REGISTRATION NOS. 2-50931
811-02485
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 53
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31
(Check appropriate box or boxes)
JOHN HANCOCK CURRENT INTEREST
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices)
Registrant's Telephone Number including Area Code
(617) 375-1700
SUSAN S. NEWTON
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 2, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24F-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
The Registrant filed the notice required by Rule 24F-2 for its most recent
fiscal year of John Hancock U.S. Government Cash Reserve Fund on or about July
29, 1996. The Registrant filed the notice required by Rule 24F-2 for the John
Hancock Money Market Fund on or about December 26, 1995.
<PAGE>
<TABLE>
<CAPTION>
Item Number Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Overview; Investor Expenses; *
3 Financial Highlights *
4 Overview; Goal and Strategy; Portfolio *
Securities; Risk Factors; Business
Structure; More About Risk
5 Overview; Business Structure; *
Manager/Subadviser; Investor Expenses
6 Choosing a Share Class; Buying Shares; *
Selling Shares; Transaction Policies;
Dividends and Account Policies;
Additional Investor Services
7 Choosing a Share Class; How Sales Charges *
are Calculated; Sales Charge Deductions
and Waivers; Opening an Account; Buying
Shares; Transaction Policies; Additional
Investor Services
8 Selling Shares; Transaction Policies; *
Dividends and Account Policies
9 Not Applicable *
10 * Front Cover Page
11 * Table of Contents
12 * Organization of the Fund
13 * Investment Objectives and Policies;
Certain Investment Practices;
Investment Restrictions
14 * Those Responsible for Management
15 * Those Responsible for Management
16 * Investment Advisory; Subadvisory
and Other Services; Distribution
Contract; Transfer Agent Services;
Custody of Portfolio; Independent
Auditors
17 * Brokerage Allocation
18 * Description of Fund's Shares
19 * Net Asset Value; Additional
Services and Programs
20 * Tax Status
21 * Distribution Contract
22 * Calculation of Performance
23 * Financial Statements
</TABLE>
<PAGE>
JOHN HANCOCK
MONEY MARKET
FUNDS
[John Hancock's graphic logo. A circle,
diamond, triangle and a cuble]
- --------------------------------------------------------------------------------
PROSPECTUS MONEY MARKET FUND
DECEMBER 2, 1996
U.S. GOVERNMENT CASH RESERVE
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for
future reference.
Please note that these funds:
- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not government-guaranteed
- - are not guaranteed to achieve their goal(s)
- - may not be able to maintain a stable $1 share price
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
[John Hancock's graphic logo. A circle, diamond, triangle and a cube.]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue, Boston,
Massachusetts 02199-7603
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
A fund-by-fund look at goals, MONEY MARKET FUND 4
strategies, risks, expenses
and financial history. U.S. GOVERNMENT CASH RESERVE 6
Policies and instructions for YOUR ACCOUNT
opening, maintaining and CHOOSING A SHARE CLASS 8
closing an account in either HOW SALES CHARGES ARE CALCULATED 8
money market fund. OPENING AN ACCOUNT 8
BUYING SHARES 9
SELLING SHARES 10
TRANSACTION POLICIES 12
DIVIDENDS AND ACCOUNT POLICIES 12
ADDITIONAL INVESTOR SERVICES 13
FUND DETAILS
Details that apply to both BUSINESS STRUCTURE 14
money market funds. SALES COMPENSATION 15
TYPES OF INVESTMENT RISK 15
FOR MORE INFORMATION BACK COVER
<PAGE>
OVERVIEW
- --------------------------------------------------------------------------------
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[A graphic image of a bullseye with an arrow in the middle of it.] GOAL AND
STRATEGY The fund's particular investment goals and the strategies it
intends to use in pursuing those goals.
[A graphic image of a black folder that contains a couple sheets of paper.]
PORTFOLIO SECURITIES The primary types of securities in which the fund
invests.
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] RISK FACTORS The major risk factors associated with the fund.
[A graphic image of a generic person.] PORTFOLIO MANAGEMENT The individual or
group designated by the investment adviser to handle the fund's day-to-day
management.
[A graphic image of a percent symbol.] EXPENSES The overall costs borne by an
investor in the fund, including sales charges and annual expenses.
[A graphic image of a dollar sign.] FINANCIAL HIGHLIGHTS A table showing the
fund's financial performance for up to ten years, by share class. A bar chart
showing total return allows you to compare the fund's historical risk level to
those of other funds.
GOAL OF THE MONEY MARKET FUNDS
John Hancock money market funds seek current income and preservation of
capital. Both funds invest primarily in money market instruments, strive to
maintain a stable $1 share price and offer checkwriting for easy liquidity. Be
sure to read all risk disclosure carefully before investing.
WHO MAY WANT TO INVEST
These funds may be appropriate for people who:
- - require stability of principal
- - are seeking a mutual fund for the money market portion of an asset allocation
portfolio
- - need to "park" their money temporarily
- - consider themselves savers rather than investors
- - are investing emergency reserves
Money market funds may NOT be appropriate if you:
- - want federal deposit insurance
- - are seeking an investment that is likely to outpace inflation
- - are investing for growth or maximum current income
THE MANAGEMENT FIRM
John Hancock money market funds are managed by John Hancock Advisers, Inc.
Founded in 1968, John Hancock Advisers is a wholly owned subsidiary of John
Hancock Mutual Life Insurance Company and manages more than $19 billion in
assets.
<PAGE>
MONEY MARKET FUND
<TABLE>
<S> <C> <C>
REGISTRANT NAME: JOHN HANCOCK CURRENT INTEREST TICKER SYMBOL CLASS A: JHMXX CLASS B: TSMXX
- -------------------------------------------------------------------------------------------------------
</TABLE>
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks the maximum current income that is consistent with maintaining liquidity
and preserving capital. The fund intends to maintain a stable $1 share price.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund may invest exclusively in U.S. dollar-denominated money market securities,
including those issued by:
- - U.S. and foreign banks
- - corporate issuers
- - the U.S. Government and its agencies and instrumentalities
- - municipalities
- - foreign governments
- - multinational organizations such as the World Bank
The fund may lend securities to financial institutions, enter into repurchase
agreements, engage in short-term trading and purchase securities on a
when-issued or forward commitment basis. The fund may also invest up to 10% of
net assets in illiquid investments.
No more than 5% of assets may be invested in securities rated in the
second-highest short-term category (or unrated equivalents). The rest of the
fund's investments must be in the highest short-term category.
No more than 25% of assets may be invested in obligations that are issued either
by foreign banks or by foreign branches of U.S. banks, unless these obligations
are backed by the U.S. parent bank.
The fund maintains an average maturity of 90 days or less, and does not invest
in securities with maturities of more than 13 months.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] The yield paid by the fund will vary with changes in interest rates.
There is a remote risk that the fund's share price could fall below $1, which
would reduce the value of your account.
To the extent that the fund uses certain securities and practices, it may be
affected by additional risks:
- - restricted and illiquid securities: liquidity, valuation, market risks
- - securities lending, repurchase agreements: credit risk
- - short-term trading: market risk, as well as potentially higher transaction
costs
- - forward commitments and when-issued securities: market, opportunity, leverage
risks
These risks are defined in "Types of investment risk" on page 15.
This mutual fund is not a bank account and is not insured or guaranteed by any
financial institution or government body. Please read "Types of investment risk"
carefully before investing.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] The fund's investment decisions are made
by a portfolio management team. Team members are part of the adviser's staff of
fixed-income research analysts and portfolio managers.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases (as a
percentage of offering price) none none
Maximum sales charge imposed on reinvested
dividends none none
Maximum deferred sales charge none 5.00%
Redemption fee(1) none none
Exchange fee none none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee(2) 0.40% 0.40%
12b-1 fee(3) 0.15% 1.00%
Other expenses 0.61% 0.61%
Total fund operating expenses 1.16% 2.01%
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $12 $37 $ 64 $141
Class B shares
Assuming redemption at end of
period $70 $93 $128 $212
Assuming no redemption $20 $63 $108 $212
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Does not include wire redemption fee (currently $4.00).
(2) Reflects the adviser's temporary agreement to limit the management fee.
Without this limitation, the management fee would be 0.50% and total fund
operating expenses would be 1.26% for Class A shares and 2.11% for Class B
shares.
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
</TABLE>
4 MONEY MARKET FUND
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
FINANCIAL HIGHLIGHTS
[A graphic image of a dollar sign.] The figures below have been audited by the fund's independent auditors, Ernst & Young LLP.
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%)
(scale varies from fund to fund) [Bar Graph]
<CAPTION>
================================================================================================================================
CLASS A - YEAR ENDED OCTOBER 31, 1995(1) 1996(2)
================================================================================================================================
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income (loss) 0.01 0.02
Less distributions:
Dividends from net investment income (0.01) (0.02)
Net asset value, end of period $ 1.00 $ 1.00
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3) (%) 0.64(4) 2.33(4)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 20,942 259,716
Ratio of expenses to average net assets (%) 1.07(5) 1.08(5)
Ratio of net investment income (loss) to average net assets (%) 4.94(5) 4.61(5)
================================================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1987(1) 1988 1989 1990 1991 1992 1993
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.0007 0.06 0.07 0.06 0.05 0.02 0.01
Less distributions:
Dividends from net investment income (0.0007) (0.06) (0.07) (0.06) (0.05) (0.02) (0.01)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 0.06(4) 6.06 7.40 6.30 4.61 1.73 0.85
Total adjusted investment return at net asset value(3,7) (%) 0.04(4) 5.16 6.93 6.15 4.49 -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 2,535 7,692 13,610 21,099 20,763 31,480 31,546
Ratio of expenses to average net assets (%) 0.01(4) 1.51 2.12 2.16 2.11 2.47 2.44
Ratio of adjusted expenses to average net assets(8) (%) 0.03(4) 2.41 2.59 2.31 2.23 -- --
Ratio of net investment income (loss) to average net assets (%) 0.07(4) 6.01 7.16 6.11 4.57 1.69 0.85
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) 0.05(4) 5.11 6.69 5.96 4.45 -- --
<CAPTION>
=======================================================================================================
CLASS B - YEAR ENDED OCTOBER 31, 1994 1995(6) 1996(2)
=======================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.02 0.04 0.02
Less distributions:
Dividends from net investment income (0.02) (0.04) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(3)(%) 1.87 4.07 1.93(4)
Total adjusted investment return at net asset value(3,7) (%) -- -- --
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 58,366 54,313 89,852
Ratio of expenses to average net assets (%) 2.06 1.92 1.88(5)
Ratio of adjusted expenses to average net assets(8) (%) -- -- --
Ratio of net investment income (loss) to average net assets (%) 1.97 3.96 3.82(5)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) -- -- --
(1) Class A and Class B shares commenced operations on September 12, 1995 and October 26, 1987, respectively.
(2) Six months ended April 30, 1996. (Unaudited.)
(3) Assumes dividend reinvestment and does not reflect the effect of any sales charges.
(4) Not annualized.
(5) Annualized.
(6) On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser of the fund.
(7) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the periods
shown.
(8) Unreimbursed, without fee reductions.
</TABLE>
MONEY MARKET FUND 5
<PAGE>
U.S. GOVERNMENT CASH RESERVE
<TABLE>
<S> <C>
REGISTRANT NAME: JOHN HANCOCK CURRENT INTEREST TICKER SYMBOL: TGVXX
</TABLE>
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[A graphic image of a bullseye with an arrow in the middle of it.] The fund
seeks the maximum current income that is consistent with maintaining liquidity
and preserving capital. To pursue this goal, the fund invests primarily in
short-term U.S. Government securities, as described below. The fund intends to
maintain a stable $1 share price.
PORTFOLIO SECURITIES
[A graphic image of a black folder that contains a couple sheets of paper.] The
fund invests in securities that are issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities. Not all of
these securities are backed by the full faith and credit of the U.S. Government.
The fund maintains an average maturity of 90 days or less, and does not invest
in securities with maturities of more than 13 months.
The fund may enter into repurchase agreements and may engage in short-term
trading. The fund may also invest up to 10% of net assets in illiquid
investments.
RISK FACTORS
[A graphic image of a line chart with a single line that depicts some peaks and
valleys.] The yield paid by the fund will vary with changes in interest rates.
There is a remote risk that the fund's share price could fall below $1, which
would reduce the value of your account.
To the extent that the fund uses certain securities and practices, it may be
affected by additional risks:
- - repurchase agreements: credit risk
- - short-term trading: market risk, as well as potentially higher transaction
costs that the fund must absorb.
These risks are defined in "Types of investment risk" on page 15.
The U.S. Government does not guarantee the market value or the current yield of
government securities, nor does the government's guarantee in any way extend to
the fund itself. Please read "Types of investment risk" carefully before
investing.
PORTFOLIO MANAGEMENT
[A graphic image of a generic person.] The fund's investment decisions are made
by a portfolio management team. Team members are part of the adviser's staff of
fixed-income research analysts and portfolio managers.
There is a $20,000 minimum initial investment for this fund.
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
<TABLE>
[A graphic image of a percent symbol.] Fund investors pay various expenses,
either directly or indirectly. The figures below show the expenses for the past
year, adjusted to reflect any changes. Future expenses may be greater or less.
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A
<S> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price) none
Maximum sales charge imposed on reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C>
12b-1 fee (after limitation)(1) 0.00%
Management fee (after expense limitation)(1) 0.00%
Other expenses (after limitation)(1) 0.35%
Total fund operating expenses (after limitation)(1) 0.35%
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $4 $11 $20 $44
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Reflects the adviser's and distributor's temporary agreement to limit
expenses. Without this limitation, management fees would be 0.50%, 12b-1 fee
would be 0.15%, other expenses would be 0.60% and total fund operating
expenses would be 1.25%.
</TABLE>
6 U.S. GOVERNMENT CASH RESERVE
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
[A graphic image of a dollar sign.] The figures below have been audited by the fund's independent auditors, Ernst & Young LLP.
YEAR-BY-YEAR TOTAL INVESTMENT RETURN (%) [Bar Graph]
(scale varies from fund to fund)
<CAPTION>
====================================================================================================================================
YEAR ENDED MAY 31, 1987 1988 1989 1990 1991 1992 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.05 0.05 0.08 0.08 0.07 0.05 0.03
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.08) (0.08) (0.07) (0.05) (0.03)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 5.25 5.50 8.02 8.66 7.42 4.95 3.25
Total adjusted investment return at net asset value(2,3) (%) 5.25 5.50 7.78 8.35 7.11 4.62 2.93
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 73,048 48,774 69,346 164,509 200,092 109,358 123,106
Ratio of expenses to average net assets (%) 0.91 1.05 0.55 0.35 0.35 0.35 0.35
Ratio of adjusted expenses to average net assets(4) (%) 0.91 1.05 0.79 0.66 0.66 0.68 0.67
Ratio of net investment income (loss) to average net assets (%) 5.13 5.42 8.29 8.27 7.21 4.86 3.19
Ratio of adjusted net investment income (loss) to average
net assets(4) (%) 5.13 5.42 8.05 7.96 6.90 4.53 2.87
<CAPTION>
===========================================================================================================
YEAR ENDED MAY 31, 1994 1995(1) 1996
===========================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.03 0.05 0.05
Less distributions:
Dividends from net investment income (0.03) (0.05) (0.05)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
TOTAL INVESTMENT RETURN AT NET ASSET VALUE(2) (%) 3.04 5.07 5.59
Total adjusted investment return at net asset value(2,3) (%) 2.74 4.69 4.84
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) ($) 94,408 29,131 28,907
Ratio of expenses to average net assets (%) 0.35 0.35 0.35
Ratio of adjusted expenses to average net assets(4) (%) 0.65 0.73 1.10
Ratio of net investment income (loss) to average net assets (%) 2.96 4.79 5.41
Ratio of adjusted net investment income (loss) to average
net assets(4) (%) 2.66 4.41 4.66
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser of the fund.
(2) Assumes dividend reinvestment.
(3) An estimated total return calculation that does not take into consideration fee reductions by the adviser during the periods
shown.
(4) Unreimbursed, without fee reduction.
</TABLE>
U.S. GOVERNMENT CASH RESERVE 7
<PAGE>
YOUR ACCOUNT
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Money Market Fund offers two classes of shares, Class A and Class B. Money
Market Fund's Class A shares have lower expenses and are therefore more
advantageous for most investors. All shares of U.S. Government Cash Reserve are
Class A shares.
================================================================================
CLASS A CLASS B
================================================================================
- - No sales charges. - No front-end sales charge.
- - Lower annual expenses than Class B - Higher annual expenses than Class A
shares. shares.
- A deferred sales charge, as described
below.
- Automatic conversion to Class A
shares after eight years, thus
reducing future annual expenses.
- Available on Money Market Fund only.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED
<TABLE>
CLASS B Money Market Fund Class B shares are offered at their net asset value
per share, without any initial sales charge. However, there is a contingent
deferred sales charge (CDSC) on shares you sell within six years of buying them.
There is no CDSC on shares acquired through reinvestment of dividends. The CDSC
is based on the original purchase cost or the current market value of the shares
being sold, whichever is less. The longer the time between the purchase and the
sale of shares, the lower the rate of the CDSC:
<CAPTION>
================================================================================
MONEY MARKET FUND CLASS B DEFERRED CHARGES
================================================================================
<S> <C>
YEARS AFTER PURCHASE CDSC ON SHARES BEING SOLD
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6 years None
All purchases made during a calendar month are counted as having been made on
the first day of that month.
</TABLE>
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
CDSC WAIVERS As long as Investor Services is notified at the time you sell, the
CDSC for Money Market Fund Class B shares will generally be waived in the
following cases:
- - to make payments through certain systematic withdrawal plans
- - to make distributions from a retirement plan
- - because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Investor Services, or consult the SAI (see the back
cover of this prospectus).
REINSTATEMENT PRIVILEGE If you sell shares in a John Hancock fund, you may
invest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
To utilize: contact your financial representative or Investor Services.
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The minimum initial investments are as
follows:
- Money Market Fund: $1,000
- non-retirement account: $1,000
- retirement account: $250
- Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must invest
at least $25 a month
- U.S. Government Cash Reserve: $20,000
3 Complete the appropriate parts of the account application, carefully following
the instructions. If you have questions, please contact your financial
representative or call Investor Services at 1-800-225-5291.
4 Complete the appropriate parts of the account privileges section of the
application. By applying for privileges now, you can avoid the delay and
inconvenience of having to file an additional application if you want to add
privileges later.
5 Make your initial investment using the table on the next page. You can
initiate any purchase, exchange or sale of shares through your financial
representative.
8 YOUR ACCOUNT
<PAGE>
<TABLE>
================================================================================
BUYING SHARES
================================================================================
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY CHECK
[A graphic image of a blank check.]
- Make out a check for the - Make out a check for the
investment amount, payable investment amount payable to
to "John Hancock Investor "John Hancock Investor Services
Services Corporation." Corporation."
- Deliver the check and your - Fill out the detachable
completed application to investment slip from an account
your financial statement. If no slip is
representative, or mail to available, include a note
Investor Services (address specifying the fund name, your
below). share class, your account number,
and the name(s) in which the
account is registered.
- Deliver the check and your
investment slip or note to your
financial representative, or mail
to Investor Services (address
below).
