive Vice President, Schering-Plough
Schering-Plough Corporation Corporation (pharmaceuticals); Director,
One Giralda Farms ReCapital Corporation (reinsurance).
Madison, NJ 07940-1000
Robert G. Freedman* Vice Chairman and Chief Vice Chairman, Director and Chief Investment
101 Huntington Avenue Investment Officer (2) Officer, the Adviser; President, the Adviser
Boston, MA 02199 (until December 1994); Director, JHAI, Investor
Services, JH Funds, SAMCorp, NM Capital; Senior
Vice President, The Berkeley Group and
Distributors (until April, 1994); Director,
TFMC; and an officer of other investment
companies managed by the Adviser.
Anne C. Hodsdon* President (2) President and Chief Operations Officer, the
101 Huntington Avenue Adviser; Executive Vice President, the Adviser
Boston, MA 02199 (until December 1994); Director, JHAI;
President and Director, TFMC.
<FN>
-------------------
* An "interested person" of the Funds, as such term is defined in the 1940 Act.
(1) A Member of the Trust's Executive Committee.
(2) A Member of the Investment Policy Committee of the Adviser.
(3) An Alternate Member of the Trust's Executive Committee.
(4) A Member of the Audit and the Administration and Nominating Committees.
</TABLE>
31
<PAGE> 85
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS THE TRUST DURING THE PAST FIVE YEARS
---------------- ---------- --------------------------
<S> <C> <C>
Thomas H. Drohan* Senior Vice President Senior Vice President and Secretary, the Adviser and
101 Huntington Avenue and Secretary The Berkeley Group, Senior Vice President JH Funds,
Boston, MA 02199 Investor Services, and Distributors (until April,
1994); Director, JHAI; Secretary, NM Capital;
Director and Secretary, TFMC.
James K. Ho* Senior Vice Executive Vice President, the Adviser.
101 Huntington Avenue President (2)
Boston, MA 02199
James B. Little* Senior Vice President Senior Vice President, the Adviser, JH Funds,
101 Huntington Avenue and Chief Financial Investor Services, Distributors (until April, 1994).
Boston, MA 02199 Officer (2)
Michael P. DiCarlo* Senior Vice President Executive Vice President, the Adviser.
101 Huntington Avenue (2)
Boston, MA 02199
Susan S. Newton* Vice President, Vice President and Assistant Secretary, the Adviser;
101 Huntington Avenue Assistant Secretary Vice President and Secretary, JH Funds, Investor
Boston, MA 02199 and Compliance Services and Distributors (until April, 1994);
Officer Secretary, , SAMCorp; Vice President, The Berkeley
Group; Assistant Secretary, NM Capital.
John A. Morin* Vice President Vice President, the Adviser, JH Funds, Distributors
101 Huntington Avenue (until April, 1994) and Investor Services; Counsel,
Boston, MA 02199 the Life Company; Vice President and Assistant
Secretary, The Berkeley Group.
James J. Stokowski* Vice President and Vice President, the Adviser.
101 Huntington Avenue Treasurer
Boston, MA 02199
<FN>
-------------------
* An "interested person" of the Funds, as such term is defined in the 1940 Act.
(1) A Member of the Trust's Executive Committee.
(2) A Member of the Investment Policy Committee of the Adviser.
(3) An Alternate Member of the Trust's Executive Committee.
(4) A Member of the Audit and the Administration and Nominating Committees.
</TABLE>
32
<PAGE> 86
All of the officers listed are officers or employees of the Adviser
and Affiliated Companies. Some of the Trustees and officers may also be
officers and/or directors and/or Trustees of one or more of the other funds for
which the Adviser serves as investment adviser.
<TABLE>
COMPENSATION OF THE TRUSTEES. The following table provides information
regarding the compensation paid by the Funds and the other investment companies
in the John Hancock Fund Complex to the Independent Trustees for their
services. Mr. Boudreau, a non- Independent Trustee, and each of the officers
of the Trust, who are interested persons of the Adviser, are compensated by the
adviser and received no compensation from the Funds for their services.
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM THE FUNDS
AGGREGATE BENEFITS ESTIMATED AND THE JOHN
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS HANCOCK FUND
FROM THE OF THE FUNDS' UPON COMPLEX TO
INDEPENDENT TRUSTEES FUNDS EXPENSES RETIREMENT TRUSTEES/DIRECTORS
-------------------- ----- --------- ---------- ------------------
(1)(2)
<S> <C> <C> <C> <C>
James F. Carlin $ 0 - - $ 60,450
William H. Cunningham 0 - - 0
Charles F. Fretz 0 - - 60,350
Harold R. Hiser, Jr. 0 - - 56,000
Charles L. Ladner 0 - - 60,450
Leo E. Linbeck, Jr. 0 - - 0
Patricia P. McCarter 0 - - 60,200
Steven R. Pruchansky 0 - - 62,450
Norman H. Smith 0 - - 62,450
John P. Toolan 0 - - 60,450
------- --------- ---------- --------
$ 0 $482,800
<FN>
(1) The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees/Directors is as of the calendar year ended December 31,
1994.
(2) All Trustees except Messers. Cunningham and Linbeck are Trustees/Directors
of 38 funds in the John Hancock Fund Complex as of the date of this SAI.
Messers. Cunningham and Linbeck are Trustees/Directors of 36 funds and were not
Trustees/Directors of any funds in the John Hancock Fund Complex prior to
December 22, 1994.
</TABLE>
33
<PAGE> 87
As of August 15, 1995 the officers and trustees of the Trust as a
group owned 13.15% of the outstanding shares of Dividend Performers Fund;
17.45% of the outstanding shares of Active Bond Fund; 11.26% of the
outstanding shares of Global Bond Fund; 2.19% of the outstanding shares of
Multi-Sector Growth Fund; 9.50% of the outstanding shares of Fundamental Value
Fund; 26.29% of the outstanding shares of International Equity Fund; less than
1% of the outstanding shares of Independence Diversified Core Equity Fund II;
and less than 1% of the outstanding shares of Independence Balanced Fund.
There were no outstanding shareholders of Independence Value Fund, Independence
Growth Fund and Independence Medium Capitalization Fund as of August 15, 1995.
<TABLE>
As of August 15, 1995 the following shareholders beneficially owned 5%
of or more of the outstanding shares of the Funds listed below:
<CAPTION>
PERCENTAGE OF
TOTAL
NUMBER OF SHARES OUTSTANDING
OF BENEFICIAL SHARES OF THE
NAME AND ADDRESS OF SHAREHOLDER FUND INTEREST OWNED FUND
------------------------------- ---- -------------- -----
<S> <C> <C> <C>
Lathers' Local No. 144L Dividend Performers 59,203.298 24.70%
Pension Plan II (DC)
c/o Price Administrators, Inc.
400 S. El Camino Real, Suite 950
San Mateo, CA 94402-1708
John Hancock Advisers 401(k) Plan Active Bond 13,346.545 13.69%
Beverly A. Cleathero
101 Huntington Avenue
Boston, MA 02199-7603
John Hancock Advisers 401(k) Plan Active Bond 8,583.947 8.80%
Robert G. Freedman
101 Huntington Avenue
Boston, MA 02199-7603
The Investment Incentive Plan Global Bond 4,807.693 20.36%
Winthrop C. Giles
101 Huntington Avenue
Boston, MA 02199-7603
John Hancock Advisers 401(k) Plan Global Bond 3,700.398 15.67%
Katherine M. Harman
101 Huntington Avenue
Boston, MA 02199-7603
</TABLE>
34
<PAGE> 88
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
NUMBER OF SHARES OUTSTANDING
OF BENEFICIAL SHARES OF THE
NAME AND ADDRESS OF SHAREHOLDER FUND INTEREST OWNED FUND
------------------------------- ---- -------------- -----
<S> <C> <C> <C>
John Hancock Advisers 401(k) Plan Global Bond 2,290.477 9.70%
Anne C. Hodsdon
101 Huntington Avenue
Boston, MA 02199-7603
Investment Incentive Program for John Multi-Sector 266,253.515 62.38%
Hancock Employees Growth
John Hancock Place
PO Box 111
Boston, MA 02117-0111
Hancock Investment Subsidiaries Multi-Sector 25,067.479 5.87%
401(k) Plan Growth
53 State Street
Boston, MA 02109-2804
Lathers' Local No. 144L Fundamental Value 59,151.846 33.98%
Pension Plan II (DC)
c/o Price Administrators, Inc.
400 S. El Camino Real, Suite 950
San Mateo, CA 94402-1708
John Hancock Advisers 401(k) Plan Fundamental Value 9,613.541 5.52%
Edward J. Boudreau, Jr.
101 Huntington Avenue
Boston, MA 02199-7603
John Hancock Advisers 401(k) Plan International Equity 10,052.856 11.01%
Robert G. Freedman
101 Huntington Avenue
Boston, MA 02199-7603
John Hancock Advisers 401(k) Plan International Equity 9,311.673 10.20%
Edward J. Boudreau, Jr.
101 Huntington Avenue
Boston, MA 02199-7603
</TABLE>
35
<PAGE> 89
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
NUMBER OF SHARES OUTSTANDING
OF BENEFICIAL SHARES OF THE
NAME AND ADDRESS OF SHAREHOLDER FUND INTEREST OWNED FUND
------------------------------- ---- -------------- -----
<S> <C> <C> <C>
Weil Gotshal & Manges Independence 1,105,310.100 8.57%
401(k) Plan FBO The Plan Diversified Core
Attn: Mark A. Vogel Equity II
767 Fifth Avenue
New York, NY 10153-0001
US Trust Co. of New York Independence 888,122.219 6.88%
Trustee Diversified Core
Anjou Pension Trust Equity II
Attn: Anne Clark
770 Broadway, 10th Floor
New York, NY 10003-9522
Saxon & Co. Independence 793,786.917 6.15%
FBO Amsco ERA Independence Diversified Core
A/C#10-01-002-1041481 Equity II
PO Box 7780-1888
Philadelphia, PA 19182
First Trust NA Trustee Independence 649,840.834 5.04%
Opus Commingled Fund Diversified Core
Discretionary Equity II
Attn: Mutual Funds #21738310
PO Box 64010
St Paul, MN 55164-0010
John Hancock Mutual Life Cust. for Independence Balanced 30,515.031 97.16%
Mokrynski Associates 401(k) Plan
Attn: Bill Koch - 5th Floor
101 Huntington Avenue
Boston, MA 02199-7603
</TABLE>
Shareholders of a Fund having beneficial ownership of more than 25% of
the shares of a Fund may be deemed for purposes of the Investment Company Act
of 1940, as amended, to control that Fund.
36
<PAGE> 90
VI. INVESTMENT ADVISORY AND OTHER SERVICES
Each of the Trustees and principal officers affiliated with the Trust
who is also an affiliated person of the Adviser or any Subadviser is named
above, together with the capacity in which such person is affiliated with the
Trust, the Adviser or Subadviser.
The Trust, on behalf of each Fund, has entered into an investment
management contract with John Hancock Advisers, Inc. (the "Adviser"). Under
the respective investment management contract, the Adviser provides each 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.
With respect to Dividend Performers Fund, the Adviser has entered into
a sub-investment management contract with SAMCorp. With respect to
International Equity Fund, the Adviser has entered into a sub-investment
management contract with JHAI. With respect to Fundamental Value Fund, the
Adviser has entered into a sub-investment management contract with NM Capital.
With respect to each Independence Fund, the Adviser has entered into a
sub-investment management contract with IIA. Under each respective sub-
investment management contract, the corresponding Subadviser, subject to the
review of the Trustees and the over-all supervision of the Adviser, is
responsible for managing the investment operations of the corresponding 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 Funds" and "The Funds'
Expenses" in the Prospectuses for a description of certain information
concerning each Fund's investment management contract and the sub-investment
management contracts of Dividend Performers Fund, International Equity Fund,
Fundamental Value Fund and the Independence Funds.
Securities held by the Funds may also be held by other funds or
investment advisory clients for which the Adviser, the Subadvisers or their
respective affiliates provide investment advice. Because of different
investment objectives or other factors, a particular security may be bought for
one or more funds or clients when one or more are selling the same security.
If opportunities for purchase or sale of securities by the Adviser or
Subadviser for a Fund or for other funds or clients for which the Adviser or
Subadvisers renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds or clients in a manner deemed equitable to all of
them. To the extent that transactions on behalf of more than one client of the
Adviser, Subadvisers 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.
No person other than the Adviser and the corresponding Subadviser and
their directors and employees regularly furnishes advice to the Funds with
respect to the desirability of the Funds investing in, purchasing or selling
securities. The Adviser and Subadvisers may from time to time receive
37
<PAGE> 91
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 contracts with the Trust
on behalf of each Fund, the Adviser provides each Fund with office space,
supplies and other facilities required for the business of the Fund. The
Adviser pays the compensation of all officers and employees of the Trust and
Trustees of the Trust affiliated with Adviser, the office expenses of the
Funds, including those of the Trust's Treasurer and Secretary, and other
expenses incurred by the Adviser in connection with the performance of its
duties.
All expenses which are not specifically paid by the Adviser and which
are incurred in the operation of the Funds including fees of Trustees of the
Trust who are not "interested persons," as such term is defined in the 1940 Act
(the "Non-Interested Trustees") and the continuous public offering of the
shares of the Funds are borne by the Funds.
As provided by the investment management contracts, each Fund pays the
Adviser an investment management fee, which is accrued daily and paid monthly
in arrears, equal on an annual basis to a stated percentage of the respective
Fund's average daily net asset value. The Adviser, not any Fund, pays the
subadvisory fees as described in the Prospectuses. See "Organization and
Management of the Funds" in the Prospectuses.
In the event normal operating expenses of a 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 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 a 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 Funds may exclude interest, brokerage commissions and
extraordinary expenses.
Pursuant to each investment management contract and, where applicable,
sub-investment management contract, the Adviser and Subadviser are not liable
to the Funds or their shareholders for any error of judgment or mistake of law
or for any loss suffered by the Funds 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 Adviser or
Subadviser in the performance of their duties or from their reckless disregard
of the obligations and duties under the applicable contract.
The 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 Funds 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 Adviser is
an indirect wholly-owned subsidiary of 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.
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<PAGE> 92
JHAI, located at 34 Dover Street, London, England, W1X 3RA, is a
wholly-owned subsidiary of the Adviser, formed in 1987 to provide international
investment research and advisory services to U.S. institutional clients.
SAMCorp, located at 235 Westlakes Drive, Berwyn, PA 19312, is a wholly-owned
subsidiary of The Berkeley Financial Group. NM Capital, located at 6501
Americas Parkway, Suite 950, Albuquerque, NM 87110, is a wholly-owned
subsidiary of The Berkeley Financial Group. IIA, located at 53 State Street,
Boston, Massachusetts 02109, was organized in 1982, and is a wholly-owned
subsidiary of John Hancock Asset Management, which is in turn a wholly-owned
subsidiary of John Hancock Subsidiaries, Inc., which is in turn a wholly-owned
subsidiary of The Life Company.
Under each investment management contract, each 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 a 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 Adviser. In addition, the 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
Under the subadvisory contract of each Independence Fund, each
Independence Fund may use the name "Independence" or any name derived from or
similar to it only for so long as the sub-investment management contract or any
extension, renewal or amendment thereof remains in effect. If an Independence
Fund's sub-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 IIA. In addition,
IIA or the Life Company may grant the non-exclusive right to use the name
"Independence" or any similar name to any other corporation or entity,
including but not limited to any investment company of which IIA or any
subsidiary or affiliate thereof or any successor to the business of any
subsidiary or affiliate thereof shall be the investment adviser.
Each investment management contract and sub-investment management
contract initially expires in the Spring of 1997 and will continue in effect
from year to year thereafter if approved annually by a vote of a majority of
the Trustees of the Trust who are not interested persons of one of the parties
to the contract, cast in person at a meeting called for the purpose of voting
on such approval, or by either the Trustees or the holders of a majority of the
applicable Fund's outstanding voting securities. Each contract automatically
terminates upon assignment. Each contract may be terminated without penalty on
60 days' notice at the option of either party to the respective contract or by
vote of the holders of a majority of the outstanding voting securities of the
applicable Fund. Each sub-investment management contract terminates
automatically upon the termination of the corresponding investment management
contract.
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<PAGE> 93
VII. NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of a Fund's
shares, the Fund follows the valuation procedures outlined in the Prospectuses
under the caption "Share Price." If a pricing service is unable to provide a
market quotation, quotations will be obtained from a broker. If market
quotations are not readily available for any security held in a Fund's
portfolio or if in the opinion of the Adviser or Subadviser, if applicable, any
quotation or price is not representative of true market values, the fair value
of the security may be determined in good faith pursuant to procedures
established by the Board.
Short-term debt instruments with a remaining maturity of 60 days or
less are valued at amortized cost if the Board determines in good faith that
this cost approximates fair value. Amortized cost involves valuing securities
at the respective Fund's acquisition cost as adjusted for amortization or
premium or accretion of discount rather than at their value based on current
market factors.
The Funds will not price their 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. On any day
an international market is closed and the New York Stock Exchange is open, the
foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which the Funds' NAVs are not calculated.
Consequently, a Fund's portfolio securities may trade and the NAV of the Fund's
shares may be significantly affected on days when a shareholder has no access
to the Fund.
VIII. SPECIAL REDEMPTIONS
Although no Fund would normally do so, each Fund has the right to pay
the redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Board. When the shareholder sells portfolio
securities received in this fashion it would incur a brokerage charge. Any
such securities would be valued for the purposes of making such payment at the
same value as used in determining net asset value. Each Fund has, however,
elected to be governed by Rule 18f-1 under the 1940 Act. Under that rule, each
Fund must redeem its shares for cash except to the extent that the redemption
payments to any one shareholder during any 90-day period would exceed the
lesser of $250,000 or 1% of the Fund's net asset value at the beginning of that
period.
IX. TAX STATUS
Each series of the Trust, including the Funds, is treated as a
separate entity for accounting and tax purposes. It is each Fund's intention
to elect to be treated and to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
each taxable year. As such and by complying with the applicable provisions of
the Code regarding the sources of its income, the timing of its distributions,
and the diversification of its assets, a Fund will not be subject to Federal
income tax on taxable income (including net realized capital gains) which is
distributed to shareholders at least annually.
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Distributions of net investment income (which includes accrued
original issue discount and accrued, recognized market discount) and any net
realized capital gains, as computed for Federal income tax purposes, will be
taxable as described in the Prospectuses whether made in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for Federal income tax purposes in each share so
received equal to the amount of cash they would have received had they taken
the distribution in cash.
If a Fund invests (either directly or through depository receipts such
as ADRs, GDRs or EDRs) in certain non-U.S. corporations that receive at least
75% of their annual gross income from passive sources (such as sources that
produce interest, dividend, rental, royalty or capital gain income) or hold at
least 50% of their assets in such passive sources ("passive foreign investment
companies"), the Fund could be subject to Federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if all income or gain actually
received by the Fund is timely distributed to its shareholders. The Funds
would not be able to pass through to their respective shareholders any credit
or deduction for such a tax. In certain cases, an election may be available
that would ameliorate these adverse tax consequences. Accordingly, the Funds
may limit their investments in such passive foreign investment companies and
will undertake appropriate actions, including the consideration of any
available elections, to limit their tax liability, if any, with respect to such
investments.
Foreign exchange gains and losses realized by a Fund in connection
with certain transactions involving foreign currency- denominated debt
securities, foreign currency forward contracts, foreign currencies, or payables
or receivables denominated in a foreign currency are subject to Section 988 of
the Code, which generally causes such gains and losses to be treated as
ordinary income and losses and may affect the amount, timing and character of
distributions to shareholders. Any such transactions that are not directly
related to a Fund's investment in stock or securities may increase the amount
of gain it is deemed to recognize from the sale of certain investments held for
less than three months, which gain is limited under the Code to less than 30%
of its annual gross income, and may under future Treasury regulations produce
income not among the types of "qualifying income" from which the Fund must
derive at least 90% of its annual gross income.
The amount of net realized capital gains, if any, in any given year
will result from sales of securities or transactions in options or futures
contracts made with a view to the maintenance of a portfolio believed by the
respective Fund's management to be most likely to attain such Fund's investment
objective. Such sales, and any resulting gains or losses, may therefore vary
considerably from year to year. Since, at the time of an investor's purchase
of Fund shares, a portion of the per share net asset value by which the
purchase price is determined may be represented by realized or unrealized
appreciation in a Fund's portfolio or undistributed taxable income of a Fund,
subsequent distributions (or portions thereof) on such shares may be taxable to
such investor even if the net asset value of his shares is, as a result of the
distributions, reduced below his cost for such shares and the distributions (or
portions thereof) in reality represent a return of a portion of the purchase
price.
Upon a redemption of shares (including by exercise of the exchange
privilege), a shareholder will ordinarily realize a taxable gain or loss
depending upon his basis in his shares. 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
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<PAGE> 95
long-term or short-term, depending upon the shareholder's holding period for
the shares. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of, such as
pursuant to the Dividend Reinvestment Plan. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized upon the redemption of shares with a tax holding period of six months
or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain with respect to such
shares.
The Funds reserve the right to retain and reinvest all or any portion
of the excess, as computed for Federal income tax purposes, of net long-term
capital gain over net short-term capital loss in any year. Although each
Fund's present intention is to distribute all net realized capital gains, if
any, the Fund will not in any event distribute net long-term capital gains
realized in any year to the extent that a capital loss is carried forward from
prior years against such gain. To the extent such excess was retained and not
exhausted by the carryforward of prior years' capital losses, it would be
subject to Federal income tax in the hands of the Fund. Each shareholder would
be treated for Federal income tax purposes as if such Fund had distributed to
him on the last day of its taxable year his pro rata share of such excess, and
he had paid his pro rata share of the taxes paid by such 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 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 Fund shares by the difference between his pro
rata share of such excess and his pro rata share of such taxes.
For Federal income tax purposes, each Fund is permitted to carry
forward a net realized capital loss in any year to offset net realized capital
gains of that Fund, if any, during the eight years following the year of the
loss. To the extent subsequent net realized capital gains are offset by such
losses, they would not result in Federal income tax liability to a Fund and, as
noted above, would not be distributed as such to shareholders. Presently,
there are no realized capital loss carryforwards in any of the Funds to offset
against future net realized capital gains.
With respect to any Fund that receives dividends from U.S. domestic
corporations, a portion of its distributions representing such dividend income
is normally eligible for the dividends-received deduction for corporations.
Distributions from other sources, including long-term capital gain
distributions, do not qualify for the dividends-received deduction allowable to
corporations. Corporate shareholders which borrow to acquire or retain Fund
shares will be denied a portion of the dividends- received deduction, and
corporate shareholders will not be eligible for any deduction if they fail to
meet applicable holding period requirements. The entire qualifying dividend,
including the otherwise deductible amount, will be included in determining the
excess (if any) of a corporation's adjusted current earnings over its
alternative minimum taxable income, which may increase a corporate
shareholder's alternative minimum tax liability, if any. Such shareholder's
tax basis in its Fund shares may also be reduced to the extent of any
"extraordinary dividends," as determined under applicable Code provisions.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions is accorded to
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<PAGE> 96
accounts maintained as qualified retirement plans. Shareholders should consult
their tax advisers for more information.
Certain entities otherwise exempt from federal income taxes (such as
pension plans, Individual Retirement Accounts and other exempt organizations)
are nevertheless taxable under Section 511 of the Code on unrelated business
taxable income ("UBTI"). UBTI is income from an unrelated trade or business
(as defined in Section 513 of the Code) regularly carried on. A tax-exempt
entity is subject to tax on UBTI in any taxable year at corporate tax rates or,
in the case of certain trusts, at the rates applicable to trusts. Tax-exempt
entities with gross income, included in computing UBTI, of $1,000 or more must
report UBTI, if any, on Form 990-T. Dividends, interest and capital gain
realized on the sale of property held for investment are generally excluded
from UBTI. However, income from such sources will be included in UBTI if
"acquisition indebtedness" exists with respect to the property generating such
income. Acquisition indebtedness ordinarily includes the unpaid amount of
indebtedness incurred to acquire or to continue to hold the property. Based on
these rules, a tax-exempt investor holding shares in the Funds for investment
will not generally recognize unrelated business taxable income from such
investment in the Funds unless the tax-exempt investor incurred indebtedness to
acquire or to continue to hold Fund shares and such indebtedness remains unpaid
during the relevant period(s).
Each Fund that invests in securities of foreign issuers may be subject
to withholding and other taxes imposed by foreign countries with respect to its
investments in foreign securities. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes. With respect to each
Fund, other than International Equity Fund and Global Bond Fund, because more
than 50% of the Fund's total assets at the close of any taxable year will not
consist of stock or securities of foreign corporations, the Funds will not be
able to pass such taxes through to their shareholders, who in consequence will
not be able to include any portion of such taxes in their incomes and will not
be entitled to tax credits or deductions with respect to such taxes. However,
such Funds will be entitled to deduct such taxes in determining the amounts
they must distribute in order to avoid Federal income tax. If more than 50% of
the value of the total assets of International Equity Fund or Global Bond Fund
at the close of any taxable year consists of stock or securities of foreign
corporations, the applicable Fund may file an election with the Internal
Revenue Service pursuant to which shareholders of the Fund will be required to
(i) include in ordinary gross income (in addition to taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Fund even
though not actually received, and (ii) treat such respective pro rata portions
as foreign income taxes paid by them.
If the election is made, shareholders of the applicable Fund may then
deduct such pro rata portions of foreign income taxes in computing their
taxable incomes, or, alternatively, use them as foreign tax credits, subject to
applicable limitations, against their U.S. federal income taxes. Shareholders
who do not itemize deductions for Federal income tax purposes will not,
however, be able to deduct their pro rata portion of foreign taxes paid by
International Equity Fund or Global Bond Fund, although such shareholders will
be required to include their shares of such taxes in gross income.
Shareholders who claim a foreign tax credit for such foreign taxes may be
required to treat a portion of dividends received from the relevant Fund as a
separate category of income for purposes of computing the limitations on the
foreign tax credit. Tax-exempt shareholders will ordinarily not benefit from
this election. Each year that International Equity Fund or Global Bond Fund
files the election described
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above, its shareholders will be notified of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the Fund and (ii)
the portion of Fund dividends which represents income from each foreign
country.
Each Fund that invests in zero coupon securities or certain PIK or
increasing rate securities and any other securities with original issue
discount (or with market discount if the Fund elects to include market discount
in income currently) accrues income on such securities prior to the receipt of
the corresponding cash payments. Each 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, a 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.
Dividend Performers Fund, Active Bond Fund and Global Bond Fund may
invest in debt obligations that are in the lower rating categories or are
unrated, including debt obligations of issuers not currently paying interest as
well as issuers who are in default. Investments in debt obligations that are
at risk of or in default present special tax issues for the Funds. Tax rules
are not entirely clear about issues such as when the Funds may cease to accrue
interest, original issue discount, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments
received on obligations in default should be allocated between principal and
income, and whether exchanges of debt obligations in a workout context are
taxable. These and other issues will be addressed by Dividend Performers Fund,
Active Bond Fund and Global Bond Fund, in the event they invest in such
securities, in order to ensure that they distribute sufficient income to
preserve their status as regulated investment companies and to avoid becoming
subject to Federal income or excise tax.
With respect to each Fund that may enter into forwards, futures and
options transactions, limitations imposed by the Code on regulated investment
companies may restrict the Funds' ability to enter into such transactions. The
options and futures transactions undertaken by a Fund may cause the Fund to
recognize gains or losses from marking to market even though its positions have
not been sold or terminated and affect their character as long-term or
short-term and timing of some capital gains and losses realized by the Fund.
Also, a Fund's losses on its transactions involving options and futures
contracts and/or offsetting portfolio positions may be deferred rather than
being taken into account currently in calculating the Fund's taxable income. A
Fund's foreign currency forward contracts may also be subject to certain of
these rules in addition to the provisions of Section 988 of the Code, described
above. These transactions may thereafter affect the amount, timing and
character of the Funds' distributions to shareholders. The Funds will take
into account the special tax rules applicable to options, futures and forward
transactions in order to minimize any potential adverse tax consequences.
Each Fund will be subject to a four percent nondeductible Federal
excise tax on certain amounts not distributed (and not treated as having been
distributed) on a timely basis in accordance with annual minimum distribution
requirements. Each Fund intends, under normal circumstances, to avoid
liability for such tax by satisfying such distribution requirements.
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)
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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 exchange or redemption
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 the Fund in particular circumstances.
Foreign investors not engaged in a U.S. trade or business with which
their Fund investment is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above, including a
possible 30% U.S. withholding tax (or lower treaty rate) on dividends
representing ordinary income, and should consult their tax advisers regarding
such treatment and the application of foreign taxes to an investment in the
Funds.
The Funds are not subject to Massachusetts corporate excise or
franchise taxes. Provided that the Funds qualify as regulated investment
companies under the Code, they will also not be required to pay any
Massachusetts income tax.
X. DESCRIPTION OF THE TRUST'S SHARES
The Trustees of the Trust are responsible for the management and
supervision of the Funds. The Declaration of Trust, dated October 31, 1994, as
amended from time to time, permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest of the Funds, without par
value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this SAI, the Trustees have
authorized shares of eleven series. Additional series may be added in the
future. The Declaration of Trust also authorizes the Trustees to classify and
reclassify the shares of the Funds, or any other series of the Trust, into one
or more classes. As of the date of this SAI, the Trustees have not authorized
the issuance of additional classes of shares.
Each share of a Fund represents an equal proportionate interest in the
assets belonging to that Fund. When issued, shares are fully paid and
nonassessable except as provided in the Prospectuses under the caption
"Organization and Management of the Funds." In the event of liquidation of a
Fund, shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to such shareholders. Shares of the Trust are
freely transferable and have no preemptive, subscription or conversion rights.
In accordance with the provisions of the Declaration of Trust, the
Trustees have initially determined that shares entitle their holders to one
vote per share on any matter on which such shares are entitled to vote. The
Trustees may determine in the future, without the vote or consent of
shareholders, that each dollar of net asset value (number of shares owned times
net asset value per share) will be entitled to one vote on any matter on which
such shares are entitled to vote.
Unless otherwise required by the 1940 Act or the Declaration of Trust,
the Trust has no intention of holding annual meetings of shareholders. Trust
shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
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call a meeting for such purpose when requested to do so in writing by the
record holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business
trust could, under certain circumstances, be held personally liable for acts or
obligations of the trust. However, the Trust's Declaration of Trust contains
an express disclaimer of shareholder liability for acts, obligations or affairs
of the Trust. The Declaration of Trust also provides for indemnification out
of the Trust's assets for all losses and expenses of any shareholder held
personally liable by reason of being or having been a shareholder. The
Declaration of Trust also provides that no series of the Trust shall be liable
for the liabilities of any other series. Liability is therefore limited to
circumstances in which a Fund itself would be unable to meet its obligations,
and the possibility of this occurrence is remote.
XI. CALCULATION OF PERFORMANCE
YIELD
-----
A Fund's yield is computed by dividing its net investment income per
share determined for a 30-day period by the maximum offering price per share on
the last day of the period, according to the following standard formula:
6
YIELD = 2 [ (a-b +1) -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).
TOTAL RETURN
------------
A Fund's total return is computed by finding the average annual
compounded rate of return over the indicated period that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
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______
T = \n/ ERV/P - 1
Where:
P = a hypothetical initial investment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment
made at the beginning of the indicated period.
This calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period.
In addition to average annual total returns, the Funds may quote
unaveraged or cumulative total returns reflecting the 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.
From time to time, in reports and promotional literature, a Fund's
total return will be ranked or compared to indices of mutual funds and bank
deposit vehicles or to indices that classify publicly traded companies. Such
indices may include Lipper Analytical Services, Inc.'s "Lipper-Mutual
Performance Analysis," a monthly publication which tracks net assets and total
return on equity mutual funds in the United States, Frank Russell, Callan
Associates, Wilshire Associates and SEI.
Performance rankings and ratings reported periodically in national
financial publications including, but not limited to, Money magazine, Forbes,
Business Week, The Wall Street Journal, Micropal, Inc., Morningstar, Stanger's,
Barron's, Pensions & Investments, and Institutional Investor, will also be
utilized.
The performance of the Funds is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of any
Fund for any period in the future. The performance of a 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 a
Fund's performance.
XII. BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities of
the Funds are made by officers of the Trust pursuant to recommendations made by
an investment policy committee of the
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Adviser, which consists of officers and directors of the Adviser, corresponding
Subadviser (if applicable), officers and Trustees who are interested persons of
the Trust. Orders for purchases and sales of securities are placed in a
manner, which, in the opinion of the officers of the Trust, will offer the best
price and market for the execution of each such transaction. Purchases from
underwriters of portfolio securities may include a commission or commissions
paid by the issuer and transactions with dealers serving as market makers
reflect a "spread." Debt securities are generally traded on a net basis
through dealers acting for their own account as principals and not as brokers;
no brokerage commissions are payable on such transactions.
Each 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. The policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing
primary policy, the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and such other policies as the Trustees may determine,
the Adviser may consider sales of shares of the Funds as a factor in the
selection of broker-dealers to execute a Fund's portfolio transactions.
To the extent consistent with the foregoing, each Fund will be
governed in the selection of brokers and dealers, and the negotiation of
brokerage commission rates and dealer spreads, by the reliability and quality
of the services, including primarily the availability and value of research
information and to a lesser extent statistical assistance furnished to the
Adviser and corresponding Subadviser (if applicable) of the Funds. It is not
possible to place a dollar value on information and services to be received
from brokers and dealers, since it is only supplementary to the research
efforts of the Adviser and corresponding Subadviser (if applicable). The
receipt of research information is not expected to reduce significantly the
expenses of the Adviser and Subadviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may
result in research information and statistical assistance beneficial to the
Funds. Similarly, research information and assistance provided to a Subadviser
by brokers and dealers may benefit other advisory clients or affiliates of such
Subadviser. The Funds will not make any commitment to allocate portfolio
transactions upon any prescribed basis. While the Adviser, in connection with
the corresponding Subadviser (if applicable), will be primarily responsible for
the allocation of the Funds' brokerage business, the policies and practices of
the Adviser in this regard must be consistent with the foregoing and will, at
all times, be subject to review by the Trustees.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
each Fund may pay to a broker which provides brokerage and research services to
the Fund an amount of disclosed commission in excess of the commission which
another broker would have charged for effecting that transaction. This
practice is subject to a good faith determination by the Trustees that such
price is reasonable in light of the services provided and to such policies as
the Trustees may adopt from time to time.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Freedom Securities Corporation and its
subsidiaries, two of which, Tucker Anthony Incorporated and Sutro & Company,
Inc., are broker-dealers. In addition, John Hancock Distributors, Inc., an
indirect wholly-owned subsidiary of the Life Company, is a broker-dealer
(together with Tucker
48
<PAGE> 102
Anthony Incorporated and Sutro & Company, "Affiliated Brokers"). Pursuant to
procedures adopted by the Trustees consistent with the above policy of
obtaining best net results, each Fund may execute portfolio transactions with
or through the Affiliated Brokers.
Any of the Affiliated Brokers may act as broker for the Funds on
exchange transactions, subject, however, to the general policy of the Funds 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 a Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers except for accounts for which
the Affiliated Broker acts as clearing broker 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 Funds, the Adviser, the corresponding Subadviser (if
applicable) or the Affiliated Broker. Because the Adviser, which is affiliated
with the Affiliated Brokers, and the corresponding Subadviser (if applicable),
have, as investment advisers to the Funds, 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
Broker as a basis for negotiating commissions at a rate higher than that
determined in accordance with the above criteria. The Funds will not effect
principal transactions with Affiliated Brokers.
Other investment advisory clients advised by the Adviser may also
invest in the same securities as the Funds. When these clients buy or sell the
same securities at substantially the same time, the Adviser may average the
transactions as to price and allocate the amount of available investments in a
manner which the Adviser believes to be equitable to each client, including the
Funds. In some instances, this investment procedure may adversely affect the
price paid or received by a Fund or the size of the position obtainable for it.
On the other hand, to the extent permitted by law, the Adviser may aggregate
the securities to be sold or purchased for the Funds with those to be sold or
purchased for other clients managed by it in order to obtain best execution.
XIII. TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9277, Boston, MA
02205-9277, a wholly-owned indirect subsidiary of the Life Company is the
transfer and dividend paying agent for each Fund. Each Fund pays Investor
Services an annual fee accrued daily of 0.05% of the its average daily net
assets, plus certain out-of-pocket expenses.
XIV. CUSTODY OF PORTFOLIO
Portfolio securities of International Equity Fund and Global Bond Fund
are held pursuant to a Master Custodian Agreement, as amended, between the
Adviser and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110. Portfolio securities of the other Funds are held pursuant
to a Master Custodian Agreement, as amended, between the Adviser and Investors
Bank & Trust Company, 24 Federal Street, Boston, Massachusetts 02205-9116.
Under the Master
49
<PAGE> 103
Custodian Agreements, Investors Bank & Trust Company and State Street Bank and
Trust Company perform custody, portfolio and fund accounting services for their
respective Funds.
XV. INDEPENDENT AUDITORS
The independent accountants of the John Hancock Series Funds are
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts 02110. The
independent accountants of the Independence Funds are Arthur Andersen LLP, One
International Place, Boston, Massachusetts 02110-2640. Arthur Andersen LLP and
Deloitte & Touche LLP audit and render opinions on their respective Funds'
annual financial statements and review their respective Funds' annual Federal
income tax returns.
50
<PAGE> 104
APPENDIX A
----------
DESCRIPTION OF SECURITIES RATINGS(1)
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
----------------------------------
(1) The ratings described here are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise these ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
those which would be given to these securities on the date of a Fund's fiscal
year-end.
A1
<PAGE> 105
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
The ratings described here are believed to be the most recent ratings available
at the date of this SAI for the securities listed. Ratings are generally given
to securities at the time of issuance. While the rating agencies may from time
to time revise these ratings, they undertake no obligation to do so, and the
ratings indicated do not necessarily represent those which would be given to
these securities on the date of a Fund's fiscal year-end.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or
companies that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is
not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
COMMERCIAL PAPER
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.
A2
<PAGE> 106
Issuers rated PRIME-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-I or P-1
repayment ability will often be evidenced by the following characteristics:
_ Leading market positions in well established industries.
_ High rates of return on funds employed.
_ Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
_ Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
_ Well established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2
Issuers (or supporting institutions) rated PRIME-2 (P-2) have a strong ability
for repayment of senior short-term obligations. This will normally be
evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3
Issuers (or supporting institutions) rated PRIME-3 (P-3) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
INVESTMENT GRADE
AAA: Debt rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A3
<PAGE> 107
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
A4
<PAGE> 108
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus of minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "P" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
L: The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit collateral is
insured by the Federal Saving & Loan Insurance Corp. or the Federal Deposit
Insurance Corp. and interest is adequately collateralized. In the case of
certificates of deposit the letter "L" indicates that the deposit, combined
with other deposits, being held in the same right and capacity will be honored
for principal and accrued pre-default interest up to the federal insurance
limits within 30 days after closing of the insured institution or, in the event
that the deposit is assumed by a successor insured institution, upon maturity.
NR: NR indicates no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER
Standard & Poor's describes its three highest ratings for commercial paper as
follows:
A-1. This desigantion indicated that the degree of safety regarding timely
payment is very strong.
A-2. Capacity for timely payment on issues with this desigantion is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.
A-3. Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
********
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. A Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by
a rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
A5
<PAGE> 109
APPENDIX B
----------
ECONOMIC SECTORS IN WHICH MULTI-SECTOR GROWTH FUND MAY INVEST
As more fully described in the John Hancock Series Funds Prospectus,
Multi-Sector Growth Fund seeks to achieve its investment objective by varying
the weight in of its portfolio among the following sixteen economic sectors:
1. AUTOMOTIVE AND HOUSING SECTOR: companies engaged in the design, production
and sale of automobiles, automobile parts, mobile homes and related products,
and in the design, construction, renovation and refurbishing of residential
dwellings. The value of automobile industry securities is affected by foreign
competition, consumer confidence, consumer debt and installment loan rates.
The housing construction industry is affected by the level of consumer
confidence, consumer debt, mortgage rates and the inflation outlook.
2. CONSUMER GOODS AND SERVICES SECTOR: companies engaged in providing
consumer goods and services such as: the design, processing, production and
storage of packaged, canned, bottled and frozen foods and beverages; and the
design, production and sale of home furnishings, appliances, clothing,
accessories, cosmetics and perfumes. Certain such companies are subject to
government regulation affecting the permissibility of using various food
additives and production methods, which regulations could affect company
profitability. Also, the success of food- and fashion-related products may be
strongly affected by fads, marketing campaigns and other factors affecting
supply and demand.
3. DEFENSE AND AEROSPACE SECTOR: companies engaged in the research,
manufacture or sale of products or services related to the defense and
aerospace industries, such as: air transport; data processing or
computer-related services; communications systems; military weapons and
transportation; general aviation equipment, missiles, space launch vehicles and
spacecraft; units for guidance, propulsion and control of flight vehicles; and
airborne and ground-based equipment essential to the test, operation and
maintenance of flight vehicles. Since such companies rely largely on U.S. (and
other) governmental demand for their products and services, their financial
conditions are heavily influenced by Federal (and other governmental) defense
spending policies.
4. ENERGY SECTOR: companies in the energy field, including oil, gas,
electricity and coal as well as nuclear, geothermal, oil shale and solar
sources of energy. The business activities of companies comprising this sector
may include: production, generation, transmission, marketing, control or
measurement of energy or energy fuels; provision of component parts or services
to companies engaged in such activities; energy research or experimentation;
environmental activities related to the solution of energy problems; and
activities resulting from technological advances or research discoveries in the
energy field. The value of such companies' securities varies based on the
price and supply of energy fuels and may be affected by events relating to
international politics, energy conservation, the success of exploration
projects, and the tax and other regulatory policies of various governments.
B1
<PAGE> 110
5. FINANCIAL SERVICES SECTOR: companies providing financial services to
consumers and industry, such as: commercial banks and thrift institutions;
consumer and industrial finance companies; securities brokerage companies;
leasing companies; and firms in all segments of the insurance field (such as
multiline, property and casualty, and life insurance). These kinds of
companies are subject to extensive governmental regulations, some of which
regulations are currently being studied by Congress. The profitability of
these groups may fluctuate significantly as a result of volatile interest rates
and general economic conditions.
6. HEALTH CARE SECTOR: companies engaged in the design, manufacture or sale
of products or services used in connection with health care or medicine, such
as: pharmaceutical companies; firms that design, manufacture, sell or supply
medical, dental and optical products, hardware or services; companies involved
in biotechnology, medical diagnostic and biochemical research and development;
and companies involved in the operation of health care facilities. Many of
these companies are subject to government regulations, which could affect the
price and availability of their products and services. Also, products and
services in this sector could quickly become obsolete.
7. HEAVY INDUSTRY SECTOR: companies engaged in the research, development,
manufacture or marketing of products, processes or services related to the
agriculture, chemicals, containers, forest products, non-ferrous metals, steel
and pollution control industries, such as: synthetic and natural materials,
for example, chemicals, plastics, fertilizers, gases, fibers, flavorings and
fragrances; paper, wood products; steel and cement. Certain companies in this
sector are subject to regulation by state and Federal authorities, which could
require alteration or cessation of production of a product, payment of fines or
cleaning of a disposal site. In addition, since some of the materials and
processes used by these companies involve hazardous components, there are risks
associated with their production, handling and disposal. The risk of product
obsolescence is also present.
8. LEISURE AND ENTERTAINMENT SECTOR: companies engaged in the design,
production or distribution of goods or services in the leisure industry, such
as: television and radio broadcast or manufacture; motion picture and
photography; recordings and musical instruments; publishing; sporting goods,
camping and recreational equipment; sports arenas; toys and games; amusement
and theme parks; travel-related services and airlines; hotels and motels; fast
food and other restaurants; and gaming casinos. Many products produced by
companies in this sector - for example, video and electronic games - may
quickly become obsolete.
9. MACHINERY AND EQUIPMENT SECTOR: companies engaged in the research,
development or manufacture of products, processes or services relating to
electrical equipment, machinery, pollution control and construction services,
such as: transformers, motors, turbines, hand tools, earth-moving equipment
and waste disposal services. The profitability of most companies in this group
may fluctuate significantly in response to capital spending and general
economic conditions. Since some of the materials and processes used by these
companies involve hazardous components, there are risks associated with their
production, handling and disposal. The risk of product obsolescence is also
present.
10. PRECIOUS METALS SECTOR: companies engaged in exploration, mining,
processing or dealing in gold, silver, platinum, diamonds or other precious
metals or companies which, in turn, invest in companies
B2
<PAGE> 111
engaged in these activities. A significant portion of this sector may be
represented by securities of foreign companies, and investors should understand
the special risks related to such an investment emphasis. Also, such
securities depend heavily on prices in metals, some of which may experience
extreme price volatility based on international economic and political
developments.
11. RETAILING SECTOR: companies engaged in the retail distribution of home
furnishings, food products, clothing, pharmaceuticals, leisure products and
other consumer goods, such as: department stores; supermarkets; and retail
chains specializing in particular items such as shoes, toys or pharmaceuticals.
The value of securities in this sector will fluctuate based on consumer
spending patterns, which depend on inflation and interest rates, level of
consumer debt and seasonal shopping habits. The success or failure of a
particular company in this highly competitive sector will depend on such
company's ability to predict rapidly changing consumer tastes.
12. TECHNOLOGY SECTOR: companies which are expected to have or develop
products, processes or services which will provide or will benefit
significantly from technological advances and improvements or future automation
trends in the office and factory, such as: semiconductors; computers and
peripheral equipment; scientific instruments; computer software;
telecommunications; and electronic components, instruments and systems. Such
companies are sensitive to foreign competition and import tariffs. Also, many
products produced by companies in this sector may quickly become obsolete.
13. TRANSPORTATION SECTOR: companies involved in the provision of
transportation of people and products, such as airlines, railroads and trucking
firms. Revenues of companies in this sector will be affected by fluctuations
in fuel prices resulting from domestic and international events, and government
regulation of fares.
14. UTILITIES SECTOR: companies in the public utilities industry and
companies deriving a substantial majority of their revenues through supplying
public utilities such as: companies engaged in the manufacture, production,
generation, transmission and sale of gas and electric energy; and companies
engaged in the communications field, including telephone, telegraph, satellite,
microwave and the provision of other communications facilities to the public.
The gas and electric public utilities industries are subject to various
uncertainties, including the outcome of political issues concerning the
environment, price of fuel for electric generation, availability of natural
gas, and risks associated with the construction and operation of nuclear power
facilities.
15. FOREIGN SECTOR: companies whose primary business activity takes place
outside of the Untied States. The securities of foreign companies would be
heavily influenced by the strength of national economies, inflation levels and
the value of the U.S. dollar versus foreign currencies. Investments in the
Foreign Sector will be subject to certain risks not generally associated with
domestic investments. Such investments may be favorably or unfavorably
affected by changes in interest rates, currency exchange rates and exchange
control regulations, and costs may be incurred in connection with conversions
between currencies. In addition, investments in foreign countries could be
affected by less favorable tax provisions, less publicly available information,
less securities regulations, political or social instability, limitations on
the removal of funds or other assets of the Fund, expropriation of assets,
diplomatic developments adverse to U.S. investments and difficulties in
enforcing contractual obligations.
B3
<PAGE> 112
16. ENVIRONMENTAL SECTOR: companies that are engaged in the research,
development, manufacture or distribution of products, processes or services
related to pollution control, waste management or pollution/waste remediation,
or that provide alternative energies such as natural gas, water utilities and
clean renewable fuels such as solar, geothermal and hydropower, various
technologies that make coal burning cleaner, notably scrubbers, emission
monitoring and control equipment, biodegradable products and materials, or new
biotechnological products favoring the environment such as non-chemical
pesticides. These companies may have broadly-diversified business segments or
lines of business, only one or several of which are in the environmental
sector.
