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. 52
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30
(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)
[ ] on (DATE) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[X] on December 2, 1996 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 LOGO]
- -------------------------------------------------------------------------------
PROSPECTUS
DECEMBER 2, 1996
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed to achieve their goal(s) o 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.
Money Market Fund
U.S. Government Cash Reserve
[JOHN HANCOCK FUNDS LOGO]
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 How sales charges are calculated 8
either money market fund. Opening an account 9
Types of investment risk 9
Buying shares 10
Selling shares 11
Transaction policies 13
Dividends and account policies 13
Additional investor services 14
Details that apply to both FUND DETAILS
money market funds. Business structure 15
Sales compensation 16
FOR MORE INFORMATION back cover
<PAGE>
OVERVIEW
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FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[BULLSEYE ICON]
GOAL AND STRATEGY The fund's particular investment goals and the strategies it
intends to use in pursuing those goals.
[FOLDER ICON]
PORTFOLIO SECURITIES The primary types of securities in which the fund invests.
Secondary investments are described in "More about risk" at the end of the
prospectus.
[CHART ICON]
RISK FACTORS The major risk factors associated with the fund.
[INDIVIDUAL ICON]
PORTFOLIO MANAGEMENT The individual or group designated by the investment
adviser to handle the fund's day-to-day management.
[PERCENT ICON]
EXPENSES The overall costs borne by an investor in the
fund, including sales charges and annual expenses.
[DOLLAR SIGN ICON]
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
REGISTRANT NAME: JOHN HANCOCK CURRENT INTEREST
TICKER SYMBOL CLASS A: N/A CLASS B: TSMXX
- -------------------------------------------------------------------------------
GOAL AND STRATEGY
[BULLSEYE ICON]
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
[FOLDER ICON]
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
- - 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.
At least 95% of assets must be invested in securities rated in the highest
short-term category or their unrated equivalents, with the balance in the
second-highest 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 a weighted average maturity of 90 days or less, and does not
invest in securities with maturities of more than 13 months.
RISK FACTORS
[CHART ICON]
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 18.
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
[INDIVIDUAL ICON]
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
[PERCENT ICON]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
<S> <C> <C>
Maximum sales charge imposed on purchases
(as a percentage of offering price) none none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none(1) 5.00%
Redemption fee(1) none none
Exchange fee none none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATIONG EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C> <C>
Management fee 0.65% 0.65%
12b-1 fee(2) 0.25% 1.00%
Other expenses 0.29% 0.29%
Total fund operating expenses 1.19% 1.94%
</TABLE>
EXAMPLE The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $56 $81 $107 $183
Class B shares
Assuming redemption
at end of period $70 $91 $125 $207
Assuming no redemption $20 $61 $105 $207
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Does not include wire redemption fee (currently $4.00).
(2) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge. 4
4 MONEY MARKET FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[DOLLAR SIGN ICON]
The figures below have been audited by the fund's independent auditors,________
_______________.
VOLATILITY, AS INDICATED BY CLASS B YEAR-BY-YEAR
TOTAL INVESTMENT RETURN (%)
(scale varies among funds)
[CLASS B INVESTMENT RETURN BAR CHART]
<TABLE>
<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(4) $ 1.00
Total investment return at net asset value(3) (%) 0.64(3) 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)
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1987(1,5) 1998 1989 1990 1991 1992
<S> <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
Net investment income (loss) 0.0007 0.06 0.07 0.06 0.05 0.02
Less distributions:
Dividends from net investment income (0.0007) (0.06) (0.07) (0.06) (0.05) (0.02
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total investment return at net asset value(3) (%) 0.06 6.06 7.40 6.30 4.61 1.73
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
Ratio of expenses to average net assets (%) 0.01(4) 1.51 2.12 2.16 2.11 2.47
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 4.45 1.69
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) 0.05(4) 5.11 6.69 5.96 4.33 --
</TABLE>
<TABLE>
<CAPTION>
CLASS B - YEAR ENDED OCTOBER 31, 1993 1994 1995(6) 1995(2)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.01 0.02 0.04 0.02
Less distributions:
Dividends from net investment income (0.01) (0.02) (0.04) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total investment return at net asset value(3) (%) 0.85 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) ($) 31,546 58,366 54,313 89,852
Ratio of expenses to average net assets (%) 2.44 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 (%) 0.85 1.97 3.96 3.82(5)
Ratio of adjusted net investment income (loss) to average
net assets(8) (%) -- -- -- --
</TABLE>
(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 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 which does not take into consideration
fee reductions by the adviser during the periods shown.
(8) Unreimbursed, without fee reductions.
MONEY MARKET FUND 5
<PAGE>
U.S. GOVERNMENT CASH RESERVE
REGISTRANT NAME: JOHN HANCOCK CURRENT INTEREST TICKER SYMBOL: TSGIX
- --------------------------------------------------------------------------------
GOAL AND STRATEGY
[BULLSEYE ICON]
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
[FOLDER ICON]
The fund invests in securities that are issued or guaranteed as to principal
and interest by the U.S. Government, its agencies or instrumentalities. The fund
maintains a weighted 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
[CHART ICON]
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 18.
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.
There is a $20,000 minimum investment for this fund.
PORTFOLIO MANAGEMENT
[INDIVIDUAL ICON]
The fund's investment decisions are made by a portfolio management team, with
no individual primarily responsible for making them. Team members are part of
the adviser's staff of fixed-income research analysts and portfolio managers.
INVESTOR EXPENSES
[PERCENT ICON]
Fund investors pay various expenses, either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A
<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(1) none
Exchange fee none
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A % OF AVERAGE NET ASSETS)
<S> <C>
Management fee 0.65%
12b-1 fee 0.25%
Other expenses 0.29%
Total fund operating expenses 1.19%
</TABLE>
Example The table below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
<TABLE>
<CAPTION>
SHARE CLASS YEAR 1 YEAR 3 YEAR 5 YEAR 10
<S> <C> <C> <C> <C>
Class A shares $4 $11 $20 $44
</TABLE>
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Does not include wire redemption fee (currently $4.00).
6 U.S. GOVERNMENT CASH RESERVE FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
[DOLLAR SIGN ICON]
The figures below have been audited by the fund's independent auditors, _______
_________________.
VOLATILITY, AS INDICATED BY YEAR-BY-YEAR
TOTAL INVESTMENT RETURN (%)
(scale varies among funds)
[YEAR BY YEAR INVESTMENT RETURN BAR CHART]
<TABLE>
<CAPTION>
YEAR ENDED MAY 31, 1987 1988 1989 1990 1991 1992
<S> <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
Net investment income (loss) 0.05 0.05 0.08 0.08 0.07 0.05
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.08) (0.08) (0.07) (0.05)
Net asset value, end of period $ 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
Total adjusted investment return at net asset value(2,3) (%) 5.25 5.50 7.78 8.35 7.11 4.62
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) ($) 73,048 48,774 69,346 164,509 200,092 109,358
Ratio of expenses to average net assets (%) 0.91 1.05 0.55 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
Ratio of net investment income (loss) to average net assets (%) 5.13 5.42 8.29 8.27 7.21 4.86
Ratio of adjusted net investment income (loss) to average
net assets(4) (%) 5.13 5.42 8.05 7.96 6.90 4.53
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MAY 31, 1993 1994 1995(1) 1996
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.03 0.03 0.05 0.05
Less distributions:
Dividends from net investment income (0.03) (0.03) (0.05) (0.05)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total investment return at net asset value(2) (%) 3.25 3.04 5.07 5.59
Total adjusted investment return at net asset value(2,3) (%) 2.93 2.74 4.69 4.84
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) ($) 123,106 94,408 29,131 28,907
Ratio of expenses to average net assets (%) 0.35 0.35 0.35 0.35
Ratio of adjusted expenses to average net assets(4) (%) 0.67 0.65 0.73 1.10
Ratio of net investment income (loss) to average net assets (%) 3.19 2.96 4.79 5.41
Ratio of adjusted net investment income (loss) to average
net assets(4) (%) 2.87 2.66 4.41 4.66
</TABLE>
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(2) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(3) An estimated total return calculation which does not take into consideration
fee reductions by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
U.S. GOVERNMENT CASH RESERVE FUND 7
<PAGE>
YOUR ACCOUNT
- -------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Money Market Fund offers two classes of shares, Class A and Class B. 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
- - No sales charges.
- - Lower annual expenses than Class B shares.
CLASS B
- - No front-end sales charge.
- - Higher annual expenses than Class A shares.
- - A deferred sales charge, as described below.
- - Automatic conversion to Class A shares after eight years (Group 2) (see
below), thus reducing future annual expenses.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
HOW SALES CHARGES ARE CALCULATED
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:
<TABLE>
<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
</TABLE>
All purchases made during a calendar month are counted as having been made on
the FIRST day of that month.
CDSC calculations are based on the number of shares involved, not on the value
of your account. To keep your CDSC as low as possible, each time you place a
request to sell shares we will first sell any shares in your account that carry
no CDSC. If there are not enough of these to meet your request, we will sell
those shares that have the lowest CDSC.
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.
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.
8 YOUR ACCOUNT
<PAGE>
- --------------------------------------------------------------------------------
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.
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 index or 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 other investments.
VALUATION RISK The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
- --------------------------------------------------------------------------------
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
- retirement account: $250
- Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must invest
at least $25 a month
- U.S. Government Cash Reserve Fund: $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.
YOUR ACCOUNT 9
<PAGE>
BUYING SHARES
- --------------------------------------------------------------------------------
BY CHECK
- --------------------------------------------------------------------------------
[Personal Check Icon]
OPENING AN ACCOUNT
- Make out a check for the investment amount, payable to "John Hancock
Investor Services Corporation."
- Deliver the check and your completed application to your financial
representative, or mail to Investor Services (address on next page).
ADDING TO AN ACCOUNT
- Make out a check for the investment amount payable to "John Hancock
Investor Services Corporation."
- Fill out the detachable investment slip from an account statement. If no
slip is available, include a note specifying the fund name, your share
class, your account number, and the name(s) in which the account is
registered.
- Deliver the check and your investment slip or note to your financial
representative, or mail to Investor Services (address on next page).
- --------------------------------------------------------------------------------
BY EXCHANGE
- --------------------------------------------------------------------------------
[Double Arrow Icon]
OPENING AN ACCOUNT
- Call your financial representative or Investor Services to request an
exchange.
ADDING TO AN ACCOUNT
- Call Investor Services to request an exchange.
- --------------------------------------------------------------------------------
BY WIRE
- --------------------------------------------------------------------------------
[Wire Icon]
OPENING AN ACCOUNT
- Deliver your completed application to your financial representative, or
mail it to Investor Services.
- Obtain your account number by calling your financial representative or
Investor Services.
- Instruct your bank to wire the amount of your investment to:
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.
ADDING TO AN ACCOUNT
- Instruct your bank to wire the amount of your investment to:
First Signature Bank & Trust
Account # 900000260
Routing # 211475000
Specify the fund name, your share class, your account number, and the
name(s) in which the account is registered. Your bank may charge a fee
to wire funds.
- --------------------------------------------------------------------------------
BY PHONE
- --------------------------------------------------------------------------------
[Phone Icon]
OPENING AN ACCOUNT
- See "By wire" and "By exchange."
ADDING TO AN ACCOUNT
- Verify that your bank or credit union is a member of the Automated
Clearing House (ACH) system.
- Complete the "Invest-By-Phone" and "Bank Information" sections on your
account application.
- Call Investor Services to verify that these features are in place on
your account.
- Tell the Investor Services representative the fund name, your share
class, your account number, the name(s) in which the account is
registered, and the amount of your investment.
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."
10 YOUR ACCOUNT
<PAGE>
SELLING SHARES
- --------------------------------------------------------------------------------
BY LETTER
- --------------------------------------------------------------------------------
[Letter Icon]
DESIGNED FOR
- Accounts of any type.
- Sales of any amount.
TO SELL SOME OR ALL OF YOUR SHARES
- Write a letter of instruction or complete a stock power indicating 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
- --------------------------------------------------------------------------------
[Phone Icon]
DESIGNED FOR
- Most accounts.
- Sales of up to $100,000.
TO SELL SOME OR ALL OF YOUR SHARES
- For automated service 24 hours a day using your touch-tone phone, 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)
- --------------------------------------------------------------------------------
[Wire Icon]
DESIGNED FOR
- Requests by letter to sell any amount (accounts of any type).
- Requests by phone to sell up to $100,000 (accounts with telephone
redemption privileges).
TO SELL SOME OR ALL OF YOUR SHARES
- Fill out the "Telephone redemption" section of your new account
application.
- To verify that the telephone redemption privilege is in place on an
account, or to request the 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 12:00 NOON EASTERN TIME THAT DAY.
- --------------------------------------------------------------------------------
BY EXCHANGE
- --------------------------------------------------------------------------------
[Double Arrow Icon]
DESIGNED FOR
- Accounts of any type.
- Sales of any amount.
TO SELL SOME OR ALL OF YOUR SHARES
- Obtain a current prospectus for the fund into which you are exchanging
by calling your financial representative or Investor Services.
- Call Investor Services to request an exchange.
- --------------------------------------------------------------------------------
BY CHECK
- --------------------------------------------------------------------------------
[Personal Check Icon]
DESIGNED FOR
- Any account with checkwriting privileges.
- Sales of over $100.
TO SELL SOME OR ALL OF YOUR SHARES
- Request checkwriting on your account application.
- 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.
To sell shares through a systematic withdrawal plan, see "Additional investor
services."