BY EXCHANGE
[A graphic image of a white arrow outlined
in black that points to the right
above a black that points to the left.]
- Call your financial - Call Investor Services to request
representative or Investor an exchange.
Services to request an
exchange.
BY WIRE
[A graphic image of a jagged white arrow
outlined in black that points upwards
at a 45 degree angle.]
- Deliver your completed - Instruct your bank to wire the
application to your amount of your investment to:
financial representative,
or mail it to Investor First Signature Bank & Trust
Services.
Account # 900000260
- Obtain your account number
by calling your financial Routing # 211475000
representative or Investor
Services. Specify the fund name, your share
class, your account number and the
- Instruct your bank to wire name(s) in which the account is
the amount of your registered. Your bank may charge a
investment to: fee to wire funds.
First Signature Bank &
Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your
choice of share class, the
new account number and the
name(s) in which the
account is registered. Your
bank may charge a fee to
wire funds.
- TO RECEIVE THE DIVIDEND FOR
THE SAME DAY YOU INVEST,
YOU MUST PLACE YOUR ORDER
WITH INVESTOR SERVICES BY
12 NOON EASTERN TIME THAT
DAY.
BY PHONE
[A graphic image of a telephone.]
See "By wire" and "By - Verify that your bank or credit
exchange." union is a member of the Automated
Clearing House (ACH) system.
- Complete the "Invest-By-Phone" and
"Bank Information" sections on
your account application.
- Call Investor Services to verify
that these features are in place
on your account.
- Tell the Investor Services
representative the fund name, your
share class, your account number,
the name(s) in which the account
is registered and the amount of
your investment.
</TABLE>
- --------------------------------------------------------------------------------
Address
John Hancock Investor Services Corporation
P.O. Box 9116 Boston, MA 02205-9116
Phone number
1-800-225-5291
Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
YOUR ACCOUNT 9
<PAGE>
<TABLE>
================================================================================
SELLING SHARES
================================================================================
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY LETTER
[A graphic image of the back of an envelope.]
- Accounts of any type. - Write a letter of instruction or
complete a stock power indicating
- Sales of any amount. the fund name, your share class,
your account number, the name(s)
in which the account is registered
and the dollar value or number of
shares you wish to sell.
- Include all signatures and any
additional documents that may be
required (see next page).
- Mail the materials to Investor
Services.
- A check will be mailed to the
name(s) and address in which the
account is registered, or
otherwise according to your letter
of instruction.
BY PHONE
[A graphic image of a telephone.]
- Most accounts. - For automated service 24 hours a
day using your touch-tone phone,
- Sales of up to $100,000. call the EASI-Line at
1-800-338-8080.
- To place your order with a
representative at John Hancock
Funds, call Investor Services
between 8 a.m. and 4 p.m. Eastern
Time on most business days. By
wire or electronic funds transfer
(EFT)
[A graphic image of a jagged white arrow
outlined in black that points upwards
at a 45 degree angle.]
- Requests by letter to sell - Fill out the "Telephone
any amount (accounts of any redemption" section of your new
type). account application.
- Requests by phone to sell - To verify that the telephone
up to $100,000 (accounts redemption privilege is in place
with telephone redemption on an account, or to request the
privileges). forms to add it to an existing
account, call Investor Services.
- Amounts of $1,000 or more will be
wired on the next business day. A
$4 fee will be deducted from your
account.
- Amounts of less than $1,000 may be
sent by EFT or by check. Funds
from EFT transactions are
generally available by the second
business day. Your bank may charge
a fee for this service.
- TO RECEIVE THE DIVIDEND FOR THE
SAME DAY YOU SELL, YOUR ORDER MUST
BE ACCEPTED AFTER 12 NOON EASTERN
TIME THAT DAY.
[A graphic image of a white arrow outlined
in black that points to the right
above a black that points to the left.]
- Accounts of any type. - Obtain a current prospectus for
the fund into which you are
- Sales of any amount. exchanging by calling your
financial representative or
Investor Services.
- Call Investor Services to request
an exchange.
BY CHECK
[A graphic image of a blank check.]
- Any account with - Request checkwriting on your
checkwriting privileges. account application.
- Sales of over $100. - Verify that the shares to be sold
were purchased more than 10 days
earlier or were purchased by wire.
- Write a check for any amount over
$100.
</TABLE>
- --------------------------------------------------------------------------------
Address
John Hancock Investor Services Corporation
P.O. Box 9116 Boston, MA 02205-9116
Phone number
1-800-225-5291
Or contact your financial representative for instructions and assistance.
- --------------------------------------------------------------------------------
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
10 YOUR ACCOUNT
<PAGE>
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You will need
a signature guarantee if:
- - your address of record has changed within the past 30 days
- - you are selling more than $100,000 worth of shares
- - you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
- - a broker or securities dealer
- - a federal savings, cooperative or other type of bank
- - a savings and loan or other thrift institution
- - a credit union
- - a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
<TABLE>
========================================================[A graphic image of the
back of an envelope.]
<CAPTION>
SELLER REQUIREMENTS FOR WRITTEN REQUESTS
========================================================
<S> <C>
Owners of individual, joint, sole - Letter of instruction.
proprietorship, UGMA/UTMA (custodial
accounts for minors) or general partner - On the letter, the signatures and
accounts. titles of all persons authorized
to sign for the account, exactly
as the account is registered.
- Signature guarantee if applicable
(see above).
Owners of corporate or association - Letter of instruction.
accounts.
- Corporate resolution, certified
within the past 90 days.
- On the letter and the resolution,
the signature of the person(s)
authorized to sign for the
account.
- Signature guarantee if applicable
(see above).
Owners or trustees of trust accounts. - Letter of instruction.
- On the letter, the signature(s) of
the trustee(s).
- If the names of all trustees are
not registered on the account,
please also provide a copy of the
trust document certified within
the last 60 days.
- Signature guarantee if applicable
(see above).
Joint tenancy shareholders whose - Letter of instruction signed by
co-tenants are deceased. surviving tenant.
- Copy of death certificate.
- Signature guarantee if applicable
(see above).
Executors of shareholder estates. - Letter of instruction signed by
executor.
- Copy of order appointing executor.
- Signature guarantee if applicable
(see above).
Administrators, conservators, guardians - Call 1-800-225-5291 for
and other sellers or account types not instructions.
listed above.
</TABLE>
YOUR ACCOUNT 11
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each fund and class
is determined twice each business day at 12 noon and at the close of regular
trading on the New York Stock Exchange (typically 4 p.m. Eastern Time), by
dividing a class's net assets by the number of its shares outstanding. To help
the fund maintain its $1 constant share price, portfolio investments are valued
at cost, and any discount or premium created by market movements is amortized to
maturity.
BUY AND SELL PRICES Investors buy and sell all shares at the NAV. When
you sell Class B shares, the deferred sales charge may be subtracted, as
described earlier.
EXECUTION OF REQUESTS Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated (normally $1) after your request is
accepted by Investor Services.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition, Investor Services will take
measures to verify the identity of the caller, such as asking for name, account
number, Social Security or taxpayer ID number and other relevant information. If
appropriate measures are not taken, Investor Services is responsible for any
losses that may occur to any account due to an unauthorized telephone call. Also
for your protection, telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other. If no sales charge was paid on Class A shares, you will
pay the sales charge imposed by the new fund. Otherwise, your Class A shares
will be exchanged without a sales charge. Class B shares will continue to age
from the original date and will retain the same CDSC rate as they had before
the exchange, except that the rate will change to that of the new fund if the
new fund's rate is higher. A CDSC rate that has increased will drop again with a
future exchange into a fund with a lower rate.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may change or cancel its exchange
privilege at any time, upon 60 days' notice to its shareholders. A fund may also
refuse any exchange order.
CERTIFICATED SHARES All money market fund shares are electronically recorded.
Certificated shares are not available.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten calendar days after
the purchase.
ELIGIBILITY BY STATE You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - after every transaction (except a dividend reinvestment) that affects your
account balance
- - after any changes of name or address of the registered owner(s)
- - in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
12 YOUR ACCOUNT
<PAGE>
DIVIDENDS The funds generally declare dividends daily and pay them monthly.
Purchases by wire or other federal funds that are accepted before 12 noon
Eastern Time will receive the dividend declared that day. Other orders,
including those that are not accompanied by federal funds, will begin receiving
dividends the following day. Redemption orders accepted before 12 noon Eastern
Time will not receive that day's dividends.
DIVIDEND REINVESTMENTS Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend payable date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a money market fund, whether reinvested
or taken as cash, are generally considered taxable as ordinary income. Some
dividends paid in January may be taxable as if they had been paid the previous
December.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. However, as long as a fund maintains a
stable share price, you will not have a gain or loss on shares you sell or
exchange.
SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Investor Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
- - Complete the appropriate parts of your account application.
- - If you are using MAAP to open an account, make out a check for your first
investment amount ($25 minimum for all funds except U.S. Government Cash
Reserve) payable to "John Hancock Investor Services Corporation." Deliver
your check and application to your financial representative or Investor
Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payment or
periodic withdrawals from your account. To establish:
- - Make sure you have at least $5,000 worth of shares in your account.
- - Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
- - Specify the payee(s). The payee may be yourself or any other party, and there
is no limit to the number of payees you may have, as long as they are all on
the same payment schedule.
- - Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
- - Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Investor Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, 401(k) plans, 403(b) plans (including TSAs) and
other pension and profit-sharing plans. Using these plans, you can invest in any
John Hancock fund (except tax-free income funds) with a low minimum investment
of $250 or, for some group plans, no minimum investment at all. To find out
more, call Investor Services at 1-800-225-5291.
YOUR ACCOUNT 13
<PAGE>
FUND DETAILS
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
HOW THE FUNDS ARE ORGANIZED Each John Hancock money market fund is an open-end
management investment company or a series of such a company.
Each fund is supervised by a board of trustees, an independent body that has
ultimate responsibility for the fund's activities. The board retains various
companies to carry out the fund's operations, including the investment adviser,
custodian, transfer agent and others (see diagram). The board has the right, and
the obligation, to terminate the fund's relationship with any of these companies
and to retain a different company if the board believes it is in the
shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the fund's board. Thereafter, the board and the shareholders determine
the board's membership. The board of the John Hancock money market funds may
include individuals who are affiliated with the investment adviser. However, the
majority of board members must be independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving a management contract or approving a 12b-1 plan (12b-1 fees
are explained in "Sales compensation").
[A flow chart that contains 7 rectangular-shaped boxes and illustrates the
hierarchy of how the funds are organized. Within the flowchart, there are 5
tiers. The tiers are connected by shaded lines.
Shareholders represent the first tier. There is a shaded vertical arrow on the
left-hand side of the page. The arrow has arrowheads on both ends and is
contained within two horizontal, shaded lines. This is meant to highlight tiers
two and three which focus on Distribution and Shareholder Services.
Financial Services Firms and their Representatives are shown on the second
tier. Principal Distributor and Transfer Agent are shown on the third tier.
A shaded vertical arrow on the right-hand side of the page denotes those
entities involved in the Asset Management. The arrow has arrowheads on both
ends and is contained within two horizontal, shaded lines. This fourth tier
includes the Investment Advisor and the Custodian.
The fifth tier contains the Trustees.]
14 FUND DETAILS
<PAGE>
ACCOUNTING COMPENSATION The funds compensate the adviser for performing tax and
financial management services. Annual compensation for 1996 will not exceed
0.02% of each fund's average net assets.
PORTFOLIO TRADES In placing portfolio trades, the adviser may use brokerage
firms that market the fund's shares or are affiliated with John Hancock Mutual
Life Insurance Company, but only when the adviser believes no other firm offers
a better combination of quality execution (i.e., timeliness and completeness)
and favorable price.
INVESTMENT GOALS U.S. Government Cash Reserve's investment goal and Money Market
Fund's 25% investment limitation on foreign bank obligations are fundamental and
may only be changed with shareholder approval.
DIVERSIFICATION Both money market funds are diversified.
- --------------------------------------------------------------------------------
SALES COMPENSATION
As part of their business strategies, the funds, along with John Hancock Funds,
pay compensation to financial services firms that sell the funds' shares. These
firms typically pass along a portion of this compensation to your financial
representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the funds' assets ("12b-1" refers to the federal
securities regulation that authorizes annual fees of this type). The 12b-1 fee
rates vary by fund and by share class, according to Rule 12b-1 plans adopted by
the funds. The sales charges and 12b-1 fees paid by investors are detailed in
the fund-by-fund information.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
<TABLE>
- --------------------------------------------------------------------------------
CLASS B UNREIMBURSED DISTRIBUTION EXPENSES(1)
- --------------------------------------------------------------------------------
<CAPTION>
UNREIMBURSED AS A % OF
FUND EXPENSES NET ASSETS
<S> <C> <C>
Money Market $947,545 1.78%
(1) As of the most recent fiscal year end covered by the fund's financial
highlights. These expenses may be carried forward indefinitely.
</TABLE>
INITIAL COMPENSATION Whenever you make an investment in Class B shares of Money
Market Fund, the financial services firm receives a commission equal to 3.75% of
the offering price. The firm also receives the first year's service fee equal to
0.25% of the net amount invested.
ANNUAL COMPENSATION Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.15% of its total
eligible net assets in Money Market Fund. This fee is paid quarterly in arrears.
Financial services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock Funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
- --------------------------------------------------------------------------------
TYPES OF INVESTMENT RISK
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Common to all debt securities.
INTEREST RATE RISK The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
LEVERAGE RISK Associated with securities or practices (such as when-issued and
forward commitment transactions) that multiply small market movements into large
changes in value.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like.
MANAGEMENT RISK The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
MARKET RISK The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. Common to all debt securities and the
mutual funds that invest in them.
OPPORTUNITY RISK The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
- --------------------------------------------------------------------------------
FUND DETAILS 15
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock money
market funds:
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance information, portfolio
holdings, a statement from portfolio management and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/ semi-annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (is legally a part of this prospectus).
To request a free copy of the current annual/semi-annual report or the SAI,
please write or call:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, MA 02205-9116
Telephone: 1-800-225-5291
EASI-Line: 1-800-338-8080
TDD: 1-800-544-6713
[John Hancock's graphic logo. A circle, diamond, triangle and a cube.]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue
Boston, Massachusetts 02199-7603
[John Hancock Script Logo] [Copyright] 1996 John Hancock Funds, Inc.
MNYPN 12/96
<PAGE>
JOHN HANCOCK MONEY MARKET FUND
Class A and Class B Shares
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 2, 1996
This Statement of Additional Information ("SAI") provides information about John
Hancock Money Market Fund (the "Fund"), a diversified series of John Hancock
Current Interest (the "Trust") in addition to the information that is contained
in the combined Money Market Funds' Prospectus dated December 2, 1996 (the
"Prospectus").
This SAI is not a prospectus. It should be read in conjunction with the
Prospectus, a copy of which can be obtained free of charge by writing or
telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund.............................................. 2
Investment Objective and Policies..................................... 2
Investment Restrictions............................................... 8
Those Responsible for Management...................................... 10
Investment Advisory and Other Services................................ 19
Distribution Contracts................................................ 21
Net Asset Value....................................................... 23
Purchase of Class A Shares............................................ 24
Deferred Sales Charge on Class B Shares............................... 24
Special Redemptions................................................... 27
Additional Services and Programs...................................... 28
Description of the Fund's Shares...................................... 28
Tax Status............................................................ 30
Calculation of Performance............................................ 32
Brokerage Allocation.................................................. 34
Transfer Agent Services............................................... 35
Custody of Portfolio.................................................. 36
Independent Auditors.................................................. 36
Appendix.............................................................. A-1
Financial Statements.................................................. F-1
1
<PAGE>
ORGANIZATION OF THE FUND
The Trust is an open-end management investment company organized as a
Massachusetts business trust under a Declaration of Trust dated October 3, 1991.
Prior to Dedember 2, 1996, the Fund was a series portfolio of John Hancock
Series, Inc. ("John Hancock Series, Inc."), an open-end management investment
company organized as a Maryland corporation. Prior to September 12, 1995, the
Fund was called John Hancock Money Market Fund B. Prior to December 22, 1994,
the Fund was called Transamerica Money Market Fund B.
John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser, a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company"), a Massachusetts life insurance company chartered in 1862
with national headquarters at John Hancock Place, Boston, Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide maximum current income consistent with preservation of
capital and liquidity. The Fund invests in high quality money market
instruments. The Fund's investments will be subject to the market fluctuation
and risks inherent in all securities, and there is no assurance that the
investment objective will always be achieved.
The Fund seeks to achieve its objective by investing in money market instruments
including, but not limited to, U.S. Government, municipal and foreign
governmental securities; obligations of supranational organizations (e.g., the
World Bank and the International Monetary Fund); obligations of U.S. and foreign
banks and other lending institutions; corporate obligations; repurchase
agreements and reverse repurchase agreements. As a fundamental policy, the Fund
may not invest more than 25% of its total assets in obligations issued by (i)
foreign banks and (ii) foreign branches of U.S. banks where the Adviser has
determined that the U.S. bank is not unconditionally responsible for the payment
obligations of the foreign branch. All of the Fund's investments will be
denominated in U.S. dollars.
At the time the Fund acquires its investments, they will be rated (or issued by
an issuer that is rated with respect to a comparable class of short-term debt
obligations) in one of the two highest rating categories for short-term debt
obligations assigned by at least two nationally recognized rating organizations
(or one rating organization if the obligation was rated by only one such
organization). These high quality securities are divided into "first tier" and
"second tier" securities. First tier securities have received the highest rating
from at least two rating organizations (or one, if only one has rated the
security). Second tier securities have received ratings within the two highest
categories from at least two rating agencies (or one, if only one has rated the
security), but do not qualify as first tier securities. The Fund may also
purchase obligations that are not rated, but are determined by the Adviser,
based on procedures adopted by the Trust's Board of Trustees, to be of
comparable quality to rated first or second tier securities. The Fund may not
purchase any second tier security if, as a result of its purchase (a) more than
5% of its total assets would be invested in second tier securities or (b) more
than 1% of its total assets or $1 million (whichever is greater) would be
invested in the second tier securities of a single issuer. For a description of
the ratings assigned by the rating organizations, see the Appendix to this
Statement of Additional Information.
2
<PAGE>
All of the Fund's investments will mature in 397 days or less. The Fund will
maintain an average dollar-weighted portfolio maturity of 90 days or less.
The Fund's investment objective and except as otherwise expressly provided, its
investment policies are nonfundamental and may be changed by a vote of the Board
of Trustees without shareholder approval.
Government Securities. The Fund may invest in U.S. Government securities, which
are obligations issued or guaranteed by the U.S. Government and its agencies,
authorities 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 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.
Custodial Receipts. The Fund may acquire custodial receipts in respect of U.S.
government securities. Such custodial receipts evidence ownership of future
interest payments, principal payments or both on certain notes or bonds. These
custodial receipts are known by various names, including Treasury Receipts,
Treasury Investors Growth Receipts ("TIGRs"), and Certificates of Accrual on
Treasury Securities ("CATS"). For certain securities law purposes, custodial
receipts are not considered U.S. government securities.
Bank and Corporate Obligations. The Fund may invest in commercial paper.