B4
<PAGE> 113
John Hancock Funds
INDEPENDENCE DIVERSIFIED
CORE EQUITY FUND II
June 30, 1995
<PAGE> 114
John Hancock Funds - John Hancock Independence Diversified Core Equity Fund II
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $82,883,935) $83,693,375
Short-term investments (cost - $1,519,485) 1,519,485
Corporate savings account 120,098
-----------
85,332,958
Receivable for shares sold 42,214
Dividends receivable 113,461
Foreign tax receivable 887
Receivable from John Hancock Advisers, Inc. - Note B 27,618
Deferred organization expenses - Note A 37,880
-----------
Total Assets 85,555,018
-------------------------------------------------
LIABILITIES:
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 58,684
Accounts payable and accrued expenses 29,730
-----------
Total Liabilities 88,414
-------------------------------------------------
NET ASSETS:
Capital paid-in 84,597,361
Accumulated net realized gain on investments 11,947
Net unrealized appreciation of investments 809,440
Undistributed net investment income 47,856
-----------
Net Assets $85,466,604
=================================================
NET ASSET VALUE PER SHARE:
(based on 9,196,707
shares of beneficial interest outstanding - unlimited number
of shares authorized with no par value) $ 9.29
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 115
John Hancock Funds - John Hancock Independence Diversified Core Equity Fund II
STATEMENT OF OPERATIONS
For the period March 10, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
<TABLE>
--------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividend $136,364
Interest 13,271
--------
149,635
EXPENSES:
Investment management fee - Note B 16,682
Custodian fee 15,094
Registration and filing fees 6,634
Printing 3,140
Organization expense - Note A 2,498
Auditing fee 2,388
Transfer agent fee 1,624
Trustees' fees 1,369
Miscellaneous 589
Legal fees 516
--------
Total Expenses 50,534
Less expenses reimbursable by
John Hancock Advisers, Inc. - Note B (27,618)
--------
Net Expenses 22,916
--------
Net Investment Income 126,719
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 11,947
Change in net unrealized appreciation/
depreciation of investments 809,440
--------
Net Realized and Unrealized Gain
on Investments 821,387
--------
Net Increase in Net Assets
Resulting from Operations $948,106
=============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 116
John Hancock Funds - John Hancock Independence Diversified Core Equity Fund II
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
FOR THE PERIOD
MARCH 10, 1995
(COMMENCEMENT OF
OPERATIONS) TO
JUNE 30, 1995
(UNAUDITED)
-----------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 126,719
Net realized gain on investments 11,947
Change in net unrealized appreciation/depreciation of investments 809,440
------------
Net Increase in Net Assets from Operations 948,106
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.0176 per share) (78,863)
------------
FROM FUND SHARE TRANSACTIONS - NET* 84,597,361
NET ASSETS:
Beginning of period --
------------
End of period (including undistributed net investment income of $47,856) $ 85,466,604
============
</TABLE>
*ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 10, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Shares sold 9,222,587 $ 84,837,970
Shares issued to shareholders in reinvestment of distributions 8,426 78,863
------------------------------
9,231,013 84,916,833
Less shares repurchased (34,306) (319,472)
------------------------------
Net increase 9,196,707 $ 84,597,361
==============================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 117
John Hancock Funds - John Hancock Independence Diversified Core Equity Fund II
The Fund's Financial Highlights
The following table includes selected data for a share outstanding throughout
the period, total investment return, key ratios and supplemental data.
<TABLE>
<CAPTION>
FOR THE PERIOD MARCH 10, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
------------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 (b)
--------------
Net Investment Income 0.03
Net Realized and Unrealized Gain on Investments 0.78
--------------
Total from Investment Operations 0.81
Less Distributions:
Dividends from Net Investment Income (0.02)
--------------
Net Asset Value, End of Period $ 9.29
==============
Total Investment Return at Net Asset Value (d) 9.50% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $85,467
Ratio of Expenses to Average Net Assets 0.70% *
Ratio of Adjusted Expenses to Average Net Assets (a) (e) 1.54% *
Ratio of Net Investment Income to Average Net Assets 3.87% *
Ratio of Adjusted Net Investment Income to Average Net Assets (a) (e) 3.03% *
Portfolio Turnover Rate 2%
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets is expected to increase as the net assets of the Fund grow.
SEE NOTES TO FINANCIAL HIGHLIGHTS
<PAGE> 118
John Hancock Funds - Independence Diversified Core Equity Fund II
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS
AEROSPACE(1.29%)
Lockheed Martin Corp. 7,200 454,500
Raytheon Co. 8,300 644,287
---------
1,098,787
---------
AUTOMOBILE/TRUCK(1.22%)
Chrysler Corp. 200 9,575
Dana Corp. 18,700 535,287
Eaton Corp. 8,500 494,063
---------
1,038,925
---------
BANKS(5.84%)
Barnett Banks, Inc. 6,800 348,500
Chemical Banking Corp. 15,800 746,550
Citicorp 24,200 1,400,575
First Interstate Bancorp 8,200 658,050
First Union Corp. 7,100 321,275
Fleet Financial Group, Inc. 9,000 334,125
NationsBank Corp. 22,000 1,179,750
---------
4,988,825
---------
BEVERAGES(3.17%)
Anheuser-Busch Cos., Inc. 4,900 278,687
Coca-Cola Co. (The) 13,700 873,375
PepsiCo, Inc 34,200 1,560,375
---------
2,712,437
---------
BIOMEDICS/GENETICS(0.65%)
Amgen, Inc.** 6,900 555,019
---------
BROADCASTING(1.31%)
Walt Disney Co., (The) 20,100 1,118,063
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 119
John Hancock Funds - Independence Diversified Core Equity Fund II
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- -----
<S> <C> <C>
BUILDING PRODUCTS(2.38%)
Home Depot, Inc. (The) 21,100 857,187
Weyerhauser Co. 24,900 1,173,413
---------
2,030,600
---------
CHEMICALS(3.26%)
Eastman Chemical Co. 5,600 333,200
Hercules, Inc. 13,300 648,375
Monsanto Co. 3,500 315,437
Morton International, Inc. 21,600 631,800
PPG Industries, Inc. 19,900 855,700
---------
2,784,512
---------
COMPUTERS(3.89%)
Cabletron Systems, Inc.** 200 10,650
Ceridian Corp.** 10,800 398,250
International Business Machines Corp. 25,300 2,428,800
Microsoft Corp.** 5,200 469,950
Tandem Computers, Inc.** 1,100 17,738
---------
3,325,388
---------
COSMETICS & TOILETRIES(0.30%)
Avon Products, Inc. 3,900 261,300
---------
DIVERSIFIED OPERATIONS(9.87%)
AlliedSignal, Inc. 300 13,350
Dial Corp. 8,000 198,000
Du Pont (E.I.) De Nemours & Co. 37,300 2,564,375
General Electric Co. 61,000 3,438,875
Tenneco Inc. 28,100 1,292,600
Textron Inc. 7,400 430,125
Whitman Corp. 25,600 496,000
---------
8,433,325
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 120
John Hancock Funds - Independence Diversified Core Equity Fund II
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- -----
<S> <C> <C>
DRUGS (4.20%)
Abbott Laboratories 600 24,300
Bristol-Myers Squibb Co. 27,100 1,846,187
Merck & Co., Inc. 22,800 1,117,200
Schering-Plough Corp. 10,800 476,550
Warner-Lambert Co. 1,500 129,563
---------
3,593,800
---------
ELECTRONICS (6.74%)
Hewlett-Packard Co. 9,900 737,550
Intel Corp. 33,300 2,108,306
Lam Research Corp.** 10,000 640,000
Parker-Hannifin Corp. 43,050 1,560,563
Teradyne, Inc.** 7,500 490,313
Texas Instruments, Inc. 1,700 227,588
---------
5,764,320
---------
FINANCE (3.38%)
American Express Co. 39,600 1,390,950
Dean Witter Discover & Co. 25,100 1,179,700
Equifax, Inc. 3,100 103,463
MBNA Corp. 300 10,125
Ryder System, Inc. 8,500 202,937
---------
2,887,175
---------
FOODS (2.53%)
Archer Daniels Midland Co. 28,300 527,087
Sara Lee Corp. 26,700 760,950
Unilever N.V 6,700 871,838
---------
2,159,875
---------
HEALTHCARE (1.01%)
Columbia/HCA Healthcare Corp. 15,000 648,750
Health Management Associates, Inc. (Class A)** 7,400 216,450
---------
865,200
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 121
John Hancock Funds - Independence Diversified Core Equity Fund II
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- -----
<S> <C> <C>
INSURANCE (3.88%)
Aetna Life & Casualty Co. 700 44,012
Allstate Corp. 24,800 734,700
Cigna Corp. 9,600 745,200
Lincoln National Corp. 27,500 1,203,125
Marsh & McLennan Cos., Inc. 4,800 389,400
St. Paul Cos., Inc. 4,000 197,000
---------
3,313,437
---------
MACHINERY (0.74%)
Millipore Corp. 9,400 634,500
---------
MEDICAL/DENTAL (4.04%)
Baxter International, Inc. 17,100 622,013
Johnson & Johnson 24,400 1,650,050
Medtronic Inc. 7,400 570,725
Pfizer, Inc. 6,600 609,675
---------
3,452,463
---------
METALS (1.60%)
Phelps Dodge Corp. 23,200 1,368,800
---------
OFFICE EQUIPMENT & SUPPLIES (1.49%)
Xerox Corp. 10,900 1,278,025
---------
OIL & GAS (9.05%)
Amoco Corp. 23,100 1,539,037
Anadarko Petroleum Corp. 13,700 590,813
Chevron Corp. 11,800 550,175
Exxon Corp. 11,000 776,875
Imperial Oil Ltd 19,500 723,937
Mobil Corp. 18,000 1,728,000
Panhandle Eastern Corp. 21,500 524,063
Phillips Petroleum Co. 39,000 1,301,625
---------
7,734,525
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 122
John Hancock Funds - Independence Diversified Core Equity Fund II
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- -----
<S> <C> <C>
PAPER (2.79%)
Georgia Pacific Corp. 4,900 425,075
International Paper Co. 800 68,600
Mead Corp. 20,500 1,217,187
Willamette Industries, Inc. 12,100 671,550
---------
2,382,412
---------
PHOTO EQUIPMENT (0.79%)
Eastman Kodak Co. 11,100 672,937
---------
RETAIL (5.10%)
Albertson's Inc. 26,900 800,275
Gap, Inc. (The) 2,800 97,650
Price/Costco Inc.** 36,300 589,875
Sears, Roebuck & Co. 34,100 2,041,738
Toys "R" Us, Inc.** 400 11,700
Wal-Mart Stores, Inc. 30,700 821,225
---------
4,362,463
---------
RUBBER (0.84%)
Goodyear Tire & Rubber Co. 17,500 721,875
---------
SOAP & CLEANING PREPARATIONS (0.39%)
Proctor & Gamble Co. (The) 4,700 337,813
---------
STEEL (0.48%)
British Steel, PLC, American Depositary Receipt 14,800 410,700
---------
TELECOMMUNICATIONS (4.12%)
AT & T Corp. 49,900 2,650,937
SBC Communications, Inc. 18,200 866,775
---------
3,517,712
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 123
John Hancock Funds - Independence Diversified Core Equity Fund II
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- -----
<S> <C> <C>
TOBACCO (3.47%)
Philip Morris Cos., Inc. 28,900 2,149,437
UST, Inc. 27,400 815,150
----------
2,964,587
----------
TRANSPORTATION (0.75%)
Conrail, Inc. 3,300 183,563
Delta Air Lines, Inc. 100 7,375
UAL Corp.** 3,200 448,800
----------
639,738
----------
UTILITIES (7.35%)
Ameritech Corp. 17,200 756,800
GTE Corp. 53,200 1,815,450
Pacific Gas & Electric Co. 74,500 2,160,500
Peco Energy Co. 9,500 262,437
Unicom Corp. 48,400 1,288,650
----------
6,283,837
----------
TOTAL COMMON STOCKS
(Cost $82,883,935) (97.92%) 83,693,375
====== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 124
John Hancock Funds - Independence Diversified Core Equity Fund II
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
SHORT-TERM INVESTMENTS RATE (000'S OMITTED) VALUE
---------------------- ---- --------------- -----
<S> <C> <C> <C>
SHORT-TERM NOTES (1.78%)
Federal Home Loan Bank, 07-03-95 6.10% 1,520 $1,519,485
-----------
CORPORATE SAVINGS ACCOUNT (0.14%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% $120,098
-----------
TOTAL SHORT-TERM INVESTMENTS (1.92%) $1,639,583
------ -----------
TOTAL INVESTMENTS (99.84%) $85,332,958
====== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK INDEPENDENCE DIVERSIFIED CORE EQUITY FUND II
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Independence Diversified Core Equity Fund II (the "Fund"), a
separate portfolio of John Hancock Institutional Series Trust (the "Trust"), is
an open-end management investment company, registered under the Investment
Company Act of 1940. The Trust organized as a Massachusetts business trust in
1994, consists of eleven series portfolios: the Fund, John Hancock Multi-Sector
Growth Fund, John Hancock Active Bond Fund, John Hancock Dividend Performers
Fund, John Hancock Fundamental Value Fund, John Hancock Global Bond Fund, John
Hancock International Equity Fund, John Hancock Independence Balanced Fund, John
Hancock Independence Growth Fund, John Hancock Independence Medium
Capitalization Fund and John Hancock Independence Value Fund. Prior to
September 12, 1995, John Hancock Multi-Sector Growth Fund was known as John
Hancock Sector Opportunity Fund, John Hancock Active Bond Fund was known as John
Hancock Berkeley Bond Fund, John Hancock Dividend Performers Fund was known as
John Hancock Berkeley Dividend Performers Fund, John Hancock Fundamental Value
Fund was known as John Hancock Berkeley Fundamental Value Fund, John Hancock
Global Bond Fund was known as John Hancock Berkeley Global Bond Fund and John
Hancock International Equity Fund was known as John Hancock Berkeley Overseas
Growth Fund. Each Fund currently has one class of shares with equal rights as
to voting, redemption, dividends and liquidation within their respective Fund.
The Trustees may authorize the creation of additional portfolio's from time to
time to satisfy various investment objectives.
Significant accounting policies of the Fund as are follows:
VALUATION OF INVESTMENTS. Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, a fair value as determined in a good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT. Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with the Adviser may
participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring
that the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS. Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES. The Fund intends to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
is not subject to Federal income tax on taxable earnings which are distributed
to shareholders.
DIVIDENDS, DISTRIBUTIONS AND INTEREST. Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. Interest
income on investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-divided date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles.
EXPENSES. The majority of the expenses of the Trust are directly identifiable
to an individual Fund. Expenses which are not readily identifiable to a
specific Fund will be allocated in such a manner as deemed equitable, taking
into consideration, among other things, the nature and type of expense and the
relative sizes of the Fund.
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK INDEPENDENCE DIVERSIFIED CORE EQUITY FUND II
ORGANIZATION EXPENSE. Expenses incurred in connection with the organization of
the Fund have been capitalized and will be charged to the Fund's operations
ratably over a five-year period that will begin with the commencement of
investment operations of the Fund.
In the event that any of the initial shares are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro rata
portion of the then unamortized organization expense in the same proportion as
the number of the initial shares redeemed bears to the number of the initial
shares outstanding at the time of such redemption.
NOTE B-
MANAGEMENT FEE, AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
The Adviser is responsible for managing the Fund's investment business
affairs and overseeing the investment activities of the sub-adviser. The
adviser has a sub-investment management contract with Independence Investment
Associates, Inc. (the "Sub-Adviser"), under which the sub-adviser, subject to
the review of the Trustees and the over-all supervision of the Adviser, provides
the Fund with investment services and advice with respect to investment
transactions. Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser, equivalent on an annual basis of 0.50% of
the Fund's average daily net asset value. The Adviser pays the Sub-Adviser a
monthly management fee, equivalent on an annual basis, of 0.80% of the advisory
fee payable on the Fund's average daily net assets. The Fund is not responsible
for payment of the Sub-Adviser's fee.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net assets, 2.0% of the next $70,000,000 and 1.5% of the
remaining average daily net assets.
The Adviser has agreed to limit Fund expenses further to the extent
required to prevent expenses from exceeding 0.70% of the Fund's average daily
net assets. Accordingly, the reduction in the Adviser's fee amounted to $27,618
for the period ended June 30, 1995. The Adviser reserves the right to terminate
this fee reduction limitation in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended June
30, 1995, all sales of shares of beneficial interest were sold at net asset
value. The Fund pays all expenses of printing prospectuses and other sales
literature, all fees and expenses in connection with 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 Trust.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays Investor Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.05% of the Fund's average daily net asset
value, plus out-of-pocket expenses incurred by Investor Services on behalf of
the Fund for proxy mailings.
Messrs. Edward J. Boudreau, Jr., Richard S. Scipione and Thomas W.L.
Cameron are directors and/or officers of the Adviser, and/or its affiliates as
well as Trustees of the Fund. The Adviser or an affiliated party owns 201,739
shares of beneficial interest of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund.
<PAGE> 127
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK INDEPENDENCE DIVERSIFIED CORE EQUITY FUND II
NOTE C-
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended June 30, 1995, aggregated $83,394,050 and $522,062, respectively. There
were no purchases or sales of the U.S. government and its agencies during the
period ended June 30, 1995.
The cost of investments owned at June 30, 1995, (excluding the corporate
savings account), for Federal income tax purposes was $84,403,420. Gross
unrealized appreciation and depreciation of investments aggregated $1,616,644
and $807,204, respectively, resulting in net unrealized appreciation of
$809,440.
<PAGE> 128
John Hancock Funds
INSTITUTIONAL SERIES
TRUST
Dividend Performers Fund
Active Bond Fund
Global Bond Fund
Multi-Sector Growth Fund
Fundamental Value Fund
International Equity Fund
June 30, 1995
<PAGE> 129
John Hancock Funds - Institutional Series Trust
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
DIVIDEND ACTIVE
PERFORMERS BOND
ASSETS: FUND FUND
---------- ----------
<S> <C> <C>
Investments at value - Note C:
Common and preferred stocks (cost - $2,521,860 and none, respectively) $2,609,253 --
United States government obligations (cost - $302,641 and none, respectively) 302,141 --
Short-term investments (cost - $249,915 and $1,144,612, respectively) 249,915 $1,144,612
Corporate savings account 6,659 2,911
---------- ----------
3,167,968 1,147,523
Interest receivable 5,587 --
Dividends receivable 4,880 --
Deferred organization expenses - Note A 39,743 39,657
Receivable from John Hancock Advisers, Inc. - Note B 23,896 13,420
---------- ----------
Total Assets 3,242,074 1,200,600
-------------------------------------------------------------------------------------------------------------
LIABILITIES:
Dividend payable -- 172
Payable to John Hancock Advisers, Inc. and affiliates - Note B 46,560 41,899
Accounts payable and accrued expenses 22,721 12,919
---------- ----------
Total Liabilities 69,281 54,990
-------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in 3,085,709 1,145,608
Net unrealized appreciation of investments 86,893 --
Undistributed net investment income 191 2
----------
Net Assets $3,172,793 $1,145,610
=============================================================================================================
NET ASSET VALUE PER SHARE
(based on 362,997 and 134,777 shares, respectively, of
beneficial interest outstanding - unlimited number of shares authorized
with no par value) $8.74 $8.50
=============================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 130
John Hancock Funds - Institutional Series Trust
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
GLOBAL MULTI - SECTOR
BOND GROWTH
ASSETS: FUND FUND
------- --------------
<S> <C> <C>
Investments at value - Note C:
Common stocks (cost - none and $1,879,348, respectively) -- $1,874,450
Cash $18,080 --
Receivable for investments sold -- 156,840
Dividends receivable -- 239
Deferred organization expenses - Note A 39,833 42,044
Receivable from John Hancock Advisers, Inc. - Note B 13,557 16,618
------- ----------
Total Assets 71,470 2,090,191
------------------------------------------------------------------------------------------------------------
LIABILITIES:
Temporary overdraft of cash -- 78,287
Payable for investments purchased -- 50,742
Payable to John Hancock Advisers, Inc. and affiliates - Note B 41,484 45,337
Accounts payable and accrued expenses 11,928 14,933
------- ----------
Total Liabilities 53,412 189,299
------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital paid-in 18,058 1,904,857
Accumulated net realized loss on investments and foreign currency transactions -- (5,089)
Net unrealized depreciation of investments -- (4,898)
Accumulated net investment income -- 6,022
------- ----------
Net Assets $18,058 $1,900,892
============================================================================================================
NET ASSET VALUE PER SHARE
(based on 2,125 and 221,744 shares, respectively, of
beneficial interest outstanding - unlimited number of shares authorized
with no par value) $8.50 $8.57
============================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 131
John Hancock Funds - Institutional Series Trust
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
FUNDAMENTAL INTERNATIONAL
VALUE EQUITY
ASSETS: FUND FUND
----------- -------------
<S> <C> <C>
Investments at value - Note C:
Common stocks (cost - $509,893 and $707,380,respectively) $515,041 $713,306
Short-term investments (cost - $69,976 and $189,936, respectively) 69,976 189,936
Corporate savings account 4,981 --
-------- --------
589,998 903,242
Cash -- 8,991
Interest receivable -- 345
Dividends receivable 959 839
Deferred organization expenses - Note A 40,114 39,657
Receivable from John Hancock Advisers, Inc. - Note B 13,582 18,891
-------- --------
Total Assets 644,653 971,965
--------------------------------------------------------------------------------------------------------------
LIABILITIES:
Foreign tax payable -- 135
Payable for investments purchased 10,564 --
Payable to John Hancock Advisers, Inc. and affiliates - Note B 42,510 43,923
Accounts payable and accrued expenses 12,135 17,086
-------- --------
Total Liabilities 65,209 61,144
NET ASSETS: --------------------------------------------------------------------------------------------------------------
Capital paid-in 574,328 897,364
Accumulated net realized loss on investments and foreign currency transactions -- (19)
Net unrealized appreciation of investments 5,148 5,926
Accumulated net investment income/(Distributions in excess of net investment income) (32) 7,550
-------- --------
Net Assets $579,444 $910,821
==============================================================================================================
NET ASSET VALUE PER SHARE
(based on 67,471 and 105,386 shares, respectively, of
beneficial interest outstanding - unlimited number of shares authorized
with no par value) $8.59 $8.64
==============================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 132
John Hancock Funds - Institutional Series Trust
STATEMENT OF OPERATIONS
Period ended June 30, 1995* (Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
GLOBAL MULTI-SECTOR
BOND GROWTH
FUND FUND
-------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 106 $ 7,392
Dividends (net of foreign withholding tax of none and $25, respectively) -- 239
-------- --------
106 7,631
Expenses:
Custodian fee 5,582 6,788
Registration and filing fees 3,418 3,704
Printing 1,186 2,520
Organization expense - Note A 1,635 1,926
Auditing fee 1,709 1,852
Investment management fee - Note B 15 1,287
Transfer agent fee -- 81
Legal fees 13 37
Trustees' fees 9 20
Miscellaneous 11 12
-------- --------
Total Expenses 13,578 18,227
Less Expenses Reimbursable by John Hancock Advisers, Inc. - Note B (13,557) (16,618)
-------- --------
Net Expenses 21 1,609
-----------------------------------------------------------------------------------------------------------
Net Investment Income 85 6,022
-----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold -- (8,274)
Net realized gain on foreign currency transactions -- 3,185
Change in net unrealized depreciation of investments -- (4,898)
-------- --------
Net Realized and Unrealized Loss on Investments -- (9,987)
===========================================================================================================
Net Increase (Decrease) in Net Assets Resulting from Operations $ 85 ($3,965)
===========================================================================================================
</TABLE>
* Global Bond Fund and Multi - Sector Growth Fund commenced operations
on April 20, 1995 and April 12, 1995, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 133
John Hancock Funds - Institutional Series Trust
STATEMENT OF OPERATIONS
Period ended June 30, 1995* (Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
DIVIDEND ACTIVE
PERFORMERS BOND
FUND FUND
INVESTMENT INCOME: ---------- -------
<S> <C> <C>
Interest $ 24,396 $15,390
Dividends 9,389 --
-------- -------
33,785 15,390
Expenses: -------- -------
Custodian fee 12,269 3,902
Registration and filing fees 5,476 4,107
Investment management fee - Note B 4,346 126
Printing 2,794 2,794
Organization expense - Note A 2,109 2,104
Auditing fee 2,054 2,053
Transfer agent fee 362 13
Miscellaneous 181 23
Legal fees 67 26
Trustees' fees 33 22
-------- -------
Total Expenses 29,691 15,170
Less Expenses Reimbursable by John Hancock Advisers, Inc. - Note B (23,896) (13,420)
-------- -------
Net Expenses 5,795 1,750
-------------------------------------------------------------------------------------------------------------
Net Investment Income 27,990 13,640
-------------------------------------------------------------------------------------------------------------
UNREALIZED GAIN ON INVESTMENTS:
Change in net unrealized appreciation of investments 86,893 --
--------
Net Unrealized Gain on Investments 86,893 --
-------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $114,883 $13,640
=============================================================================================================
</TABLE>
* Dividend Performers Fund and Active Bond Fund commenced operations on
April 3, 1995.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 134
John Hancock Funds - Institutional Series Trust
STATEMENT OF OPERATIONS
Period ended June 30, 1995* (Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
FUNDAMENTAL INTERNATIONAL
VALUE EQUITY
FUND FUND
----------- -------------
<S> <C> <C>
Investment Income:
Interest $ 1,360 $ 3,669
Dividends (net of foreign withholding tax of $62 and $906, respectively) 2,766 6,367
-------- --------
4,126 10,036
-------- --------
Expenses:
Custodian fee 5,315 8,885
Registration and filing fees 3,418 4,107
Printing 1,642 1,973
Organization expense - Note A 1,647 2,104
Auditing fee 1,709 2,053
Investment management fee - Note B 699 2,054
Transfer agent fee 50 108
Legal fees 22 32
Trustees' fees 18 22
Miscellaneous 11 39
-------- --------
Total Expenses 14,531 21,377
Less Expenses Reimbursable by John Hancock Advisers, Inc. - Note B (13,582) (18,891)
-------- --------
Net Expenses 949 2,486
-----------------------------------------------------------------------------------------------------------
Net Investment Income 3,177 7,550
-----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on foreign currency transactions -- (19)
Change in net unrealized appreciation/depreciation of investments 5,148 5,926
-------- --------
Net Realized and Unrealized Gain on Investments 5,148 5,907
-----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 8,325 $ 13,457
===========================================================================================================
</TABLE>
* Fundamental Value Fund and International Equity Fund
commenced operations on April 20, 1995 and April 3, 1995, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 135
John Hancock Funds - Institutional Series Trust
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
DIVIDEND ACTIVE
PERFORMERS BOND
FUND FUND
-------------- --------------
PERIOD ENDED PERIOD ENDED
JUNE 30, 1995+ JUNE 30, 1995+
INCREASE (DECREASE) IN NET ASSETS: (UNAUDITED) (UNAUDITED)
FROM OPERATIONS: -------------- --------------
<S> <C> <C>
Net investment income $ 27,990 $ 13,640
Change in net unrealized appreciation of investments 86,893 --
---------- ----------
Net Increase in Net Assets Resulting from Operations 114,883 13,640
DISTRIBUTIONS TO SHAREHOLDERS: * ---------- ----------
Dividends from net investment income (27,799) (13,638)
---------- ----------
FROM PORTFOLIO SHARE TRANSACTIONS: **
Shares sold 3,278,384 1,152,247
Shares issued to shareholders in reinvestment of distributions 27,799 13,465
---------- ----------
3,306,183 1,165,712
Less shares repurchased (220,474) (20,104)
---------- ----------
Net Increase 3,085,709 1,145,608
---------- ----------
NET ASSETS:
Beginning of period -- --
End of period (including undistributed net investment income of ---------- ----------
$191 and $2, respectively) $3,172,793 $1,145,610
================================
* DISTRIBUTIONS TO SHAREHOLDERS:
Per share dividends from net investment income $0.0773 $0.1107
---------- ----------
** ANALYSIS OF PORTFOLIO SHARE TRANSACTIONS:
Shares sold 384,933 135,558
Shares issued to shareholders in reinvestment of distributions 3,173 1,584
---------- ----------
388,106 137,142
Less shares repurchased (25,109) (2,365)
---------- ----------
Net increase 362,997 134,777
================================
</TABLE>
+ Dividend Performers Fund and Active Bond Fund commenced operations on
April 3, 1995.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 136
John Hancock Funds - Institutional Series Trust
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL MULTI-SECTOR
BOND GROWTH
FUND FUND
-------------- --------------
PERIOD ENDED PERIOD ENDED
JUNE 30, 1995+ JUNE 30, 1995+
(UNAUDITED) (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS: -------------- --------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 85 $ 6,022
Net realized loss on investments sold and foreign currency transaction -- (5,089)
Change in net unrealized appreciation/depreciation of investments -- (4,898)
------- ----------
Net Increase (Decrease) in Net Assets Resulting from Operations 85 (3,965)
------- ----------
DISTRIBUTIONS TO SHAREHOLDERS: *
Dividends from net investment income (85) --
------- ----------
FROM PORTFOLIO SHARE TRANSACTIONS: **
Shares sold 17,973 1,829,479
Shares issued to shareholders in reinvestment of distributions 85 --
------- ----------
18,058 1,829,479
Less shares repurchased -- (24,622)
Initial Investment by John Hancock Advisers, Inc. - Note A -- 100,000
------- ----------
Net Increase 18,058 1,904,857
------- ----------
NET ASSETS:
Beginning of period -- --
End of period (including accumulated net investment income of ------- ----------
none and $6,022, respectively) $18,058 $1,900,892
=========================
* DISTRIBUTIONS TO SHAREHOLDERS:
Per share dividends from net investment income $0.0685 --
------- ----------
** ANALYSIS OF PORTFOLIO SHARE TRANSACTIONS:
Shares sold 2,115 212,865
Shares issued to shareholders in reinvestment of distributions 10 --
------- ----------
2,125 212,865
Less shares repurchased -- (2,886)
Initial Investment by John Hancock Advisers, Inc. - Note A -- 11,765
------- ----------
Net increase 2,125 221,744
=========================
+ Global Bond Fund and Multi-Sector Growth Fund commenced operations
on April 20, 1995 and April 12, 1995, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 137
John Hancock Funds - Institutional Series Trust
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUNDAMENTAL INTERNATIONAL
VALUE EQUITY
FUND FUND
-------------- --------------
PERIOD ENDED PERIOD ENDED
JUNE 30, 1995+ JUNE 30, 1995+
(UNAUDITED) (UNAUDITED)
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 3,177 $ 7,550
Net realized loss on investments sold and foreign currency transactions -- (19)
Change in net unrealized appreciation/depreciation of investments 5,148 5,926
-------- --------
Net Increase in Net Assets Resulting from Operations 8,325 13,457
Distributions to Shareholders: * -------- --------
Dividends from net investment income (3,209) --
-------- --------
FROM PORTFOLIO SHARE TRANSACTIONS: **
Shares sold 571,119 908,394
Shares issued to shareholders in reinvestment of distributions 3,209 --
-------- --------
574,328 908,394
Less shares repurchased -- (11,030)
-------- --------
Net Increase 574,328 897,364
-------- --------
NET ASSETS:
Beginning of period -- --
-------- --------
End of period (including distributions in excess of net investment income
and accumulated net investment income of ($32) and $7,550, respectively $579,444 $910,821
===============================
* DISTRIBUTIONS TO SHAREHOLDERS:
Per share dividends from net investment income $0.0480 --
-------- --------
** ANALYSIS OF PORTFOLIO SHARE TRANSACTIONS:
Shares sold 67,098 106,632
Shares issued to shareholders in reinvestment of distributions 373 --
-------- --------
67,471 106,632
Less shares repurchased -- (1,246)
-------- --------
Net increase 67,471 105,386
==============================
+ Fundamental Value Fund and International Equity Fund
commenced operations on April 20, 1995 and April 3, 1995, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 138
John Hancock Funds - John Hancock Dividend Performers Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 3, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 (b)
------
Net Investment Income 0.08
Net Unrealized Gain on Investments 0.24
------
Total from Investment Operations 0.32
------
Less Distributions:
Dividends from Net Investment Income (0.08)
------
Net Asset Value, End of Period $ 8.74
======
Total Investment Return at Net Asset Value (d) 3.73% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $3,173
Ratio of Expenses to Average Net Assets 0.80% *
Ratio of Adjusted Expenses to Average Net Assets (a)(e) 4.10% *
Ratio of Net Investment Income to Average Net Assets 3.86% *
Ratio of Adjusted Net Investment Income to Average Net Assets (a)(e) 0.56% *
Portfolio Turnover Rate 0%
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets are expected to increase as the net assets of the Fund grow.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 139
John Hancock Funds - John Hancock Active Bond Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 3, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 8.50 (b)
------
Net Investment Income 0.11
------
Less Distributions:
Dividends from Net Investment Income (0.11)
------
Net Asset Value, End of Period $ 8.50
======
Total Investment Return at Net Asset Value (d) 1.29% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $1,146
Ratio of Expenses to Average Net Assets 0.70% *
Ratio of Adjusted Expenses to Average Net Assets (a)(e) 6.04% *
Ratio of Net Investment Income to Average Net Assets 5.43% *
Ratio of Adjusted Net Investment Income to Average Net Assets (a)(e) 0.09% *
Portfolio Turnover Rate 0%
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets are expected to increase as the net assets of the Fund grow.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 140
John Hancock Funds - John Hancock Global Bond Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 20, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
-----------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 (b)
-----
Net Investment Income 0.07
-----
Less Distributions:
Dividends from Net Investment Income (0.07)
-----
Net Asset Value, End of Period $8.50
=====
Total Investment Return at Net Asset Value (d) 0.81% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $18
Ratio of Expenses to Average Net Assets 1.10% *
Ratio of Adjusted Expenses to Average Net Assets (a)(e) N/M *
Ratio of Net Investment Income to Average Net Assets 4.28% *
Ratio of Adjusted Net Investment Income to Average Net Assets (a)(e) N/M *
Portfolio Turnover Rate 0%
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets is expected to increase as the net assets of the Fund grow.
NM - Not Meaningful
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 141
John Hancock Funds - John Hancock Multi-Sector Growth Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 12, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
-----------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 (b)
-----
Net Investment Income 0.03
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 0.04
-----
Total from Investment Operations 0.07
-----
-----
Net Asset Value, End of Period $8.57
=====
Total Investment Return at Net Asset Value (d) 0.82% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $1,901
Ratio of Expenses to Average Net Assets 1.00% *
Ratio of Adjusted Expenses to Average Net Assets (a)(e) 11.33% *
Ratio of Net Investment Income to Average Net Assets 3.74% *
Ratio of Adjusted Net Investment Loss to Average Net Assets (a)(e) (6.59%)*
Portfolio Turnover Rate 9%
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets is expected to increase as the net assets of the Fund grow.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 142
John Hancock Funds - John Hancock Fundamental Value Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 20, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
-----------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 (b)
-----
Net Investment Income 0.05
Net Unrealized Gain on Investments 0.09
-----
Total from Investment Operations 0.14
-----
Less Distributions:
Dividends from Net Investment Income (0.05)
-----
Net Asset Value, End of Period $8.59
=====
Total Investment Return at Net Asset Value (d) 1.62% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $579
Ratio of Expenses to Average Net Assets ** 0.95% *
Ratio of Adjusted Expenses to Average Net Assets (a)(e) 14.54% *
Ratio of Net Investment Income to Average Net Assets 3.18% *
Ratio of Adjusted Net Investment Loss to Average Net Assets (a)(e) (10.41%)*
Portfolio Turnover Rate 0%
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
(e) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets is expected to increase as the net assets of the Fund grow.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 143
John Hancock Funds - John Hancock International Equity Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 3, 1995
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1995
(UNAUDITED)
----------------------------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $8.50 (b)
-----
Net Investment Income 0.08 (e)
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions 0.06
-----
Total from Investment Operations 0.14
-----
Net Asset Value, End of Period $8.64
=====
Total Investment Return at Net Asset Value (d) 1.65% (c)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $911
Ratio of Expenses to Average Net Assets ** 1.15% *
Ratio of Adjusted Expenses to Average Net Assets (a)(f) 8.74% *
Ratio of Net Investment Income to Average Net Assets 3.49% *
Ratio of Adjusted Net Investment Loss to Average Net Assets (a)(f) (5.25%)*
Portfolio Turnover Rate 0%
</TABLE>
* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) Without the reimbursement, total investment return would have been lower.
(e) On average month end shares outstanding.
(f) Adjusted expenses as a percentage of average net assets are expected to
decrease and adjusted net investment income as a percentage of average net
assets is expected to increase as the net assets of the Fund grow.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 144
John Hancock Mutual Funds - Dividend Performers Fund
Schedule of Investments
June 30, 1995
(Unaudited)
The Schedule of Investments is a complete list of all securities owned by
Dividend Performers Fund on June 30, 1995. Its divided into four main
categories: common stocks, preferred stocks, U.S. government obligations and
short-term investments. The common stocks are further broken down by industry
groups. Short-term investments, which represent the Fund's "cash" position, are
listed last.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES COMMON STOCKS (81.14%) VALUE
--------- --------
<S> <C> <C>
BANKS (6.41%)
1,000 First Tennessee National Corp. @ 46 3/8 $ 46,375
Tennessee-based bank holding company
1,000 First Union Corp. @ 45 1/4 45,250
North Carolina-based bank holding company
1,000 KeyCorp. @ 31 3/8 31,375
Multi-regional bank holding company
1,500 NationsBank Corp. @ 53 5/8 80,438
Largest superregional bank in the Southeast
--------
203,438
--------
BASIC INDUSTRY (1.47%)
1,890 Sonoco Products Corp. @ 24 3/4 46,778
--------
Containers, paper products and packaging
CHEMICALS (6.44%)
1,000 Air Products & Chemicals, Inc. @ 55 3/4 55,750
Producer of industrial and specialty chemicals and gases
2,000 Crompton & Knowles Corp. @ 14 1/8 28,250
Produces and markets specialty chemicals
500 E.I. du Pont de Nemours and Co. @ 68 3/4 34,375
Nation's largest chemical manufacturer
2,000 PPG Industries, Inc. @ 43 86,000
Manufacturer of specialty chemicals, coatings and resins
--------
204,375
--------
COMPUTER & OFFICE EQUIPMENT (1.51%)
600 Alco Standard Corp. @ 79 7/8 47,925
--------
Distributor of office and paper products
CONSUMER CYCLICALS & SERVICES (5.42%)
1,000 Albertson's, Inc. @ 29 3/4 29,750
Idaho-based operator of supermarkets and combination food-drug stores
3,000 Sysco Corp. @ 29 1/2 88,500
Largest distributor of food service products
1,000 V.F. Corp. @ 53 3/4 53,750
International apparel manufacturer
--------
172,000
--------
CONSUMER DURABLES (1.39%)
1,000 Leggett & Platt, Inc. @ 44 44,000
Produces intermediate products for the home furnishings industry
--------
CONSUMER NON-DURABLES (11.41%)
1,000 Anheuser-Busch Cos., Inc. @ 56 7/8 56,875
Nation's largest brewer
1,000 Campbell Soup Co. @ 49 49,000
Leading food manufacturer and distributor
2,000 PepsiCo, Inc. @ 45 5/8 91,250
Second largest soft drink company
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 145
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES COMMON STOCKS (81.14%) VALUE
--------- --------
<S> <C> <C>
1,500 Procter & Gamble Co. (The) @ 71 7/8 107,812
Leading producer of household consumer products
2,000 Sara Lee Corp. @ 28 1/2 57,000
Manufacturer of brand name packaged food and consumer products
--------
361,937
--------
DIVERSIFIED OPERATIONS (2.84%)
1,000 Corning Inc. @ 32 3/4 32,750
Operations are in laboratory services, fiber optics, specialty materials and consumer products
1,000 Minnesota Mining & Manufacturing Co. @ 57 1/4 57,250
--------
Diversified manufacturer of industrial, commercial, health care and consumer products 90,000
--------
ELECTRICAL EQUIPMENT (8.62%)
1,000 AMP Inc. @ 42 1/4 42,250
Produces and sells electrical/electronic products and systems
1,000 Emerson Electric Co. @ 71 1/2 71,500
Produces and sells electrical/electronic products and systems
2,000 General Electric Co. @ 56 3/8 112,750
Dominant force in home appliances, electrical power, and financial services
800 W.W. Grainger, Inc. @ 58 3/4 47,000
Dominant force in home appliances, electrical power, and financial services
--------
273,500
--------
ENERGY (1.78%)
800 Exxon Corp. @ 70 5/8 56,500
Major factor in the crude oil, natural gas and chemical industry
--------
HEALTHCARE (6.87%)
2,000 Abbott Laboratories @ 40 1/2 81,000
Major pharmaceutical and healthcare firm
1,300 Johnson & Johnson @ 67 5/8 87,912
Major producer of prescription and non-prescription drugs, toiletries, medical instruments
and supplies
1,000 Merck & Co., Inc. @ 49 49,000
World's largest ethical drug manufacturer
--------
217,912
--------
INSURANCE (1.20%)
1,000 Reliastar Financial Corp. @ 38 1/4 38,250
Financial services company engaged in life/health insurance and consumer finance
--------
MEDIA AND INFORMATION SERVICES (2.76%)
1,000 Interpublic Group Inc. @ 37 1/2 37,500
One of the largest advertising agencies in the world
1,000 Reuters Holdings PLC ADR @ 50 1/8 50,125
Electronic publisher of worldwide news, market information and trading systems
--------
87,625
--------
METALS - STEEL (1.69%)
1,000 Nucor Corp. @ 53 1/2 53,500
Nation's fifth largest steelmaker in the U.S.
--------
POLLUTION CONTROL (1.79%)
2,000 WMX Technologies Inc. @ 28 3/8 56,750
Nation's largest provider of waste management services
--------
RETAIL (5.53%)
1,000 May Department Stores Co. (The) @ 41 5/8 41,625
Operates 318 department stores and 3,295 shoe stores
2,000 Pep Boys (The) - Manny, Moe & Jack @ 26 3/4 53,500
Retailer of automotive parts and accessories
3,000 Wal-Mart Stores, Inc. @ 26 3/4 80,250
Operates chain of discount department stores
--------
175,375
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 146
<TABLE>
<CAPTION>
NUMBER MARKET
OF SHARES COMMON STOCKS (81.14%) VALUE
--------- ----------
<S> <C> <C>
TECHNOLOGY (1.98%)
1,000 Automatic Data Processing, Inc. @ 62 7/8 62,875
Largest independent computing services firm in the U.S.
----------
TELECOMMUNICATIONS (6.16%)
1,500 ALLTEL Corp. @ 25 3/8 38,063
One of the country's largest telephone systems
700 Bell Atlantic Corp. @ 56 39,200
Provides telephone services in Mid-Atlantic states
3,500 Frontier Corp. @ 24 84,000
Provides telephone service to the city of Rochester N.Y. and outlying areas
1,000 GTE Corp. @ 34 1/8 34,125
Largest independent local telephone holding company
----------
195,388
----------
TOBACCO (2.81%)
800 Philip Morris Cos., Inc. @ 74 3/8 59,500
Global tobacco, brewing and food company
1,000 UST Inc. @ 29 3/4 29,750
Leading producer of smokeless tobacco
----------
89,250
----------
UTILITIES (3.06%)
1,000 Florida Progress Corp. @ 31 1/4 31,250
Holding Company for Florida Power electric utility services
1,000 National Fuel Gas Co. @ 28 5/8 28,625
Integrated natural gas system serving New York, Pennsylvania and Ohio
1,000 Union Electric Co. @ 37 1/4 37,250
Largest electric utility in Missouri
----------
97,125
----------
TOTAL COMMON STOCKS
(Cost $2,488,040) 2,574,503
----------
PREFERRED STOCKS (1.10%)
1,000 Sprint Corp. 8.25% Conv Pfd @ 34 3/4 34,750
----------
TOTAL PREFERRED STOCKS
(Cost $33,820) 34,750
----------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
(000's
OMITTED) UNITED STATES GOVERNMENT OBLIGATIONS (9.52%)
----------
<S> <C> <C> <C>
100 United States Treasury, Note 7.875%, 02-15-96 @ 101.250 101,250
100 United States Treasury, Note 6.00%, 06-30-96 @ 100.250 100,250
100 United States Treasury, Note 6.25%, 01-31-97 @ 100.641 100,641
----------
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS
(Cost $302,641) 302,141
----------
SHORT-TERM INVESTMENTS (8.09%)
SHORT-TERM NOTES (7.88%)
250 Federal Home Loan Bank, 6.10% 07/03/1995 249,915
----------
TOTAL SHORT-TERM NOTES 249,915
----------
CORPORATE SAVINGS ACCOUNT ( 0.21%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% 6,659
----------
TOTAL SHORT-TERM INVESTMENTS 256,574
----------
TOTAL INVESTMENTS (99.85%) $3,167,968
====== ==========
</TABLE>
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 147
John Hancock Funds - Active Bond Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Par Value
Interest (000`s Market
Issuer - Description Rate Omitted) Value
-------------------- -------- --------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
GOVERNMENTAL U.S. (1.18%)
Federal Home Loan Bank, Due 07-03-95 6.10% $1,145 $1,144,612
----------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% 2,911
----------
TOTAL SHORT-TERM INVESTMENTS (100.15%) 1,147,523
------- ----------
TOTAL INVESTMENTS (100.15%) $1,147,523
------- ==========
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
See notes to financial statements.
<PAGE> 148
JOHN HANCOCK FUNDS - MULTI-SECTOR GROWTH FUND
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by
Multi-Sector Growth Fund on June 30, 1995. Its divided into one main category:
common stocks. The common stocks are further broken down by industry groups.