YOUR ACCOUNT 11
<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.
- --------------------------------------------------------------------------------
SELLER
Owners of individual, joint, sole proprietorship, UGMA/UTMA (custodial accounts
for minors) or general partner accounts.
REQUIREMENTS FOR WRITTEN REQUESTS
- Letter of instruction.
- On the letter, the signatures and titles of all persons authorized to
sign for the account, exactly as the account is registered.
- Signature guarantee if applicable (see above)
- --------------------------------------------------------------------------------
SELLER
Owners of corporate or association accounts.
REQUIREMENTS FOR WRITTEN REQUESTS
- Letter of instruction.
- Corporate resolution, certified within the past 90 days.
- On the letter and the resolution, the signature of the person(s)
authorized to sign for the account.
- Signature guarantee if applicable (see above)
- --------------------------------------------------------------------------------
SELLER
Owners or trustees of trust accounts.
REQUIREMENTS FOR WRITTEN REQUESTS
- 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)
- --------------------------------------------------------------------------------
SELLER
Joint tenancy shareholders whose co-tenants are deceased.
REQUIREMENTS FOR WRITTEN REQUESTS
- Letter of instruction signed by surviving tenant.
- Copy of death certificate.
- Signature guarantee if applicable (see above)
- --------------------------------------------------------------------------------
SELLER
Executors of shareholder estates.
REQUIREMENTS FOR WRITTEN REQUESTS
- Letter of instruction signed by executor.
- Copy of order appointing executor.
- Signature guarantee if applicable (see above)
- --------------------------------------------------------------------------------
SELLER
Administrators, conservators, guardians and other sellers or account types not
listed above.
REQUIREMENTS FOR WRITTEN REQUESTS
- Call 1-800-225-5291 for instructions.
12 YOUR ACCOUNT
<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 12:00 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, except that
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 your 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 Most shares are electronically recorded. If you wish to have
certificates for your shares, please write to Investor Services. Certificated
shares can only be sold by returning the certificates to Investor Services,
along with a letter of instruction or a stock power and a signature guarantee.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten calendar days after
the purchase.
ELIGIBILITY BY STATE You may only invest in, or exchange into, fund shares
legally available in your state.
- --------------------------------------------------------------------------------
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - after every transaction (except a dividend reinvestment) that affects your
account balance
- - after any changes of name or address of the registered owner(s)
- - in all other circumstances, every quarter.
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
YOUR ACCOUNT 13
<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 prior to 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 record date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
TAXABILITY OF DIVIDENDS As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a 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: o Complete the appropriate
parts of your account application.
- - If you are using MAAP to open an account, make out a check ($25 minimum) for
your first investment amount payable to "John Hancock Investor Services
Corporation." Deliver your check and application to your financial
representative or Investor Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payment or
periodic withdrawals from your account. To establish:
- - Make sure you have at least $5,000 worth of shares in your account.
- - Make sure you are not planning to invest more money in this account (buying
shares during a period when you are also selling shares of the same fund is
not advantageous to you, because of sales charges).
- - Specify the payee(s). The payee may be yourself or any other party, and there
is no limit to the number of payees you may have, as long as they are all on
the same payment schedule.
- - Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
- - Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Investor Services.
RETIREMENT PLANS John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SEPs, SARSEPs, 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.
14 YOUR ACCOUNT
<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").
[Flow Chart]
SHAREHOLDERS
DISTRIBUTION AND SHAREHOLDER SERVICES
FINANCIAL SERVICES FIRMS AND
THEIR REPRESENTATIVES
Advise current and prospective shareholders on their fund investments, often in
the context of an overall financial plan.
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Markets the funds and distributes shares through selling brokers, financial
planners, and other financial representatives.
TRANSFER AGENT
John Hancock Investor Services Corporation
PO Box 9116
Boston, MA 02205-9116
Handles shareholder services, including record-keeping and statements,
distribution of dividends, and processing of buy and sell requests.
ASSET MANAGEMENT
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the funds' business and investment activities.
CUSTODIAN
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
Holds the funds' assets, settles all portfolio trades, and collects most of the
valuation data required for calculating each fund's NAV.
TRUSTEES
Supervise the funds' activities.
YOUR ACCOUNT 15
<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% foreign investment limitation are fundamental and may only be changed
with shareholder approval.
DIVERSIFICATION Both of the 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. The portions of these expenses that are reallowed
to financial services firms are shown on the next page.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
CLASS B UNREIMBURSED DISTRIBUTION EXPENSES(1)
<TABLE>
<CAPTION>
UNREIMBURSED AS A % OF
FUND EXPENSES NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Money Market $827,683 1.55%
</TABLE>
(1) As of the most recent fiscal year end covered by each fund's financial
highlights. These expenses may be carried forward indefinitely.
INITIAL COMPENSATION Whenever you make an investment in 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
.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.
Firms affiliated with John Hancock, which include Sutro & Company and John
Hancock Distributors, may receive an additional fee of up to 0.05% a year of
their total eligible net assets.
To compensate for continuing services, John Hancock Funds will pay Merrill
Lynch, Pierce, Fenner & Smith, Inc. an annual fee equal to 0.15% of the value of
Class A shares held by its customers for more than four years.
16 FUND DETAILS
<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 FUNDS LOGO]
101 Huntington Avenue
Boston, Massachusetts 02199-7603
[JOHN HANCOCK FINANCIAL SERVICES LOGO] (C) 1996 John Hancock Funds
MNYPN 10/96
<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 02205-5291
1-800-225-5291
<TABLE>
<CAPTION>
Table of Contents Page
- ----------------- ----
<S> <C>
Organization of the Trust ................................................ 2
Investment Objective and Policies ........................................ 2
Certain Investment Practices ............................................. 2
Investment Restrictions .................................................. 4
Those Responsible for Management ......................................... 6
Investment Advisory and Other Services ................................... 16
Distribution Contract .................................................... 19
Amortized Cost Method of Portfolio Valuation ............................. 21
Purchase of Shares ....................................................... 22
Special Redemptions ...................................................... 22
Additional Services and Programs ......................................... 22
Description of the Fund's Shares ......................................... 23
Tax Status ............................................................... 24
Calculation of Performance ............................................... 26
Brokerage Allocation ..................................................... 27
Transfer Agent Services .................................................. 29
Custody of Portfolio ..................................................... 29
Independent Auditors ..................................................... 29
Financial Statements ..................................................... F-1
</TABLE>
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.
The Fund is managed by John Hancock Advisers, Inc. (the "Adviser"), a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company") chartered in 1862 with national headquarters at John
Hancock Place, Boston, Massachusetts. John Hancock Funds, Inc. ("John Hancock
Funds") acts as principal distributor of the shares of the Fund.
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.
CERTAIN INVESTMENT PRACTICES
2
<PAGE>
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
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. The Fund may enter into repurchase agreements
collateralized by U.S. Government securities. A repurchase agreement is a
contract under which the Fund acquires a security for a relatively short period
(usually not more than 7 days) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). The Fund will enter into
repurchase agreements only with member banks of the Federal Reserve System and
with "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 and lack of
access to income during this period and 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,
3
<PAGE>
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_% 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 Board of Trustees. Under procedures
established by the Board of 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
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
4
<PAGE>
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" and "Certain Investment Practices" 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;
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
5
<PAGE>
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 Board of 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 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.
Set forth below is the principal occupation or employment of the
Trustees and principal officers of the Trust during the past five years. Unless
otherwise indicated, the business address of each is 101 Huntington Avenue,
Boston, Massachusetts 02199.
6
<PAGE>
7
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman Chairman and Chief Executive
October 1944 and Chief Executive Officer, the Adviser and The
Officer (1) (2) Berkeley Financial Group
("Berkeley 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 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).
</TABLE>
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
8
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
James F. Carlin Trustee (3) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments);
April 1940 Director, 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
O'Henry Hall the University of Texas, Austin,
Austin, TX 78701 Texas; Lee Hage and Joseph D.
January 1944 Jamail 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.
</TABLE>
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
9
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
Charles F. Fretz Trustee (3) Retired; self employed; former
RD #5, Box 300B Vice President and Director,
Clothier Springs Road Towers, Perrin, Foster & Crosby,
Malvern, PA 19355 Inc. (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
October 1931 1996); Director, ReCapital
Corporation (reinsurance) (until
1995).
Anne C. Hodsdon * President and President and Chief Operating
April 1953 Trustee (1) (2) Officer, the Adviser; Director,
Advisers International;
Executive Vice President, the
Adviser (until December 1994);
Senior Vice President, the
Adviser (until December 1993);
Vice President, the Adviser
(until 1991).
Charles L. Ladner Trustee (3) Director, Energy North, Inc.
UGI Corporation (public utility holding company)
P.O. Box 858 (until 1992); Senior Vice
Valley Forge, PA 19482 President of UGI Corp. (public
February 1938 utilities LPGAS).
</TABLE>
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
10
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
Leo E. Linbeck, Jr. Trustee (3) Chairman, President, Chief
3810 W. Alabama Executive Officer and Director,
Houston, TX 77027 Linbeck Corporation (a holding
August 1934 company 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
Eastern Corporation (a
diversified energy company),
Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest
International, Inc. (a
geophysical consulting firm)
(1980-1993); Director, Greater
Houston Partnership.
Patricia P. McCarter Trustee (3) Director and Secretary of the
1230 Brentford Road McCarter Corp. (machine
Malvern, PA 19355 manufacturer).
May 1928
</TABLE>
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
11
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
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 General Counsel, John Hancock
John Hancock Place Life Company; Director, the
P.O. Box 111 Adviser, Advisers International,
Boston, MA 02117 John Hancock Funds, Investor
August 1937 Services, John Hancock
Distributors, Inc., John Hancock
Subsidiaries, Inc., John Hancock
Property and Casualty Insurance
and its affiliates (until
November, 1993), SAMCorp. and NM
Capital; Trustee, The Berkeley
Group; Director JH Networking
Insurance Agency, Inc.
</TABLE>
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
12
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
Norman H. Smith Trustee (3) Lieutenant General, United
243 Mt. Oriole Lane States Marine Corps; Deputy
Linden, VA 22642 Chief of Staff for Manpower and
March 1933 Reserve Affairs, Headquarters
Marine Corps; Commanding General
III Marine Expeditionary
Force/3rd Marine Division
(retired 1991).
John P. Toolan Trustee (3) Director, 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).
</TABLE>
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
13
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
Robert G. Freedman * Vice Chairman and Vice Chairman and Chief
July 1938 Chief Investment Investment Officer, the Adviser;
Officer (2) President, the Adviser (until
December 1994); Director, the
Adviser, Advisers International,
John Hancock Funds, Investor
Services, SAMCorp., and NM
Capital; Senior Vice President,
The Berkeley Group.
James B. Little * Senior Vice President Senior Vice President, the
February 1935 and Chief Financial Adviser, The Berkeley group,
Officer John Hancock Funds and Investor
Services; Senior Vice President
and Chief Financial Officer,
each of the John Hancock Funds.
Susan S. Newton * Vice President and Vice President and Assistant
March 1950 Secretary Secretary, the Adviser; Vice
President and Secretary, John
Hancock Funds, Investor Services
and John Hancock Distributors,
Inc. (until 1994) and certain
John Hancock funds; Secretary,
SAMCorp; Vice President, The
Berkeley Group.
</TABLE>
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
14
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
<S> <C> <C>
John A. Morin * Vice President Vice President, the Adviser,
July 1950 Investor Services and John
Hancock Funds and each of the
John Hancock funds; Compliance
Officer, certain John Hancock
funds; Counsel, the Life
Company; Vice President and
Assistant Secretary, The
Berkeley Group.
James J. Stokowski * Vice President and Vice President, the Adviser;
November 1946 Treasurer Vice President and Treasurer,
each of the John Hancock funds.
</TABLE>
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 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. At such
date, Thomas R. Powers and Pat G. Powers JTWROS, Houston, Texas held of record
4,152,999 shares representing approximately 9.00% of the shares outstanding;
Ultima Partners LP, c/o Norman Zadeh, Beverly Hills, California held of record
6,000,000 shares representing approximately 13.01% of the shares outstanding and
Charles C. Sorsby, Chicago, Illinois held of record 2,844,241 shares
representing approximately 6.17% 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 have established an Advisory Board which
acts to facilitate a smooth transition of management over a two-year period
(between Transamerica Fund Management Company ("TFMC"), the prior investment
adviser, and the 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.
15
<PAGE>
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 managementservices);
former Chairman of the Board, Mosher Steel Company.
Mrs. Lloyd Bentsen, Formerly National Democratic Committeewomanfrom Texas;
co-founder, Houston Parents' League; former board member of various
civic and cultural organizations in Houston, including the Houston
Symphony, Museum of Fine Arts and YWCA. Mrs. Bentsen is presently
active in various civic and cultural activities in the Washington, D.C.
area, including membership on the Area Board for The March of Dimes and
is a National Trustee for the Botanic Gardens of Washington, D.C.
Thomas R. Powers, Formerly Chairman of the Board, President and Chief Executive
Officer, TFMC; Director, West Central Advisory Board, Texas Commerce
Bank; Trustee, Memorial Hospital System; Chairman of the Board of
Regents of Baylor University; Member, Board of Governors, National
Association of Securities Dealers, Inc.; Formerly, Chairman, Investment
Company Institute; formerly, President, Houston Chapter of Financial
Executive Institute.