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations and finance
companies. The commercial paper purchased by the Fund consists of direct U.S.
dollar denominated obligations of domestic or foreign issuers. Bank obligations
in which the Fund may invest include certificates of deposit, bankers'
acceptances and fixed time deposits. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Fixed time deposits are bank
obligations payable at a stated maturity date and bearing interest at a fixed
rate. Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Bank notes and bankers' acceptances rank junior to domestic deposit
liabilities of the bank and pari passu with other senior, unsecured obligations
of the bank. Bank notes are not insured by the Federal Deposit Insurance
Corporation or any other insurer. Deposit notes are insured by the Federal
Deposit Insurance Corporation only to the extent of $100,000 per depositor per
bank.
3
<PAGE>
Municipal Obligations. The Fund may invest in a variety of municipal obligations
which consist of municipal bonds, municipal notes and municipal commercial
paper.
Municipal Bonds. Municipal bonds are issued to obtain funds for various public
purposes including the construction of a wide range of public facilities such as
airports, highways, bridges, schools, hospitals, housing, mass transportation,
streets and water and sewer works. Other public purposes for which municipal
bonds may be issued include refunding outstanding obligations, obtaining funds
for general operating expenses and obtaining funds to lend to other public
institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds for many types of local, privately operated facilities. Such debt
instruments are considered municipal obligations if the interest paid on them is
exempt from federal income tax. The payment of principal and interest by issuers
of certain obligations purchased by the Fund may be guaranteed by a letter of
credit, note repurchase agreement, insurance or other credit facility agreement
offered by a bank or other financial institution. Such guarantees and the
creditworthiness of guarantors will be considered by the Adviser in determining
whether a municipal obligation meets the Fund's investment quality requirements.
No assurance can be given that a municipality or guarantor will be able to
satisfy the payment of principal or interest on a municipal obligation.
Municipal Notes. Municipal notes are short-term obligations of municipalities,
generally with a maturity ranging from six months to three years. The principal
types of such notes include tax, bond and revenue anticipation notes and project
notes.
Municipal Commercial Paper. Municipal commercial paper is a short-term
obligation of a municipality, generally issued at a discount with a maturity of
less than one year. Such paper is likely to be issued to meet seasonal working
capital needs of a municipality or interim construction financing. Municipal
commercial paper is backed in many cases by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks and other institutions.
Federal tax legislation enacted in the 1980s placed substantial new restrictions
on the issuance of the bonds described above and in some cases eliminated the
ability of state or local governments to issue municipal obligations for some of
the above purposes. Such restrictions do not affect the Federal income tax
treatment of municipal obligations in which the Fund may invest which were
issued prior to the effective dates of the provisions imposing such
restrictions. The effect of these restrictions may be to reduce the volume of
newly issued municipal obligations.
Issuers of municipal obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any one or more issuers to pay when due
the principal of and interest on their municipal obligations may be affected.
The yields of municipal bonds depend upon, among other things, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, the maturity of the obligation and rating of the issue. The
ratings of Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service,
Inc. ("Moody's") and Fitch Investors Service ("Fitch") represent their
4
<PAGE>
respective opinions on the quality of the municipal bonds they undertake to
rate. It should be emphasized, however, that ratings are general and not
absolute standards of quality. Consequently, municipal bonds with the same
maturity, coupon and rating may have different yields and municipal bonds of the
same maturity and coupon with different ratings may have the same yield. Many
issuers of securities choose not to have their obligations rated. Although
unrated securities eligible for purchase by the Fund must be determined to be
comparable in quality to securities having certain specified ratings, the market
for unrated securities may not be as broad as for rated securities since many
investors rely on rating organizations for credit appraisal.
Investment in Foreign Securities. The Fund may invest in U.S. dollar denominated
foreign securities and certificates of deposit, bankers' acceptances and fixed
time deposits and other obligations issued by foreign banks and their U.S. and
foreign branches and foreign branches of U.S. banks. The Fund may also invest in
municipal instruments backed by letters of credit issued by certain foreign
banks. Under current Securities and Exchange Commission ("SEC") rules relating
to the use of the amortized cost method of portfolio securities valuation, the
Fund is restricted to purchasing U.S. dollar denominated securities.
Investing in obligations of non-U.S. issuers and foreign banks, particularly
securities of issuers located in emerging countries, may entail greater risks
than investing in similar securities of U.S. issuers. These risks include (i)
social, political and economic instability; (ii) the small current size of the
markets for many such securities and the currently low or nonexistent volume of
trading, which may result in a lack of liquidity and in greater price
volatility; (iii) certain national policies which may restrict the 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.
Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (generally not more than 7 days) subject to the
obligation to sell it back to the issurer at a fixed time and price plus accrued
interest. The Fund will enter into repurchase agreements only with member banks
of the Federal Reserve System and with "primary dealers" in U.S. Government
securities. The Adviser will continuously monitor the creditworthiness of the
parties with whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period which the Fund seeks to
enforce its rights thereto, possible subnormal levels of income decline in value
of the underlying securities or lack of access to income during this period as
well as the expense of enforcing its rights. The Fund will not invest in a
repurchase agreement maturing in more than seven days, if such investment,
together with other illiquid securities held by the Fund (including restricted
securities) would exceed 10% of the Fund's net assets.
Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
5
<PAGE>
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. The Fund will not enter into reverse repurchase
agreements and other borrowings exceeding in the aggregate 33-1/3% of the market
value of its total net assets. The Fund will enter into reverse repurchase
agreements only with federally insured banks or savings and loan associations
which are approved in advance as being creditworthy by the Trustees. Under
procedures established by the Trustees, the Adviser will monitor the
creditworthiness of the banks involved.
Forward Commitment and When-Issued Securities. The Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. The Fund will engage in when-issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When the Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued and forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities equal in value to the Fund's commitment. These
assets will be valued daily at market, and additional cash or securities will be
segregated in a separate account to the extent that the total value of the
assets in the account declines below the amount of the when-issued commitments.
Alternatively, the Fund may enter into offsetting contracts for the forward sale
of other securities that it owns.
Short Sales. The Fund may engage in short sales in order to profit from an
anticipated decline in the value of a security. The Fund may also engage in
short sales to attempt to limit its exposure to a possible market decline in the
value of its portfolio securities through short sales of securities which the
Adviser believes possess volatility characteristics similar to those being
hedged. To effect such a transaction, the Fund must borrow the security sold
short to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. Until the security is replaced, the Fund is required to pay to the
lender any accrued interest or dividends and may be required to pay a premium.
When the Fund engages in a short sale, it will place in a segregated account and
mark to market daily, cash or U.S. government securities in accordance with
applicable regulatory requirements. The Fund may only enter into short sales
that are "against the box." 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.
6
<PAGE>
Short selling may produce higher than normal portfolio turnover which may result
in increased transaction costs to the Fund and may result in gains from the sale
of securities deemed to have been held for less than three months, which gains
must be less than 30% of the Fund's gross income for a taxable year in order for
the Fund to qualify as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code") for that year.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including securities offered and sold to "qualified institutional buyers" under
Rule 144A under the 1933 Act. However, the Fund will not invest more than 10% of
its net assets in illiquid investments, which include repurchase agreements
maturing in more than seven days, securities that are not readily marketable and
restricted securities. However, if the Trustees determines, based upon a
continuing review of the trading markets for specific Rule 144A securities, that
they are liquid, then such securities may be purchased without regard to the 10%
limit. The Trustees may adopt guidelines and delegate to the Adviser the daily
function of determining the monitoring and liquidity of restricted securities.
The Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations. The Trustees will carefully monitor the
Fund's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of illiquidity
in the Fund if qualified institutional buyers become for a time uninterested in
purchasing these restricted securities.
The Fund may acquire other restricted securities including securities for which
market quotations are not readily available. These securities may be sold only
in privately negotiated transactions or in public offerings with respect to
which a registration statement is in effect under the 1933 Act. Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell. Restricted securities will be priced at
fair market value as determined in good faith by the Fund's Trustees.
Short-Term Trading and Portfolio Turnover. The Fund may attempt to maximize
current income through short-term portfolio trading. This will involve selling
portfolio instruments and purchasing different instruments to take advantage of
yield disparities in different segments of the market for Government
Obligations. Short-term trading may have the effect of increasing portfolio
turnover rate. A high rate of portfolio turnover (100% or greater) involves
correspondingly higher transaction expenses and may make it more difficult for
the Fund to qualify as a regulated investment company for federal income tax
purposes.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities. When the Fund
lends portfolio securities, there is a risk that the borrower may fail to return
the securities involved in the transaction. As a result, the Fund may incur a
loss or, in the event of the borrower's bankruptcy, the Fund may be delayed in
7
<PAGE>
or prevented from liquidating the collateral. It is a fundamental policy of the
Fund not to lend portfolio securities having a total value exceeding 30% of its
total assets.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Fund has adopted certain fundamental investment restrictions upon its
investments as set forth below which cannot be changed without the approval of
the holders of a majority of the Fund's outstanding shares. A majority for this
purpose means: (a) more than 50% of the outstanding shares of the Fund, or
(b)The holders of 67% or more of the shares represented at a meeting where more
than 50% of the outstanding shares of the Fund are represented, whichever is
less. If a percentage restriction or rating restriction on investment or
utilization of assets is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the Fund's portfolio securities or a later change in the rating of a
portfolio security will not be considered a violation of policy.
The Fund may not:
(1) Borrow money in an amount in excess of 33-1/3% of its total assets, and
then only as a temporary measure for extraordinary or emergency purposes
(except that it may enter into a reverse repurchase agreement within the
limits described in the Prospectus or this SAI), or pledge, mortgage or
hypothecate an amount of its assets (taken at market value) in excess of
15% of its total assets, in each case taken at the lower of cost or market
value. For the purpose of this restriction, collateral arrangements with
respect to options, futures contracts, options on futures contracts and
collateral arrangements with respect to initial and variation margins are
not considered a pledge of assets.
(2) Underwrite securities issued by other persons except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of 1933
in selling a portfolio security.
(3) Purchase or retain real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein and securities secured by
real estate), or mineral leases, commodities or commodity contracts (except
contracts for the future delivery of fixed income securities, stock index
and currency futures and options on such futures) in the ordinary course of
its business. The Fund reserves the freedom of action to hold and to sell
real estate or mineral leases, commodities or commodity contracts acquired
as a result of the ownership of securities.
(4) Invest in direct participation interests in oil, gas or other mineral
exploration or development programs.
(5) Make loans to other persons except by the purchase of obligations in which
the Fund is authorized to invest and by entering into repurchase
agreements; provided that the Fund may lend its portfolio securities not in
excess of 30% of its total assets (taken at market value). Not more than
10% of the Fund's total assets (taken at market value) will be subject to
repurchase agreements maturing in more than seven days. For these purposes
8
<PAGE>
the purchase of all or a portion of an issue of debt securities shall not
be considered the making of a loan.
(6) Purchase the securities of any issuer if such purchase, at the time
thereof, would cause more than 5% of its total assets (taken at market
value) to be invested in the securities of such issuer, other than
securities issued or guaranteed by the United States or any state or
political subdivision thereof, or any political subdivision of any such
state, or any agency or instrumentality of the United States, any state or
political subdivision thereof, or any political subdivision of any such
state. In applying these limitations, a guarantee of a security will not be
considered a security of the guarantor, provided that the value of all
securities issued or guaranteed by that guarantor, and owned by the Fund,
does not exceed 10% of the Fund's total assets. In determining the issuer
of a security, each state and each political subdivision agency, and
instrumentality of each state and each multi-state agency of which such
state is a member is a separate issuer. Where securities are backed only by
assets and revenues of a particular instrumentality, facility or
subdivision, such entity is considered the issuer.
(7) Invest in companies for the purpose of exercising control or management.
(8) Purchase or retain in its portfolio any securities issued by an issuer any
of whose officers, directors, trustees or security holders is an officer or
Trustee of the Fund, or is a member, partner, officer or Director of the
Adviser, if after the purchase of the securities of such issuer by the Fund
one or more of such persons owns beneficially more than 1/2 of 1% of the
shares or securities, or both, all taken at market value, of such issuer,
and such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or
both, all taken at market value.
(9) Purchase any securities or evidences of interest therein on margin, except
that the Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of securities.
(10) Sell any security which the Fund does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to obtain
securities without payment of further consideration equivalent in kind and
amount to the securities sold and provided that if such right is
conditional the sale is made upon equivalent conditions.
(11) Knowingly invest in securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market
(e.g., trading in the security is suspended or market makers do not exist
or will not entertain bids or offers), except for repurchase agreements,
if, as a result thereof more than 10% of the Fund's total assets (taken at
market value) would be so invested. (The Staff of the Securities and
Exchange Commission has taken the position that a money market fund may not
invest more than 10% of its net assets in illiquid securities. The Fund has
undertaken with the Staff to require, that as a matter of operating policy,
it will not invest in illiquid securities in an amount exceeding 10% of its
net assets.)
(12) Issue any senior security (as that term is defined in the Investment
Company Act of 1940 (the "1940 Act")) if such issuance is specifically
prohibited by the 1940 Act or the rules and regulations promulgated
thereunder. For the purpose of this restriction, collateral arrangements
9
<PAGE>
with respect to options, Futures Contracts and Options on futures contracts
and collateral arrangements with respect to initial and variation margins
are not deemed to be the issuance of a senior security.
In addition, the Fund may not invest more than 25% of its total assets in
obligations issued by (i) foreign banks or (ii) foreign branches of U.S. banks
where the Adviser has determined that the U.S. bank is not unconditionally
responsible for the payment obligations of the foreign branch. Also, the Fund
may not purchase securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities) if such
purchase, at the time thereof, would cause the Fund to hold more than 10% of any
class of securities of such issuer. For this purpose, all indebtedness of an
issuer maturing in less than one year shall be deemed a single class and all
preferred stock of an issuer shall be deemed a single class.
Nonfundamental Investment Restrictions
The following investment restrictions are designated as nonfundamental and may
be changed by the Trustees without shareholder approval.
The Fund will not invest more than 5% of its total assets in companies which,
including their respective predecessors, have a record of less than three years'
continuous operation.
In order to comply with certain state regulatory policies, the Fund will not
pledge, mortgage or hypothecate its portfolio securities if the percentage of
securities so pledged, mortgaged or hypothecated would exceed 15%.
The Fund may not purchase a security if, as a result, (i) more than 10% of the
Fund's total assets would be invested in the securities of other investment
companies, (ii) the Fund would hold more than 3% of the total outstanding voting
securities of any one investment company, or (iii) more than 5% of the Fund's
total assets would be invested in the securities of any one investment company.
These limitations do not apply to (a) the investment of cash collateral,
received by the Fund in connection with lending the Fund's portfolio securities,
in the securities of open-end investment companies or (b) the purchase of shares
of any investment company in connection with a merger, consolidation,
reorganization or purchase of substantially all of the assets of another
investment company. Subject to the above percentage limitations, the Fund may,
in connection with the John Hancock Group of Funds Deferred Compensation Plan
for Independent Trustees/Directors, purchase securities of other investment
companies within the John Hancock Group of Funds. The Fund may not purchase the
shares 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.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Trust's Trustees who elect officers
who are responsible for the day-to-day operations of the Trust and the Fund and
who execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also officers and directors of the Adviser or officers
and directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
10
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1, 2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
October 1944 Group"); Chairman, NM Capital
Management, Inc. ("NM Capital") and
John Hancock Advisers International
Limited ("Advisers International");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds"), John
Hancock Investor Services
Corporation ("Investor Services"),
First Signature Bank and Trust
Company and Sovereign Asset
Management Corporation
("SAMCorp."); Director, John
Hancock Freedom Securities
Corporation, John Hancock Insurance
Agency, Inc. ("Insurance Agency,
Inc."), John Hancock Capital
Corporation and New England/Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science; Vice
Chairman and President, the Adviser
(until July 1992); Chairman, John
Hancock Distributors, Inc. (until
April, 1994).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
11
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James F. Carlin Trustee (3) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual Insurance Company
(insurance), Consolidated Group
Trust (insurance administration),
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995) Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (since 1995);
Receiver, the City of Chelsea
(until August 1992).
William H. Cunningham Trustee (3) Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair of Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Texas Commerce Bank - Austin.
Charles F. Fretz Trustee (3) Retired; self employed; Former Vice
RD #5, Box 300B President and Director, Towers,
Clothier Springs Road Perrin, Foster & Crosby, Inc.
Malvern, PA 19355 (international management
June 1928 consultants) (1952-1985).
Harold R. Hiser, Jr. Trustee (3) Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hill, NJ 07078 (pharmaceuticals) (retired 1996);
October 1931 Director, ReCapital Corporation
(reinsurance) (until 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
12
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Anne C. Hodsdon * President and Director (1, 2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser;
Boston, MA 02199 Director, The Berkeley Group, John
April 1953 Hancock Funds, Investor Services
(since October 1996); Director,
Advisers International; Executive
Vice President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993).
Charles L. Ladner Trustee (3) Director, Energy North, Inc. (public
UGI Corporation utility holding company) (until
P.O. Box 858 1992); Senior Vice President of UGI
Valley Forge, PA 19482 Corp. Holding Company Public
February 1938 Utilities, LPGAS.
Leo E. Linbeck, Jr. Trustee (3) Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company
August 1934 engaged in various phases of the
construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board and Chief Executive
Officer, Linbeck Construction
Corporation; Director, PanEnergy
Corporation (a diversified energy
company), Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest International
Holdings, Inc. (a geophysical
consulting firm) (1980-1993);
Former Director, Greater Houston
Partnership (1980 -1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
13
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Patricia P. McCarter Trustee (3) Director and Secretary, The McCarter
1230 Brentford Road Corp. (machine manufacturer).
Malvern, PA 19355
May 1928
Steven R. Pruchansky Trustee (1, 3) Director and President, Mast
4327 Enterprise Avenue Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
August 1944 Trust Company (until August 1991);
Director, Mast Realty Trust (until
1994); President, Maxwell Building
Corp. (until 1991).
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, Investor Services, John
August 1937 Hancock Distributors, Inc.,
Insurnace Agency, Inc., John Hancock
Subsidiaries, Inc., SAMCorp. and NM
Capital; Trustee, The Berkeley
Group; Director, JH Networking
Insurance Agency, Inc.; Director,
John Hancock Property and Casualty
Insurance and its affiliates (until
November, 1993),
Norman H. Smith Trustee (3) Lieutenant General, United States
243 Mt. Oriole Lane Marine Corps; Deputy Chief of Staff
Linden, VA 22642 for Manpower and Reserve Affairs,
March 1933 Headquarters Marine Corps;
Commanding General III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
14
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
John P. Toolan Trustee (3) Director, The Smith Barney Muni Bond
13 Chadwell Place Funds, The Smith Barney Tax-Free
Morristown, NJ 07960 Money Funds, Inc., Vantage Money
September 1930 Market Funds (mutual funds), The
Inefficient-Market Fund, Inc.
(closed-end investment company) and
Smith Barney Trust Company of
Florida; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member of
the Executive Committee, Smith
Barney, Harris Upham & Co.,
Incorporated (investment bankers)
(until 1991).
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, Investor
Services, SAMCorp., Insurance
Agency, Inc., Southeastern Thrift &
Bank Fund and NM Capital; Senior
Vice President, The Berkeley Group;
President, the Adviser (until
December 1994).
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds and Investor Services.