<TABLE>
<CAPTION>
NUMBER MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
------------------- --------- --------
<S> <C> <C>
COMMON STOCKS
BROADCASTING (11.99%)
Infinity Broadcasting Corp. (Class A)* 3,500 $116,812
Lin Television Corp.* 1,500 50,437
New World Communications Group, Inc.* 500 10,438
Renaissance Communications Corp.* 1,500 50,250
--------
227,937
--------
COMPUTERS (25.20%)
BMC Software, Inc.* 1,500 115,875
Computer Associates International, Inc. 1,500 101,625
Microsoft Corp.* 1,500 135,562
Seagate Technology, Inc.* 1,500 58,875
3Com Corp.* 1,000 67,000
--------
478,937
--------
DIVERSIFIED OPERATIONS (5.52%)
CUC International Inc.* 2,500 105,000
--------
ELECTRICAL (4.69%)
Integrated Device Technology, Inc.* 500 23,125
Linear Technology Corp. 1,000 66,000
--------
89,125
--------
ELECTRONICS (4.52%)
Helix Technology Corp. 2,000 86,000
--------
HEALTHCARE (6.83%)
American Oncology Resources, Inc.* 500 13,875
HealthCare COMPARE Corp.* 1,000 30,000
Rotech Medical Corp.* 500 13,875
RTW, Inc.* 500 9,125
Vencor, Inc.* 2,000 63,000
--------
129,875
--------
LEISURE & RECREATION (4.39%)
Walt Disney Co., (The) 1,500 83,437
--------
MACHINERY-PRINTING TRADE (0.53%)
Indigo N.V. (Netherlands)* 200 10,000
--------
MEDICAL (8.72%)
Boston Scientific Corp.* 3,000 95,625
Community Health Systems, Inc.* 1,500 50,812
STAAR Surgical Co.* 2,300 19,263
--------
165,700
--------
Metals (3.76%)
Battle Mountain Gold Co. 1,000 9,625
Hemlo Gold Mines, Inc. 1,500 15,938
Kinross Gold Corp. (Canada)* 4,500 33,750
Santa Fe Pacific Gold Corp. 1,000 12,125
--------
71,438
--------
</TABLE>
See notes to financial statements
<PAGE> 149
John Hancock Mutual Funds - Multi-Sector Growth Fund
<TABLE>
<CAPTION>
NUMBER MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
------------------- --------- ----------
<S> <C> <C>
Oil & Gas (8.47%)
Benton Oil & Gas Co.* 3,500 $ 48,563
Coflexip, American Depositary Receipts (ADR) (France) 500 12,688
Nabors Industries, Inc.* 4,000 33,000
Petroleum Geo-Services AS (ADR) (Norway)* 1,000 28,750
Pride Petroleum Services, Inc.* 3,000 22,500
Seitel Inc.* 500 15,500
----------
161,001
----------
Pollution Control (1.91%)
Tetra Technologies, Inc.* 3,000 36,375
----------
Publishing (1.39%)
Houghton Mifflin Co. 500 26,375
----------
Telecommunications (9.22%)
America Online, Inc.* 3,000 132,000
Cascade Communications Corp.* 1,000 43,250
----------
175,250
----------
Textile-Apparel Manufacturing (1.47%)
Tommy Hilfiger Corp.* 1,000 28,000
----------
TOTAL COMMON STOCKS
(COST $1,879,348) (98.61%) 1,874,450
------ ----------
TOTAL INVESTMENTS (98.61%) $1,874,450
====== ==========
</TABLE>
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Portfolio Concentration
The Multi-Sector Growth Fund invests primarily in securities issued in the
United States of America. The performance of the Fund is closely tied to the
economic and financial conditions within the countries in which it invests. The
concentration of investments by industry category for individual securities held
by the Fund is shown in the Schedule of Investments. In Addition, concentration
of investments can be aggregated by various countries. The table below shows the
percentages of the Fund's investments at June 30, 1995 assigned to country
categories.
<TABLE>
<CAPTION>
MARKET VALUE AS A
PERCENTAGE OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
----------------------- -----------------
<S> <C>
Canada 1.77%
France 0.67
Netherlands 0.53
Norway 1.51
United States 94.13
-----
TOTAL INVESTMENTS 98.61%
=====
</TABLE>
See notes to financial statements
<PAGE> 150
John Hancock Funds - Fundamental Value Fund
Schedule of Investments
June 30, 1995
(Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
Fundamental Value Fund on June 30, 1995. It's divided into two main categories:
common stocks and short-term investments. Common stocks are further broken down
by industry groups. Short-term investments, which represent the Fund's "cash"
position are listed last.
<TABLE>
<CAPTION>
MARKET
ISSUER,DESCRIPTION NUMBER OF SHARES VALUE
------------------ ---------------- ------
<S> <C> <C>
COMMMON STOCKS
AIRCRAFT (9.02%)
Boeing Co. (The) 400 $ 25,050
Thiokol Corp. 900 27,225
--------
52,275
--------
BEVERAGES (4.24%)
Coors (Adolph) Co. 1,500 24,563
--------
DIVERSIFIED OPERATIONS (9.28%)
Hanson PLC, American Depositary Receipts 1,500 26,437
Tejon Ranch 1,900 26,363
U. S. Industries, Inc.* 70 954
--------
53,754
--------
FOODS (9.02%)
Archer-Daniels-Midland Co. 1,400 26,075
Dole Food Co. 900 26,212
--------
52,287
--------
LEISURE & RECREATION (9.53%)
Outboard Marine Corp. 1,400 27,475
Russ Berrie & Co. Inc. 2,000 27,750
--------
55,225
--------
MACHINERY (5.38%)
Harnischfeger Industries, Inc. 900 31,163
--------
OIL & GAS ( 5.17%)
Parker Drilling Co.* 5,700 29,925
--------
PAPER (4.86%)
Glatfelter (P.H.) Co. 1,400 28,175
--------
POLLUTION CONTROL (4.60%)
Calgon Carbon Corp. 2,200 26,675
--------
PUBLISHING (5.36%)
Times Mirror Co. (The) Class A 1,300 31,038
--------
RETAIL (4.56%)
Great Atlantic & Pacific Tea Co., Inc. (The) 1,000 26,375
--------
SHOES (4.71%)
Brown Group, Inc. 1,200 27,300
--------
TEXTILE (8.15%)
Delta Woodside Industries, Inc. 2,900 22,111
Garan Inc. 1,500 25,125
--------
47,236
--------
TRANSPORTATION - SHIP (5.01%)
Overseas Shipholding Group, Inc. 1,400 29,050
--------
TOTAL COMMON STOCKS (88.89%) $515,041
-------- --------
(Cost $509,893)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 151
John Hancock Funds - Fundamental Value Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
RATE (000'S OMITTED) VALUE
-------- --------------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
SHORT TERM NOTES (12.07%)
Federal Home Loan Bank, 07-03-95 6.10% 70 $ 69,976
--------
CORPORATE SAVINGS ACCOUNT (0.86%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% 4,981
--------
TOTAL SHORT-TERM INVESTMENTS ( 12.93%) 74,957
--------- ---------
TOTAL INVESTMENTS (101.82%) $589,998
--------- =========
</TABLE>
* Non-income producing security
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 152
John Hancock Funds - International Equity Fund
Schedule of Investments
June 30, 1995 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the
International Equity Fund on June 30, 1995. It's divided into two main
categories: common stocks and short-term investments. Common stocks are further
broken down by country. Under each country heading is a list of the securities
owned by the Fund. Short-term investments, which represent the Fund's "cash"
position, are listed last.
<TABLE>
<CAPTION>
ISSUER,DESCRIPTION NUMBER OF SHARES MARKET VALUE
------------------ ---------------- ------------
<S> <C> <C>
COMMON STOCKS
Australia (6.73%)
Broken Hill Proprietary Co., Ltd.
(Diversified Operations) 1,210 $ 14,896
BTR Nylex Ltd. (Diversified Operations) 7,700 14,722
News Corp. Ltd. (The) (Publishing) 3,100 17,319
Western Mining Corp. Holdings Ltd.
(Metal Processing & Products) 2,600 14,322
--------
61,259
--------
Chile (2.05%)
Madeco, SA, American Depositary Receipts
(ADR) (Metal Processing & Products) 650 18,687
--------
France (6.00%)
Banque Nationale de Paris (Banks) 280 13,506
LVMH Moet Henessey Louis Vuitton (Beverages) 75 13,496
Lyonnaise Des Eaux Dumez (Diversified Operations) 150 14,186
Renault SA (Automobile/Trucks)* 430 13,473
--------
54,661
--------
Germany (3.43%)
Bayerische Motoren Werke AG (Automobile/Trucks) 29 15,958
Mannesmann AG (Diversified Operations) 50 15,276
--------
31,234
--------
Hong Kong (7.14%)
CITIC Pacific Ltd. (Diversified Operations) 6,000 15,082
HSBC Holdings Ltd. (Banks) 1,200 15,392
Hutchison Whampoa Ltd. (Diversified Operations) 4,000 19,334
Swire Pacific Ltd. (Diversified Operations) 2,000 15,250
--------
65,058
--------
Japan (14.10%)
Daido Steel Co., Ltd. (Steel) 3,000 14,158
Denki Kagaku Kogyo K.K. (Chemicals)* 4,000 13,309
Fujisawa Pharmaceutical Co., Ltd. (Drugs) 1,000 10,477
Jusco Co., Ltd. (Retail) 1,000 20,766
Matsushita Electric Industrial Co., Ltd. (Electronics) 1,000 15,574
NKK Corp. (Steel)* 6,000 14,088
Seino Transportation Co., Ltd. (Transportation) 1,000 16,872
Sumitomo Osaka Cement Co., Ltd. (Building Products) 3,000 11,008
Sumitomo Trust & Banking Co., Ltd. (The) (Banks) 1,000 12,153
--------
128,405
--------
</TABLE>
See notes to financial statements
<PAGE> 153
John Hancock Funds - International Equity Fund
<TABLE>
<CAPTION>
ISSUER,DESCRIPTION NUMBER OF SHARES MARKET VALUE
------------------ ---------------- ------------
<S> <C> <C>
Malaysia (2.65%)
Aokam Perdana Berhad (Building Products) 3,000 $ 7,445
Land & General Berhad (Diversified Operations) 5,000 16,714
--------
24,159
--------
Mexico (1.63%)
Telefonos de Mexico S.A. de C.V. (ADR)
(Telecommunications) 500 14,812
--------
Netherlands (3.40%)
Koninklijke P.T.T. Nederland (Telecommunications) 425 15,277
Polygram N.V. (Audio/Video) 265 15,649
--------
30,926
--------
New Zealand (1.69%)
Carter Holt Harvey Ltd. (Paper) 6,300 15,416
--------
Norway (3.36%)
Den norske Bank AS (Banks) 5,500 14,901
Orkla AS (Diversified Operations) 350 15,671
--------
30,572
--------
Philippines (1.95%)
San Miguel Corp. (Beverages) 4,290 17,805
--------
Singapore (6.26%)
Fraser & Neave Ltd. (Diversified Operations) 2,000 23,041
Jardine Matheson Holdings Ltd. (Diversified Operations) 2,400 17,640
Keppel Corp. (Diversified Operations) 2,000 16,315
--------
56,996
--------
Spain (1.73%)
Repsol SA (Oil & Gas) 500 15,728
--------
Sweden (3.75%)
Investor AB (Diversified Operations) 550 15,858
Telefonaktiebolaget (LM) Ericsson
(Telecommunications) 920 18,316
--------
34,174
--------
Switzerland (5.25%)
BBC Brown Boveri AG (Engineering) 80 16,049
Ciba-Geigy AG (Drugs) 22 16,125
Nestle S.A. (Food) 15 15,619
--------
47,793
--------
United Kingdom (7.20%)
Carlton Communications PLC (Broadcasting) 1,000 15,148
Reed International PLC (Publishing) 1,170 16,430
Smithkline Beecham (Drugs) 1,840 16,650
Thorn EMI PLC (Leisure & Recreation) 840 17,393
--------
65,621
--------
TOTAL COMMON STOCKS
(Cost $707,380) (78.32%) 713,306
-------- --------
</TABLE>
See notes to financial statements
<PAGE> 154
John Hancock Funds - International Equity Fund
<TABLE>
<CAPTION>
INTEREST PAR VALUE
ISSUER,DESCRIPTION RATE (000'S OMITTED) MARKET VALUE
------------------ -------- --------------- ------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Short-Term Notes (20.85%)
Federal Home Loan Bank, 07-03-95 6.10% 190 $189,936
-------- --------
TOTAL SHORT-TERM INVESTMENTS (20.85%) 189,936
-------- --------
TOTAL INVESTMENTS (99.17%) $903,242
======== ========
</TABLE>
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Industry Diversification
...............................................................................
The Fund primarily invests in securities issued by companies of other
countries. The performance of the Fund is closely tied to the economic
conditions within the countries it invests. The concentration of investments by
country for individual securities held by the Fund is shown in the schedule of
investments. In addition, the concentration of investments can be aggregated by
various industry groups. The table below shows the percentages of the Fund's
Investments at June 30, 1995 assigned to the various investment categories.
<TABLE>
<CAPTION>
MARKET VALUE OF
SECURITIES AS A
INVESTMENT CATEGORIES % OF NET ASSETS
--------------------- ---------------
<S> <C>
Audio/Video 1.72
Automobile/Trucks 3.23
Banks 6.14
Beverages 3.44
Broadcasting 1.66
Building Products 2.03
Chemicals 1.46
Diversified Operations 23.49
Drugs 4.75
Electronics 1.71
Engineering 1.76
Food 1.72
Leisure & Recreation 1.91
Metal Processing & Products 3.62
Oil & Gas 1.73
Paper 1.69
Publishing 3.71
Retail 2.28
Steel 3.10
Telecommunications 5.32
Transportation 1.85
Short-Term Investments 20.85
-----
TOTAL INVESTMENTS 99.17%
=====
</TABLE>
See notes to financial statements
<PAGE> 155
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
NOTE A -
ACCOUNTING POLICIES
(UNAUDITED)
John Hancock Dividend Performers Fund ("Dividend Performers Fund"), John Hancock
Active Bond Fund ("Active Bond Fund"), John Hancock Global Bond Fund ("Global
Bond Fund"), John Hancock Multi-Sector Growth Fund ("Multi-Sector Growth Fund"),
John Hancock Fundamental Value Fund ("Fundamental Value Fund") and John Hancock
International Equity Fund ("International Equity Fund"), (each, a "Fund" and
collectively, the "Funds"), are separate portfolios of John Hancock
Institutional Series Trust (the "Trust"), an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to September
12, 1995, Dividend Performers Fund was known as John Hancock Berkeley Dividend
Performers Fund, Active Bond Fund was known as John Hancock Berkeley Bond Fund,
Global Bond Fund was known as John Hancock Berkeley Global Bond Fund,
Multi-Sector Growth Fund was known as John Hancock Berkeley Sector Opportunity
Fund, Fundamental Value Fund was known as John Hancock Berkeley Fundamental
Value Fund and International Equity Fund was known as John Hancock Berkeley
Overseas Growth Fund. The Trust, organized as a Massachusetts business trust in
1994, consists of eleven series portfolios: the Funds, John Hancock Independence
Balanced Fund, John Hancock Independence Diversified Core Equity Fund II, John
Hancock Independence Growth Fund, John Hancock Independence Medium
Capitalization Fund and John Hancock Independence Value Fund. Each Fund
currently has one class of shares with equal rights as to voting, redemption,
dividends and liquidation within their respective Fund. The Trustees may
authorize the creation of additional portfolios from time to time to satisfy
various investment objectives.
Significant accounting policies of the Funds are as follows:
VALUATION OF INVESTMENTS Securities in the Funds portfolios are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency Translation"
below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies.
They will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date or, in the case of some foreign securities,
on the date thereafter when the Funds are made aware of the dividend. Interest
income on investment securities is recorded on the accrual basis. Foreign income
may be subject to foreign withholding taxes which are accrued as applicable.
The Funds record all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
ORGANIZATION EXPENSE Expenses incurred in connection with the organization of
the Fund's has been capitalized and will be charged to the Fund's operations
ratably over a five-year period that will begin with the commencement of
investment operations of the Funds.
<PAGE> 156
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
In the event that any of the initial shares are redeemed during the
amortization period, the redemption proceeds will be reduced by a pro rata
portion of the then unamortized organization expense in the same proportion as
the number of the initial shares redeemed bears to the number of the initial
shares outstanding at the time of such redemption.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Funds. Transactions affecting
statement of operations accounts and net realized gain/loss on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities, resulting
from changes in the exchange rate.
NOTE B -
MANAGEMENT FEE, AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund's pay a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis as follows:
<TABLE>
<CAPTION>
Fund Rate
---- ----
<S> <C>
Dividend Performers Fund .60% of average daily net assets up to $500 million
.55% of such assets in excess of $500 million
Active Fund .50% of average daily net assets up to $1.5 billion
.45% of such assets in excess of $1.5 billion
Global Bond Fund .75% of average daily net assets up to $250 million
.70% of such assets in excess of $250 million
Multi-Sector Growth Fund .80% of average daily net assets up to $500 million
.75% of such assets in excess of $500 million
Fundamental Value Fund .70% of average daily net assets up to $500 million
.65% of such assets in excess of $500 million
International Equity Fund .95% of average daily net assets up to $500 million (0.90% effective September 12, 1995)
.65% of such assets in excess of $500 million
</TABLE>
In the event normal operating expenses of the Funds, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Funds are registered to sell shares of beneficial interest, the
fees payable to the Adviser will be reduced to the extent of such excess, and
the Adviser will make additional arrangements necessary to eliminate any
remaining excess expenses. The current limits are 2.5% of the first $30,000,000
of the Fund's average daily net assets, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
As of June 30, 1995, the Adviser voluntarily agreed to limit the Funds
expenses, including the management fee, to the extent required to prevent
expenses from exceeding: 0.80% of Dividend Performers Fund's average daily net
assets, 0.70% of Active Bond Fund's average daily net assets, 1.10% of Global
Bond Fund's average daily net assets, 1.00% of Multi-Sector Growth Fund's
average daily net assets, 0.95% of Fundamental Value Fund's average daily net
assets and 1.15% of International Equity Fund's average daily net assets. The
<PAGE> 157
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
Adviser reserves the right to terminate this limitation in the future.
Accordingly, for the period ended June 30, 1995, the reduction in the Fund's
expenses collectively with any additional amounts not borne by the Funds by
virtue of the expense limit amounted to $23,896 for Dividend Performers Fund,
$13,420 for Active Bond Fund, $13,557 for Global Bond Fund, $16,618 for
Multi-Sector Growth Fund, $13,582 for Fundamental Value Fund and $18,891 for
International Equity Fund.
Effective September 12, 1995, the Adviser plans to limit the Funds expenses
further to the extent required to prevent expenses from exceeding: 0.70% of
Dividend Performers Fund's average daily net assets, 0.60% of Active Bond Fund's
average daily net assets, 0.85% of Global Bond Fund's average daily net assets,
0.90% of Multi-Sector Growth Fund's average daily net assets, 0.80% of
Fundamental Value Fund's average daily net assets and 1.00% of International
Equity Fund's average daily net assets. The Adviser reserves the right to
terminate this limitation in the future.
SAMCorp serves as subadviser to Dividend Performers Fund pursuant to a
subadvisory agreement with that Fund and the Adviser. SAMCorp was organized in
1992 and is a wholly-owned subsidiary of The Berkeley Financial Group. The
Adviser pays SAMCorp a monthly management fee, equivalent on an annual basis, to
the sum of (a) 0.20% of the advisory fee payable on the Fund's average daily net
assets up to $100 million and (b) 0.55% of the advisory fee payable on the
Fund's assets exceeding $100 million.
NM Capital serves as subadviser to Fundamental Value Fund pursuant to a
subadvisory agreement with that Fund and the Adviser. NM Capital was organized
in 1977 and is a wholly-owned subsidiary of The Berkeley Financial Group. The
Adviser pays NM Capital a monthly management fee, equivalent on an annual basis,
to the sum of (a) 0.20% of the advisory fee payable on the Fund's average daily
net assets up to $100 million and (b) 0.55% of the advisory fee payable on the
Fund's assets exceeding $100 million.
John Hancock Advisers International, Ltd. serves as subadviser to
International Equity Fund pursuant to a subadvisory agreement with that Fund and
the Adviser. Formed in 1987, it is a wholly-owned subsidiary of the Adviser. The
Adviser pays John Hancock Advisers International, Ltd. a monthly management fee,
equivalent on an annual basis, to the sum of (a) 0.70% of the advisory fee
payable on the Fund's average daily net assets up to $500 million and (b) 0.90%
of the advisory fee payable on the Fund's assets exceeding $500 million.
The Funds are responsible for payment of these subadvisory fees.
The Funds have a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended June 30,
1995, all sales of shares of beneficial interest were sold at net asset value.
The Funds pay all expenses of printing prospectuses and other sales literature,
all fees and expenses in connection with 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 Trust.
The Funds have a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Each fund pays Investor Services an annual fee accrued daily of
0.05% of its average net assets, plus certain out-of-pocket expenses.
Messrs. Edward J. Boudreau, Jr., Richard S. Scipione and Thomas W.L. Cameron
are directors and/or officers of the Adviser, and/or its affiliates as well as
Trustees of the Fund. The Adviser and other subsidiaries of John Hancock Mutual
Life Insurance Company owned, as of June 30, 1995, the following shares of
beneficial interest: 259,334 shares of Dividend Performers Fund, 114,230 shares
of Active Bond Fund, 3 shares of Global Bond Fund, 186,320 shares of
Multi-Sector Growth Fund, 3 shares of Fundamental Value Fund and 96,671 shares
of International Equity Fund, respectively. The compensation of unaffiliated
Trustees is borne by the Funds.
<PAGE> 158
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
NOTE C -
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, excluding short term
obligations, for the period ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds
--------- --------
<S> <C> <C>
Dividend Performers Fund
U.S. Government Securities $302,641 None
Other Investments 2,521,860 None
Bond Fund None None
Global Bond Fund None None
Sector Opportunity Fund 2,045,312 $157,690
Fundamental Value Fund 509,893 None
Overseas Growth Fund 707,380 None
</TABLE>
At June 30, 1995, the cost and gross unrealized appreciation and depreciation in
value of investments owned by the Funds, as computed on a federal income tax
basis, were as follows:
<TABLE>
<CAPTION>
Net unrealized
Aggregate Gross unrealized Gross unrealized appreciation/
cost appreciation depreciation depreciation
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend Performers Fund $3,074,416 $112,373 ($25,480) $86,893
Bond Fund 1,144,612 N/A N/A N/A
Global Bond Fund N/A N/A N/A N/A
Sector Opportunity Fund 1,879,348 36,241 (41,139) (4,898)
Fundamental Value Fund 579,869 21,008 (15,860) 5,148
Overseas Growth Fund 897,316 38,139 (32,213) 5,926
</TABLE>
<PAGE> 159
PART C.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements included in the Registration Statement:
John Hancock Institutional Series Trust
---------------------------------------
John Hancock Berkeley Sector Opportunity Fund:
----------------------------------------------
Statement of Assets and Liabilities as of June 30, 1995
(unaudited).
Statement of Operations of the period ended June 30, 1995
(unaudited).
Statement of changes in Net Asset for period ended
June 30, 1995 (unaudited).
Notes to Financial Statements.
Financial Highlights for each of the period ended June 30,
1994 (unaudited).
Schedule of Investments as of June 30, 1994 (unaudited).
John Hancock Berkeley Overseas Growth Fund
------------------------------------------
Statement of Assets and Liabilities as of June 30, 1995
(unaudited).
Statement of Operations of the period ended June 30, 1995
(unaudited).
Statement of changes in Net Asset for period ended June 30,
1995 (unaudited).
Notes to Financial Statements.
Financial Highlights for each of the period ended June 30,
1994 (unaudited).
Schedule of Investments as of June 30, 1994 (unaudited).
John Hancock Independence Diversified Core Equity Fund II
---------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 1995
(unaudited).
Statement of Operations of the period ended June 30, 1995
(unaudited).
Statement of changes in Net Asset for period ended June 30,
1995 (unaudited).
Notes to Financial Statements.
Financial Highlights for each of the period ended June 30,
1994 (unaudited).
Schedule of Investments as of June 30, 1994 (unaudited).
<PAGE> 160
John Hancock Berkeley Dividend Performers Fund
----------------------------------------------
Statement of Assets and Liabilities as of June 30, 1995
(unaudited).
Statement of Operations of the period ended June 30, 1995
(unaudited).
Statement of changes in Net Asset for period ended June 30,
1995 (unaudited).
Notes to Financial Statements.
Financial Highlights for each of the period ended June 30,
1994 (unaudited).
Schedule of Investments as of June 30, 1994 (unaudited).
John Hancock Berkeley Bond Fund
-------------------------------
Statement of Assets and Liabilities as of June 30, 1995
(unaudited).
Statement of Operations of the period ended June 30, 1995
(unaudited).
Statement of changes in Net Asset for period ended June 30,
1995 (unaudited).
Notes to Financial Statements.
Financial Highlights for each of the period ended June 30,
1994 (unaudited).
Schedule of Investments as of June 30, 1994 (unaudited).
John Hancock Berkeley Global Bond Fund
--------------------------------------
Statement of Assets and Liabilities as of June 30, 1995
(unaudited).
Statement of Operations of the period ended June 30, 1995
(unaudited).
Statement of changes in Net Asset for period ended June 30,
1995 (unaudited).
Notes to Financial Statements.
Financial Highlights for each of the period ended June 30,
1994 (unaudited).
Schedule of Investments as of June 30, 1994 (unaudited).
John Hancock Berkeley Fundamental Value Fund
--------------------------------------------
Statement of Assets and Liabilities as of June 30, 1995
(unaudited).
Statement of Operations of the period ended June 30, 1995
(unaudited).
Statement of changes in Net Asset for period ended June 30,
1995 (unaudited).
Notes to Financial Statements.
Financial Highlights for each of the period ended June 30,
1994 (unaudited).
Schedule of Investments as of June 30, 1994 (unaudited).
<PAGE> 161
(b) Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit
Index hereto and are incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is directly or indirectly controlled by or under common
control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
As of August 14, 1995, the number of record holders of sharews are the
Registrant was as follows:
<CAPTION>
Title Number of Record Holders
----- ------------------------
<S> <C>
Berkeley Dividend Performers 333
Berkeley Bond 207
Berkeley Global Bond 102
Berkeley Sector Opportunity 325
Berkeley Fundamental Value 251
Berkeley Overseas Growth 253
Independence Diversified Core Equity 353
Independence Value 0
Independence Growth 0
Independence Medium Capitalization 0
Independence Balanced 5
</TABLE>
ITEM 27. INDEMNIFICATION
(a) Under Registrant's Declaration of Trust. Article IV, Section 4.3
of the Registrant's Declaration of Trust contains provisions
indemnifying each trustee and each officer of Registrant from
liability to the full extent permitted by law, subject to the
provisions of the Investment Company Act of 1940, as amended.
(b) Under the Underwriting Agreement. Under Section 12 of the
Distribution Agreement, the principal underwriter has agreed to
indemnify the Registrant and its Trustees, officers and
controlling persons against claims arising out of certain acts and
statements of the underwriter.
<PAGE> 162
(c) Under The By-Laws of the John Hancock Mutual Life Insurance
Company ("the Company"), John Hancock Funds, Inc. ("JH Funds,
Inc.") and John Hancock Advisers, Inc. (the "Adviser"). Section
9a of the By-Laws of the Company provides, in effect, that the
Company will, subject to limitations of law, indemnify each
present and former director, officer and employee of the Company
who serves as a director or officer of the Registrant at the
direction or request of the Company against litigation expenses
and liabilities incurred while acting as such, except that such
indemnification does not cover any expense or liability incurred
or imposed in connection with any matter as to which such person
shall be finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interests of
the Company. In addition, no such person will be indemnified by
the Company in respect of any liability or expense incurred in
connection with any matter settled without final adjudication
unless such settlement shall have been approved as in the best
interests of the Company either by vote of the Board of Directors
at a meeting composed of directors who have no interest in the
outcome of such vote or by vote of the policyholders. The Company
may pay expenses incurred in defending an action or claim in
advance of its final disposition, but only upon receipt of an
undertaking by the person indemnified to repay such payment if he
should be determined to be entitled to indemnification.
Article IX of the respective By-Laws of JH Funds, Inc. and the
Adviser provides as follows:
Section 9.01. Indemnity: Any person made or threatened to be
made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the
fact that he is or was at any time since the inception of the
Corporation a director, officer, employee or agent of the
Corporation, or is or was at any time since the inception of
the Corporation serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
be indemnified by the Corporation against expenses (including
attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and the liability was not incurred by reason of
gross negligence or reckless disregard of the duties involved
in the conduct of his office, and expenses in connection
therewith may be advanced by the Corporation, all to the full
extent authorized by law.
Section 9.02. Not Exclusive; Survival of Rights: The
indemnification provided by Section 9.01 shall not be deemed
exclusive of any other right to which those indemnified may be
entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such
a person.
<PAGE> 163
(d) Under the Investment Management Contracts of Registrant on behalf of
each Fund. Each of the Registrant's Investment Management Contracts (the
"Contracts") provides that the Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Contract relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under the contract. Any
person, even though also employed by the Adviser, who may be or become an
employee of and paid by the Trust a 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 the Adviser's employee or agent.
(e) Under the Sub-Investment Management Contracts. Each of the
Sub-Investment Management Contracts (the "Sub-Investment Contracts")
provides that the Sub-Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust, the Fund or the
Adviser in connection with matters to which the Sub-Investment Contract
relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the Sub-Adviser's part in the performance of its duties
or from reckless disregard by it of its obligations and duties under the
contract. Any person, even though also employed by the Sub-Adviser, who
may be or become an employee of and paid by the Trust or the Fund shall be
deemed, when acting within the scope of his employment by the Trust or the
Fund, to be acting in such employment solely for the Trust or the Fund and
not as the Sub-Adviser's employee or agent.
(f) Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to Trustees, officers
and controlling persons of Registrant pursuant to the foregoing provisions,
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against policy as expressed in
the 1933 Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with
the securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether indemnification by
it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
For all of the information required by this item reference is made to
the Forms ADV, as amended, filed under the Investment Advisers Act of
1940 of the Registrant's Adviser, John Hancock Advisers, Inc. (File
No. 801-8124), and the Registrant's Sub-Advisers; Independence
Investment Associates, Inc. (File No. 801- 18048), John Hancock
Advisers International, Ltd. (File No. 801-294981), NM Capital
Management, Inc. (File No. 801
<PAGE> 164
-14571) and Sovereign Asset Management Corporation (File No. 801-
420231) incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The Registrant's sole principal underwriter is JH Funds, Inc., which
also acts as principal underwriter for the following investment companies:
John Hancock Cash Management Fund, John Hancock Capital Series, John
Hancock Sovereign Bond Fund, John Hancock Sovereign Investors Fund, Inc.,
John Hancock Special Equities Fund, John Hancock Strategic Series, John
Hancock Tax- Exempt Income Fund, John Hancock Tax-Exempt Series Fund, John
Hancock Technology Series, Inc., John Hancock Limited Term Government Fund,
John Hancock World Fund, Freedom Investment Trust, Freedom Investment Trust
II, Freedom Investment Trust III, John Hancock Bond Fund, John Hancock
California Tax-Free Income Fund, John Hancock Capital Growth Fund, John
Hancock Cash Reserve, Inc., John Hancock Current Interest, John Hancock
Investment Trust, John Hancock Series, Inc. and John Hancock Tax-Free Bond
Fund.
<TABLE>
(b) The following table lists, for each director and officer of JH Funds,
Inc., the information indicated.
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
------------------ ------------- --------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman of Chairman and
101 Huntington Avenue the Board Chief Executive
Boston, Massachusetts Officer
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
Robert H. Watts Director None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
<PAGE> 165
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
------------------ ------------- --------------
<S> <C> <C>
C. Troy Shaver, Jr. President, Chief None
101 Huntington Avenue Executive Officer
Boston, Massachusetts and Director
Stephen W. Blair Executive Vice None
101 Huntington Avenue President
Boston, Massachusetts
James V. Bowhers Executive Vice None
101 Huntington Avenue President
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and Chief Financial
Boston, Massachusetts Officer
Thomas H. Drohan Senior Vice Senior Vice
101 Huntington Avenue President President and
Boston, Massachusetts Secretary
David A. King Director and Senior None
101 Huntington Avenue Vice President
Boston, Massachusetts
James B. Little Senior Vice Senior Vice
101 Huntington Avenue President President and
Boston, Massachusetts Chief
Financial Officer
John A. Morin Vice President Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President,
101 Huntington Avenue and Secretary Assistant Secretary
Boston, Massachusetts and Compliance
Officer
</TABLE>
<PAGE> 166
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
------------------ ------------- --------------
<S> <C> <C>
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Michael T. Carpenter Senior Vice President None
1000 Louisiana Street
Houston, Texas
Christopher M. Meyer Treasurer None
101 Huntington Avenue
Boston, Massachusetts
Robert G. Freedman Director Vice Chairman
101 Huntington Avenue and Chief Investment
Boston, Massachusetts Officer
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
</TABLE>
<PAGE> 167
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
------------------ ------------- --------------
<S> <C> <C>
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) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant maintains the records required to be maintained by it under
Rules 31a-1(a), 31a-1(b) and 31a-2(a) under the Investment Company Act
of 1940 at 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 or Custodian.
ITEM 31. MANAGEMENT SERVICES
The Registrant is not a party to any management-related service
contract, except as described in this Registration Statement.
ITEM 32. UNDERTAKINGS
The Registrant undertakes:
(a) not applicable;
<PAGE> 168
(b) to file a post-effective amendment, using financial statements which
need not be certified, within four to six months from the effective date of
the Trust's 1933 Act registration statement;
(c) 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; and
(d) if requested to do so by holders of at least 10% of the outstanding
shares of the Registrant, to call and hold a meeting of shareholders of the
Registrant for the purpose of voting upon the question of removal of a
trustee or trustees and to assist shareholders in the communication with
other shareholders.
<PAGE> 169
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts on the 1st day of September 1995.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
By: *
-------------------------------
Edward J. Boudreau, Jr.
Chairman
<TABLE>
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.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman
--------------------------- (Principal Executive Officer)
Edward J. Boudreau, Jr.
Senior Vice President and Chief
Financial Officer (Principal
/s/ James B. Little Financial and Accounting Officer) September 7, 1995
---------------------------
James B. Little
*
--------------------------- Trustee
Thomas W. L. Cameron
*
--------------------------- Trustee
James F. Carlin
*
--------------------------- Trustee
Charles F. Fretz
</TABLE>
<PAGE> 170
<TABLE>
<S> <C> <C>
*
--------------------------- Trustee
Harold R. Hiser, Jr.
*
--------------------------- Trustee
Charles L. Ladner
*
--------------------------- Trustee
Patricia P. McCarter
*
--------------------------- Trustee
Steven R. Pruchansky
*
--------------------------- Trustee
Richard S. Scipione
*
--------------------------- Trustee
Norman H. Smith
*
--------------------------- Trustee
John P. Toolan
*By:
/s/Thomas H. Drohan September 7, 1995
---------------------------
Thomas H. Drohan
(Attorney-in-Fact)
</TABLE>
<PAGE> 171
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES
---------------------------------
EXHIBIT INDEX
-------------
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NUMBER
----------- ------------------- -----------
<S> <C>
1 Declaration of Trust dated October 31, 1994.
2 Amended and Restated By-Laws dated December 19, 1994.
3 None
4 Specimen share certificates for each series of the
Registrant.
5 Investment Management Contracts between the Registrant
on behalf of John Hancock Berkeley Bond Fund, John
Hancock Berkeley Sector Opportunity Fund, John Hancock
Independence Diversified Core Equity Fund II, John
Hancock Berkeley Dividend Performers Fund, John Hancock
Berkeley Global Bond Fund, John Hancock Independence
Balanced Fund, John Hancock Berkeley Fundamental Value
Fund, John Hancock Berkeley Overseas Growth Fund.
5.1 Sub-Investment Management Contracts among the
Registrant on behalf of John Hancock Independence
Diversified Core Equity Fund II and John Hancock
Independence Balanced Fund, John Hancock Advisers,
Inc., and Independence Investment Associates, Inc.
5.2 Sub-Investment Management Contract among the Registrant
on behalf of John Hancock Berkeley Dividend Performers
Fund, John Hancock Advisers, Inc., and Sovereign Asset
Management Corporation.
5.3 Sub-Investment Management Contact among the Registrant
on behalf of John Hancock Berkeley Overseas Growth
Fund, John Hancock Advisers, Inc., and John Hancock
Advisers International, Ltd.
5.4 Sub-Investment Management Contract among the Registrant
on behalf of John Hancock Berkeley Fundamental Value
Fund, John Hancock Advisers, Inc., and NM Capital
Management, Inc.
6 Distribution Agreement between the Registrant and John
Hancock Funds, Inc. dated January 30, 1995.
7 None
</TABLE>
<PAGE> 172
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NUMBER
----------- ------------------- -----------
<S> <C>
8 Master Custodian Agreement between John Hancock Mutual
Funds and Investors Bank and Trust Company .
8.1 Master Custodian Agreement between John Hancock Mutual
Funds and State Street Bank and Trust Company.
8.2 Amendment to Master Custodian Agreement between
Registrant on behalf of John Hancock Berkeley Global
Bond Fund and John Hancock Berkeley Overseas Growth
Fund and State Street Bank and Trust Company.
8.3 Amendment to Master Custodian Agreement between
Registrant on behalf of 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 and John Hancock
Independence Balanced Fund and Investors Bank and Trust
Company.
9 Transfer Agency and Service Agreement between the
Registrant and John Hancock Investors Services
Corporation dated January 30, 1995.
10 None
11 None
12 Financial Statements of the Registrant for the period
ended June 30, 1995 included in Parts A and B.
13 Subscription agreement between Registrant and John
Hancock Advisers, Inc. dated January 12, 1995
14 None
15 None
16 None
17 Powers of Attorney
27.1 Sector Opp
27.2 Overseas Gr
27.3 Div Core II
</TABLE>
<PAGE> 173
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NUMBER
----------- ------------------- -----------
<S> <C>
27.4 Div Perf
27.5 Berk Bond
27.6 Global Bond
27.7 Fund Value
</TABLE>
<PAGE> 1
DECLARATION OF TRUST
OF
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
101 Huntington Avenue
Boston, Massachusetts
02199-7603
Dated October 31, 1994
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I - NAME AND DEFINITIONS............................. 1
Section 1.1. Name..................................... 1
Section 1.2. Definitions.............................. 1
ARTICLE II - TRUSTEES........................................ 4
Section 2.1. General Powers........................... 4
Section 2.2. Investments.............................. 4
Section 2.3. Legal Title.............................. 6
Section 2.4. Issuance and Repurchase of Shares........ 7
Section 2.5. Delegation; Committees................... 7
Section 2.6. Collection and Payment................... 7
Section 2.7. Expenses................................. 7
Section 2.8. Manner of Acting; By-laws................ 7
Section 2.9. Miscellaneous Powers..................... 8
Section 2.10. Principal Transactions................... 9
Section 2.11. Litigation............................... 9
Section 2.12. Number of Trustees....................... 9
Section 2.13. Election and Term........................ 9
Section 2.14. Resignation and Removal.................. 10
Section 2.15. Vacancies................................ 10
Section 2.16. Delegation of Power to Other
Trustees................................. 11
ARTICLE III - CONTRACTS...................................... 11
Section 3.1. Distribution Contract.................... 11
Section 3.2. Advisory or Management Contract.......... 11
Section 3.3. Administration Agreement................. 12
Section 3.4. Service Agreement........................ 12
Section 3.5. Transfer Agent........................... 12
Section 3.6. Custodian................................ 13
Section 3.7. Affiliations of Trustees or
Officers, Etc. .......................... 13
Section 3.8. Compliance with 1940 Act................. 13
ARTICLE IV - LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS............................. 14
Section 4.1. No Personal Liability of
Shareholders, Trustees, Etc. ............ 14
Section 4.2. Non-Liability of Trustees, Etc. ......... 15
Section 4.3. Mandatory Indemnification................ 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.4. No Bond Required of Trustees............. 17
Section 4.5. No Duty of Investigation; Notice
in Trust Instruments, Etc. .............. 17
Section 4.6. Reliance on Experts, Etc. ............... 18
ARTICLE V - SHARES OF BENEFICIAL INTEREST.................... 18
Section 5.1. Beneficial Interest...................... 18
Section 5.2. Rights of Shareholders................... 18
Section 5.3. Trust Only............................... 19
Section 5.4. Issuance of Shares....................... 19
Section 5.5. Register of Shares....................... 19
Section 5.6. Transfer of Shares....................... 20
Section 5.7. Notices.................................. 20
Section 5.8. Treasury Shares.......................... 20
Section 5.9. Voting Powers............................ 20
Section 5.10. Meetings of Shareholders................. 21
Section 5.11. Series or Class Designation.............. 22
Section 5.12. Assent to Declaration of Trust........... 25
ARTICLE VI - REDEMPTION AND REPURCHASE OF SHARES............. 26
Section 6.1. Redemption of Shares..................... 26
Section 6.2. Price.................................... 26
Section 6.3. Payment.................................. 26
Section 6.4. Effect of Suspension of Determination
of Net Asset Value....................... 26
Section 6.5. Repurchase by Agreement.................. 27
Section 6.6. Redemption of Shareholder's
Interest................................. 27
Section 6.7. Redemption of Shares in Order to
Qualify as Regulated Investment
Company; Disclosure of Holding........... 27
Section 6.8. Reductions in Number of Outstanding
Shares Pursuant to Net Asset Value
Formula.................................. 28
Section 6.9. Suspension of Right of Redemption........ 28
ARTICLE VII - DETERMINATION OF NET ASSET VALUE, NET
INCOME AND DISTRIBUTIONS....................... 29
Section 7.1. Net Asset Value.......................... 29
Section 7.2. Distributions to Shareholders............ 29
Section 7.3. Determination of Net Income;
Constant Net Asset Value;
Reduction of Outstanding Shares.......... 30
Section 7.4. Power to Modify Foregoing
Procedures............................... 31
ARTICLE VIII - DURATION; TERMINATION OF TRUST OR A
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
SERIES OR CLASS; AMENDMENT; MERGERS, ETC. .... 32
Section 8.1. Duration................................. 32
Section 8.2. Termination of the Trust or a
Series or a Class........................ 32
Section 8.3. Amendment Procedure...................... 33
Section 8.4. Merger, Consolidation and
Sale of Assets........................... 34
Section 8.5. Incorporation............................ 35
ARTICLE IX - REPORTS TO SHAREHOLDERS......................... 35
ARTICLE X - MISCELLANEOUS.................................... 36
Section 10.1. Execution and Filing.................... 36
Section 10.2. Governing Law........................... 36
Section 10.3. Counterparts............................ 36
Section 10.4. Reliance by Third Parties............... 36
Section 10.5. Provisions in Conflict with Law
or Regulations.......................... 37
</TABLE>
<PAGE> 5
DECLARATION OF TRUST
OF
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
101 Huntington Avenue
Boston, Massachusetts 02199
Dated October 31, 1994
DECLARATION OF TRUST made this 31st day of October, 1994 by Edward J. Boudreau,
Jr. and Richard S. Scipione (together with all other persons from time to time
duly elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof, the "Trustees");
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto;
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
WHEREAS, the Trustees declare that all money and property contributed to the
trust established hereunder shall be held and managed in trust for the benefit
of the holders, from time to time, of the shares of beneficial interest issued
hereunder and subject to the provisions hereof;
NOW, THEREFORE, in consideration of the foregoing premises and the agreements
contained herein, the undersigned, being all of the Trustees of the Trust,
hereby declare as follows:
ARTICLE I
NAME AND DEFINITIONS
--------------------
SECTION 1.1. NAME. The name of the trust created hereby is "John Hancock
Institutional Series Trust" (the "Trust").
SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following terms
have the following respective meanings:
(a)"ADMINISTRATOR" means the party, other than the Trust, to the contract
described in Section 3.3 hereof.
(b)"BY-LAWS" means the By-laws referred to in Section 2.8 hereof, as amended
from time to time.
(c)"CLASS" means any division of shares within a Series in accordance with the
provisions of Article V.
(d)The terms "COMMISSION" and "INTERESTED PERSON" have the me anings given them
in the 1940 Act. Except as such term may be otherwise defined by the Trustees
in conjunction with the establishment of any Series, the TERM "VOTE OF A
MAJORITY OF THE OUTSTANDING SHARES ENTITLED TO
<PAGE> 6
VOTE" shall have the same meaning as is assigned to the term "VOTE OF A MAJORITY
OF THE OUTSTANDING VOTING SECURITIES" in the 1940 Act.
(e)"CUSTODIAN" means any Person other than the Trust who has custody of any
Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f)"DECLARATION" means this Declaration of Trust as amended from time to time.
Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(g)"DISTRIBUTOR" means the party, other than the Trust, to the contract
described in Section 3.1 hereof.
(h)"FUND" or "FUNDS," individually or collectively, means the separate Series of
the Trust, together with the assets and liabilities assigned thereto.
(i)"FUNDAMENTAL RESTRICTIONS" means the investment restrictions set forth in the
Prospectus and Statement of Additional Information for any Series and
designated as fundamental restrictions therein with respect to such Series.
(j)"HIS" shall include the feminine and neuter, as well as the masculine,
genders.
(k)"INVESTMENT ADVISER" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(l)The "1940 ACT" means the Investment Company Act of 1940, as amended from
time to time.
(m)"PERSON" means and includes individuals, corporations, partnerships, trusts,
associations, joint ventures and other entities, whether or not legal entities,
and governments and agencies and political subdivisions thereof.
(n)"PROSPECTUS" means the Prospectuses and Statements of Additional Information
included in the Registration Statement of the Trust under the Securities Act
of 1933, as amended, as such Prospectuses and Statements of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(o)"SERIES" individually or collectively means the separately managed
component(s) of the Trust (or, if the Trust shall have only one such component,
then that one) as may be established and designated from time to time by
the Trustees pursuant to Section 5.11 hereof.
(p)"SHAREHOLDER" means a record owner of Outstanding Shares.
(q)"SHARES" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time, including
the Shares of any and all Series or of any Class within any Series (as the
context may require) which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. "OUTSTANDING" Shares means those
Shares shown from time to time on the books of the Trust or its Transfer Agent
as then issued and
<PAGE> 7
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the treasury of the
Trust.
(r)"TRANSFER AGENT" means any Person other than the Trust who maintains the
Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
(s)"TRUST" means John Hancock Institutional Series Trust.
(t)"TRUSTEES" means the persons who have signed this Declaration, so long as
they shall continue in office in accordance with the terms hereof, and all other
persons who now serve or may from time to time be duly elected, qualified
and serving as Trustees in accordance with the provisions of Article II hereof,
and reference herein to a Trustee or the Trustees shall refer to such person or
persons in this capacity or their capacities as trustees hereunder.
(u)"TRUST PROPERTY" means any and all property, real or personal, tangible or
intangible, which is owned or held by or for the account of the Trust or the
Trustees, including any and all assets of or allocated to any Series or Class,
as the context may require.
ARTICLE II
TRUSTEES
--------
SECTION 2.1. GENERAL POWERS. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the United States of
America and of foreign governments, and to do all such other things and execute
all such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as limiting
the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 2.2. INVESTMENTS. The Trustees shall have the power:
(a)To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b)To invest in, hold for investment, or reinvest in, cash; securities,
including common, preferred and preference stocks; warrants; subscription
rights; profit-sharing interests or participations and all other contracts for
or evidence of equity interests; bonds, debentures, bills, time notes and all
other evidences of indebtedness; negotiable or non-negotiable instruments;
government securities,
<PAGE> 8
including securities of any state, municipality or other political subdivision
thereof, or any governmental or quasi-governmental agency or instrumentality;
and money market instruments including bank certificates of deposit, finance
paper, commercial paper, bankers' acceptances and all kinds of repurchase
agreements, of any corporation, company, trust, association, firm or other
business organization however established, and of any country, state,
municipality or other political subdivision, or any governmental or quasi-
governmental agency or instrumentality; any other security, instrument or
contract the acquisition or execution of which is not prohibited by any
Fundamental Restriction; and the Trustees shall be deemed to have the foregoing
powers with respect to any additional securities in which the Trust may invest
should the Fundamental Restrictions be amended.
(c)To acquire (by purchase, subscription or otherwise), to hold, to trade in and
deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend and to pledge any such securities, to enter into
repurchase agreements, reverse repurchase agreements, firm commitment
agreements, forward foreign currency exchange contracts, interest rate, mortgage
or currency swaps, and interest rate caps and floors, to purchase and sell
options on securities, indices, currency or other financial assets, futures
contracts and options on futures contracts of all descriptions and to engage in
all types of hedging, risk management or income enhancement transactions.
(d)To exercise all rights, powers and privileges of ownership or interest in all
securities and repurchase agreements included in the Trust Property, including
the right to vote thereon and otherwise act with respect thereto and to do all
acts for the preservation, protection, improvement and enhancement in value of
all such securities and repurchase agreements.
(e)To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f)To borrow money and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; and to endorse, guarantee, or
undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
(g)To aid by further investment any corporation, company, trust, association or
firm, any obligation of or interest in which is included in the Trust Property
or in the affairs of which the Trustees have any direct or indirect interest; to
do all acts and things designed to protect, preserve, improve or enhance the
value of such obligation or interest; and to guarantee or become surety
on any or all of the contracts, stocks, bonds, notes, debentures and other
obligations of any such corporation, company, trust, association or firm.
