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. 55
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 33
(Check appropriate box or boxes)
JOHN HANCOCK CURRENT INTEREST
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices)
Registrant's Telephone Number including Area Code
(617) 375-1700
SUSAN S. NEWTON
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24F-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
The Registrant filed the notice required by Rule 24F-2 for its most recent
fiscal year of John Hancock U.S. Government Cash Reserve and John Hancock Money
Market Fund on or about May 22, 1997.
<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
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Prospectus Money Market Fund
August 1, 1997 U.S. Government Cash Reserve
This prospectus gives vital information about these funds. For your own benefit
and protection, please read it before you invest, and keep it on hand for future
reference.
Please note that these funds:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank
o or government agency
o are not government-guaranteed
o 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.
[Logo] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
Contents
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A fund-by-fund look at Money Market Fund 4
goals, strategies,
risks, expenses and U.S. Government Cash Reserve 6
financial history.
Policies and Your account
instructions for
opening, maintaining and Choosing a share class 8
closing an account in How sales charges are calculated 8
either money market Opening an account 8
fund. Buying shares 9
Selling shares 10
Transaction policies 12
Dividends and account policies 12
Additional investor services 13
Fund details
Details that apply to Business structure 14
both money market funds. Sales compensation 15
Types of investment risk 15
For more information back cover
<PAGE>
Overview
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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:
o require stability of principal
o are seeking a mutual fund for the money market portion of an asset
allocation portfolio
o need to "park" their money temporarily
o consider themselves savers rather than investors
o are investing emergency reserves
Money market funds may NOT be appropriate if you:
o want federal deposit insurance
o are seeking an investment that is likely to outpace inflation
o 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 $22 billion in
assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[Clip Art] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[Clip Art] Portfolio securities The primary types of securities in which the
fund invests.
[Clip Art] Risk factors The major risk factors associated with the fund.
[Clip Art] Portfolio management The individual or group designated by the
investment adviser to handle the fund's day-to-day management.
[Clip Art] Expenses The overall costs borne by an investor in the fund,
including sales charges and annual expenses.
[Clip Art] Financial highlights A table showing the fund's financial performance
for up to ten years, by share class. A bar chart showing total return allows you
to compare the fund's historical risk level to those of other funds.
<PAGE>
Money Market Fund
REGISTRANT NAME: JOHN HANCOCK CURRENT INTEREST
TICKER SYMBOL CLASS A: JHMXX CLASS B: TSMXX
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GOAL AND STRATEGY
[Clip Art] 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
[Clip Art] The fund may invest exclusively in U.S. dollar-denominated money
market securities, including those issued by:
o U.S. and foreign banks
o corporate issuers
o the U.S. Government and its agencies and instrumentalities
o municipalities
o foreign governments
o multinational organizations such as the World Bank
The fund may lend securities to financial institutions, enter into repurchase
agreements, engage in short-term trading and purchase securities on a
when-issued or forward commitment basis. The fund may also invest up to 10% of
net assets in illiquid investments.
No more than 5% of assets may be invested in securities rated in the
second-highest short-term category (or unrated equivalents). The rest of the
fund's investments must be in the highest short-term category.
No more than 25% of assets may be invested in obligations that are issued either
by foreign banks or by foreign branches of U.S. banks, unless these obligations
are backed by the U.S. parent bank.
The fund maintains an average maturity of 90 days or less, and does not invest
in securities with maturities of more than 13 months.
RISK FACTORS
[Clip Art] 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:
o restricted and illiquid securities: liquidity, valuation, market risks
o securities lending, repurchase agreements: credit risk
o short-term trading: market risk, as well as potentially higher transaction
costs
o forward commitments and when-issued securities: market, opportunity,
leverage risks
These risks are defined in "Types of investment risk" on page 15.
This mutual fund is not a bank account and is not insured or guaranteed by any
financial institution or government body. Please read "Types of investment risk"
carefully before investing.
PORTFOLIO MANAGEMENT
[Clip Art] The fund's investment decisions are made by a portfolio management
team. Team members are part of the adviser's staff of money market research
analysts and portfolio managers.
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INVESTOR EXPENSES
[Clip Art] 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.
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Shareholder transaction expenses Class A Class B
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Maximum sales charge imposed on purchases
(as a percentage of offering price) none none
Maximum sales charge imposed on
reinvested dividends none none
Maximum deferred sales charge none 5.00%
Redemption fee(1) none none
Exchange fee none none
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Annual fund operating expenses (as a % of average net assets)
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Management fee(2) 0.40% 0.40%
12b-1 fee(2,3) 0.15% 1.00%
Other expenses 0.56% 0.56%
Total fund operating expenses(2) 1.11% 1.96%
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%.
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Share class Year 1 Year 3 Year 5 Year 10
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Class A shares $11 $35 $61 $135
Class B shares
Assuming redemption
at end of period $70 $92 $126 $207
Assuming no redemption $20 $62 $106 $207
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Does not include wire redemption fee (currently $4.00).
(2) Reflects the adviser's agreement to limit the management fee and the 12b-1
fee on Class A shares. Without this limitation, the management fee would be
0.50%, the 12b-1 fee on Class A shares would be 0.25% and total fund
operating expenses would be 1.31% for Class A shares and 2.06% for Class B
shares. The adviser may terminate this limitation in the future.
(3) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
4 MONEY MARKET FUND
<PAGE>
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FINANCIAL HIGHLIGHTS
[Clip Art] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP. Year-by-year total investment return (%) (scale
varies from fund to fund)
Year-by-year total investment return
(%)(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<CAPTION>
10/87(1) 10/88 10/89 10/90 10/91 10/92 10/93 10/94 10/95(1) 10/96 3/97(2)
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.06(4) 6.06 7.40 6.30 4.61 1.73 0.85 1.87 4.07 3.71 1.45(4)
five
months
</TABLE>
<TABLE>
<CAPTION>
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Class A - year ended: 10/95(1) 10/96 3/97(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share operating performance
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.01 0.05 0.02
Less distributions:
Dividends from net investment income (0.01) (0.05) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
Total investment return at net asset value(3) (%) 0.64(4) 4.56 1.80(4)
Ratios and supplemental dataNet assets, end of period
(000s omitted) ($) 20,942 262,475 359,453
Ratio of expenses to average net assets (%) 1.07(5) 1.17 1.10(5)
Ratio of net investment income (loss) to average
net assets (%) 4.94(5) 4.41 4.44(5)
</TABLE>
<TABLE>
<CAPTION>
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Class B - year ended: 10/87(1) 10/88 10/89 10/90 10/91 10/92 10/93
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share operating performance Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income (loss) 0.0007 0.06 0.07 0.06 0.05 0.02 0.01
Less distributions:
Dividends from net investment income (0.0007) (0.06) (0.07) (0.06) (0.05) (0.02) (0.01)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total investment return at net asset value(3) (%) 0.06(4) 6.06 7.40 6.30 4.61 1.73 0.85
Total adjusted investment return at net asset
value(3,7) (%) 0.04(4) 5.16 6.93 6.15 4.49 -- --
Ratios and supplemental dataNet assets, end of
period (000s omitted) ($) 2,535 7,692 13,610 21,099 20,763 31,480 31,546
Ratio of expenses to average net assets (%) 0.01(4) 1.51 2.12 2.16 2.11 2.47 2.44
Ratio of adjusted expenses to average net assets(8) (%) 0.03(4) 2.41 2.59 2.31 2.23 -- --
Ratio of net investment income (loss) to
average net assets (%) 0.07(4) 6.01 7.16 6.11 4.57 1.69 0.85
Ratio of adjusted net investment income (loss)
to average net assets(8) (%) 0.05(4) 5.11 6.69 5.96 4.45 -- --
<CAPTION>
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Class B - year ended: 10/94 10/95(6) 10/96 3/97(2)
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<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) 0.02 0.04 0.04 0.01
Less distributions:
Dividends from net investment income (0.02) (0.04) (0.04) (0.01)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total investment return at net asset value(3) (%) 1.87 4.07 3.71 1.45(4)
Total adjusted investment return at net asset
value(3,7) (%) -- -- -- --
Ratios and supplemental dataNet assets, end of
period (000s omitted) ($) 58,366 54,313 108,162 130,056
Ratio of expenses to average net assets (%) 2.06 1.92 2.00 1.96(5)
Ratio of adjusted expenses to average net assets(8) (%) -- -- -- --
Ratio of net investment income (loss) to
average net assets (%) 1.97 3.96 3.58 3.60(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) Effective March 31, 1997, the fiscal year end changed from October 31 to
March 31.
(3) Assumes dividend reinvestment and does not reflect the effect of any sales
charges.
(4) Not annualized.
(5) Annualized.
(6) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(7) An estimated total return calculation that does not take into
consideration fee reductions by the adviser during the periods shown.
(8) Unreimbursed, without fee reductions.
MONEY MARKET FUND 5
<PAGE>
U.S. Government Cash Reserve
REGISTRANT NAME: JOHN HANCOCK CURRENT INTEREST TICKER SYMBOL TGVXX
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GOAL AND STRATEGY
[Clip Art] 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
[Clip Art] The fund invests in securities that are issued or guaranteed as to
principal and interest by the U.S. Government, its agencies or
instrumentalities. Not all of these securities are backed by the full faith and
credit of the U.S. Government. The fund maintains an average maturity of 90 days
or less, and does not invest in securities with maturities of more than 13
months. The fund may enter into repurchase agreements and may engage in
short-term trading.
RISK FACTORS
[Clip Art] 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:
o repurchase agreements: credit risk
o short-term trading: market risk, as well as potentially higher transaction
costs that the fund must absorb.
These risks are defined in "Types of investment risk" on page 15.
The U.S. Government does not guarantee the market value or the current yield of
government securities, nor does the government's guarantee in any way extend to
the fund itself. Please read "Types of investment risk" carefully before
investing.
PORTFOLIO MANAGEMENT
[Clip Art] The fund's investment decisions are made by a portfolio management
team. Team members are part of the adviser's staff of U.S. Government securities
research analysts and portfolio managers.
There is a $20,000 minimum initial investment for this fund.
INVESTOR EXPENSES
[Clip Art] 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.
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Shareholder transaction expenses Class A
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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
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Annual fund operating expenses (as a % of average net assets)
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Management fee (after expense limitation)(1) 0.00%
12b-1 fee (after limitation)(1) 0.00%
Other expenses (after limitation)(1) 0.35%
Total fund operating expenses (after limitation)(1) 0.35%
Example The table below shows what you would pay
if you invested $1,000 over the various time frames indicated. The example
assumes you reinvested all dividends and that the average annual return was 5%.
- --------------------------------------------------------------------------------
Share class Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------------------------------------
Class A shares $4 $11 $20 $44
This example is for comparison purposes only and is not a representation of the
fund's actual expenses and returns, either past or future.
(1) Reflects the adviser's and distributor's temporary agreement to limit
expenses. Without this limitation, management fees would be 0.50%,
12b-1 fee would be 0.15%, other expenses would be 0.38% and total fund
operating expenses would be 1.03%.