February 1935
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
15
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Susan S. Newton Vice President and Secretary Vice President and Assistant
101 Huntington Avenue Secretary, the Adviser; Vice
Boston, MA 02199 President, John Hancock Funds,
March 1950 Investor Services; Secretary,
SAMCorp; Vice President, The
Berkeley Group, John Hancock
Distributors, Inc. (until 1994).
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Investor Services and John Hancock
July 1950 Funds; Counsel, John Hancock Mutual
Life Insurance Company.
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
</TABLE>
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
16
<PAGE>
All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or Directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
As of August 30, 1996, the officers and Trustees of the Trust as a group
beneficially owned less than 1% of the outstanding shares of the Fund. On such
date, no person or entity owned beneficially or of record 5% or more of the
outstanding shares of the Fund.
As of December 22, 1994, the Trustees established an Advisory Board which acts
to facilitate a smooth transition of management over a two-year period (between
Transamerica Fund Management Company ("TFMC"), the prior investment adviser, and
the Adviser). The members of the Advisory Board are distinct from the Board of
Trustees, do not serve the Fund in any other capacity and are persons who have
no power to determine what securities are purchased or sold and behalf of the
Fund. Each member of the Advisory Board may be contacted at 101 Huntington
Avenue, Boston, Massachusetts 02199.
Members of the Advisory Board and their respective principal occupations during
the past five years are as follows:
R. Trent Campbell, President, FMS, Inc. (financial and management services);
former Chairman of the Board, Mosher Steel Company.
Mrs. Lloyd Bentsen, Formerly National Democratic Committeewoman from Texas;
co-founder, Houston Parents' League; former board member of various civic
and cultural organizations in Houston, including the Houston Symphony,
Museum of Fine Arts and YWCA. Mrs. Bentsen is presently active in various
civic and cultural activities in the Washington, D.C. area, including
membership on the Area Board for The March of Dimes and is a National
Trustee for the Botanic Gardens of Washington, D. C.
Thomas R. Powers, Formerly Chairman of the Board, President and Chief Executive
Officer, TFMC; Director, West Central Advisory Board, Texas Commerce Bank;
Trustee, Memorial Hospital System; Chairman of the Board of Regents of
Baylor University; Member, Board of Governors, National Association of
Securities Dealers, Inc.; Formerly, Chairman, Investment Company Institute;
formerly, President, Houston Chapter of Financial Executive Institute.
Thomas B. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation); Member,
Board of Managers, Harris County Hospital District; Advisory Director,
Commercial State Bank, El Campo; Advisory Director, First National Bank of
Bryan; Advisory Director, Sterling Bancshares; Former Director and Vice
Chairman, Texas Commerce Bancshares; and Vice Chairman, Texas Commerce
Bank.
17
<PAGE>
Compensation of the Board of Directors and Advisory Board. The following table
provides information regarding the compensation paid by the Fund and the other
investment companies in the John Hancock Fund Complex to the Independent
Trustees and the Advisory Board members for their services. The three non-
Independent Directors, Ms. Hodsdon and Messrs. Scipione and Boudreau, and each
of the officers of the Trust are interested persons of the Adviser, are
compensated by the Adviser and its affiliates and receive no compensation from
the Funds for their services.
Total Compensation
from all Funds in
Aggregate John Hancock
Compensation Fund Complex to
Directors from the Fund* the Trustees**
- --------- -------------- --------------
James F. Carlin $ 346 $ 60,700
William H. Cunningham(+) 1,098 69,700
Charles F. Fretz 29 56,200
Harold R. Hiser. Jr.(+) 48 60,200
Charles L. Ladner 454 60,700
Leo E. Linbeck, Jr. 1,348 73,200
Patricia P. McCarter 454 60,700
Steven R. Pruchansky 470 62,700
Norman H. Smith 470 62,700
John P. Toolan(+) 346 60,700
------ --------
Total $5,063 $627,500
* Compensation is for the fiscal year ended October 31, 1995.
** The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of calendar year ended December 31, 1995. On
that date there were 61 funds in the John Hancock Fund Complex, with each
of these Independent Trustees except Messrs. Cunningham and Linbeck serving
33. Messrs. Cunningham and Linbeck served 31 of these funds.
(+) As of December 31, 1995, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Fund Complex for Mr.
Cunningham was $54,413, for Mr. Hiser was $31,324 and for Mr. Toolan was
$71,437 under the John Hancock Deferred Compensation Plan for Independent
Trustees.
18
<PAGE>
Total Compensation
from all Funds in
Aggregate Compensation John Hancock
Advisory Board from the Fund* Fund Complex**
- -------------- -------------- --------------
R. Trent Campbell $ 925 $ 54,000
Mrs. Lloyd Bentsen 900 54,000
Thomas R. Powers 925 54,000
Thomas B. McDade 925 54,000
TOTAL $3,775 $216,000
* Compensation is for the fiscal year ended October 31, 1995.
** Total compensation paid by the John Hancock Fund Complex is as of calendar
year ended December 31, 1995.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $19 billion in total assets under
management in its capacity as investment adviser to the Fund and the other
mutual funds and publicly traded investment companies in the John Hancock group
of funds having a combined total of over 1,080,000 shareholders. The Adviser is
an affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of more
than $80 billion, the Life Company is one of the ten largest life insurance
companies in the United States, and carries high ratings from S&P and A.M.
Best's. Founded in 1862, the Life Company has been serving clients for over 130
years.
The Trust, on behalf of the Fund, has entered into an investment management
contract (the "Advisory Agreement") with the Adviser. Under the Advisory
Agreement, the Adviser provides the Fund with (i) a continuous investment
program, consistent with the Fund's stated investment objective and policies and
(ii) supervision of all aspects of the Fund's operations except those that are
delegated to a custodian, transfer agent or other agent. The Adviser is
responsible for the day-to-day management of the Fund's portfolio assets.
All expenses which are not specifically paid by the Adviser and which are
incurred in the operation of the Fund including, but not limited to, (i) the
fees of the Trustees of the Trust who are not "interested persons," as such term
is defined in the 1940 Act (the "Independent Trustees"), (ii) the fees of the
members of the Trust's Advisory Board (described above) and (iii) the continuous
public offering of the shares of the Fund are borne by the Fund.
As provided by the Advisory Agreement, the Fund pays the Adviser an investment
management fee, which is accrued daily and paid monthly in arrears at the
following rates of the Fund's average daily net assets:
19
<PAGE>
Average Daily Net Assets Fee (Annual Rate)
The first $500 million 0.50%*
The next $250 million 0.425%
The next $250 million 0.375%
The next $500 million 0.35%
The next $500 million 0.325%
The next $500 million 0.30%
Over $2.5 billion 0.275%
* The Adviser has reduced the fee to 0.40% of the Fund's average daily net
assets and cannot reinstate the fee to 0.50% without the Trustees' consent.
The Adviser may temporarily reduce its advisory fee or make other arrangements
to reduce the Fund's expenses to a specified percentage of average daily net
assets. The Adviser retains the right to re-impose the advisory fee and recover
any other payments to the extent that, at the end of any fiscal year, the Fund's
annual expenses fall below this limit.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of any state limit where the
Fund is registered to sell shares, the fee payable to the Adviser will be
reduced to the extent of such excess and the Adviser will make any additional
arrangements necessary to eliminate any remaining excess expenses. The most
restrictive limit applicable to the Fund is 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2% of the next $70,000,000 of such assets
and 1.5% of the remaining average daily net asset value.
Pursuant to the Advisory Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which 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 its reckless disregard of the obligations
and duties under the contract.
The initial term of the Advisory Agreement expires on December 22, 1996, and the
agreement will continue in effect from year to year thereafter if approved
annually by a vote of a majority of the Independent Trustees, cast in person at
a meeting called for the purpose of voting on such approval, and by either a
majority of the Trustees, or the holders of a majority of the Fund's outstanding
voting securities. The Advisory Agreement may be terminated without penalty on
60 days' notice at the option of either party or by vote of a majority of the
outstanding voting securities of the Fund. The Advisory Agreement terminates
automatically in the event of its assignment.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser for the Fund or for other funds or clients for which
the Adviser renders investment advice arise for consideration at or about the
same time, transactions in such securities will be made, insofar as feasible,
for the respective funds or clients in a manner deemed equitable to all of them.
To the extent that transactions on behalf of more than one client of the Adviser
20
<PAGE>
or its affiliates may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for as long as the investment management
contract or any extension, renewal or amendment thereof remains in effect. If
the Advisory Agreement 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.
For the period from November 1, 1994 to December 22, 1994(a) and for the fiscal
years ended October 31, 1994(b) and 1993(c), advisory fees payable by the Fund
to TFMC, the Fund's former investment adviser, were $50,611, $214,088 and
$142,298, respectively.
For the period from December 22, 1994 to the fiscal year ended October 31, 1995
advisory fees payable by the Fund to the Adviser, were $221,171.
Administrative Services Agreement. The John Hancock Series, Inc., on behalf of
the Fund, was a party to an administrative services agreement with TFMC (the
"Services Agreement"), pursuant to which TFMC performed bookkeeping and
accounting services and functions, including preparing and maintaining various
accounting books, records and other documents and keeping such general ledgers
and portfolio accounts as are reasonably necessary for the operation of the
Fund. Other administrative services included communications in response to
shareholder inquiries and certain printing expenses of various financial
reports. In addition, such staff and office space, facilities and equipment was
provided as necessary to provide administrative services to the Fund. The
Services Agreement was amended in connection with the appointment of the Adviser
as adviser to the Fund to permit services under the Agreement to be provided to
the Fund by the Adviser and its affiliates. The Services Agreement was
terminated during the fiscal year 1995.
The following amounts for the Fund reflect the total of administrative services
fees paid to TFMC (and to the Adviser during the period December 22, 1994 to
January 16, 1995) for the fiscal years ended October 31, 1995, 1994 and 1993:
$7,517, $46,621 and $42,511, respectively.
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services.
DISTRIBUTION CONTRACTS
Distribution Agreement. The Fund's shares are sold on a continuous basis at the
public offering price. John Hancock Funds, a wholly-owned subsidiary of the
Adviser, has the exclusive right, pursuant to the Distribution Agreement dated
December 2, 1996 (the "Distribution Agreement"), to purchase shares from the
Fund at net asset value for resale to the public or to broker-dealers at the
public offering price. Upon notice to all broker-dealers with whom it has sales
agreements ("Selling Brokers"), John Hancock Funds may allow such Selling
Brokers up to the full applicable sales charge, if any, during periods specified
21
<PAGE>
in such notice. During these periods, such Selling Brokers may be deemed to be
underwriters as that term is defined in the 1933 Act.
The Distribution Agreement was initially adopted by the affirmative vote of the
Trust's Board of Trustees including the vote of a majority of Trustees who are
not parties to the agreement or interested persons of any such party, cast in
person at a meeting called for such purpose. The Distribution Agreement shall
continue in effect with respect to the Fund until December 2, 1998 and from year
to year if approved by either the vote of the Fund's shareholders or the Board
of Trustees including the vote of a majority of the Trustees who are not parties
to the agreement or interested persons of any such party, cast in person at a
meeting called for such purpose. The Distribution Agreement may be terminated at
any time without penalty by either party upon sixty (60) days' written notice or
by a vote of a majority of the outstanding voting securities of the Fund and
terminates automatically in the case of an assignment by John Hancock Funds.
Distribution Plans. The Board of Trustees adopted Distribution Plans on behalf
of the Fund with respect to Class A and Class B shares of the Fund (the
"Plans"), pursuant to Rule 12b-1 under the 1940 Act.
Under the Class A Plan and the Class B Plan, the Fund will pay distribution and
service fees at an aggregate annual rate of up to 0.15% and 1.00% for Class A
and Class B shares, respectively, of the Fund's daily net assets attributable to
shares of that class. The Fund may in the future determine to pay up to 0.25%
under the Class A Plan. The service fee will not exceed 0.15% or 0.25% of the
Fund's average daily net assets attributable to Class A shares and Class B
shares, respectively. The distribution fees will be used to reimburse John
Hancock Funds for its distribution expenses, including but not limited to: (i)
initial and ongoing sales compensation to Selling Brokers and others (including
affiliates of John Hancock Funds) engaged in the sale of Fund shares; (ii)
marketing, promotional and overhead expenses incurred in connection with the
distribution of Fund shares; (iii) unreimbursed distribution expenses under the
Fund's prior distribution plans for Class B shares; (iv) distribution expenses
incurred by other investment companies which sell all or substantially all of
their assets to, merge with or otherwise engage in a reorganization transaction
with the Fund; and (v) with respect to Class B shares only, interest expenses on
unreimbursed distribution expenses. The service fees will be used to compensate
Selling Brokers and others for providing personal and account maintenance
services to shareholders. In the event John Hancock Funds is not fully
reimbursed for payments it makes or expenses it incurs under the Class A Plan,
these expenses will not be carried beyond one year from the date they were
incurred. Unreimbursed expenses under the Class B Plan will be carried forward
together with interest on the balance of these unreimbursed expenses provided,
however, that the Trustees may terminate the Class B Plan and thus the Fund's
obligation to make further payments at any time. Accordingly, the Fund does not
treat unreimbursed expenses relating to the Class B shares as a liability of the
Fund. For the fiscal year ended October 31, 1995, an aggregate of $947,545 of
distribution expenses, or 1.78% of the average net assets of the Fund's Class B
shares, was not reimbursed or recovered by John Hancock Funds through the
receipt of deferred sales charges or 12b-1 fees in prior periods. The Plans were
approved by the sole shareholder of the Fund and by a majority of the Trustees
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plans (the "Independent Trustees"),
by votes cast in person at meetings called for the purpose of voting on such
Plans.
During the fiscal year ended October 31, 1995, the Fund paid John Hancock Funds
and its former distributor, Transamerica Fund Distributors, Inc., the following
amounts of expenses with respect to the Class A shares and Class B shares of the
Fund:
22
<PAGE>
<TABLE>
<CAPTION>
Expense Items
Printing and Interest,
Mailing of Compensation Expenses of Carrying or
Prospectuses to to Selling John Hancock Other Finance
Advertising New Shareholders Brokers Funds Charges
----------- ---------------- ------- ----- -------
<S> <C> <C> <C> <C> <C>
Class A Shares 0 0 $ 2,145 $ 6,107 NONE
Class B Shares $25,434 $6,766 $226,733 $23,473 $203,757
</TABLE>
Each of the Plans provides that it will continue in effect only so long as its
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. Each of the Plans provides that it may be terminated
without penalty (a) by vote of a majority of the Independent Trustees, (b) by a
majority of the respective Class' outstanding voting securities upon 60 days'
written notice to John Hancock Funds, and (c) automatically in the event of
assignment. Each of the Plans further provides that it may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to the Plan. Each of the Plans
provides that no material amendment to the Plan will, in any event, be effective
unless it is approved by a majority vote of the Trustees and the Independent
Trustees of the Trust. The holders of Class A Shares and Class B Shares have
exclusive voting rights with respect to the Plan applicable to their respective
class of shares. In adopting the Plans, the Board of Trustees has determined
that, in their judgment, there is a reasonable likelihood that each Plan will
benefit the holders of the applicable class of shares of the Fund.
Pursuant to the plans, at least quarterly, John Hancock Funds provides the Fund
a written report of the amounts expended under the Plan and the purpose for
which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their confirmed appropriateness.
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
The Fund utilizes the amortized cost valuation method of valuing portfolio
instruments in the absence of extraordinary or unusual circumstances. Under the
amortized cost method, assets are valued by constantly amortizing over the
remaining life of an instrument the difference between the principal amount due
at maturity and the cost of the instrument to the Fund. The Trustees will from
time to time review the extent of any deviation of the net asset value, as
determined on the basis of the amortized cost method, from net asset value as it
would be determined on the basis of available market quotations. If any
deviation occurs which may result in unfairness either to new investors or
existing shareholders, the Trustees will take such actions as they deem
appropriate to eliminate or reduce such unfairness to the extent reasonably
practicable. These actions may include selling portfolio instruments prior to
maturity to realize gains or losses or to shorten the Fund's average portfolio
23
<PAGE>
maturity, withholding dividends, splitting, combining or otherwise
recapitalizing outstanding shares or utilizing available market quotations to
determine net asset value per share.
Since a dividend is declared to shareholders each time net asset value is
determined, the net asset value per share of each class of the Fund will
normally remain constant at $1.00 per share. There is no assurance that the Fund
can maintain the $1.00 per share value. Monthly, any increase in the value of a
shareholder's investment in either class from dividends is reflected as an
increase in the number of shares of such class in the shareholder's account or
is distributed as cash if a shareholder has so elected.
It is expected that the Fund's net income will be positive each time it is
determined. However, if because of a sudden rise in interest rates or for any
other reason the net income of the Fund determined at any time is a negative
amount, the Fund will offset the negative amount against income accrued during
the month for each shareholder account. If at the time of payment of a
distribution such negative amount exceeds a shareholder's portion of accrued
income, the Fund may reduce the number of its outstanding shares by treating the
shareholder as having contributed to the capital of the Fund that number of full
or fractional shares which represents the amount of excess. By investing in
either class of shares of the Fund, shareholders are deemed to have agreed to
make such a contribution. This procedure permits the Fund to maintain its net
asset value at $1.00 per share.
If in the view of the Trustees it is inadvisable to continue the practice of
maintaining net asset value at $1.00 per share, the Trustees reserve the right
to alter the procedures for determining net asset value. The Fund will notify
shareholders of any such alteration.
The NAV for the fund and class is determined twice each business day at 12 noon
and at the close of regular trading on the New York Stock Exchange (typically 4
p.m. Eastern Time), by dividing a class's net assets by the number of its shares
outstanding. To help the Fund maintain its $1 constant share price, portfolio
investments are valued at cost, and any discount or premium created by market
movements is amortized to maturity.
PURCHASE OF CLASS A SHARES
Class A shares of the Fund will be sold at their net asset value without a sales
charge. Share certificates will not be issued unless requested by the
shareholder in writing, and then only will be issued for full shares. The
Trustees reserve the right to change or waive the Fund's minimum investment
requirements and to reject any order to purchase shares (including purchase by
exchange) when in the judgment of the Adviser such rejection is in the Fund's
best interest.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of a sales charge so that the Fund will receive the full amount
of the purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a CDSC at the rates set forth in the
Prospectus as a percentage of the dollar amount subject to the CDSC. The charge
will be assessed on an amount equal to the lesser of the current market value or
the original purchase cost of the Class B shares being redeemed. No CDSC will be
24
<PAGE>
imposed on increases in account value above the initial purchase prices,
including Class B shares derived from reinvestment of dividends or capital gains
distributions.
Class B shares are not available to full-service defined contribution plans
administered by John Hancock Investor Services Corporation ("Investor Services")
or the Life Company that had more than 100 eligible employees at the inception
of the Fund account.
The amount of the CDSC, if any, will vary depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month will be aggregated and deemed to have been made on the first day
of the month. Class B shares not purchased directly will be subject upon
redemption to the CDSC set forth in the Prospectus of the John Hancock fund from
which the investor initially exchanged his/her shares.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend and capital gain reinvestment, and next from the shares you have held
the longest during the six-year period. For this purpose, the amount of any
increase in a share's value above its initial purchase price is regarded as a
share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price.