(h)To enter into a plan of distribution and any related agree ments whereby the
Trust may finance directly or indirectly any activity which is primarily
intended to result in the distribution and/or servicing of Shares.
(i)To adopt on behalf of the Trust or any Series thereof an alternative
purchase plan providing for the issuance of multiple Classes of Shares (as
authorized herein at Section 5.11).
(j)In general to carry on any other business in connection with or incidental to
any of the foregoing powers, to do everything necessary, suitable or proper for
the accomplishment of any
<PAGE> 9
purpose or the attainment of any object or the furtherance of any power
hereinbefore set forth, either alone or in association with others, and to do
every other act or thing incidental or appurtenant to or arising out of or
connected with the aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have full power
in their discretion as contemplated in Section 8.5, without any requirement of
approval by Shareholders, to invest part or all of the Trust Property (or part
or all of the assets of any Series), or to dispose of part or all of the Trust
Property (or part or all of the assets of any Series) and invest the
proceeds of such disposition, in securities issued by one or more other
investment companies registered under the 1940 Act. Any such other investment
company may (but need not) be a trust (formed under the laws of the State of New
York or of any other state) which is classified as a partnership for federal
income tax purposes.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
SECTION 2.3. LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided that the interest of the Trust therein is
deemed appropriately protected. The right, title and interest of the Trustees
in the Trust Property and the Property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office, resignation, removal or death of a Trustee he
shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
SECTION 2.4. ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in Shares and, subject to the
provisions set forth in Articles VI and VII and Section 5.11 hereof, to apply to
any such repurchase, redemption, retirement, cancellation or acquisition of
Shares any funds or property of the Trust or of the particular Series with
respect to which such Shares are issued, whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the laws of The
Commonwealth of Massachusetts governing business corporations.
SECTION 2.5. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
any Series of the Trust or the names of the Trustees or otherwise as the
Trustees may deem expedient, to the same extent as such delegation is permitted
by the 1940 Act.
<PAGE> 10
SECTION 2.6. COLLECTION AND PAYMENT. The Trustees shall have power to collect
all property due to the Trust; to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims relating
to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
SECTION 2.7. EXPENSES. The Trustees shall have the power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
SECTION 2.8. MANNER OF ACTING; BY-LAWS. Except as otherwise provided herein
or in the By-laws, any action to be taken by the Trustees may be taken by a
majority of the Trustees present at a meeting of Trustees, including any meeting
held by means of a conference telephone circuit or similar communications
equipment by means of which all persons participating in the meeting can
hear each other, or by written consents of a majority of Trustees then in
office. The Trustees may adopt By-laws not inconsistent with this Declaration
to provide for the conduct of the business of the Trust and may amend or repeal
such By-laws to the extent such power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in addition to
such provisions or any other provision of this Declaration or of the By-laws,
the Trustees may by resolution appoint a committee consisting of less than the
whole number of Trustees then in office, which committee may be empowered to act
for and bind the Trustees and the Trust, as if the acts of such committee were
the acts of all the Trustees then in office, with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any action, suit
or proceeding which shall be pending or threatened to be brought before any
court, administrative agency or other adjudicatory body.
SECTION 2.9. MISCELLANEOUS POWERS. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) remove Trustees, fill vacancies in, add to or subtract from their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) purchase,
and pay for out of Trust Property or the property of the appropriate Series of
the Trust, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, administrators, distributors, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, share purchase, and
other retirement, incentive and benefit plans for any Trustees, officers,
employees and agents of the Trust; (f) to the extent permitted by law, indemnify
any person with whom the Trust or any Series thereof has dealings, including the
Investment Adviser, Administrator, Distributor, Transfer Agent and selected
dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year and taxable year of the Trust or any Series thereof and the method
by which its or their accounts shall be kept; and
<PAGE> 11
(i) adopt a seal for the Trust, but the absence of such seal shall not
impair the validity of any instrument executed on behalf of the Trust.
SECTION 2.10. PRINCIPAL TRANSACTIONS. Except for transactions not permitted by
the 1940 Act or rules and regulations adopted, or orders issued, by the
Commission thereunder, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the Trust or
any Series thereof to any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any
such dealings with the Investment Adviser, Distributor or Transfer Agent or with
any Interested Person of such Person; and the Trust or a Series thereof may
employ any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
SECTION 2.11. LITIGATION. The Trustees shall have the power to engage in and
to prosecute, defend, compromise, abandon, or adjust by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust.
SECTION 2.12. NUMBER OF TRUSTEES. The initial Trustees shall be the persons
initially signing this Declaration. The number of Trustees (other than the
initial Trustees) shall be such number as shall be fixed from time to time by a
written instrument signed by a majority of the Trustees, provided, however, that
the number of Trustees shall in no event be less than one (1) nor more than
fifteen (15).
SECTION 2.13. ELECTION AND TERM. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.15 hereof, the Trustees may
succeed themselves and shall be elected by the Shareholders owning of record a
plurality of the Shares voting at a meeting of Shareholders on a date fixed by
the Trustees. Except in the event of resignations or removals pursuant to
Section 2.14 hereof, each Trustee shall hold office until such time as less than
a majority of the Trustees holding office have been elected by Shareholders. In
such event the Trustees then in office shall call a Shareholders' meeting for
the election of Trustees. Except for the foregoing circumstances, the Trustees
shall continue to hold office and may appoint successor Trustees.
SECTION 2.14. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees or by action of two-thirds
of the outstanding Shares of the Trust (for purposes of determining the
circumstances and procedures under which any such removal by the Shareholders
may take place, the provisions of Section 16(c) of the 1940 Act (or any
successor provisions) shall be applicable to the same extent as if the Trust
were subject to the provisions of that Section). Upon the resignation or
removal of a Trustee, or his
<PAGE> 12
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property held in the name of the
resigning or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
SECTION 2.15. VACANCIES. The term of office of a Trustee shall terminate and
a vacancy shall occur in the event of his death, retirement, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform
the duties of the office of a Trustee. No such vacancy shall operate to annul
the Declaration or to revoke any existing agency created pursuant to the terms
of the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall
fill such vacancy by the appointment of such other person as they in their
discretion shall see fit, made by a written instrument signed by a majority of
the Trustees then in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of retirement,
resignation or increase in the number of Trustees, provided that such
appointment shall not become effective prior to such retirement, resignation or
increase in the number of Trustees. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided in this Section
2.15, the Trustees in office, regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all the duties imposed upon
the Trustees by the Declaration. A written instrument certifying the existence
of such vacancy signed by a majority of the Trustees in office shall be
conclusive evidence of the existence of such vacancy.
SECTION 2.16. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trust ee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise expressly provided.
ARTICLE III
CONTRACTS
---------
SECTION 3.1. DISTRIBUTION CONTRACT. The Trustees may in their discretion from
time to time enter into an exclusive or non- exclusive distribution contract or
contracts providing for the sale of the Shares to net the Trust or the
applicable Series of the Trust not less than the amount provided for in Section
7.1 of Article VII hereof, whereby the Trustees may either agree to sell
the Shares to the other party to the contract or appoint such other party as
their sales agent for the Shares, and in either case on such terms and
conditions, if any, as may be prescribed in the By-laws, and such further terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article III or of the By-laws; and such
contract may also provide for the repurchase of the Shares by such other party
as agent of the Trustees.
SECTION 3.2. ADVISORY OR MANAGEMENT CONTRACT. The Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts or, if the Trustees establish multiple Series,
separate investment advisory or management contracts with respect to
<PAGE> 13
one or more Series whereby the other party or parties to any such contracts
shall undertake to furnish the Trust or such Series management, investment
advisory, administration, accounting, legal, statistical and research
facilities and services, promotional or marketing activities, and such other
facilities and services, if any, as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may
in their discretion determine. Notwithstanding any provisions of the
Declaration, the Trustees may authorize the Investment Advisers, or any of
them, under any such contracts (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of portfolio securities and other investments of the
Trust on behalf of the Trustees or may authorize any officer, employee or
Trustee to effect such purchases, sales, loans or exchanges pursuant to
recommendations of such Investment Advisers, or any of them (and all without
further action by the Trustees). Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all of the
Trustees. The Trustees may, in their sole discretion, call a meeting of
Shareholders in order to submit to a vote of Shareholders at such meeting the
approval or continuance of any such investment advisory or management contract.
If the Shareholders of any one or more of the Series of the Trust should fail
to approve any such investment advisory or management contract, the Investment
Adviser may nonetheless serve as Investment Adviser with respect to any Series
whose Shareholders approve such contract.
SECTION 3.3. ADMINISTRATION AGREEMENT. The Trustees may in their discretion
from time to time enter into an administration agreement or, if the Trustees
establish multiple Series or Classes separate administration agreements with
respect to each Series or Class, whereby the other party to such agreement shall
undertake to manage the business affairs of the Trust or of a Series or Class
thereof and furnish the Trust or a Series or a Class thereof with office
facilities, and shall be responsible for the ordinary clerical, bookkeeping and
recordkeeping services at such office facilities, and other facilities and
services, if any, and all upon such terms and conditions as the Trustees may in
their discretion determine.
SECTION 3.4. SERVICE AGREEMENT. The Trustees may in their discretion from
time to time enter into Service Agreements with respect to one or more Series or
Classes thereof whereby the other parties to such Service Agreements will
provide administration and/or support services pursuant to administration plans
and service plans, and all upon such terms and conditions as the Trustees in
their discretion may determine.
SECTION 3.5. TRANSFER AGENT. The Trustees may in their discretion from time
to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
SECTION 3.6. CUSTODIAN. The Trustees may appoint or otherwise engage one or
more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least two
million dollars ($2,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-laws of the Trust. The Trustees may also authorize
the Custodian to employ one or more sub-custodians, including such foreign banks
and securities depositories as meet the requirements of applicable provisions of
the 1940 Act, and upon such terms and conditions as may be agreed upon between
the Custodian and such sub-custodian, to hold securities and other assets of the
Trust and to perform the acts and services of the Custodian, subject to
applicable provisions of law and resolutions adopted by the Trustees.
<PAGE> 14
SECTION 3.7. AFFILIATIONS OF TRUSTEES OR OFFICERS, ETC. The fact that:
(i) any of the Shareholders, Trustees or officers of
the Trust or any Series thereof is a shareholder, director,
officer, partner, trustee, employee, manager, adviser or
distributor of or for any partnership, corporation, trust,
association or other organization or of or for any parent or
affiliate of any organization, with which a contract of the
character described in Sections 3.1, 3.2, 3.3 or 3.4 above
or for services as Custodian, Transfer Agent or disbursing
agent or for related services may have been or may hereafter
be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder of or has an interest in
the Trust, or that
(ii) any partnership, corporation, trust, association
or other organization with which a contract of the character
described in Sections 3.1, 3.2, 3.3 or 3.4 above or for
services as Custodian, Transfer Agent or disbursing agent or
for related services may have been or may hereafter be made
also has any one or more of such contracts with one or more
other partnerships, corporations, trusts, associations or
other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
SECTION 3.8. COMPLIANCE WITH 1940 ACT. Any contract entered into
pursuant to Sections 3.1 or 3.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable Act of Congress hereafter enacted), as modified by any
applicable order or orders of the Commission, with respect to its continuance in
effect, its termination and the method of authorization and approval of such
contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
------------------------
SECTION 4.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust or any Series thereof. No Trustee, officer, employee or agent of the
Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its Shareholders, in
connection with Trust Property or the affairs of the Trust, except to the extent
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties with respect to such Person; and all such Persons shall
look solely to the Trust Property, or to the Property of one or more specific
Series of the Trust if the claim arises from the conduct of such Trustee,
officer, employee or agent with respect to only such Series, for satisfaction of
claims of any nature arising in connection with the affairs of the Trust. If
any Shareholder, Trustee, officer, employee, or agent, as such, of the Trust or
any Series thereof, is made a party to any suit or proceeding to enforce any
such liability of the Trust or any Series thereof, he shall not, on account
thereof, be held to any personal liability. The Trust
<PAGE> 15
shall indemnify and hold each Shareholder harmless from and against all claims
and liabilities, to which such Shareholder may become subject by reason of
his being or having been a Shareholder, and shall reimburse such Shareholder or
former Shareholder (or his or her heirs, executors, administrators or other
legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) out of the Trust Property for all legal
and other expenses reasonably incurred by him in connection with any such claim
or liability. The indemnification and reimbursement required by the preceding
sentence shall be made only out of assets of the one or more Series whose Shares
were held by said Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust or any Series thereof to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
SECTION 4.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust or any Series thereof shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
SECTION 4.3. MANDATORY INDEMNIFICATION. (a) Subject to the exceptions
and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee,
officer, employee or agent of the Trust (including any
individual who serves at its request as director, officer,
partner, trustee or the like of another organization in
which it has any interest as a shareholder, creditor or
otherwise) shall be indemnified by the Trust, or by one or
more Series thereof if the claim arises from his or her
conduct with respect to only such Series, to the fullest
extent permitted by law against all liability and against
all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue
of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal, or other, including appeals),
actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust, a Series
thereof or the Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good
faith in the reasonable belief that his action was in the
best interest of the Trust or a Series thereof;
<PAGE> 16
(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) by a vote of a majority of the Shares
outstanding and entitled to vote (excluding Shares
owned of record or beneficially by such individual).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust or any Series thereof other
than Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust or a Series thereof prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the recipient,
or the Trust or Series thereof shall be insured against
losses arising out of any such advances; or
(ii) a majority of the Non-interested Trustees acting
on the matter (provided that a majority of the Non-
interested Trustees act on the matter) or an independent
legal counsel in a written opinion shall determine, based
upon a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe
that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who (i)
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) is not involved in the claim, action, suit or
proceeding.
<PAGE> 17
SECTION 4.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
SECTION 4.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or a Series thereof or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as officers, employees or
agents of the Trust or a Series thereof. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or a Series thereof
or undertaking made or issued by the Trustees may recite that the same is
executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the Trust Property or the Trust Property of the
applicable Series, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property or the Trust Property of the applicable
Series, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment shall deem
advisable.
SECTION 4.6. RELIANCE ON EXPERTS, ETC. Each Trustee, officer or
employee of the Trust or a Series thereof shall, in the performance of his
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or a Series thereof, upon an opinion of
counsel, or upon reports made to the Trust or a Series thereof by any of its
officers or employees or by the Investment Adviser, the Administrator, the
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
-----------------------------
SECTION 5.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such Shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the exclusive authority without
the requirement of Shareholder approval to establish and designate one or more
Series of shares and one or more Classes thereof as the Trustees deem necessary
or desirable. Each Share of any Series shall represent an equal proportionate
Share in the assets of
<PAGE> 18
that Series with each other Share in that Series. Subject to the provisions of
Section 5.11 hereof, the Trustees may also authorize the creation of additional
Series of Shares (the proceeds of which may be invested in separate,
independently managed portfolios) and additional Classes of Shares within any
Series. All Shares issued hereunder including, without limitation, Shares
issued in connection with a dividend in Shares or a split in Shares, shall be
fully paid and nonassessable.
SECTION 5.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to share or assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any Series or Class of Shares.
SECTION 5.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
SECTION 5.4. ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time without a vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, including
cash or property, at such time or times and on such terms as the Trustees may
deem best, except that only Shares previously contracted to be sold may be
issued during any period when the right of redemption is suspended pursuant to
Section 6.9 hereof, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares of the Trust or, if
the Shares be divided into Series or Classes, of any Series or any Class thereof
of the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1,000ths of a Share or integral multiples thereof.
SECTION 5.5. REGISTER OF SHARES. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as provided
herein or in the By-laws, until he has given his address to the Transfer Agent
or such other officer or agent of the Trustees as shall keep the said register
for entry thereon. It is not contemplated that certificates will be issued for
the Shares;
<PAGE> 19
however, the Trustees, in their discretion, may authorize the issuance of
share certificates and promulgate appropriate rules and regulations as to their
use.
SECTION 5.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on
the register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
SECTION 5.7. NOTICES. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
SECTION 5.8. TREASURY SHARES. Shares held in the treasury shall, until
resold pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
SECTION 5.9. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.13; (ii) with
respect to any investment advisory contract entered into pursuant to Section
3.2; (iii) with respect to termination of the Trust or a Series or Class thereof
as provided in Section 8.2; (iv) with respect to any amendment of this
Declaration to the limited extent and as provided in Section 8.3; (v) with
respect to any merger, consolidation or sale of assets as provided in Section
8.4; (vi) with respect to incorporation of the Trust to the extent and as
provided in Section 8.5; (vii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or a Series thereof or the
Shareholders of either; (viii) with respect to any plan adopted pursuant to Rule
12b-1 (or any successor rule) under the 1940 Act, and related matters; and (ix)
with respect to such additional matters relating to the Trust as may be required
by this Declaration, the By-laws or any registration of the Trust as an
investment company under the 1940 Act with the Commission (or any successor
agency) or as the Trustees may consider necessary or desirable. As determined
by the Trustees without the vote or consent of shareholders, on any matter
submitted to a vote of Shareholders either (i) each whole Share shall
<PAGE> 20
be entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote or
(ii) each dollar of net asset value (number of Shares owned times net asset
value per share of such Series or Class, as applicable) shall be entitled to one
vote on any matter on which such Shares are entitled to vote and each fractional
dollar amount shall be entitled to a proportionate fractional vote. The
Trustees may, in conjunction with the establishment of any further Series or any
Classes of Shares, establish conditions under which the several Series or
Classes of Shares shall have separate voting rights or no voting rights. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for Shareholders'
votes and meetings and related matters.
SECTION 5.10. MEETINGS OF SHAREHOLDERS. No annual or regular meetings
of Shareholders are required. Special meetings of the Shareholders, including
meetings involving only the holders of Shares of one or more but less than all
Series or Classes thereof, may be called at any time by the Chairman of the
Board, President, or any Vice-President of the Trust, and shall be called by
the President or the Secretary at the request, in writing or by resolution, of
a majority of the Trustees, or at the written request of the holder or holders
of ten percent (10%) or more of the total number of Outstanding Shares of the
Trust entitled to vote at such meeting. Meetings of the Shareholders of any
Series shall be called by the President or the Secretary at the written request
of the holder or holders of ten percent (10%) or more of the total number of
Outstanding Shares of such Series of the Trust entitled to vote at such
meeting. Any such request shall state the purpose of the proposed meeting.
SECTION 5.11. SERIES OR CLASS DESIGNATION. (a) Without limiting the
authority of the Trustees set forth in Section 5.1 to establish and designate
any further Series or Classes, the Trustees hereby establish the following
eleven Series, each of which consists of a single Class of Shares: John Hancock
Independence Diversified Core Equity Fund II, John Hancock Independence Growth
Fund, John Hancock Independence Value Fund, John Hancock Independence Medium
Capitalization Fund, John Hancock Independence Balanced Fund, John Hancock
Berkeley Bond Fund, John Hancock Berkeley Global Bond Fund, John Hancock
Berkeley Overseas Growth Fund, John Hancock Berkeley Sector Opportunity Fund,
John Hancock Berkeley Fundamental Value Fund and John Hancock Berkeley Dividend
Performers Fund (the "Existing Series").
(b) The Shares of the Existing Series and Class thereof herein
established and designated and any Shares of any further Series and Classes
thereof that may from time to time be established and designated by the Trustees
shall be established and designated, and the variations in the relative rights
and preferences as between the different Series shall be fixed and determined,
by the Trustees (unless the Trustees otherwise determine with respect to further
Series or Classes at the time of establishing and designating the same);
provided, that all Shares shall be identical except that there may be variations
so fixed and determined between different Series or Classes thereof as to
investment objective, policies and restrictions, purchase price, payment
obligations, distribution expenses, right of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, exchange rights,
and conditions under which the several Series or Classes shall have separate
voting rights, all of which are subject to the limitations set forth below.
<PAGE> 21
All references to Shares in this Declaration shall be deemed to be Shares of
any or all Series or Classes as the context may require.
(c) As to any Existing Series and Classes herein established and
designated and any further division of Shares of the Trust into additional
Series or Classes, the following provisions shall be applicable:
(i) The number of authorized Shares and the number of Shares of each
Series or Class thereof that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or one or more Classes
that may be established and designated from time to time. The Trustees may hold
as treasury shares (of the same or some other Series or Class), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any Series or Class reacquired by the Trust at their discretion from time to
time.
(ii) All consideration received by the Trust for the issue or sale of
Shares of a particular Series or Class, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors of such Series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series, the Trustees shall allocate them among any
one or more of the Series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series for all purposes. No holder of Shares of
any Series shall have any claim on or right to any assets allocated or belonging
to any other Series.
(iii) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series or the appropriate
Class or Classes thereof and all expenses, costs, charges and reserves
attributable to that Series or Class or Classes thereof, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series and Classes for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items are capital; and each
such determination and allocation shall be conclusive and binding upon the
Shareholders. The assets of a particular Series of the Trust shall under no
circumstances be charged with liabilities attributable to any other Series or
Class thereof of the Trust. All persons extending credit to, or contracting with
or having any claim against a particular Series or Class of the Trust shall look
only to the assets of that particular Series for payment of such credit,
contract or claim.
(iv) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 7.2 of this Declaration. With respect to any
Series or Class, dividends and distributions on Shares of a particular Series or
Class may be paid with such frequency as the
<PAGE> 22
Trustees may determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of Shares of that Series or Class, from
such of the income and capital gains, accrued or realized, from the assets
belonging to that Series, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to that Series or Class. All
dividends and distributions on Shares of a particular Series or Class shall be
distributed pro rata to the Shareholders of that Series or Class in proportion
to the number of Shares of that Series or Class held by such Shareholders at the
time of record established for the payment of such dividends or distribution.
(v) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
Class thereof shall be entitled to receive his pro rata share of distributions
of income and capital gains made with respect to such Series or Class net of
expenses. Upon redemption of his Shares or indemnification for liabilities
incurred by reason of his being or having been a Shareholder of a Series or
Class, such Shareholder shall be paid solely out of the funds and property of
such Series of the Trust. Upon liquidation or termination of a Series or Class
thereof of the Trust, Shareholders of such Series or Class thereof shall be
entitled to receive a pro rata share of the net assets of such Series. A
Shareholder of a particular Series of the Trust shall not be entitled to
participate in a derivative or class action on behalf of any other Series or the
Shareholders of any other Series of the Trust.
(vi) On each matter submitted to a vote of Shareholders, all Shares of
all Series and Classes shall vote as a single class; provided, however, that (1)
as to any matter with respect to which a separate vote of any Series or Class is
required by the 1940 Act or is required by attributes applicable to any Series
or Class or is required by any Rule 12b-1 plan, such requirements as to a
separate vote by that Series or Class shall apply, (2) to the extent that a
matter referred to in clause (1) above, affects more than one Class or Series
and the interests of each such Class or Series in the matter are identical,
then, subject to clause (3) below, the Shares of all such affected Classes or
Series shall vote as a single Class; (3) as to any matter which does not affect
the interests of a particular Series or Class, only the holders of Shares of the
one or more affected Series or Classes shall be entitled to vote; and (4) the
provisions of the following sentence shall apply. On any matter that pertains
to any particular Class of a particular Series or to any Class expenses with
respect to any Series which matter may be submitted to a vote of Shareholders,
only Shares of the affected Class or that Series, as the case may be, shall be
entitled to vote except that: (i) to the extent said matter affects Shares of
another Class or Series, such other Shares shall also be entitled to vote, and
in such cases Shares of the affected Class, as the case may be, of such Series
shall be voted in the aggregate together with such other Shares; and (ii) to the
extent that said matter does not affect Shares of a particular Class of such
Series, said Shares shall not be entitled to vote (except where otherwise
required by law or permitted by the Trustees acting in their sole discretion)
even though the matter is submitted to a vote of the Shareholders of any other
Class or Series.
(vii) Except as otherwise provided in this Article V, the Trustees
shall have the power to determine the designations, preferences, privileges,
payment obligations, limitations and rights, including voting and dividend
rights, of each Class and Series of Shares. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that the holders of Shares of any Series or Class shall have the right to
convert or exchange said Shares into Shares of one or more Series or Classes of
Shares in accordance with such requirements, conditions and procedures as may be
established by the Trustees.
<PAGE> 23
(viii) The establishment and designation of any Series or Classes of
Shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Classes, or as otherwise
provided in such instrument. At any time that there are no Shares outstanding
of any particular Series or Class previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that Series or Class and the establishment and designation thereof. Each
instrument referred to in this section shall have the status of an amendment to
this Declaration.
SECTION 5.12. ASSENT TO DECLARATION OF TRUST. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
-----------------------------------
SECTION 6.1. REDEMPTION OF SHARES. (a) All Shares of the Trust shall
be redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust. The
Trust may require any Shareholder to pay a sales charge to the Trust, the
underwriter, or any other person designated by the Trustees upon redemption or
repurchase of Shares in such amount and upon such conditions as shall be
determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or
Class thereof at the price determined as hereinafter set forth, upon the
appropriately verified written application of the record holder thereof (or upon
such other form of request as the Trustees may determine) at such office or
agency as may be designated from time to time for that purpose by the Trustees.
The Trustees may from time to time specify additional conditions, not
inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective Prospectus.
SECTION 6.2. PRICE. Shares shall be redeemed at a price based on their
net asset value determined as set forth in Section 7.1 hereof as of such time as
the Trustees shall have theretofore prescribed by resolution. In the absence of
such resolution, the redemption price of Shares deposited shall be based on the
net asset value of such Shares next determined as set forth in Section 7.1
hereof after receipt of such application. The amount of any contingent deferred
sales charge or redemption fee payable upon redemption of Shares may be deducted
from the proceeds of such redemption.
SECTION 6.3. PAYMENT. Payment of the redemption price of Shares of the
Trust or any Series or Class thereof shall be made in cash or in property to the
Shareholder at such time and in the manner, not inconsistent with the 1940 Act
or other applicable laws, as may be specified from time to time in the Trust's
then effective Prospectus(es), subject to the provisions of Section 6.4 hereof.
Notwithstanding the foregoing, the Trustees may withhold from such redemption
proceeds any amount arising (i) from a liability of the redeeming Shareholder to
the Trust or (ii) in connection with any Federal or state tax withholding
requirements.
<PAGE> 24
SECTION 6.4. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series or Class thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 6.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series or Class thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right
so suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any Share certificates
on deposit. The redemption price of Shares for which redemption applications
have not been revoked shall be based on the net asset value of such Shares next
determined as set forth in Section 7.1 after the termination of such suspension,
and payment shall be made within seven (7) days after the date upon which the
application was made plus the period after such application during which the
determination of net asset value was suspended.
SECTION 6.5. REPURCHASE BY AGREEMENT. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
SECTION 6.6. REDEMPTION OF SHAREHOLDER'S INTEREST. The Trustees, in
their sole discretion, may cause the Trust to redeem all of the Shares of one or
more Series or Class thereof held by any Shareholder if the value of such Shares
held by such Shareholder is less than the minimum amount established from time
to time by the Trustees.
SECTION 6.7. REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY; DISCLOSURE OF HOLDING. (a) If the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal Revenue Code of 1986, then
the Trustees shall have the power by lot or other means deemed equitable by them
(i) to call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust or any Series of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust or any Series of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust or any Series of the
Trust in question would result in such disqualification. The redemption shall
be effected at the redemption price and in the manner provided in Section 6.1.
(b) The holders of Shares or other securities of the Trust or any
Series of the Trust shall upon demand disclose to the Trustees in writing such
information with respect to direct and indirect ownership of Shares or other
securities of the Trust or any Series of the Trust as the Trustees deem
necessary to comply with the provisions of the Internal Revenue Code of 1986, as
amended, or to comply with the requirements of any other taxing authority.
<PAGE> 25
SECTION 6.8. REDUCTIONS IN NUMBER OF OUTSTANDING SHARES PURSUANT TO NET
ASSET VALUE FORMULA. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series of the Trust pursuant to the provisions of Section
7.3.
SECTION 6.9. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare
a suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Series
thereof of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Trust or a Series thereof fairly to determine the
value of its net assets, or (iv) during any other period when the Commission may
for the protection of Shareholders of the Trust by order permit suspension of
the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in clauses (ii), (iii), or (iv) exist.
Such suspension shall take effect at such time as the Trust shall specify but
not later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the
case of a suspension of the right of redemption, a Shareholder may either
withdraw his request for redemption or receive payment based on the net asset
value existing after the termination of the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
------------------------------
SECTION 7.1. NET ASSET VALUE. The net asset value of each outstanding
Share of the Trust or of each Series or Class thereof shall be determined on
such days and at such time or times as the Trustees may determine. The value of
the assets of the Trust or any Series thereof may be determined (i) by a pricing
service which utilizes electronic pricing techniques based on general
institutional trading, (ii) by appraisal of the securities owned by the Trust or
any Series of the Trust, (iii) in certain cases, at amortized cost, or (iv) by
such other method as shall be deemed to reflect the fair value thereof,
determined in good faith by or under the direction of the Trustees. From the
total value of said assets, there shall be deducted all indebtedness, interest,
taxes, payable or accrued, including estimated taxes on unrealized book profits,
expenses and management charges accrued to the appraisal date, net income
determined and declared as a distribution and all other items in the nature of
liabilities which shall be deemed appropriate, as incurred by or allocated to
the Trust or any Series or Class of the Trust. The resulting amount which shall
represent the total net assets of the Trust or Series or Class thereof shall be
divided by the number of Shares of the Trust or Series or Class thereof
outstanding at the time and the quotient so obtained shall be deemed to be the
net asset value of the Shares of the Trust or Series or Class thereof. The net
asset value of the Shares shall be determined at least once on each business
day, as of the close of regular trading on the New York Stock Exchange or as of
such other time or times as the Trustees shall determine. The power and duty to
make the daily
<PAGE> 26
calculations may be delegated by the Trustees to the Investment Adviser, the
Administrator, the Custodian, the Transfer Agent or such other Person as the
Trustees by resolution may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act.
It shall not be a violation of any provision of this Declaration if Shares are
sold, redeemed or repurchased by the Trust at a price other than one based on
net asset value if the net asset value is affected by one or more errors
inadvertently made in the pricing of portfolio securities or in accruing income,
expenses or liabilities.
SECTION 7.2. DISTRIBUTIONS TO SHAREHOLDERS. (a) The Trustees shall
from time to time distribute ratably among the Shareholders of the Trust or of a
Series or Class thereof such proportion of the net profits, surplus (including
paid-in surplus), capital, or assets of the Trust or such Series held by the
Trustees as they may deem proper. Such distributions may be made in cash or
property (including without limitation any type of obligations of the Trust or
Series or Class or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust or Series or Class thereof additional Shares
of the Trust or Series or Class thereof issuable hereunder in such manner, at
such times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of the Trust or Series or Class
thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding Shares shall
exclude Shares for which orders have been placed subsequent to a specified time
on the date the distribution is declared or on the next preceding day if the
distribution is declared as of a day on which Boston banks are not open for
business, all as described in the then effective prospectus under the Securities
Act of 1933. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or a Series or
Class thereof or to meet obligations of the Trust or a Series or Class thereof,
or as they may deem desirable to use in the conduct of its affairs or to retain
for future requirements or extensions of the business. The Trustees may adopt
and offer to Shareholders such dividend reinvestment plans, cash dividend payout
plans or related plans as the Trustees shall deem appropriate. The Trustees may
in their discretion determine that an account administration fee or other
similar charge may be deducted directly from the income and other distributions
paid on Shares to a Shareholder's account in each Series or Class.
(b) Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or a Series or Class thereof to avoid or reduce liability for
taxes.
SECTION 7.3. DETERMINATION OF NET INCOME; CONSTANT NET ASSET VALUE;
REDUCTION OF OUTSTANDING SHARES. Subject to Section 5.11 hereof, the net income
of the Series and Classes thereof of the Trust shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the Trust or of
a Series or Class thereof, including the advisory or management fee, shall be
accrued each day. Each Class shall bear only expenses relating to its Shares
and an allocable share of Series expenses in accordance with such policies as
may be established by the Trustees from time to time and as are not inconsistent
with the provisions of this Declaration or of any applicable document filed by
the Trust with the Commission or of the Internal Revenue Code of 1986, as
amended. Such net income may be determined by or under the direction of the
Trustees as of the close of trading on the New York Stock Exchange on each
<PAGE> 27
day on which such market is open or as of such other time or times as the
Trustees shall determine, and, except as provided herein, all the net
income of any Series or Class, as so determined, may be declared as a dividend
on the Outstanding Shares of such Series or Class. If, for any reason, the net
income of any Series or Class determined at any time is a negative amount, or
for any other reason, the Trustees shall have the power with respect to such
Series or Class (i) to offset each Shareholder's pro rata share of such negative
amount from the accrued dividend account of such Shareholder, or (ii) to reduce
the number of Outstanding Shares of such Series or Class by reducing the number
of Shares in the account of such Shareholder by that number of full and
fractional Shares which represents the amount of such excess negative net
income, or (iii) to cause to be recorded on the books of the Trust an asset
account in the amount of such negative net income, which account may be reduced
by the amount, provided that the same shall thereupon become the property of the
Trust with respect to such Series or Class and shall not be paid to any
Shareholder, of dividends declared thereafter upon the Outstanding Shares of
such Series or Class on the day such negative net income is experienced, until
such asset account is reduced to zero. The Trustees shall have full discretion
to determine whether any cash or property received shall be treated as income or
as principal and whether any item of expense shall be charged to the income or
the principal account, and their determination made in good faith shall be
conclusive upon the Shareholders. In the case of stock dividends received, the
Trustees shall have full discretion to determine, in the light of the particular
circumstances, how much if any of the value thereof shall be treated as income,
the balance, if any, to be treated as principal.
SECTION 7.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VII, but subject to Section 5.11
hereof, the Trustees may prescribe, in their absolute discretion, such other
bases and times for determining the per Share net asset value of the Shares of
the Trust or a Series or Class thereof or net income of the Trust or a Series or
Class thereof, or the declaration and payment of dividends and distributions as
they may deem necessary or desirable. Without limiting the generality of the
foregoing, the Trustees may establish several Series or Classes of Shares in
accordance with Section 5.11, and declare dividends thereon in accordance with
Section 5.11(d)(iv).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES OR CLASS;
AMENDMENT; MERGERS, ETC.
---------------------------
SECTION 8.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII.
SECTION 8.2. TERMINATION OF THE TRUST OR A SERIES OR A CLASS. The
Trust or any Series or Class thereof may be terminated by (i) the affirmative
vote of the holders of not less than two-thirds of the Outstanding Shares
entitled to vote and present in person or by proxy at any meeting of
Shareholders of the Trust or the appropriate Series or Class thereof, (ii) by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the Shares of the Trust or a Series or Class thereof;
provided, however, that, if such termination as described in clauses (i) and
(ii) is recommended by the Trustees, the vote or written consent of the holders
of a majority of the Shares of the Trust or a Series or Class thereof
outstanding and entitled to vote shall be sufficient authorization, or (iii)
notice to Shareholders by means of an instrument in
<PAGE> 28
writing signed by a majority of the Trustees, stating that a majority of the
Trustees has determined that the continuation of the Trust or a Series or a
Class thereof is not in the best interest of such Series or a Class, the Trust
or their respective shareholders as a result of such factors or events adversely
affecting the ability of such Series or a Class or the Trust to conduct its
business and operations in an economically viable manner. Such factors and
events may include (but are not limited to) the inability of a Series or Class
or the Trust to maintain its assets at an appropriate size, changes in laws
or regulations governing the Series or Class or the Trust or affecting assets of
the type in which such Series or Class or the Trust invests or economic
developments or trends having a significant adverse impact on the business or
operations of such Series or Class or the Trust. Upon the termination of the
Trust or the Series or Class,
(i) The Trust, Series or Class shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs
of the Trust, Series or Class and all of the powers of the
Trustees under this Declaration shall continue until the
affairs of the Trust, Series or Class shall have been wound
up, including the power to fulfill or discharge the
contracts of the Trust, Series or Class, collect its assets,
sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property
or Trust Property allocated or belonging to such Series or
Class to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to
liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all
or substantially all the Trust Property or Trust Property
allocated or belonging to such Series or Class that requires
Shareholder approval in accordance with Section 8.4 hereof
shall receive the approval so required.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements as they deem
necessary for their protection, the Trustees may distribute
the remaining Trust Property or the remaining property of
the terminated Series or Class, in cash or in kind or partly
each, among the Shareholders of the Trust or the Series or
Class according to their respective rights.
(b) After termination of the Trust, Series or Class and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust and file with the Office of the
Secretary of The Commonwealth of Massachusetts an instrument in writing setting
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties with respect to the Trust or
the terminated Series or Class, and the rights and interests of all Shareholders
of the Trust or the terminated Series or Class shall thereupon cease.
SECTION 8.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended
by a vote of the holders of a majority of the Shares outstanding and entitled to
vote or by any instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by the holders of a majority of the Shares
outstanding and entitled to vote.
<PAGE> 29
(b) This Declaration may be amended by a vote of a majority of
Trustees, without approval or consent of the Shareholders, except that no
amendment can be made by the Trustees to impair any voting or other rights of
shareholders prescribed by federal or state law. Without limiting the
foregoing, the Trustees may amend this Declaration without the approval or
consent of Shareholders (i) to change the name of the Trust or any Series, (ii)
to add to their duties or obligations or surrender any rights or powers granted
to them herein; (iii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein or to
make any other provisions with respect to matters or questions arising under
this Declaration which will not be inconsistent with the provisions of this
Declaration; and (iv) to eliminate or modify any provision of this Declaration
which (a) incorporates, memorializes or sets forth an existing requirement
imposed by or under any Federal or state statute or any rule, regulation or
interpretation thereof or thereunder or (b) any rule, regulation, interpretation
or guideline of any federal or state agency, now or hereafter in effect,
including without limitation, requirements set forth in the 1940 Act and the
rules and regulations thereunder (and interpretations thereof), to the extent
any change in applicable law liberalizes, eliminates or modifies any such
requirements, but the Trustees shall not be liable for failure to do so.
(c) The Trustees may also amend this Declaration without the approval
or consent of Shareholders if they deem it necessary to conform this Declaration
to the requirements of applicable Federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or if requested or required to do so by any
Federal agency or by a state Blue Sky commissioner or similar official, but the
Trustees shall not be liable for failing so to do.
(d) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Trustees or by the
Shareholders as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
SECTION 8.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or
any Series may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or Trust Property allocated or belonging to such
Series, including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by the affirmative vote of the holders of two-thirds of the Shares
of the Trust or such Series outstanding and entitled to vote and present in
person or by proxy at a meeting of Shareholders, or by an instrument or
instruments in writing without a meeting, consented to by the holders of
two-thirds of the Shares of the Trust or such Series; provided, however, that,
if such merger, consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of a majority of the Shares
of the Trust or such Series outstanding and entitled to vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to
Massachusetts law.
<PAGE> 30
SECTION 8.5. INCORPORATION. The Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other organization
to take over all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell, convey and
transfer all or any portion of the Trust Property or the Trust Property
allocated or belonging to such Series to any such corporation, trust,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring all or a portion of the Trust Property to such organization or
entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
-----------------------
The Trustees shall at least semi-annually submit to the Shareholders of
each Series a written financial report of the transactions of the Trust and
Series thereof, including financial statements which shall at least annually be
certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1. EXECUTION AND FILING. This Declaration and any amendment
hereto shall be filed in the office of the Secretary of The Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee stating that such action was
duly taken in a manner provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its execution. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and filed with the Secretary of The Commonwealth of
Massachusetts. A restated Declaration shall, upon execution, be conclusive
evidence of all amendments contained therein and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
SECTION 10.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of
<PAGE> 31
all parties and the validity and construction of every provision hereof
shall be subject to and construed according to the laws of said Commonwealth.
SECTION 10.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 10.4. RELIANCE BY THIRD PARTIES. Any certificate executed by
an individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying (a) the number or identity of Trustees or Shareholders,
(b) the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact
that the number of Trustees or Shareholders present at any meeting or executing
any written instrument satisfies the requirements of this Declaration, (e) the
form of any By-laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
SECTION 10.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
<PAGE> 32
IN WITNESS WHEREOF, the undersigned have executed this instrument this
31st day of October, 1994.
/s/Edward J. Boudreau, Jr.
--------------------------
Edward J. Boudreau, Jr.
as Trustee and not individually,
34 Swan Road
Winchester, Massachusetts 01890
/s/Richard S. Scipione
----------------------
Richard S. Scipione,
as Trustee and not individually,
4 Sentinel Road
Hingham, Massachusetts 02043
THE COMMONWEALTH OF
MASSACHUSETTS
SUFFOLK COUNTY, MASSACHUSETTS
October 31, 1994
Then personally appeared the above-named person, Edward J. Boudreau,
Jr., who acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/Susan S. Newton
-----------------------------------------
Notary Public
My commission expires: 8/19/97
<PAGE> 33
THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK COUNTY, MASSACHUSETTS
October _31, 1994
Then personally appeared the above-named person, Richard S. Scipione,
who acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/Susan S. Newton
Notary Public
My commission expires: 8/19/97
<PAGE> 1
BY-LAWS
OF
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
As Amended and Restated December 19, 1994
<PAGE> 2
ARTICLE I
DEFINITIONS
All capitalized terms have the respective meanings given them in the
Declaration of Trust of John Hancock Institutional Series Trust dated
October 31, 1994, 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 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
-2-
<PAGE> 3
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, except for dividend payments which shall be
governed by the Declaration of Trust.
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. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration of Trust to vote and fractional shares shall
be entitled to a proportionate fractional 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.
SECTION 5. ABSTENTIONS AND BROKER NON-VOTES. Outstanding Shares represented in
person or by proxy (including Shares which abstain or do not vote with respect
to one or more of any proposals presented for Shareholder approval) will be
counted for purposes of determining whether a quorum is present at a meeting.
Abstentions will be treated as Shares that are present and entitled to vote for
purposes of determining the number of Shares that are present and entitled to
vote with respect to any particular proposal, but will not be counted as a vote
in favor of such proposal. If a broker or nominee holding Shares in "street
name" indicates on the proxy that it does not have discretionary authority to
vote as to a particular proposal, those Shares will not be considered as
present and entitled to vote with respect to such proposal.
SECTION 6. 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 7. 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.
-3-
<PAGE> 4
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.
SECTION 2. QUORUM AND MANNER OF ACTING. A majority of the Trus tees 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
-4-
<PAGE> 5
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. 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 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.
SECTION 4. POWERS AND DUTIES OF THE CHAIRMAN. The Trustees may, but need not,
appoint from among their number a Chairman. 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
SECTION 4A. POWERS AND DUTIES OF THE VICE CHAIRMAN. The Trustees may, but need
not, appoint one or more Vice Chairman of the Trust. A Vice Chairman shall
be an executive officer of the Trust and shall have the powers and duties of a
Vice President of the Trust as provided in Section 6 of this Article VI. The
Vice Chairman shall perform such duties as may be assigned to him or her from
time to time by the Trustees or the Chairman.
-5-
<PAGE> 6
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.
SECTION 5. POWERS AND DUTIES OF THE PRESIDENT. The President m ay 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 6. 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.
SECTION 7. POWERS AND DUTIES OF THE TREASURER. The Treasurer s hall 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
con dition 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 8. POWERS AND DUTIES OF THE SECRETARY. The Secretary s hall 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 9. POWERS AND DUTIES OF ASSISTANT OFFICERS. In the abs ence 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.
-6-
<PAGE> 7
SECTION 10. 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 11. 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 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
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of March in each year
and shall end on the last day of February 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 VIII
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 IX
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.
ARTICLE X
AMENDMENTS
-7-
<PAGE> 8
These By-laws, or any of them, may be altered, amended or repealed, or new
By-laws may be adopted by a vote of a majority of 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 federal or state law,
the Declaration of Trust or these By-laws, a vote of the Shareholders.