6 U.S. GOVERNMENT CASH RESERVE
<PAGE>
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FINANCIAL HIGHLIGHTS
[Clip Art] The figures below have been audited by the fund's independent
auditors, Ernst & Young LLP.
Year-by-year total investment return (%)
(scale varies from fund to fund)
[The table below was represented as a bar graph in the printed material.]
<TABLE>
<CAPTION>
5/87 5/88 5/89 5/90 5/91 5/92 5/93 5/94 5/95(1) 5/96 3/97(2)
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.25 5.50 8.02 8.66 7.42 4.95 3.25 3.04 5.07 5.59 4.37(5)
ten
months
</TABLE>
<TABLE>
<CAPTION>
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Year ended: 5/87 5/88 5/89 5/90 5/91 5/92
- --------------------------------------------------------------------------------------------------------------------------
<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 $1.00
Total investment return at net asset value(3) (%) 5.25 5.50 8.02 8.66 7.42 4.95
Total adjusted investment return at net asset value(3,5) (%) 5.25 5.50 7.78 8.35 7.11 4.62
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 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(6) (%) 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(6) (%) 5.13 5.42 8.05 7.96 6.90 4.53
<CAPTION>
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Year ended: 5/93 5/94 5/95(1) 5/96 3/97(2)
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<S> <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
Net investment income (loss) 0.03 0.03 0.05 0.05 0.04
Less distributions:
Dividends from net investment income (0.03) (0.03) (0.05) (0.05) (0.04)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
Total investment return at net asset value(3) (%) 3.25 3.04 5.07 5.59 4.37(4)
Total adjusted investment return at net asset value(3,5) (%) 2.93 2.74 4.69 4.84 3.93(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 123,106 94,408 29,131 28,907 55,321
Ratio of expenses to average net assets (%) 0.35 0.35 0.35 0.35 0.35(7)
Ratio of adjusted expenses to average net assets(6) (%) 0.67 0.65 0.73 1.10 0.88(7)
Ratio of net investment income (loss) to average net assets (%) 3.19 2.96 4.79 5.41 5.15(7)
Ratio of adjusted net investment income (loss) to average
net assets(6) (%) 2.87 2.66 4.41 4.66 4.62(7)
</TABLE>
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the fund.
(2) Effective March 31, 1997, the fiscal year end changed from May 31, to
March 31.
(3) Assumes dividend reinvestment.
(4) Not annualized
(5) An estimated total return calculation that does not take into consideration
fee reductions by the adviser during the periods shown.
(6) Unreimbursed, without fee reduction.
(7) Annualized
U.S. GOVERNMENT CASH RESERVE 7
<PAGE>
Your account
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CHOOSING A SHARE CLASS
Money Market Fund offers two classes of shares, Class A and Class B. Money
Market Fund's Class A shares have lower expenses and are therefore more
advantageous for most investors. All shares of U.S. Government Cash Reserve are
Class A shares.
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Class A Class B
- --------------------------------------------------------------------------------
o No sales charges. o No Front-end sales charge.
o Lower annual expenses o Higher annual expenses
than Class B shares. than Class A shares.
o A deferred sales charge, as
described below.
o Automatic conversion to
Class A shares after eight
years, thus reducing future
annual expenses.
o Available on Money Market
Fund only.
For actual past expenses of Class A and B shares, see the fund-by-fund
information earlier in this prospectus.
HOW SALES CHARGES ARE CALCULATED
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:
- --------------------------------------------------------------------------------
Money Market Fund Class B deferred charges
- --------------------------------------------------------------------------------
Years after purchase CDSC on shares being sold
1st year 5.00%
2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
After 6 years None
All purchases made during a calendar month are counted as having been made on
the FIRST day of that month.
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 Signature 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:
o to make payments through certain systematic withdrawal plans
o to make distributions from a retirement plan
o because of shareholder death or disability
To utilize: if you think you may be eligible for a CDSC waiver, contact your
financial representative or Signature Services, or consult the SAI (see the back
cover of this prospectus).
Reinstatement privilege If you sell shares of a John Hancock fund, you may
reinvest some or all of the proceeds in the same share class of any John Hancock
fund within 120 days without a sales charge as long as Signature Services is
notified before you reinvest. 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 Signature Services.
OPENING AN ACCOUNT
1 Read this prospectus carefully.
2 Determine how much you want to invest. The
minimum initial investments are as follows:
o Money Market Fund: $1,000
o non-retirement account: $1,000
o retirement account: $250
o Monthly Automatic Accumulation Plan (MAAP): $25 to open; you must
invest at least $25 a month
o U.S. Government Cash Reserve: $20,000
3 Complete the appropriate parts of the account application, carefully
following the instructions. If you have questions, please contact your
financial representative or call Signature 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 and your
financial representative can initiate any purchase, exchange or sale of
shares.
8 YOUR ACCOUNT
<PAGE>
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Buying shares
- --------------------------------------------------------------------------------
Opening an account Adding to an account
By check
[Clip art] o Make out a check for the o Make out a check for the
investment amount, investment amount payable
payable to "John Hancock to "John Hancock
Signature Services, Inc." Signature Services, Inc."
o Deliver the check and o Fill out the detachable
your completed investment slip from an
application to your account statement. If no
financial representative, slip is available,
or mail them to Signature include a note specifying
Services (address below). the fund name, your share
class, your account
number and the name(s) in
which the account is
registered.
o Deliver the check and
your investment slip or
note to your financial
representative, or mail
them to Signature
Services (address below).
By exchange
[Clip art] o Call your financial o Call your financial
representative or representative or
Signature Services to Signature Services to
request an exchange. request an exchange.
By wire
[Clip art] o Deliver your completed o Instruct your bank to
application to your wire the amount of your
financial representative, investment to: First
or mail it to Signature Signature Bank & Trust
Services. Account # 900000260
Routing # 211475000
o Obtain your account Specify the fund name,
number by calling your your share class, your
financial representative account number and the
or Signature Services. name(s) in which the
account is registered.
o Instruct your bank to Your bank may charge a
wire the amount of your fee to wire funds.
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.
o To receive the dividend
for the same day you
invest, you must place
your order with Signature
Services by 12 noon
Eastern Time that day.
By phone
[Clip art] See "By wire" and "By o Verify that your bank or
exchange." credit union is a member
of the Automated Clearing
House (ACH) system.
o Complete the
"Invest-By-Phone" and
"Bank Information"
sections on your account
application.
o Call Signature Services
to verify that these
features are in place on
your account.
o Tell the Signature
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 Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone number
1-800-225-5291
Or contact your financial representative
for instructions and assistance.
- ----------------------------------------
To open or add to an account using the Monthly Automatic Accumulation Program,
see "Additional investor services."
YOUR ACCOUNT 9
<PAGE>
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Selling shares
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Designed for To sell some or all of your shares
By letter
[Clip art] o Accounts of any type. o Write a letter of
instruction or complete a
o Sales of any amount. 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.
o Include all signatures
and any additional
documents that may be
required (see next page).
o Mail the materials to
Signature Services.
o 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
[Clip art] o Most accounts. o For automated service 24
hours a day using your
o Sales of up to $100,000. touch-tone phone, call
the EASI-Line at
1-800-338-8080.
o To place your order with
a representative at John
Hancock Funds, call
Signature Services
between 8 A.M. and 4 P.M.
Eastern Time on most
business days.
By wire or electronic funds transfer (EFT)
[Clip art] o Requests by letter to o Fill out the "Telephone
sell any amount (accounts redemption" section of
of any type). your new account
application.
o Requests by phone to sell
up to $100,000 (accounts o To verify that the
with telephone redemption telephone redemption
privileges). privilege is in place on
an account, or to request
the forms to add it to an
existing account, call
Signature Services.
o Amounts of $1,000 or more
will be wired on the next
business day. A $4 fee
will be deducted from
your account.
o 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.
o To receive the dividend
for the same day you
sell, your order must be
accepted after 12 noon
Eastern Time that day.
By exchange
[Clip art] o Accounts of any type. o Obtain a current
prospectus for the fund
o Sales of any amount. into which you are
exchanging by calling
your financial
representative or
Signature Services.
o Call your financial
representative or
Signature Services to
request an exchange.
By check
[Clip art] o Any account with o Request checkwriting on
checkwriting privileges. your account application.
o Sales of over $100. o Verify that the shares to
be sold were purchased
more than 10 days earlier
or were purchased by
wire.
o Write a check for any
amount over $100.
-----------------------------------------
Address
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone number
1-800-225-5291
Or contact your financial representative
for instructions and assistance.
To sell shares through a systematic
withdrawal plan, see "Additional
investor services."
-----------------------------------------
10 YOUR ACCOUNT
<PAGE>
Selling shares in writing In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You will need
a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
o 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:
o a broker or securities dealer
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution
o a credit union
o a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
- --------------------------------------------------------------------------------
Seller Requirements for written requests
- --------------------------------------------------------------------------------
[Clipart]
Owners of individual, joint, sole o Letter of instruction.
proprietorship, UGMA/UTMA (custodial
accounts for minors) or general partner o On the letter, the signatures and
accounts. titles of all persons authorized to
sign for the account, exactly as the
account is registered.
o Signature guarantee if applicable
(see above).
Owners of corporate or association o Letter of instruction.
accounts.
o Corporate resolution, certified
within the past two years.
o On the letter and the resolution,
the signature of the person(s)
authorized to sign for the account.
o Signature guarantee if applicable
(see above).
Owners or trustees of trust accounts. o Letter of instruction.
o On the letter, the signature(s) of
the trustee(s).
o If the names of all trustees are
not registered on the account,
please also provide a copy of the
trust document certified within the
past six months.
o Signature guarantee if applicable
(see above).
Joint tenancy shareholders whose o Letter of instruction signed by
co-tenants are deceased. surviving tenant.
o Copy of death certificate.
o Signature guarantee if applicable
(see above).
Executors of shareholder estates. o Letter of instruction signed by
executor.
o Copy of order appointing executor.
o Signature guarantee if applicable
(see above).
Administrators, conservators, guardians o Call 1-800-225-5291 for instructions.
and other sellers or account types not
listed above.
YOUR ACCOUNT 11
<PAGE>
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TRANSACTION POLICIES
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Valuation of shares The net asset value per share (NAV) for each fund and class
is determined twice each business day at 12 noon and at the close of regular
trading on the New York Stock Exchange (typically 4 P.M. Eastern Time), by
dividing a class's net assets by the number of its shares outstanding. To help
the fund maintain its $1 constant share price, portfolio investments are valued
at cost, and any discount or premium created by market movements is amortized to
maturity.
Buy and sell prices Investors buy and sell all shares at the NAV. When you sell
Class B shares, the deferred sales charge may be subtracted, as described
earlier.
Execution of requests Each fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated (normally $1) after your request is
accepted by Signature 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, Signature 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 taken, Signature Services is not responsible for any
losses that may occur to any account due to an unauthorized telephone call. Also
for your protection, telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.