Thomas B. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation);
Member, Board of Managers, Harris County Hospital District; Advisory
Director, Commercial State Bank, El Campo; Advisory Director, First
National Bank of Bryan; Advisory Director, Sterling Bancshares; Former
Director and Vice Chairman, Texas Commerce Bancshares; and Vice
Chairman, Texas Commerce Bank.
COMPENSATION OF THE BOARD OF TRUSTEES AND ADVISORY BOARD. 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.
16
<PAGE>
<TABLE>
<CAPTION>
Total Compensation
Aggregate from all Funds in
Compensation John Hancock Fund
Trustees from the Fund Complex to Trustees**
- -------- ------------- ---------------------
<S> <C> <C>
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
------ --------
$3,408 $627,500
</TABLE>
* 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. As of
such date there were 61 funds in the John Hancock Fund Complex, of which each of
these Independent Trustees, except for Messrs. Cunningham and Linbeck, served
33. Messrs. Cunningham and Linbeck served 31 of such funds.
17
<PAGE>
<TABLE>
<CAPTION>
Total Compensation
from all Funds in
Aggregate John Hancock
Compensation Fund Complex to
Advisory Board from the Fund Advisory Board***
- -------------- ------------- -----------------
<S> <C> <C>
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
</TABLE>
***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. As of such
date there were 61 funds in the John Hancock Fund Complex, of which each of
these Advisory Board members served 33.
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Prospectus, the Fund receives its investment advice
from the Adviser. Investors should refer to the Prospectus for a description of
certain information concerning the investment management contract. Each of the
Trustees and principal officers affiliated with the Fund who is also an
affiliated person of the Adviser is named above, together with the capacity in
which such person is affiliated with the Fund and the Adviser.
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
18
<PAGE>
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.
No person other than the Adviser and its directors and employees
regularly furnishes advice to the Fund with respect to the desirability of the
Fund investing in, purchasing or selling securities. The Adviser may from time
to time receive statistical or other similar factual information, and
information regarding general economic factors and trends, from the Life Company
and its affiliates.
Under the terms of the investment management contract with the 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 conditions set forth in a private letter ruling that the Fund has
received from the Internal Revenue Service relating to its multiple-class
structure, class expenses properly allocable to any Class A or Class B shares
will be borne exclusively by such class of shares.
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:
<TABLE>
<CAPTION>
Fee
Average Daily Net Assets of the Fund (annual rate)
- ------------------------------------ -------------
<S> <C>
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%
</TABLE>
The Adviser may voluntarily and temporarily reduce its advisory fee or
make other arrangements to limit the Fund's expenses to a specified percentage
of average daily net assets. The 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
19
<PAGE>
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
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.
20
<PAGE>
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 CONTRACT
DISTRIBUTION CONTRACT. As discussed in the Prospectus, 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 Contract dated December 22, 1994 (the "Distribution
Contract"), 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 Securities Act of 1933.
The Distribution Contract was initially adopted by the affirmative vote
of the Fund's Board of Trustees including the vote a majority of Independent
Trustees, cast in person at a meeting called for such purpose. The Distribution
Contract 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
Board of Trustees including the vote of a majority of Independent Trustees, cast
in person at a meeting called for such purpose. The Distribution Contract 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
21
<PAGE>
voting securities of the Fund and terminates automatically in the case of an
assignment by John Hancock Funds.
DISTRIBUTION PLAN. The Board of 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 may pay distribution and service fees at an
aggregate annual rate of up to 0.15% of the Fund's average daily net assets.
Expenditures shall be calculated and accrued daily and paid monthly or at such
other intervals as the Trustees shall determine under the Plan. 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.
Information regarding the services rendered under the Plan and the
Distribution Contract and the amounts paid therefor by the Fund is provided to,
and reviewed by, the Board of Trustees on a quarterly basis. In its quarterly
review, the Board of Trustees
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<PAGE>
considers the continued appropriateness of the Plan and the Distribution
Contract and the level of compensation provided therein.
When the Fund seeks an Independent Trustee to fill a vacancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Trustee is, under resolutions adopted by the Trustees
contemporaneously with their adoption of the Plans, committed to the discretion
of the Committee on Administration of the Trustees. The members of the Committee
on Administration are all Independent Trustees and identified in this Statement
of Additional Information under the heading "Those Responsible for Management."
AMORTIZED COST METHOD OF PORTFOLIO VALUATION
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.
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<PAGE>
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.
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.
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 would incur a brokerage charge. Any such
securities would be valued for the purposes of making such payment at the same
value as used in determining net asset value. The Fund has 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. As described more fully in the Prospectus, 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 more fully in the Prospectus and the Account Privileges Application.
The program, as it relates to automatic investment checks, is subject to the
following conditions:
The investments will be drawn on or about the day of the month
indicated.
The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by John Hancock Investor Services
Corporation ("Investor Services") without prior notice if any investment is not
honored by the
24
<PAGE>
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the non-payment of any check.
The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the due date of any investment.
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.
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
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Declaration of Trust also provides that no series of the Trust shall be liable
for the liabilities of any other series. Liability is therefore limited to
circumstances in which the Fund itself would be unable to meet its obligations,
and the possibility of this occurrence is remote.
Pursuant to an order granted by the SEC, the Fund has adopted a
deferred compensation plan for its Independent Trustees which allows Trustees'
fees to be invested by the Fund in other John Hancock funds.
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.
Notwithstanding the fact that the Prospectus is a combined prospectus
for the Fund and other John Hancock mutual funds, the Fund shall not be liable
for the liabilities of any other John Hancock mutual fund.
TAX STATUS
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 at least annually in accordance with the timing requirements of the
Code.
The Fund will be subject to a four percent nondeductible federal excise
tax on certain amounts not distributed (and not treated as having been
distributed) on a timely basis in accordance with annual minimum distribution
requirements. The Fund intends under normal circumstances to avoid liability for
such tax by satisfying such distribution requirements.
Distributions of net investment income (which include original issue
discount and accrued, recognized market discount) and any net realized
short-term capital gains, as computed for Federal income tax purposes, will be
taxable as described in the Prospectus whether taken in shares or in cash.
Although the Fund does not expect to realize any net long-term capital gains,
distributions from such gains, if any, would be taxable as long-term capital
gains. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the amount of cash they would have received had they taken the
distribution in cash, divided by the number of shares received.
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<PAGE>
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.
Distributions from the Fund will not qualify for the dividends-received
deduction for corporate shareholders.
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.
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 31%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends 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
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<PAGE>
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
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 approximately 1,000 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
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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.
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 Investment Advisor will offer the best price and market for
the execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market makers reflect a "spread."
Investments in debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the NASD and other policies that the
Trustees may determine, the 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
29
<PAGE>
portfolio transactions upon any prescribed basis. While the Fund's officers will
be primarily responsible for the allocation of the Fund's brokerage business,
their policies and practices in this regard must be consistent with the
foregoing and will at all times be subject to review by the Trustees. For the
fiscal years ended 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
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. The Fund will not effect principal transactions with
Affiliated Brokers. The Fund may, however, purchase securities from other
members of underwriting syndicates of which Tucker Anthony, Sutro and John
30
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Hancock Distributors are members, but only in accordance with the policy set
forth above and procedures adopted and reviewed periodically by the Trustees.
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.
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
__________________, __________________, Boston, Massachusetts 02116,
has been selected as the independent auditors of the Fund. The financial
statements of the Fund included in the Prospectus and this Statement of
Additional Information have been audited by _________________ 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.
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<PAGE>
FINANCIAL STATEMENTS
F-1
<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"), in addition to the
information that is contained in the combined Money Market Funds' Prospectus
dated December 2, 1996 (the "Prospectus"). The Fund is a series portfolio of
John Hancock Current Interest (the "Trust").
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
<TABLE>
<CAPTION>
Page
<S> <C>
Organization of the Fund .......................................................2
Investment Objectives and Policies .............................................2
Certain Investment Practices ...................................................3
Investment Restrictions .......................................................10
Those Responsible for Management ..............................................13
Investment Advisory and Other Services ........................................24
Distribution Agreement ........................................................27
Net Asset Value ...............................................................30
Purchase of Class A Shares ....................................................31
Deferred Sales Charge on Class B Shares .......................................31
Special Redemptions ...........................................................35
Additional Services and Programs ..............................................36
Description of the Fund's Shares ..............................................37
Tax Status ....................................................................39
Calculation of Performance ....................................................42
Brokerage Allocation ..........................................................43
Transfer Agent Services .......................................................45
Custody of Portfolio ..........................................................46
Independent Auditors ..........................................................46
Appendix .....................................................................A-1
Financial Statements .........................................................F-1
</TABLE>
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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 September 30, 1996, the Fund was a series portfolio of 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.
The Fund is managed by John Hancock Advisers, Inc. (the "Adviser"), a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company"), chartered in 1862 with national headquarters at John
Hancock Place, Boston, Massachusetts. John Hancock Funds, Inc. ("John Hancock
Funds") acts as principal distributor of the shares of the Fund.
INVESTMENT OBJECTIVES 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
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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.
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.
CERTAIN INVESTMENT PRACTICES
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.
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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.
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
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<PAGE>
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
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
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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.
FOREIGN SECURITIES AND EMERGING COUNTRIES. The Fund may invest in foreign
securities and in 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 of such
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. The Fund may enter into repurchase agreements. A
repurchase agreement is a contract under which the Fund acquires a security for
a relatively short period (generally not more than seven days) subject to the
obligation of the seller to repurchase and the Fund to resell such security at a
fixed time and price (representing the Fund's cost plus interest). The Fund will
enter into repurchase agreements only with member banks of the Federal Reserve
System and with "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 and lack of
access to income during this period and the expense of enforcing its rights. The
Fund will not invest in a repurchase agreement
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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"
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 more than 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 Board of
Trustees. Under procedures established by the Board of 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
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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.
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.
The Fund will realize a gain if the security declines in price between the date
of the short sale and the date on which the Fund replaces the borrowed security.
On the other hand, the Fund will incur a loss as a result of the short sale if
the price of the security increases between those dates. The amount of any gain
will be decreased, and the amount of any loss increased, by the amount of any
premium or interest or dividends the Fund may be required to pay in connection
with a short sale. The successful use of short selling as a hedging device may
be adversely affected by imperfect correlation between movements in the price of
the security sold short and the securities being hedged.
Under applicable guidelines of the staff of the SEC, if the Fund engages in
short sales, it must put in a segregated account (not with the broker) an amount
of cash or U.S. Government securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short and
(b) any cash or U.S. Government securities required to be deposited as
collateral with the broker in connection with the short sale (not including the
proceeds from the short sale). In addition, until the Fund replaces the borrowed
security, it must daily maintain the segregated account at such a level that the
amount deposited in it plus the amount deposited with the broker as collateral
will equal the current market value of the securities sold short. Except for
short sales against the box, the amount of the Fund's net assets that may be
committed to short sales is limited and the securities in which short sales are
made must be listed on a national securities exchange.
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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. Emerging Growth 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 Board of Directors
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 Directors may adopt guidelines
and delegate to the Adviser the daily function of determining the monitoring and
liquidity of restricted securities. The Directors, however, will retain
sufficient oversight and be ultimately responsible for the determinations. The
Directors 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 Directors.
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
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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
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)
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.
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<PAGE>
(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 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
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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 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.
OTHER OPERATING POLICIES
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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, as
a matter of operating policy, pledge, mortgage or hypothecate its portfolio
securities if the percentage of securities so pledged, mortgaged or hypothecated
would exceed 15%.
As a nonfundamental investment restriction, 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.
These operating policies are not fundamental and may be changed without
shareholder approval. In order to comply with certain state regulatory
practices, certain policies, if changed, would require advance written notice to
shareholders.
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").
-13-
<PAGE>
The following table sets forth the principal occupations of the Trustees and
principal officers of the Trust during the past five years. Unless otherwise
indicated, the business address of each is 101 Huntington Avenue, Boston,
Massachusetts 02199.
-14-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
Edward J. Boudreau, Jr.* Chairman and Chief Chairman and Chief Executive Officer,
October 1944 Executive the Adviser and The Berkeley Financial
Officer(1)(2) Group ("The Berkeley 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");
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-15-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
Director, John Hancock Freedom
Securities Corporation, 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).
James F. Carlin Trustee (3) Chairman and CEO, Carlin Consolidated,
233 West Central Street Inc. (management/investments) ;
Natick, MA 01760 Director, Arbella Mutual Insurance
April 1940 Company (insurance), Consolidated Group
Trust (insurance administration), Carlin
Insurance Agency, Inc., West Insurance
Agency, Inc. (until May 1995) and Uno
Restaurant Corp.; Chairman,
Massachusetts Board of Higher Education
(since 1995); Receiver, the City of
Chelsea (until August 1992).
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-16-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
William H. Cunningham Trustee(3) Chancellor, University of Texas System
601 Colorado Street and former President of the University
O'Henry Hall of Texas, Austin, Texas; Lee Hage and
Austin, TX 78701 Joseph D. Jamail Regents Chair for Free
January 1944 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.
Harold R. Hiser, Jr. Trustee(3) Executive Vice President,
Schering-Plough Schering-Plough Corporation
Corporation (pharmaceuticals) (retired 1996);
One Giralda Farms Director, ReCapital Corporation
Madison, NJ 07940-1000 (reinsurance) (until 1995).
October 1931
Charles F. Fretz Trustee(3) Retired; self-employed; Former Vice
RD #5, Box 300B President and Director, Towers, Perrin,
Clothier Springs Road Forster & Crosby, Inc. (international
Malvern, PA 19355 management consultants) (1952-1985).