END OF BY-LAWS
-8-
<PAGE> 1
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK INDEPENDENCE MEDIUM CAPITALIZATION FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: POLLY & CO Certificate No. KC 0001835
ATTN STOCK TRANSFER DEPT 5TH FL Account No. 5636514
C/O THE BANK OF NEW YORK Alpha Code CO---POLL&
PO BOX 11203 Issue Date 01/10/95
NEW YORK NY 10286-1203 CUSIP No. 410225106
Shares ***10623***
is registered owner of ************************* TEN THOUSAND SIX HUNDERED TWENTY THREE ***************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Independence Medium Capitalization Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration
of Trust dated October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the
"Declaration"), is on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby
incorporated in and made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions
the holder and every transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the
shares represented hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by
attorney upon surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock
Institutional Series Trust - John Hancock Independence Medium Capitalization Fund, acting not individually but as such Trustees,
and is not valid until countersigned by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Independence Medium Capitalization Fund is the designation of the
Trustees under the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY GLOBAL BOND FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: ROBERT J. REILLY Certificate No. KC 0001282
40 17TH ST Account No. 4726047
ATLANTIC BEACH FL 32233-5810 Alpha Code REILLROBEJ
Issue Date 01/10/95
CUSIP No. 410228100
Shares ***146***
is registered owner of ****************************** ONE HUNDERED FORTY SIX ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Berkeley Global Bond Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of Trust dated
October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the "Declaration"), is on
file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby incorporated in and made
a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and every
transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the shares represented
hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by attorney upon
surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock Institutional Series
Trust - John Hancock Berkeley Global Bond Fund, acting not individually but as such Trustees, and is not valid until countersigned
by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Berkeley Global Bond Fund is the designation of the Trustees under
the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 3
8888
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK INDEPENDENCE VALUE FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: DANIEL J. HARTINGER Certificate No. BF0001292
LORRAINE V. HARTINGER JTWROS Account No. 91001884
600 CAROLINA VILLAGE RD #228 Alpha Code HARTILORRV
HENDERSONVILLE NC 28792-2825 Issue Date 01/10/95
CUSIP No. 410227102
Shares ***709***
is registered owner of ****************************** SEVEN HUNDERED NINE ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Independence Value Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of Trust dated
October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the "Declaration"), is on
file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby incorporated in and made
a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and every
transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the shares represented
hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by attorney upon
surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock Institutional Series
Trust - John Hancock Independence Value Fund, acting not individually but as such Trustees, and is not valid until countersigned by
the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Independence Value Fund is the designation of the Trustees under
the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 4
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK INDEPENDENCE GROWTH FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: POLLY & CO Certificate No. KC0001835
ATTN STOCK TRANSFER DEPT 5TH FL Account No. 5636514
C/O THE BANK OF NEW YORK Alpha Code CO---POLL&
PO BOX 11203 Issue Date 01/10/95
NEW YORK NY 10286-1203 CUSIP No. 410225106
Shares ***10623***
is registered owner of ****************************** TEN THOUSAND SIX HUNDERED TWENTY THREE ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Independence Growth Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of Trust dated
October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the "Declaration"), is on
file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby incorporated in and made
a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and every
transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the shares represented
hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by attorney upon
surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock Institutional Series
Trust - John Hancock Independence Growth Fund, acting not individually but as such Trustees, and is not valid until countersigned
by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Independence Growth Fund is the designation of the Trustees under
the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 5
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY BOND FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: ROBERT J REILLY Certificate No. KC0001282
40 17TH ST Account No. 4726047
ATLANTIC BEACH FL 32233-5810 Alpha Code REILLROBEJ
Issue Date 01/10/95
CUSIP No. 410228100
Shares ***146***
is registered owner of ****************************** ONE HUNDERED FORTY SIX ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Berkeley Bond Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of Trust dated
October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the "Declaration"), is
on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby incorporated in and
made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and every
transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the shares represented
hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by attorney upon
surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock Institutional Series
Trust - John Hancock Berkeley Bond Fund, acting not individually but as such Trustees, and is not valid until countersigned by the
Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Berkeley Bond Fund is the designation of the Trustees under the
Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 6
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK INDEPENDENCE DIVERSIFIED CORE EQUITY FUND II
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: DANIEL J. HARTINGER Certificate No. BF0001292
LORRAINE V. HARTINGER JTWROS Account No. 91001884
600 CAROLINA VILLAGE RD #228 Alpha Code HARTILORRV
HENDERSONVILLE NC 28792-2825 Issue Date 01/10/95
CUSIP No. 410227102
Shares ***709***
is registered owner of ****************************** SEVEN HUNDERED NINE ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Independence Diversified Core Equity Fund II (the "Fund"), a Massachusetts voluntary association established by the
Declaration of Trust dated October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto
(the "Declaration"), is on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are
hereby incorporated in and made a part of this certificate as fully as if set forth herein in their entirety, to all of which
provisions the holder and every transferee or assignee hereof by accepting or holding the same agrees to be bound. This
certificate, and the shares represented hereby are negotiable and transferable on the books of the Fund by the registered holder
hereof in person or by attorney upon surrender of this certificate properly endorsed. This certificate is issued by the Trustees
of John Hancock Institutional Series Trust - John Hancock Independence Diversified Core Equity Fund II, acting not individually but
as such Trustees, and is not valid until countersigned by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Independence Diversified Core Equity Fund II is the designation of
the Trustees under the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 7
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK INDEPENDENCE BALANCED FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: POLLY & CO Certificate No. KC0001835
ATTN STOCK TRANSFER DEPT 5TH FL Account No. 5636514
C/O THE BANK OF NEW YORK Alpha Code CO---POLL&
PO BOX 11203 Issue Date 01/10/95
NEW YORK NY 10286-1203 CUSIP No. 410225106
Shares ***10623***
is registered owner of ****************************** TEN THOUSAND SIX HUNDERED TWENTY THREE ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Independence Balanced Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of Trust
dated October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the "Declaration"),
is on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby incorporated in
and made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and
every transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the shares
represented hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by attorney
upon surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock Institutional
Series Trust - John Hancock Independence Balanced Fund, acting not individually but as such Trustees, and is not valid until
countersigned by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Independence Balanced Fund is the designation of the Trustees under
the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 8
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY FUNDAMENTAL VALUE FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: ROBERT J REILLY Certificate No. KC0001282
40 17TH ST Account No. 4726047
ATLANTIC BEACH FL 32233-5810 Alpha Code REILLROBEJ
Issue Date 01/10/95
CUSIP No. 410228100
Shares ***146***
is registered owner of ****************************** ONE HUNDERED FORTY SIX ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Berkeley Fundamental Value Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of Trust
dated October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the "Declaration"),
is on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby incorporated in
and made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and
every transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the shares
represented hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by attorney
upon surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock Institutional
Series Trust - John Hancock Berkeley Fundamental Value Fund, acting not individually but as such Trustees, and is not valid until
countersigned by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Berkeley Fundamental Value Fund is the designation of the Trustees
under the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 9
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY SECTOR OPPORTUNITY FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: DANIEL J. HARTINGER Certificate No. BF0001292
LORRAINE V. HARTINGER JTWROS Account No. 91001884
600 CAROLINA VILLAGE RD #228 Alpha Code HARTILORRV
HENDERSONVILLE NC 28792-2825 Issue Date 01/10/95
CUSIP No. 410227102
Shares ***709***
is registered owner of ****************************** SEVEN HUNDERED NINE ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Berkeley Sector Opportunity Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of
Trust dated October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the
"Declaration"), is on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby
incorporated in and made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions
the holder and every transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the
shares represented hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by
attorney upon surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock
Institutional Series Trust - John Hancock Berkeley Sector Opportunity Fund, acting not individually but as such Trustees, and is
not valid until countersigned by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Berkeley Sector Opportunity Fund is the designation of the Trustees
under the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 10
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY DIVIDEND PERFORMERS FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: ROBERT J REILLY Certificate No. KC0001282
40 17TH ST Account No. 4726047
ATLANTIC BEACH FL 32233-5810 Alpha Code REILLROBEJ
Issue Date 01/10/95
CUSIP No. 410228100
Shares ***146***
is registered owner of ****************************** ONE HUNDERED FORTY SIX ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Berkeley Dividend Performers Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of
Trust dated October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the
"Declaration"), is on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby
incorporated in and made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions
the holder and every transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the
shares represented hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by
attorney upon surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock
Institutional Series Trust - John Hancock Berkeley Dividend Performers Fund, acting not individually but as such Trustees, and is
not valid until countersigned by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Berkeley Dividend Performers Fund is the designation of the Trustees
under the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 11
<TABLE>
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY OVERSEAS GROWTH FUND
A MASSACHUSETTS VOLUNTARY ASSOCIATION
<S> <C> <C> <C>
This certifies that: DANIEL J. HARTINGER Certificate No. BF0001292
LORRAINE V. HARTINGER JTWROS Account No. 91001884
600 CAROLINA VILLAGE RD #228 Alpha Code HARTILORRV
HENDERSONVILLE NC 28792-2825 Issue Date 01/10/95
CUSIP No. 410227102
Shares ***709***
is registered owner of ****************************** SEVEN HUNDERED NINE ********************************
fully paid and non-assessable shares of beneficial interest, without par value, in John Hancock Institutional Series Trust - John
Hancock Berkeley Overseas Growth Fund (the "Fund"), a Massachusetts voluntary association established by the Declaration of Trust
dated October 31, 1994, as amended from time to time, a copy of which, together with any amendments thereto (the "Declaration"), is
on file with the Secretary of the Commonwealth of Massachusetts. The provisions of the Declaration are hereby incorporated in and
made a part of this certificate as fully as if set forth herein in their entirety, to all of which provisions the holder and every
transferee or assignee hereof by accepting or holding the same agrees to be bound. This certificate, and the shares represented
hereby are negotiable and transferable on the books of the Fund by the registered holder hereof in person or by attorney
upon surrender of this certificate properly endorsed. This certificate is issued by the Trustees of John Hancock Institutional
Series Trust - John Hancock Berkeley Overseas Growth Fund, acting not individually but as such Trustees, and is not valid until
countersigned by the Transfer Agent.
The name John Hancock Institutional Series Trust - John Hancock Berkeley Overseas Growth Fund is the designation of the Trustees
under the Declaration of Trust dated October 31, 1994, as amended from time to time. The obligations hereunder 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 the Fund property or a specific portion thereof only shall be bound.
WITNESS the facsimile signatures of the duly authorized officers of the Fund.
Date 01/12/95
COUNTERSIGNED:
/s/ E Boudreau /s/ J ??? JOHN HANCOCK INVESTOR SERVICES CORPORATION
CHAIRMAN TREASURER BY TRANSFER AGENT
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 1
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY OVERSEAS GROWTH FUND
101 Huntington Avenue
Boston, Massachusetts
March 30, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which
John Hancock Berkeley Overseas Growth Fund (the "Fund") is a series,
has been organized as a business trust under the laws of the
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets. Series may be established or terminated from
time to time by action of the Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the
Adviser is willing to provide such advice, management and services
under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund,
agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser
with copies, properly certified or otherwise authenticated, of
each of the following:
(a) Declaration of Trust of the Trust, dated October 31, 1994,
(the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the
investment adviser for the Fund and approving the form of this
Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with
copies, properly certified or otherwise authenticated, of all
amendments of or supplements to the foregoing, if any.
<PAGE> 2
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use
its best efforts to provide to the Fund continuing and suitable
investment programs with respect to investments, consistent
with the investment objectives, policies 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
Fund's then-current Prospectus and Statement of Additional
Information included in the registration statement of the Trust
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 objectives, policies and
restrictions of the Fund, with respect to the purchase, holding
and disposition of portfolio securities including the purchase
and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this
Agreement and subject to the provisions of any sub-investment
management contract respecting the responsibilities of such
sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
provided that in connection with the placing of such orders
and the selection of such brokers or dealers the Adviser 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 Fund of the Adviser's performance
of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business
and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of
Rule 31a-1 thereunder (other than those records being
maintained by the Fund's custodian or transfer agent) and
preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees 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 the Adviser may deem necessary or useful in the
discharge of the Adviser's duties hereunder;
2
<PAGE> 3
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be
parties, which contract shall be subject to approval by the
vote of a majority of the Trustees of the Trust who are not
interested persons of the Adviser, the sub-adviser or of the
Trust, 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 sub-adviser shall be
paid by the Adviser, and no obligation to the sub-adviser shall
be incurred on the Fund's or Trust's behalf, except as agreed
upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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
expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection
with the performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the
Adviser and the Trustees.
5. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser
will not be required to pay any expenses which this Agreement
does not expressly make payable by it. In particular, and
without limiting the generality of the foregoing but subject to
the provisions of Section 4, the Adviser will not be required
to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund
(including without limitation legal, accounting and auditing
fees and expenses incurred in connection with the matters
referred to in this clause (a)), of initially registering the
shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through the Adviser;
(c) legal (including an allocable portion of the cost of its
employees rendering legal services to the Fund), accounting and
auditing fees and expenses of the Fund;
(d) the fees or disbursements of custodians and depositories
of the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(e) taxes and governmental fees assessed against the Fund's
assets and payable by the Fund;
3
<PAGE> 4
(f) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset
value of the shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Adviser as herein provided, the Adviser shall be entitled
to a fee, paid monthly in arrears, equal to a stated percentage
of the average daily net assets of the Fund for the preceding
month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
up to $500 million 0.95%
in excess of $500 million 0.65%
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Adviser will receive a pro-rata portion of
such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On
any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for
purposes of calculating the advisory fee shall be calculated as
of the date last determined.
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 the law of a state where
the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent
required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to
time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion
thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or
modified by the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Adviser or any
affiliate or associate of the Adviser from engaging in any
other business or from acting as investment adviser or
investment manager for any other person or entity, whether or
not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers,
directors and employees of the Adviser and those of its parent
company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio
management services and advice to other investment companies,
whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates
themselves.
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its investment
management
4
<PAGE> 5
subsidiaries, nor any of the Adviser's or such investment
management subsidiaries' directors, officers or employees
will act as principal or agent or receive any commission
except as may be permitted by the 1940 Act and rule and
regulations promulgated thereunder. If any occasions shall
arise in which the Adviser advises persons concerning the
shares of the Fund, the Adviser will act solely on its own
behalf and not in any way on behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The Fund acknowledges that the Adviser
and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or
dispose of positions in investments which are at the same time
being acquired or disposed of hereunder. The Adviser shall
have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if, in the sole
discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from
purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or
clients may be selling the same security.
9. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the
Fund, nor the Adviser are partners of or joint ventures with
each other and nothing herein shall be construed so as to make
them such partners or joint ventures or impose any liability as
such on any of them.
10. NAME OF THE TRUST AND FUND. The Fund may use the names
"John Hancock" or "Berkeley" or any name or names derived from
or similar to the names "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" or "The Berkeley
Financial Group" only for so long as this Agreement (or similar
agreement with John Hancock Mutual Life Insurance Company or
any of its affiliates or subsidiaries) remains in effect. At
such time as this Agreement or such other agreement shall no
longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name
indicating that the Fund is advised by or otherwise connected
with the Adviser. The Fund acknowledges that it has adopted
the name "John Hancock Berkeley Overseas Growth 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 or
names 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. The Fund acknowledges that it
has adopted the name "_____________ Berkeley Overseas Growth
Fund" through permission of the Berkeley Financial Group and
agrees that The Berkeley Financial Group reserves to itself and
any successor to its business the right to grant the
non-exclusive right to use the name "Berkeley" or any similar
name or names to any other corporation or entity, including but
not limited to any investment company of which The Berkeley
Financial Group or any subsidiary or affiliate thereof shall be
the investment adviser.
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
matters
5
<PAGE> 6
to which this Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence
on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Any person, even though also
employed by the Adviser, 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 the Adviser's
employee or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This
Agreement shall remain in force until the second anniversary of
the date upon which this Agreement was executed by the parties
hereto, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons
of the Adviser or (other than as Board Members) 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 vote of a
majority of the outstanding voting securities of the Fund, by
the Trustees or by the Adviser. Termination of this Agreement
shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other
series of the Trust. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall
be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
16. 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 name John Hancock
Berkeley Overseas Growth Fund is a series designation of the
Trustees under the Trust's Declaration of Trust, dated October
31, 1994, as amended from time to time. The Declaration of
Trust has been filed with the Secretary of State of the
Commonwealth of Massachusetts. The obligations of the Fund are
6
<PAGE> 7
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 series of the Trust.
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock Berkeley
Overseas Growth Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 8
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY FUNDAMENTAL VALUE FUND
101 Huntington Avenue
Boston, Massachusetts
April 3, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which
John Hancock Berkeley Fundamental Value Fund (the "Fund") is a
series, has been organized as a business trust under the laws of the
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets. Series may be established or terminated from
time to time by action of the Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the
Adviser is willing to provide such advice, management and services
under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund,
agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser
with copies, properly certified or otherwise authenticated, of
each of the following:
(a) Declaration of Trust of the Trust, dated October 31, 1994,
(the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the
investment adviser for the Fund and approving the form of this Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with
copies, properly certified or otherwise authenticated, of all
amendments of or supplements to the foregoing, if any.
<PAGE> 9
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use
its best efforts to provide to the Fund continuing and suitable
investment programs with respect to investments, consistent
with the investment objectives, policies 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
Fund's then-current Prospectus and Statement of Additional
Information included in the registration statement of the Trust
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 objectives, policies and
restrictions of the Fund, with respect to the purchase, holding
and disposition of portfolio securities including the purchase
and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this
Agreement and subject to the provisions of any sub-investment
management contract respecting the responsibilities of such
sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
provided that in connection with the placing of such orders
and the selection of such brokers or dealers the Adviser 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 Fund of the Adviser's performance
of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business
and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of
Rule 31a-1 thereunder (other than those records being
maintained by the Fund's custodian or transfer agent) and
preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees 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 the Adviser may deem necessary or useful in the
discharge of the Adviser's duties hereunder;
2
<PAGE> 10
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be
parties, which contract shall be subject to approval by the
vote of a majority of the Trustees of the Trust who are not
interested persons of the Adviser, the sub-adviser or of the
Trust, 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 sub-adviser shall be
paid by the Adviser, and no obligation to the sub-adviser shall
be incurred on the Fund's or Trust's behalf, except as agreed
upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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
expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection
with the performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the
Adviser and the Trustees.
5. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser
will not be required to pay any expenses which this Agreement
does not expressly make payable by it. In particular, and
without limiting the generality of the foregoing but subject to
the provisions of Section 4, the Adviser will not be required
to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund
(including without limitation legal, accounting and auditing
fees and expenses incurred in connection with the matters
referred to in this clause (a)), of initially registering the
shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through the Adviser;
(c) legal (including an allocable portion of the cost of its
employees rendering legal services to the Fund), accounting and
auditing fees and expenses of the Fund;
(d) the fees or disbursements of custodians and depositories
of the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(e) taxes and governmental fees assessed against the Fund's
assets and payable by the Fund;
3
<PAGE> 11
(f) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset
value of the shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Adviser as herein provided, the Adviser shall be entitled
to a fee, paid monthly in arrears, equal to a stated percentage
of the average daily net assets of the Fund for the preceding
month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
up to $500 million 0.70%
in excess of $500 million 0.65%
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Adviser will receive a pro-rata portion of
such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On
any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for
purposes of calculating the advisory fee shall be calculated as
of the date last determined.
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 the law of a state where
the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent
required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to
time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion
thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or
modified by the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Adviser or any
affiliate or associate of the Adviser from engaging in any
other business or from acting as investment adviser or
investment manager for any other person or entity, whether or
not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers,
directors and employees of the Adviser and those of its parent
company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio
management services and advice to other investment companies,
whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates
themselves.
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its investment
management
4
<PAGE> 12
subsidiaries, nor any of the Adviser's or such investment
management subsidiaries' directors, officers or employees
will act as principal or agent or receive any commission
except as may be permitted by the 1940 Act and rule
and regulations promulgated thereunder. If any occasions shall
arise in which the Adviser advises persons concerning the
shares of the Fund, the Adviser will act solely on its own
behalf and not in any way on behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The Fund acknowledges that the Adviser
and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or
dispose of positions in investments which are at the same time
being acquired or disposed of hereunder. The Adviser shall
have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if, in the sole
discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from
purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or
clients may be selling the same security.
9. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the
Fund, nor the Adviser are partners of or joint ventures with
each other and nothing herein shall be construed so as to make
them such partners or joint ventures or impose any liability as
such on any of them.
10. NAME OF THE TRUST AND FUND. The Fund may use the names
"John Hancock" or "Berkeley" or any name or names derived from
or similar to the names "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" or "The Berkeley
Financial Group" only for so long as this Agreement (or similar
agreement with John Hancock Mutual Life Insurance Company or
any of its affiliates or subsidiaries) remains in effect. At
such time as this Agreement or such other agreement shall no
longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name
indicating that the Fund is advised by or otherwise connected
with the Adviser. The Fund acknowledges that it has adopted
the name "John Hancock Berkeley Fundamental Value 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 or
names 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. The Fund acknowledges that it
has adopted the name "_____________ Berkeley Fundamental Value
Fund" through permission of the Berkeley Financial Group and
agrees that The Berkeley Financial Group reserves to itself and
any successor to its business the right to grant the
non-exclusive right to use the name "Berkeley" or any similar
name or names to any other corporation or entity, including but
not limited to any investment company of which The Berkeley
Financial Group or any subsidiary or affiliate thereof shall be
the investment adviser.
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
matters
5
<PAGE> 13
to which this Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence
on the part of the Adviser in the performance of its duties
or from reckless disregard by it of its obligations and
duties under this Agreement. Any person, even though also
employed by the Adviser, 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 the Adviser's
employee or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This
Agreement shall remain in force until the second anniversary of
the date upon which this Agreement was executed by the parties
hereto, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons
of the Adviser or (other than as Board Members) 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 vote of a
majority of the outstanding voting securities of the Fund, by
the Trustees or by the Adviser. Termination of this Agreement
shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other
series of the Trust. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall
be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
16. 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 name John Hancock
Berkeley Fundamental Value Fund is a series designation of the
Trustees under the Trust's Declaration of Trust, dated October
31, 1994, as amended from time to time. The Declaration of
Trust has been filed with the Secretary of State of the
Commonwealth of Massachusetts. The obligations of the Fund are
6
<PAGE> 14
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 series of the Trust.
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock Berkeley
Fundamental Value Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 15
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK INDEPENDENCE BALANCED FUND
101 Huntington Avenue
Boston, Massachusetts
July 5, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which
John Hancock Independence Balanced Fund (the "Fund") is a series,
has been organized as a business trust under the laws of the
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets. Series may be established or terminated from
time to time by action of the Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the
Adviser is willing to provide such advice, management and services
under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund,
agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser
with copies, properly certified or otherwise authenticated, of
each of the following:
(a) Declaration of Trust of the Trust, dated October 31, 1994,
(the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the
investment adviser for the Fund and approving the form of this
Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with
copies, properly certified or otherwise authenticated, of all
amendments of or supplements to the foregoing, if any.
<PAGE> 16
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use
its best efforts to provide to the Fund continuing and suitable
investment programs with respect to investments, consistent
with the investment objectives, policies 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
Fund's then-current Prospectus and Statement of Additional
Information included in the registration statement of the Trust
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 objectives, policies and
restrictions of the Fund, with respect to the purchase, holding
and disposition of portfolio securities including the purchase
and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this
Agreement and subject to the provisions of any sub-investment
management contract respecting the responsibilities of such
sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
provided that in connection with the placing of such orders
and the selection of such brokers or dealers the Adviser 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 Fund of the Adviser's performance
of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business
and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of
Rule 31a-1 thereunder (other than those records being
maintained by the Fund's custodian or transfer agent) and
preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees that such
records are the property of the Fund and will be surrendered to
the Fund promptly upon request therefor);
2
<PAGE> 17
(j) obtain and evaluate such information relating to
economies, industries, businesses, securities markets and
securities as the Adviser may deem necessary or useful in the
discharge of the Adviser's duties hereunder;
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be
parties, which contract shall be subject to approval by the
vote of a majority of the Trustees of the Trust who are not
interested persons of the Adviser, the sub-adviser or of the
Trust, 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 sub-adviser shall be
paid by the Adviser, and no obligation to the sub-adviser shall
be incurred on the Fund's or Trust's behalf, except as agreed
upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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
expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection
with the performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the
Adviser and the Trustees.
5. Expenses of the Fund Not Paid by the Adviser. The Adviser
will not be required to pay any expenses which this Agreement
does not expressly make payable by it. In particular, and
without limiting the generality of the foregoing but subject to
the provisions of Section 4, the Adviser will not be required
to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund
(including without limitation legal, accounting and auditing
fees and expenses incurred in connection with the matters
referred to in this clause (a)), of initially registering the
shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through the Adviser;
(c) legal (including an allocable portion of the cost of its
employees rendering legal services to the Fund), accounting and
auditing fees and expenses of the Fund;
3
<PAGE> 18
(d) the fees or disbursements of custodians and depositories
of the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(e) taxes and governmental fees assessed against the Fund's
assets and payable by the Fund;
(f) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset
value of the shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Adviser as herein provided, the Adviser shall be entitled
to a fee, paid monthly in arrears, equal to a stated percentage
of the average daily net assets of the Fund for the preceding
month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
up to $500 million 0.70%
in excess of $500 million 0.65%
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Adviser will receive a pro-rata portion of
such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On
any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for
purposes of calculating the advisory fee shall be calculated as
of the date last determined.
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 the law of a state where
the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent
required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to
time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion
thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or
modified by the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Adviser or any
affiliate or associate of the Adviser from engaging in any
other business or from acting as investment adviser or
investment manager for any other person or entity, whether or
not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers,
directors and employees of the Adviser and those of its parent
company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio
management services and advice to other investment companies,
whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates
themselves.
4
<PAGE> 19
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its investment
management subsidiaries, nor any of the Adviser's or such
investment management subsidiaries' directors, officers or
employees will act as principal or agent or receive any
commission except as may be permitted by the 1940 Act and rule
and regulations promulgated thereunder. If any occasions shall
arise in which the Adviser advises persons concerning the
shares of the Fund, the Adviser will act solely on its own
behalf and not in any way on behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The Fund acknowledges that the Adviser
and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or
dispose of positions in investments which are at the same time
being acquired or disposed of hereunder. The Adviser shall
have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if, in the sole
discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from
purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or
clients may be selling the same security.
9. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the
Fund, nor the Adviser are partners of or joint ventures with
each other and nothing herein shall be construed so as to make
them such partners or joint ventures or impose any liability as
such on any of them.
10. NAME OF THE TRUST AND FUND. The Fund may use the names
"John Hancock" or any name or names derived from or similar to
the names "John Hancock Advisers, Inc." or "John Hancock Mutual
Life Insurance Company" or "The Berkeley Financial Group" only
for so long as this Agreement (or similar agreement with John
Hancock Mutual Life Insurance Company or any of its affiliates
or subsidiaries) remains in effect. At such time as this
Agreement or such other agreement shall no longer be in effect,
the Fund will (to the extent that it lawfully can) cease to use
such a name or any other name indicating that the Fund is
advised by or otherwise connected with the Adviser. The Fund
acknowledges that it has adopted the name "John Hancock
Independence Balanced 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 or names 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.
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Any person, even though also
5
<PAGE> 20
employed by the Adviser, 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 the Adviser's
employee or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This
Agreement shall remain in force until the second anniversary of
the date upon which this Agreement was executed by the parties
hereto, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons
of the Adviser or (other than as Board Members) 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 vote of a
majority of the outstanding voting securities of the Fund, by
the Trustees or by the Adviser. Termination of this Agreement
shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other
series of the Trust. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall
be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
16. 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 name John Hancock
Independence Balanced Fund is a series designation of the
Trustees under the Trust's Declaration of Trust, dated October
31, 1994, as amended from time to time. The Declaration of
Trust has been filed with the Secretary of State of the
Commonwealth of Massachusetts. The obligations of the 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 series of the Trust.
6
<PAGE> 21
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock Independence
Balanced Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 22
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY GLOBAL BOND FUND
101 Huntington Avenue
Boston, Massachusetts
April 3, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which
John Hancock Berkeley Global Bond Fund (the "Fund") is a series, has
been organized as a business trust under the laws of the
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets. Series may be established or terminated from
time to time by action of the Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the
Adviser is willing to provide such advice, management and services
under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund,
agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser
with copies, properly certified or otherwise authenticated, of
each of the following:
(a) Declaration of Trust of the Trust, dated October 31, 1994,
(the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the
investment adviser for the Fund and approving the form of this
Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with
copies, properly certified or otherwise authenticated, of all
amendments of or supplements to the foregoing, if any.
<PAGE> 23
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use
its best efforts to provide to the Fund continuing and suitable
investment programs with respect to investments, consistent
with the investment objectives, policies 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
Fund's then-current Prospectus and Statement of Additional
Information included in the registration statement of the Trust
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 objectives, policies and
restrictions of the Fund, with respect to the purchase, holding
and disposition of portfolio securities including the purchase
and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this
Agreement and subject to the provisions of any sub-investment
management contract respecting the responsibilities of such
sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
provided that in connection with the placing of such orders
and the selection of such brokers or dealers the Adviser 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 Fund of the Adviser's performance
of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business
and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of
Rule 31a-1 thereunder (other than those records being
maintained by the Fund's custodian or transfer agent) and
preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees 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 the Adviser may deem necessary or useful in the
discharge of the Adviser's duties hereunder;
2
<PAGE> 24
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be
parties, which contract shall be subject to approval by the
vote of a majority of the Trustees of the Trust who are not
interested persons of the Adviser, the sub-adviser or of the
Trust, 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 sub-adviser shall be
paid by the Adviser, and no obligation to the sub-adviser shall
be incurred on the Fund's or Trust's behalf, except as agreed
upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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
expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection
with the performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the
Adviser and the Trustees.
5. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser
will not be required to pay any expenses which this Agreement
does not expressly make payable by it. In particular, and
without limiting the generality of the foregoing but subject to
the provisions of Section 4, the Adviser will not be required
to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund
(including without limitation legal, accounting and auditing
fees and expenses incurred in connection with the matters
referred to in this clause (a)), of initially registering the
shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through the Adviser;
(c) legal (including an allocable portion of the cost of its
employees rendering legal services to the Fund), accounting and
auditing fees and expenses of the Fund;
(d) the fees or disbursements of custodians and depositories
of the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(e) taxes and governmental fees assessed against the Fund's
assets and payable by the Fund;
3
<PAGE> 25
(f) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset
value of the shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Adviser as herein provided, the Adviser shall be entitled
to a fee, paid monthly in arrears, equal to a stated percentage
of the average daily net assets of the Fund for the preceding
month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
up to $250 million 0.75%
in excess of $250 million 0.70%
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Adviser will receive a pro-rata portion of
such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On
any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for
purposes of calculating the advisory fee shall be calculated as
of the date last determined.
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 the law of a state where
the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent
required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to
time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion
thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or
modified by the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Adviser or any
affiliate or associate of the Adviser from engaging in any
other business or from acting as investment adviser or
investment manager for any other person or entity, whether or
not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers,
directors and employees of the Adviser and those of its parent
company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio
management services and advice to other investment companies,
whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates
themselves.
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its investment
management
4
<PAGE> 26
subsidiaries, nor any of the Adviser's or such investment
management subsidiaries' directors, officers or employees
will act as principal or agent or receive any commission
except as may be permitted by the 1940 Act and rule and
regulations promulgated thereunder. If any occasions shall
arise in which the Adviser advises persons concerning the
shares of the Fund, the Adviser will act solely on its own
behalf and not in any way on behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The Fund acknowledges that the Adviser
and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or
dispose of positions in investments which are at the same time
being acquired or disposed of hereunder. The Adviser shall
have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if, in the sole
discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from
purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or
clients may be selling the same security.
9. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the
Fund, nor the Adviser are partners of or joint ventures with
each other and nothing herein shall be construed so as to make
them such partners or joint ventures or impose any liability as
such on any of them.
10. NAME OF THE TRUST AND FUND. The Fund may use the names
"John Hancock" or "Berkeley" or any name or names derived from
or similar to the names "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" or "The Berkeley
Financial Group" only for so long as this Agreement (or similar
agreement with John Hancock Mutual Life Insurance Company or
any of its affiliates or subsidiaries) remains in effect. At
such time as this Agreement or such other agreement shall no
longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name
indicating that the Fund is advised by or otherwise connected
with the Adviser. The Fund acknowledges that it has adopted
the name "John Hancock Berkeley Global 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 or
names 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. The Fund acknowledges that it
has adopted the name "_____________ Berkeley Global Bond Fund"
through permission of the Berkeley Financial Group and agrees
that The Berkeley Financial Group reserves to itself and any
successor to its business the right to grant the non-exclusive
right to use the name "Berkeley" or any similar name or names
to any other corporation or entity, including but not limited
to any investment company of which The Berkeley Financial Group
or any subsidiary or affiliate thereof shall be the investment
adviser.
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or
5
<PAGE> 27
gross negligence on the part of the Adviser in the performance
of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also
employed by the Adviser, 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 the Adviser's
employee or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This
Agreement shall remain in force until the second anniversary of
the date upon which this Agreement was executed by the parties
hereto, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons
of the Adviser or (other than as Board Members) 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 vote of a
majority of the outstanding voting securities of the Fund, by
the Trustees or by the Adviser. Termination of this Agreement
shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other
series of the Trust. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall
be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
16. 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 name John Hancock
Berkeley Global Bond Fund is a series designation of the
Trustees under the Trust's Declaration of Trust, dated October
31, 1994, as amended from time to time. The Declaration of
Trust has been filed with the Secretary of State of the
Commonwealth of Massachusetts. The obligations of the Fund are
not personally binding upon, nor shall resort be had to the
private property of, any of the Trustees,
6
<PAGE> 28
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 series of the Trust.
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock Berkeley Global
Bond Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 29
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY DIVIDEND PERFORMERS FUND
101 Huntington Avenue
Boston, Massachusetts
March 30, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which
John Hancock Berkeley Dividend Performers Fund (the "Fund") is a
series, has been organized as a business trust under the laws of the
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets. Series may be established or terminated from
time to time by action of the Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the
Adviser is willing to provide such advice, management and services
under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund,
agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser
with copies, properly certified or otherwise authenticated, of
each of the following:
(a) Declaration of Trust of the Trust, dated October 31, 1994,
(the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the
investment adviser for the Fund and approving the form of this
Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with
copies, properly certified or otherwise authenticated, of all
amendments of or supplements to the foregoing, if any.
<PAGE> 30
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use
its best efforts to provide to the Fund continuing and suitable
investment programs with respect to investments, consistent
with the investment objectives, policies 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
Fund's then-current Prospectus and Statement of Additional
Information included in the registration statement of the Trust
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 objectives, policies and
restrictions of the Fund, with respect to the purchase, holding
and disposition of portfolio securities including the purchase
and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this
Agreement and subject to the provisions of any sub-investment
management contract respecting the responsibilities of such
sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
provided that in connection with the placing of such orders
and the selection of such brokers or dealers the Adviser 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 Fund of the Adviser's performance
of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business
and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of
Rule 31a-1 thereunder (other than those records being
maintained by the Fund's custodian or transfer agent) and
preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees that such
records are the property of the Fund and will be surrendered to
the Fund promptly upon request therefor);
2
<PAGE> 31
(j) obtain and evaluate such information relating to
economies, industries, businesses, securities markets and
securities as the Adviser may deem necessary or useful in the
discharge of the Adviser's duties hereunder;
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be
parties, which contract shall be subject to approval by the
vote of a majority of the Trustees of the Trust who are not
interested persons of the Adviser, the sub-adviser or of the
Trust, 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 sub-adviser shall be
paid by the Adviser, and no obligation to the sub-adviser shall
be incurred on the Fund's or Trust's behalf, except as agreed
upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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
expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection
with the performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the
Adviser and the Trustees.
5. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser
will not be required to pay any expenses which this Agreement
does not expressly make payable by it. In particular, and
without limiting the generality of the foregoing but subject to
the provisions of Section 4, the Adviser will not be required
to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund
(including without limitation legal, accounting and auditing
fees and expenses incurred in connection with the matters
referred to in this clause (a)), of initially registering the
shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through the Adviser;
(c) legal (including an allocable portion of the cost of its
employees rendering legal services to the Fund), accounting and
auditing fees and expenses of the Fund;
3
<PAGE> 32
(d) the fees or disbursements of custodians and depositories
of the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(e) taxes and governmental fees assessed against the Fund's
assets and payable by the Fund;
(f) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset
value of the shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Adviser as herein provided, the Adviser shall be entitled
to a fee, paid monthly in arrears, equal to a stated percentage
of the average daily net assets of the Fund for the preceding
month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
up to $500 million 0.60%
in excess of $500 million 0.55%
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Adviser will receive a pro-rata portion of
such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On
any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for
purposes of calculating the advisory fee shall be calculated as
of the date last determined.
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 the law of a state where
the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent
required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to
time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion
thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or
modified by the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Adviser or any
affiliate or associate of the Adviser from engaging in any
other business or from acting as investment adviser or
investment manager for any other person or entity, whether or
not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers,
directors and employees of the Adviser and those of its parent
company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio
management services and advice to other investment companies,
whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates
themselves.
4
<PAGE> 33
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its investment
management subsidiaries, nor any of the Adviser's or such
investment management subsidiaries' directors, officers or
employees will act as principal or agent or receive any
commission except as may be permitted by the 1940 Act and rule
and regulations promulgated thereunder. If any occasions shall
arise in which the Adviser advises persons concerning the
shares of the Fund, the Adviser will act solely on its own
behalf and not in any way on behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The Fund acknowledges that the Adviser
and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or
dispose of positions in investments which are at the same time
being acquired or disposed of hereunder. The Adviser shall
have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if, in the sole
discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from
purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or
clients may be selling the same security.
9. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the
Fund, nor the Adviser are partners of or joint ventures with
each other and nothing herein shall be construed so as to make
them such partners or joint ventures or impose any liability as
such on any of them.
10. NAME OF THE TRUST AND FUND. The Fund may use the names
"John Hancock" or "Berkeley" or any name or names derived from
or similar to the names "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" or "The Berkeley
Financial Group" only for so long as this Agreement (or similar
agreement with John Hancock Mutual Life Insurance Company or
any of its affiliates or subsidiaries) remains in effect. At
such time as this Agreement or such other agreement shall no
longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name
indicating that the Fund is advised by or otherwise connected
with the Adviser. The Fund acknowledges that it has adopted
the name "John Hancock Berkeley Dividend Performers 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 or names 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. The Fund
acknowledges that it has adopted the name "_____________
Berkeley Dividend Performers Fund" through permission of the
Berkeley Financial Group and agrees that The Berkeley Financial
Group reserves to itself and any successor to its business the
right to grant the non-exclusive right to use the name
"Berkeley" or any similar name or names to any other
corporation or entity, including but not limited to any
investment company of which The Berkeley Financial Group or any
subsidiary or affiliate thereof shall be the investment
adviser.
5
<PAGE> 34
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Any person, even though also
employed by the Adviser, 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 the Adviser's
employee or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This
Agreement shall remain in force until the second anniversary of
the date upon which this Agreement was executed by the parties
hereto, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons
of the Adviser or (other than as Board Members) 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 vote of a
majority of the outstanding voting securities of the Fund, by
the Trustees or by the Adviser. Termination of this Agreement
shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other
series of the Trust. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall
be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
16. 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 name John Hancock
Berkeley Dividend Performers
6
<PAGE> 35
Fund is a series designation of the Trustees under the Trust's
Declaration of Trust, dated October 31, 1994, as amended from time
to time. The Declaration of Trust has been filed with the Secretary
of State of the Commonwealth of Massachusetts. The obligations of
the 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 series of the Trust.
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock Berkeley
Dividend Performers Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 36
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK INDEPENDENCE DIVERSIFIED CORE EQUITY FUND II
101 Huntington Avenue
Boston, Massachusetts
March 8, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which John
Hancock Independence Diversified Core Equity Fund II (the "Fund") is a series,
has been organized as a business trust under the laws of the Commonwealth of
Massachusetts to engage in the business of an investment company. The Trust's
shares of beneficial interest are currently divided into eleven series
(including the Fund), each series representing the entire undivided interest in
a separate portfolio of assets. Series may be established or terminated from
time to time by action of the Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the Adviser is willing to provide such advice,
management and services under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund, agree
as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser with
copies, properly certified or otherwise authenticated, of each of the
following:
(a) Declaration of Trust of the Trust, dated October 31, 1994, (the
"Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the investment
adviser for the Fund and approving the form of this Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with copies, properly
certified or otherwise authenticated, of all amendments of or supplements
to the foregoing, if any.
<PAGE> 37
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use its best
efforts to provide to the Fund continuing and suitable investment programs
with respect to investments, consistent with the investment objectives,
policies 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 Fund's then-current Prospectus and
Statement of Additional Information included in the registration statement
of the Trust 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 objectives, policies and restrictions of the Fund, with respect
to the purchase, holding and disposition of portfolio securities including
the purchase and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this Agreement and
subject to the provisions of any sub-investment management contract
respecting the responsibilities of such sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement, place
orders for the purchase, sale or exchange of portfolio securities with
brokers or dealers selected by the Adviser, provided that in connection
with the placing of such orders and the selection of such brokers or
dealers the Adviser 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 Fund of the Adviser's performance of the foregoing services
and furnish advice and recommendations with respect to other aspects of
the business and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's securities
transactions required by the 1940 Act, including sub-paragraphs (b)(5),
(6), (9) and (10) and paragraph (f) of Rule 31a-1 thereunder (other than
those records being maintained by the Fund's custodian or transfer agent)
and preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees that such records are the
property of the Fund and will be surrendered to the Fund promptly upon
request therefor);
2
<PAGE> 38
(j) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as the Adviser
may deem necessary or useful in the discharge of the Adviser's duties
hereunder;
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be parties,
which contract shall be subject to approval by the vote of a majority of
the Trustees of the Trust who are not interested persons of the Adviser,
the sub-adviser or of the Trust, 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 sub-adviser shall be paid by the Adviser, and no obligation to
the sub-adviser shall be incurred on the Fund's or Trust's behalf, except
as agreed upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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 expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection with the
performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the Adviser and
the Trustees.
5. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser will not
be required to pay any expenses which this Agreement does not expressly
make payable by it. In particular, and without limiting the generality of
the foregoing but subject to the provisions of Section 4, the Adviser will
not be required to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund (including without
limitation legal, accounting and auditing fees and expenses incurred in
connection with the matters referred to in this clause (a)), of initially
registering the shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants, managers
and other unaffiliated agents employed by the Fund other than through the
Adviser;
(c) legal (including an allocable portion of the cost of its employees
rendering legal services to the Fund), accounting and auditing fees and
expenses of the Fund;
3
<PAGE> 39
(d) the fees or disbursements of custodians and depositories of the
Fund's assets, transfer agents, disbursing agents, plan agents and
registrars;
(e) taxes and governmental fees assessed against the Fund's assets and
payable by the Fund;
(f) the cost of preparing and mailing dividends, distributions, reports,
notices and proxy materials to shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset value of the
shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be rendered,
facilities furnished and expenses paid or assumed by the Adviser as herein
provided, the Adviser shall be entitled to a fee, paid monthly in arrears,
equal to a stated percentage of the average daily net assets of the Fund
for the preceding month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
all asset levels 0.50%
The "average daily net assets" of the Fund shall be determined on the
basis set forth in the Fund's Prospectus or otherwise consistent with the
1940 Act and the regulations promulgated thereunder. The Adviser will
receive a pro-rata portion of such monthly fee for any periods in which
the Adviser serves as investment adviser to the Fund for less than a full
month. On any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for purposes of
calculating the advisory fee shall be calculated as of the date last
determined.
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 the law of a state where the Fund is registered to sell shares
of beneficial interest, the fee payable to the Adviser will be reduced to
the extent required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to time agree not
to impose all or a portion of its fee otherwise payable hereunder (in
advance of the time such fee or portion thereof would otherwise accrue)
and/or undertake to pay or reimburse the Fund for all or a portion of its
expenses not otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or modified by
the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Adviser or any affiliate or associate of the
Adviser from engaging in any other business or from acting as investment
adviser or investment manager for any other person or entity,
whether or not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers, directors and
employees of the Adviser and those of its parent company, John Hancock
Mutual Life Insurance Company, or other affiliates may continue to engage
in providing portfolio management services and advice to other investment
companies, whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates themselves.
4
<PAGE> 40
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or sales
of portfolio securities for the account of the Fund, neither the Adviser nor
any of its investment management subsidiaries, nor any of the Adviser's or such
investment management subsidiaries' directors, officers or employees will act
as principal or agent or receive any commission except as may be permitted by
the 1940 Act and rule and regulations promulgated thereunder. If any occasions
shall arise in which the Adviser advises persons concerning the shares of the
Fund, the Adviser will act solely on its own behalf and not in any way on
behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser or any of its
officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The Fund acknowledges
that the Adviser and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or dispose of
positions in investments which are at the same time being acquired or disposed
of hereunder. The Adviser shall have no obligation to acquire with respect to
the Fund a position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own accounts or for the
account of another client, if, in the sole discretion of the Adviser, it is not
feasible or desirable to acquire a position in such investment on behalf of the
Fund. Nothing herein contained shall prevent the Adviser from purchasing or
recommending the purchase of a particular security for one or more funds or
clients while other funds or clients may be selling the same security.
9. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the Fund, nor the
Adviser are partners of or joint ventures with each other and nothing herein
shall be construed so as to make them such partners or joint ventures or impose
any liability as such on any of them.
10. NAME OF THE TRUST AND FUND. The Fund may use the names "John Hancock" or
any name or names derived from or similar to the names "John Hancock Advisers,
Inc." or "John Hancock Mutual Life Insurance Company" or "The Berkeley
Financial Group" only for so long as this Agreement (or similar agreement with
John Hancock Mutual Life Insurance Company or any of its affiliates or
subsidiaries) remains in effect. At such time as this Agreement or such other
agreement shall no longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name indicating that the
Fund is advised by or otherwise connected with the Adviser. The Fund
acknowledges that it has adopted the name "John Hancock Independence
Diversified Core Equity Fund II" 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 or names 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.
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any
person, even though also employed by the Adviser, who may be or become an
employee of and paid by the Fund shall be
5
<PAGE> 41
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 the Adviser's employee
or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain
in force until the second anniversary of the date upon which this Agreement was
executed by the parties hereto, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the Adviser or
(other than as Board Members) 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 vote of a majority of the outstanding voting
securities of the Fund, by the Trustees or by the Adviser. Termination of this
Agreement shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other series of the
Trust. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 12, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer, assignment,
sale, hypothecation or pledge of this Agreement shall be effective until
approved by (a) the Trustees, including a majority of the Trustees who are not
interested persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
16. 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 name John Hancock Independence Diversified
Core Equity Fund II is a series designation of the Trustees under the Trust's
Declaration of Trust, dated October 31, 1994, as amended from time to time.
The Declaration of Trust has been filed with the Secretary of State of the
Commonwealth of Massachusetts. The obligations of the 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 series of the Trust.
6
<PAGE> 42
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock
Independence Diversified Core Equity
Fund II
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 43
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY SECTOR OPPORTUNITY FUND
101 Huntington Avenue
Boston, Massachusetts
January 30, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which
John Hancock Berkeley Sector Opportunity Fund (the "Fund") is a
series, has been organized as a business trust under the laws of the
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets. Series may be established or terminated from
time to time by action of the Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the
Adviser is willing to provide such advice, management and services
under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund,
agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser
with copies, properly certified or otherwise authenticated, of
each of the following:
(a) Declaration of Trust of the Trust, dated October 31, 1994,
(the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the
investment adviser for the Fund and approving the form of this
Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with
copies, properly certified or otherwise authenticated, of all
amendments of or supplements to the foregoing, if any.
<PAGE> 44
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use
its best efforts to provide to the Fund continuing and suitable
investment programs with respect to investments, consistent
with the investment objectives, policies 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
Fund's then-current Prospectus and Statement of Additional
Information included in the registration statement of the Trust
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 objectives, policies and
restrictions of the Fund, with respect to the purchase, holding
and disposition of portfolio securities including the purchase
and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this
Agreement and subject to the provisions of any sub-investment
management contract respecting the responsibilities of such
sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
provided that in connection with the placing of such orders
and the selection of such brokers or dealers the Adviser 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 Fund of the Adviser's performance
of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business
and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of
Rule 31a-1 thereunder (other than those records being
maintained by the Fund's custodian or transfer agent) and
preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees that such
records are the property of the Fund and will be surrendered to
the Fund promptly upon request therefor);
2
<PAGE> 45
(j) obtain and evaluate such information relating to
economies, industries, businesses, securities markets and
securities as the Adviser may deem necessary or useful in the
discharge of the Adviser's duties hereunder;
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be
parties, which contract shall be subject to approval by the
vote of a majority of the Trustees of the Trust who are not
interested persons of the Adviser, the sub-adviser or of the
Trust, 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 sub-adviser shall be
paid by the Adviser, and no obligation to the sub-adviser shall
be incurred on the Fund's or Trust's behalf, except as agreed
upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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
expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection
with the performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the
Adviser and the Trustees.
5. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser
will not be required to pay any expenses which this Agreement
does not expressly make payable by it. In particular, and
without limiting the generality of the foregoing but subject to
the provisions of Section 4, the Adviser will not be required
to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund
(including without limitation legal, accounting and auditing
fees and expenses incurred in connection with the matters
referred to in this clause (a)), of initially registering the
shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through the Adviser;
(c) legal (including an allocable portion of the cost of its
employees rendering legal services to the Fund), accounting and
auditing fees and expenses of the Fund;
3
<PAGE> 46
(d) the fees or disbursements of custodians and depositories
of the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(e) taxes and governmental fees assessed against the Fund's
assets and payable by the Fund;
(f) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset
value of the shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Adviser as herein provided, the Adviser shall be entitled
to a fee, paid monthly in arrears, equal to a stated percentage
of the average daily net assets of the Fund for the preceding
month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
up to $500 million 0.80%
in excess of $500 million 0.75%
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Adviser will receive a pro-rata portion of
such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On
any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for
purposes of calculating the advisory fee shall be calculated as
of the date last determined.
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 the law of a state where
the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent
required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to
time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion
thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or
modified by the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Adviser or any
affiliate or associate of the Adviser from engaging in any
other business or from acting as investment adviser or
investment manager for any other person or entity, whether or
not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers,
directors and employees of the Adviser and those of its parent
company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio
management services and advice to other investment companies,
whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates
themselves.
4
<PAGE> 47
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its investment
management subsidiaries, nor any of the Adviser's or such
investment management subsidiaries' directors, officers or
employees will act as principal or agent or receive any
commission except as may be permitted by the 1940 Act and rule
and regulations promulgated thereunder. If any occasions shall
arise in which the Adviser advises persons concerning the
shares of the Fund, the Adviser will act solely on its own
behalf and not in any way on behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The Fund acknowledges that the Adviser
and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or
dispose of positions in investments which are at the same time
being acquired or disposed of hereunder. The Adviser shall
have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if, in the sole
discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from
purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or
clients may be selling the same security.
9. No Partnership or Joint Venture. Neither the Trust, the
Fund, nor the Adviser are partners of or joint ventures with
each other and nothing herein shall be construed so as to make
them such partners or joint ventures or impose any liability as
such on any of them.