Exchanges You may exchange shares of one John Hancock fund for shares of the
same class of any other. The registration for both accounts involved must be
identical. 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 the new fund's rate if that 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 also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
Certificated shares All money market fund shares are electronically recorded.
Certificated shares are not available.
Sales in advance of purchase payments When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.
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DIVIDENDS AND ACCOUNT POLICIES
Account statements In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
12 YOUR ACCOUNT
<PAGE>
Dividends The funds generally declare dividends daily and pay them monthly.
Purchases by wire or other federal funds that are accepted before 12 noon
Eastern Time will receive the dividend declared that day. Other orders,
including those that are not accompanied by federal funds, will begin receiving
dividends the following day. Redemption orders accepted before 12 noon Eastern
Time will not receive that day's dividends.
Dividend reinvestments Most investors have their dividends reinvested in
additional shares of the same fund and class. If you choose this option, or if
you do not indicate any choice, your dividends will be reinvested on the
dividend payable date. Alternatively, you can choose to have a check for your
dividends mailed to you. However, if the check is not deliverable, your
dividends will be reinvested.
Taxability of dividends As long as a fund meets the requirements for being a
tax-qualified regulated investment company, which each fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.
Consequently, dividends you receive from a money market fund, whether reinvested
or taken as cash, are generally considered taxable as ordinary income. Some
dividends paid in January may be taxable as if they had been paid the previous
December.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
Taxability of transactions Any time you sell or exchange shares, it is
considered a taxable event for you. However, as long as a fund maintains a
stable share price, you will not have a gain or loss on shares you sell or
exchange.
Small accounts (non-retirement only) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature 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.
o If you are using MAAP to open an account, make out a check for your first
investment amount ($25 minimum for all funds except U.S. Government Cash
Reserve) payable to "John Hancock Signature Services, Inc." Deliver your
check and application to your financial representative or Signature Services.
Systematic withdrawal plan This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o 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).
o 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.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Signature Services.
Retirement plans John Hancock Funds offers a range of qualified retirement
plans, including IRAs, SIMPLE plans, SEPs, 401(k) plans, 403(b) plans (including
TSAs) and other pension and profit-sharing plans. Using these plans, you can
invest in any John Hancock fund (except tax-free income funds) with a low
minimum investment of $250 or, for some group plans, no minimum investment at
all. To find out more, call Signature Services at 1-800-225-5291.
YOUR ACCOUNT 13
<PAGE>
Fund details
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
How the funds are organized Each John Hancock money market fund is an open-end
management investment company or a series of such a company.
Each fund is supervised by a board of trustees, an independent body that has
ultimate responsibility for the fund's activities. The board retains various
companies to carry out the fund's operations, including the investment adviser,
custodian, transfer agent and others (see diagram). The board has the right, and
the obligation, to terminate the fund's relationship with any of these companies
and to retain a different company if the board believes it is in the
shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the fund's board. Thereafter, the board and the shareholders determine
the board's membership. The board of the John Hancock money market funds may
include individuals who are affiliated with the investment adviser. However, the
majority of board members must be independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for such purposes as electing or removing board members, changing fundamental
policies, approving a management contract or approving a 12b-1 plan (12b-1 fees
are explained in "Sales compensation").
[Diagram outlining the business structure of John Hancock Funds.]
SHAREHOLDERS
FINANCIAL SERVICES FIRMS AND
DISTRIBUTION AND THEIR REPRESENTATIVES
SHAREHOLDER SERVICES
Advise current and prospective
shareholders on their fund
investments, often in the context
of an overall financial plan.
PRINCIPAL DISTRIBUTOR TRANSFER AGENT
John Hancock Funds, Inc. John Hancock Signature Services, Inc.
101 Huntington Avenue 1 John Hancock Way, Suite 1000
Boston, MA 02199-7603 Boston, MA 02217-1000
Markets the funds and distributes Handles shareholder services,
shares through selling brokers, including record-keeping and
financial planners and other statements, distribution of dividends
financial representatives. and processing of buy and sell
requests.
INVESTMENT ADVISER CUSTODIAN
John Hancock Advisers, Inc. State Street Bank & Trust Co.
101 Huntington Avenue 225 Franklin Street
Boston, MA 02199-7603 Boston, MA 02110
Manages the funds' business and Holds the funds' assets, settles all
investment activities. portfolio trades and collects most of
the valuation data required for
calculating each fund's NAV.
ASSET
TRUSTEES MANAGEMENT
Supervise the funds' activities.
14 FUND DETAILS
<PAGE>
Accounting compensation The funds compensate the adviser for performing tax and
financial management services. Annual compensation is not expected to 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 CashReserve's investment goal and Money Market
Fund's 25% investment limitation on foreign bank obligations are fundamental and
may only be changed with shareholder approval.
Diversification Both money market funds are diversified.
- --------------------------------------------------------------------------------
SALES COMPENSATION
As part of their business strategies, the funds, along with John Hancock Funds,
pay compensation to financial services firms that sell the funds' shares. These
firms typically pass along a portion of this compensation to your financial
representative.
Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the funds' assets ("12b-1" refers to the federal
securities regulation that authorizes annual fees of this type). The 12b-1 fee
rates vary by fund and by share class, according to Rule 12b-1 plans adopted by
the funds. The sales charges and 12b-1 fees paid by investors are detailed in
the fund-by-fund information.
Distribution fees may be used to pay for sales compensation to financial
services firms, marketing and overhead expenses and, for Class B shares,
interest expenses.
- --------------------------------------------------------------------------------
Class B unreimbursed distribution expenses(1)
- --------------------------------------------------------------------------------
Unreimbursed As a % of
Fund expenses net assets
Money Market $897,288 0.93%
(1) As of the most recent fiscal year end covered by the 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
0.25% of the net amount invested.
Annual compensation Beginning with the second year after an investment is made,
the financial services firm receives an annual service fee of 0.15% of its total
eligible net assets in Money Market Fund. This fee is paid quarterly in arrears.
Financial services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock Funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
Types of Investment Risk
Credit risk The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Common to all debt securities.
Interest rate risk The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
Leverage risk Associated with securities or practices (such as when-issued and
forward commitment transactions) that multiply small market movements into large
changes in value.
Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like.
Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.
Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. Common to all debt securities and the
mutual funds that invest in them.
Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
Valuation risk The risk that a fund has valued certain of its securities at a
higher price than it can sell them for.
FUND DETAILS 15
<PAGE>
For more information
- --------------------------------------------------------------------------------
Two documents are available that offer further information on John Hancock money
market funds:
ANNUAL/SEMIANNUAL 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/semiannual 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/semiannual report or SAI, please
write or call:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Telephone: 1-800-225-5291
EASI-Line: 1-800-338-8080
TDD: 1-800-544-6713
Internet: www.jhancock.com/funds
[Logo] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(C) 1996 John Hancock Funds, Inc.
MNYPN 8/97
John Hancock Funds
Financial Services
<PAGE>
JOHN HANCOCK MONEY MARKET FUND
Class A and Class B Shares
Statement Of Additional Information
August 1, 1997
This Statement of Additional Information provides information about John Hancock
Money Market Fund (the "Fund"), a diversified series of John Hancock Current
Interest (the "Trust") in addition to the information that is contained in the
combined Money Market Funds' Prospectus dated August 1, 1997 (the "Prospectus").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
1-800-225-5291
TABLE OF CONTENTS
Page
Organization of the Fund................................................ 2
Investment Objective and Policies....................................... 2
Investment Restrictions................................................. 8
Those Responsible for Management........................................ 10
Investment Advisory and Other Services.................................. 19
Distribution Contracts.................................................. 21
Net Asset Value......................................................... 23
Purchase of Class A Shares.............................................. 24
Deferred Sales Charge on Class B Shares................................. 24
Special Redemptions..................................................... 27
Additional Services and Programs........................................ 28
Description of the Fund's Shares........................................ 29
Tax Status.............................................................. 30
Calculation of Performance.............................................. 33
Brokerage Allocation.................................................... 34
Transfer Agent Services................................................. 35
Custody of Portfolio.................................................... 36
Independent Auditors.................................................... 36
Appendix................................................................ A-1
Financial Statements.................................................... F-1
1
<PAGE>
ORGANIZATION OF THE FUND
The Trust is an open-end investment management company organized as a
Massachusetts business trust under the laws of The Commonwealth of
Massachusetts. Prior to December 2, 1996, the Fund was a series portfolio of
John Hancock Series, Inc.("John Hancock Series, Inc."), an open-end management
investment company organized as a Maryland corporation. Prior to September 12,
1995, the Fund was called John Hancock Money Market Fund B. Prior to December
22, 1994, the Fund was called Transamerica Money Market Fund B.
John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser, a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company"), a Massachusetts life insurance company chartered in 1862
with national headquarters at John Hancock Place, Boston, Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus.
The Fund seeks to provide maximum current income that is consistent with
maintaining liquidity and preserving capital. 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 Fund will achieve its investment objective.
The Fund seeks to achieve its objective by investing in money market instruments
including, but not limited to, U.S. Government, municipal and foreign
governmental securities; obligations of supranational organizations (e.g., the
World Bank and the International Monetary Fund); obligations of U.S. and foreign
banks and other lending institutions; corporate obligations; repurchase
agreements and reverse repurchase agreements. As a fundamental policy, the Fund
may not invest more than 25% of its total assets in obligations issued by (i)
foreign banks and (ii) foreign branches of U.S. banks where the Adviser has
determined that the U.S. bank is not unconditionally responsible for the payment
obligations of the foreign branch. All of the Fund's investments will be
denominated in U.S. dollars.
At the time the Fund acquires its investments, they will be rated (or issued by
an issuer that is rated with respect to a comparable class of short-term debt
obligations) in one of the two highest rating categories for short-term debt
obligations assigned by at least two nationally recognized rating organizations
(or one rating organization if the obligation was rated by only one such
organization). These high quality securities are divided into "first tier" and
"second tier" securities. First tier securities have received the highest rating
from at least two rating organizations (or one, if only one has rated the
security). Second tier securities have received ratings within the two highest
categories from at least two rating agencies (or one, if only one has rated the
security), but do not qualify as first tier securities. The Fund may also
purchase obligations that are not rated, but are determined by the Adviser,
based on procedures adopted by the 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.
2
<PAGE>
Ratings as Investment Criteria. In general, the ratings of Moody's Investors
Service, Inc. (" Moody's") and Standard & Poor's Ratings Group ("S&P") represent
the opinions of these agencies as to the quality of the securities which they
rate. It should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will be used
by the Fund as initial criteria for the selection of portfolio securities. Among
the factors which will be considered are the long-term ability of the issuer to
pay principal and interest and general economic trends. Appendix A contains
further information concerning the ratings of Moody's and S&P and their
significance.
Subsequent to its purchase by either Fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by the
Fund, but the Adviser will consider the event in its determination of whether
the Fund should continue to hold the securities.
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 non-fundamental and may be changed by a vote of the
Trustees without shareholder approval.