June 1928
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-17-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
Anne C. Hodsdon* President and President and Chief Operating Officer,
April 1953 Trustee(1)(2) the Adviser; Executive Vice President,
the Adviser (until December 1994);
Senior Vice President, the Adviser
(until December 1993); Vice President,
the Adviser (until 1991).
Charles L. Ladner Trustee(3) Director, Energy North, Inc. (public
UGI Corporation utility holding company)(until 1992);
460 North Gulph Road Senior Vice President, Finance UGI Corp.
King of Prussia, PA 19406 (holding company, public utilities,
February 1938 LPGAS).
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-18-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
Leo E. Linbeck, Jr. Trustee(3) Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company engaged
August 1934 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 Eastern Corporation
(a diversified energy company), Daniel
Industries, Inc. (manufacturer of gas
measuring products and energy related
equipment), GeoQuest International, Inc.
(a geophysical consulting firm)
(1980-1993); Director, Greater Houston
Partnership.
Patricia P. McCarter Trustee(3) Director and Secretary, The McCarter
Swedesford Road Corp. (machine manufacturer).
RD #3, Box 121
Malvern, PA 19355
May 1928
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-19-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
Steven R. Pruchansky Trustee(1)(3) Director and President, Mast Holdings,
360 Horse Creek Drive, #208 Inc. (since 1991); Director, First
Naples, FL 33942 Signature Bank & Trust Company (until
August 1944 August 1991); Director, Mast Realty
Trust (1982-1994); President, Maxwell
Building Corp. (until 1991).
Richard S. Scipione* Trustee(1) General Counsel, John Hancock Mutual
John Hancock Place Life Insurance Company; Director, the
P.O. Box 111 Adviser, Advisers International, John
Boston, MA 02199 Hancock Funds, Investor Services, John
August 1937 Hancock Distributors, Inc., John Hancock
Subsidiaries, Inc., John Hancock
Property and Casualty Insurance and its
affiliates (until November 1993),
SAMCorp and NM Capital; Trustee, The
Berkeley Group; Director, JH Networking
Insurance Agency, Inc.
Norman H. Smith Trustee(3) Lieutenant General, USMC, Deputy Chief
Rt. 1, Box 249 E of Staff for Manpower and Reserve
Linden, VA 22642 Affairs, Headquarters Marine Corps;
March 1933 Commanding General III Marine
Expeditionary Force/3rd Marine Division
(retired 1991).
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-20-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
John P. Toolan Trustee(3) Director, The Smith Barney Muni Bond
13 Chadwell Place Funds, The Smith Barney Tax-Free Money
Morristown, NJ 07960 Fund, Inc., Vantage Money Market Funds
September 1930 (mutual funds), The Inefficient-Market
Fund, Inc. (closed-end investment
company) and Smith Barney Trust Company
of Florida; Chairman, Smith Barney Trust
Company (retired 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 Vice Chairman and Chief Investment
July 1938 Chief Investment Officer, the Adviser; President, the
Officer(2) Adviser (until December 1994); Director,
the Adviser, Advisers International,
John Hancock Funds, Investor Services,
SAMCorp and NM Capital; Senior Vice
President, The Berkeley Group.
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-21-
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD
WITH THE PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS REGISTRANT DURING PAST FIVE YEARS
<S> <C> <C>
James B. Little* Senior Vice President Senior Vice President, the Adviser, The
February 1935 and Chief Financial Berkeley Group, John Hancock Funds and
Officer Investor Services; Senior Vice President
and Chief Financial Officer, each of the
John Hancock funds.
James J. Stokowski* Vice President and Vice President, the Adviser; Vice
November 1946 Treasurer President and Treasurer, each of the
John Hancock funds.
Susan S. Newton* Vice President and Vice President and Assistant Secretary,
March 1950 Secretary the Adviser; Vice President and
Secretary, certain John Hancock funds,
John Hancock Funds, Investor Services
and John Hancock Distributors, Inc.
(until 1994); Secretary, SAMCorp; Vice
President, The Berkeley Group.
John A. Morin* Vice President Vice President, the Adviser, Investor
July 1950 Services, John Hancock Funds and each of
the John Hancock funds; Compliance
Officer, certain John Hancock funds;
Counsel, the Life Company; Vice
President and Assistant Secretary, The
Berkeley Group.
</TABLE>
- ------------------------
* An "interested person" of the Trust, as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
-22-
<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 have established an Advisory Board which
acts to facilitate a smooth transition of management over a two-year period
(between Transamerica Fund Management Company ("TFMC"), the prior investment
adviser, and the 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,
-23-
<PAGE>
Commercial State Bank, El Campo; Advisory Director, First National
Bank of Bryan; Advisory Director,Sterling Bancshares; Former Director
and Vice Chairman, Texas Commerce Bancshares; and Vice Chairman,
Texas Commerce Bank.
COMPENSATION OF THE BOARD OF 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
-24-
<PAGE>
by the Adviser and its affiliates and receive no compensation from the Funds for
their services.
<TABLE>
<CAPTION>
Total
Compensation
from all Funds in
Aggregate John Hancock
Compensation Fund Complex to
Directors from the Fund* the Trustees**
- --------- -------------- ------------------
<S> <C> <C>
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
</TABLE>
* 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. As of
such date there were 61 funds in the John Hancock Fund Complex, of which
each of these Independent Trustees except Messrs. Cunningham and Linbeck
served 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.
-25-
<PAGE>
<TABLE>
<CAPTION>
Total Compensation
Aggregate from all Funds in
Compensation John Hancock
Advisory Board from the Fund* Fund Complex ***
- -------------- -------------- -------------------
<S> <C> <C>
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 $3,765 $216,000
</TABLE>
* 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 Fund receives investment advice from the Adviser. Investors should refer to
the Prospectus for a description of certain information concerning the Fund's
investment management contract. Each of the Trustees and principal officers
affiliated with the Trust who is also an affiliated person of the Adviser is
named above, together with the capacity in which such person is affiliated with
the Trust and the Adviser.
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $18 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.
-26-
<PAGE>
No person other than the Adviser and its directors and employees regularly
furnishes advice to the Fund with respect to the desirability of the Fund
investing in, purchasing or selling securities. The Adviser may from time to
time receive statistical or other similar factual information, and information
regarding general economic factors and trends, from the Life Company and its
affiliates.
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:
<TABLE>
<CAPTION>
FEE
AVERAGE DAILY NET ASSETS (ANNUAL RATE)
- ------------------------ -------------
<S> <C>
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%
</TABLE>
*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
-27-
<PAGE>
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 a Fund in connection with
the matters to which their respective contracts relate, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from its reckless disregard of the
obligations and duties under the applicable contract.
The initial term of the Advisory Agreement 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, 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
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.
-28-
<PAGE>
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 Trust, 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 AGREEMENT
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
in such notice. During these periods, such Selling Brokers may be deemed to be
underwriters as that term is defined in the 1933 Act.
-29-
<PAGE>
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
-30-
<PAGE>
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:
Expense Items
<TABLE>
<CAPTION>
Printing and Interest,
Mailing of Compensation Expenses of Carrying or
Prospectuses to to John Hancock Other Finance
Advertising New Shareholders Selling Brokers Funds Charges
<S> <C> <C> <C> <C> <C>
Class A Shares 0 0 $7,724 $6,107 NONE
Class B Shares $5,434 $6,766 $226,733 $3,472 $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.
Information regarding the services rendered under the Plans and the Distribution
Agreement and the amounts paid therefor by the respective Class of the Fund are
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<PAGE>
provided to, and reviewed by, the Board of Trustees on a quarterly basis. In its
quarterly review, the Board of Trustees considers the continued appropriateness
of the Plans and the Distribution Agreement and the level of compensation
provided therein.
When the Trust seeks an Independent Trustee to fill a vacancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Trustee is, under resolutions adopted by the Trustees
contemporaneously with their adoption of the Plans, committed to the discretion
of the Committee on Administration of the Trustees. The members of the Committee
on Administration are all Independent Trustees and are identified in this
Statement of Additional Information under the heading "Those Responsible for
Management."
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the shares of the
Fund, 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
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.
-32-
<PAGE>
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 and 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 represent 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 Fund is permitted to redeem shares of either class in kind. Nevertheless,
the Fund has filed with the Securities and Exchange Commission a notification of
election committing itself to pay in cash on redemption by a shareholder of
record, limited during any 90-day period to the lesser of $250,000 or 1% of the
net asset value of the Fund at the beginning of such period.
The Fund will not price its securities on the following national holidays: New
Year's Day; President's Day; Good Friday; Memorial Day; Independence Day; Labor
Day;
Thanksgiving Day and Christmas Day.
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
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<PAGE>
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
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 not regarded as
a share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price.
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:
-34-
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C>
* Proceeds of 50 shares redeemed at $1 per share $50
* Minus proceeds of 10 shares not subject to CDSC (dividend reinvestment) -10
* Amount subject to CDSC $40
</TABLE>
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the
Prospectus for additional information regarding the CDSC.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a CDSC,
if any, unless indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to a 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.)
-35-
<PAGE>
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.
-36-
<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
mandatory account
distributions value annually
in periodic
payments
Between 59-1/2 Waived Waived Waived Waived 12% of account
and 70-1/2 for Life value annually
Expectancy in periodic
or 12% of payments
account
value
annually in
periodic
payments
Under 59-1/2 Waived Waived for Waived for Waived for 12% of
annuity annuity annuity account
payments payments payments value annually
(72t) or 12% (72t) or 12% (72t) or 12% in periodic
of account of account of account payments
value value value
annually in annually in annually in
periodic periodic periodic
payments payments 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
-37-
<PAGE>
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
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. As described more fully in the Prospectus, 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. Since the
redemption price of Fund shares may be more or less than the shareholder's cost,
depending upon the market value of the securities owned by the Fund at the time
of redemption, the distribution of cash pursuant to this plan may result in
realization of gain or loss for purposes of Federal, state and local income
taxes. The maintenance of a Systematic Withdrawal Plan concurrently with
purchases of additional Class B shares of the Fund could be disadvantageous to a
shareholder because of the CDSC imposed on redemptions of Class B shares and
because redemptions are taxable events. 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 more
fully in the Prospectus and the Account Privileges Application. The program, as
it relates to automatic investment checks, is subject to the following
conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the Monthly Automatic Accumulation
Program may be revoked by 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.
-38-
<PAGE>
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.
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes, even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "Tax
Status."
DESCRIPTION OF THE FUND'S SHARES
Ownership of the Fund is represented by transferable shares of beneficial
interest. The Declaration of Trust permits the Trustees to create an unlimited
number of series and classes of shares of the Fund and, with respect to each
series and class, to issue an unlimited number of full or fractional shares and
to divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests of the Fund. As
of the date of this Statement of Additional Information, the Trustees have
authorized the shares of two series -- the Fund and the U.S. Government Cash
Reserve.
Pursuant to the Declaration of Trust, the Trustees may authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes within any
series (which would be used to distinguish among the rights of different
categories of shareholders, as might be required by future regulations or other
unforeseen circumstances).
The Trustees of the Trust have authorized the issuance of three classes of
shares for the Fund, designated as Class A, Class B and Class S shares. Class A,
Class B and Class S 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. Class S shares are available exclusively to
investors who maintain
-39-
<PAGE>
brokerage accounts with certain brokers who offer shares of the Fund as part of
a sweep account arrangement. Class S shares of the Fund are not subject to a
sales charge on purchases, redemptions or reinvested dividends, nor are they
subject to deferred sales charges or an exchange fee. The holders of Class A,
Class B and Class S 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. The
Trustees of the Trust may classify and reclassify the shares of the Fund into
additional classes of shares at a future date.
VOTING RIGHTS. Shareholders are entitled to a full vote for each full share
held. Shareholders of each series or class vote separately from other
shareholders of the Trust with respect to all matters which affect solely the
interests of that series or class. The Trustees themselves have the power to
alter the number and the terms of office of Trustees, and they may at any time
lengthen their own terms or make their terms of unlimited duration (subject to
certain removal procedures) and appoint their own successors, provided that at
all times at least a majority of the Trustees have been elected by shareholders.
The voting rights of shareholders are not cumulative, so that holders of more
than 50 percent of the shares voting can, if they choose, elect all Trustees
being selected, while the holders of the remaining shares would be unable to
elect any Trustees. Although the Fund need not hold annual meetings of
shareholders, the Trustees may call special meetings of shareholders for action
by shareholder vote as may be required by the 1940 Act or the Declaration of
Trust. Also, a shareholders' meeting must be called if so requested in writing
by the holders of record of 10% or more of the outstanding shares of the Trust.
In addition, the Trustees may be removed by the action of the holders of record
of two-thirds or more of the outstanding shares.
SHAREHOLDER LIABILITY. The Declaration of Trust provides that no Trustee,
officer, employee or agent of the Fund is liable to the Fund or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of the Fund, except as such liability may
arise from his or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties. It also provides that all third persons shall
look solely to the Fund's property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.
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
-40-
<PAGE>
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.
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.
As a Massachusetts business trust, the Fund is not required to issue share
certificates. The Fund shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders.
Notwithstanding the fact that the Prospectus is a combined prospectus for the
Fund and other John Hancock mutual funds, the Fund shall not be liable for the
liabilities of any other John Hancock mutual fund.
Pursuant to an order granted by the SEC, the Trust has adopted a defined
contribution plan for its Independent Trustees which allows Trustees' fees to be
invested by the Fund in other John Hancock funds.
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.
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) which is
distributed to shareholders at least annually in accordance with the timing
requirements of the Code.