10. Name of the Trust and Fund. The Fund may use the names
"John Hancock" or "Berkeley" or any name or names derived from
or similar to the names "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" or "The Berkeley
Financial Group" only for so long as this Agreement (or similar
agreement with John Hancock Mutual Life Insurance Company or
any of its affiliates or subsidiaries) remains in effect. At
such time as this Agreement or such other agreement shall no
longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name
indicating that the Fund is advised by or otherwise connected
with the Adviser. The Fund acknowledges that it has adopted
the name "John Hancock Berkeley Sector Opportunity 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 or names 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. The Fund
acknowledges that it has adopted the name "_____________
Berkeley Sector Opportunity Fund" through permission of the
Berkeley Financial Group and agrees that The Berkeley Financial
Group reserves to itself and any successor to its business the
right to grant the non-exclusive right to use the name
"Berkeley" or any similar name or names to any other
corporation or entity, including but not limited to any
investment company of which The Berkeley Financial Group or any
subsidiary or affiliate thereof shall be the investment
adviser.
5
<PAGE> 48
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Any person, even though also
employed by the Adviser, 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 the Adviser's
employee or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This
Agreement shall remain in force until the second anniversary of
the date upon which this Agreement was executed by the parties
hereto, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons
of the Adviser or (other than as Board Members) 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 vote of a
majority of the outstanding voting securities of the Fund, by
the Trustees or by the Adviser. Termination of this Agreement
shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other
series of the Trust. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall
be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
16. 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 name John Hancock
Berkeley Sector Opportunity
6
<PAGE> 49
Fund is a series designation of the Trustees under the Trust's
Declaration of Trust, dated October 31, 1994, as amended from time
to time. The Declaration of Trust has been filed with the Secretary
of State of the Commonwealth of Massachusetts. The obligations of
the 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 series of the Trust.
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock Berkeley Sector
Opportunity Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 50
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
JOHN HANCOCK BERKELEY BOND FUND
101 Huntington Avenue
Boston, Massachusetts
March 30, 1995
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Investment Management Contract
------------------------------
Ladies and Gentlemen:
John Hancock Institutional Series Trust (the "Trust") of which
John Hancock Berkeley Bond Fund (the "Fund") is a series, has been
organized as a business trust under the laws of the Commonwealth of
Massachusetts to engage in the business of an investment company.
The Trust's shares of beneficial interest are currently divided into
eleven series (including the Fund), each series representing the
entire undivided interest in a separate portfolio of assets. Series
may be established or terminated from time to time by action of the
Board of Trustees of the Trust.
The Board of Trustees of the Trust (the "Trustees") has 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 the
Adviser is willing to provide such advice, management and services
under the terms and conditions hereinafter set forth.
Accordingly, the Adviser and the Trust, on behalf of the Fund,
agree as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Adviser
with copies, properly certified or otherwise authenticated, of
each of the following:
(a) Declaration of Trust of the Trust, dated October 31, 1994,
(the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Adviser as the
investment adviser for the Fund and approving the form of this
Agreement.
(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; and
(e) The Trust's Code of Ethics.
The Trust will furnish the Adviser from time to time with
copies, properly certified or otherwise authenticated, of all
amendments of or supplements to the foregoing, if any.
<PAGE> 51
2. INVESTMENT AND MANAGEMENT SERVICES. The Adviser will use
its best efforts to provide to the Fund continuing and suitable
investment programs with respect to investments, consistent
with the investment objectives, policies 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
Fund's then-current Prospectus and Statement of Additional
Information included in the registration statement of the Trust
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 objectives, policies and
restrictions of the Fund, with respect to the purchase, holding
and disposition of portfolio securities including the purchase
and sale of options, alone or in consultation with any
sub-adviser or sub-advisers appointed pursuant to this
Agreement and subject to the provisions of any sub-investment
management contract respecting the responsibilities of such
sub-adviser or sub-advisers;
(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 provisions of Section 8 of this Agreement,
place orders for the purchase, sale or exchange of portfolio
securities with brokers or dealers selected by the Adviser,
provided that in connection with the placing of such orders
and the selection of such brokers or dealers the Adviser 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 Fund of the Adviser's performance
of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business
and affairs of the Fund;
(i) maintain all books and records with respect to the Fund's
securities transactions required by the 1940 Act, including
sub-paragraphs (b)(5), (6), (9) and (10) and paragraph (f) of
Rule 31a-1 thereunder (other than those records being
maintained by the Fund's custodian or transfer agent) and
preserve such records for the periods prescribed therefor by
Rule 31a-2 of the 1940 Act (the Adviser agrees 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 the Adviser may deem necessary or useful in the
discharge of the Adviser's duties hereunder;
2
<PAGE> 52
(k) oversee and use the Adviser's 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.
3. SUB-ADVISERS. 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 sub-advisers 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 to which the Trust and the Adviser shall be
parties, which contract shall be subject to approval by the
vote of a majority of the Trustees of the Trust who are not
interested persons of the Adviser, the sub-adviser or of the
Trust, 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 sub-adviser shall be
paid by the Adviser, and no obligation to the sub-adviser shall
be incurred on the Fund's or Trust's behalf, except as agreed
upon by the Trustees of the Trust and otherwise consistent with
the terms of the 1940 Act.
4. Expenses paid by the Adviser. The Adviser 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
expenses of the Fund;
(c) any other expenses incurred by the Adviser in connection
with the performance of its duties hereunder; and
(d) premiums for such insurance as may be agreed upon be the
Adviser and the Trustees.
5. EXPENSES OF THE FUND NOT PAID BY THE ADVISER. The Adviser
will not be required to pay any expenses which this Agreement
does not expressly make payable by it. In particular, and
without limiting the generality of the foregoing but subject to
the provisions of Section 4, the Adviser will not be required
to pay under this Agreement:
(a) the expenses of organizing the Trust and the Fund
(including without limitation legal, accounting and auditing
fees and expenses incurred in connection with the matters
referred to in this clause (a)), of initially registering the
shares of the Trust 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;
(b) 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 the Adviser, and
of independent advisers, independent contractors, consultants,
managers and other unaffiliated agents employed by the Fund
other than through the Adviser;
(c) legal (including an allocable portion of the cost of its
employees rendering legal services to the Fund), accounting and
auditing fees and expenses of the Fund;
(d) the fees or disbursements of custodians and depositories
of the Fund's assets, transfer agents, disbursing agents, plan
agents and registrars;
(e) taxes and governmental fees assessed against the Fund's
assets and payable by the Fund;
3
<PAGE> 53
(f) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Fund;
(g) brokers' commissions and underwriting fees; and
(h) the expense of periodic calculations of the net asset
value of the shares of the Fund.
6. COMPENSATION OF THE ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Adviser as herein provided, the Adviser shall be entitled
to a fee, paid monthly in arrears, equal to a stated percentage
of the average daily net assets of the Fund for the preceding
month as set forth below:
Net Asset Value Annual Rate
--------------- -----------
up to $1.5 billion 0.50%
in excess of $1.5 billion 0.45%
The "average daily net assets" of the Fund shall be determined
on the basis set forth in the Fund's Prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Adviser will receive a pro-rata portion of
such monthly fee for any periods in which the Adviser serves as
investment adviser to the Fund for less than a full month. On
any day that the net asset value calculation is suspended as
specified in the Fund's Prospectus, the net asset value for
purposes of calculating the advisory fee shall be calculated as
of the date last determined.
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 the law of a state where
the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent
required by law, and the Adviser will make any arrangements
that the Adviser is required by law to make.
In addition to the foregoing, the Adviser may from time to
time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion
thereof would otherwise accrue) and/or undertake to pay or
reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Adviser.
Any such fee reduction or undertaking may be discontinued or
modified by the Adviser at any time.
7. OTHER ACTIVITIES OF THE ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Adviser or any
affiliate or associate of the Adviser from engaging in any
other business or from acting as investment adviser or
investment manager for any other person or entity, whether or
not having investment policies or portfolios similar to the
Fund's; and it is specifically understood that officers,
directors and employees of the Adviser and those of its parent
company, John Hancock Mutual Life Insurance Company, or other
affiliates may continue to engage in providing portfolio
management services and advice to other investment companies,
whether or not registered, to other investment advisory clients
of the Adviser or of its affiliates and to said affiliates
themselves.
8. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Adviser nor any of its investment
management
4
<PAGE> 54
subsidiaries, nor any of the Adviser's or such investment
management subsidiaries' directors, officers or employees
will act as principal or agent or receive any commission
except as may be permitted by the 1940 Act and rule
and regulations promulgated thereunder. If any occasions shall
arise in which the Adviser advises persons concerning the
shares of the Fund, the Adviser will act solely on its own
behalf and not in any way on behalf of the Fund.
Nothing herein contained shall limit or restrict the Adviser
or any of its officers, affiliates or employees from buying,
selling or trading in any securities for its or their own
account or accounts. The Fund acknowledges that the Adviser
and its officers, affiliates, and employees, and its other
clients may at any time have, acquire, increase, decrease or
dispose of positions in investments which are at the same time
being acquired or disposed of hereunder. The Adviser shall
have no obligation to acquire with respect to the Fund a
position in any investment which the Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if, in the sole
discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment on behalf of the Fund.
Nothing herein contained shall prevent the Adviser from
purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or
clients may be selling the same security.
9. NO PARTNERSHIP OR JOINT VENTURE. Neither the Trust, the
Fund, nor the Adviser are partners of or joint ventures with
each other and nothing herein shall be construed so as to make
them such partners or joint ventures or impose any liability as
such on any of them.
10. NAME OF THE TRUST AND FUND. The Fund may use the names
"John Hancock" or "Berkeley" or any name or names derived from
or similar to the names "John Hancock Advisers, Inc." or "John
Hancock Mutual Life Insurance Company" or "The Berkeley
Financial Group" only for so long as this Agreement (or similar
agreement with John Hancock Mutual Life Insurance Company or
any of its affiliates or subsidiaries) remains in effect. At
such time as this Agreement or such other agreement shall no
longer be in effect, the Fund will (to the extent that it
lawfully can) cease to use such a name or any other name
indicating that the Fund is advised by or otherwise connected
with the Adviser. The Fund acknowledges that it has adopted
the name "John Hancock Berkeley 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 or names 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. The Fund acknowledges that it has adopted
the name "_____________ Berkeley Bond Fund" through permission
of the Berkeley Financial Group and agrees that The Berkeley
Financial Group reserves to itself and any successor to its
business the right to grant the non-exclusive right to use the
name "Berkeley" or any similar name or names to any other
corporation or entity, including but not limited to any
investment company of which The Berkeley Financial Group or any
subsidiary or affiliate thereof shall be the investment
adviser.
11. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall
not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or
5
<PAGE> 55
gross on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Any person, even though also
employed by the Adviser, 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 the Adviser's
employee or agent.
12. DURATION AND TERMINATION OF THIS AGREEMENT. This
Agreement shall remain in force until the second anniversary of
the date upon which this Agreement was executed by the parties
hereto, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by
(a) a majority of the Trustees who are not interested persons
of the Adviser or (other than as Board Members) 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 vote of a
majority of the outstanding voting securities of the Fund, by
the Trustees or by the Adviser. Termination of this Agreement
shall not be deemed to terminate or otherwise invalidate any
provisions of any contract between the Adviser and any other
series of the Trust. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the
provisions of this Section 12, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of
"assignment," "interested person" and "voting security"), shall
be applied.
13. AMENDMENT OF THIS AGREEMENT. No provision of this
agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Agreement
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser or (other than as Board Members) 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.
14. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of
Massachusetts.
15. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
16. 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 name John Hancock
Berkeley Bond Fund is a series designation of the Trustees
under the Trust's Declaration of Trust, dated October 31, 1994,
as amended from time to time. The Declaration of Trust has
been filed with the Secretary of State of the Commonwealth of
Massachusetts. The obligations of the Fund are not personally
binding upon, nor shall resort be had to the private property
of, any of the Trustees,
6
<PAGE> 56
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 series of the Trust.
Yours very truly,
JOHN HANCOCK INSTITUTIONAL
SERIES TRUST
--on behalf of John Hancock Berkeley Bond Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing contract is hereby agreed
to as of the date hereof.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
President
7
<PAGE> 1
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
March 8, 1995
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
-- John Hancock Independence Diversified Core Equity Fund II
101 Huntington Avenue
Boston, Massachusetts 02199
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
53 State Street
Boston, MA 02109
Sub-Investment Management Contract
----------------------------------
Dear Sirs:
John Hancock Institutional Series Trust (the "Trust"), of which John
Hancock Independence Diversified Core Equity Fund II (the "Fund") is a series,
has been organized as a business trust under the laws of The Commonwealth of
Massachusetts to engage in the business of an investment company. The Trust's
shares of beneficial interest are currently divided into eleven series
(including the Fund), each series representing the entire undivided interest in
a separate portfolio of assets.
The Board of Trustees of the Trust (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,
under the terms and conditions provided in the investment management contract,
dated as of the date hereof, between the Trust, on behalf of the Fund, and the
Adviser (the "Investment Management Contract").
The Adviser and the Trustees have selected Independence Investment
Associates, Inc. (the "Sub-Adviser") to provide the Adviser and the Fund with
the advice and services set forth below, and the Sub-Adviser is willing to
provide such advice and services, subject to the review of the Trustees and
overall supervision of the Adviser, under the terms and conditions hereinafter
set forth. The Sub-Adviser hereby represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended (the "1940 Act"). Accordingly, the Trust, on behalf of the Fund,
and the Adviser agree with the Sub-Adviser as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the Sub-Adviser with
copies, properly certified or otherwise authenticated, of each of
the following:
<PAGE> 2
(a) Declaration of Trust of the Trust, dated October 31, 1994 (the
"Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date hereof;
(c) Resolutions of the Trustees selecting the Sub-Adviser as the
investment sub-adviser to the Fund and approving the form of this
Sub-Investment Management Contract (the "Contract");
(d) Resolutions of the Trustees selecting the Adviser as investment
adviser to the Fund and approving the form of the Investment
Management Contract and resolutions adopted by the initial
shareholder of the Fund approving the form of the Investment
Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by the Trust to
state "blue sky" authorities for the purpose of qualifying shares of
the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional information;
and
The Adviser will furnish the Sub-Adviser from time to time with
copies, properly certified or otherwise authenticated, of all amendments
of or supplements to the foregoing, if any.
The Sub-Adviser has furnished the Adviser with a copy of the
Sub-Adviser's Code of Ethics, and will furnish the Adviser from time to
time with copies of any amendments to the code. The restrictions of the
Sub-Adviser may differ from those of the Trust where appropriate as long
as they maintain the same intent consistent with the sub-adviser's own
procedures for recommending and purchasing securities.
2. INVESTMENT SERVICES. The Sub-Adviser will use its best efforts to
provide to the Fund continuing and suitable investment advice with respect
to investments, consistent with the investment policies, objectives and
restrictions of the Fund as set forth in the Fund's Prospectus and
Statement of Additional Information. In the performance of the
Sub-Adviser's duties hereunder, subject always to the provisions contained
in the documents delivered to the Sub-Adviser pursuant to Section 1 above,
as each of the same may from time to time be amended or supplemented, the
Sub-Adviser will have investment discretion with respect to the Fund and
will, at its own expense:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies, objectives
and restrictions of the Fund as set forth in the Fund's prospectus
and statement of additional information, with respect to the
purchase, holding and disposition of portfolio securities and other
permitted investments;
(b) furnish the Adviser and the Fund with advice as to the manner in
which voting rights, subscription rights, rights to consent to
corporate action and any other rights
2
<PAGE> 3
pertaining to the Fund's assets shall be exercised, the Fund having
the responsibility to exercise such voting and other rights; and, as
requested, furnish the Fund with research, economic and statistical
data in connection with the Fund's investments and investment
policies;
(c) submit such reports relating to the valuation of the Fund's
securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser, engage in
negotiations relating to the Fund's investments with issuers,
investment banking firms, securities brokers or dealers and other
institutions or investors;
(e) consistent with the provisions of Section 7 of this Contract,
place orders for the purchase, sale or exchange of portfolio
securities for the Fund's account with brokers or dealers selected by
the Adviser or the Sub-Adviser, provided that in connection with the
placing of such orders and the selection of such brokers or dealers
the Sub-Adviser 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 and furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the Adviser or the
Trustees, make reports to the Adviser or the Trust, as requested, of
the Sub-Adviser's performance of the foregoing services;
(g) subject to the supervision of the Adviser, maintain and preserve
the records required by the 1940 Act to be maintained by the
Sub-Adviser (the Sub-Adviser agrees that such records are the
property of the Trust and copies will be surrendered to the Trust
promptly upon request therefor);
(h) give instructions to the custodian (including any subcustodian)
of the Fund as to deliveries of securities to and from such custodian
and payments of cash for the account of the Fund, and advise the
Adviser on the same day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to provide
information necessary for the preparation of registration statements
and periodic reports to be filed with the Securities and Exchange
Commission, including Form N-1A, semi-annual reports on Form N-SAR,
periodic statements, shareholder communications and proxy materials
furnished to holders of shares of the Fund, filings with state "blue
sky" authorities and with United States agencies responsible for tax
matters, and other reports and filings of like nature; and
3. EXPENSES PAID BY THE SUB-ADVISER. The Sub-Adviser will pay the cost
of maintaining the staff and personnel necessary for it to perform its
obligations under this Contract, the expenses of office rent, telephone,
telecommunications and other facilities it is obligated to provide in
order to perform the services specified in Section 2, and any other
expenses incurred by it in connection with the performance of its duties
hereunder.
3
<PAGE> 4
4. EXPENSES OF THE FUND NOT PAID BY THE SUB-ADVISER. The Sub-Adviser
will not be required to pay any expenses which this Contract does not
expressly state shall be payable by the Sub-Adviser. In particular, and
without limiting the generality of the foregoing but subject to the
provisions of Section 3, the Sub-Adviser will not be required to pay under
this contract:
(a) the compensation and expenses of Trustees and of independent
advisers, independent contractors, consultants, managers and other
agents employed by the Trust or the Fund other than through the
Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the Trust
or the Fund;
(c) the fees and disbursements of custodians and depositories of
the Trust or the Fund's assets, transfer agents, disbursing agents,
plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust or the
Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends, distributions,
reports, notices and proxy materials to shareholders of the Trust or
the Fund except that the Sub-Adviser shall bear the costs of
providing the information referred to in Section 2(i) to the Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset value of
the shares of the Fund.
5. COMPENSATION OF THE SUB-ADVISER. For all services to be rendered,
facilities furnished and expenses paid or assumed by the Sub-Adviser as herein
provided for the Fund, the Adviser will pay the Sub-Adviser quarterly, based on
the "average daily net asset" value of the Fund for each of the preceding 3
months, in arrears a fee at the annual rate of 80% of the investment advisory
fee payable to the Adviser. The "average daily net assets" of the Fund shall
be determined on the basis set forth in the Fund's prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated thereunder. The
Sub-Adviser will receive a pro rata portion of such monthly fee for any periods
in which the Sub-Adviser advises the Fund less than a full month. The
Sub-Adviser understands and agrees that neither the Trust nor the Fund has any
liability for the Sub-Adviser's fee hereunder. Calculations of the
Sub-Adviser's fee will be based on average net asset values as provided by the
Adviser.
In addition to the foregoing, the Sub-Adviser may from time to time
agree not to impose all or a portion of its fee otherwise payable hereunder (in
advance of the time such fee or portion thereof would otherwise accrue) and/or
undertake to pay or reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by it. Any such fee reduction or
undertaking may be discontinued or modified by the Sub-Adviser at any time.
6. OTHER ACTIVITIES OF THE SUB-ADVISER AND ITS AFFILIATES. Nothing herein
contained shall prevent the Sub-Adviser or any of its affiliates or associates
from engaging in any other business or from acting as investment adviser or
investment manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is specifically
4
<PAGE> 5
understood that officers, directors and employees of the Sub-Adviser and those
of its affiliates may engage in providing portfolio management services and
advice to other investment advisory clients of the Sub-Adviser or of its
affiliates.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with purchases or sales
of portfolio securities for the account of the Fund, neither the Sub-Adviser
nor any of its directors, officers or employees will act as principal or agent
or receive any commission , except as permitted by the 1940 Act and the rules
and regulations promulgated thereunder. The Sub-Adviser shall not knowingly
recommend that the Fund purchase, sell or retain securities of any issuer in
which the Sub-Adviser has a financial interest without obtaining prior approval
of the Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the Sub-Adviser or any of its
officers, affiliates or employees from buying, selling or trading in any
securities for its or their own account or accounts. The Trust and Fund
acknowledge the Sub-Adviser and its officers, affiliates and employees, and its
other clients may at any time have, acquire, increase, decrease or dispose of
positions in investments which are at the same time being acquired or disposed
of by the Fund. The Sub-Adviser shall have no obligation to acquire with
respect to the Fund, a position in any investment which the Sub-Adviser, its
officers, affiliates or employees may acquire for its or their own accounts or
for the account of another client if, in the sole discretion of the
Sub-Adviser, it is not feasible or desirable to acquire a position in such
investment on behalf of the Fund. Nothing herein contained shall prevent the
Sub-Adviser from purchasing or recommending the purchase of a particular
security for one or more funds or clients while other funds or clients may be
selling the same security.
8. NO PARTNERSHIP OR JOINT VENTURE. The Trust, the Fund, the Adviser and the
Sub-Adviser are not partners of or joint venturers with each other and nothing
herein shall be construed so as to make them such partners or joint venturers
or impose any liability as such on any of them.
9. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust, the Fund or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the Sub-Adviser's part in the performance of its duties
or from reckless disregard by it of its obligations and duties under this
Contract. Any person, even though also employed by the Sub-Adviser, who may be
or become an employee of and paid by the Trust or the Fund shall be deemed,
when acting within the scope of his employment by the Trust or the Fund, to be
acting in such employment solely for the Trust or the Fund and not as the
Sub-Adviser's employee or agent.
10. DURATION AND TERMINATION OF THIS CONTRACT. This Contract shall remain in
force until the second anniversary of the date upon which this Contract was
executed by the parties hereto, and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the Adviser, of the
Sub-Adviser or (other than as Board members) of the Trust or 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 Contract may, on 60 days' written notice, be terminated at
any time without the payment of any penalty by the Trust on
5
<PAGE> 6
behalf of the Fund by vote of a majority of the outstanding voting securities
of the Fund or by the Board of Trustees or by the Adviser or by the
Sub-Adviser. Termination of this Contract 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 Trust. This Contract shall
automatically terminate in the event of its assignment or upon the termination
of the Adviser's Investment Management Contract. In interpreting the
provisions of this Section 10, the definitions contained in Section 2(a) of the
1940 Act (including the definitions of "assignment," "interested person" and
"voting security"), shall be applied.
11. AMENDMENT OF THIS CONTRACT. No provision of this Contract may be changed,
discharged, terminated or waived orally, but only by an instrument in writing
signed by the party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer, assignment, sale,
hypothecation or pledge of this Contract shall be effective until approved by
(a) the Trustees, including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board members) the
Trust or the Fund, cast in person at a meeting called for the purpose of voting
on such approval, and (b) a majority of the outstanding voting securities of
the Fund, as defined in the 1940 Act.
12. MISCELLANEOUS.
--------------
(a) The captions in this Contract 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 Contract 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 Institutional Series Trust is
the designation of the Trustees under the Declaration of Trust, dated
October 31, 1994 as amended from time to time. The Declaration of Trust
has been filed with the Secretary of State of The Commonwealth of
Massachusetts. The obligations of the Trust and the Fund are not
personally binding upon, nor shall resort be had to the private property
of, any of the Trustees, shareholders, officers, employees or agents of the
Trust or the Fund, but only the Fund's property shall be bound. The Trust
or the Fund shall not be liable for the obligations of any other series of
the Trust.
(b) Any information supplied by the Sub-Adviser, which is not otherwise in
the public domain, in connection with the performance of its duties
hereunder is to be regarded as confidential and for use only by the
Fund and/or its agents, and only in connection with the Fund and its
investments.
(c) The Trust and the Fund may use the name "Independence" or "NIXDEX" or
any name similar to "Independence Investment Associates, Inc." or "NIXDEX"
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 that
it lawfully can) cease to use such names or any other names indicating that
the Fund is advised by or otherwise connected with the Sub-Adviser. The
Fund acknowledges that it has adopted a name that includes the name
"Independence" through permission of the Sub-Adviser and agrees that the
Sub-Adviser reserves to itself and any successor to its business the right
to grant the non-exclusive right to use the name "Independence" or "NIXDEX"
or any similar name to any other
6
<PAGE> 7
corporation or entity, including but not limited to any investment
company of which it or any of its subsidiaries or affiliates shall be the
investment adviser.
13. GOVERNING LAW. This Contract shall be construed in accordance with the
laws of The Commonwealth of Massachusetts and the applicable provisions of the
1940 Act.
14. SEVERABILITY. The provisions of this contract are independent of and
separable from each other and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be deemed invalid or unenforceable in whole or in part.
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
on behalf of John Hancock Independence Diversified Core Equity Fund II
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
Independence Investment Associates, Inc.
By: /s/ William C. Fletcher
-----------------------
Its: President
---------
7
<PAGE> 8
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
July 5, 1995
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
-- John Hancock Independence Balanced Fund
101 Huntington Avenue
Boston, Massachusetts 02199
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
53 State Street
Boston, MA 02109
Sub-Investment Management Contract
----------------------------------
Dear Sirs:
John Hancock Institutional Series Trust (the "Trust"), of which
John Hancock Independence Balanced Fund (the "Fund") is a series,
has been organized as a business trust under the laws of The
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets.
The Board of Trustees of the Trust (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, under the terms and conditions provided in
the investment management contract, dated as of the date hereof,
between the Trust, on behalf of the Fund, and the Adviser (the
"Investment Management Contract").
The Adviser and the Trustees have selected Independence Investment
Associates, Inc. (the "Sub-Adviser") to provide the Adviser and the
Fund with the advice and services set forth below, and the
Sub-Adviser is willing to provide such advice and services, subject
to the review of the Trustees and overall supervision of the
Adviser, under the terms and conditions hereinafter set forth. The
Sub-Adviser hereby represents and warrants that it is registered as
an investment adviser under the Investment Advisers Act of 1940, as
amended (the "1940 Act"). Accordingly, the Trust, on behalf of the
Fund, and the Adviser agree with the Sub-Adviser as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the
Sub-Adviser with copies, properly certified or otherwise
authenticated, of each of the following:
<PAGE> 9
(a) Declaration of Trust of the Trust, dated October 31,
1994 (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date
hereof;
(c) Resolutions of the Trustees selecting the
Sub-Adviser as the investment subadviser to the Fund and
approving the form of this Sub-Investment Management
Contract (the "Contract");
(d) Resolutions of the Trustees selecting the Adviser as
investment adviser to the Fund and approving the form of
the Investment Management Contract and resolutions adopted
by the initial shareholder of the Fund approving the form
of the Investment Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by
the Trust to state "blue sky" authorities for the purpose
of qualifying shares of the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional
information; and
The Adviser will furnish the Sub-Adviser from time to time
with copies, properly certified or otherwise authenticated, of
all amendments of or supplements to the foregoing, if any.
The Sub-Adviser has furnished the Adviser with a copy of the
Sub-Adviser's Code of Ethics, and will furnish the Adviser from
time to time with copies of any amendments to the code. The
restrictions of the Sub-Adviser may differ from those of the
Trust where appropriate as long as they maintain the same
intent consistent with the sub-adviser's own procedures for
recommending and purchasing securities.
2. INVESTMENT SERVICES. The Sub-Adviser will use its best
efforts to provide to the Fund continuing and suitable
investment advice with respect to investments, consistent with
the investment policies, objectives and restrictions of the
Fund as set forth in the Fund's Prospectus and Statement of
Additional Information. In the performance of the
Sub-Adviser's duties hereunder, subject always to the
provisions contained in the documents delivered to the
Sub-Adviser pursuant to Section 1 above, as each of the same
may from time to time be amended or supplemented, the
Sub-Adviser will have investment discretion with respect to the
Fund and will, at its own expense:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the Fund as set forth in
the Fund's prospectus and statement of additional
information, with respect to the purchase, holding and
disposition of portfolio securities and other permitted
investments;
(b) furnish the Adviser and the Fund with advice as to
the manner in which voting rights, subscription rights,
rights to consent to corporate action and any other rights
2
<PAGE> 10
pertaining to the Fund's assets shall be exercised, the
Fund having the responsibility to exercise such voting and
other rights; and, as requested, furnish the Fund with
research, economic and statistical data in connection with
the Fund's investments and investment policies;
(c) submit such reports relating to the valuation of the
Fund's securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser,
engage in negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers
or dealers and other institutions or investors;
(e) consistent with the provisions of Section 7 of this
Contract, place orders for the purchase, sale or exchange
of portfolio securities for the Fund's account with
brokers or dealers selected by the Adviser or the
Sub-Adviser, provided that in connection with the placing
of such orders and the selection of such brokers or
dealers the Sub-Adviser 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 and
furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the
Adviser or the Trustees, make reports to the Adviser or
the Trust, as requested, of the Sub-Adviser's performance
of the foregoing services;
(g) subject to the supervision of the Adviser, maintain
and preserve the records required by the 1940 Act to be
maintained by the Sub-Adviser (the Sub-Adviser agrees that
such records are the property of the Trust and copies will
be surrendered to the Trust promptly upon request
therefor);
(h) give instructions to the custodian (including any
subcustodian) of the Fund as to deliveries of securities
to and from such custodian and payments of cash for the
account of the Fund, and advise the Adviser on the same
day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to
provide information necessary for the preparation of
registration statements and periodic reports to be filed
with the Securities and Exchange Commission, including Form N-1A,
semi-annual reports on Form N-SAR, periodic statements,
shareholder communications and proxy materials furnished
to holders of shares of the Fund, filings with state "blue
sky" authorities and with United States agencies responsible
for tax matters, and other reports and filings of like
nature; and
3. EXPENSES PAID BY THE SUB-ADVISER. The Sub-Adviser will
pay the cost of maintaining the staff and personnel necessary
for it to perform its obligations under this Contract, the
expenses of office rent, telephone, telecommunications and
other facilities it is obligated to provide in order to perform
the services specified in Section 2, and any other expenses
incurred by it in connection with the performance of its duties
hereunder.
3
<PAGE> 11
4. EXPENSES OF THE FUND NOT PAID BY THE SUB-ADVISER. The
Sub-Adviser will not be required to pay any expenses which this
Contract does not expressly state shall be payable by the
Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of
Section 3, the Sub-Adviser will not be required to pay under
this contract:
(a) the compensation and expenses of Trustees and of
independent advisers, independent contractors, consultants,
managers and other agents employed by the Trust or the Fund
other than through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the
Trust or the Fund;
(c) the fees and disbursements of custodians and
depositories of the Trust or the Fund's assets, transfer
agents, disbursing agents, plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust
or the Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Trust or the Fund except that the
Sub-Adviser shall bear the costs of providing the information
referred to in Section 2(i) to the Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset
value of the shares of the Fund.
5. COMPENSATION OF THE SUB-ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Sub-Adviser as herein provided for the Fund, the Adviser
will pay the Sub-Adviser quarterly, based on the "average daily
net asset" value of the Fund for each of the preceding 3
months, in arrears a fee at the annual rate of 60% of the
investment advisory fee payable to the Adviser. The "average
daily net assets" of the Fund shall be determined on the basis
set forth in the Fund's prospectus or otherwise consistent with
the 1940 Act and the regulations promulgated thereunder. The
Sub-Adviser will receive a pro rata portion of such monthly fee
for any periods in which the Sub-Adviser advises the Fund less
than a full month. The Sub-Adviser understands and agrees that
neither the Trust nor the Fund has any liability for the
Sub-Adviser's fee hereunder. Calculations of the Sub-Adviser's
fee will be based on average net asset values as provided by
the Adviser.
In addition to the foregoing, the Sub-Adviser may from time
to time agree not to impose all or a portion of its fee
otherwise payable hereunder (in advance of the time such fee or
portion thereof would otherwise accrue) and/or undertake to pay
or reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by it. Any such
fee reduction or undertaking may be discontinued or modified by
the Sub-Adviser at any time.
6. OTHER ACTIVITIES OF THE SUB-ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Sub-Adviser or any
of its affiliates or associates from engaging in any other
business or from acting as investment adviser or investment
manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is
specifically
4
<PAGE> 12
understood that officers, directors and employees of the
Sub-Adviser and those of its affiliates may engage in
providing portfolio management services and advice to other
investment advisory clients of the Sub-Adviser or of its
affiliates.
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Sub-Adviser nor any of its directors,
officers or employees will act as principal or agent or receive
any commission , except as permitted by the 1940 Act and the
rules and regulations promulgated thereunder,. The Sub-Adviser
shall not knowingly recommend that the Fund purchase, sell or
retain securities of any issuer in which the Sub-Adviser has a
financial interest without obtaining prior approval of the
Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the
Sub-Adviser or any of its officers, affiliates or employees
from buying, selling or trading in any securities for its or
their own account or accounts. The Trust and Fund acknowledge
the Sub-Adviser and its officers, affiliates and employees, and
its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at
the same time being acquired or disposed of by the Fund. The
Sub-Adviser shall have no obligation to acquire with respect to
the Fund, a position in any investment which the Sub-Adviser,
its officers, affiliates or employees may acquire for its or
their own accounts or for the account of another client if, in
the sole discretion of the Sub-Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of
the Fund. Nothing herein contained shall prevent the
Sub-Adviser from purchasing or recommending the purchase of a
particular security for one or more funds or clients while
other funds or clients may be selling the same security.
8. NO PARTNERSHIP OR JOINT VENTURE. The Trust, the Fund,
the Adviser and the Sub-Adviser are not partners of or joint
venturers with each other and nothing herein shall be construed
so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. Limitation of Liability of the Sub-Adviser. The
Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust, the Fund
or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's
part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Contract. Any person, even though also employed by the
Sub-Adviser, who may be or become an employee of and paid by
the Trust or the Fund shall be deemed, when acting within the
scope of his employment by the Trust or the Fund, to be acting
in such employment solely for the Trust or the Fund and not as
the Sub-Adviser's employee or agent.
10. Duration and Termination of this Contract. This Contract
shall remain in force until the second anniversary of the date
upon which this Contract was executed by the parties hereto,
and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the
Adviser, of the Sub-Adviser or (other than as Board members) of
the Trust or 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 Contract may, on 60 days' written
notice, be terminated at any time without the payment of any
penalty by the Trust on
5
<PAGE> 13
behalf of the Fund by vote of a majority of the outstanding voting
securities of the Fund or by the Board of Trustees or by the Adviser or by
the Sub-Adviser. Termination of this Contract 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 Trust. This
Contract shall automatically terminate in the event of its assignment or
upon the termination of the Adviser's Investment Management Contract. In
interpreting the provisions of this Section 10, the definitions contained
in Section 2(a) of the 1940 Act (including the definitions of
"assignment," "interested person" and "voting security"), shall be
applied.
11. AMENDMENT OF THIS CONTRACT. No provision of this
Contract may be changed, discharged, terminated or waived
orally, but only by an instrument in writing signed by the
party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Contract
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board
members) the Trust or the Fund, cast in person at a meeting
called for the purpose of voting on such approval, and (b) a
majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act.
12. MISCELLANEOUS.
-------------
(a) The captions in this Contract 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 Contract 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 Institutional Series Trust is the
designation of the Trustees under the Declaration of
Trust, dated October 31, 1994 as amended from time to
time. The Declaration of Trust has been filed with the
Secretary of State of The Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not
personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders,
officers, employees or agents of the Trust or the Fund,
but only the Fund's property shall be bound. The Trust or
the Fund shall not be liable for the obligations of any
other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which
is not otherwise in the public domain, in connection with
the performance of its duties hereunder is to be regarded
as confidential and for use only by the Fund and/or its
agents, and only in connection with the Fund and its
investments.
(c) The Trust and the Fund may use the name
"Independence" or "NIXDEX" or any name similar to
"Independence Investment Associates, Inc." or "NIXDEX"
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 that it lawfully can) cease
to use such names or any other names indicating that the
Fund is advised by or otherwise connected with the
Sub-Adviser. The Fund acknowledges that it has adopted a
name that includes the name "Independence" through
permission of the Sub-Adviser and agrees that the
Sub-Adviser reserves to itself and any successor to its
business the right to grant the non-exclusive right to use
the name "Independence" or "NIXDEX" or any similar name to
any other
6
<PAGE> 14
corporation or entity, including but not limited to any
investment company of which it or any of its subsidiaries
or affiliates shall be the investment adviser.
13. GOVERNING LAW. This Contract shall be construed in
accordance with the laws of The Commonwealth of Massachusetts
and the applicable provisions of the 1940 Act.
14. SEVERABILITY. The provisions of this contract are
independent of and separable from each other and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By /s/ Anne C. Hodsdon
---------------------------------
Its: President
---------------------------------
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
on behalf of John Hancock Independence Balanced Fund
By: /s/ Anne C. Hodsdon
---------------------------------
Its: President
---------------------------------
INDEPENDENCE INVESTMENT ASSOCIATES, INC.
By: /s/ William C. Fletcher
---------------------------------
Its: President
---------------------------------
7
<PAGE> 1
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
March 30, 1995
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
-- John Hancock Berkeley Dividend Performers Fund
101 Huntington Avenue
Boston, Massachusetts 02199
SOVEREIGN ASSET MANAGEMENT CORP.
101 Huntington Avenue
Boston, Massachusetts 02199
Sub-Investment Management Contract
----------------------------------
Dear Sirs:
John Hancock Institutional Series Trust (the "Trust"), of which
John Hancock Berkeley Dividend Performers Fund (the "Fund") is a
series, has been organized as a business trust under the laws of The
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets.
The Board of Trustees of the Trust (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, under the terms and conditions provided in
the investment management contract, dated as of the date hereof,
between the Trust, on behalf of the Fund, and the Adviser (the
"Investment Management Contract").
The Adviser and the Trustees have selected Sovereign Asset
Management Corp. (the "Sub-Adviser") to provide the Adviser and the
Fund with the advice and services set forth below, and the
Sub-Adviser is willing to provide such advice and services, subject
to the review of the Trustees and overall supervision of the
Adviser, under the terms and conditions hereinafter set forth. The
Sub-Adviser hereby represents and warrants that it is registered as
an investment adviser under the Investment Advisers Act of 1940, as
amended (the "1940 Act"). Accordingly, the Trust, on behalf of the
Fund, and the Adviser agree with the Sub-Adviser as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the
Sub-Adviser with copies, properly certified or otherwise
authenticated, of each of the following:
<PAGE> 2
(a) Declaration of Trust of the Trust, dated October 31,
1994 (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date
hereof;
(c) Resolutions of the Trustees selecting the
Sub-Adviser as the investment sub-adviser to the Fund and
approving the form of this Sub-Investment Management
Contract (the "Contract");
(d) Resolutions of the Trustees selecting the Adviser as
investment adviser to the Fund and approving the form of
the Investment Management Contract and resolutions adopted
by the initial shareholder of the Fund approving the form
of the Investment Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by
the Trust to state "blue sky" authorities for the purpose
of qualifying shares of the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional
information; and
(h) The Trust's Code of Ethics.
The Adviser will furnish the Sub-Adviser from time to time
with copies, properly certified or otherwise authenticated, of
all amendments of or supplements to the foregoing, if any.
2. INVESTMENT SERVICES. The Sub-Adviser will use its best
efforts to provide to the Fund continuing and suitable
investment advice with respect to investments, consistent with
the investment policies, objectives and restrictions of the
Fund as set forth in the Fund's Prospectus and Statement of
Additional Information. In the performance of the
Sub-Adviser's duties hereunder, subject always to the
provisions contained in the documents delivered to the
Sub-Adviser pursuant to Section 1 above, as each of the same
may from time to time be amended or supplemented, the
Sub-Adviser will have investment discretion with respect to the
Fund and will, at its own expense:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the Fund as set forth in
the Fund's prospectus and statement of additional
information, with respect to the purchase, holding and
disposition of portfolio securities and other permitted
investments;
(b) furnish the Adviser and the Fund with advice as to
the manner in which voting rights, subscription rights,
rights to consent to corporate action and any other rights
pertaining to the Fund's assets shall be exercised, the
Fund having the responsibility to exercise such voting and
other rights; and, as requested, furnish the Fund with
research, economic and statistical data in connection with
the Fund's investments and investment policies;
2
<PAGE> 3
(c) submit such reports relating to the valuation of the
Fund's securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser,
engage in negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers
or dealers and other institutions or investors;
(e) consistent with the provisions of Section 7 of this
Contract, place orders for the purchase, sale or exchange
of portfolio securities for the Fund's account with
brokers or dealers selected by the Adviser or the
Sub-Adviser, provided that in connection with the placing
of such orders and the selection of such brokers or
dealers the Sub-Adviser 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 and
furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the
Adviser or the Trustees, make reports to the Adviser or
the Trust, as requested, of the Sub-Adviser's performance
of the foregoing services;
(g) subject to the supervision of the Adviser, maintain
and preserve the records required by the 1940 Act to be
maintained by the Sub-Adviser (the Sub-Adviser agrees that
such records are the property of the Trust and copies will
be surrendered to the Trust promptly upon request
therefor);
(h) give instructions to the custodian (including any
subcustodian) of the Fund as to deliveries of securities
to and from such custodian and payments of cash for the
account of the Fund, and advise the Adviser on the same
day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to
provide information necessary for the preparation of
registration statements and periodic reports to be filed
with the Securities and Exchange Commission, including Form N-1A,
semi-annual reports on Form N-SAR, periodic statements,
shareholder communications and proxy materials furnished
to holders of shares of the Fund, filings with state "blue
sky" authorities and with United States agencies responsible
for tax matters, and other reports and filings of like
nature; and
3. EXPENSES PAID BY THE SUB-ADVISER. The Sub-Adviser will
pay the cost of maintaining the staff and personnel necessary
for it to perform its obligations under this Contract, the
expenses of office rent, telephone, telecommunications and
other facilities it is obligated to provide in order to perform
the services specified in Section 2, and any other expenses
incurred by it in connection with the performance of its duties
hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE SUB-ADVISER. The
Sub-Adviser will not be required to pay any expenses which this
Contract does not expressly state shall be payable by the
Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of
Section 3, the Sub-Adviser will not be required to pay under
this contract:
3
<PAGE> 4
(a) the compensation and expenses of Trustees and of
independent advisers, independent contractors, consultants,
managers and other agents employed by the Trust or the Fund
other than through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the
Trust or the Fund;
(c) the fees and disbursements of custodians and
depositories of the Trust or the Fund's assets, transfer
agents, disbursing agents, plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust
or the Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Trust or the Fund except that the
Sub-Adviser shall bear the costs of providing the information
referred to in Section 2(i) to the Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset
value of the shares of the Fund.
5. COMPENSATION OF THE SUB-ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Sub-Adviser as herein provided for the Fund, the Adviser
will pay the Sub-Adviser quarterly, for each of the preceding 3
months, in arrears a fee at the annual rate of 20% of the
investment advisory fee payable to the Adviser while the Fund's
average daily net assets are less than $100 million; and 55% of
the investment advisory fee payable to the Adviser while the
Fund's average daily net assets are $100 million or more. The
"average daily net assets" of the Fund shall be determined on
the basis set forth in the Fund's prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Sub-Adviser will receive a pro rata portion of
such monthly fee for any periods in which the Sub-Adviser
advises the Fund less than a full month. The Sub-Adviser
understands and agrees that neither the Trust nor the Fund has
any liability for the Sub-Adviser's fee hereunder.
Calculations of the Sub-Adviser's fee will be based on average
net asset values as provided by the Adviser.
In addition to the foregoing, the Sub-Adviser may from time
to time agree not to impose all or a portion of its fee
otherwise payable hereunder (in advance of the time such fee or
portion thereof would otherwise accrue) and/or undertake to pay
or reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by it. Any such
fee reduction or undertaking may be discontinued or modified by
the Sub-Adviser at any time.
6. OTHER ACTIVITIES OF THE SUB-ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Sub-Adviser or any
of its affiliates or associates from engaging in any other
business or from acting as investment adviser or investment
manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is
specifically understood that officers, directors and employees
of the Sub-Adviser and those of its affiliates may engage in
providing portfolio management services and advice to other
investment advisory clients of the Sub-Adviser or of its
affiliates.
4
<PAGE> 5
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Sub-Adviser nor any of its directors,
officers or employees will act as principal or agent or receive
any commission , except as permitted by the 1940 Act and the
rules and regulations promulgated thereunder. The Sub-Adviser
shall not knowingly recommend that the Fund purchase, sell or
retain securities of any issuer in which the Sub-Adviser has a
financial interest without obtaining prior approval of the
Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the
Sub-Adviser or any of its officers, affiliates or employees
from buying, selling or trading in any securities for its or
their own account or accounts. The Trust and Fund acknowledge
the Sub-Adviser and its officers, affiliates and employees, and
its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at
the same time being acquired or disposed of by the Fund. The
Sub-Adviser shall have no obligation to acquire with respect to
the Fund, a position in any investment which the Sub-Adviser,
its officers, affiliates or employees may acquire for its or
their own accounts or for the account of another client if, in
the sole discretion of the Sub-Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of
the Fund. Nothing herein contained shall prevent the
Sub-Adviser from purchasing or recommending the purchase of a
particular security for one or more funds or clients while
other funds or clients may be selling the same security.
8. NO PARTNERSHIP OR JOINT VENTURE. The Trust, the Fund,
the Adviser and the Sub-Adviser are not partners of or joint
venturers with each other and nothing herein shall be construed
so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The
Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust, the Fund
or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's
part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Contract. Any person, even though also employed by the
Sub-Adviser, who may be or become an employee of and paid by
the Trust or the Fund shall be deemed, when acting within the
scope of his employment by the Trust or the Fund, to be acting
in such employment solely for the Trust or the Fund and not as
the Sub-Adviser's employee or agent.
10. DURATION AND TERMINATION OF THIS CONTRACT. This Contract
shall remain in force until the second anniversary of the date
upon which this Contract was executed by the parties hereto,
and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the
Adviser, of the Sub-Adviser or (other than as Board members) of
the Trust or 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 Contract may, on 60 days' written
notice, be terminated at any time without the payment of any
penalty by the Trust on behalf of the Fund by vote of a
majority of the outstanding voting securities of the Fund or by
the Board of Trustees or by the Adviser or by the Sub-Adviser.
Termination of this Contract with respect to the Fund shall not
be deemed to terminate or otherwise invalidate any provisions
5
<PAGE> 6
of any contract between you and any other series of the Trust.
This Contract shall automatically terminate in the event of its
assignment or upon the termination of the Adviser's Investment
Management Contract. In interpreting the provisions of this
Section 10, the definitions contained in Section 2(a) of the
1940 Act (including the definitions of "assignment,"
"interested person" and "voting security"), shall be applied.
11. AMENDMENT OF THIS CONTRACT. No provision of this
Contract may be changed, discharged, terminated or waived
orally, but only by an instrument in writing signed by the
party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Contract
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board
members) the Trust or the Fund, cast in person at a meeting
called for the purpose of voting on such approval, and (b) a
majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act.
12. MISCELLANEOUS.
-------------
(a) The captions in this Contract 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 Contract 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 Institutional Series Trust is the
designation of the Trustees under the Declaration of
Trust, dated October 31, 1994 as amended from time to
time. The Declaration of Trust has been filed with the
Secretary of State of The Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not
personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders,
officers, employees or agents of the Trust or the Fund,
but only the Fund's property shall be bound. The Trust or
the Fund shall not be liable for the obligations of any
other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which
is not otherwise in the public domain, in connection with
the performance of its duties hereunder is to be regarded
as confidential and for use only by the Fund and/or its
agents, and only in connection with the Fund and its
investments.
13. GOVERNING LAW. This Contract shall be construed in
accordance with the laws of The Commonwealth of Massachusetts
and the applicable provisions of the 1940 Act.