When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $1 per share. The second year after your
purchase, you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $1 per share $50
* Minus proceeds of 10 shares not subject to CDSC (dividend -10
reinvestment)
---
* Amount subject to CDSC $40
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the
Prospectus for additional information regarding the CDSC.
25
<PAGE>
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a CDSC,
if any, unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account if
you own shares worth less than $1,000.
* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.
* Redemptions due to death or disability.
* Redemptions made under the Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" in the Prospectus.
* Redemptions of Class B shares made under a periodic withdrawal plan, as
long as your annual redemptions do not exceed 12% of your account value,
including reinvested dividends, at the time you established your periodic
withdrawal plan and 12% of the value of subsequent investments (less
redemptions) in that account at the time you notify Investor Services.
(Please note, this waiver does not apply to periodic withdrawal plan
redemptions of Class A shares that are subject to a CDSC.)
For Retirement Accounts (such as IRA, Rollover IRA, TSA, 457, 403(b), 401(k),
Money Purchase Pension Plan, Profit-Sharing Plan and other plans qualified under
the Internal Revenue Code of 1986, as amended (the "Code")) unless otherwise
noted.
* Redemptions made to effect mandatory or life expectancy distributions under
the Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or beneficiaries
from employer sponsored retirement plans under Section 401(a) of the Code
(such as 401(k), Money Purchase Plans and Profit Sharing Plans).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares prior
to May 15, 1995.
Please see matrix for reference.
26
<PAGE>
CDSC Waiver Matrix
<TABLE>
<CAPTION>
Type of 401(a) Plan 403(b) 457 IRA, IRA Non-Retirement
Distribution (401(k), MPP, Rollover
PSP)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Death or Waived Waived Waived Waived Waived
Disability
- -------------------------------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually in
distribtutions periodic payments
- -------------------------------------------------------------------------------------------------------------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account
and 70 1/2 Expectancy or value annually
12% of account in periodic
value annually payments
in periodic
payments
- -------------------------------------------------------------------------------------------------------------------
Under 59 1/2 Waived Waived for annuity Waived for Waived for 12% of account
payments (72t) or annuity annuity value annually
12% of account payments (72t) payments (72t) in periodic
value annually in or 12% of or 12% of payments
periodic payments account value account value
annually in annually in
periodic payments periodic payments
- -------------------------------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- -------------------------------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Return of Waived Waived Waived Waived N/A
Excess
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services at the time you make your redemption. The waiver will be
granted once Investor Services has confirmed that you are entitled to the
waiver.
SPECIAL REDEMPTIONS
Although the Fund would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, he will incur a brokerage charge. Any such
security will be valued for the purpose of making such payment at the same value
as used in determining the Fund's net asset value. The Fund has elected to be
governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is
27
<PAGE>
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund during any 90-day period for any one account.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class for shares
of the same class in any other John Hancock fund offering that class.
Systematic Withdrawal Plan. As described briefly in the Prospectus, the Fund
permits the establishment of a Systematic Withdrawal Plan. Payments under this
plan represent proceeds arising from the redemption of Fund shares. The
maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional Class B shares of the Fund could be disadvantageous to a shareholder
because of the CDSC imposed on redemptions of Class B shares. Therefore, a
shareholder should not purchase Class B shares of the Fund at the same time as a
Systematic Withdrawal Plan is in effect. The Fund reserves the right to modify
or discontinue the Systematic Withdrawal Plan of any shareholder on 30 days'
prior written notice to such shareholder, or to discontinue the availability of
such plan in the future. The shareholder may terminate the plan at any time by
giving proper notice to Investor Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is explained in
the Prospectus and the Account Privileges Application. The program, as it
relates to automatic investment checks, is subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the Monthly Automatic Accumulation
Program may be revoked by Investor Services without prior notice if any
investment is not honored by the shareholder's bank. The bank shall be under no
obligation to notify the shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling Investor
Services or upon written notice to Investor Services which is received at least
five (5) business days prior to the due date of any investment.
Reinvestment Privilege. A shareholder who has redeemed Class B shares of the
Fund and paid a CDSC thereon, may, within 120 days after the date of redemption,
reinvest any part of the redemption proceeds in shares of the same class of the
Fund or another John Hancock mutual fund, subject to the minimum investment
limit in that fund and, upon such reinvestment, the shareholder's account will
be credited with the amount of any CDSC charged upon the redemption and the new
shares will continue to be subject to the CDSC. The holding period of the shares
acquired through reinvestment will, for purposes of computing the CDSC payable
upon a subsequent redemption, include the holding period of the redeemed shares.
The Fund may modify or terminate the reinvestment privilege at any time.
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund, without
par value. Under the Declaration of Trust, the Trustees have the authority to
28
<PAGE>
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have authorized shares of the Fund and one other
series. Additional series may be added in the future. The Declaration of Trust
also authorizes the Trustees to classify and reclassify the shares of the Fund
or any new series of the Trust, into one or more classes. As of the date of this
Statement of Additional Information, the Trustees have authorized the issuance
of two classes of shares of the fund, designated as Class A and Class B.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
Class A and Class B shares have certain exclusive voting rights on matters
relating to their respective distribution plans. The different classes of the
Fund may bear different expenses relating to the cost of holding shareholder
meetings necessitated by the exclusive voting rights of any class of shares.
Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to Class A and Class B shares will be
borne exclusively by that class (ii) Class B shares will pay higher distribution
and service fees than Class A shares and (iii) each of Class A and Class B
shares will bear any class expenses properly allocable to that class of shares,
subject to the conditions the Internal Revenue Services imposes with respect to
the multiple-class structures. Similarly, the net asset value per share may vary
depending on whether Class A or Class B shares are purchased.
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
The Trustees of the Trust have authorized the issuance of two classes of shares
for the Fund, designated as Class A and Class B shares. Class A and Class B
shares each represent an interest in the same assets of the Fund and are
identical in all respects except that each class bears certain expenses related
to the distribution of such shares and certain expenses related to transfer
agency services.
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 Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations and affairs of the
Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
29
<PAGE>
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no Fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock Fund. Liability is
therefore limited to circumstances in which the Fund itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser and
the Fund have adopted extensive restrictions on personal securities trading by
personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
A shareholder's account is governed by the laws of the Commonwealth of
Massachusetts.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes. The
Fund has qualified and elected to be treated as a "regulated investment company"
under Subchapter M of the Code, and intends to continue to so qualify for each
taxable year. As such and by complying with the applicable provisions of the
Code regarding the sources of its income, the timing of its distributions, and
the diversification of its assets, the Fund will not be subject to Federal
income tax on taxable income (including net realized capital gains, if any)
which is distributed to shareholders in accordance with the timing requirements
of the Code.
The Fund will be subject to a 4% non-deductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss investment company taxable income is all taxable income
and capital gains or losses, other than those gains or losses taken into account
in computing net capital gain, after reduction by deductible expenses. It is not
likely that the Fund will earn or distribute any net capital gain.) Some
distributions may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. Distributions from
the Fund will not qualify for the dividends-received deduction for any corporate
shareholder. The tax treatment described above will apply without regard to
whether distributions are received in cash or reinvested in additional shares of
the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
30
<PAGE>
Upon a redemption of shares of the Fund (including by exercise of the exchange
privilege) a shareholder ordinarily will not realize a taxable gain or loss if
the Fund always successfully maintains a constant net asset value per share,
although a loss may still arise if a CDSC is paid. If the Fund is not successful
in maintaining a constant net asset value per share, a redemption may produce a
taxable gain or loss. Any gain or loss will be treated as capital gain or loss
if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period for
the shares and subject to the special rules described below. Any loss realized
on a redemption or exchange may be disallowed to the extent the shares disposed
of are replaced with other shares of the same Fund within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of,
such as pursuant to automatic dividend reinvestments. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized upon the redemption of shares with a tax holding period of six months
or less will be treated as a long-term capital loss to the extent of any amounts
treated as distributions of long-term capital gain with respect to such shares.
For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset its own net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent net capital
gains are offset by such losses, they would not result in Federal income tax
liability to the Fund and would not be distributed as such to shareholders.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments, if any, in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. It is not likely that the Fund will generally qualify to
pass through such foreign taxes and any associated foreign tax credits or
deduction to its shareholders, who therefore will generally not take such taxes
into account directly on their tax returns.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions (if any), and ownership of
or gains realized (if any) on the redemption (including an exchange) of Fund
shares may also be subject to state and local taxes. Shareholders should consult
their own tax advisers as to the Federal, state or local tax consequences of
ownership of shares of, and receipt of distributions from, a Fund in their
particular circumstances.
A state income ( and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Fund will not seek to satisfy any
31
<PAGE>
threshold or reporting requirements that any apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions may be subject to backup
withholding of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholders
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions, whether taken in
cash or reinvested in shares, will be reduced by the amounts required to be
withheld. Any amounts withheld may be credited against a shareholder's U.S.
federal income tax liability. Investors should consult their tax advisers about
the applicability of the backup withholding provisions.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute for Form W-8 is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
Provided that the Fund qualifies as a regulated investment company under the
Code, it will not be required to pay any Massachusetts income.
CALCULATION OF PERFORMANCE
For the purposes of calculating yield for both classes of the Fund, daily income
per share consists of interest and discount earned on the Fund's investments
less provision for amortization of premiums and applicable expenses, divided by
the number of shares outstanding, but does not include realized or unrealized
appreciation or depreciation.
In any case in which the Fund reports its annualized yield, it will also furnish
information as to the average portfolio maturities of the Fund. It will also
report any material effect of realized gains or losses or unrealized
appreciation on dividends which have been excluded from the computation of
yield.
32
<PAGE>
Yield calculations are based on the value of a hypothetical preexisting account
with exactly one share at the beginning of the seven day period. Yield is
computed by determining the net change in the value of the account during the
base period and dividing the net change by the value of the account at the
beginning of the base period to obtain the base period return. Base period is
multiplied by 365/7 and the resulting figure is carried to the nearest 100th of
a percent. Net change in account value during the base period includes dividends
declared on the original share, dividends declared on any shares purchased with
dividends of that share and any account or sales charges that would affect an
account of average size, but excludes any capital changes.
Effective yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1
The yield of the Fund is not fixed or guaranteed. Yield quotations should not be
considered to be representations of yield of the Fund for any period in the
future. The yield of the Fund is a function of available interest rates on money
market instruments, which can be expected to fluctuate, as well as of the
quality, maturity and types of portfolio instruments held by the Fund and of
changes in operating expenses. The Fund's yield may be affected if, through net
sales of its shares, there is a net investment of new money in the Fund which
the Fund invests at interest rates different from that being earned on current
portfolio instruments. Yield could also vary if the Fund experiences net
redemptions, which may require the disposition of some of the Fund's current
portfolio instruments.
From time to time, in reports and promotional literature, the Fund's yield and
total return will be compared to indices of mutual funds and bank deposit
vehicles such as Lipper Analytical Services, Inc.'s "Lipper--Fixed Income Fund
Performance Analysis," a monthly publication which tracks net assets, total
return, and yield on fixed income mutual funds in the United States or
"IBC/Donahue's Money Fund Report," a similar publication. Comparisons may also
be made to bank Certificates of Deposit, which differ from mutual funds, like
the Fund, in several ways. The interest rate established by the sponsoring bank
is fixed for the term of a CD, there are penalties for early withdrawal from
CD's and the principal on a CD is insured. Unlike CD's, which are insured as to
principal, an investment in the Fund is not insured or guaranteed.
Performance rankings and ratings reported periodically in national financial
publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL STREET
JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S, etc. will also be
utilized. A Fund's promotional and sales literature may make reference to the
Fund's "beta." Beta reflects the market-related risk of the Fund by showing how
responsive the Fund is to the market.
33
<PAGE>
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser pursuant to
recommendations made by its investment committee, which consists of officers and
directors of the Adviser and affiliates and officers and Trustees who are
interested persons of the Funds. Orders for purchases and sales of securities
are placed in a manner which, in the opinion of the Adviser, will offer the best
price and market for the execution of each such transaction. Purchases from
underwriters of portfolio securities may include a commission or commissions
paid by the issuer and transactions with dealers serving as market makers
reflect a "spread." Investments in debt securities are generally traded on a net
basis through dealers acting for their own account as principals and not as
brokers; no brokerage commissions are payable on these transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and other policies that the Trustees may determine, the Adviser may consider
sales of shares of the Fund as a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser, and their value
and expected contribution to the performance of the Fund. It is not possible to
place a dollar value on information and services to be received from brokers and
dealers, since it is only supplementary to the research efforts of the Adviser.
The receipt of research information is not expected to reduce significantly the
expenses of the Adviser. The research information and statistical assistance
furnished by brokers and dealers may benefit the Life Company or other advisory
clients of the Adviser, and conversely, brokerage commissions and spreads paid
by other advisory clients of the Adviser may result in research information and
statistical assistance beneficial to the Fund. The Fund will make no commitments
to allocate portfolio transactions upon any prescribed basis. While the
Adviser's officers will be primarily responsible for the allocation of the
Fund's brokerage business, their 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. For the fiscal years ended October 31, 1995, 1994 and
1993 no negotiated brokerage commissions were paid on portfolio transactions.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time. During the fiscal year ended October 31, 1995, the
Fund did not pay commissions as compensation to any brokers for research
services such as industry, economic and company reviews and evaluations of
securities.
34
<PAGE>
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Freedom Securities Corporation and its subsidiaries,
three of which, Tucker Anthony Incorporated ("Tucker Anthony") John Hancock
Distributors, Inc. ("John Hancock Distributors") and Sutro & Company, Inc.
("Sutro"), are broker-dealers ("Affiliated Brokers"). Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
Tucker Anthony, Sutro or John Hancock Distributors. During the year ended
October 31, 1995, the Fund did not execute any portfolio transactions with then
affiliated brokers.
Any of the Affiliated Brokers may act as broker for the Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the Trustees pursuant to the 1940 Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers, except for accounts for which
the Affiliated Broker acts as a clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not "interested persons" (as defined in
the 1940 Act) of the Fund, the Adviser or the Affiliated Brokers. Because the
Adviser, which is affiliated with the Affiliated Brokers, has, as an investment
adviser to the Fund, the obligation to provide investment management services,
which includes elements of research and related investment skills, such research
and related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria.
Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205-9116, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays Investor Services
monthly a transfer agent fee equal to $20 per account for the Class A shares and
$22.50 per account for the Class B shares on an annual basis, plus out-of-pocket
expenses. These expenses are aggregated and charged to the Fund and allocated to
each class on the basis of the relative net asset values.
35
<PAGE>
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Trust and State Street Bank and Trust Company, 225 Franklin Street,
Boston Massachusetts 02110. Under the custodian agreement, the custodian
performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. The independent auditors audit and render
an opinion on the Fund's annual financial statements and prepare the Fund's
annual income tax returns. The financial statements of the Fund included in the
Prospectus and this SAI as of the end of the Fund's last fiscal year have been
audited by Ernst & Young LLP for the periods indicated in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing. The
financial statements of the Fund included in the Prospectus and this SAI as of
the six-month period ended April 30, 1996 have not been audited.
36
<PAGE>
APPENDIX A
CORPORATE AND TAX-EXEMPT BOND RATINGS
Moody's Investors Service, Inc. ("Moody's)
Aaa, Aa, A and Baa - Tax-exempt bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to bonds that are of "high quality by all
standards," but long-term risks appear somewhat larger than Aaa rated bonds. The
Aaa and Aa rated bonds are generally known as "high grade bonds." The foregoing
ratings for tax-exempt bonds are rated conditionally. Bonds for which the
security depends upon the completion of some act or upon the fulfillment of some
condition are rated conditionally. These are bonds secured by (a) earnings of
projects under construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals that begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. Such conditional
ratings denote the probable credit stature upon completion of construction or
elimination of the basis of the condition. Bonds rated A are considered as upper
medium grade obligations. Principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Bonds rated Baa are considered a medium grade obligations; i.e.,
they are neither highly protected or poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact, have speculative characteristics as well.
Standard & Poor's Ratings Group ("S&P")
AAA, AA, A and BBB - Bonds rated AAA bear the highest rating assigned to debt
obligations, which indicates an extremely strong capacity to pay principal and
interest. Bonds rated AA are considered "high grade," are only slightly less
marked than those of AAA ratings and have the second strongest capacity for
payment of debt service. Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat susceptible to the adverse effects of
changes in circumstances and economic conditions. The foregoing ratings are
sometimes followed by a "p" indicating that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the bonds being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. Although a provisional rating addresses credit quality subsequent to
completion of the project, it makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. Bonds rated BBB are regarded as
having an adequate capacity to repay principal and pay interest. Whereas they
normally exhibit protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to repay principal
and pay interest for bonds in this category than for bonds in the A category.
Fitch Investors Service ("Fitch")
1
<PAGE>
AAA, AA, A, BBB - Bonds rated AAA are considered to be investment grade and of
the highest quality. The obligor has an extraordinary ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal, while very
strong, is somewhat less than for AAA rated securities or more subject to
possible change over the term of the issue. Bonds rated A are considered to be
investment grade and of good quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher
ratings. Bonds rated BBB are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds with
higher ratings.
TAX-EXEMPT NOTE RATINGS
Moody's - MIG-1 and MIG-2. Notes rated MIG-1 are judged to be of the best
quality, enjoying strong protection from established cash flow or funds for
their services or from established and broad-based access to the market for
refinancing or both. Notes rated MIG-2 are judged to be of high quality with
ample margins of protection, though not as large as MIG-1.
S&P - SP-1 and SP-2. SP-1 denotes a very strong or strong capacity to pay
principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+). SP-2 denotes a
satisfactory capacity to pay principal and interest.
Fitch - FIN-1 and FIN-2. Notes assigned FIN-1 are regarded as having the
strongest degree of assurance for timely payment. A plus symbol may be used to
indicate relative standing. Notes assigned FIN-2 reflect a degree of assurance
for timely payment only slightly less in degree than the highest category.
CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS
Moody's - Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Prime-1, indicates highest quality repayment capacity of
rated issue and Prime-2 indicates higher quality.
S&P - Commercial Paper ratings are a current assessment of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
Issues rated A have the greatest capacity for a timely payment and the
designation 1, 2 and 3 indicates the relative degree of safety. Issues rated
"A-1+" are those with an "overwhelming degree of credit protection."
Fitch - Commercial Paper ratings reflect current appraisal of the degree of
assurance of timely payment. F-1 issues are regarded as having the strongest
degree of assurance for timely payment. (+) is used to designate the relative
position of an issuer within the rating category. F-2 issues reflect an
assurance of timely payment only slightly less in degree than the strongest
issues. The symbol (LOC) may follow either category and indicates that a letter
of credit issued by a commercial bank is attached to the commercial paper note.
Other Considerations - The ratings of S&P, Moody's, and Fitch represent their
respective opinions of the quality of the municipal securities they undertake to
2
<PAGE>
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal securities with the same
maturity, coupon and ratings may have different yields and municipal securities
of the same maturity and coupon with different ratings may have the same yield.
3
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
JOHN HANCOCK U.S. GOVERNMENT CASH RESERVE
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 2, 1996
This Statement of Additional Information ("SAI") provides information about John
Hancock U.S. Government Cash Reserve (the "Fund"), a diversified series of John
Hancock Current Interest (the "Trust"), in addition to the information that is
contained in the combined Money Market Funds' Prospectus (the "Prospectus"),
dated December 2, 1996.