The Fund will be subject to a 4% non-deductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
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<PAGE>
intends under normal circumstances to avoid liability for such tax by satisfying
such distribution requirements.
Distributions other than exempt-interest dividends from the Fund's current or
accumulated earnings and profits ("E&P") will be taxable under the Code for
investors who are subject to tax. If these distributions are paid from the
Fund's "investment company taxable income," they will be taxable as ordinary
income; and if they are paid from the Fund's "net capital gain," they will be
taxable as long-term capital gain. (Net capital gain is the excess (if any) of
net long-term capital gain over net short-term capital loss, and investment
company taxable income is all taxable income and capital gains, other than net
capital gain, after reduction by deductible expenses.) Some distributions from
investment company taxable income and/or net capital gain may be paid in January
but may be taxable to shareholders as if they had been received on December 31
of the previous year. The tax treatment described above will apply without
regarding 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 other
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.
The amount of the Fund's net short-term and long-term capital gains, if any, in
any given year will vary depending upon the Adviser's current investment
strategy and whether the Adviser believes it to be in the best interest of the
Fund to dispose of portfolio securities. At the time of an investor's purchase
of Fund shares, a portion of the purchase price is often attributable to
realized or unrealized appreciation in the Fund's portfolio. Consequently,
subsequent distributions from such appreciation may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares, and the
distributions in reality represent a return of a portion of the purchase price.
Upon a redemption of shares of the Fund (including by exercise of the exchange
privilege) a shareholder may realize a taxable gain or loss depending upon his
basis in his shares, except that a redemption of shares may not result in a 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. 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
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<PAGE>
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 an election to reinvest dividends in additional shares. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period of six months or less will be treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares.
Although its present intention is to distribute all net capital gains, if any,
the Fund reserves the right to retain and reinvest all or any portion of the
excess, as computed for Federal income tax purposes, of net long-term capital
gain over net short-term capital loss in any year. The Fund will not in any
event distribute net capital gain realized in any year to the extent that a
capital loss is carried forward from prior years against such gain. To the
extent such excess was retained and not exhausted by the carryforward of prior
years' capital losses, it would be subject to Federal income tax in the hands of
the Fund. Upon proper designation of this amount by the Fund, each shareholder
would be treated for Federal income tax purposes as if the Fund had distributed
to him on the last day of its taxable year his pro rata share of such excess,
and he had paid his pro rata share of the taxes paid by the Fund and reinvested
the remainder in the Fund. Accordingly, each shareholder would (a) include his
pro rata share of such excess as long-term capital gain income in his return for
his taxable year in which the last day of the Fund's taxable year falls, (b) be
entitled either to a tax credit on his return for, or to a refund of, his pro
rata share of the taxes paid by the Fund, and (c) be entitled to increase the
adjusted tax basis for his shares in the Fund by the difference between his pro
rata share of such excess and his pro rata share of such taxes.
For Federal income tax purposes, the Fund is generally permitted to carry
forward a net capital loss in any year to offset its 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, as noted above, would not be
distributed as such to shareholders. As of October 31, 1995, the Fund had no
capital loss carryforwards.
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 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
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<PAGE>
entities, insurance companies, and financial institutions. Dividends, capital
gain distributions, and ownership of or gains realized on the redemption
(including an exchange) of Fund shares may also be subject to state and local
taxes. Shareholders should consult their own tax advisers as to the Federal,
state or local tax consequences of ownership of shares of, and receipt of
distributions from, a Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from a Fund and, unless an effective IRS Form W-8 or authorized
substitute 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.
Provided that the Fund qualifies as a regulated investment company under the
Code, it will not be required to pay any Massachusetts income, corporate excise
or franchise taxes.
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.
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.
-44-
<PAGE>
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.
BROKERAGE ALLOCATION
-45-
<PAGE>
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser and officers of the
Trust 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 such transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the NASD 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.
-46-
<PAGE>
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that 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.
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 Directors and consistent with the above policy of obtaining
best net results, each 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. The Fund will not effect principal transactions with
Affiliated Brokers. The Fund may, however, purchase securities from other
members of underwriting syndicates of which Tucker Anthony and Sutro are
members, but only in accordance with the policy set forth above and procedures
adopted and reviewed periodically by the Trustees.
-47-
<PAGE>
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.
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 __________________, ______________
______, 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 ________________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.
-48-
<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
A-1
<PAGE>
principal and pay interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and pay interest for bonds in this
category than for bonds in the A category.
FITCH INVESTORS SERVICE ("FITCH")
AAA, AA, A, BBB - Bonds rated AAA are considered to be investment grade and of
the highest quality. The obligor has an extraordinary ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are 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
A-2
<PAGE>
months. Prime-1, indicates highest quality repayment capacity of rated issue and
Prime-2 indicates higher quality.
S&P - Commercial Paper ratings are a current assessment of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
Issues rated A have the greatest capacity for a timely payment and the
designation 1, 2 and 3 indicates the relative degree of safety. Issues rated
"A-1+" are those with an "overwhelming degree of credit protection."
FITCH - Commercial Paper ratings reflect current appraisal of the degree of
assurance of timely payment. F-1 issues are regarded as having the strongest
degree of assurance for timely payment. (+) is used to designate the relative
position of an issuer within the rating category. F-2 issues reflect an
assurance of timely payment only slightly less in degree than the strongest
issues. The symbol (LOC) may follow either category and indicates that a letter
of credit issued by a commercial bank is attached to the commercial paper note.
OTHER CONSIDERATIONS - The ratings of S&P, Moody's, and Fitch represent their
respective opinions of the quality of the municipal securities they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal securities with the same
maturity, coupon and ratings may have different yields and municipal securities
of the same maturity and coupon with different ratings may have the same yield.
A-3
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
JOHN HANCOCK MONEY MARKET FUND
Class S Shares
Prospectus
December 2, 1996
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Expense Information..................................................... 2
The Fund's Financial Highlights......................................... 3
Yield Information....................................................... 5
Investment Objective and Policies....................................... 5
Organization and Management of the Fund................................. 7
The Fund's Expenses..................................................... 8
Dividends and Taxes..................................................... 8
How to Buy Class S Shares............................................... 9
Share Price............................................................. 10
How to Redeem Class S Shares............................................ 10
Investments, Techniques and Risk Factors................................ 11
This Prospectus sets forth the information about Class S shares of John
Hancock Money Market Fund (the "Fund"), a diversified series of John Hancock
Current Interest. (the "Company"), that you should know before investing. Please
read and retain it for future reference. Class S shares of the Fund are offered
exclusively to investors who maintain brokerage accounts with certain brokers
who offer the Fund's shares as part of a sweep account (the "Selling Broker").
To invest in Class S shares of the Fund, the credit balances in your brokerage
account will be automatically invested or "swept" into the Fund, subject to the
terms of your brokerage account agreement.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. There is no assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
Additional information about the Fund and the Company has been filed
with the Securities and Exchange Commission (the "SEC"). You can obtain a copy
of the Fund's Statement of Additional Information for Class S shares, dated
December 2, 1996, and incorporated by reference into this Prospectus, free of
charge by writing or telephoning: John Hancock Investor Services Corporation,
P.O. Box 9116, Boston, Massachusetts 02205-9116, 1-800-225-5291 (1-800-554-6713
TDD). If you have any service related questions you should contact your Selling
Broker.
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.
1
<PAGE>
EXPENSE INFORMATION
The purpose of the following information is to help you to understand
the various fees and expenses you will bear, directly or indirectly, when you
purchase Class S shares of the Fund. The operating expenses included in the
table and hypothetical example below are based on fees and expenses of the Class
A and Class B shares of the Fund for the fiscal year ended October 31, 1995
adjusted for certain current fees and expenses. No Class S shares were actually
outstanding during the period. Actual fees and expenses of Class S shares in the
future may be greater or less than those indicated.
Shareholder Transaction Expenses
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
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fee (net of reduction)..................................... 0.40%
12b-1 fee*............................................................. 0.40%
Other expenses**....................................................... 0.59%
----
Total Fund operating expenses (net of reduction)***................... 1.39%
+ Redemption by wire fee (currently $4.00) not included.
* The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Fund's average net assets, and the remaining portion will be
used to cover distribution expenses.
** Other Expenses include transfer agent, legal, audit, custody and other
expenses.
*** Expenses reflect the reduction of the management fee by the Fund's adviser.
The higher fee cannot be reinstated without the Trustees' consent. Without
such a reduction the management fee and total fund operating expenses would
have been estimated as 0.50% and 1.49%, respectively.
2
<PAGE>
In addition to the above expenses, the Selling Broker with whom a shareholder
maintains a sweep account may charge an annual administration fee for making the
account available.
Example 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses
for the indicated period of years on
a hypothetical $1,000 investment,
assuming 5% annual return $ 14 $ 44 $ 76 $ 167
(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown).
The Fund's payment of a distribution fee may result in a long-term
shareholder indirectly paying more than the economic equivalent of the maximum
front-end sales charge permitted under the National Association of Securities
Dealers, Inc.'s Rules of Fair Practice.
The management and 12b-1 fees referred to above are more fully
explained in this Prospectus under the caption "The Fund's Expenses" and in the
Statement of Additional Information under the captions "Investment Advisory and
Other Services" and "Distribution Contract."
THE FUND'S FINANCIAL HIGHLIGHTS
The information in the following table of financial highlights has been
audited by _____________________, the Fund's independent auditors, whose
unqualified report is included in the Statement of Additional Information. Class
S shares are a new class of shares; no financial highlights exist for Class S
shares. Further information about the performance of the Fund is contained in
the Fund's Annual Report to shareholders, which may be obtained free of charge
by writing or telephoning John Hancock Investor Services Corporation ("Investor
Services") at the address or telephone number listed on the front page of this
Prospectus.
3
<PAGE>
Selected data for a Class A share outstanding
throughout each period is as follows:
Year Ended
October 31, 1995
----------------
Net asset value, beginning of period............................. $ 1.00
Net investment income............................................ 0.01
Less Distributions
Dividends from net investment income............................. (0.01)
Net asset value, end of period................................... $ 1.00
Total investment return at net asset value (d)................... 0.64%(e)
Ratios and Supplemental Data
Net Assets, end of period (000's omitted)........................ $20,942
Ratio of expenses to average net assets.......................... 1.07%*
Ratio of net investment income to average net assets............. 4.94%*
4
<PAGE>
Selected data for a Class B share outstanding
throughout each period is as follows:
<TABLE>
<CAPTION>
Year Ended October 31, Year Ended
October 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987(2)
---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income................ 0.04 0.02 0.01 0.02 0.05 0.06 0.07 0.06 0.0007
Less Distributions:
Dividends from net investment
income............................... (0.04) (0.02) (0.001) (0.02) (0.05) (0.06) (0.07) (0.06) (0.0007)
------- ------- ------- ------- ------- ------- ------- ------ -------
Net asset value, end of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= ====== ======
Total investment return at net
asset value (d)...................... 4.07% 1.87% 0.85% 1.73% 4.61% 6.30% 7.40% 6.06% 0.06%
======= ======= ======= ====== ======= ======= ======= ====== ======
Total adjusted investment return
at net asset value (a)(c)............ 4.49% 6.15% 6.93% 5.16% 0.04%
Ratios and Supplemental Data
Net Assets, end of period
(000's omitted)...................... $54,313 $58,366 $31,546 $31,480 $20,763 $21,099 $13,610 $7,692 $2,535
Ratio of expenses to average
net assets........................... 1.92% 2.06% 2.44% 2.47% 2.11% 2.16% 2.12% 1.51% 0.01%
Ratio of adjusted expenses to
average net assets (a)............. -- -- -- -- 2.23% 2.31% 2.59% 2.41% 0.03%
------ ------ ------ ------- ------- ------- ------- ----- -------
Ratio of net investment income to
average net assets................ 3.96% 1.97% 0.85% 1.69% 4.45% 6.11% 7.16% 6.01% 0.07%
------ ------ ------ ------- ------- ------- ------- ----- -------
Ratio of adjusted net investment
income to average net assets (a)... -- -- -- -- 4.33% 5.96% 6.69% 5.11% 0.05%
------ ------ ------ ------- ------- ------- ------- ----- -------
</TABLE>
- ----------
* On an annualized basis.
(a) On an unreimbursed basis without expense reduction.
(b) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser to the Fund.
(c) An estimated total return calculation takes into consideration fees and
expenses waived or borne by the adviser during the periods shown
(d) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(e) Not annualized.
(f) Financial highlights, including total return, are for the period from
October 26, 1987 (date of the Fund's initial offering of shares to the
public) to October 31, 1987 and have not been annualized.
5
<PAGE>
YIELD INFORMATION
Current information on the Fund's annualized yield during a recent
seven-day period may be obtained by calling the Easi-Line at 1-800-338-8080 or a
customer service representative, 1-800-225-5291. For information on how the Fund
calculates its annualized yield see the Statement of Additional Information.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide maximum current income consistent with
capital preservation and liquidity.
The Fund seeks to provide maximum current income consistent with
capital preservation and liquidity. The Fund's investments will be subject to
the market fluctuations 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 John
Hancock Advisers, Inc. (the "Adviser"), the Fund's investment 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.
The Fund invests only in high quality securities believed to present
minimal credit risks, under procedures adopted by the Board of Directors.
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 Fund's Board of Directors, 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 Statement of
Additional Information.
6
<PAGE>
By limiting the maturity of its investments, the Fund seeks to lessen
the changes in the value of its assets caused by market factors.