Government Securities. The Fund may invest in U.S. Government securities, which
are obligations issued or guaranteed by the U.S. Government and its agencies,
authorities or instrumentalities. Certain U.S. Government securities, including
U.S. Treasury bills, notes and bonds, and Government National Mortgage
Association certificates ("Ginnie Maes"), are supported by the full faith and
credit of the United States. Certain other U.S. Government securities, issued or
guaranteed by Federal agencies or government sponsored enterprises, are not
supported by the full faith and credit of the United States, but may be
supported by the right of the issuer to borrow from the U.S. Treasury. These
securities include obligations of the Federal Home Loan Mortgage Corporation
("Freddie Macs"), and obligations supported by the credit of the
instrumentality, such as Federal National Mortgage Association Bonds ("Fannie
Maes"). No assurance can be given that the U.S. Government will provide
financial support to such Federal agencies, authorities, instrumentalities and
government sponsored enterprises in the future.
Custodial Receipts. The Fund may acquire custodial receipts in respect of U.S.
government securities. Such custodial receipts evidence ownership of future
interest payments, principal payments or both on certain notes or bonds. These
custodial receipts are known by various names, including Treasury Receipts,
Treasury Investors Growth Receipts ("TIGRs"), and Certificates of Accrual on
Treasury Securities ("CATS"). For certain securities law purposes, custodial
receipts are not considered U.S. government securities.
Bank and Corporate Obligations. The Fund may invest in commercial paper.
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations and finance
companies. The commercial paper purchased by the Fund consists of direct U.S.
dollar denominated obligations of domestic or foreign issuers. Bank obligations
in which the Fund may invest include certificates of deposit, bankers'
acceptances and fixed time deposits. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
3
<PAGE>
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 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
4
<PAGE>
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power or ability of any one or more issuers to pay when due
the principal of and interest on their municipal obligations may be affected.
The yields of municipal bonds depend upon, among other things, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, the maturity of the obligation and rating of the issue. The
ratings of S&P, Moody's and Fitch 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 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.
Investments in Foreign Securities. The Fund may invest in U.S. dollar
denominated foreign securities and certificates of deposit, bankers' acceptances
and fixed time deposits and other obligations issued by foreign banks and their
U.S. and foreign branches and foreign branches of U.S. banks. The Fund may also
invest in municipal instruments backed by letters of credit issued by certain
foreign banks. Under current Securities and Exchange Commission ("SEC") rules
relating to the use of the amortized cost method of portfolio securities
valuation, the Fund is restricted to purchasing U.S. dollar denominated
securities.
Investing in obligations of non-U.S. issuers and foreign banks, particularly
securities of issuers located in emerging countries, may entail greater risks
than investing in similar securities of U.S. issuers. These risks include (i)
social, political and economic instability; (ii) the small current size of the
markets for many such securities and the currently low or nonexistent volume of
trading, which may result in a lack of liquidity and in greater price
volatility; (iii) certain national policies which may restrict the Fund's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign taxation; and
(v) the absence of developed structures governing private or foreign investment
or allowing for judicial redress for injury to private property.
Investments in foreign securities may involve a greater degree of risk than
those in domestic securities. There is generally less publicly available
information about foreign companies in the form of reports and ratings similar
to those that are published about issuers in the United States. Also, foreign
issuers are generally not subject to uniform accounting, auditing and financial
reporting requirements comparable to those applicable to United States issuers.
Foreign securities will be purchased in the best available market, whether
through over-the-counter markets or exchanges located in the countries where
principal offices of the issuers are located. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange, and securities of some foreign issuers are less liquid and more
volatile than securities of comparable United States issuers. Fixed commissions
on foreign exchanges are generally higher than negotiated commissions on United
States exchanges, although the Fund will endeavor to achieve the most favorable
5
<PAGE>
net results on its portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers and listed issuers
than in the United States.
With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
The dividends, in some cases, capital gains, and interest payable on certain of
the Fund's foreign portfolio securities, may be subject to foreign withholding
or other foreign taxes, thus reducing the net amount of income or gains
available for distribution to the Fund's shareholders.
Repurchase Agreements. In a repurchase agreement the Fund buys a security for a
relatively short period (generally not more than 7 days) subject to the
obligation to sell it back to the issuer at a fixed time and price plus accrued
interest. The Fund will enter into repurchase agreements only with member banks
of the Federal Reserve System and with "primary dealers" in U.S. Government
securities. The Adviser will continuously monitor the creditworthiness of the
parties with whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period which the Fund seeks to
enforce its rights thereto, possible subnormal levels of income decline in value
of the underlying securities or lack of access to income during this period as
well as the expense of enforcing its rights. The Fund will not invest in a
repurchase agreement maturing in more than seven days, if such investment,
together with other illiquid securities held by the Fund (including restricted
securities) would exceed 10% of the Fund's net assets.
Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain with the
Fund's custodian a separate account consisting of liquid securities, of any type
or maturity, in an amount at least equal to the repurchase prices of the
securities (plus any accrued interest thereon) under such agreements. In
addition, the Fund will not enter into reverse repurchase agreements or borrow
money in excess of 33 1/3% of its total assets, and then only as a temporary
measure for extraordinary or emergency purposes, 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
6
<PAGE>
this purpose, 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. The Fund
will enter into reverse repurchase agreements only with federally insured banks
or savings and loan associations which are approved in advance as being
creditworthy by the Trustees. Under procedures established by the Trustees, the
Adviser will monitor the creditworthiness of the banks involved.
Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 10% of its net
assets in illiquid investments. If the Trustees determine, based upon a
continuing review of the trading markets for Section 4(2) paper or specific Rule
144A securities, that they are liquid, they will not be subject to the 10%
limit. The Trustees may adopt guidelines and delegate to the Adviser the daily
function of determining and monitoring the liquidity of restricted securities.
The Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations. The Trustees will carefully monitor the
Fund's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of illiquidity
in the Fund if qualified institutional buyers become for a time uninterested in
purchasing these restricted securities.
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, of any type or maturity, 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.
Lending of Securities. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities and money market
funds. When the Fund lends portfolio securities, there is a risk that the
borrower may fail to return the securities involved in the transaction. As a
7
<PAGE>
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.
Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held a relatively brief
period of time. The Fund may attempt to maximize current income through
short-term portfolio trading. This will involve selling portfolio instruments
and purchasing different instruments to take advantage of yield disparities in
different segments of the market for Government Obligations. Short-term trading
may have the effect of increasing portfolio turnover rate. A high rate of
portfolio turnover (100% or greater) involves correspondingly greater brokerage
expenses and may make it more difficult for the Fund to qualify as a regulated
investment company for federal income tax purposes. The Fund's portfolio
turnover rate is set forth in the table under the caption "Financial Highlights"
in the Prospectus.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without approval of a majority of the Fund's outstanding voting
securities, which as used in the Prospectus and this Statement of Additional
Information, means approval by the lesser of (1) the holders of 67% or more of
the Fund's shares represented at a meeting if more than 50% of the Fund's
outstanding shares are present in person or by proxy at the meeting or (2) more
than 50% of the Fund's outstanding shares.
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 Statement of
Additional Information), 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.
8
<PAGE>
(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 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.)
9
<PAGE>
(12) Issue any senior security (as that term is defined in the Investment
Company Act of 1940 (the "Investment Company Act")) if such issuance is
specifically prohibited by the Investment Company 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.
Non-fundamental Investment Restrictions. The following investment restrictions
are designated as non-fundamental and may be changed by the Trustees without
shareholder approval.
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.
If a percentage restriction or rating restriction on investment or utilization
of assets as set forth above 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 the policy.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of each Fund is managed by its Trustees of the Trust who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also Officers and Directors of the Adviser or Officers
and Directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").
10
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman, Director and Chief
101 Huntington Avenue Executive Officer (1, 2) Executive Officer, the Adviser;
Boston, MA 02199 Chairman, Trustee and Chief
October 1944 Executive Officer, The Berkeley
Financial Group ("The Berkeley
Group"); Chairman and Director, NM
Capital Management, Inc. ("NM
Capital"), John Hancock Advisers
International Limited ("Advisers
International") and Sovereign Asset
Management Corporation ("SAMCorp");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds");
Chairman, First Signature Bank and
Trust Company; Director, John
Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Advisers International
(Ireland) Limited ("International
Ireland"), 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;
Chairman, John Hancock
Distributors, Inc. (until April
1994); Director, John Hancock
Freedom Securities Corporation
(until September 1996); Director,
John Hancock Signature Services,
Inc. ("Signature Services") (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
11
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James F. Carlin Trustee (3) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual Insurance Company
(insurance), Consolidated Group
Trust (insurance administration),
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995) Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (since 1995);
Receiver, the City of Chelsea (until
August 1992).
William H. Cunningham Trustee (3) Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair of Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Texas Commerce Bank - Austin.
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
12
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Charles F. Fretz Trustee (3) Retired; self employed; Former Vice
RD #5, Box 300B President and Director, Towers,
Clothier Springs Road Perrin, Foster & Crosby, Inc.
Malvern, PA 19355 (international management
June 1928 consultants) (1952-1985).
Harold R. Hiser, Jr. Trustee (3) Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hill, NJ 07078 (pharmaceuticals) (retired 1996);
October 1931 Director, ReCapital Corporation
(reinsurance) (until 1995).
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser; Trustee,
Boston, MA 02199 The Berkeley Group; Director, John
April 1953 Hancock Funds, Advisers
International, Insurance Agency,
Inc. and International Ireland;
President and Director, SAMCorp. and
NM Capital; Executive Vice
President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993); Director, Signature
Services (until January 1997).
Charles L. Ladner Trustee (3) Director, Energy North, Inc. (public
UGI Corporation utility holding company) (until
P.O. Box 858 1992); Senior Vice President of UGI
Valley Forge, PA 19482 Corp. Holding Company Public
February 1938 Utilities, LPGAS.
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
13
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Leo E. Linbeck, Jr. Trustee (3) Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company
August 1934 engaged in various phases of the
construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board and Chief Executive
Officer, Linbeck Construction
Corporation; Director, PanEnergy
Corporation (a diversified energy
company), Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest International
Holdings, Inc. (a geophysical
consulting firm) (1980-1993);
Former Director, Greater Houston
Partnership (1980 -1995).
Patricia P. McCarter Trustee (3) Director and Secretary, The McCarter
1230 Brentford Road Corp. (machine manufacturer).
Malvern, PA 19355
May 1928
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
14
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Steven R. Pruchansky Trustee (1, 3) Director and President, Mast
4327 Enterprise Avenue Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
August 1944 Trust Company (until August 1991);
Director, Mast Realty Trust (until
1994); President, Maxwell Building
Corp. (until 1991).
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, John Hancock Distributors,
August 1937 Inc., Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp. and NM Capital; Trustee,
The Berkeley Group; Director, JH
Networking Insurance Agency, Inc.;
Director, John Hancock Property and
Casualty Insurance and its
affiliates (until November 1993);
Director, Signature Services (until
January 1997).