This SAI is not a prospectus. It should be read in conjunction with the
Prospectus, a copy of which can be obtained free of charge by writing or
telephoning:
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
1-800-225-5291
Table of Contents
Page
Organization of the Trust........................................ 2
Investment Objective and Policies................................ 2
Investment Restrictions.......................................... 4
Those Responsible for Management................................. 6
Investment Advisory and Other Services........................... 15
Distribution Contracts........................................... 17
Net Asset Value.................................................. 19
Purchase of Shares............................................... 20
Special Redemptions.............................................. 19
Additional Services and Programs................................. 20
Description of the Fund's Shares................................. 20
Tax Status....................................................... 21
Calculation of Performance....................................... 23
Brokerage Allocation............................................. 25
Transfer Agent Services.......................................... 26
Custody of Portfolio............................................. 27
Independent Auditors............................................. 27
Financial Statements............................................. F-1
1
<PAGE>
ORGANIZATION OF THE TRUST
John Hancock Current Interest (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust under a
Declaration of Trust dated October 3, 1991. Prior to December 22, 1994, the Fund
was called Transamerica U.S. Government Cash Reserve.
John Hancock Advisers, Inc. (the "Adviser"), is the Fund's investment
adviser, a wholly- owned indirect subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company") a Massachusetts life insurance company
chartered in 1862 with national headquarters at John Hancock Place, Boston,
Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The Fund invests only in securities issued or guaranteed by the U.S.
Government which mature within 13 months from the date of purchase and
repurchase agreements with respect to these securities with an average portfolio
maturity of 90 days or less. The Fund seeks to obtain maximum current income
from these short-term investments to the extent consistent with maintaining
liquidity and preserving capital. There can be no assurance that the Fund's
investment objective will be realized.
Securities issued or guaranteed by the U.S. Government differ only in
their interest rates, maturities and dates of issuance. Treasury bills have a
maturity of one year or less. Treasury notes have maturities of 1-10 years and
Treasury bonds have maturities of greater than 10 years at the date of issuance.
Securities in which the Fund invests may not earn as high a level of
current income as longer-term or lower quality securities, which generally have
less liquidity, greater market risk and more fluctuation in market value.
The return on an investment in the Fund will depend on the interest
earned by the Fund's investments after expenses of the Fund are deducted. The
return is paid to shareholders in the form of dividends.
The Fund seeks to maintain a net asset value of $1.00 per share at all
times. There can be no assurance that the Fund will be able to maintain a
constant $1.00 share price. However, because the Fund purchases high quality
U.S. Government securities with short maturities, this policy helps to minimize
any price decreases or increases that could result from changes in interest
rates or an issuer's creditworthiness. The Fund's investment objective, policies
and restrictions (including a restriction on borrowing money and pledging
assets), except as noted, are fundamental and may not be changed without the
approval of the Fund's shareholders.
Government Securities. U.S. Government securities are issued or
guaranteed as to principal and interest by the U.S. Government or one of its
agencies or instrumentalities. Treasury bills, bonds and notes and certain
obligations of government agencies and instrumentalities, such as Government
National Mortgage Association pass-through certificates ("Ginnie Maes") are
supported by the full faith and credit of the U.S. Treasury (the "Treasury").
Other obligations such as securities of the Federal Home Loan Bank and the
Federal Home Loan Mortgage Corporation ("Freddie Macs") are supported by the
right of the issuer to borrow from the Treasury; while others, such as bonds
issued by the Federal National Mortgage Association ("Fannie Maes"), which is a
private corporation, are supported only by the credit of the issuing
instrumentality. No assurance can be given that the U.S. Government will provide
2
<PAGE>
financial support to such Federal agencies, authorities, instrumentalities and
government sponsored enterprises in the future.
Obligations not backed by the full faith and credit of the U.S.
Government may be secured, in whole or in part, by a line of credit with the
Treasury or collateral consisting of cash or other securities which are backed
by the full faith and credit of the U.S. Government. In the case of other
obligations, the agency issuing or guaranteeing the obligation must be looked to
for ultimate repayment. Variable Amount Demand Master Notes are obligations that
permit the investment by the Fund of fluctuating amounts as determined by the
Fund at varying rates of interest pursuant to direct arrangements between the
Fund and the issuing government agency. Although callable on demand by the Fund,
these obligations are not marketable to third parties.
Repurchase Agreements. In a repurchase agreement the Fund buys a
security for a relatively short period (generally not more than 7 days) subject
to the obligation to sell it back to the issuer at a fixed time and price plus
accrued interest. The Fund will enter into repurchase agreements only with
member banks of the Federal Reserve System and with "primary dealers" in U.S.
Government securities. The Adviser will continuously monitor the
creditworthiness of the parties with whom the Fund enters into repurchase
agreements.
The Fund has established a procedure providing that the securities
serving as collateral for each repurchase agreement must be delivered to the
Fund's custodian either physically or in book-entry form and that the collateral
must be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income decline in
value of the underlying securities or lack of access to income during this
period as well as the expense of enforcing its rights.
The Fund will not enter into repurchase agreements of more than one
week's duration if more than 10% of its net assets would then be so
invested-considering only the remaining days to maturity of existing repurchase
agreements. In addition, the securities underlying repurchase agreements are not
subject to the restrictions applicable to maturity of the portfolio or its
securities.
Reverse Repurchase Agreements. The Fund may also enter into reverse
repurchase agreements which involve the sale of U.S. Government securities held
in its portfolio to a bank with an agreement that the Fund will buy back the
securities at a fixed future date at a fixed price plus an agreed amount of
"interest" which may be reflected in the repurchase price. Reverse repurchase
agreements are considered to be borrowings by the Fund. Reverse repurchase
agreements involve the risk that the market value of securities purchased by the
Fund with proceeds of the transaction may decline below the repurchase price of
the securities sold by the Fund which it is obligated to repurchase. The Fund
will also continue to be subject to the risk of a decline in the market value of
the securities sold under the agreements because it will reacquire those
securities upon effecting their repurchase. The Fund will not enter into reverse
repurchase agreements and other borrowings exceeding in the aggregate 33 1/3% of
its net assets. The Fund will enter into reverse repurchase agreements only with
federally insured banks or savings and loan associations which are approved in
advance as being creditworthy by the Trustees. Under procedures established by
the Trustees, the Adviser will monitor the creditworthiness of the banks
involved.
Money Market Instruments. Because interest rates on money market
instruments fluctuate in response to economic factors, the rates on short-term
3
<PAGE>
investments made by the Fund and the daily dividend paid to investors will vary,
rising or falling with short- term rates generally. All of these obligations in
which the Fund invests are guaranteed by the U.S. Government or one of its
agencies or instrumentalities.
Short Term Trading and Portfolio Turnover. The Fund may attempt to
maximize current income through short-term portfolio trading. This will involve
selling portfolio instruments and purchasing different instruments to take
advantage of yield disparities in different segments of the market for
Government Obligations. Short-term trading may have the effect of increasing
portfolio turnover rate. A high rate of portfolio turnover (100% or greater)
involves corresponding higher transaction expenses and may make it more
difficult for the Fund to qualify as a regulated investment company for federal
income tax purposes.
The Fund does not intend to invest for the purpose of seeking
short-term profits. The Fund's portfolio securities may be changed, however,
without regard to the holding period of these securities (subject to certain tax
restrictions), when the 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.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Fund has adopted certain fundamental investment restrictions upon
its investments as set forth below which may not be changed without the approval
of the holders of a majority of the outstanding shares of the Fund. A majority
for this purpose means: (a) more than 50% of the outstanding shares of the Fund
or (b) 67% or more of the shares represented at a meeting where more than 50% of
the outstanding shares of the Fund are represented, whichever is less. Under
these restrictions, the Fund may not:
1. Purchase common stocks, preferred stocks, warrants, other equity
securities, private placements, corporate bonds or debentures maturing
beyond one year from the date of purchase, state bonds, or industrial
revenue bonds, except through the purchase of debt obligations
referred to under "Investment Objective and Policies" in this
Statement of Additional Information.
2. Sell securities short;
3. Write or purchase put or call options;
4. Underwrite the securities of another issuer, purchase securities
subject to restrictions on disposition under the Securities Act of
1933 (so-called "restricted securities") or purchase securities which
are not readily marketable;
5. Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests;
6. Make loans to other persons, except the Fund may enter into repurchase
agreements as provided in the investment practices. The purchase of an
issue of publicly distributed bonds, debentures or other securities,
whether or not the purchase was made upon the original issuance of
securities, is not considered to be the making of a loan;
4
<PAGE>
7. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
business activities in the same industry, provided that this
limitation does not apply to investments in bank obligations of
domestic branches of U.S. banks including deposits with and obligation
of savings institutions, obligations of foreign branches of domestic
banks when the Adviser believes that the domestic parent will be
ultimately responsible for payment if the issuing bank should fail to
do so, U.S. Treasury Bills or other obligations issued or guaranteed
by the U.S. Government, or one of its agencies or instrumentalities;
8. Invest in companies for the purpose of exercising control;
9. Invest more than 5% of the value of the Fund's assets in the
securities of any one issuer (other than securities issued or
guaranteed as to principal and interest by the U.S. Government, or one
of its agencies or instrumentalities).
10. Borrow money except from banks for temporary or emergency purposes
(but not to purchase investment securities) in an amount up to 1/3 of
the value of the Fund's total assets. The borrowing restriction set
forth above does not prohibit the use of reverse repurchase
agreements, in an amount (including any borrowings) not to exceed 33
1/3% of net assets; or
11. Pledge its assets except in amounts not in excess of the lesser of the
dollar amount borrowed or 15% of the value of the Fund's total assets
at the time of borrowing and only to secure borrowings for temporary
or emergency purposes.
In order to comply with certain state regulatory policies, the Fund
will not, as a matter of non-fundamental policy, pledge, mortgage or hypothecate
its assets in amounts that would exceed 10% of its net assets at market value.
Nonfundamental Investment Restriction
The following restriction is designated as nonfundamental and may be
changed by the Trustees without shareholder approval:
The Fund may not:
1. Purchase a security if, as a result, (i) more than 10% of the Fund's
total assets would be invested in the securities of other investment
companies, (ii) the Fund would hold more than 3% of the total
outstanding voting securities of any one investment company, or (iii)
more than 5% of the Fund's total assets would be invested in the
securities of any one investment company. These limitations do not
apply to (a) the investment of cash collateral, received by the Fund
in connection with lending of the Fund's portfolio securities, in the
securities of open-end investment companies or (b) the purchase of
shares of any investment company in connection with a merger,
consolidation, reorganization or purchase of substantially all of the
assets of another investment company. Subject to the above percentage
limitations, the Fund may, in connection with the John Hancock Group
of Funds Deferred Compensation Plan for Independent
Trustees/Directors, purchase securities of other investment companies
5
<PAGE>
within the John Hancock Group of Funds. The Fund may not purchase the
shares 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.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Trust and the Fund is managed by the Trust's
Trustees who elect officers who are responsible for the day-to-day operations of
the Fund and who execute policies formulated by the Trustees. Several of the
officers and Trustees of the Trust are also officers and directors of the
Adviser or officers and directors of John Hancock Funds.
6
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1, 2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
October 1944 Group"); Chairman, NM Capital
Management, Inc. ("NM Capital") and
John Hancock Advisers International
Limited ("Advisers International");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds"), John
Hancock Investor Services
Corporation ("Investor Services"),
First Signature Bank and Trust
Company and Sovereign Asset
Management Corporation
("SAMCorp."); Director, John
Hancock Freedom Securities
Corporation, John Hancock Insurance
Agency, Inc. ("Insurance Agency,
Inc."), John Hancock Capital
Corporation and New England/Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science; Vice
Chairman and President, the Adviser
(until July 1992); Chairman, John
Hancock Distributors, Inc. (until
April, 1994).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
7
<PAGE>
Principal Occupations(s) Positions Held Principal Occupations(s)
During the Past Five Years With the Company During the Past Five Years
- -------------------------- ---------------- --------------------------
James F. Carlin Trustee Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual Insurance Company
(insurance), Consolidated Group
Trust (insurance administration),
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995) Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (since 1995);
Receiver, the City of Chelsea (until
August 1992).
William H. Cunningham Trustee (3) Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair of Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Texas Commerce Bank - Austin.
Charles F. Fretz Trustee (3) Retired; self employed; Former Vice
RD #5, Box 300B President and Director, Towers,
Clothier Springs Road Perrin, Foster & Crosby, Inc.
Malvern, PA 19355 (international management
June 1928 consultants) (1952-1985).
Harold R. Hiser, Jr. Trustee (3) Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hill, NJ 07078 (pharmaceuticals) (retired 1996);
October 1931 Director, ReCapital Corporation
(reinsurance) (until 1995).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
8
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Anne C. Hodsdon * President and Director (1, 2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser; Director,
Boston, MA 02199 The Berkeley Group, John Hancock
April 1953 Funds, Investor Services (since
October 1996); Director, Advisers
International; Executive Vice
President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993).
Charles L. Ladner Trustee (3) Director, Energy North, Inc. (public
UGI Corporation utility holding company) (until
P.O. Box 858 1992); Senior Vice President of UGI
Valley Forge, PA 19482 Corp. Holding Company Public
February 1938 Utilities, LPGAS.
Leo E. Linbeck, Jr. Trustee (3) Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company
August 1934 engaged in various phases of the
construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board and Chief Executive
Officer, Linbeck Construction
Corporation; Director, PanEnergy
Corporation (a diversified energy
company), Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest International
Holdings, Inc. (a geophysical
consulting firm) (1980-1993);
Former Director, Greater Houston
Partnership (1980 -1995).
Patricia P. McCarter Trustee (3) Director and Secretary, The McCarter
1230 Brentford Road Corp. (machine manufacturer).
Malvern, PA 19355
May 1928
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
9
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Steven R. Pruchansky Trustee (1, 3) Director and President, Mast
4327 Enterprise Avenue Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
August 1944 Trust Company (until August 1991);
Director, Mast Realty Trust (until
1994); President, Maxwell Building
Corp. (until 1991).
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, Investor Services, John
August 1937 Hancock Distributors, Inc.,
Insurnace Agency, Inc., John Hancock
Subsidiaries, Inc., SAMCorp. and NM
Capital; Trustee, The Berkeley
Group; Director, JH Networking
Insurance Agency, Inc.; Director,
John Hancock Property and Casualty
Insurance and its affiliates (until
November, 1993),
Norman H. Smith Trustee (3) Lieutenant General, United States
243 Mt. Oriole Lane Marine Corps; Deputy Chief of Staff
Linden, VA 22642 for Manpower and Reserve Affairs,
March 1933 Headquarters Marine Corps;
Commanding General III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
10
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
John P. Toolan Trustee (3) Director, The Smith Barney Muni Bond
13 Chadwell Place Funds, The Smith Barney Tax-Free
Morristown, NJ 07960 Money Funds, Inc., Vantage Money
September 1930 Market Funds (mutual funds), The
Inefficient-Market Fund, Inc.
(closed-end investment company) and
Smith Barney Trust Company of
Florida; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member of
the Executive Committee, Smith
Barney, Harris Upham & Co.,
Incorporated (investment bankers)
(until 1991).
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, Investor
Services, SAMCorp., Insurance
Agency, Inc., Southeastern Thrift &
Bank Fund and NM Capital; Senior
Vice President, The Berkeley Group;
President, the Adviser (until
December 1994);
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
11
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds and Investor Services.
February 1935
Susan S. Newton Vice President and Secretary Vice President and Assistant
101 Huntington Avenue Secretary, the Adviser; Vice
Boston, MA 02199 President, John Hancock Funds,
March 1950 Investor Services; Secretary,
SAMCorp; Vice President, The
Berkeley Group, John Hancock
Distributors, Inc. (until 1994).
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Investor Services and John Hancock
July 1950 Funds; Counsel, John Hancock Mutual
Life Insurance Company.
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
</TABLE>
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
12
<PAGE>
All of the officers listed are officers or employees of the Adviser of
affiliated companies. Some of the Trustees and officers may also be officers
and/or Directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
As of October 31, 1996, the officers and Trustees of the Trust as a group
beneficially owned less than 1% of the outstanding shares of the Fund. At such
date, Novell Incorporated, 1555 North Technology Way, Orem, Ut. 84057 held of
record 5,591,116 shares representing approximately 11.52% of the shares
outstanding. At such date, no other person owned of record or beneficially as
much as 5% of the outstanding shares of the Fund.
As of December 22, 1994, the Trustees established an Advisory Board which acts
to facilitate a smooth transition of management over a two-year period (between
Transamerica Fund Management Company ("TFMC"), the prior investment adviser, and
the Adviser). The members of the Advisory Board are distinct from the Board of
Trustees, do not serve the Fund in any other capacity and are persons who have
no power to determine what securities are purchased or sold on behalf of the
Fund. Each member of the Advisory Board may be contacted at 101 Huntington
Avenue, Boston, Massachusetts 02199.
Members of the Advisory Board and their respective principal occupations during
the past five years are as follows:
R. Trent Campbell, President, FMS, Inc. (financial and management services);
former Chairman of the Board, Mosher Steel Company.
Mrs. Lloyd Bentsen, Formerly National Democratic Committeewoman from Texas;
co-founder, Houston Parents' League; former board member of various civic
and cultural organizations in Houston, including the Houston Symphony,
Museum of Fine Arts and YWCA. Mrs. Bentsen is presently active in various
civic and cultural activities in the Washington, D.C. area, including
membership on the Area Board for The March of Dimes and is a National
Trustee for the Botanic Gardens of Washington, D.C.
Thomas R. Powers, Formerly Chairman of the Board, President and Chief Executive
Officer, TFMC; Director, West Central Advisory Board, Texas Commerce Bank;
Trustee, Memorial Hospital System; Chairman of the Board of Regents of
Baylor University; Member, Board of Governors, National Association of
Securities Dealers, Inc.; Formerly, Chairman, Investment Company Institute;
formerly, President, Houston Chapter of Financial Executive Institute.
Thomas B. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation); Member,
Board of Managers, Harris County Hospital District; Advisory Director,
Commercial State Bank, El Campo; Advisory Director, First National Bank of
Bryan; Advisory Director, Sterling Bancshares; Former Director and Vice
Chairman, Texas Commerce Bancshares; and Vice Chairman, Texas Commerce
Bank.
13
<PAGE>
Compensation of the Trustees and Advisory Board. The following table
provides information regarding the compensation paid by the Fund and the other
investment companies in the John Hancock Fund Complex to the Independent
Trustees and the Advisory Board members for their services. Ms. Hodsdon and
Messrs. Boudreau and Scipione, each a non-Independent Trustee, and each of the
officers of the Fund who are interested persons of the Adviser, are compensated
by the Adviser and receive no compensation from the Fund for their services. The
compensation to the Trustees and members of the Advisory Board from the Fund
shown below is for the Fund's fiscal year ended May 31, 1996.