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.
Class S shares of the Fund may be appropriate for a variety of
investment programs, which can be long-term or short-term in nature.
While the Fund is not a substitute for building an investment portfolio
tailored to your investment needs and risk tolerance, the "sweep" feature of the
Class S shares enables you to use the Fund as a high quality, conveniently
liquid money market investment for cash balances in your brokerage account. See
"How to Buy Class S Shares" and "How to Redeem Class S Shares."
Because the Fund is designed to provide liquidity and stability of
capital, as well as automatic investment of free credit balances, it may be
especially suitable if you have short-term investment objectives or are awaiting
an opportune time to invest in the equity and/or bond markets. However, the Fund
may also be appropriate if you are a long-term investor seeking low-risk
investment alternatives which are designed to provide current income.
The Fund follows certain policies that may help to reduce investment
risk.
The Fund has adopted certain investment restrictions that are
enumerated in detail in the Statement of Additional Information, where they are
classified as fundamental or nonfundamental. Those restrictions designated as
fundamental may not be changed without shareholder approval. The Fund's
investment objective and, except as otherwise expressly stated, its investment
policies are nonfundamental and may be changed by a vote of the Board of
Directors without shareholder approval. Notwithstanding the Fund's fundamental
investment restriction prohibiting investments in other investment companies,
the Fund may, pursuant to an order granted by the SEC, invest in other
investment companies in connection with a deferred compensation plan for the
non-interested directors of the John Hancock funds.
Brokers are chosen on best price and execution.
When choosing brokerage firms to carry out the Fund's transactions, the
Adviser gives primary consideration to execution at the most favorable prices,
taking into account the broker's professional ability and quality of service.
Pursuant to procedures determined by the Board of Directors, the Adviser may
place securities transactions with brokers affiliated with the Adviser. The
brokers include Tucker Anthony Incorporated, Sutro & Company, Inc. and John
Hancock Distributors, Inc., which are indirectly owned by the John Hancock
Mutual Life Insurance Company (the "Life Company"), which in turn indirectly
owns the Adviser.
See "Investments, Techniques and Risk Factors" for more information
about the Fund's investments.
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ORGANIZATION AND MANAGEMENT OF THE FUND
The Trustees elect officers and retains the investment adviser who is
responsible for the day-to-day operations of the Fund, subject to the policies
and supervision.
The Fund is a diversified series of the Company, which is an open-end
management investment company organized as a Massachusetts business trust
organized in 1996. The Company reserves the right to create and issue a number
of series of shares, or funds or classes thereof, which are separately managed
and have different investment objectives. The Directors have authorized the
issuance of three classes of shares of the Fund, designated as Class A, Class B
and Class S. The shares of each class represent an interest in the same
portfolio of investments of the Fund. Each class has equal rights as to voting,
redemption, dividends and liquidation. However, each class is subject to
different fees and expenses (which affect performance), has different minimum
investment requirements and is entitled to different services. Also Class A,
Class B and Class S shareholders have exclusive voting rights with respect to
their distribution plans. Like Class S shares, Class A shares are not subject to
a sales charge on purchases, redemptions or reinvested dividends, nor are they
subject to deferred sales charges or an exchange fee. While not subject to a
sales charge on purchases or reinvested dividends, Class B shares are subject to
a contingent deferred sales charge if redeemed within six years of purchase.
Class A and Class B expenses are identical to those of Class S shares except
that the 12b-1 fees are 0.15% and 1.00% of average daily net assets on Class A
and Class B shares, respectively. Information regarding Class A and Class B
shares of the Fund may be obtained from your Selling Broker or from the Fund by
calling a John Hancock customer service representative at the number on the
front cover of this Prospectus. The Company is not required to and does not
intend to hold annual meetings of shareholders, although special meetings may be
held for such purposes as electing or removing Directors, changing fundamental
policies or approving a management contract. The Fund, under certain
circumstances, will assist in shareholder communications with other
shareholders.
John Hancock Advisers, Inc. advises investment companies having a total
asset value of more than $19 billion.
The Adviser was organized in 1968 and is a wholly-owned indirect
subsidiary of the Life Company, a financial services company. The Adviser
provides the Fund, and other investment companies in the John Hancock group of
funds, with investment research and portfolio management services. John Hancock
Funds, Inc. ("John Hancock Funds") distributes shares for all of the John
Hancock mutual funds through brokers who have arrangements with John Hancock
Funds. Certain Fund officers are also officers of the Adviser and John Hancock
Funds.
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: preclearance for all personal trades and a ban on the purchase
of initial public offerings, as well as contributions to specified charities of
profits on securities held for less than 91 days. These restrictions are a
continuation of the basic principle that the interests of the Fund and its
shareholders come first.
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THE FUND'S EXPENSES
For managing its investment and business affairs, the Fund pays a fee
to the Adviser which for the 1995 fiscal year end was 0.50% of the Fund's
average daily net assets. The fee has been reduced to 0.40% of the Fund's
average daily net assets and cannot be reinstated to 0.50% without the Trustees'
consent.
The Fund pays distribution and service fees for marketing and
sales-related shareholder servicing.
The Class S shareholders have adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"). Under this Plan, the Fund will pay distribution and service fees at an
aggregate annual rate of up to 0.40% of the Class S shares' average daily net
assets. Under the Plan, up to 0.25% is for service expenses and the remaining
amount is for distribution expenses. The distribution fees will be used to
reimburse John Hancock Funds for its distribution expenses, including but not
limited to: (i) initial and ongoing sales compensation to other brokers or
financial service firms who have arrangements with John Hancock Funds 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; and (iii) 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. The service fees will be used to compensate brokers who have arrangements
with John Hancock Funds 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 Plan, these expenses will be carried
forward together with interest on the balance of these unreimbursed expenses.
Information on the Fund's total expenses is in the Financial Highlights
section of this Prospectus.
DIVIDENDS AND TAXES
The Fund generally declares dividends daily and distributes dividends
monthly.
Dividends. The Fund generally declares dividends daily and distributes dividends
monthly, representing all or substantially all of its net investment income.
Purchase orders which are received from a Selling Broker together with
Federal Funds by wire before 12:00 noon New York time will receive the dividend
declared that day and other purchase orders, including any order with payment
other than by Federal Funds, will begin receiving dividends the following
business day. Redemption orders effected by a Selling Broker prior to 12:00 noon
New York time will not receive that day's dividend. Refer to your brokerage
account agreement to determine the time and method of payment (for purchases)
that your Selling Broker will use in executing purchases and redemptions on your
behalf.
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Taxation. Dividends from the Fund's net investment income and net short-term
capital gains are taxable to you as ordinary income. Dividends from the Fund's
net long-term capital gains, if any, are taxable as long-term capital gain. The
Fund does not anticipate that it will generally realize any long- term capital
gains. Dividends are taxable, whether received in cash or reinvested in
additional shares. Certain dividends may be paid by the Fund in January of a
given year but may be treated as if you received them the previous December.
Your Selling Broker will prepare and send you a statement by January 31 showing
the federal tax status of the dividends you received for the prior year.
The Fund has qualified and intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As a regulated investment company, the Fund will
not be subject to Federal income tax on any net investment income or net
realized capital gains distributed to its shareholders within the time period
prescribed by the Code.
On the account application, you must certify that the social security
or other taxpayer identification number you provide is your correct number and
that you are not subject to backup withholding of Federal income tax. If you do
not provide this information or are otherwise subject to this withholding, the
Fund may be required to withhold 31% of your dividends.
In addition to Federal taxes, you may be subject to state and local or
foreign taxes with respect to your investment in and distributions from the
Fund. A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent the Fund's distributions are
derived from interest on (or, in the case of intangibles taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in some
states that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. Non-U.S. shareholders and tax-exempt shareholders
are subject to different tax rules not described herein. You should consult your
tax adviser for specific advice.
HOW TO BUY CLASS S SHARES
Class S shares of the Fund are offered exclusively to investors who
maintain a brokerage account with certain brokers who offer the Fund's shares as
part of a sweep program (the "Selling Broker"). When you open a brokerage
account, free credit cash balances (including deposits, proceeds of sales of
securities, and miscellaneous cash dividends and interest, but not amounts held
by the Selling Broker as collateral for margin obligations to the Selling
Broker) in your brokerage account will be automatically invested or "swept" into
the Fund, subject to the terms and conditions of your brokerage account
agreement. When the free credit cash balances in your brokerage account exceed
the amount specified in your brokerage account agreement at the time specified
in your brokerage account agreement, the free credit cash balance will be
automatically invested in Class S shares of the Fund in accordance with the
terms of your brokerage account agreement. Refer to your brokerage account
agreement to determine the time and method of payment that your Selling Broker
will use in executing purchases on your behalf. Your Selling Broker may benefit
from the use of free credit cash balances in your account prior to their
transfer to the Fund. See "Dividends and Taxation" for a discussion of when you
will receive dividends.
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You will receive account statements that you should keep to help with
your personal recordkeeping.
Your Selling Broker will prepare and send to you a statement of your
account after any transaction that affects your share balance or registration
(statements related to reinvestment of dividends will be sent to you quarterly).
A tax information statement will be mailed to you by your Selling Broker by
January 31 of each year.
SHARE PRICE
The price of your shares is their net asset value per share, which will
normally be constant at $1.00.
The net asset value per share ("NAV") is the value of one share. The
NAV is calculated by dividing the net assets allocable to the Class S shares by
the number of outstanding Class S shares. Securities in the Fund's portfolio are
valued at amortized cost, which the Board of Directors has determined
approximates market value. Under the amortized cost pricing method, a portfolio
investment is valued at its cost and thereafter any discount or premium is
amortized to maturity, regardless of the impact of fluctuating interest rates on
the market value of the investment. Amortized cost pricing facilitates the
maintenance of a $1.00 constant net asset value per share, but, of course, this
cannot be guaranteed.
The NAV is calculated twice daily, at 12:00 noon Eastern time and as of
the close of regular trading on the New York Stock Exchange (the "Exchange")
(generally at 4:00 P.M., New York time) on each day that the Exchange is open.
The price you pay for shares of the Fund equals the NAV computed after
your investment is accepted in good order by John Hancock Funds, which will
normally be constant at $1.00 per share. There is no sales charge on Class S
shares of the Fund.
HOW TO REDEEM CLASS S SHARES
Redemptions will be automatically effected by your Selling Broker to
satisfy debit balances in your brokerage account.
Redemptions will be automatically effected by your Selling Broker to
satisfy debit balances in your brokerage account or to provide the necessary
cash collateral for your margin obligations to your Selling Broker. Redemptions
will also be automatically effected to settle securities transactions with your
Selling Broker if your free credit balance on the day before settlement is
insufficient to settle the transactions. Your Selling Broker will, at the time
specified in your brokerage account agreement, automatically scan each sweep
account for debits and pending securities settlements, and, after application of
any free credit balances in the sweep account to such debits, your Selling
Broker will
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redeem on your behalf a sufficient number (or your entire balance of Class S
shares in the event that your debits exceed the amount of Class S shares in your
account) of Class S shares of the Fund in accordance with the terms of your
brokerage account agreement to satisfy any remaining debits in the account.
Refer to your brokerage account agreement to determine the time and procedures
that your Selling Broker will use in executing redemptions on your behalf. You
may also redeem Class S shares of the Fund by placing a redemption request
through your Selling Broker. Your redemption proceeds will be deposited as cash
balances in your sweep account with the Selling Broker.
You may elect the checkwriting privilege which allows you to write
checks in amounts from a minimum of $100. Checks may not be written against
shares in your account which have been purchased within the last 10 days, except
for shares purchased by wire transfer (which are immediately available).
INVESTMENTS, TECHNIQUES AND RISK FACTORS
Securities of Foreign Issuers. Foreign issuers may not be subject to accounting
standards and government supervision comparable to U.S. companies, and there is
often less publicly available information about their operations. Foreign
markets generally provide less liquidity than U.S. markets (and thus potentially
greater price volatility), and typically provide fewer regulatory protections
for investors. Foreign securities can also be affected by political or financial
instability abroad. Foreign branches of United States banks may be subject to
less stringent reserve requirements than domestic branches. United States
branches and agencies of foreign banks and foreign branches of United States
banks may provide less public information than, and may not be subject to, the
same accounting, auditing and financial record-keeping standards as domestic
banks.
Restricted and Illiquid Securities. The Fund may invest up to 10% of its net
assets in illiquid investments, which include repurchase agreements maturing in
more than seven days, restricted securities and securities not readily
marketable. The Fund may also invest in restricted securities eligible for
resale to certain institutional investors pursuant to Rule 144A under the
Securities Act of 1933. These purchases are subject to the Fund's investment
restriction limiting all illiquid securities held by the Fund to not more than
10% of the Fund's net assets.
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 loaned securities. As a result, the Fund may incur a loss, or, in the event
of the borrower's bankruptcy, the Fund may be delayed in or prevented from
liquidating the collateral. It is a fundamental policy of the Fund not to lend
portfolio securities having a total value in excess of 30% of its total assets.
Repurchase Agreements, Forward Commitments and When-Issued Securities. The Fund
may enter into repurchase agreements and may purchase securities on a forward
commitment or when-issued basis. In a repurchase agreement, the Fund buys a
security subject to the right and obligation to sell it back to the seller at a
higher price. These transactions must be fully collateralized at
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all times, but involve some credit risk to the Fund if the other party defaults
on its obligation and the Fund is delayed in or prevented from liquidating the
collateral. The Fund will segregate in a separate account cash or liquid, high
grade debt securities equal in value to its forward commitments and when-issued
securities. Purchasing debt securities for future delivery or on a when-issued
basis may increase the Fund's overall investment exposure and involves a risk of
loss if the value of the securities declines before the settlement date.