Norman H. Smith Trustee (3) Lieutenant General, United States
243 Mt. Oriole Lane Marine Corps; Deputy Chief of Staff
Linden, VA 22642 for Manpower and Reserve Affairs,
March 1933 Headquarters Marine Corps;
Commanding General III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
15
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
John P. Toolan Trustee (3) Director, The Smith Barney Muni Bond
13 Chadwell Place Funds, The Smith Barney Tax-Free
Morristown, NJ 07960 Money Funds, Inc., Vantage Money
September 1930 Market Funds (mutual funds), The
Inefficient-Market Fund, Inc.
(closed-end investment company) and
Smith Barney Trust Company of
Florida; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member of
the Executive Committee, Smith
Barney, Harris Upham & Co.,
Incorporated (investment bankers)
(until 1991).
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, SAMCorp.,
Insurance Agency, Inc.,
Southeastern Thrift & Bank Fund and
NM Capital; Senior Vice President,
The Berkeley Group; President, the
Adviser (until December 1994);
Director, Signature Services (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
16
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds.
February 1935
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services and John Hancock
July 1950 Funds; Secretary, NM Capital and
SAMCorp.; Clerk, Insurance Agency,
Inc.; Counsel, John Hancock Mutual
Life Insurance Company (until
February 1996), and Vice President
of John Hancock Distributors, Inc.
(until April 1994).
Susan S. Newton Vice President and Secretary Vice President, the Adviser; John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group; Vice
March 1950 President, John Hancock
Distributors, Inc. (until April
1994).
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
</TABLE>
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
17
<PAGE>
All of the officers listed are officers or employees of the Adviser or
Affiliated Companies. Some of the Trustees and officers may also be officers
and/or Directors and/or Trustees of one or more of the other funds for which the
Adviser serves as investment adviser.
As of July 10, 1997, the officers and Trustees of the Trust as a group
beneficially owned less than 1% of the outstanding shares of either class of the
Fund. As of that date, no person or entity owned beneficially or of record 5% or
more of the outstanding shares of either class of the Fund.
From December 22, 1994 until December 22, 1996, the Trustees established an
Advisory Board to facilitate a smooth transition between Transamerica Fund
Management Company ("TFMC"), the prior investment adviser, and the Adviser. The
members of the Advisory Board were distinct from the Trustees, did not serve the
Fund in any other capacity and are persons who had no power to determine what
securities are purchased or sold and behalf of the Fund.
Compensation of the Trustees and Advisory Board. The following tables provide
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, 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/or
its affiliates and receive no compensation from the Fund for their services.
Total Compensation
from all Funds in
Aggregate John Hancock
Compensation Fund Complex to
Trustees from the Fund* the Trustees**
- -------- -------------- --------------
James F. Carlin $ 3,437 $ 74,250
William H. Cunningham + $ 3,437 74,250
Charles F. Fretz $ 3,437 74,500
Harold R. Hiser. Jr. + $ 3,437 70,250
Charles L. Ladner $ 3,437 74,500
Leo E. Linbeck, Jr. $ 3,437 74,250
Patricia P. McCarter + $ 3,437 74,250
Steven R. Pruchansky + $ 3,509 77,500
Norman H. Smith + $ 3,509 77,500
John P. Toolan + $ 3,437 74,250
------- --------
Total $34,514 $745,500
* Compensation is for the period from November 1, 1996 to March 31, 1997.
** The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees as of the calendar year ended December 31, 1996.
As of this date, there were sixty-seven funds in the John Hancock Fund
Complex, of which each of these Independent Trustees served on
thirty-two.
+ As of December 31, 1996, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Fund Complex for
Mr. Cunningham was $131,741 for Mr. Hiser was $90,972, for Ms. McCarter
was $67,548, for Mr. Pruchansky was $28,731, for Mr. Smith was $32,314
and for Mr. Toolan was $ 163,385 under the John Hancock Deferred
Compensation Plan for Independent Trustees.
18
<PAGE>
Total Compensation
Aggregate from all Funds in
Compensation John Hancock Fund Complex
Advisory Board Members from the Fund* to Advisory Board Members**
R. Trent Campbell $ -- $ 47,000
Mrs. Lloyd Bentsen $ -- 47,000
Thomas R. Powers $ -- 47,000
Thomas B. McDade $ -- 47,000
----- --------
Total $ -- $188,000
* Compensation is for the period from November 1, 1996 to March 31, 1997.
The Advisory Board was discontinued on December 22, 1996.
** Total compensation paid by the John Hancock Fund Complex is as of
calendar year ended December 31, 1996.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $22 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 more than $100
billion, the Life Company is one of the ten largest life insurance companies in
the United States, and carries a high rating from Standard & Poor's and A.M.
Best's. Founded in 1862, the Life Company has been serving clients for over 130
years.
The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser will (a) furnish continuously an
investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.
The Fund bears all costs of its organization and operation, including expenses
of preparing, printing and mailing all shareholders' reports, notices,
prospectuses, proxy statements and reports to regulatory agencies; expenses
relating to the issuance, registration and qualification of shares; government
fees; interest charges; expenses of furnishing to shareholders their account
statements; taxes; expenses of redeeming shares; brokerage and other expenses
connected with the execution of portfolio securities transactions; expenses
pursuant to the Fund's plan of distribution; fees and expenses of custodians
including those for keeping books and accounts and calculating the net asset
value of shares; fees and expenses of transfer agents and dividend disbursing
agents; legal, accounting, financial, management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of the
Adviser's employees rendering such services to the Fund; the compensation and
expenses of Trustees who are not otherwise affiliated with the Trust, the
Adviser or any of their affiliates; expenses of Trustees' and shareholders'
meetings; trade association memberships; insurance premiums; and any
extraordinary expenses.
19
<PAGE>
As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser a monthly fee based on a stated percentage of the average daily net
assets of the Fund as follows:
Average Daily Net Assets Fee (Annual Rate)
- ------------------------ -----------------
First $500 million 0.500%*
Next $250 million 0.425%*
Next $250 million 0.375%
Next $500 million 0.350%
Next $500 million 0.325%
Next $500 million 0.300%
Over $2.5 billion 0.275%
*The Adviser has reduced the fee to 0.40% of the Fund's average daily net assets
and cannot reinstate the fee without the Trustees' consent.
From time to time, the Adviser may reduce its fees or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser retains the right to reimpose 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.
For the period from November 1, 1994 to December 22, 1994 and for the fiscal
year ended October 31, 1994, advisory fees payable by the Fund to TFMC, the
Fund's former investment adviser, were $50,611 and $214,088, respectively.
For the period from December 22, 1994 to the fiscal year ended October 31, 1995
and for the fiscal year ended October 31, 1996 and for the period from November
1, 1996 to March 31, 1997, advisory fees payable by the Fund to the Adviser,
were $221,171, $1,327,385 and $694,373.
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.
Pursuant to the Advisory Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the contract relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from its reckless disregard of the obligations
and duties under the contract.
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 Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the contract
is no longer in effect, the Fund (to the extent that it lawfully can) will cease
to use such name or any other name indicating that it is advised by or otherwise
20
<PAGE>
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.
The continuation of the Advisory Agreement was approved by all of the Trustees.
The Advisory Agreement and the Distribution Agreement discussed will continue in
effect from year to year, provided that its continuance is approved annually
both (i) by the holders of a majority of the outstanding voting securities of
the Trust or by the Trustees, and (ii) by a majority of the Trustees who are not
parties to the Agreement or "interested persons" of any such parties. Both
agreements may be terminated on 60 days written notice by either party or by
vote of a majority of the outstanding voting securities of the Funds and will
terminate automatically if assigned.
Administrative Services Agreement. John Hancock Series, Inc., on behalf of the
Fund, was a party to an administrative services agreement with TFMC (the
"Services Agreement"), pursuant to which TFMC performed bookkeeping and
accounting services and functions, including preparing and maintaining various
accounting books, records and other documents and keeping such general ledgers
and portfolio accounts as are reasonably necessary for the operation of the
Fund. Other administrative services included communications in response to
shareholder inquiries and certain printing expenses of various financial
reports. In addition, such staff and office space, facilities and equipment was
provided as necessary to provide administrative services to the Fund. The
Services Agreement was amended in connection with the appointment of the Adviser
as adviser to the Fund to permit services under the Agreement to be provided to
the Fund by the Adviser and its affiliates. The Services Agreement was
terminated during the fiscal year 1995.
The following amounts for the Fund reflect the total of administrative services
fees paid to TFMC (and to the Adviser during the period December 22, 1994 to
January 16, 1995) for the fiscal years ended October 31, 1995 and 1994 were
$7,517 and $46,621, 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. For the fiscal year ended October 31, 1996, the Fund paid
the Adviser $54,014 for services under this agreement. For the period from
November 1, 1996 to March 31, 1997, the Fund paid the Adviser $32,549 for
services under this agreement.
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.
DISTRIBUTION CONTRACTS
The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of each class of the Fund. Shares of the Fund are also sold by selected
broker-dealers (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. John Hancock Funds accepts orders for the
purchase of the shares of the Fund which are continually offered at net asset
21
<PAGE>
value next determined, plus an applicable sales charge, if any. In connection
with the sale of Class A or Class B shares, John Hancock Funds and Selling
Brokers receive compensation in the form of a sales charge imposed, in the case
of Class A shares, at the time of sale or, in the case of Class B shares, on a
deferred basis. John Hancock Funds may pay extra compensation to financial
services firms selling large amounts of fund shares. The compensation would be
calculated as a percentage of fund shares sold by the firm.
The Fund's Trustees adopted Distribution Plans with respect to Class A and Class
B shares (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act.
Under the Plans, the Fund will pay distribution and service fees at an aggregate
annual rate of up to 0.25% and 1.00%, for Class A and Class B shares,
respectively, of the Fund's daily net assets attributable to shares of that
class. Currently however, the Fund has agreed to limit fees attributable to
Class A shares to 0.15% of the Fund's daily net assets. The service fee will not
exceed 0.15% or 0.25% of the Fund's average daily net assets attributable to
Class A and Class B shares, respectively, and the remaining amount is for
distribution expenses. The distribution fees will be used to reimburse John
Hancock Funds for their 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; and (iii) with respect to Class B shares only,
interest expenses on unreimbursed distribution expenses. The service fees will
be used to compensate Selling Brokers and others for providing personal and
account maintenance services to shareholders. In the event the John Hancock
Funds is not fully reimbursed for payments or expenses they incur under the
Class A Plan, these expenses will not be carried beyond twelve months from the
date they were incurred. Unreimbursed expenses under the Class B Plan will be
carried forward together with interest on the balance of these unreimbursed
expenses. The Fund does not treat unreimbursed expenses under the Class B Plan
as a liability of the Fund because the Trustees may terminate Class B Plan at
any time. For the period from November 1, 1996 to March 31, 1997, an aggregate
of $897,288 of distribution expenses or of 0.93% of the average net assets of
the Class B shares of the Fund, was not reimbursed or recovered by John Hancock
Funds through the receipt of deferred sales charges or Rule 12b-1 fees in prior
periods.