Total Compensation
from all Funds in
Aggregate Compensation John Hancock Fund
Trustees from the Fund Complex to Trustees
- -------- -------------
James F. Carlin $ 307 $ 60,700
William H. Cunningham* $ 430 $ 69,700
Charles F. Fretz $ 322 $ 56,200
Harold R. Hiser, Jr.* $ 305 $ 60,200
Charles L. Ladner $ 322 $ 60,700
Leo E. Linbeck, Jr. $ 430 $ 73,200
Patricia P. McCarter $ 322 $ 60,700
Steven R. Pruchansky $ 325 $ 62,700
Norman H. Smith $ 325 $ 62,700
John P. Toolan* $ 320 $ 60,700
------ --------
Totals $3,408 $627,500
* As of December 31, 1995, the value of the aggregate accrued deferred
compensation from all Funds in the John Hancock Fund complex for Mr.
Cunningham was $54,413 for Mr. Hiser was $31,324, and for Mr. Toolan was
$71,437 under the John Hancock Deferred Compensation Plan for Trustees.
** The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1995. On
that date there were 61 funds in the John Hancock Fund Complex, with each
of these Independent Trustees, except for Messrs. Cunningham and Linbeck,
serving 33. Messrs. Cunningham and Linbeck served 31 of these funds.
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Total Compensation
from all Funds in John
Aggregate Compensation Hancock Fund Complex to
Advisory Board from the Fund Advisory Board***
- -------------- ------------- -----------------
R Trent Campbell $534 $54,000
Mrs. Lloyd Bentsen $534 $54,000
Thomas R. Powers $534 $54,000
Thomas B. McDade $534 $54,000
---- -------
TOTAL $2,136 $216,000
*** The total compensation paid by the John Hancock Fund Complex to the
Advisory Board members is as of the calendar year ended December 31, 1995.
On that date there were 61 funds in the John Hancock Fund Complex, with
each Advisory Board member serving 33 of these funds.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199- 7603, was organized in 1968 and currently has more than $19 billion in
assets under management in its capacity as investment adviser to the Fund and
the other mutual funds and publicly traded investment companies in the John
Hancock group of funds having a combined total of over 1,080,000 shareholders.
The Adviser is an affiliate of the Life Company, one of the most recognized and
respected financial institutions in the nation. With total assets under
management of $80 billion, the Life Company is one of the ten largest life
insurance companies in the United States and carries high ratings from Standard
& Poor's and A.M. Best's. Founded in 1862, the Life Company has been serving
clients for over 130 years.
The Fund has entered into an investment management contract with the
Adviser. Under the investment management contract, the Adviser provides the Fund
with (i) a continuous investment program, consistent with the Fund's stated
investment objective and policies, and (ii) supervision of all aspects of the
Fund's operations except those that are delegated to a custodian, transfer agent
or other agent. The Adviser is responsible for the day-to-day management of the
Fund's portfolio assets.
Under the terms of the investment management contract with the Trust on
behalf of the Fund, all expenses which are not specifically paid by the Adviser
and which are incurred in the operation of the Fund including, but not limited
to, (i) the fees of the Trustees of the Fund who are not "interested persons,"
as such term is defined in the 1940 Act (the "Independent Trustees"), (ii) the
fees of the members of the Fund's Advisory Board (described above) and (iii) the
continuous public offering of the shares of the Fund are borne by the Fund.
Subject to the positions of the Internal Revenue Service relating to mutual
funds with a multiple-class structure, class expenses properly allocable to any
Class A shares will be borne exclusively by such class of shares.
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As provided by the investment management contract, the Fund pays the
Adviser an investment management fee, which is accrued daily and paid monthly in
arrears, equal on an annual basis to a percentage of the Fund's average daily
net asset value as follows:
Fee
Average Daily Net Assets of the Fund (annual rate)
First $500 million.......................................... 0.500%
Next $250 million........................................... 0.425%
Next $250 million........................................... 0.375%
Next $500 million........................................... 0.350%
Next $500 million........................................... 0.325%
Next $500 million........................................... 0.300%
Amount Over $2.5 billion.................................... 0.275%
The Adviser may reduce its advisory fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to re-impose the advisory fee and recover any
other payments to the extent that, at the end of any fiscal year, the Fund's
annual expenses fall below this limit.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of any state limit where
the Fund is registered to sell shares of beneficial interest, the fee payable to
the Adviser will be reduced to the extent of such excess and the Adviser will
make any additional arrangements necessary to eliminate any remaining excess
expenses. Currently, the most restrictive limit applicable to the Fund is 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.
Pursuant to the investment management contract, the Adviser is not
liable to the Fund or its shareholders for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
the 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 its reckless disregard of the obligations and duties under the
applicable contract.
The investment management contract initially expires on December 22,
1996 and will continue in effect from year to year thereafter if approved
annually by a vote of a majority of the Independent Trustees of the Fund, cast
in person at a meeting called for the purpose of voting on such approval, and by
either a majority of the Trustees or the holders of a majority of the Fund's
outstanding voting securities. The management contract may, on 60 days' written
notice, be terminated at any time without the payment of any penalty to the Fund
by vote of a majority of the outstanding voting securities of the Fund, by the
Trustees or by the Adviser. The management contract terminates automatically in
the event of its assignment.
Securities held by the Fund may also be held by other funds or
investment advisory clients for which the Adviser or its affiliates provide
investment advice. Because of different investment objectives or other factors,
a particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser or for other funds or clients for which the Adviser
renders investment advice arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
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extent that transactions on behalf of more than one client of the Adviser or its
respective affiliates may increase the demand for securities being purchased or
the supply of securities being sold, there may be an adverse effect on price.
Under the investment management contract, the Fund may use the name
"John Hancock" or any name derived from or similar to it only for so long as the
investment management contract or any extension, renewal or amendment thereof
remains in effect. If the Fund's investment management contract is no longer in
effect, the Fund (to the extent that it lawfully can) will cease to use such
name or any other name indicating that it is advised by or otherwise connected
with the 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.
For the fiscal years ended May 31, 1994 and 1995 advisory fees paid by
the Fund to TFMC, the Fund's former investment adviser, amounted to $690,268 and
$310,040, respectively. For the fiscal years ended May 31, 1995 and 1996,
advisory fees paid by the Fund to the Adviser amounted to $130,358 and $143,299,
respectively. However, a portion of such fees were not imposed pursuant to the
voluntary fee and expense limitation arrangements then in effect.
Administrative Services Agreement. The Fund was a party to an
administrative services agreement with TFMC (the "Services Agreement"), pursuant
to which TFMC performed bookkeeping and accounting services and functions,
including preparing and maintaining various accounting books, records and other
documents and keeping such general ledgers and portfolio accounts as are
reasonably necessary for the operation of the Fund. Other administrative
services included communications in response to shareholder inquiries and
certain printing expenses of various financial reports. In addition, such staff
and office space, facilities and equipment was provided as necessary to provide
administrative services to the Fund. The Services Agreement was amended in
connection with the appointment of the Adviser as adviser to the Fund to permit
services under the Agreement to be provided to the Fund by the Adviser and its
affiliates. The Services Agreement was terminated during the fiscal year 1995.
For the fiscal years ended May 31, 1994 and 1995, the Fund paid to TFMC
(pursuant to the Services Agreement) $48,703 and $27,466 respectively, of which
$35,000 and $19,884, respectively, was paid to TFMC and $13,703 and $7,582,
respectively, were paid for certain data processing and pricing information
services.
DISTRIBUTION CONTRACTS
Distribution Agreements. The Fund's shares are sold on a continuous
basis at the public offering price. John Hancock Funds, a wholly-owned
subsidiary of the Adviser, has the exclusive right, pursuant to the Distribution
Agreement dated December 22, 1994 (the "Distribution Agreement"), to purchase
shares from the Fund at net asset value for resale to the public or to
broker-dealers at the public offering price. Upon notice to all broker-dealers
("Selling Brokers") with whom it has sales agreements, John Hancock Funds may
allow such Selling Brokers up to the full applicable sales charge during periods
specified in such notice. During these periods, such Selling Brokers may be
deemed to be underwriters as that term is defined in the 1933 Act.
The Distribution Agreement was initially adopted by the affirmative
vote of the Fund's Trustees including the vote a majority of Independent
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<PAGE>
Trustees, cast in person at a meeting called for such purpose. The Distribution
Agreement shall continue in effect until December 22, 1996 and from year to year
thereafter if approved by either the vote of the Fund's shareholders or the
Trustees including the vote of a majority of Independent Trustees, cast in
person at a meeting called for such purpose. The Distribution Agreement may be
terminated at any time, without penalty, by either party upon sixty (60) days'
written notice or by a vote of a majority of the outstanding voting securities
of the Fund and terminates automatically in the case of an assignment by John
Hancock Funds.
Distribution Plan. The Trustees, including the Independent Trustees of
the Fund, approved a distribution plan pursuant to Rule 12b-1 under the 1940 Act
for shares of the Fund (the "Plan"). The Plan was approved by a majority of the
outstanding shares of the Fund on December 16, 1994 and became effective on
December 22, 1994.
Under the Plan, the Fund will pay distribution and service fees at an
aggregate annual rate of 0.15% of the Fund's daily net assets. The fee may be
spent by John Hancock Funds on Distribution Expenses or Service Expenses.
"Distribution Expenses" include any activities or expenses primarily intended to
result in the sale of shares of the Fund, including, but not limited to: (i)
initial and ongoing sales compensation payable out of such fee as such
compensation is received by John Hancock Funds or by Selling Brokers, (ii)
direct out-of- pocket expenses incurred in connection with the distribution of
shares, including expenses related to printing of prospectuses and reports;
(iii) preparation, printing and distribution of sales literature and advertising
material; (iv) an allocation of overhead and other branch office expenses of
John Hancock Funds related to the distribution of Fund Shares (v) distribution
expenses that were incurred by the Fund's former distributor and not recovered
through payments under the former plan; and (vi) in the event that any other
investment company (the "Acquired Fund") sells all or substantially all of its
assets to, merges with or otherwise engages in a combination with the Fund,
distribution expenses originally incurred in connection with the distribution of
the Acquired Fund's shares. Service Expenses under the Plan include payments
made to, or on account of, account executives of selected broker-dealers
(including affiliates of John Hancock Funds) and others who furnish personal and
shareholder account maintenance services to shareholders of the Fund. The
payment of fees by the Fund under the Plan has been indefinitely suspended.
The Plan provides that it will continue in effect only as long as its
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. The Plan provides that it may be terminated (a) at any
time by vote of a majority of the Trustees, a majority of the Independent
Trustees, or a majority of the Fund's outstanding voting securities or (b) by
John Hancock Funds on 60 days' notice in writing to the Fund. The Plan further
provides that it may not be amended to increase the maximum amount of the fees
for the services described therein without the approval of a majority of the
outstanding shares of the Fund. The Plan provides that no material amendment to
the Plan will, in any event, be effective unless it is approved by a majority
vote of the Trustees and the Independent Trustees of the Fund. In adopting the
Plan, the Board of Trustees has determined that, in their judgment, there is a
reasonable likelihood that the Plan will benefit the holders of the shares of
the Fund.
Pursuant to the Plan, at least quarterly, John Hancock Funds provides
the Fund a written report of the amounts expended under the Plan and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their contract appropriateness.
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NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund
shares, the following procedures are utilized whenever applicable. The Fund
utilizes the amortized cost valuation method of valuing portfolio instruments in
the absence of extraordinary or unusual circumstances. Under the amortized cost
method, assets are valued by constantly amortizing over the remaining life of an
instrument the difference between the principal amount due at maturity and the
cost of the instrument to the Fund. The Trustees will from time to time review
the extent of any deviation of the net asset value, as determined on the basis
of the amortized cost method, from net asset value as it would be determined on
the basis of available market quotations. If any deviation occurs which may
result in unfairness either to new investors or existing shareholders, the
Trustees will take such actions as they deem appropriate to eliminate or reduce
such unfairness to the extent reasonably practicable. These actions may include
selling portfolio instruments prior to maturity to realize gains or losses or to
shorten the Fund's average portfolio maturity, withholding dividends, splitting,
combining or otherwise recapitalizing outstanding shares or utilizing available
market quotations to determine net asset value per share.
Since a dividend is declared to shareholders each time net asset value
is determined, the net asset value per share of the Fund will normally remain
constant at $1.00 per share. There is no assurance that the Fund can maintain
the $1.00 per share value. Monthly, any increase in the value of a shareholder's
investment from dividends is reflected as an increase in the number of shares in
the shareholder's account or is distributed as cash if a shareholder has so
elected.
It is expected that the Fund's net income will be positive each time it
is determined. However, if because of a sudden rise in interest rates or for any
other reason the net income of the Fund determined at any time is a negative
amount, the Fund will offset the negative amount against income accrued during
the month for each shareholder account. If at the time of payment of a
distribution such negative amount exceeds a shareholder's portion of accrued
income, the Fund may reduce the number of its outstanding shares by treating the
shareholder as having contributed to the capital of the Fund that number of full
or fractional shares which represents the amount of excess. By investing in the
Fund, shareholders are deemed to have agreed to make such a contribution. This
procedure is intended to permit the Fund to maintain its net asset value at
$1.00 per share.
If in the view of the Trustees it is inadvisable to continue the
practice of maintaining net asset value at $1.00 per share, the Trustees reserve
the right to alter the procedures for determining net asset value. The Fund will
notify shareholders of any such alteration.
The NAV for the Fund is determined twice each business day at 12 noon
and at the close of regular trading on the New York Stock Exchange (typically 4
p.m. Eastern Time), by dividing the net assets by the number of its shares
outstanding. To help the Fund maintain its $1 constant share price, portfolio
investments are valued at cost, and any discount or premium created by market
movements is amortized to maturity.
PURCHASE OF SHARES
Shares of the Fund are offered at a price equal to their net asset
value per share which will normally be constant at $1.00. Share certificates
will not be issued unless requested by the shareholder in writing, and then only
will be issued for full shares.
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SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed the Trustees. When the shareholder sells portfolio
securities received in this fashion, he/she will incur a brokerage charge. Any
such securities would be valued for the purposes of making such payment at the
same value as used in determining net asset value. The Fund has elected to be
governed by Rule 18f-1 under the 1940 Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund during any 90 day period for any one account.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of Fund shares for
shares of other funds and portfolios managed by the Adviser.
Systematic Withdrawal Plan. As described briefly in the Prospectus, the
Fund permits the establishment of a Systematic Withdrawal Plan. Payments under
this plan represent proceeds arising from the redemption of Fund shares. The
Fund reserves the right to modify or discontinue the Systematic Withdrawal Plan
of any shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Fund Services.
Monthly Automatic Accumulation Program ("MAAP"). This program is
explained in the Prospectus and the Account Privileges Application. The program,
as it relates to automatic investment checks, is subject to the following
conditions:
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by John Hancock Investor Services
Corporation ("Investor Services") without prior notice if any investment is not
honored by the shareholder's bank. The bank shall be under no obligation to
notify the shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the due date of any investment.
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and
supervision of the Fund. The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of beneficial interest of the
Trust without par value. Under the Declaration of Trust, the Trustees have the
authority to create and classify shares of beneficial interest in separate
series, without further action by shareholders. As of the date of this Statement
of Additional Information, the Trustees have authorized shares of the Fund and
one other series. Additional series may be added in the future. The Declaration
of Trust also authorizes the Trustees to classify and reclassify the shares of
the Fund, or any other series of the Trust, into one or more classes. As of the
date of this Statement of Additional Information, the Trustees have authorized
the issuance of one class of shares of the Fund.
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The shares of the Fund represent an equal proportionate interest in the
aggregate net assets attributable to the Fund.
In the event of liquidation, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable except as set forth below.
Unless otherwise required by the 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 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 Fund's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations or affairs of
the Fund. The Declaration of Trust also provides for indemnification out of the
Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no Fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock Fund. Liability is
therefore limited to circumstances in which the Fund itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.
In order to avoid conflicts with portfolio trades for the Fund, the
Adviser and the Fund have adopted extensive restrictions on personal securities
trading by personnel of the Adviser and its affiliates. Some of these
restrictions are: pre-clearance for all personal trades and a ban on the
purchase of initial public offerings, as well as contributions to specified
charities of profits on securities held for less than 91 days. These
restrictions are a continuation of the basic principle that the interests of the
Fund and its shareholders come first.
A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax
purposes. The Fund has qualified and has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and intends to continue to so qualify in the future. As
such and by complying with the applicable provisions of the Code regarding the
sources of its income, the timing of its distributions, and the diversification
of its assets, the Fund will not be subject to Federal income tax on taxable
income (including net realized capital gains, if any) which is distributed to
shareholders in accordance with the timing requirements of the Code.
The Fund will be subject to a four percent nondeductible federal excise
tax on certain amounts not distributed (and not treated as having been
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distributed) on a timely basis in accordance with annual minimum distribution
requirements. The Fund intends under normal circumstances to seek to avoid or
minimize liability for such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and
profits ("E&P") will be taxable under the Code for investors who are subject to
tax. If these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss investment company taxable income is all taxable income
and capital gains or losses, other than those gains or losses taken into account
in computing net capital gain, after reduction by deductible expenses. It is not
likely that the Fund will earn or distribute any net capital gain.) Some
distributions may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. Distributions from
the Fund will not qualify for the dividends-received deduction for any corporate
shareholder. The tax treatment described above will apply without regard to
whether distributions are received in cash or reinvested in additional shares of
the Fund.
Distributions, if any, in excess of E&P will constitute a return of
capital under the Code, which will first reduce an investor's federal tax basis
in Fund shares and then, to the extent such basis is exceeded, will generally
give rise to capital gains. Shareholders who have chosen automatic reinvestment
of their distributions will have a federal tax basis in each share received
pursuant to such a reinvestment equal to the amount of cash they would have
received had they elected to receive the distribution in cash, divided by the
number of shares received in the reinvestment.
Upon a redemption of shares (including by exercise of the exchange
privilege) a shareholder ordinarily will not realize a taxable gain or loss if,
as anticipated, the Fund maintains a constant net asset value per share. If the
Fund is not successful in maintaining a constant net asset value per share, a
redemption may produce a taxable gain or loss.
For Federal income tax purposes, the Fund is permitted to carry forward
a net capital loss in any year to offset net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent net capital
gains are offset by such losses, they would not result in Federal income tax
liability to the Fund and would not be distributed as such to shareholders.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
A state income ( and possibly local income and/or intangible property)
tax exemption is generally available to the extent (if any) the Fund's
distributions are derived from interest on (or, in the case of intangibles
taxes, the value of its assets is attributable to) certain U.S. Government
obligations, provided in some states that certain thresholds for holdings of
such obligations and/or reporting requirements are satisfied. The Fund will not
seek to satisfy any threshold or reporting requirements that any apply in
particular taxing jurisdictions, although the Fund may in its sole discretion
provide relevant information to shareholders.
The Fund will be required to report to the Internal Revenue Service
(the "IRS") all taxable distributions to shareholders, except in the case of
certain exempt recipients, i.e., corporations and certain other investors
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distributions to which are exempt from the information reporting provisions of
the Code. Under the backup withholding provisions of Code Section 3406 and
applicable Treasury regulations, all such reportable distributions may be
subject to backup withholding of federal income tax at the rate of 31% in the
case of non-exempt shareholders who fail to furnish the Fund with their correct
taxpayer identification number and certain certifications required by the IRS or
if the IRS or a broker notifies the Fund that the number furnished by the
shareholders is incorrect or that the shareholder is subject to backup
withholding as a result of failure to report interest or dividend income. The
Fund may refuse to accept an application that does not contain any required
taxpayer identification number or certification that the number provided is
correct. If the backup withholding provisions are applicable, any such
distributions, whether taken in cash or reinvested in shares, will be reduced by
the amounts required to be withheld. Any amounts withheld may be credited
against a shareholder's U.S. federal income tax liability. Investors should
consult their tax advisers about the applicability of the backup withholding
provisions.
The Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Fund qualifies as a regulated investment company under
the Code, the Fund will also not be required to pay any Massachusetts income
tax.
The foregoing discussion relates solely to U.S. Federal income tax laws
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions (if any), and ownership of
or gains realized (if any) on the redemption (including an exchange) of shares
of the Fund may also be subject to state and local taxes. Shareholders should
consult their own tax advisers as to the federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from, the
Fund in their particular circumstances.
Non-U.S. investors not engaged in U.S. trade or business with which
their Fund investment is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute for Form W-8 is on file, to 31% backup withholding on certain other
payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
CALCULATION OF PERFORMANCE
For the purposes of calculating yield, daily income per share consists
of interest and discount earned on the Fund's investments less provision for
amortization of premiums and applicable expenses, divided by the number of
shares outstanding, but does not include realized or unrealized appreciation or
depreciation.
In any case in which the Fund reports its annualized yield, it will
also furnish information as to the average portfolio maturities of the Fund. It
will also report any material effect of realized gains or losses or unrealized
appreciation on dividends which have been excluded from the computation of
yield.
Yield calculations are based on the value of a hypothetical preexisting
account with exactly one share at the beginning of the seven day period. Yield
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is computed by determining the net change in the value of the account during the
base period and dividing the net change by the value of the account at the
beginning of the base period to obtain the base period return. Base period is
multiplied by 365/7 and the resulting figure is carried to the nearest 100th of
a percent. Net change in account value during the base period includes dividends
declared on the original share, dividends declared on any shares purchased with
dividends of that share and any account or sales charges that would affect an
account of average size, but excludes any capital changes.
Effective yield is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical preexisting account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1
The yield of the Fund is not fixed or guaranteed. Yield quotations
should not be considered to be representations of yield of the Fund for any
period in the future. The yield of the Fund is a function of available interest
rates on money market instruments, which can be expected to fluctuate, as well
as of the quality, maturity and types of portfolio instruments held by the Fund
and of changes in operating expenses. The Fund's yield may be affected if,
through net sales of its shares, there is a net investment of new money in the
Fund which the Fund invests at interest rates different from that being earned
on current portfolio instruments. Yield could also vary if the Fund experiences
net redemptions, which may require the disposition of some of the Fund's current
portfolio instruments.
From time to time, in reports and promotional literature, the Fund's
yield and total return will be ranked or compared to indices of mutual funds and
bank deposit vehicles such as Lipper Analytical Services, Inc. "Lipper-Fixed
Income Fund Performance Analysis," a monthly publication which tracks net
assets, total return, and yield on mutual funds in the United States or
"IBC/Donahue's Money Fund Report," a similar publication. Comparisons may also
be made to bank Certificates of Deposit, which differ from mutual funds, like
the Fund, in several ways. The interest rate established by the sponsoring bank
is fixed for the term of a CD, there are penalties for early withdrawal from
CD's and the principal on a CD is insured. Unlike CD's, which are insured as to
principal, an investment in the Fund is not insured or guaranteed.
Performance rankings and ratings, reported periodically in national
financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRONS, will also be
utilized. The Fund's promotional and sales literature may make reference to the
Fund's "beta." Beta is a reflection of the market-related risk of the Fund by
showing how responsive the Fund is to the market.
24
<PAGE>
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities are
made by the Adviser pursuant to recommendations made by its investment
committee, which consists of officers and directors of the Adviser and
affiliates and officers and Trustees who are interested persons of the Fund.
Orders for purchases and sales of securities are placed in a manner which, in
the opinion of the Adviser will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market makers reflect a "spread."
Investments in debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on these transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. and other policies that the Trustees may determine, the Adviser
may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed
in the selection of brokers and dealers, and the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research information
and to a lesser extent statistical assistance furnished to the Adviser of the
Fund, and their value and expected contribution to the performance of the Fund.
It is not possible to place a dollar value on information and services to be
received from brokers and dealers, since it is only supplementary to the
research efforts of the Adviser. The receipt of research information is not
expected to reduce significantly the expenses of the Adviser. The research
information and statistical assistance furnished by brokers and dealers may
benefit the Life Company or other advisory clients of the Adviser, and
conversely, brokerage commissions and spreads paid by other advisory clients of
the Adviser may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitments to allocate portfolio
transactions upon any prescribed basis. While the Adviser officers will be
primarily responsible for the allocation of the Fund's brokerage business, their
policies and practices in this regard must be consistent with the foregoing and
will at all times be subject to review by the Trustees. For the fiscal years
ended May 31, 1996, 1995 and 1994, no negotiated brokerage commissions were paid
on portfolio transactions.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Fund may pay to a broker which provides brokerage and research services to
the Fund an amount of disclosed commission in excess of the commission which
another broker would have charged for effecting that transaction. This practice
is subject to a good faith determination by the Trustees that the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time. During the fiscal year ended May 31, 1996, the Fund
did not pay commissions as compensation to any brokers for research services
such as industry, economic and company reviews and evaluations of securities.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc. ("Distributors"), a broker-dealer
and John Hancock Freedom Securities Corporation and its two broker-dealer
subsidiaries, Tucker Anthony Incorporated ("Tucker Anthony") and Sutro &
Company, Inc. ("Sutro") all affiliated brokers. Pursuant to procedures
determined by the Trustees and consistent with the above policy of obtaining
best net results, the Fund may execute portfolio transactions with or through
25
<PAGE>
Tucker Anthony, Sutro or John Hancock Distributors. During the year ended May
31, 1996, the Fund did not execute any portfolio transactions with then
affiliated brokers.
Any of the Affiliated Brokers may act as broker for the Fund on
exchange transactions, subject, however, to the general policy of the Fund set
forth above and the procedures adopted by the Trustees pursuant to the 1940 Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers, except for accounts for which
the Affiliated Broker acts as a clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as defined in the
1940 Act) of the Fund, the Adviser or the Affiliated Brokers. Because the
Adviser, which is affiliated with the Affiliated Brokers, has, as an investment
adviser to the Fund, the obligation to provide investment management services,
which includes elements of research and related investment skills, such research
and related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria.
Other investment advisory clients advised by the Adviser may also
invest in the same securities as the Fund. When these clients buy or sell the
same securities at substantially the same time, the Adviser may average the
transactions as to price and allocate the amount of available investments in a
manner which the Adviser believes to be equitable to each client, including the
fund. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund of the size of the position obtainable for
it. On the other hand, to the extent permitted by law, the Adviser may aggregate
the securities to be sold or purchased for the Fund with those to be sold or
purchased for other clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205- 9116, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays Investor Services
an annual fee of $25.00 per account plus out-of-pocket expenses.
26
<PAGE>
CUSTODY OF PORTFOLIO
Portfolio securities of the Fund are held pursuant to a custodian
agreement between the Fund and State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts. Under the custodian agreement, State Street Bank
performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. The independent auditors audit and render
an opinion on the Fund's annual financial statements and prepare the Fund's
annual income tax returns. The financial statements of the Fund included in the
Prospectus and this SAI as of the end of the Fund's last fiscal year have been
audited by Ernst & Young LLP for the periods indicated in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
27
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
JOHN HANCOCK CURRENT INTEREST
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements listed below are included in and incorporated
by reference into Part B of the Registration Statement from the U.S. Government
Cash Reserve 1996 Annual Report to Shareholders for the year ended May 31, 1996
(filed electronically on July 25, 1996; file nos. 811- 2485 and 2-50931;
accession number 0001010521-96-000133) and Money Market Fund 1995 Annual Report
to Shareholders for the year ended October 31, 1995 (filed electronically on
January 3, 1996; file nos. 811-5254 and 33-16048; accession number
0000950135-96-000059) and Semi Annual Reports for the period ended April 30,
1996 filed electronically on June 28, 1996; file nos. 811-5254 and 33-16048;
accession number 0001005477-96-000175.
John Hancock Money Market Fund
Statement of Assets and Liabilities as of October 31, 1995.
Statement of Operations of the year ended October 31, 1995.
Statement of Changes in Net Asset for each of the two years in the period
ended October 31, 1995.
Notes to Financial Statements.
Financial Highlights for each of the 10 years in the period ended October
31, 1995 and for the six months ended April 30, 1996 (unaudited).
Schedule of Investments as of October 31, 1995.
Report of Independent Auditors.
Statement of Assets and Liabilities as of April 30, 1996 (unaudited).
Statement of Operations of the six months ended April 30, 1996 (unaudited).
Statement of Changes in Net Asset for the year ended October 31, 1995 and
for the six months ended April 30, 1996 (unaudited).
Notes to Financial Statements (unaudited).
Financial Highlights for each of the 10 years in the period ended October
31, 1995.
Schedule of Investments as of April 30, 1996 (unaudited).
John Hancock U.S. Government Cash Reserve
Statement of Assets and Liabilities as of May 31, 1996.
Statement of Operations of the year ended May 31, 1996.
Statement of Changes in Net Asset for each of the two years in the period
ended May 31, 1996.
Notes to Financial Statements.
Financial Highlights for each of the 10 years in the period ended May 31,
1996.
Schedule of Investments as of May 31, 1996.
Report of Independent Auditors.
C-1
<PAGE>
(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
As of October 31, 1996, the number of record holders of shares of
Registrant was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
U.S. Government Cash Reserve
Money Market Fund - Class A 35,490
Money Market Fund - Class B 10,340
Money Market Fund - Class S 2
Item 27. Indemnification
(a) Indemnification provisions relating to the Registrant's Trustees,
officers, employees and agents is set forth in Article VII of the Registrant's
By Laws included as Exhibit 2 herein.
(b) Under Section 12 of the Distribution Agreement, John Hancock Funds,
Inc. ("John Hancock Funds" ) has agreed to indemnify the Registrant and its
Trustees, officers and controlling persons against claims arising out of certain
acts and statements of John Hancock Funds.
Section 9(a) of the By-Laws of John Hancock Mutual Life Insurance Company
("Insurance Company") provides, in effect, that the Insurance Company will,
subject to limitations of law, indemnify each present and former director,
officer and employee of the of the Insurance Company who serves as a Trustee or
officer of the Registrant at the direction or request of the Insurance Company
against litigation expenses and liabilities incurred while acting as such,
except that such indemnification does not cover any expense or liability
incurred or imposed in connection with any matter as to which such person shall
be finally adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interests of the Insurance Company. In addition,
no such person will be indemnified by the Insurance Company in respect of any
liability or expense incurred in connection with any matter settled without
final adjudication unless such settlement shall have been approved as in the
best interests of the Insurance Company either by vote of the Board of Directors
at a meeting composed of directors who have no interest in the outcome of such
vote, or by vote of the policyholders. The Insurance Company may pay expenses
incurred in defending an action or claim in advance of its final disposition,
but only upon receipt of an undertaking by the person indemnified to repay such
payment if he should be determined not to be entitled to indemnification.
C-2
<PAGE>
Article IX of the respective By-Laws of John Hancock Funds and John Hancock
Advisers, Inc. ("the Adviser") provide as follows:
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a 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 the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the Registrant's Declaration of Trust and By-Laws of John
Hancock Funds, the Adviser, or the Insurance Company or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Advisers
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Adviser,
reference is made to Forms ADV (801-8124) filed under the Investment Advisers
Act of 1940, which is incorporated herein by reference.
C-3
<PAGE>
Item 29. Principal Underwriters
(a) John Hancock Funds acts as principal underwriter for the Registrant and also
serves as principal underwriter or distributor of shares for John Hancock Cash
Reserve, Inc., John Hancock Bond Trust, John Hancock Current Interest, John
Hancock Series, Inc., John Hancock Tax-Free Bond Trust, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Limited Term
Government Fund, John Hancock Sovereign Investors Fund, Inc., John Hancock
Special Equities Fund, John Hancock Sovereign Bond Fund, John Hancock Tax-Exempt
Series, John Hancock Strategic Series, John Hancock Technology Series, Inc.,
John Hancock World Fund, John Hancock Investment Trust, John Hancock
Institutional Series Trust, John Hancock Investment Trust II, John Hancock
Investment Trust III and John Hancock Investment Trust IV.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Edward J. Boudreau, Jr. Director, Chairman, President and Trustee, Chairman and Chief
101 Huntington Avenue Chief Executive Officer Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts
Robert G. Freedman Director Chairman and Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
James W. McLaughlin Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
David A. King Director None
101 Huntington Avenue
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
John A. Morin Vice President and Secretary Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President
101 Huntington Avenue and Secretary
Boston, Massachusetts
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Christopher M. Meyer Second Vice President and None
101 Huntington Avenue Treasurer
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Trustee
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John Goldsmith Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-6
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington avenue
Boston, Massachusetts
Anthony P. Petrucci Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Charles H. Womack Senior Vice President None
6501 Americas Parkway
Suite 950
Albuquerque, New Mexico
Keith Harstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts
Karen Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
(c) None.
Item 30. Location of Accounts and Records
The 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 offices of
Registrant's Transfer Agent and Custodian.
C-7
<PAGE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable
(b) Not applicable
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a
copy of the latest annual report to shareholders with respect to that
series upon request and without charge.
(d) Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940, as amended which relates to the assistance to be
rendered to shareholders by the Trustees of the Registrant in calling a
meeting of shareholders for the purpose of voting upon the question of the
removal of a trustee.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston and The Commonwealth of Massachusetts on
the 22nd day of November, 1996.
JOHN HANCOCK CURRENT INTEREST
By: *
-------------------------
Edward J. Boudreau, Jr.
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- ------------------------ Chairman and Chief Executive
Edward J. Boudreau, Jr. Officer (Principal Executive Officer)
/s/ James B. Little
- ------------------------ Senior Vice President and Chief November 22, 1996
James B. Little Financial Officer (Principal
Financial and Accounting Officer)
*
- ------------------------ Trustee
James F. Carlin
*
- ------------------------ Trustee
William H. Cunningham
*
- ------------------------ Trustee
Charles F. Fretz
*
- ------------------------ Trustee
Anne C. Hodsdon
C-9
<PAGE>
Signature Title Date
--------- ----- ----
*
- ------------------------ Trustee
Charles L. Ladner
*
- ------------------------ Trustee
Leo E. Linbeck, Jr.
*
- ------------------------ Trustee
Patricia P. McCarter
*
- ------------------------ Trustee
Steven R. Pruchansky
*
- ------------------------ Trustee
Richard S. Scipione
*
- ------------------------ Trustee
Norman H. Smith
*
- ------------------------ Trustee
John P. Toolan
*By: /s/ Susan S. Newton
------------------- November 22, 1996
Susan S. Newton,
Attorney-in-Fact under
Powers of Attorney dated
June 25, 1996, filed herewith.
</TABLE>
C-10
<PAGE>
John Hancock Current Interest
EXHIBIT INDEX
Exhibit No. Exhibit Description
99.B1 Amended and Restated Declaration of Trust dated July 1, 1996.**
99.B2 Amended By-Laws.*
99.B3 Not Applicable
99.B4 Not Applicable
99.B5 Investment Management Contract between John Hancock Advisers,
Inc. and the Registrant on behalf of U.S. Government Cash
Reserve Fund.*
99.B6 Distribution Agreement between John Hancock Broker Distribution
Services, Inc. and the Registrant dated December 22, 1994.*
99.B6.1 Form of Soliciting Dealer Agreement between John Hancock Funds,
Inc. and Selected Dealers.*
99.B6.2 Form of Financial Institution Sales and Service Agreement between
John Hancock Funds, Inc. and the John Hancock funds.*
99.B7 Not Applicable
99.B8 Master Custodian Agreement between the John Hancock funds and
Investors Bank and Trust Company.*
99.B9 Transfer Agency Agreement between John Hancock Investor Services
Corporation and the John Hancock funds.*
99.B10 Not Applicable
99.B11 Consent of Independent Auditors.+
99.B12 Not Applicable
99.B13 Not Applicable
99.B14 Not Applicable
C-11
<PAGE>
99B15 Not Applicable
99.B16 Schedule of Computation of Yield and Total Return.**
99.27.1A Money Market - Annual+
99.27.1B Money Market - Annual+
99.27.2A Money Market - Semi-Annual+
99.27.2B Money Market - Semi-Annual+
99.27.3 U.S. Government Cash Reserve - Annual+
* Previously filed electronically with post-effective amendment number 48
(file nos. 811-02485 and 2-50931 ) on September 27, 1995, accession number
0000950135-95-001114.
** Previously filed electronically with post-effective amendment number 51
(file numbers 811-02485 and 2-50931) on August 26, 1996, accession number
0001010521-96-000145).
+ Filed herewith.
C-11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" for Money Market Fund in the John Hancock Money Market Funds
Prospectus and "Independent Auditors" in the John Hancock Money Market Fund
Class A and Class B Shares Statement of Additional Information in Post-Effective
Amendment No. 53 to Registration Statement (Form N-1A No. 2-50931) dated
December 2, 1996.
We also consent to the incorporation by reference therein of our report dated
December 15, 1995, with respect to the financial statements and financial
highlights of the John Hancock Money Market Fund (one of the portfolios
constituting John Hancock Current Interest) in this Form N-1A.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
November 20, 1996
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" for U.S. Government Cash Reserve Fund in the John Hancock Money
Market Funds Prospectus and "Independent Auditors" in the John Hancock U.S.
Government Cash Reserve Statement of Additional Information in Post-Effective
Amendment No. 53 to Registration Statement (Form N-1A No. 2-50931) dated
December 2, 1996.
We also consent to the incorporation by reference therein of our report dated
July 3, 1996, with respect to the financial statements and financial highlights
of the John Hancock U.S. Government Cash Reserve Fund (one of the portfolios
constituting John Hancock Current Interest) in this Form N-1A.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
November 20, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 081
<NAME> JOHN HANCOCK MONEY MARKET FUND - A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 74,748,213
<INVESTMENTS-AT-VALUE> 74,748,213
<RECEIVABLES> 397,572
<ASSETS-OTHER> 721,023
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 75,866,808
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 611,801
<TOTAL-LIABILITIES> 611,801
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,255,007
<SHARES-COMMON-STOCK> 20,942,062
<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> 75,255,007
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,223,760
<OTHER-INCOME> 0
<EXPENSES-NET> 1,039,659
<NET-INVESTMENT-INCOME> 2,184,101
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,184,101
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 71,384
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 47,205,231
<NUMBER-OF-SHARES-REDEEMED> 26,318,771
<SHARES-REINVESTED> 55,602
<NET-CHANGE-IN-ASSETS> 16,889,418
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 276,032
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,039,659
<AVERAGE-NET-ASSETS> 10,762,515
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 082
<NAME> JOHN HANCOCK MONEY MARKET FUND - B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 74,748,213
<INVESTMENTS-AT-VALUE> 74,748,213
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<NAME> JOHN HANCOCK MONEY MARKET FUND - CLASS A
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<NAME> JOHN HANCOCK MONEY MARKET FUND - CLASS B
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<NAME> JOHN HANCOCK U.S. GOVERNMENT CASH RESERVE
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