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JOHN HANCOCK MONEY MARKET FUND JOHN HANCOCK MONEY MARKET FUND
Investment Adviser Class S Shares
John Hancock Advisers, Inc. Prospectus
101 Huntington Avenue December 2, 1996
Boston, Massachusetts 02199-7603
Principal Distributor A money market fund that seeks to
John Hancock Funds, Inc. provide maximum current income
101 Huntington Avenue consistent with capital preservation
Boston, Massachusetts 02199-7603 and liquidity.
Custodian
State Street Bank and Trust Company 101 Huntington Avenue
225 Franklin Street Boston, Massachusetts 02199-7603
Boston, Massachusetts 02110
Transfer Agent
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
Independent Auditors
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JOHN HANCOCK MONEY MARKET FUND
CLASS S SHARES
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1996
(AS REVISED 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 Fund's Class S Prospectus, dated March 1, 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 02205-5291
1-800-225-5291
TABLE OF CONTENTS
Page
----
Organization of the Corporation .......................................... 2
Investment Objective and Policies ........................................ 2
Certain Investment Practices ............................................. 2
Investment Restrictions .................................................. 7
Those Responsible for Management ......................................... 10
Investment Advisory and Other Services ................................... 19
Distribution Contract .................................................... 22
Amortized Cost Method of Portfolio Valuation ............................. 24
Special Redemptions ...................................................... 25
Description of the Fund's Shares ......................................... 25
Tax Status ............................................................... 27
Calculation of Performance ............................................... 29
Brokerage Allocation ..................................................... 30
Transfer Agent Services .................................................. 32
Custody of Portfolio ..................................................... 32
Independent Auditors ..................................................... 33
Appendix ................................................................. A-1
Financial Statements ..................................................... F-1
<PAGE>
ORGANIZATION OF THE TRUST
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 September 30, 1996, the Fund was a series portfolio of 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.
The Fund is managed by John Hancock Advisers, Inc. (the "Adviser"), a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance
Company (the "Life Company"), chartered in 1862 with national headquarters at
John Hancock Place, Boston, Massachusetts. John Hancock Funds, Inc. ("John
Hancock Funds") acts as principal distributor of the shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide maximum current income consistent with the
preservation of capital and liquidity. 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. There can be no assurance that the Fund's
investment objective will be realized.
CERTAIN INVESTMENT PRACTICES
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.
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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.
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. These 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 1980's placed substantial new
restrictions on the issuance of the bonds described above and in some cases
eliminated the ability of state or local governments to issue municipal
obligations for some of the above purposes. Such restrictions do 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
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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
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. See the
Appendix for a description of ratings. Many issuers of securities choose not to
have their obligations rated. Although unrated securities eligible for purchase
by the Fund must be determined to be comparable in quality to securities having
certain specified ratings, the market for unrated securities may not be as broad
as for rated securities since many investors rely on rating organizations for
credit appraisal.
FOREIGN SECURITIES. The Fund may invest in foreign securities and in
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 of such 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 banks, 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. The Fund may enter into repurchase agreements. A
repurchase agreement is a contract under which the Fund would acquire a security
for a relatively short period (generally not more than seven days) subject to
the obligation of the seller to repurchase and the Fund to resell such security
at a fixed time and price (representing the Fund's cost plus interest). The Fund
will enter into repurchase agreements only with member banks of the Federal
Reserve System and with securities dealers. The Adviser will continuously
monitor the creditworthiness of the parties with whom the Fund enters into
repurchase agreements. The Fund has established a procedure providing that the
securities serving as collateral for each repurchase agreement must be delivered
to the Fund's custodian either physically or in book-entry form and that the
collateral must be marked to market daily to ensure that each repurchase
agreement is fully collateralized at all times. In the event of bankruptcy or
other default by a seller of a repurchase agreement, the Fund could experience
delays in liquidating the underlying securities and could experience losses,
including the possible decline in the value of the underlying securities during
the period which the Fund seeks to enforce its rights thereto, possible
subnormal levels of income and lack of access to income during this period, and
the expense of enforcing its rights. 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 total assets.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements which involve the sale of government securities held in
its portfolio to a bank or securities firm 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
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repurchase agreements are considered to be borrowings by the Fund. The Fund will
use proceeds obtained from the sale of securities pursuant to reverse repurchase
agreements to purchase other investments. The use of borrowed funds to make
investments is a practice known as "leverage," which is considered speculative.
Use of reverse repurchase agreements is an investment technique that is intended
to increase income. Thus, the Fund will enter into a reverse repurchase
agreement only when the Adviser determines that the interest income to be earned
from the investment of the proceeds is greater than the interest expense of the
transaction. However, there is a risk that interest expense will nevertheless
exceed the income earned. 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 more than 33_1/3% of the market
value of its total assets. The Fund will enter into reverse repurchase
agreements only with selected registered broker/dealers or with federally
insured banks or savings and loan associations which are approved in advance as
being creditworthy by the Board of Directors. Under procedures established by
the Board of Directors, the Adviser will monitor the creditworthiness of the
firms 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, high grade debt securities equal in value to the Fund's
commitment. These assets will be valued daily at market, and additional cash or
securities will be segregated in a separate account to the extent that the total
value of the assets in the account declines below the amount of the when-issued
commitments. Alternatively, the Fund may enter into offsetting contracts for the
forward sale of other securities that it owns.
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. 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 would not be considered a violation of policy.
5
<PAGE>
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 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 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.
(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 Trust, 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.
6
<PAGE>
(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 ("SEC") 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 ("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 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.
OTHER OPERATING POLICIES
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, as a matter of operating policy, pledge, mortgage or hypothecate its
portfolio securities if the percentage of securities so pledged, mortgaged or
hypothecated would exceed 15%.
As a nonfundamental investment restriction, 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.
These operating policies are not fundamental and may be changed without
shareholder approval. In order to comply with certain state regulatory
practices, certain policies, if changed, would require advance written notice to
shareholders.
7
<PAGE>
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Trust is managed by its Directors 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 John Hancock Funds.
Set forth below is the principal occupation or employment of the Trustees
and principal officers of the Trust during the past five years:
8
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
Edward J. Boudreau, Jr. * Chairman(2) Chairman and Chief
101 Huntington Avenue Executive Officer, the
Boston, MA 02199 Adviser and The Berkeley
Financial Group ("Berkeley
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
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 Trust 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) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
9
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT 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);
April 1940 Director, 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
601 Colorado Street Texas System and former
O'Henry Hall President of the
Austin, TX 78701 University of Texas,
January 1944 Austin, Texas; Lee Hage
and Joseph D. Jamail
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;
RD #5, Box 300B former Vice President and
Clothier Springs Road Director, Towers, Perrin,
Malvern, PA 19355 Foster & Crosby, Inc.
June 1928 (international management
consultants) (1952-1985).
Harold R. Hiser, Jr. Trustee(3) Executive Vice President,
123 Highland Avenue Schering- Plough
Short Hill, NJ 07078 Corporation
October 1931 (pharmaceuticals) (retired
1996); Director, ReCapital
Corporation (reinsurance)
(until 1995).
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
10
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
Anne C. Hodsdon* Trustee, President(2) President and Chief
101 Huntington Avenue Operating Officer, the
Boston, MA 02199 Adviser; Director,
Advisers International;
Executive Vice President,
the Adviser (until
December 1994); Senior
Vice President, the
Adviser (until December
1993); Vice President, the
Adviser (until 1991).
Charles L. Ladner Trustee(3) Director, Energy North,
UGI Corporation Inc. (public utility
P.O. Box 858 holding company) (until
Valley Forge, PA 19482 1992); Senior Vice
February 1938 President of UGI Corp.
(public utilities LPGAS).
Leo E. Linbeck, Jr. Trustee(3) Chairman, President, Chief
3810 W. Alabama Executive Officer and
Houston, TX 77027 Director, Linbeck
August 1934 Corporation (a holding
company 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
Eastern Corporation (a
diversified energy
company), Daniel
Industries, Inc.
(manufacturer of gas
measuring products and
energy related equipment),
GeoQuest International,
Inc. (a geophysical
consulting firm)
(1980-1993); Director,
Greater Houston
Partnership.
Patricia P. McCarter Trustee(3) Director and Secretary of
1230 Brentford Road the McCarter Corp.
Malvern, PA 19355 (machine manufacturer).
May 1928
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
11
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
Richard S. Scipione* Trustee General Counsel, John
John Hancock Place Hancock Life Company;
P.O. Box 111 Director, the Adviser,
Boston, MA 02117 Advisers International,
August 1937 John Hancock Funds,
Investor Services, John
Hancock Distributors,
Inc., John Hancock
Subsidiaries, Inc., John
Hancock Property and
Casualty Insurance and its
affiliates (until
November, 1993), SAMCorp.
and NM Capital; Trustee,
The Berkeley Group;
Director JH Networking
Insurance Agency, Inc.
Norman H. Smith Trustee(3) Lieutenant General, United
243 Mt. Oriole Lane States Marine Corps;
Linden, VA 22642 Deputy Chief of Staff for
March 1933 Manpower and Reserve
Affairs, Headquarters
Marine Corps; Commanding
General III Marine
Expeditionary Force/3rd
Marine Division (retired
1991).
John P. Toolan Trustee(3) Director, Smith Barney
13 Chadwell Place Muni Bond Funds, The Smith
Morristown, NJ 07960 Barney Tax-Free Money
September 1930 Funds, Inc., Vantage Money
Market Funds (mutual
funds), The
Inefficient-Market Fund,
Inc. (closed- end
investment company) and
Smith Barney Trust Company
of Florida; Chairman,
Smith Barney Trust Company
(retired December, 1991);
Director, Smith Barney,
Inc., Mutual Management
Company and Smith Barney
Advisers, Inc. (investment
advisers) (retired 1991);
Senior Executive Vice
President, Director and
member of the Executive
Committee, Smith Barney,
Harris Upham & Co.,
Incorporated (investment
bankers) (until 1991).
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
12
<PAGE>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- ------------------- --------------------------
Robert G. Freedman* Vice Chairman and Chief Vice Chairman and Chief
101 Huntington Avenue Investment Officer(2) Investment Officer, the
Boston, MA 02199 Adviser; President, the
Adviser (until December
1994); Director, the
Adviser, Advisers
International, John
Hancock Funds, Investor
Services, SAMCorp., and NM
Capital; Senior Vice
President, The Berkeley
Group.
James B. Little* Senior Vice President Senior Vice President, the
101 Huntington Avenue and Chief Financial Adviser.
Boston, MA 02199 Officer
Susan S. Newton* Vice President, Vice President and
101 Huntington Avenue Assistant Secretary Assistant Secretary, the
Boston, MA 02199 and Compliance Officer Adviser.
John A. Morin* Vice President Vice President, the
101 Huntington Avenue Adviser.
Boston, MA 02199
James J. Stokowski* Vice President and Vice President, the
101 Huntington Avenue Treasurer Adviser.
Boston, MA 02199
- ---------------
* Trustee may be deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) Member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
13
<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 August 30, 1996, the officers and Trustees as a group beneficially
owned less than 1% of the outstanding shares of the Fund. As of August 30, 1996,
John Hancock Advisers, Inc., 101 Huntington Avenue, Boston, Massachusetts held
25 Class S shares representing 100% of the Fund's Class S shares. At such date,
no other person owned of record or was known by the Corporation to beneficially
own as much as 5% or more of the outstanding Class A and B 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.
ThomasB. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation); Member,
Board of Managers, Harris County Hospital District; Advisory Director,
Commercial State Bank, El Campo; Advisory Director, First National Bank of
Bryan; Advisory Director, Sterling Bancshares; Former Director and Vice
Chairman, Texas Commerce Bancshares; and Vice Chairman, Texas Commerce
Bank.
COMPENSATION OF THE BOARD OF TRUSTEES AND ADVISORY BOARD. 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. Messrs. Boudreau and
Scipione and Ms. Hodsdon, 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.
14
<PAGE>
<TABLE>
<CAPTION>
Total Compensation from
Aggregate Compensation all Funds in John Hancock
Trustees from the Fund Fund Complex to Trustees
- -------- ---------------------- -------------------------
<S> <C> <C>
James F. Carlin $ 346 $ 60,700
William H. Cunningham+ 402 69,700
Charles F. Fretz 29 56,200
Harold R. Hiser, Jr.+ -- 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+ 4 60,700
------ --------
Total $3,977 $627,500
</TABLE>
* Compensation for the fiscal year ended October 31, 1995.
** The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees was $627,500 as of the calendar year ended
December 31, 1995. All Trustees except Messrs. Cunningham and Linbeck
are Trustees of 33 funds in the John Hancock Fund Complex. Messrs.
Cunningham and Linbeck are Trustees of 31 funds.
+ 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 Independent
Trustees.
<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement from all Funds in
Aggregate Benefits Accrued John Hancock
Compensation as Part of the Fund Complex to
Advisory Board*** from the Fund* Fund's Expenses Advisory Board**
- ----------------- -------------- ---------------- ------------------
<S> <C> <C> <C>
R. Trent Campbell $ 1,675 $ 0 $ 70,000
Mrs. Lloyd Bentsen $ 1,204 $ 0 $ 63,000
Thomas R. Powers $ 1,175 $ 0 $ 63,000
Thomas B. McDade $ 1,675 $ 0 $ 63,000
TOTAL $ 5,729 $ 0 $259,000
</TABLE>
* Compensation is for the Fiscal year ended October 31, 1995.