The Plans were approved by a majority of the voting securities of the Fund. The
Plans and all amendments were approved by the Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plans (the "Independent
Trustees"), by votes cast in person at meetings called for the purpose of voting
on such Plans.
Pursuant to the Plans, at least quarterly, John Hancock Funds provide the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
The Plans provide that they will continue in effect only so long as their
continuance is approved at least annually by a majority of both the Trustees and
Independent Trustees. The Plans provide that they may be terminated without
penalty, (a) by vote of a majority of the Independent Trustees, (b) by a vote of
a majority of the Fund's outstanding shares of the applicable class upon 60
days' written notice to John Hancock Funds, and (c) automatically in the event
of assignment. The Plans further provide that they may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to that Plan. Each plan provides, that
22
<PAGE>
no material amendment to the Plans will be effective unless it is approved by a
vote of a majority of the Trustees and the Independent Trustees of the Fund. The
holders of Class A and Class B shares have exclusive voting rights with respect
to the Plan applicable to their respective class of shares. In adopting the
Plans, the Trustees concluded that, in their judgment, there is a reasonable
likelihood that the Plans will benefit the holders of the applicable class of
shares of the Fund.
Amounts paid to John Hancock Funds by any class of shares of the Fund will not
be used to pay the expenses incurred with respect to any other class of shares
of the Fund; provided, however, that expenses attributable to the Fund as a
whole will be allocated, to the extent permitted by law, according to a formula
based upon gross sales dollars and/or average daily net assets of each such
class, as may be approved from time to time by vote of a majority of Trustees.
From time to time, the Fund may participate in joint distribution activities
with other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Funds.
During the period from November 1, 1996 to March 31, 1997, the Funds paid John
Hancock Funds the following amounts of expenses with respect to the Class A and
Class B shares of the Fund:
<TABLE>
<CAPTION>
Expense Items
Printing and
Mailing of Interest,
Prospectuses Compensation Carrying or
to New Expenses of to Selling Other Finance
Advertising Shareholders Distributors Brokers Charges
----------- ------------ ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Class A shares $33,544 $2,665 $61,969 $102,049 $ --
Class B shares $25,071 $2,056 $46,403 $172,697 $154,860
</TABLE>
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.
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.
23
<PAGE>
Since a dividend is declared to shareholders each time net asset value is
determined, the net asset value per share of each class of the Fund will
normally remain constant at $1.00 per share. There is no assurance that the Fund
can maintain the $1.00 per share value. Monthly, any increase in the value of a
shareholder's investment in either class from dividends is reflected as an
increase in the number of shares of such class in the shareholder's account or
is distributed as cash if a shareholder has so elected.
It is expected that the Fund's net income will be positive each time it is
determined. However, if because of a sudden rise in interest rates or for any
other reason the net income of the Fund determined at any time is a negative
amount, the Fund will offset the negative amount against income accrued during
the month for each shareholder account. If at the time of payment of a
distribution such negative amount exceeds a shareholder's portion of accrued
income, the Fund may reduce the number of its outstanding shares by treating the
shareholder as having contributed to the capital of the Fund that number of full
or fractional shares which represents the amount of excess. By investing in
either class of shares of the Fund, shareholders are deemed to have agreed to
make such a contribution. This procedure permits the Fund to maintain its net
asset value at $1.00 per share.
If in the view of the Trustees it is inadvisable to continue the practice of
maintaining net asset value at $1.00 per share, the Trustees reserve the right
to alter the procedures for determining net asset value. The Fund will notify
shareholders of any such alteration.
The NAV for the fund and class is determined twice each business day at 12 noon
and at the close of regular trading on the New York Stock Exchange (typically 4
p.m. Eastern Time), by dividing a class's net assets by the number of its shares
outstanding. To help the Fund maintain its $1 constant share price, portfolio
investments are valued at cost, and any discount or premium created by market
movements is amortized to maturity.
PURCHASE OF CLASS A SHARES
Class A shares of the Fund will be sold at their net asset value without a sales
charge. Share certificates will not be issued unless requested by the
shareholder in writing, and then only will be issued for full shares. The
Trustees reserve the right to change or waive the Fund's minimum investment
requirements and to reject any order to purchase shares (including purchase by
exchange) when in the judgment of the Adviser such rejection is in the Fund's
best interest.
DEFERRED SALES CHARGE ON CLASS B SHARES
Investments in Class B shares are purchased at net asset value per share without
the imposition of a sales charge so the Fund will receive the full amount of the
purchase payment.
Contingent Deferred Sales Charge. Class B shares which are redeemed within six
years of purchase will be subject to a contingent deferred sales charge ("CDSC")
at the rates set forth in the Prospectus as a percentage of the dollar amount
subject to the CDSC. The charge will be assessed on an amount equal to the
lesser of the current market value or the original purchase cost of the Class B
shares being redeemed. No CDSC will be imposed on increases in account value
above the initial purchase prices, including Class B shares derived from
reinvestment of dividends or capital gains distributions. No CDSC will be
imposed on shares derived from reinvestment of dividends or capital gains
distributions.
24
<PAGE>
Class B shares are not available to full-service defined contribution plans
administered by John Hancock Signature Services Inc. ("Signature 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.
In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period or those you acquired through
dividend and capital gain reinvestment, and next from the shares you have held
the longest during the six-year period. For this purpose, the amount of any
increase in a share's value above its initial purchase price is regarded as a
share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price. However, you cannot redeem appreciation value only in order to avoid a
CDSC.
When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.
Example:
You have purchased 100 shares at $1 per share. The second year after your
purchase, you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time your CDSC will be calculated as follows:
* Proceeds of 50 shares redeemed at $1 per share $50
* Minus proceeds of 10 shares not subject to CDSC (dividend -10
reinvestment)
---
* Amount subject to CDSC $40
Proceeds from the CDSC are paid to John Hancock Funds and are used in whole or
in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase.
Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B and Class A shares that are subject to a CDSC, unless
indicated otherwise, in the circumstances defined below:
For all account types:
* Redemptions made pursuant to the Fund's right to liquidate your account
if you own shares worth less than $1,000.
25
<PAGE>
* 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 Signature
Services. (Please note, this waiver does not apply to periodic
withdrawal plan redemptions of Class A shares that are subject to a
CDSC.)
For Retirement Accounts (such as IRA, SIMPLE, Rollover IRA, TSA, 457, 403(b),
401(k), Money Purchase Pension Plan, Profit-Sharing Plan and other plans
qualified under the Internal Revenue Code of 1986, as amended (the "Code"))
unless otherwise noted.
* Redemptions made to effect mandatory or life expectancy distributions
under the Code.
* Returns of excess contributions made to these plans.
* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans under Section
401(a) of the Code (such as 401(k), Money Purchase Plans and Profit
Sharing Plans).
* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares
prior to May 15, 1995.
Please see matrix for reference.
26
<PAGE>
<TABLE>
<CAPTION>
CDSC Waiver Matrix for Class B Funds.
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Type of 401(a) Plan 403(b) 457 IRA, IRA Non-
Distribution (401(k), MPP, Rollover Retirement
PSP)
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Death or Waived Waived Waived Waived Waived
Disability
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually in
distributions periodic payments
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account
and 70 1/2 Expectancy or value annually
12% of account in periodic
value annually payments
in periodic
payments
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Under 59 1/2 Waived Waived for annuity Waived for Waived for 12% of account
payments (72t) or annuity annuity value annually
12% of account payments (72t) payments (72t) in periodic
value annually in or 12% of or 12% of payments
periodic payments account value account value
annually in annually in
periodic payments periodic payments
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Loans Waived Waived N/A N/A N/A
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Hardships Waived Waived Waived N/A N/A
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Return of Waived Waived Waived Waived N/A
Excess
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
</TABLE>
If you qualify for a CDSC waiver under one of these situations, you must notify
Signature Services at the time you make your redemption. The waiver will be
granted once Signature Services has confirmed that you are entitled to the
waiver.
SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
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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 Investment Company Act,
pursuant to which the Fund is obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Fund during any
90-day period for any one account.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.
Exchanges between funds with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock Short-Term Strategic Income
Fund, John Hancock Intermediate Maturity Government Fund and John Hancock
Limited-Term Government Fund will retain the exchanged fund's CDSC schedule).
For purposes of computing the CDSC payable upon redemption of shares acquired in
an exchange, the holding period of the original shares is added to the holding
period of the shares acquired in an exchange.
If a shareholder exchanges Class B shares purchased prior to January 1, 1994
(except John Hancock Short-Term Strategic Income Fund) for Class B shares of any
other John Hancock fund, the acquired shares will continue to be subject to the
CDSC schedule that was in effect when the exchanged shares were purchased.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares. The maintenance of a Systematic Withdrawal Plan
concurrently with purchases of additional Class B shares of the Fund could be
disadvantageous to a shareholder because of the CDSC imposed on redemptions of
Class B shares. Therefore, a shareholder should not purchase Class B shares of
the Fund at the same time as a Systematic Withdrawal Plan is in effect. The Fund
reserves the right to modify or discontinue the Systematic Withdrawal Plan of
any shareholder on 30 days' prior written notice to such shareholder, or to
discontinue the availability of such plan in the future. The shareholder may
terminate the plan at any time by giving proper notice to Signature Services.
Monthly Automatic Accumulation Program ("MAAP"). The program is explained in the
Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
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The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the MAAP may be revoked by Signature
Services without prior notice if any investment is not honored by the
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature Services which is received at least
five (5) business days prior to the due date of any investment.
Reinstatement and Reinvestment Privilege. If Signature Services is notified
prior to reinvestment, 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 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.
To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege 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. Also, the Fund may refuse any reinvestment
request.
The Fund may change or cancel its reinvestment policies at any time.
A redemption or exchange of Fund shares is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
Fund shares will be treated for tax purposes as described under the caption "TAX
STATUS".
DESCRIPTION OF THE FUND'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund, without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have authorized shares of the Fund and one other
series. Additional series may be added in the future. The Declaration of Trust
also authorizes the Trustees to classify and reclassify the shares of the Fund
or any new series of the Trust, into one or more classes. As of the date of this
Statement of Additional Information, the Trustees have authorized the issuance
of two classes of shares of the fund, designated as Class A and Class B.
The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
Class A and Class B shares have certain exclusive voting rights on matters
relating to their respective distribution plans. The different classes of the
Fund may bear different expenses relating to the cost of holding shareholder
meetings necessitated by the exclusive voting rights of any class of shares.
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Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to Class A and Class B shares will be
borne exclusively by that class (ii) Class B shares will pay higher distribution
and service fees than Class A shares and (iii) each of Class A and Class B
shares will bear any class expenses properly allocable to that class of shares,
subject to the conditions the Internal Revenue Services imposes with respect to
the multiple-class structures. Similarly, the net asset value per share may vary
depending on whether Class A or Class B shares are purchased.
In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.
Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts, obligations or affairs of the Fund. The
Declaration of Trust also provides for indemnification out of the Fund's assets
for all losses and expenses of any shareholder held personally liable by reason
of being or having been a shareholder. The Declaration of Trust also provides
that no series of the Trust shall be liable for the liabilities of any other
series. Furthermore, no Fund included in this Fund's prospectus shall be liable
for the liabilities of any other John Hancock Fund. Liability is therefore
limited to circumstances in which the Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or policies of any regulatory authority. Use of
information provided on the account application may be used by the Fund to
verify the accuracy of the information or for background or financial history
purposes. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes. The
Fund has qualified and elected to be treated as a "regulated investment company"
under Subchapter M of the Code, and intends to continue to so qualify for each
taxable year. As such and by complying with the applicable provisions of the
Code regarding the sources of its income, the timing of its distributions, and
the diversification of its assets, the Fund will not be subject to Federal
income tax on taxable income (including net realized capital gains, if any
)which is distributed to shareholders in accordance with the timing requirements
of the Code.
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The Fund will be subject to a 4% non-deductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss investment company taxable income is all taxable income
and capital gains or losses, other than those gains or losses taken into account
in computing net capital gain, after reduction by deductible expenses. It is not
likely that the Fund will earn or distribute any net capital gain.) Some
distributions may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. Distributions from
the Fund will not qualify for the dividends-received deduction for any corporate
shareholder. The tax treatment described above will apply without regard to
whether distributions are received in cash or reinvested in additional shares of
the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
Upon a redemption of shares of the Fund (including by exercise of the exchange
privilege) a shareholder ordinarily will not realize a taxable gain or loss if
the Fund always successfully maintains a constant net asset value per share,
although a loss may still arise if a CDSC is paid. If the Fund is not successful
in maintaining a constant net asset value per share, a redemption may produce a
taxable gain or loss. Any gain or loss will be treated as capital gain or loss
if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period for
the shares and subject to the special rules described below. Any loss realized
on a redemption or exchange may be disallowed to the extent the shares disposed
of are replaced with other shares of the same Fund within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of,
such as pursuant to automatic dividend reinvestments. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized upon the redemption of shares with a tax holding period of six months
or less will be treated as a long-term capital loss to the extent of any amounts
treated as distributions of long-term capital gain with respect to such shares.
For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset its own net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent net capital
gains are offset by such losses, they would not result in Federal income tax
liability to the Fund and would not be distributed as such to shareholders.
Presently, there are no capital loss carry forward, available to offset future
net realized capital gains.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
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prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments, if any, in foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. It is not likely that the Fund will generally qualify to
pass through such foreign taxes and any associated foreign tax credits or
deduction to its shareholders, who therefore will generally not take such taxes
into account directly on their tax returns.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions (if any), and ownership of
or gains realized (if any) on the redemption (including an exchange) of Fund
shares may also be subject to state and local taxes. Shareholders should consult
their own tax advisers as to the Federal, state or local tax consequences of
ownership of shares of, and receipt of distributions from, a Fund in their
particular circumstances.
A state income ( and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Fund will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions may be subject to backup
withholding of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholders
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions, whether taken in
cash or reinvested in shares, will be reduced by the amounts required to be
withheld. Any amounts withheld may be credited against a shareholder's U.S.
federal income tax liability. Investors should consult their tax advisers about
the applicability of the backup withholding provisions.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute for Form W-8 is on file, to 31% backup withholding on certain other
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payments from the Fund. Non-U.S. investors should consult their tax advisers
regarding such treatment and the application of foreign taxes to an investment
in the Fund.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
Provided that the Fund qualifies as a regulated investment company under the
Code, it will not be required to pay any Massachusetts income.
CALCULATION OF PERFORMANCE
For the purposes of calculating yield for both classes of the Fund, daily income
per share consists of interest and discount earned on the Fund's investments
less provision for amortization of premiums and applicable expenses, divided by
the number of shares outstanding, but does not include realized or unrealized
appreciation or depreciation.
In any case in which the Fund reports its annualized yield, it will also furnish
information as to the average portfolio maturities of the Fund. It will also
report any material effect of realized gains or losses or unrealized
appreciation on dividends which have been excluded from the computation of
yield.
Yield calculations are based on the value of a hypothetical preexisting account
with exactly one share at the beginning of the seven day period. Yield is
computed by determining the net change in the value of the account during the
base period and dividing the net change by the value of the account at the
beginning of the base period to obtain the base period return. Base period is
multiplied by 365/7 and the resulting figure is carried to the nearest 100th of
a percent. Net change in account value during the base period includes dividends
declared on the original share, dividends declared on any shares purchased with
dividends of that share and any account or sales charges that would affect an
account of average size, but excludes any capital changes.
Effective yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1
The yield of the Fund is not fixed or guaranteed. Yield quotations should not be
considered to be representations of yield of the Fund for any period in the
future. The yield of the Fund is a function of available interest rates on money
market instruments, which can be expected to fluctuate, as well as of the
quality, maturity and types of portfolio instruments held by the Fund and of
changes in operating expenses. The Fund's yield may be affected if, through net
sales of its shares, there is a net investment of new money in the Fund which
the Fund invests at interest rates different from that being earned on current
portfolio instruments. Yield could also vary if the Fund experiences net
redemptions, which may require the disposition of some of the Fund's current
portfolio instruments.
From time to time, in reports and promotional literature, the Fund's yield and
total return will be compared to indices of mutual funds and bank deposit
vehicles such as Lipper Analytical Services, Inc.'s "Lipper--Fixed Income Fund
Performance Analysis," a monthly publication which tracks net assets, total
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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
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser pursuant to
recommendations made by its investment committee of the Adviser, which consists
of officers and directors of the Adviser and affiliates and Trustees who are
interested persons of the Fund. Orders for purchases and sales of securities are
placed in a manner which, in the opinion of the Adviser, will offer the best
price and market for the execution of each such transaction. Purchases from
underwriters of portfolio securities may include a commission or commissions
paid by the issuer and transactions with dealers serving as market makers
reflect a "spread." Debt securities are generally traded on a net basis through
dealers acting for their own account as principals and not as brokers; no
brokerage commissions are payable on these transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and other policies that the Trustees may determine, the Adviser may consider
sales of shares of the Fund as a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser of the Fund, and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will make no commitments to allocate portfolio transactions upon any
prescribed basis. While the Adviser'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
31,1996, 1995 and 1994 no negotiated brokerage commissions were paid on
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portfolio transactions. Also for the period from November 1, 1996 to March 31,
1997, 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 period from November 1, 1996 to March
31, 1997, 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. a broker-dealer ("Distributors"
or "Affiliated Broker"). 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 Affiliated Brokers. For the
period from November 1, 1996 to March 31, 1997, the Fund paid no brokerage
commissions to any Affiliated Broker.
Distributors may act as broker for the Fund on exchange transactions, subject,
however, to the general policy of the Fund set forth above and the procedures
adopted by the Trustees pursuant to the Investment Company Act. Commissions paid
to an Affiliated Broker must be at least as favorable as those which the
Trustees believe to be contemporaneously charged by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold. A transaction would not be placed with an Affiliated Broker if the Fund
would have to pay a commission rate less favorable than the Affiliated Broker's
contemporaneous charges for comparable transactions for its other most favored,
but unaffiliated, customers, except for accounts for which the Affiliated Broker
acts as 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 Investment Company
Act) of the Fund, the Adviser or the Affiliated Brokers. Because the Adviser,
which is affiliated with the Affiliated Brokers, has, as an investment adviser
to the Fund, the obligation to provide investment management services, which
includes elements of research and related investment skills, such research and
related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria.
Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1000, Boston,
MA 02217-1000, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$20.00 per Class A shareholder and $22.50 per Class B shareholder, plus
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out-of-pocket expenses. These expenses are aggregated and charged to the Fund
and allocated to each class on the basis of their relative net asset values.
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 02110. Under the custodian agreement, the custodian
performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. The financial statements of the Fund
included in the Prospectus and this Statement of Additional Information as of
the Fund's fiscal period ended March 31, 1997 have been audited by Ernst & Young
LLP for the periods indicated in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The financial statements listed below are included in and incorporated by
reference into Part B of the Registration Statement for Money Market Fund and
U.S. Government Cash Reserve 1997 Annual Report to Shareholders for the year
ended March 31, 1997; (filed electronically on May 20, 1997; file nos. 811-2485
and 2-50931; accession number 000092816-97-000153).
John Hancock Current Interest
John Hancock Money Market
Statement of Assets and Liabilities as of March 31, 1997.
Statement of Operations for the period from November 1, 1996 to
March 31, 1997.
Statement of Changes in Net Asset for each of the periods indicated
therein.
Financial Highlights for each of the periods indicated therein.
Schedule of Investments as of March 31, 1997.
Notes to Financial Statements.
Report of Independent Auditors.
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APPENDIX A
CORPORATE AND TAX-EXEMPT BOND RATINGS
Moody's Investors Service, Inc. ("Moody's)
Aaa, Aa, A and Baa - 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
A-1
<PAGE>
investment grade and of good quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher
ratings. Bonds rated BBB are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds with
higher ratings.
TAX-EXEMPT NOTE RATINGS
Moody's - MIG-1 and MIG-2. Notes rated MIG-1 are judged to be of the best
quality, enjoying strong protection from established cash flow or funds for
their services or from established and broad-based access to the market for
refinancing or both. Notes rated MIG-2 are judged to be of high quality with
ample margins of protection, though not as large as MIG-1.
S&P - SP-1 and SP-2. SP-1 denotes a very strong or strong capacity to pay
principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+). SP-2 denotes a
satisfactory capacity to pay principal and interest.
Fitch - FIN-1 and FIN-2. Notes assigned FIN-1 are regarded as having the
strongest degree of assurance for timely payment. A plus symbol may be used to
indicate relative standing. Notes assigned FIN-2 reflect a degree of assurance
for timely payment only slightly less in degree than the highest category.
CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS
Moody's - Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Prime-1, indicates highest quality repayment capacity of
rated issue and Prime-2 indicates higher quality.
S&P - Commercial Paper ratings are a current assessment of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
Issues rated A have the greatest capacity for a timely payment and the
designation 1, 2 and 3 indicates the relative degree of safety. Issues rated
"A-1+" are those with an "overwhelming degree of credit protection."
Fitch - Commercial Paper ratings reflect current appraisal of the degree of
assurance of timely payment. F-1 issues are regarded as having the strongest
degree of assurance for timely payment. (+) is used to designate the relative
position of an issuer within the rating category. F-2 issues reflect an
assurance of timely payment only slightly less in degree than the strongest
issues. The symbol (LOC) may follow either category and indicates that a letter
of credit issued by a commercial bank is attached to the commercial paper note.
Other Considerations - The ratings of S&P, Moody's, and Fitch represent their
respective opinions of the quality of the municipal securities they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal securities with the same
maturity, coupon and ratings may have different yields and municipal securities
of the same maturity and coupon with different ratings may have the same yield.