14. SEVERABILITY. The provisions of this contract are
independent of and separable from each other and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
6
<PAGE> 7
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
on behalf of John Hancock Berkeley Dividend Performers Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
SOVEREIGN ASSET MANAGEMENT CORP.
By: /s/ Anthony Petrucci
--------------------
Its: President
---------
7
<PAGE> 1
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
March 30,1995
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
-- John Hancock Berkeley Overseas Growth Fund
101 Huntington Avenue
Boston, Massachusetts 02199
JOHN HANCOCK ADVISERS INTERNATIONAL LTD.
34 Dover Street
London, UK W1X 3RA
Sub-Investment Management Contract
----------------------------------
Dear Sirs:
John Hancock Institutional Series Trust (the "Trust"), of which
John Hancock Berkeley Overseas Growth Fund (the "Fund") is a series,
has been organized as a business trust under the laws of The
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets.
The Board of Trustees of the Trust (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, under the terms and conditions provided in
the investment management contract, dated as of the date hereof,
between the Trust, on behalf of the Fund, and the Adviser (the
"Investment Management Contract").
The Adviser and the Trustees have selected John Hancock Advisers
International Ltd. (the "Sub-Adviser") to provide the Adviser and
the Fund with the advice and services set forth below, and the
Sub-Adviser is willing to provide such advice and services, subject
to the review of the Trustees and overall supervision of the
Adviser, under the terms and conditions hereinafter set forth. The
Sub-Adviser hereby represents and warrants that it is registered as
an investment adviser under the Investment Advisers Act of 1940, as
amended (the "1940 Act"). Accordingly, the Trust, on behalf of the
Fund, and the Adviser agree with the Sub-Adviser as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the
Sub-Adviser with copies, properly certified or otherwise
authenticated, of each of the following:
<PAGE> 2
(a) Declaration of Trust of the Trust, dated October 31,
1994 (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date
hereof;
(c) Resolutions of the Trustees selecting the
Sub-Adviser as the investment sub-adviser to the Fund and
approving the form of this Sub-Investment Management
Contract (the "Contract");
(d) Resolutions of the Trustees selecting the Adviser as
investment adviser to the Fund and approving the form of
the Investment Management Contract and resolutions adopted
by the initial shareholder of the Fund approving the form
of the Investment Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by
the Trust to state "blue sky" authorities for the purpose
of qualifying shares of the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional
information; and
(h) The Trust's Code of Ethics.
The Adviser will furnish the Sub-Adviser from time to time
with copies, properly certified or otherwise authenticated, of
all amendments of or supplements to the foregoing, if any.
2. INVESTMENT SERVICES. The Sub-Adviser will use its best
efforts to provide to the Fund continuing and suitable
investment advice with respect to investments, consistent with
the investment policies, objectives and restrictions of the
Fund as set forth in the Fund's Prospectus and Statement of
Additional Information. In the performance of the
Sub-Adviser's duties hereunder, subject always to the
provisions contained in the documents delivered to the
Sub-Adviser pursuant to Section 1 above, as each of the same
may from time to time be amended or supplemented, the
Sub-Adviser will have investment discretion with respect to the
Fund and will, at its own expense:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the Fund as set forth in
the Fund's prospectus and statement of additional
information, with respect to the purchase, holding and
disposition of portfolio securities and other permitted
investments;
(b) furnish the Adviser and the Fund with advice as to
the manner in which voting rights, subscription rights,
rights to consent to corporate action and any other rights
pertaining to the Fund's assets shall be exercised, the
Fund having the responsibility to exercise such voting and
other rights; and, as requested, furnish the Fund with
research, economic and statistical data in connection with
the Fund's investments and investment policies;
2
<PAGE> 3
(c) submit such reports relating to the valuation of the
Fund's securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser,
engage in negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers
or dealers and other institutions or investors;
(e) consistent with the provisions of Section 7 of this
Contract, place orders for the purchase, sale or exchange
of portfolio securities for the Fund's account with
brokers or dealers selected by the Adviser or the
Sub-Adviser, provided that in connection with the placing
of such orders and the selection of such brokers or
dealers the Sub-Adviser 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 and
furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the
Adviser or the Trustees, make reports to the Adviser or
the Trust, as requested, of the Sub-Adviser's performance
of the foregoing services;
(g) subject to the supervision of the Adviser, maintain
and preserve the records required by the 1940 Act to be
maintained by the Sub-Adviser (the Sub-Adviser agrees that
such records are the property of the Trust and copies will
be surrendered to the Trust promptly upon request
therefor);
(h) give instructions to the custodian (including any
subcustodian) of the Fund as to deliveries of securities
to and from such custodian and payments of cash for the
account of the Fund, and advise the Adviser on the same
day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to
provide information necessary for the preparation of
registration statements and periodic reports to be filed with
the Securities and Exchange Commission, including Form N-1A,
semi-annual reports on Form N-SAR, periodic statements,
shareholder communications and proxy materials furnished
to holders of shares of the Fund, filings with state "blue
sky" authorities and with United States agencies responsible
for tax matters, and other reports and filings of like nature;
and
3. EXPENSES PAID BY THE SUB-ADVISER. The Sub-Adviser will
pay the cost of maintaining the staff and personnel necessary
for it to perform its obligations under this Contract, the
expenses of office rent, telephone, telecommunications and
other facilities it is obligated to provide in order to perform
the services specified in Section 2, and any other expenses
incurred by it in connection with the performance of its duties
hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE SUB-ADVISER. The
Sub-Adviser will not be required to pay any expenses which this
Contract does not expressly state shall be payable by the
Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of
Section 3, the Sub-Adviser will not be required to pay under
this contract:
3
<PAGE> 4
(a) the compensation and expenses of Trustees and of
independent advisers, independent contractors, consultants,
managers and other agents employed by the Trust or the Fund
other than through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the
Trust or the Fund;
(c) the fees and disbursements of custodians and
depositories of the Trust or the Fund's assets, transfer
agents, disbursing agents, plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust
or the Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Trust or the Fund except that the
Sub-Adviser shall bear the costs of providing the information
referred to in Section 2(i) to the Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset
value of the shares of the Fund.
5. COMPENSATION OF THE SUB-ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Sub-Adviser as herein provided for the Fund, the Adviser
will pay the Sub-Adviser quarterly, for each of the preceding 3
months, in arrears a fee at the annual rate of 70% of the
investment advisory fee payable to the Adviser while the Fund's
average daily net assets are less than $500 million; and 90%
of the investment advisory fee payable to the Adviser while the
Fund's average daily net assets are $500 million or more. The
"average daily net assets" of the Fund shall be determined on
the basis set forth in the Fund's prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Sub-Adviser will receive a pro rata portion of
such monthly fee for any periods in which the Sub-Adviser
advises the Fund less than a full month. The Sub-Adviser
understands and agrees that neither the Trust nor the Fund has
any liability for the Sub-Adviser's fee hereunder.
Calculations of the Sub-Adviser's fee will be based on average
net asset values as provided by the Adviser.
In addition to the foregoing, the Sub-Adviser may from time
to time agree not to impose all or a portion of its fee
otherwise payable hereunder (in advance of the time such fee or
portion thereof would otherwise accrue) and/or undertake to pay
or reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by it. Any such
fee reduction or undertaking may be discontinued or modified by
the Sub-Adviser at any time.
6. OTHER ACTIVITIES OF THE SUB-ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Sub-Adviser or any
of its affiliates or associates from engaging in any other
business or from acting as investment adviser or investment
manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is
specifically understood that officers, directors and employees
of the Sub-Adviser and those of its affiliates may engage in
providing portfolio management services and advice to other
investment advisory clients of the Sub-Adviser or of its
affiliates.
4
<PAGE> 5
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Sub-Adviser nor any of its directors,
officers or employees will act as principal or agent or receive
any commission , except as permitted by the 1940 Act and the
rules and regulations promulgated thereunder. The Sub-Adviser
shall not knowingly recommend that the Fund purchase, sell or
retain securities of any issuer in which the Sub-Adviser has a
financial interest without obtaining prior approval of the
Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the
Sub-Adviser or any of its officers, affiliates or employees
from buying, selling or trading in any securities for its or
their own account or accounts. The Trust and Fund acknowledge
the Sub-Adviser and its officers, affiliates and employees, and
its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at
the same time being acquired or disposed of by the Fund. The
Sub-Adviser shall have no obligation to acquire with respect to
the Fund, a position in any investment which the Sub-Adviser,
its officers, affiliates or employees may acquire for its or
their own accounts or for the account of another client if, in
the sole discretion of the Sub-Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of
the Fund. Nothing herein contained shall prevent the
Sub-Adviser from purchasing or recommending the purchase of a
particular security for one or more funds or clients while
other funds or clients may be selling the same security.
8. NO PARTNERSHIP OR JOINT VENTURE. The Trust, the Fund,
the Adviser and the Sub-Adviser are not partners of or joint
venturers with each other and nothing herein shall be construed
so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The
Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust, the Fund
or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's
part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Contract. Any person, even though also employed by the
Sub-Adviser, who may be or become an employee of and paid by
the Trust or the Fund shall be deemed, when acting within the
scope of his employment by the Trust or the Fund, to be acting
in such employment solely for the Trust or the Fund and not as
the Sub-Adviser's employee or agent.
10. DURATION AND TERMINATION OF THIS CONTRACT. This Contract
shall remain in force until the second anniversary of the date
upon which this Contract was executed by the parties hereto,
and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the
Adviser, of the Sub-Adviser or (other than as Board members) of
the Trust or 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 Contract may, on 60 days' written
notice, be terminated at any time without the payment of any
penalty by the Trust on behalf of the Fund by vote of a
majority of the outstanding voting securities of the Fund or by
the Board of Trustees or by the Adviser or by the Sub-Adviser.
Termination of this Contract with respect to the Fund shall not
be deemed to terminate or otherwise invalidate any provisions
5
<PAGE> 6
of any contract between you and any other series of the Trust.
This Contract shall automatically terminate in the event of its
assignment or upon the termination of the Adviser's Investment
Management Contract. In interpreting the provisions of this
Section 10, the definitions contained in Section 2(a) of the
1940 Act (including the definitions of "assignment,"
"interested person" and "voting security"), shall be applied.
11. AMENDMENT OF THIS CONTRACT. No provision of this
Contract may be changed, discharged, terminated or waived
orally, but only by an instrument in writing signed by the
party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Contract
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board
members) the Trust or the Fund, cast in person at a meeting
called for the purpose of voting on such approval, and (b) a
majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act.
12. MISCELLANEOUS.
--------------
(a) The captions in this Contract 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 Contract 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 Institutional Series Trust is the
designation of the Trustees under the Declaration of
Trust, dated October 31, 1994 as amended from time to
time. The Declaration of Trust has been filed with the
Secretary of State of The Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not
personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders,
officers, employees or agents of the Trust or the Fund,
but only the Fund's property shall be bound. The Trust or
the Fund shall not be liable for the obligations of any
other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which
is not otherwise in the public domain, in connection with
the performance of its duties hereunder is to be regarded
as confidential and for use only by the Fund and/or its
agents, and only in connection with the Fund and its
investments.
13. GOVERNING LAW. This Contract shall be construed in
accordance with the laws of The Commonwealth of Massachusetts
and the applicable provisions of the 1940 Act.
14. SEVERABILITY. The provisions of this contract are
independent of and separable from each other and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
6
<PAGE> 7
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
on behalf of John Hancock Berkeley Overseas Growth Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
JOHN HANCOCK ADVISERS INTERNATIONAL LTD.
By: /s/ Robert G. Freedman
----------------------
Its: Director
--------
7
<PAGE> 1
JOHN HANCOCK ADVISERS, INC.
101 Huntington Avenue
Boston, Massachusetts 02199
April 3, 1995
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
-- John Hancock Berkeley Fundamental Value Fund
101 Huntington Avenue
Boston, Massachusetts 02199
NM CAPITAL MANAGEMENT, INC.
6501 Americas Parkway, Suite 950
Albuquerque, NM 87110-5372
Sub-Investment Management Contract
----------------------------------
Dear Sirs:
John Hancock Institutional Series Trust (the "Trust"), of which
John Hancock Berkeley Fundamental Value Fund (the "Fund") is a
series, has been organized as a business trust under the laws of The
Commonwealth of Massachusetts to engage in the business of an
investment company. The Trust's shares of beneficial interest are
currently divided into eleven series (including the Fund), each
series representing the entire undivided interest in a separate
portfolio of assets.
The Board of Trustees of the Trust (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, under the terms and conditions provided in
the investment management contract, dated as of the date hereof,
between the Trust, on behalf of the Fund, and the Adviser (the
"Investment Management Contract").
The Adviser and the Trustees have selected NM Capital Management,
Inc. (the "Sub-Adviser") to provide the Adviser and the Fund with
the advice and services set forth below, and the Sub-Adviser is
willing to provide such advice and services, subject to the review
of the Trustees and overall supervision of the Adviser, under the
terms and conditions hereinafter set forth. The Sub-Adviser hereby
represents and warrants that it is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the
"1940 Act"). Accordingly, the Trust, on behalf of the Fund, and the
Adviser agree with the Sub-Adviser as follows:
1. DELIVERY OF DOCUMENTS. The Trust has furnished the
Sub-Adviser with copies, properly certified or otherwise
authenticated, of each of the following:
<PAGE> 2
(a) Declaration of Trust of the Trust, dated October 31,
1994 (the "Declaration of Trust");
(b) By-Laws of the Trust as in effect on the date
hereof;
(c) Resolutions of the Trustees selecting the
Sub-Adviser as the investment sub-adviser to the Fund and
approving the form of this Sub-Investment Management
Contract (the "Contract");
(d) Resolutions of the Trustees selecting the Adviser as
investment adviser to the Fund and approving the form of
the Investment Management Contract and resolutions adopted
by the initial shareholder of the Fund approving the form
of the Investment Management Contract;
(e) The Adviser's Investment Management Contract;
(f) Commitments, limitations and undertakings made by
the Trust to state "blue sky" authorities for the purpose
of qualifying shares of the Fund for sale in such states;
(g) The Fund's prospectus and statement of additional
information; and
(h) The Trust's Code of Ethics.
The Adviser will furnish the Sub-Adviser from time to time
with copies, properly certified or otherwise authenticated, of
all amendments of or supplements to the foregoing, if any.
2. INVESTMENT SERVICES. The Sub-Adviser will use its best
efforts to provide to the Fund continuing and suitable
investment advice with respect to investments, consistent with
the investment policies, objectives and restrictions of the
Fund as set forth in the Fund's Prospectus and Statement of
Additional Information. In the performance of the
Sub-Adviser's duties hereunder, subject always to the
provisions contained in the documents delivered to the
Sub-Adviser pursuant to Section 1 above, as each of the same
may from time to time be amended or supplemented, the
Sub-Adviser will have investment discretion with respect to the
Fund and will, at its own expense:
(a) furnish the Adviser and the Fund with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the Fund as set forth in
the Fund's prospectus and statement of additional
information, with respect to the purchase, holding and
disposition of portfolio securities and other permitted
investments;
(b) furnish the Adviser and the Fund with advice as to
the manner in which voting rights, subscription rights,
rights to consent to corporate action and any other rights
pertaining to the Fund's assets shall be exercised, the
Fund having the responsibility to exercise such voting and
other rights; and, as requested, furnish the Fund with
research, economic and statistical data in connection with
the Fund's investments and investment policies;
2
<PAGE> 3
(c) submit such reports relating to the valuation of the
Fund's securities as the Adviser may reasonably request;
(d) subject to prior consultation with the Adviser,
engage in negotiations relating to the Fund's investments
with issuers, investment banking firms, securities brokers
or dealers and other institutions or investors;
(e) consistent with the provisions of Section 7 of this
Contract, place orders for the purchase, sale or exchange
of portfolio securities for the Fund's account with
brokers or dealers selected by the Adviser or the
Sub-Adviser, provided that in connection with the placing
of such orders and the selection of such brokers or
dealers the Sub-Adviser 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 and
furnished to the Sub-Adviser from time to time;
(f) from time to time or at any time requested by the
Adviser or the Trustees, make reports to the Adviser or
the Trust, as requested, of the Sub-Adviser's performance
of the foregoing services;
(g) subject to the supervision of the Adviser, maintain
and preserve the records required by the 1940 Act to be
maintained by the Sub-Adviser (the Sub-Adviser agrees that
such records are the property of the Trust and copies will
be surrendered to the Trust promptly upon request
therefor);
(h) give instructions to the custodian (including any
subcustodian) of the Fund as to deliveries of securities
to and from such custodian and payments of cash for the
account of the Fund, and advise the Adviser on the same
day such instructions are given;
(i) cooperate generally with the Fund and the Adviser to
provide information necessary for the preparation of
registration statements and periodic reports to be filed
with the Securities and Exchange Commission, including Form N-1A,
semi-annual reports on Form N-SAR, periodic statements,
shareholder communications and proxy materials furnished
to holders of shares of the Fund, filings with state "blue
sky" authorities and with United States agencies
responsible for tax matters, and other reports and filings
of like nature; and
3. EXPENSES PAID BY THE SUB-ADVISER. The Sub-Adviser will
pay the cost of maintaining the staff and personnel necessary
for it to perform its obligations under this Contract, the
expenses of office rent, telephone, telecommunications and
other facilities it is obligated to provide in order to perform
the services specified in Section 2, and any other expenses
incurred by it in connection with the performance of its duties
hereunder.
4. EXPENSES OF THE FUND NOT PAID BY THE SUB-ADVISER. The
Sub-Adviser will not be required to pay any expenses which this
Contract does not expressly state shall be payable by the
Sub-Adviser. In particular, and without limiting the
generality of the foregoing but subject to the provisions of
Section 3, the Sub-Adviser will not be required to pay under
this contract:
3
<PAGE> 4
(a) the compensation and expenses of Trustees and of
independent advisers, independent contractors, consultants,
managers and other agents employed by the Trust or the Fund
other than through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses of the
Trust or the Fund;
(c) the fees and disbursements of custodians and
depositories of the Trust or the Fund's assets, transfer
agents, disbursing agents, plan agents and registrars;
(d) taxes and governmental fees assessed against the Trust
or the Fund's assets and payable by the Trust or the Fund;
(e) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders of the Trust or the Fund except that the
Sub-Adviser shall bear the costs of providing the information
referred to in Section 2(i) to the Adviser;
(f) brokers' commissions and underwriting fees; and;
(g) the expense of periodic calculations of the net asset
value of the shares of the Fund.
5. COMPENSATION OF THE SUB-ADVISER. For all services to be
rendered, facilities furnished and expenses paid or assumed by
the Sub-Adviser as herein provided for the Fund, the Adviser
will pay the Sub-Adviser quarterly, for each of the preceding 3
months, in arrears a fee at the annual rate of 20% of the
investment advisory fee payable to the Adviser while the Fund's
average daily net assets are less than $100 million; and 55% of
the investment advisory fee payable to the Adviser while the
Fund's average daily net assets are $100 million or more. The
"average daily net assets" of the Fund shall be determined on
the basis set forth in the Fund's prospectus or otherwise
consistent with the 1940 Act and the regulations promulgated
thereunder. The Sub-Adviser will receive a pro rata portion of
such monthly fee for any periods in which the Sub-Adviser
advises the Fund less than a full month. The Sub-Adviser
understands and agrees that neither the Trust nor the Fund has
any liability for the Sub-Adviser's fee hereunder.
Calculations of the Sub-Adviser's fee will be based on average
net asset values as provided by the Adviser.
In addition to the foregoing, the Sub-Adviser may from time
to time agree not to impose all or a portion of its fee
otherwise payable hereunder (in advance of the time such fee or
portion thereof would otherwise accrue) and/or undertake to pay
or reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by it. Any such
fee reduction or undertaking may be discontinued or modified by
the Sub-Adviser at any time.
6. OTHER ACTIVITIES OF THE SUB-ADVISER AND ITS AFFILIATES.
Nothing herein contained shall prevent the Sub-Adviser or any
of its affiliates or associates from engaging in any other
business or from acting as investment adviser or investment
manager for any other person or entity, whether or not having
investment policies or a portfolio similar to the Fund. It is
specifically understood that officers, directors and employees
of the Sub-Adviser and those of its affiliates may engage in
providing portfolio management services and advice to other
investment advisory clients of the Sub-Adviser or of its
affiliates.
4
<PAGE> 5
7. AVOIDANCE OF INCONSISTENT POSITION. In connection with
purchases or sales of portfolio securities for the account of
the Fund, neither the Sub-Adviser nor any of its directors,
officers or employees will act as principal or agent or receive
any commission , except as permitted by the 1940 Act and the
rules and regulations promulgated thereunder. The Sub-Adviser
shall not knowingly recommend that the Fund purchase, sell or
retain securities of any issuer in which the Sub-Adviser has a
financial interest without obtaining prior approval of the
Adviser prior to the execution of any such transaction.
Nothing herein contained shall limit or restrict the
Sub-Adviser or any of its officers, affiliates or employees
from buying, selling or trading in any securities for its or
their own account or accounts. The Trust and Fund acknowledge
the Sub-Adviser and its officers, affiliates and employees, and
its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at
the same time being acquired or disposed of by the Fund. The
Sub-Adviser shall have no obligation to acquire with respect to
the Fund, a position in any investment which the Sub-Adviser,
its officers, affiliates or employees may acquire for its or
their own accounts or for the account of another client if, in
the sole discretion of the Sub-Adviser, it is not feasible or
desirable to acquire a position in such investment on behalf of
the Fund. Nothing herein contained shall prevent the
Sub-Adviser from purchasing or recommending the purchase of a
particular security for one or more funds or clients while
other funds or clients may be selling the same security.
8. NO PARTNERSHIP OR JOINT VENTURE. The Trust, the Fund,
the Adviser and the Sub-Adviser are not partners of or joint
venturers with each other and nothing herein shall be construed
so as to make them such partners or joint venturers or impose
any liability as such on any of them.
9. LIMITATION OF LIABILITY OF THE SUB-ADVISER. The
Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust, the Fund
or the Adviser in connection with the matters to which this
Contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's
part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Contract. Any person, even though also employed by the
Sub-Adviser, who may be or become an employee of and paid by
the Trust or the Fund shall be deemed, when acting within the
scope of his employment by the Trust or the Fund, to be acting
in such employment solely for the Trust or the Fund and not as
the Sub-Adviser's employee or agent.
10. DURATION AND TERMINATION OF THIS CONTRACT. This Contract
shall remain in force until the second anniversary of the date
upon which this Contract was executed by the parties hereto,
and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by (a) a
majority of the Trustees who are not interested persons of the
Adviser, of the Sub-Adviser or (other than as Board members) of
the Trust or 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 Contract may, on 60 days' written
notice, be terminated at any time without the payment of any
penalty by the Trust on behalf of the Fund by vote of a
majority of the outstanding voting securities of the Fund or by
the Board of Trustees or by the Adviser or by the Sub-Adviser.
Termination of this Contract with respect to the Fund shall not
be deemed to terminate or otherwise invalidate any provisions
5
<PAGE> 6
of any contract between you and any other series of the Trust.
This Contract shall automatically terminate in the event of its
assignment or upon the termination of the Adviser's Investment
Management Contract. In interpreting the provisions of this
Section 10, the definitions contained in Section 2(a) of the
1940 Act (including the definitions of "assignment,"
"interested person" and "voting security"), shall be applied.
11. AMENDMENT OF THIS CONTRACT. No provision of this
Contract may be changed, discharged, terminated or waived
orally, but only by an instrument in writing signed by the
party against which enforcement of the change discharge,
termination or waiver is sought, and no amendment, transfer,
assignment, sale, hypothecation or pledge of this Contract
shall be effective until approved by (a) the Trustees,
including a majority of the Trustees who are not interested
persons of the Adviser, the Sub-Adviser or (other than as Board
members) the Trust or the Fund, cast in person at a meeting
called for the purpose of voting on such approval, and (b) a
majority of the outstanding voting securities of the Fund, as
defined in the 1940 Act.
12. MISCELLANEOUS.
--------------
(a) The captions in this Contract 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 Contract 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 Institutional Series Trust is the
designation of the Trustees under the Declaration of
Trust, dated October 31, 1994 as amended from time to
time. The Declaration of Trust has been filed with the
Secretary of State of The Commonwealth of Massachusetts.
The obligations of the Trust and the Fund are not
personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders,
officers, employees or agents of the Trust or the Fund,
but only the Fund's property shall be bound. The Trust or
the Fund shall not be liable for the obligations of any
other series of the Trust.
(b) Any information supplied by the Sub-Adviser, which
is not otherwise in the public domain, in connection with
the performance of its duties hereunder is to be regarded
as confidential and for use only by the Fund and/or its
agents, and only in connection with the Fund and its
investments.
13. GOVERNING LAW. This Contract shall be construed in
accordance with the laws of The Commonwealth of Massachusetts
and the applicable provisions of the 1940 Act.
14. SEVERABILITY. The provisions of this contract are
independent of and separable from each other and no provision
shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of
them may be deemed invalid or unenforceable in whole or in
part.
6
<PAGE> 7
Yours very truly,
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
The foregoing Contract is hereby agreed to as of the date thereof.
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
on behalf of John Hancock Berkeley Fundamental Value Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
NM CAPITAL MANAGEMENT, INC.
By: /s/ Anthony Petrucci
-------------------
Its: President
---------
7
<PAGE> 1
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
101 Huntington Avenue
Boston, Massachusetts 02199
January 30, 1995
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Distribution Agreement
----------------------
Dear Sir:
John Hancock Institutional Series Trust. (the "Trust") has been
organized as a business trust under the laws of the Commonwealth of
Massachusetts to engage in the business of an investment company.
The Trust's 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 each series of the Trust, to sell
the shares to the public, to brokers, dealers or to both, in the
manner and on the conditions hereinafter set forth. The Trust
intends to offer shares in eleven series designated as: John Hancock
Independence Diversified Core Equity Fund II, John Hancock
Independence Growth Fund, John Hancock Independence Value Fund, John
Hancock Independence Medium Capitalization Fund, John Hancock
Independence Balanced Fund, John Hancock Berkeley Dividend
Performers Fund, John Hancock Berkeley Bond Fund, John Hancock
Berkeley Global Bond Fund, John Hancock Berkeley Sector Opportunity
Fund, John Hancock Berkeley Fundamental Value Fund and John Hancock
Berkeley Overseas Growth Fund, together with all other series
subsequently established by the Trust and made subject to this
Agreement (each, a "Fund" and collectively, the "Funds"). You are
willing, as agent for the Trust, to sell the shares to the public,
to brokers, dealers or to both, in the manner and on the conditions
hereinafter set forth. Accordingly, the Trust hereby agrees with
you as follows:
1. DELIVERY OF DOCUMENTS. The Trust 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 Trust will use
its best efforts to register from time to time 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
Trust. This Agreement relates to the issue and sale of shares that
are duly authorized and registered and available for sale by the
Trust if, but only if, the Trust sees fit to sell them. You and the
Trust will cooperate in taking such action as may be necessary from
time to time to qualify shares of the Trust for sale in the
Commonwealth of Massachusetts and in any other states mutually
agreeable to you and the Trust, and to maintain such qualification
if and so long as such shares are duly registered under the
Securities Act of 1933, as amended.
<PAGE> 2
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 issuance by
the Trust 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 prospectuses, you are
authorized to sell as agent on behalf of the Trust, authorized and
issued shares registered under the Securities Act of 1933, as
amended. Such sales may be made by you on behalf of the Trust 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 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 Funds
will not apply to shares issued in connection with the merger or
consolidation of any other investment company with any Fund or its
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 a 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
Funds will be sold at the public offering price, which will be
determined in the manner provided in the Funds' prospectuses or
statement of additional information, as now in effect or as it may
be amended .
7. NO SALES DISCOUNT. The respective Fund shall receive the
applicable net asset value on all sales of shares by you as agent of
the Trust.
8. DELIVERY OF PAYMENTS. You will deliver to the 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 Trust'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. Each Fund reserves the right to
suspend the sale of its shares and your authority to accept orders
for shares on behalf of the Fund if, in the judgment of a majority
of the Trust'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 Trust 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,
2
<PAGE> 3
covering the issue and sale of shares and in connection with the qualification
of shares for sale in the various states in which the Funds shall determine
advisable to qualify such shares for sale. The Trust, or applicable Fund, 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 Funds which
have not been herein specifically allocated to the Trust.
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.
12. INDEMNIFICATION. You agree to indemnify and hold harmless the
Trust and each of its Board members and officers and each person, if
any, who controls the Trust or any 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 Trust, Fund or
such Board members, 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 the Trust 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 in light of
the circumstances in which they were made if such statement or
omission was made in reliance upon information furnished or
confirmed in writing to the Trust by you, or (c) may be incurred or
arise by reason of your acting as the Trust'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 Board member or officer of the Trust or any other person deemed
to protect such Board member or officer of the Trust 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 Trust 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 Trust.
13. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall remain in effect until the second anniversary of 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 who are not interested persons of
you (other than as Board members) or of the Trust, 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 Trust, or (ii) a majority of
the outstanding voting securities of the Trust. 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 Trust, by a
vote of a majority of the outstanding voting securities of the
Trust, or by you. This
3
<PAGE> 4
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 (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 Trust should at any time deem it necessary or
advisable in the best interests of the Trust that any amendment of
this agreement be made in order to comply with the recommendations
or 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 Trust may terminate this agreement
forthwith. If you should at any time request that a change be made
in the Trust'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 Trust 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.
Very truly yours,
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
By: /s/ Anne C. Hodsdon
-------------------
Its: President
The foregoing Agreement is hereby
accepted as of the date hereof.
JOHN HANCOCK BROKER DISTRIBUTION SERVICES, INC.
By: /s/ C. Troy Shaver, Jr.
-----------------------
C. Troy Shaver, Jr., President
4
<PAGE> 1
EXHIBIT 99.B8
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<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
<PAGE> 7
the purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
------------------------------------------------------------
A. SAFEKEEPING AND HOLDING OF PROPERTY The Custodian shall keep
safely all property of the Fund and on behalf of the Fund shall
from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Fund all property of
the Fund, including all securities, participation interests and
other assets of the Fund (1) physically held by the Custodian, (2)
held by any subcustodian referred to in Section 2 hereof or by any
agent referred to in Paragraph K hereof, (3) held by or maintained
in The Depository Trust Company or in Participants Trust Company
or in an Approved Clearing Agency or in the Federal Book- Entry
System or in an Approved Foreign Securities Depository, each of
which from time to time is referred to herein as a "Securities
System", and (4) held by the Custodian or by any subcustodian
referred to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. DELIVERY OF SECURITIES The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or
deemed to be held) by the Custodian or maintained in a Securities
System account or in an Approved Book-Entry System for Commercial
Paper account only upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities or participation interests
for the account of the Fund, BUT ONLY against receipt of
payment therefor; if delivery is made in Boston or New
York City, payment therefor shall be made in accordance
with generally accepted clearing house procedures or by
use of Federal Reserve Wire System procedures; if delivery
is made elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in
accordance with such procedures agreed to in writing from
time to time by the parties hereto; if the sale is
effected through a Securities System, delivery and payment
therefor shall be made in accordance with the provisions
of Paragraph L hereof; if the sale of commercial paper is
to be effected through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph M
hereof; if the securities are to be sold outside the
United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the
parties hereto; for the purposes of this subparagraph, the
term "sale" shall include the disposition of a portfolio
<PAGE> 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 business day.
(d) The Custodian shall promptly send to the Fund any report or other
communication received or obtained by the Custodian relating to
the Securities System's accounting system, system of internal
accounting controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall promptly
send to the Fund any report or other communication relating to the
Custodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System; and
the Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any Securities
System. The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times during
regular business hours be open to the inspection of the Fund's
authorized officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the absence
of receipt of a certificate of an officer of the Fund that the
Board has approved the use of a particular Securities System; the
Custodian shall also obtain appropriate assurance from the
officers of the Fund that the Board has annually reviewed and
approved the continued use by the Fund of each Securities System,
so long as such review and approval is required by Rule 17f-4
under the Investment Company Act of 1940, and the Fund shall
promptly notify the Custodian if the use of a Securities System is
to be discontinued; at the request of the Fund, the Custodian will
terminate the use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or subcustodians or of any of its or their employees
or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have
against the Securities System or any other person; at the election
of the Fund, it shall be entitled to be
<PAGE> 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 options transactions. The Custodian and the
broker-dealer shall be responsible for the sufficiency of
assets held in each Fund's segregated account in
compliance with applicable margin maintenance
requirements.
2. FUTURES CONTRACTS The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations and
other documents, if any, evidencing the purchase or sale
of a futures contract or an option on a futures contract
by the Fund; deposit and maintain in a segregated account,
for the benefit of any futures commission merchant, assets
designated by the Fund as initial, maintenance or
variation "margin" deposits (including mark- to-market
payments) intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold
or any options on futures contracts written by Fund, in
accordance with the provisions of any agreement or
agreements among the Fund, the Custodian and such futures
commission merchant, designed to comply with the rules of
the Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin accounts
only in
<PAGE> 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.
8. Responsibility of Bank
----------------------
<PAGE> 26
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
MASTER CUSTODIAN AGREEMENT
between
JOHN HANCOCK MUTUAL FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
1. Definitions..................................................1-3
2. Employment of Custodian and Property to be held by it........3-4
3. Duties of the Custodian with Respect to
Property of the Fund.........................................4
A. Safekeeping and Holding of Property......................4
B. Delivery of Securities...................................4-7
C. Registration of Securities...............................7
D. Bank Accounts............................................7
E. Payments for Shares of the Fund..........................8
F. Investment and Availability of Federal Funds.............8
G. Collections..............................................8-9
H. Payment of Fund Moneys...................................9-10
I. Liability for Payment in Advance of
Receipt of Securities Purchased..........................10
J. Payments for Repurchases of Redemptions
of Shares of the Fund....................................11
K. Appointment of Agents by the Custodian...................11
L. Deposit of Fund Portfolio Securities in
Securities Systems.......................................12-13
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper...................14-16
N. Segregated Account.......................................16
O. Ownership Certificates for Tax Purposes..................16
P. Proxies .................................................17
Q. Communications Relating to Fund Portfolio
Securities.........................................17
R. Exercise of Rights; Tender Offers.......................17-18
S. Depository Receipts......................................18
T. Interest Bearing Call or Time Deposits...................18
U. Options, Futures Contracts and Foreign
Currency Transactions....................................18-20
V. Actions Permitted Without Express Authority..............20
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value...............................20-21
5. Records and Miscellaneous Duties.............................21
6. Opinion of Fund's Independent Public Accountants.............22
7. Compensation and Expenses of Bank............................22
8. Responsibility of Bank.......................................22-23
9. Persons Having Access to Assets of the Fund..................23
10. Effective Period, Termination and Amendment;
Successor Custodian..........................................24
11. Interpretive and Additional Provisions.......................25
12. Certification as to Authorized Officers......................25
13. Notices......................................................25
14. Massachusetts Law to Apply...................................25
15. Adoption of the Agreement by the Fund........................26
<PAGE> 3
MASTER CUSTODIAN AGREEMENT
This Agreement is made as of June 15, 1994 between each investment company
advised by John Hancock Advisers, Inc. which has adopted this Agreement in the
manner provided herein and State Street Bank and Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under the
laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the Investment
Company Act of 1940 and has appointed the Bank to act as Custodian of its
property and to perform certain duties as its Agent, as more fully hereinafter
set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement and is listed on Appendix A hereto. If the Fund is a Massachusetts
business trust or Maryland corporation, it may in the future establish and
designate other separate and distinct series of shares, each of which may be
called a "portfolio"; in such case, the term "Fund" shall also refer to each
such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Authorized Officer", shall mean any of the following officers of the
Trust: The Chairman of the Board of Trustees, the President, a Vice President,
the Secretary, the Treasurer or Assistant Secretary or Assistant Treasurer, or
any other officer of the Trust duly authorized to sign by appropriate resolution
of the Board of Trustees of the Trust.
(e) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(f) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository but
only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(g) "Federal Book-Entry System" shall mean the book-entry system referred
to in Rule 17f-4(b) under the Investment Company Act of 1940 for United States
and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry
regulations of federal agencies substantially in the form of Subpart O).
(h) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(i) "Approved Book-Entry System for Commercial Paper" shall mean a system
maintained by the Custodian or by a subcustodian employed pursuant to Section 2
hereof for the holding of commercial paper in book-entry form but only if the
Custodian has received a certified copy of a vote of the Board approving the
participation by the Fund in such system.
(j) The Custodian shall be deemed to have received "proper instructions" in
respect of any of the matters referred to in this Agreement upon receipt of
written or facsimile instructions signed by such one or more person or persons
as the Board shall have from time to time authorized to give the particular
class of instructions in question. Electronic instructions for the purchase and
sale of securities which are transmitted by John Hancock Advisers, Inc. to the
Custodian through the John Hancock equity trading system and the John Hancock
fixed income trading system shall be deemed to be proper instructions; the Fund
shall cause all such instructions to be confirmed in writing. Different persons
may be authorized to give instructions for different purposes. A certified copy
of a vote of the Board may be received and accepted by the Custodian as
<PAGE> 4
conclusive evidence of the authority of any such person to act and may be
considered as in full force and effect until receipt of written notice to the
contrary. Such instructions may be general or specific in terms and, where
appropriate, may be standing instructions. Unless the vote delegating authority
to any person or persons to give a particular class of instructions specifically
requires that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class, the
Custodian shall be under no obligation to question the right of the person or
persons giving such instructions in so doing. Oral instructions will be
considered proper instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. The Fund authorizes the Custodian to tape record any and all
telephonic or other oral instructions given to the Custodian. Upon receipt of a
certificate signed by two officers of the Fund as to the authorization by the
President and the Treasurer of the Fund accompanied by a detailed description of
the communication procedures approved by the President and the Treasurer of the
Fund, "proper instructions" may also include communications effected directly
between electromechanical or electronic devices provided that the President and
Treasurer of the Fund and the Custodian are satisfied that such procedures
afford adequate safeguards for the Fund's assets. In performing its duties
generally, and more particularly in connection with the purchase, sale and
exchange of securities made by or for the Fund, the Custodian may take
cognizance of the provisions of the governing documents and registration
statement of the Fund as the same may from time to time be in effect (and votes,
resolutions or proceedings of the shareholders or the Board), but, nevertheless,
except as otherwise expressly provided herein, the Custodian may assume unless
and until notified in writing to the contrary that so-called proper instructions
received by it are not in conflict with or in any way contrary to any provisions
of such governing documents and registration statement, or votes, resolutions or
proceedings of the shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
The Fund hereby appoints and employs the Bank as its Custodian and Agent in
accordance with and subject to the provisions hereof, and the Bank hereby
accepts such appointment and employment. The Fund agrees to deliver to the
Custodian all securities, participation interests, cash and other assets owned
by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), By-Laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of its
duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board. Any such subcustodian so employed by
the Custodian shall be deemed to be the agent of the Custodian, and the
Custodian shall remain primarily responsible for the securities, participation
interests, moneys and other property of the Fund held by such subcustodian. Any
foreign subcustodian shall be a bank or trust company which is an eligible
foreign custodian within the meaning of Rule 17f-5 under the Investment Company
Act of 1940, and the foreign custody arrangements shall be approved by the Board
and shall be in accordance with and subject to the provisions of said Rule. For
the purposes of this Agreement, any property of the Fund held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the Custodian
under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Fund and on behalf of the Fund
shall from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate
on its books and records for the account of the Fund all
property of the Fund, including all securities, participation
interests and other assets of the Fund (1) physically held by
the Custodian, (2) held by any subcustodian referred to in
Section 2 hereof or by any agent referred to in Paragraph K
hereof, (3) held by or maintained in The Depository Trust
Company or in Participants Trust Company or in an Approved
Clearing Agency or in the Federal Book-Entry System or in an
Approved Foreign Securities Depository, each of which from
time to time is referred to herein as a "Securities System",
and (4) held by the Custodian or by any subcustodian referred
to in Section 2 hereof and maintained in any Approved
Book-Entry System for Commercial Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or deemed
to be held) by the Custodian or maintained in a Securities System
account or in an Approved Book-Entry System for Commercial Paper
account only upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the parties, and
<PAGE> 5
only in the following cases:
1) Upon sale of such securities or participation interests for the
account of the Fund, but only against receipt of payment
therefor; if delivery is made in Boston or New York City, payment
therefor shall be made in accordance with generally accepted
clearing house procedures or by use of Federal Reserve Wire
System procedures; if delivery is made elsewhere payment therefor
shall be in accordance with the then current "street delivery"
custom or in accordance with such procedures agreed to in writing
from time to time by the parties hereto; if the sale is effected
through a Securities System, delivery and payment therefor shall
be made in accordance with the provisions of Paragraph L hereof;
if the sale of commercial paper is to be effected through an
Approved Book-Entry System for Commercial Paper, delivery and
payment therefor shall be made in accordance with the provisions
of Paragraph M hereof; if the securities are to be sold outside
the United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the parties
hereto; for the purposes of this subparagraph, the term "sale"
shall include the disposition of a portfolio security (i) upon
the exercise of an option written by the Fund and (ii) upon the
failure by the Fund to make a successful bid with respect to a
portfolio security, the continued holding of which is contingent
upon the making of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the Custodian
or any subcustodian employed pursuant to Section 2 hereof;
5) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee of the Custodian or
into the name or nominee name of any agent appointed pursuant to
Paragraph K hereof or into the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities or
participation interests are to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in accordance with
the "street delivery" custom; provided that the Custodian shall
adopt such procedures as the Fund from time to time shall approve
to ensure their prompt return to the Custodian by the broker in
the event the broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, re capitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion of such securities, or pursuant to
any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian
or any subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
9) For delivery in connection with any loans of securities made by
the Fund (such loans to be made pursuant to the terms of the
Fund's current registration statement), but only against receipt
of adequate collateral as agreed upon from time to time by the
Custodian and the Fund, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities.
10) For delivery as security in connection with any borrowings by the
Fund requiring a pledge or hypothecation of assets by the Fund
(if then permitted under circumstances described in the current
registration statement of the Fund), provided, that the
securities shall be released only upon payment to the Custodian
of the monies borrowed, except that in cases where additional
collateral is required to secure a borrowing already made,
further securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such loan upon
redelivery to it of the securities pledged or hypothecated
therefor and upon surrender of the note or notes evidencing the
<PAGE> 6
loan;
11) When required for delivery in connection with any redemption or
repurchase of Shares of the Fund in accordance with the
provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any agreement
between the Custodian (or a subcustodian employed pursuant to
Section 2 hereof) and a broker-dealer registered under the
Securities Exchange Act of 1934 and, if necessary, the Fund,
relating to compliance with the rules of The Options Clearing
Corporation or of any registered national securities exchange, or
of any similar organization or organizations, regarding deposit
or escrow or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian (or a subcustodian employed
pursuant to Section 2 hereof), and a futures commission merchant,
relating to compliance with the rules of the Commodity Futures
Trading Commission and/or of any contract market or commodities
exchange or similar organization, regarding futures margin
account deposits or payments in connection with futures
transactions by the Fund;
14) For any other proper corporate purpose, but only upon receipt of,
in addition to proper instructions, a certified copy of a vote of
the Board specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall
be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Fund
shall be registered in the name of the Fund or in the name of
any nominee of the Fund or of any nominee of the Custodian, or
in the name or nominee name of any agent appointed pursuant to
Paragraph K hereof, or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, or in the
name or nominee name of The Depository Trust Company or
Participants Trust Company or Approved Clearing Agency or
Federal Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in an
account of the Custodian or of such agent or of such
subcustodian containing only assets of the Fund or only assets
held by the Custodian or such agent or such subcustodian as a
custodian or subcustodian or in a fiduciary capacity for
customers. All certificates for securities accepted by the
Custodian or any such agent or subcustodian on behalf of the
Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be
advised of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a
separate bank account or accounts in the name of the Fund,
subject only to draft or order by the Custodian acting in
pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Fund
other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian
for the Fund may be deposited by it to its credit as Custodian
in the banking department of the Custodian or in such other
banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940
and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved in writing by an Authorized Officer. Such funds
shall be deposited by the Custodian in its capacity as
Custodian and shall be subject to withdrawal only by the
Custodian in that capacity.
E. Payment for Shares of the Fund The Custodian shall make
appropriate arrangements with the Transfer Agent and the
principal underwriter of the Fund to enable the Custodian to
make certain it promptly receives the cash or other
consideration due to the Fund for such new or treasury Shares
as may be issued or sold from time to time by the Fund, in
accordance with the governing documents and offering
prospectus and statement of additional information of the
Fund. The Custodian will provide prompt notification to the
Fund of any receipt by it of payments for Shares of the Fund.
F. Investment and Availability of Federal Funds Upon agreement
between the Fund and the Custodian, the Custodian shall, upon
the receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
<PAGE> 7
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and
the Fund.
G. Collections The Custodian shall promptly collect all income
and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect to
bearer securities if, on the date of payment by the issuer,
such securities are held by the Custodian or agent thereof and
shall credit such income, as collected, to the Fund's
custodian account.
The Custodian shall do all things necessary and proper in connection with such
prompt collections and, without limiting the generality of the foregoing, the
Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or
be called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities System
or in an Approved Book-Entry System for Commercial Paper at the
time funds become available to the Custodian; in the case of
securities maintained in The Depository Trust Company funds shall
be deemed available to the Fund not later than the opening of
business on the first business day after receipt of such funds by
the Custodian.
The Custodian shall notify the Fund as soon as reasonably practicable whenever
income due on any security is not promptly collected. In any case in which the
Custodian does not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in writing, enclosing
copies of any demand letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await instructions from
the Fund; the Custodian shall in no case have any liability for any nonpayment
of such income provided the Custodian meets the standard of care set forth in
Section 8 hereof. The Custodian shall not be obligated to take legal action for
collection unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock dividends, rights and
other items of like nature, and deal with the same pursuant to proper
instructions relative thereto.
H. Payment of Fund Moneys Upon receipt of proper instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options on
futures contracts purchased for the account of the Fund but only
(a) against the receipt of:
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward
contracts or options on futures contracts
by the Custodian (or by a subcustodian employed pursuant to
Section 2 hereof or by a clearing corporation of a national
securities exchange of which the Custodian is a member or by any
bank, banking institution or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940 to act as a custodian and which has been
designated by the Custodian as its agent for this purpose or by
the agent specifically designated in such instructions as
representing the purchasers of a new issue of privately placed
securities); (b) in the case of a purchase effected through a
Securities System, upon receipt of the securities by the
Securities System in accordance with the conditions set forth in
Paragraph L hereof; (c) in the case of a purchase of commercial
paper effected through an Approved Book-Entry System for
Commercial Paper, upon receipt of the paper by the Custodian or
subcustodian in accordance with the conditions set forth in
Paragraph M hereof; (d) in the case of repurchase agreements
entered into between the Fund and another bank or a
broker-dealer, against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate form or
through an entry crediting the Custodian's segregated,
<PAGE> 8
non-proprietary account at the Federal Reserve Bank of Boston
with such securities along with written evidence of the agreement
by the bank or broker-dealer to repurchase such securities from
the Fund; or (e) with respect to securities purchased outside of
the United States, in accordance with written procedures agreed
to from time to time in writing by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the Fund as
set forth in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of
Paragraph J hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: advisory fees, distribution plan payments,
interest, taxes, management compensation and expenses,
accounting, transfer agent and legal fees, and other operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions
to holders of Shares declared or authorized by the
Board; and
6) For any other proper corporate purpose, but only upon receipt of,
in addition to proper instructions, a certified copy of a vote of
the Board, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Fund is made by the
Custodian in advance of receipt of the securities purchased in
the absence of specific written instructions signed by two
officers of the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by the
Custodian; except that in the case of a repurchase agreement
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Custodian may transfer funds to
the account of such bank prior to the receipt of (i) the
securities in certificate form subject to such repurchase
agreement or (ii) written evidence that the securities subject
to such repurchase agreement have been transferred by
book-entry into a segregated non-proprietary account of the
Custodian maintained with the Federal Reserve Bank of Boston
or (iii) the safekeeping receipt, provided that such
securities have in fact been so transferred by book-entry and
the written repurchase agreement is received by the Custodian
in due course; and except that if the securities are to be
purchased outside the United States, payment may be made in
accordance with procedures agreed to from time to time by the
parties hereto.