** As of December 31, 1995
INVESTMENT ADVISORY AND OTHER SERVICES
As described in the Prospectus, the Fund receives its investment advice
from the Adviser. Investors should refer to the Prospectus for a description of
certain information concerning the investment management contract. Each of the
Directors and principal officers affiliated with the Fund who is also an
affiliated person of the Adviser is named above, together with the capacity in
which such person is affiliated with the Fund, the Adviser or TFMC (the Fund's
prior investment adviser).
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and currently has more than $16 billion in
assets under management in its capacity as investment adviser to the Fund and
the other mutual funds and publicly traded investment
15
<PAGE>
companies in the John Hancock group of funds having a combined total of over
1,080,000 shareholders. The Adviser is a wholly-owned subsidiary of The Berkeley
Financial Group, which is in turn a wholly-owned subsidiary of John Hancock
Subsidiaries, Inc., which is in turn a wholly-owned subsidiary of 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 Standard & Poor's and A.M. Best's. Founded in
1862, the Life Company has been serving clients for over 130 years.
As described in the Prospectus under the caption "Organization and
Management of the Fund," 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, (ii) supervision of all aspects
of the Fund's operations except those that are delegated to a custodian,
transfer agent or other agent and (iii) such executive, administrative and
clerical personnel, officers and equipment as are necessary for the conduct of
its business. The Adviser is responsible for the day-to-day management of the
Fund's portfolio assets.
No person other than the Adviser and its directors and employees regularly
furnishes advice to the Fund with respect to the desirability of the Fund
investing in, purchasing or selling securities. The Adviser may from time to
time receive statistical or other similar factual information, and information
regarding general economic factors and trends, from the Life Company and its
affiliates.
Under the terms of the investment management contract with the Fund, the
Adviser provides the Fund with office space, equipment and supplies and other
facilities and personnel required for the business of the Fund. The Adviser pays
the compensation of all officers and employees of the Fund and pays the expenses
of clerical services relating to the administration 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
Directors of the Fund who are not "interested persons," as such term is defined
in the 1940 Act (the "Independent Directors"), (ii) the fees of the members of
the Fund's Advisory Board (described above) and (iii) the continuous public
offering of the shares of the Fund are borne by the Fund.
As provided by the investment management contract, the Fund pays the
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:
<TABLE>
<CAPTION>
Fee
Average Daily Net Assets of the Fund (annual rate)
- ------------------------------------ -------------
<S> <C>
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%
</TABLE>
*The Adviser has reduced the fee to 0.40% of the Fund's average daily net assets
and can not reinstate the fee to 0.50% without 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
dally net assets. The Adviser retains
16
<PAGE>
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 dally 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 Directors 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 Directors 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 Directors 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
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 October 31, 1993 and 1994 advisory fees payable
by the Fund to TFMC, the Fund's former investment adviser, amounted to $142,298
and $214,088, respectively. For the fiscal year ended October 31, 1995 advisory
fees paid by the Fund to the Adviser was $271,782.
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DISTRIBUTION CONTRACT
DISTRIBUTION CONTRACT. As discussed in the Prospectus, 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 Contract dated December 22, 1994 (the "Distribution Contract"),
to purchase shares from the Fund at net asset value for resale to the public or
to broker-dealers at the public offering price.
The Distribution Contract was initially adopted by the affirmative vote of
the Fund's Board of Directors including the vote of a majority of Independent
Directors, cast in person at a meeting called for such purpose. The Distribution
Contract 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
Board of Directors including the vote of a majority of Independent Directors,
cast in person at a meeting called for such purpose. The Distribution Contract
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 Board of Directors, including the Independent
Directors of the Fund, approved a new distribution plan pursuant to Rule 12b-1
under the 1940 Act for Class S shares of the Fund (the "Plan"). The Plan was
approved by the sole shareholder of Class S shares of the Fund on September 12,
1995 and became effective on September 12, 1995.
Under the Plan, the distribution or service fee will not exceed an annual
rate of 0.40% of the average daily net asset value of the Fund attributable to
Class S shares (determined in accordance with the Fund's Prospectus as from time
to time in effect). In accordance with generally accepted accounting principles,
the Fund does not treat unreimbursed distribution expenses attributable to Class
S shares as a liability of the Fund and does not reduce the current net assets
of Class B by such amount although the amount may be payable under the Plan in
the future.
Under the Plan, expenditures shall be calculated and accrued daily and
paid monthly or at such other intervals as the Directors shall determine. 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 Class S 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, other brokers or
financial service firms who have arrangements with John Hancock Funds engaged in
the sale of Class S shares, (ii) direct out-of-pocket expenses incurred in
connection with the distribution of Class S 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 Class S shares; and (v) 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 Class S shareholders of the Fund.
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 Directors
and the Independent Directors. The Plan provides that it may be terminated (a)
at any time by vote of a majority of the Directors, a majority of the
Independent Directors, or a majority of the outstanding voting securities of the
Class S shares of the Fund 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
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described therein without the approval of a majority of the outstanding Class S
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
Directors and the Independent Directors of the Fund. In adopting the Plans, the
Board of Directors has determined that, in their judgment, there is a reasonable
likelihood that the Plan will benefit the holders of the Class S shares of the
Fund.
Information regarding the services rendered under the Plan and the
Distribution Contract and the amounts paid therefor by the Fund is provided to,
and reviewed by, the Board of Directors on a quarterly basis. In its quarterly
review, the Board of Directors considers the continued appropriateness of the
Plan and the Distribution Contract and the level of compensation provided
therein.
When the Fund seeks an Independent Director to fill a vacancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Director is, under resolutions adopted by the Directors
contemporaneously with their adoption of the Plan, committed to the discretion
of the Committee on Administration of the Directors. The members of the
Committee on Administration are all Independent Directors and identified in this
Statement of Additional Information under the heading "Those Responsible for
Management."
AMORTIZED COST METHOD OF PORTFOLIO VALUATION
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 Directors 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 Directors 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 Directors it is inadvisable to continue the practice
of maintaining net asset value at $1.00 per share, the Directors reserve the
right to alter the procedures for determining net asset value. The Fund will
notify shareholders of any such alteration.
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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 by the Directors. When the shareholder sells portfolio
securities received in this fashion, he would incur a brokerage charge. Any such
securities would be valued for the purposes of making such payment at the same
value as used in determining net asset value. The Fund has 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.
DESCRIPTION OF THE FUND'S SHARES
Ownership of the Fund is represented by transferable shares of beneficial
interest. The Declaration of Trust permits the Trustees to create an unlimited
number of series and classes of shares of the Fund and, with respect to each
series and class, to issue an unlimited number of full or fractional shares and
to divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests of the Fund. As
of the date of this Statement of Additional Information, the Trustees have
authorized the shares of two series -- the Fund and the U.S. Government Cash
Reserve.
Pursuant to the Declaration of Trust, the Trustees may authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional classes within any
series (which would be used to distinguish among the rights of different
categories of shareholders, as might be required by future regulations or other
unforeseen circumstances).
The Trustees of the Trust have authorized the issuance of three classes of
shares for the Fund, designated as Class A, Class B and Class S shares. Class A,
Class B and Class S 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. Like Class S shares, Class A shares of the Fund are
not subject to a sales charge on purchases, redemptions or reinvested dividends,
nor are they subject to deferred sales charges or an exchange fee. While Class B
shares are not subject to a sales charge on purchases or reinvested dividends,
nor subject to an exchange fee, Class B shares are subject to a contingent
deferred sales charge if redeemed within six years of purchase. The holders of
Class A, Class B and Class S 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. The Trustees of the Trust may classify and reclassify the shares of the
Fund into additional classes of shares at a future date.
VOTING RIGHTS. Shareholders are entitled to a full vote for each full
share held. Shareholders of each series or class vote separately from other
shareholders of the Trust with respect to all matters which affect solely the
interests of that series or class. The Trustees themselves have the power to
alter the number and the terms of office of Trustees, and they may at any time
lengthen their own terms or make their terms of unlimited duration (subject to
certain removal procedures) and appoint their own successors, provided that at
all times at least a majority of the Trustees have been elected by shareholders.
The voting rights of shareholders are not cumulative, so that holders of more
than 50 percent of the shares voting can, if they choose, elect all Trustees
being selected, while the holders of the remaining shares would be unable to
elect any Trustees. Although the Fund need not hold annual meetings of
shareholders, the Trustees may call special meetings of shareholders for action
by shareholder vote as may be required by the 1940 Act or the Declaration of
Trust. Also, a shareholders' meeting must be called if so requested in writing
by the
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holders of record of 10% or more of the outstanding shares of the Trust. In
addition, the Trustees may be removed by the action of the holders of record of
two-thirds or more of the outstanding shares.
SHAREHOLDER LIABILITY. The Declaration of Trust provides that no Trustee,
officer, employee or agent of the Fund is liable to the Fund or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons in connection with the affairs of the Fund, except as such liability may
arise from his or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties. It also provides that all third persons shall
look solely to the Fund's property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.
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
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Liability is therefore limited to circumstances in which the
Fund itself would be unable to meet its obligations, and the possibility of this
occurrence is remote.
As a Massachusetts business trust, the Fund is not required to issue share
certificates. The Fund shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders.
Notwithstanding the fact that the Prospectus is a combined prospectus for
the Fund and other John Hancock mutual funds, the Fund shall not be liable for
the liabilities of any other John Hancock mutual fund.
Pursuant to an order granted by the SEC, the Trust has adopted a defined
contribution plan for its Independent Trustees which allows Trustees' fees to be
invested by the Fund in other John Hancock funds.
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.
TAX STATUS
The Fund has qualified and has elected to be treated as a "regulated
investment company" under Subchapter M of the Code, and intends to continue to
so quality 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 at least annually in
accordance with the timing requirements of the Code.
The Fund will be subject to a 4% non-deductible federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual
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minimum distribution requirements. The Fund intends under normal circumstances
to avoid liability for such tax by satisfy such distribution requirements.
Distributions of net investment income (which include original issue
discount and accrued, recognized market discount) and any net realized
short-term capital gains, as computed for Federal income tax purposes, will be
taxable as described in the Prospectus whether taken in shares or in cash.
Although the Fund does not expect to realize any net long-term capital gains,
distributions from such gains, if any, would be taxable as long-term capital
gains. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the amount of cash they would have received had they taken the
distribution in cash, divided by the number of shares received.
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.
Distributions from the Fund will not quality for the dividends-received
deduction for corporate shareholders.
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.
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 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 31% (or a lower rate under an applicable tax treaty) on amounts
treated as ordinary dividends 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.
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.
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
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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
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 fluids 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 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 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.
BROKERAGE ALLOCATION
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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 Directors 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 such transactions.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the NASD and other policies that the
Directors 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's officers will be
primarily responsible for the allocation of the Fund's brokerage business, their
policies and practices in this regard must be consistent with the foregoing and
will at all times be subject to review by the Directors. 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 Directors that the price is
reasonable in light of the services provided and to policies that the Directors
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.
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 Directors 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.
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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 Directors pursuant to the 1940 Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Directors 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 Directors 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. The Fund will not effect principal transactions with
Affiliated Brokers. The Fund may, however, purchase securities from other
members of underwriting syndicates of which Tucker Anthony, Sutro and John
Hancock Distributors are members, but only in accordance with the policy set
forth above and procedures adopted and reviewed periodically by the Directors.
TRANSFER AGENT SERVICES
John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205-9116, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays Investor Services
a monthly transfer agent fee equal to $18 per account for Class S shares plus
out-of-pocket expenses.
CUSTODY OF PORTFOLIO
Effective September 30, 1995, 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 02110. Prior to such
date, portfolio securities of the Fund are held pursuant to a custodian
agreement between the Fund and Investors Bank and Trust Company, 24 Federal
Street, Boston, Massachusetts. Under the custodian agreement, the custodian
performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has
been selected as the independent auditors of the Fund. The financial statements
of the Fund included in the Prospectus and this Statement of Additional
Information have been audited by Ernst & Young LLP for the periods indicated in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
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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")
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
A-1
<PAGE>
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.
A-2
<PAGE>
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 rate. It should be emphasized, however, that ratings are general
and are not absolute standards of quality. Consequently, municipal securities
with the same maturity, coupon and ratings may have different yields and
municipal securities of the same maturity and coupon with different ratings may
have the same yield.
A-3
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
JOHN HANCOCK CURRENT INTEREST
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not applicable.
(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 August 30, 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 983
Money Market Fund - Class A 34,228
Money Market Fund - Class B 10,641
Money Market Fund - Class S 3
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.
C-1
<PAGE>
(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.
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
C-2
<PAGE>
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.
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, Freedom Investment Trust, Freedom Investment Trust
II and Freedom Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-3
<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
C-4
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
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
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
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
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-6
<PAGE>
(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.
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-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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
13th day of September, 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 September 13, 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-8
<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
------------------- September 13, 1996
Susan S. Newton,
Attorney-in-Fact under
Powers of Attorney dated
June 25, 1996, filed herewith.
</TABLE>
C-9
<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 Not Applicable
99.B12 Not Applicable
99.B13 Not Applicable
99.B14 Not Applicable
C-10
<PAGE>
99B15 Not Applicable
99.B16 Schedule of Computation of Yield and Total Return.**
99.27 Not Applicable
* 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