J. Payments for Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose, but
subject to any applicable votes of the Board and the current
redemption and repurchase procedures of the Fund, the
Custodian shall, upon receipt of written instructions from the
Fund or from the Fund's transfer agent or from the principal
underwriter, make funds and/or portfolio securities available
for payment to holders of Shares who have caused their Shares
to be redeemed or repurchased by the Fund or for the Fund's
account by its transfer agent or principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding Shares
for which certificates have not been issued. Such checking account and
such special checks shall be subject to such rules and regulations as
the Custodian and the Fund may from time to time adopt. The Custodian
or the Fund may suspend or terminate use of such checking account or
such special checks (either generally or for one or more shareholders)
at any time. The Custodian and the Fund shall notify the other
immediately of any such suspension or termination.
K. Appointment of Agents by the Custodian The Custodian may at
any time or times in its discretion appoint (and may at any
time remove) any other bank or trust company (provided such
bank or trust company is itself qualified under the Investment
Company Act of 1940 to act as a custodian or is itself an
eligible foreign custodian within the meaning of Rule 17f-5
under said Act) as the agent of the Custodian to carry out
such of the duties and functions of the Custodian described in
this Section 3 as the Custodian may from time to time direct;
provided, however, that the appointment of any such agent
shall not relieve the Custodian of any of its responsibilities
or liabilities hereunder, and as between the Fund and the
<PAGE> 9
Custodian the Custodian shall be fully responsible for the
acts and omissions of any such agent. For the purposes of
this Agreement, any property of the Fund held by any such
agent shall be deemed to be held by the Custodian hereunder.
L. Deposit of Fund Portfolio Securities in Securities Systems
The Custodian may deposit and/or maintain securities owned by
the Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, and at
all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep securities
of the Fund in a Securities System provided that such
securities are maintained in a non-proprietary account
("Account") of the Custodian or such subcustodian in the
Securities System which shall not include any assets of the
Custodian or such subcustodian or any other person other than
assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund, and the Custodian
shall be fully and completely responsible for maintaining a record
keeping system capable of accurately and currently stating the Fund's
holdings maintained in each such Securities System.
(c) The Custodian shall pay for securities purchased in book-entry
form for the account of the Fund only upon (i) receipt of
notice or advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of any entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund only upon (i) receipt of notice or advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all notices or
advises from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be promptly
provided to the Fund at its request. The Custodian shall
promptly send to the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written advice
or notice of each such transaction, and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund on the next business day.
(d) The Custodian shall promptly send to the Fund any report or
other communication received or obtained by the Custodian
relating to the Securities System's accounting system, system
of internal accounting controls or procedures for safeguarding
securities deposited in the Securities System; the Custodian
shall promptly send to the Fund any report or other
communication relating to the Custodian's internal accounting
controls and procedures for safeguarding securities deposited
in any Securities System; and the Custodian shall ensure that
any agent appointed pursuant to Paragraph K hereof or any
subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Fund and to the Custodian any report or
other communication relating to such agent's or
subcustodian's internal accounting controls and procedures for
safeguarding securities deposited in any Securities System.
The Custodian's books and records relating to the Fund's
participation in each Securities System will at all times
during regular business hours be open to the inspection of the
Fund's Authorized Officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L in the
absence of receipt of a certificate of an Authorized Officer
that the Board has approved the use of a particular Securities
System; the Custodian shall also obtain appropriate assurance
from an Authorized Officer that the Board has annually
reviewed and approved the continued use by the Fund of each
Securities System, so long as such review and approval is
required by Rule 17f-4 under the Investment Company Act of
<PAGE> 10
1940, and the Fund shall promptly notify the Custodian if the
use of a Securities System is to be discontinued; at the
request of the Fund, the Custodian will terminate the use of
any such Securities System as promptly as practicable.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities System
by reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or subcustodians or of any of
its or their employees or from any failure of the Custodian or
any such agent or subcustodian to enforce effectively such
rights as it may have against the Securities System or any
other person; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
M. Deposit of Fund Commercial Paper in an Approved Book-Entry System
for Commercial Paper Upon receipt of proper instructions with
respect to each issue of direct issue commercial paper purchased
by the Fund, the Custodian may deposit and/or maintain direct
issue commercial paper owned by the Fund in any Approved
Book-Entry System for Commercial Paper, in each case only in
accordance with applicable Securities and Exchange Commission
rules, regulations, and no-action correspondence, and at all
times subject to the following provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry
System for Commercial Paper, provided that such paper is
issued in book entry form by the Custodian or
subcustodian on behalf of an issuer with which the
Custodian or subcustodian has entered into a book-entry
agreement and provided further that such paper is
maintained in a non-proprietary account ("Account") of
the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not
include any assets of the Custodian or such subcustodian
or any other person other than assets held by the
Custodian or such subcustodian as a fiduciary,
custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Fund which is maintained in an Approved
Book-Entry System for Commercial Paper shall identify by
book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System
and shall at all times during regular business hours be
open for inspection by authorized officers, employees or
agents of the Fund. The Custodian shall be fully and
completely responsible for maintaining a record keeping
system capable of accurately and currently stating the
Fund's holdings of commercial paper maintained in each
such System.
(c) The Custodian shall pay for commercial paper purchased
in book-entry form for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice from the
issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Fund. The Custodian shall transfer such commercial
paper which is sold or cancel such commercial paper
which is redeemed for the account of the Fund only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer or redemption
and payment for the account of the Fund. Copies of all
notices, advises and confirmations of transfers of
commercial paper for the account of the Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be promptly provided to the Fund at its
request. The Custodian shall promptly send to the Fund
confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice of
each such transaction, and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the System for the account of the Fund
on the next business day.
(d) The Custodian shall promptly send to the Fund any report
or other communication received or obtained by the
Custodian relating to each System's accounting system,
system of internal accounting controls or procedures for
safeguarding commercial paper deposited in the System;
the Custodian shall promptly send to the Fund any report
<PAGE> 11
or other communication relating to the Custodian's
internal accounting controls and procedures for
safeguarding commercial paper deposited in any Approved
Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant
to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the
Fund and to the Custodian any report or other
communication relating to such agent's or subcustodian's
internal accounting controls and procedures for
safeguarding securities deposited in any Approved
Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph M in
the absence of receipt of a certificate of an officer of
the Fund that the Board has approved the use of a
particular Approved Book-Entry System for Commercial
Paper; the Custodian shall also obtain appropriate
assurance from an Authorized Officer that the Board has
annually reviewed and approved the continued use by the
Fund of each Approved Book-Entry System for Commercial
Paper, so long as such review and approval is required
by Rule 17f-4 under the Investment Company Act of 1940,
and the Fund shall promptly notify the Custodian if the
use of an Approved Book-Entry System for Commercial
Paper is to be discontinued; at the request of the Fund,
the Custodian will terminate the use of any such System
as promptly as practicable.
(f) The Custodian (or subcustodian, if the Approved Book-Entry System
for Commercial Paper is maintained by the subcustodian) shall
issue physical commercial paper or promissory notes whenever
requested to do so by the Fund or in the event of an electronic
system failure which impedes issuance, transfer or custody of
direct issue commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Fund for any loss or damage to the Fund resulting from
use of any Approved Book-Entry System for Commercial
Paper by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or
subcustodians or of any of its or their employees or
from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it
may have against this System, the issuer of the
commercial paper or any other person; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against this System, the issuer of the commercial paper
or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any
such loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant
to Paragraph L hereof, (i) in accordance with the provisions
of any agreement among the Fund, the Custodian and any
registered broker-dealer (or any futures commission merchant),
relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange
(or of the Commodity Futures Trading Commission or of any
contract market or commodities exchange), or of any similar
organization or organizations, regarding escrow or deposit or
other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or
written by the Fund or futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of
compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to proper instructions, a certificate signed
by two officers of the Fund, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities
held by it hereunder, cause to be promptly delivered to the
<PAGE> 12
Fund all forms of proxies and all notices of meetings and any
other notices or announcements or other written information
affecting or relating to the securities, and upon receipt of
proper instructions shall execute and deliver or cause its
nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor
its nominee shall vote upon any of the securities or execute
any proxy to vote thereon or give any consent or take any
other action with respect thereto (except as otherwise herein
provided) unless ordered to do so by proper instructions.
Q. Communications Relating to Fund Portfolio Securities The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call
and maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Fund. With respect to tender or exchange offers,
the Custodian shall deliver promptly to the Fund all written
information received by the Custodian from issuers and other
persons relating to the securities and participation interests
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender
offers, similar offers to purchase or exercise rights
(including, without limitation, pendency of calls and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options and the maturity of futures
contracts) affecting or relating to securities and
participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for
promptly notifying the Fund of all such offers in accordance
with the standard of reasonable care set forth in Section 8
hereof. For all such offers for which the Custodian is
responsible as provided in this Paragraph R, the Fund shall
have responsibility for providing the Custodian with all
necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to the
issuer or trustee thereof, or to the agent of either,
warrants, puts, calls, rights or similar securities for the
purpose of being exercised or sold upon proper receipt
therefor and upon receipt of assurances satisfactory to the
Custodian that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall timely
deposit securities upon invitations for tenders of securities
upon proper receipt therefor and upon receipt of assurances
satisfactory to the Custodian that the consideration to be
paid or delivered or the tendered securities are to be
returned to the Custodian or subcustodian employed pursuant to
Section 2 hereof. Notwithstanding any provision of this
Agreement to the contrary, the Custodian shall take all
necessary action, unless otherwise directed to the contrary by
proper instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or
similar rights of security ownership, and shall thereafter
promptly notify the Fund in writing of such action.
S. Depository Receipts The Custodian shall, upon receipt of
proper instructions, surrender or cause to be surrendered
foreign securities to the depository used by an issuer of
American Depository Receipts, European Depository Receipts or
International Depository Receipts (hereinafter collectively
referred to as "ADRs") for such securities, against a written
receipt therefor adequately describing such securities and
written evidence satisfactory to the Custodian that the
depository has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of a nominee
of the Custodian or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, for
delivery to the Custodian or such subcustodian at such place
as the Custodian or such subcustodian may from time to time
designate. The Custodian shall, upon receipt of proper
instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian
that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian
employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall,
upon receipt of proper instructions, place interest bearing
fixed term and call deposits with the banking department of
such banking institution (other than the Custodian) and in
such amounts as the Fund may designate. Deposits may be
<PAGE> 13
denominated in U.S. Dollars or other currencies. The
Custodian shall include in its records with respect to the
assets of the Fund appropriate notation as to the amount and
currency of each such deposit, the accepting banking
institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if
any, as may be forwarded to the Custodian by the banking
institution. Such deposits shall be deemed portfolio
securities of the applicable Fund for the purposes of this
Agreement, and the Custodian shall be responsible for the
collection of income from such accounts and the transmission
of cash to and from such accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodians shall, upon receipt of proper
instructions and in accordance with the provisions of
any agreement between the Custodian, any registered
broker-dealer and, if necessary, the Fund, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations,
receive and retain confirmations or other documents, if
any, evidencing the purchase or writing of an option on
a security, securities index, currency or other
financial instrument or index by the Fund; deposit and
maintain in a segregated account for each Fund
separately, either physically or by book-entry in a
Securities System, securities subject to a covered call
option written by the Fund; and release and/or transfer
such securities or other assets only in accordance with
a notice or other communication evidencing the
expiration, termination or exercise of such covered
option furnished by the Options Clearing Corporation,
the securities or options exchange on which such covered
option is traded or such other organization as may be
responsible for handling such options transactions.
2. Futures Contracts The Custodian shall, upon receipt of
proper instructions, receive and retain confirmations
and other documents, if any, evidencing the purchase or
sale of a futures contract or an option on a futures
contract by the Fund; deposit and maintain in a
segregated account, for the benefit of any futures
commission merchant, assets designated by the Fund as
initial, maintenance or variation "margin" deposits
(including mark-to-market payments) intended to secure
the Fund's performance of its obligations under any
futures contracts purchased or sold or any options on
futures contracts written by Fund, in accordance with
the provisions of any agreement or agreements among the
Fund, the Custodian and such futures commission
merchant, designed to comply with the rules of the
Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin
accounts only in accordance with any such agreements or
rules.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts,
currency swaps or options to purchase and sell foreign
currencies for spot and future delivery on behalf and
for the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts, swaps and options shall be deemed to
be portfolio securities of the Fund; and accordingly,
the responsibility of the Custodian therefor shall be
the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities
of the Fund. The Custodian shall be responsible for the
transmittal to and receipt of cash from the currency
broker or banking or financial institution with which
the contract or option is made, the maintenance of
proper records with respect to the transaction and the
maintenance of any segregated account required in
connection with the transaction. The Custodian shall
have no duty with respect to the selection of the
currency brokers or banking or financial institutions
with which the Fund deals or for their failure to comply
with the terms of any contract or option. Without
limiting the foregoing, it is agreed that upon receipt
of proper instructions and insofar as funds are made
available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian
to consummate a particular transaction on behalf and for
the account of the Fund) make free outgoing payments of
cash in the form of U.S. dollars or foreign currency
<PAGE> 14
before receiving confirmation of a foreign exchange
contract or swap or confirmation that the countervalue
currency completing the foreign exchange contract or
swap has been delivered or received. The Custodian
shall not be responsible for any costs and interest
charges which may be incurred by the Fund or the
Custodian as a result of the failure or delay of third
parties to deliver foreign exchange; provided that the
Custodian shall nevertheless be held to the standard of
care set forth in, and shall be liable to the Fund in
accordance with, the provisions of Section 8.
V. Actions Permitted Without Express Authority The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Agreement, provided, that all such payments shall be
accounted for by the Custodian to the Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund
except as otherwise directed by the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such books of
account and render as at the close of business on each day a detailed statement
of the amounts received or paid out and of securities received or delivered for
the account of the Fund during said day and such other statements, including a
daily trial balance and inventory of the Fund's portfolio securities; and shall
furnish such other financial information and data as from time to time requested
by the Treasurer or any Authorized Officer of the Fund; and shall compute and
determine, as of the close of regular trading on the New York Stock Exchange, or
at such other time or times as the Board may determine, the net asset value of a
share in the Fund, such computation and determination to be made in accordance
with the governing documents of the Fund and the votes and instructions of the
Board at the time in force and applicable, and promptly notify the Fund and its
investment adviser and such other persons as the Fund may request of the result
of such computation and determination. In computing the net asset value the
Custodian may rely upon security quotations received by telephone or otherwise
from sources or pricing services designated by the Fund by proper instructions,
and may further rely upon information furnished to it by any authorized officer
of the Fund relative (a) to liabilities of the Fund not appearing on its books
of account, (b) to the existence, status and proper treatment of any reserve or
reserves, (c) to any procedures established by the Board regarding the valuation
of portfolio securities, and (d) to the value to be assigned to any bond, note,
debenture, Treasury bill, repurchase agreement, subscription right, security,
participation interest or other asset or property for which market quotations
are not readily available.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All books of account and
records maintained by the Bank in connection with the performance of its duties
under this Agreement shall be the property of the Fund, shall at all times
during the regular business hours of the Bank be open for inspection by
authorized officers, employees or agents of the Fund, and in the event of
termination of this Agreement shall be delivered to the Fund or to such other
person or persons as shall be designated by the Fund. Disposition of any account
or record after any required period of preservation shall be only in accordance
with specific instructions received from the Fund. The Bank shall assist
generally in the preparation of reports to shareholders, audits of accounts, and
other ministerial matters of like nature; and, upon request, shall furnish the
Fund's auditors with an attested inventory of securities held with appropriate
information as to securities in transit or in the process of purchase or sale
and with such other information as said auditors may from time to time request.
The Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof, and
shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for which it
is responsible under this Agreement in such manner as the Custodian shall
determine from time to time to be advisable in order to verify the accuracy of
such inventory. The Bank shall not disclose or use any books or records it has
prepared or maintained by reason of this Agreement in any manner except as
expressly authorized herein or directed by the Fund, and the Bank shall keep
confidential any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
<PAGE> 15
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to enable the Fund to obtain from year to year favorable opinions
from the Fund's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's registration
statement and Form N-SAR or other periodic reports to the Securities and
Exchange Commission and with respect to any other requirements of such
Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its services as
Custodian and Agent, as agreed upon from time to time between the Fund and the
Bank. The Bank shall be entitled to receive from the Fund on demand
reimbursement for its cash disbursements, expenses and charges, including
counsel fees, in connection with its duties as Custodian and Agent hereunder,
but excluding salaries and usual overhead expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable care, the
Bank as Custodian and Agent shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
The Bank as Custodian and Agent shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement but shall be liable only for
its own negligent or bad faith acts or failures to act. Notwithstanding the
foregoing, nothing contained in this paragraph is intended to nor shall it be
construed to modify the standards of care and responsibility set forth in
Section 2 hereof with respect to subcustodians and in subparagraph f of
Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in Section 2 hereof, provided that, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank, the Custodian shall not be liable for any
loss, damage, cost, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody of any
securities or cash of the Fund in a foreign county including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
acts of war, civil war or terrorism, insurrection, revolution, military or
usurped powers, nuclear fission, fusion or radiation, earthquake, storm or other
disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to the Fund
being liable for the payment of money or incurring liability of some other form,
the Fund, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to
advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
9. Persons Having Access to Assets of the Fund
(i) No trustee, director, general partner, officer, employee
or agent of the Fund shall have physical access to the
assets of the Fund held by the Custodian or be
authorized or permitted to withdraw any investments of
the Fund, nor shall the Custodian deliver any assets of
the Fund to any such person. No officer or director,
employee or agent of the Custodian who holds any similar
position with the Fund or the investment adviser of the
Fund shall have access to the assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only
be available to duly Authorized Officers, employees,
representatives or agents of the Custodian or other
persons or entities for whose actions the Custodian
shall be responsible to the extent permitted hereunder,
or to the Fund's independent public accountants in
connection with their auditing duties performed on
<PAGE> 16
behalf of the Fund.
(iii) Nothing in this Section 9 shall prohibit any Authorized Officer,
employee or agent of the Fund or of the investment adviser of the
Fund from giving instructions to the Custodian or executing a
certificate so long as it does not result in delivery of or
access to assets of the Fund prohibited by paragraph (i) of this
Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, that the Fund may at any
time by action of its Board, (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Federal Deposit Insurance
Corporation or by the Banking Commissioner of The Commonwealth of Massachusetts
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of the
Agreement, the Fund shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding shares of the Fund vote to
have the securities, funds and other properties held hereunder delivered and
paid over to some other bank or trust company, specified in the vote, having not
less than $2,000,000 of aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other qualifications for
custodians set forth in the Investment Company Act of 1940, the Board shall,
forthwith, upon giving or receiving notice of termination of this Agreement,
appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been adopted by
the shareholders and that no written order designating a successor custodian
shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative thereto.
Thereafter such bank or trust company shall be the successor of the Custodian
under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
governing instruments of the Fund. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.
12. Certification as to Authorized Officers
The Secretary of the Fund shall at all times maintain on file with the Bank his
certification to the Bank, in such form as may be acceptable to the Bank, of the
names and signatures of the Authorized Officers of each fund, it being
understood that upon the occurrence of any change in the information set forth
in the most recent certification on file (including without limitation any
person named in the most recent certification who has ceased to hold the office
designated therein), the Secretary of the Fund shall sign a new or amended
certification setting forth the change and the new, additional or omitted names
or signatures. The Bank shall be entitled to rely and act upon instructions from
any officers named in the most recent certification.
13. Notices
Notices and other writings delivered or mailed postage prepaid to the Fund
addressed to Thomas H. Drohan, John Hancock Advisers, Inc., 101 Huntington
Avenue, Boston, Massachusetts 02199, or to such other address as the Fund may
have designated to the Bank, in writing, or to State Street Bank and Trust
Company, shall be deemed to have been properly delivered or given hereunder to
the respective addressees.
14. Massachusetts Law to Apply; Limitations on Liability
<PAGE> 17
This Agreement shall be construed and the provisions thereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund. Each
Fund, and each series or portfolio of a Fund, shall be liable only for its own
obligations to the Custodian under this Agreement and shall not be jointly or
severally liable for the obligations of any other Fund, series or portfolio
hereunder.
15. Adoption of the Agreement by the Fund
The Fund represents that its Board has approved this Agreement and has duly
authorized the Fund to adopt this Agreement. This Agreement shall be deemed to
supersede and terminate, as of the date first written above, all prior
agreements between the Fund and the Bank relating to the custody of the Fund's
assets.
* * * * *
<PAGE> 18
In Witness Whereof, the parties hereto have caused this agreement to be executed
in duplicate as of the date first written above by their respective officers
thereunto duly authorized.
John Hancock Mutual Funds listed on Appendix A
by: /s/James B. Little
James B. Little
Senior Vice President and Chief Financial Officer
Attest:
/s/ Avery P. Maher
State Street Bank and Trust Company
by: /s/Ronald E. Logue
Attest:
/s/ Sharon Baker Morin
<PAGE> 19
State Street Bank and Trust Company
Appendix A
[EFFECTIVE JANUARY 30, 1995]
John Hancock Cash Management Fund
John Hancock World Fund
John Hancock Pacific Basin Equities Fund
John Hancock Global Rx Fund
John Hancock Global Retail Fund
John Hancock Patriot Premium Dividend Fund I
John Hancock Patriot Premium Dividend Fund II
John Hancock Patriot Select Dividend Trust
John Hancock Patriot Global Dividend Fund
John Hancock Patriot Preferred Dividend Fund
John Hancock Bank and Thrift Opportunity Fund (Effective - August 15,
1994)
Freedom Investment Trust II
John Hancock Global Fund
John Hancock Global Income Fund
John Hancock Short-Term Strategic Income Fund
John Hancock International Fund
The Southeastern Thrift and Bank Fund, Inc.
John Hancock Institutional Series Trust
John Hancock Berkeley Global Bond Fund
John Hancock Berkeley Overseas Growth Fund
<PAGE> 1
January 27, 1995
State Street Bank & Trust Company
1 Heritage Drive, Palmer Building, 5th Floor
Quincy, MA 02169
Attn: Theresa McGuire, Mutual Funds
RE: John Hancock Institutional Series Trust
John Hancock Berkeley Global Bond Fund
John Hancock Berkeley Overseas Growth Fund
Dear Sirs:
John Hancock Institutional Series Trust (the "Trust"), a
Massachusetts business trust, on behalf of John Hancock Berkeley
Global Bond Fund and John Hancock Berkeley Overseas Growth Fund
(the "Funds"), each a series of the Trust, hereby notifies State
Street Bank & Trust Company (the "Bank"), that the Trust desires
to place and maintain each Funds' securities and cash in the
custody of the Bank pursuant to the Master Custodian Agreement
between John Hancock Mutual Funds and the Bank dated June 15,
1994, as amended from time to time.
If the Bank agrees to provide such services, please sign below
and return a signed copy of this letter to the undersigned.
STATE STREET BANK JOHN HANCOCK
& TRUST COMPANY INSTITUTIONAL SERIES TRUST
On behalf of John Hancock Berkeley Global
Bond Fund and John Hancock Berkeley
Overseas Growth Fund.
By: /s/ Theresa McGuire By: /s/Anne C. Hodsdon
------------------- ------------------
Name: Theresa McGuire Name:
Title: Vice President Title:
<PAGE> 1
January 26, 1995
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02205-9277
RE: 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
Dear Sirs,
John Hancock Institutional Series Trust (the "Trust"), a
Massachusetts business trust, on behalf of 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 and John Hancock Independence
Balanced Fund (the "Funds"), each a series of the Trust, hereby
notifies Investors Bank & Trust Company (the "Bank"), that the
Trust desires to place and maintain each Funds' securities and
cash in the custody of the Bank pursuant to the Master Custodian
Agreement between John Hancock Mutual Funds and the Bank dated
December 15, 1992, as amended from time to time.
<PAGE> 2
If the Bank agrees to provide such services, please sign below
and return a signed copy of this letter to the undersigned.
INVESTORS BANK JOHN HANCOCK
& TRUST COMPANY INSTITUTION SERIES TRUST
On behalf of the above-named series
of the Trust
By: /s/Henry M. Joyce By: /s/Anne C. Hodsdon
----------------- ------------------
Name: Name: Anne C. Hodsdon
Title: Director Title: Presdient & COO
Attest: Attest:
---------------------------- ----------------------------
<PAGE> 1
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the 30th day of January, 1995_ by and between JOHN HANCOCK
INSTITUTIONAL SERIES TRUST, a Massachusetts business trust, having its
principal office and place of business at 101 Huntington Avenue, Boston,
Massachusetts, 02199 (the "Trust"), and John Hancock Investor Services
Corporation, a Delaware corporation having its principal office and place of
business at 101 Huntington Avenue, Boston, Massachusetts 02199 ("JHISC").
WITNESSETH:
WHEREAS, the Trust desires to appoint JHISC as its transfer agent, dividend
disbursing agent and agent in connection with certain other activities,
and JHISC desires to accept such appointment;
WHEREAS, the Trust is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Trust intends to initially offer shares in eleven series
designated as: John Hancock Independence Diversified Core Equity Fund II, John
Hancock Independence Growth Fund, John Hancock Independence Value Fund, John
Hancock Independence Medium Capitalization Fund, John Hancock Independence
Balanced Fund, John Hancock Berkeley Dividend Performers Fund, John Hancock
Berkeley Bond Fund, John Hancock Berkeley Global Bond Fund, John Hancock
Berkeley Sector Opportunity Fund, John Hancock Berkeley Fundamental Value Fund
and John Hancock Berkeley Overseas Growth Fund, together with all other series
subsequently established by the Trust and made subject to this Agreement in
accordance with Article 8 herein (each, a "Fund" and collectively, the
"Funds");
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of JHISC
-------------------------------------
1.01 Subject to the terms and conditions set forth in this
Agreement, the Trust hereby employs and appoints JHISC to act, and JHISC agrees
to act, as transfer agent with respect to the authorized and issued shares of
beneficial interest ("Shares") of each series of the Trust subject to this
Agreement and to provide to the shareholders of the Trust ("Shareholders") such
services in connection therewith as may be set out in the prospectuses of the
Trust from time to time.
1.02 JHISC agrees that it will perform the following services:
(a) In accordance with procedures established from time to
time by agreement between the Trust and JHISC, JHISC shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate documentation
therefor to each Fund's Custodian authorized pursuant to the Trust's
Declaration of Trust (the "Custodian");
-1-
<PAGE> 2
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance, redemption requests and
redemption directions and deliver the appropriate
documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as instructed
by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Funds;
(vii) Maintain records of account for and advise the Trust
and its Shareholders as to the foregoing; and
(viii) Record the issuance of Shares of each Fund and
maintain pursuant to Rule 17Ad-10(e) of the rules and regulations of the
Securities and Exchange Commission a record of the total number of Shares
of each Fund which are authorized, based upon data provided to it by each
Fund, and issued and outstanding. JHISC shall also provide each Fund on a
regular basis with the total number of Shares which are authorized and
issued and outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of these Shares or to
take cognizance of any laws relating to the issue or sale of these Shares,
which functions shall be the sole responsibility of each Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), JHISC shall: (i) perform all of the customary
services of a transfer agent and dividend disbursing agent including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, receiving and tabulating proxies, mailing
Shareholder reports and prospectuses to current Shareholders, withholding taxes
on U.S. resident and non-resident alien accounts, preparing and filing
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Trust to monitor the total number of each Fund's Shares sold in each
State.
(c) In addition, the Trust shall (i) identify to JHISC in writing
those transactions and assets to be treated as exempt from the blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of JHISC for the Trust's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Trust and the reporting of
these transactions to the Trust as provided above.
-2-
<PAGE> 3
(d) Additionally, JHISC shall:
(i) Utilize a system to identify all share transactions which
involve purchase and redemption orders that are processed at a time other than
the time of the computation of net asset value per share next computed after
receipt of such orders, and shall compute the net effect upon each Fund of
the transactions so identified on a daily and cumulative basis.
(ii) If upon any day the cumulative net effect of such
transactions upon the Fund is negative and exceeds a dollar amount equivalent
to 1/2 of 1 cent per share, JHISC shall promptly make a payment to the Fund in
cash or through the use of a credit in the manner described in paragraph (iv)
below, in such amount as may be necessary to reduce the negative cumulative
net effect to less than 1/2 of 1 cent per share.
(iii) If on the last business day of any month the cumulative
net effect upon the Fund of such transactions (adjusted by the amount of all
prior payments and credits by JHISC and the Fund) is negative, the Fund shall
be entitled to a reduction in the fee next payable under the Agreement by an
equivalent amount, except as provided in paragraph (iv) below. If on the
last business day in any month the cumulative net effect upon the Fund of such
transactions (adjusted by the amount of all prior payments and credits by JHISC
and the Fund) is positive, JHISC shall be entitled to recover certain past
payments and reductions in fees, and to a credit against all future payments
and fee reductions that may be required under the Agreement as herein described
in paragraph (iv) below.
(iv) At the end of each month, any positive cumulative net
effect upon the Fund of such transactions shall be deemed to be a credit to
JHISC which shall first be applied to permit JHISC to recover any prior cash
payments and fee reductions made by it to the Fund under paragraphs (ii) and
(iii) above during the calendar year, by increasing the amount of the monthly
fee under the Agreement next payable in an amount equal to prior payments and
fee reductions made by JHISC during such calendar year, but not exceeding the
sum of that month's credit and credits arising in prior months during such
calendar year to the extent such prior credits have not previously been
utilized as contemplated by this paragraph. Any portion of a credit to JHISC
not so used by it shall remain as a credit to be used as payment against the
amount of any future negative cumulative net effects that would otherwise
require a cash payment or fee reduction to be made to the Fund pursuant to
paragraphs (ii) or (iii) above (regardless of whether or not the credit or any
portion thereof arose in the same calendar year as that in which the negative
cumulative net effects or any portion thereof arose).
(v) JHISC shall supply to the Fund from time to time, as mutually
agreed upon, reports summarizing the transactions identified pursuant to
paragraph (i) above, and the daily and cumulative net effects of such
transactions, and shall advise the Fund at the end of each month of the net
cumulative effect at such time. JHISC shall promptly advise the Fund if at any
time the cumulative net effects exceeds a dollar amount equivalent to 1/2 of 1
cent per share.
(vi) In the event that this Agreement is terminated for
whatever cause, or this provision 1.02 (d) is terminated pursuant to paragraph
(vii) below, the Fund shall promptly pay to JHISC an amount in cash equal to
the amount by which the cumulative net effect upon the Fund is positive or, if
the cumulative net effect upon the Fund is negative, JHISC shall promptly pay
to the Fund an amount in cash equal to the amount of such cumulative net
effect.
-3-
<PAGE> 4
(vii) This provision 1.02 (d) of the Agreement may be terminated
by JHISC at any time without cause, effective as of the close of business on
the date written notice (which may be by telex) is received by the Trust.
Procedures applicable to certain of these services may be
established from time to time by agreement between the Trust and JHISC.
Article 2 Fees and Expenses
-----------------
2.01 For performance by JHISC pursuant to this Agreement, the
Trust on behalf of each Fund agrees to pay JHISC an annual maintenance fee for
each Shareholder account as set out in the initial fee schedule attached
hereto. Such fees and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and JHISC.
2.02 In addition to the fee paid under Section 2.01 above, the
Trust on behalf of each Fund agrees to reimburse JHISC for out-of-pocket
expenses or advances incurred by JHISC for the items set out in the fee
schedule attached hereto. In addition, any other expenses incurred by JHISC at
the request or with the consent of a Fund, will be reimbursed by the Trust on
behalf of such Fund.
2.03 The Trust on behalf of each Fund agrees to pay all fees and
reimbursable expenses promptly following the mailing of the respective billing
notice. Postage for mailing of proxies to all shareholder accounts shall be
advanced to JHISC by the Trust on behalf of the Funds at least seven (7) days
prior to the mailing date of such materials.
Article 3 Representations and Warranties of JHISC
---------------------------------------
JHISC represents and warrants to the Trust that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware, and is duly qualified and in
good standing as a foreign corporation under the Laws of The Commonwealth of
Massachusetts.
3.02 It has corporate power and authority to enter into and
perform its obligations under this Agreement.
3.03 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.04 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
Article 4 Representations and Warranties of the Trust
-------------------------------------------
The Trust represents and warrants to JHISC that:
-4-
<PAGE> 5
4.01 It is a business trust duly organized and existing and in
good standing under the laws of The Commonwealth of Massachusetts.
4.02 It has power and authority to enter into and perform this
Agreement.
4.03 All trust proceedings required by the Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.05 A registration statement under the Securities Act of 1933, as
amended, with respect to the shares of each series of the Trust subject to
this Agreement has become effective, and appropriate state securities law
filings have been made and will continue to be made.
Article 5 Indemnification
---------------
5.01 JHISC shall not be responsible for, and the Trust
shall indemnify and hold JHISC harmless from and against, any
and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to:
(a) All actions of JHISC or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that
such actions are taken in good faith and without negligence or
willful misfeasance.
(b) The Trust's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Trust's bad faith, gross negligence
or willful misfeasance or which arise out of the reckless disregard of any
representation or warranty of the Trust hereunder.
(c) The reliance on or use by JHISC or its agents or
subcontractors of information, records and documents which (i) are received by
JHISC or its agents or subcontractors and furnished to it by or on behalf of
the Trust, and (ii) have been prepared and/or maintained by the Trust or any
other person or firm on behalf of the Trust.
(d) The reliance on, or the carrying out by JHISC or its agents
or subcontractors of, any instructions or requests of the Trust.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that Fund Shares be registered in that state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of Shares in that state.
(f) It is understood and agreed that the assets of each Fund may
be used to satisfy the indemnity under this Article 5 only to the extent that
the loss, damage, cost, charge, counsel fee, payment, expense and liability
arises out of or is attributable to services hereunder with respect to the
Shares of such Fund.
-5-
<PAGE> 6
5.02 JHISC shall indemnify and hold harmless the Trust on behalf
of each Fund from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or attributed
to any action or failure or omission to act by JHISC as a result of JHISC's lack
of good faith, negligence or willful misfeasance.
5.03 At any time JHISC may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by JHISC under this
Agreement, and JHISC and its agents or subcontractors shall not be liable and
shall be indemnified by the Trust for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. JHISC,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Trust, reasonably
believed to be genuine and to have been signed by the proper person or persons,
or upon any instruction, information, data, records or documents provided JHISC
or its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Trust, and shall not be held to
have notice of any change of authority of any person, until receipt of written
notice thereof from the Trust. JHISC, its agents and subcontractors shall also
be protected and indemnified in recognizing share certificates which are
reasonably believed to bear the proper manual or facsimile signatures of the
officer of the Trust, and the proper countersignature of any former transfer
agent or registrar, or of a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for
any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion, and shall keep the
other party advised with respect to all developments concerning such claim.
The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 6 Covenants of the Trust and JHISC
--------------------------------
6.01 The Trust shall promptly furnish to JHISC the following:
(a) A certified copy of the resolution(s) of the Trustees of the
Trust authorizing the appointment of JHISC and the execution and delivery of
this Agreement.
-6-
<PAGE> 7
(b) A copy of the Declaration of Trust and By-Laws of the Trust
and all amendments thereto.
6.02 JHISC hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of share
certificates and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates and devices.
6.03 JHISC shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the 1940 Act and the rules and regulations of
the Securities and Exchange Commission thereunder, JHISC agrees that all
such records prepared or maintained by JHISC relating to the services to be
performed by JHISC hereunder are the property of the Trust and will be
preserved, maintained and made unavailable in accordance with such Act and
rules, and will be surrendered to the Trust on and in accordance with its
request.
6.04 JHISC and the Trust agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust, JHISC will endeavor to notify the Trust and
to secure instructions from an authorized officer of the Trust as to such
inspection. JHISC reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
------------------------
7.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days' written notice to the other.
7.02 Should the Trust exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material
will be borne by the Trust. Additionally, JHISC reserves the right to charge
for any other reasonable expenses associated with such termination.
Article 8 Assignment
----------
8.01 Except as provided in Section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
-7-
<PAGE> 8
8.03 JHISC may, without further consent on the part of the Trust,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered
as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934 ("Section 17A(c)(1)") or any other entity registered as a transfer
agent under Section 17A(c)(1) JHISC deems appropriate in order to comply with
the terms and conditions of this Agreement; provided, however, that JHISC shall
be as fully responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
---------
9.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Trustees of the Trust.
Article 10 Massachusetts Law to Apply
--------------------------
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the internal substantive laws
of The Commonwealth of Massachusetts.
Article 11 Merger of Agreement
-------------------
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 12 Limitation on Liability
-----------------------
12.01 The name "John Hancock Institutional Series Trust" is the
designation of the Trustees under the Declaration of Trust dated October 31,
1994. The obligations of such Trust are not personally binding upon, nor
shall resort be had to the property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust, but the Trust's property only
shall be bound. Each Fund shall be liable only for its own obligations under
this Agreement and shall not be jointly or severally liable to the obligations
of any other Fund hereunder.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
JOHN HANCOCK INSTITUTIONAL SERIES
TRUST
By: /s/ Anne C. Hodsdon
-------------------
Its: President
JOHN HANCOCK INVESTOR SERVICES
CORPORATION
By: /s/ David A. King
-----------------
Its: President
-9-
<PAGE> 1
SUBSCRIPTION AGREEMENT
This Agreement is made as of the 12th day of January, 1995 between John
Hancock Advisers, Inc., a Delaware corporation ("Purchaser"), and John Hancock
Institutional Series Trust, a Massachusetts business trust (the "Trust"), on
behalf of John Hancock Berkeley Sector Opportunity Fund (the "Fund"), a series
of the Trust.
WHEREAS, the Fund wishes to sell to Purchaser, and Purchaser wishes to
purchase from the Fund, $100,000 shares of beneficial interest of the Fund at a
purchase price of $8.50 per share (collectively, the Shares"); and
WHEREAS, Purchaser is purchasing the Shares for the purpose of
providing the initial capitalization of the Trust as required by the Investment
Company Act of 1940;
NOW, THEREFORE, the parties hereto agree as follows:
1. Simultaneously with the execution of this Agreement, Purchaser is
delivering to the Fund a check in the amount of $100,000 in full payment for
the Shares.
2. Purchaser agrees that it is purchasing the Shares for investment
and has no present intention of redeeming or reselling the Shares.
3. Purchaser agrees that it is purchasing the Shares for investment
and has no present intention of redeeming or reselling the Shares.
Executed as of the date first set forth above.
JOHN HANCOCK ADVISERS, INC.
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
JOHN HANCOCK INSTITUTIONAL SERIES TRUST
on behalf of John Hancock Berkeley Sector Opportunity
Fund
By: /s/ Anne C. Hodsdon
-------------------
Its: President
---------
<PAGE> 1
POWER OF ATTORNEY
-----------------
The undersigned Trustee of John Hancock Institutional Series Trust, a
Massachusetts business trust, 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 John Hancock
Institutional Series Trust under the Investment Company Act of 1940, as amended
(the "1940 Act"), and under the Securities Act of 1933, as amended (the "1933
Act"), and any and all amendments to said Registration Statements, with respect
to the offering of 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 John Hancock
Institutional Series Trust to comply with the 1940 Act and the 1933 Act, and
all requirements of the Securities and Exchange Commission thereunder, hereby
ratifying and confirming my signature as it may be signed by said attorneys or
each of them to any such Registration Statements and any and all amendments
thereto.
IN WITNESS WHEREOF, we have hereunto set our hands on the date
indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE AS OF:
--------- ----- -----------
<S> <C> <C>
/s/ Edward J. Boudreau, Jr. Chairman, Trustee October 31, 1994
--------------------------- and Principal
Edward J. Boudreau, Jr. Executive Officer
/s/ James F. Carlin Trustee November 29, 1994
---------------------------
James F. Carlin
/s/ Charles F. Fretz Trustee November 29, 1994
---------------------------
Charles F. Fretz
/s/ Harold R. Hiser, Jr. Trustee November 29, 1994
---------------------------
Harold R. Hiser, Jr.
/s/ Charles L. Ladner Trustee November 29, 1994
---------------------------
Charles L. Ladner
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
/s/ James B. Little Senior Vice President October 31, 1994
--------------------------- and Chief Financial
James B. Little Officer
/s/ Patricia P. McCarter Trustee November 29, 1994
---------------------------
Patricia P. McCarter
/s/ Steven R. Pruchansky Trustee November 29, 1994
---------------------------
Stevem R/ Pruchansky
/s/ Richard S. Scipione Trustee October 7, 1994
---------------------------
Richard S. Scipione
/s/ Norman H. Smith Trustee November 29, 1994
---------------------------
Norman H. Smith
/s/ John P. Toolan Trustee November 29, 1994
---------------------------
John P. Toolan
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> SECTOR OPPORTUNITY
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> APR-11-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 1,879,348
<INVESTMENTS-AT-VALUE> 1,874,450
<RECEIVABLES> 173,697
<ASSETS-OTHER> 42,044
<OTHER-ITEMS-ASSETS> (4,898)
<TOTAL-ASSETS> 2,090,191
<PAYABLE-FOR-SECURITIES> 50,742
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 138,557
<TOTAL-LIABILITIES> 189,299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,904,857
<SHARES-COMMON-STOCK> 221,744
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 6,022
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,089)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,898)
<NET-ASSETS> 1,900,892
<DIVIDEND-INCOME> 239
<INTEREST-INCOME> 7,392
<OTHER-INCOME> 0
<EXPENSES-NET> 1,609
<NET-INVESTMENT-INCOME> 6,022
<REALIZED-GAINS-CURRENT> (5,089)
<APPREC-INCREASE-CURRENT> (4,898)
<NET-CHANGE-FROM-OPS> (3,965)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 224,630
<NUMBER-OF-SHARES-REDEEMED> 2,886
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,900,892
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,287
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,227
<AVERAGE-NET-ASSETS> 743,212
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.57
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> OVERSEAS GROWTH
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 897,316
<INVESTMENTS-AT-VALUE> 903,242
<RECEIVABLES> 20,075
<ASSETS-OTHER> 48,648
<OTHER-ITEMS-ASSETS> 5,921
<TOTAL-ASSETS> 971,965
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61,144
<TOTAL-LIABILITIES> 61,144
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 897,364
<SHARES-COMMON-STOCK> 105,386
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7,550
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (19)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,926
<NET-ASSETS> 910,821
<DIVIDEND-INCOME> 6,367
<INTEREST-INCOME> 3,669
<OTHER-INCOME> 0
<EXPENSES-NET> 2,486
<NET-INVESTMENT-INCOME> 7,550
<REALIZED-GAINS-CURRENT> (19)
<APPREC-INCREASE-CURRENT> 5,926
<NET-CHANGE-FROM-OPS> 13,456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 106,632
<NUMBER-OF-SHARES-REDEEMED> 1,246
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 910,821
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,054
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21,377
<AVERAGE-NET-ASSETS> 857,708
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.06
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.64
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> DIV CORE II
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-10-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 84,403,420
<INVESTMENTS-AT-VALUE> 85,212,860
<RECEIVABLES> 184,180
<ASSETS-OTHER> 157,978
<OTHER-ITEMS-ASSETS> 809,440
<TOTAL-ASSETS> 85,555,018
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 88,414
<TOTAL-LIABILITIES> 88,414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 84,597,361
<SHARES-COMMON-STOCK> 9,196,707
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 47,856
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,947
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 809,440
<NET-ASSETS> 85,466,604
<DIVIDEND-INCOME> 136,364
<INTEREST-INCOME> 13,271
<OTHER-INCOME> 0
<EXPENSES-NET> 22,916
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 11,947
<APPREC-INCREASE-CURRENT> 809,440
<NET-CHANGE-FROM-OPS> 948,106
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 78,863
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,222,587
<NUMBER-OF-SHARES-REDEEMED> (34,306)
<SHARES-REINVESTED> 8,426
<NET-CHANGE-IN-ASSETS> 85,466,604
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16,682
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50,534
<AVERAGE-NET-ASSETS> 10,569,915
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.78
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.29
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> DIV PERF
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 3,074,416
<INVESTMENTS-AT-VALUE> 3,161,309
<RECEIVABLES> 34,363
<ASSETS-OTHER> 46,402
<OTHER-ITEMS-ASSETS> 86,893
<TOTAL-ASSETS> 3,242,074
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,281
<TOTAL-LIABILITIES> 69,281
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,085,709
<SHARES-COMMON-STOCK> 362,997
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 191
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 86,893
<NET-ASSETS> 3,172,793
<DIVIDEND-INCOME> 9,389
<INTEREST-INCOME> 24,396
<OTHER-INCOME> 0
<EXPENSES-NET> 5,795
<NET-INVESTMENT-INCOME> 27,990
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 86,893
<NET-CHANGE-FROM-OPS> 114,883
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 27,799
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 384,933
<NUMBER-OF-SHARES-REDEEMED> 25,109
<SHARES-REINVESTED> 3,173
<NET-CHANGE-IN-ASSETS> 3,172,793
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29,691
<AVERAGE-NET-ASSETS> 2,873,810
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 0.24
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.74
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> BERKELEY BOND
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 1,144,612
<INVESTMENTS-AT-VALUE> 1,144,612
<RECEIVABLES> 13,420
<ASSETS-OTHER> 42,568
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,200,600
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,990
<TOTAL-LIABILITIES> 54,990
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,145,608
<SHARES-COMMON-STOCK> 134,777
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,145,610
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,390
<OTHER-INCOME> 0
<EXPENSES-NET> 1,750
<NET-INVESTMENT-INCOME> 13,640
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 13,640
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,638
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 135,558
<NUMBER-OF-SHARES-REDEEMED> 2,365
<SHARES-REINVESTED> 1,584
<NET-CHANGE-IN-ASSETS> 1,145,610
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 126
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,170
<AVERAGE-NET-ASSETS> 997,153
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.50
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> GLOBAL BOND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> APR-19-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 13,557
<ASSETS-OTHER> 57,913
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 71,470
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,412
<TOTAL-LIABILITIES> 53,412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,058
<SHARES-COMMON-STOCK> 2,125
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 18,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 106
<OTHER-INCOME> 0
<EXPENSES-NET> 21
<NET-INVESTMENT-INCOME> 85
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 85
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 85
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,115
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> 18,058
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,578
<AVERAGE-NET-ASSETS> 10,032
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.50
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> FUND VALUE
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> APR-19-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 579,869
<INVESTMENTS-AT-VALUE> 585,017
<RECEIVABLES> 14,541
<ASSETS-OTHER> 45,095
<OTHER-ITEMS-ASSETS> 5,148
<TOTAL-ASSETS> 644,653
<PAYABLE-FOR-SECURITIES> 10,564
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,645
<TOTAL-LIABILITIES> 65,209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 574,328
<SHARES-COMMON-STOCK> 67,471
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (32)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,148
<NET-ASSETS> 579,444
<DIVIDEND-INCOME> 2,766
<INTEREST-INCOME> 1,360
<OTHER-INCOME> 0
<EXPENSES-NET> 949
<NET-INVESTMENT-INCOME> 3,177
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 5,148
<NET-CHANGE-FROM-OPS> 8,325
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<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 0
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<NET-CHANGE-IN-ASSETS> 579,444
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<PER-SHARE-NAV-BEGIN> 8.50
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<PER-SHARE-DIVIDEND> (0.05)
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<PER-SHARE-NAV-END> 8.59
<EXPENSE-RATIO> 0.95
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</TABLE>