A-2
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
JOHN HANCOCK U.S. GOVERNMENT CASH RESERVE
Statement Of Additional Information
August 1, 1997
This Statement of Additional Information 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 dated August 1, 1997 (the
"Prospectus").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
1-800-225-5291
Table of Contents
Page
Organization of the Fund ............................................... 2
Investment Objective and Policies ...................................... 2
Investment Restrictions ................................................ 4
Those Responsible for Management ....................................... 6
Investment Advisory and Other Services ................................. 15
Distribution Contracts ................................................. 17
Net Asset Value ........................................................ 19
Purchase of Shares ..................................................... 19
Special Redemptions .................................................... 20
Additional Services and Programs ....................................... 20
Description of the Fund's Shares ....................................... 20
Tax Status ............................................................. 21
Calculation of Performance ............................................. 23
Brokerage Allocation ................................................... 24
Transfer Agent Services ................................................ 26
Custody of Portfolio ................................................... 26
Independent Auditors ................................................... 26
Financial Statements ................................................... F-1
1
<PAGE>
ORGANIZATION OF THE TRUST
The Trust is an open-end investment management company organized as a
Massachusetts business trust under the laws of The Commonwealth of
Massachusetts. Prior to December 22, 1994, the Fund was called Transamerica U.S.
Government Cash Reserve.
John Hancock Advisers, Inc. (the "Adviser"), is the Fund's investment adviser, a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company") a Massachusetts life insurance company chartered in 1862
with national headquarters at John Hancock Place, Boston, Massachusetts.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus.
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 is no assurance that the Fund will achieve its
investment objective.
Securities issued or guaranteed by the U.S. Government differ only in their
interest rates, maturities and dates of issuance. Treasury bills have a maturity
of one year or less. Treasury notes have maturities of 1-10 years and Treasury
bonds have maturities of greater than 10 years at the date of issuance.
Securities in which the Fund invests may not earn as high a level of current
income as longer-term or lower quality securities, which generally have less
liquidity, greater market risk and more fluctuation in market value.
The return on an investment in the Fund will depend on the interest earned by
the Fund's investments after expenses of the Fund are deducted. The return is
paid to shareholders in the form of dividends.
The Fund seeks to maintain a net asset value of $1.00 per share at all times.
There can be no assurance that the Fund will be able to maintain a constant
$1.00 share price. However, because the Fund purchases high quality U.S.
Government securities with short maturities, this policy helps to minimize any
price decreases or increases that could result from changes in interest rates or
an issuer's creditworthiness. The Fund's investment objective, policies and
restrictions (including a restriction on borrowing money and pledging assets),
except as noted, are fundamental and may not be changed without the approval of
the Fund's shareholders.
Government Securities. U.S. Government securities are issued or guaranteed as to
principal and interest by the U.S. Government or one of its agencies or
instrumentalities. U.S. Treasury bills, notes and bonds, 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
2
<PAGE>
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. In a repurchase agreement the Fund buys a security for a
relatively short period (generally not more than 7 days) subject to the
obligation to sell it back to the issuer at a fixed time and price plus accrued
interest. The Fund will enter into repurchase agreements only with member banks
of the Federal Reserve System and with "primary dealers" in U.S. Government
securities. The Adviser will continuously monitor the creditworthiness of the
parties with whom the Fund enters into repurchase agreements.
The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income decline in
value of the underlying securities or lack of access to income during this
period as well as the expense of enforcing its rights.
The Fund will not enter into repurchase agreements of more than one week's
duration if more than 10% of its net assets would then be so
invested-considering only the remaining days to maturity of existing repurchase
agreements. In addition, the securities underlying repurchase agreements are not
subject to the restrictions applicable to maturity of the portfolio or its
securities.
Reverse Repurchase Agreements. The Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain with the
Fund's custodian a separate account consisting of liquid securities (plus any
accrued interest thereon) under such agreements. In addition, the Fund will not
enter into reverse repurchase agreements or borrow money except from banks for
temporary or emergency purposes (but not to purchase investment securities) in
an amount up to 1/3 of the value of the Fund's total assets. The borrowing
restriction set forth above does not prohibit the use of reverse repurchase
agreements, in an amount (including any borrowings) not to exceed 33 1/3% of net
3
<PAGE>
assets. The Fund will enter into reverse repurchase agreements only with
federally insured banks or savings and loan associations which are approved in
advance as being creditworthy by the Trustees. Under procedures established by
the Trustees, the Adviser will monitor the creditworthiness of the banks
involved.
Money Market Instruments. Because interest rates on money market instruments
fluctuate in response to economic factors, the rates on short-term 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. Short-term trading means the purchase
and subsequent sale of a security after it has been held a relatively brief
period of time. The Fund may attempt to maximize current income through
short-term portfolio trading. This will involve selling portfolio instruments
and purchasing different instruments to take advantage of yield disparities in
different segments of the market for Government Obligations. Short-term trading
may have the effect of increasing portfolio turnover rate. A high rate of
portfolio turnover (100% or greater) involves correspondingly greater brokerage
expenses and may make it more difficult for the Fund to qualify as a regulated
investment company for federal income tax purposes. The Fund's portfolio
turnover rate is set forth under the caption "Financial Highlights" in the
Prospectus.
The Fund does not intend to invest for the purpose of seeking short-term
profits. The Fund's portfolio securities may be changed, however, without regard
to the holding period of these securities (subject to certain tax restrictions),
when the Adviser deems that this action will help achieve the Fund's objective
given a change in an issuer's operations or changes in general market
conditions.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without the approval of the majority of the Fund's outstanding
voting securities, which as used in the Prospectus and this Statement of
Additional Information, means approval by the lesser of (1) the holders of 67%
or more of the Fund's shares represented at a meeting if more than 50% of the
Fund's outstanding shares are present in person or by proxy at the meeting or
(2) more than 50% of the Fund's outstanding shares.
The Fund may not:
1. Purchase common stocks, preferred stocks, warrants, other
equity securities, private placements, corporate bonds or
debentures maturing beyond one year from the date of purchase,
state bonds, or industrial revenue bonds, except through the
purchase of debt obligations referred to under "Investment
Objective and Policies" in this Statement of Additional
Information.
2. Sell securities short;
3. Write or purchase put or call options;
4. Underwrite the securities of another issuer, purchase
securities subject to restrictions on disposition under the
Securities Act of 1933 (so-called "restricted securities") or
purchase securities which are not readily marketable;
4
<PAGE>
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 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.
Non-fundamental Investment Restriction. The following investment restriction is
designated as non-fundamental and may be changed by the Trustees without
shareholder approval:
The Fund may not:
1. Purchase a security if, as a result, (i) more than 10% of the
Fund's total assets would be invested in the securities of
other investment companies, (ii) the Fund would hold more than
3% of the total outstanding voting securities of any one
investment company, or (iii) more than 5% of the Fund's total
assets would be invested in the securities of any one
investment company. These limitations do not apply to (a) the
investment of cash collateral, received by the Fund in
connection with lending of the Fund's portfolio securities, in
the securities of open-end investment companies or (b) the
purchase of shares of any investment company in connection
with a merger, consolidation, reorganization or purchase of
substantially all of the assets of another investment company.
Subject to the above percentage limitations, the Fund may, in
connection with the John Hancock Group of Funds Deferred
5
<PAGE>
Compensation Plan for Independent Trustees/Directors, purchase
securities of other investment companies within the John
Hancock Group of Funds.
If a percentage restriction or rating restriction on investment or utilization
of assets as set forth above 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 the policy.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by the Trustees of the Trust who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
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").
6
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman, Director and Chief
101 Huntington Avenue Executive Officer (1, 2) Executive Officer, the Adviser;
Boston, MA 02199 Chairman, Trustee and Chief
October 1944 Executive Officer, The Berkeley
Financial Group ("The Berkeley
Group"); Chairman and Director, NM
Capital Management, Inc. ("NM
Capital"), John Hancock Advisers
International Limited ("Advisers
International") and Sovereign Asset
Management Corporation ("SAMCorp");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds");
Chairman, First Signature Bank and
Trust Company; Director, John
Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Advisers International
(Ireland) Limited ("International
Ireland"), 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;
Chairman, John Hancock
Distributors, Inc. (until April
1994); Director, John Hancock
Freedom Securities Corporation
(until September 1996); Director,
John Hancock Signature Services,
Inc. ("Signature Services") (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
7
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James F. Carlin Trustee (3) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual Insurance Company
(insurance), Consolidated Group
Trust (insurance administration),
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995) Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (since 1995);
Receiver, the City of Chelsea (until
August 1992).
William H. Cunningham Trustee (3) Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair of Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Texas Commerce Bank - Austin.
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
8
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Charles F. Fretz Trustee (3) Retired; self employed; Former Vice
RD #5, Box 300B President and Director, Towers,
Clothier Springs Road Perrin, Foster & Crosby, Inc.
Malvern, PA 19355 (international management
June 1928 consultants) (1952-1985).
Harold R. Hiser, Jr. Trustee (3) Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hill, NJ 07078 (pharmaceuticals) (retired 1996);
October 1931 Director, ReCapital Corporation
(reinsurance) (until 1995).
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser; Trustee,
Boston, MA 02199 The Berkeley Group; Director, John
April 1953 Hancock Funds, Advisers
International, Insurance Agency,
Inc. and International Ireland;
President and Director, SAMCorp. and
NM Capital; Executive Vice
President, the Adviser (until
December 1994); Senior Vice
President, the Adviser (until
December 1993); Director, Signature
Services (until January 1997).
Charles L. Ladner Trustee (3) Director, Energy North, Inc. (public
UGI Corporation utility holding company) (until
P.O. Box 858 1992); Senior Vice President of UGI
Valley Forge, PA 19482 Corp. Holding Company Public
February 1938 Utilities, LPGAS.
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
9
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Leo E. Linbeck, Jr. Trustee (3) Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company
August 1934 engaged in various phases of the
construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board and Chief Executive
Officer, Linbeck Construction
Corporation; Director, PanEnergy
Corporation (a diversified energy
company), Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest International
Holdings, Inc. (a geophysical
consulting firm) (1980-1993);
Former Director, Greater Houston
Partnership (1980 -1995).
Patricia P. McCarter Trustee (3) Director and Secretary, The McCarter
1230 Brentford Road Corp. (machine manufacturer).
Malvern, PA 19355
May 1928
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
10
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Steven R. Pruchansky Trustee (1, 3) Director and President, Mast
4327 Enterprise Avenue Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
August 1944 Trust Company (until August 1991);
Director, Mast Realty Trust (until
1994); President, Maxwell Building
Corp. (until 1991).
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, John Hancock Distributors,
August 1937 Inc., Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp. and NM Capital; Trustee,
The Berkeley Group; Director, JH
Networking Insurance Agency, Inc.;
Director, John Hancock Property and
Casualty Insurance and its
affiliates (until November 1993);
Director, Signature Services (until
January 1997).
Norman H. Smith Trustee (3) Lieutenant General, United States
243 Mt. Oriole Lane Marine Corps; Deputy Chief of Staff
Linden, VA 22642 for Manpower and Reserve Affairs,
March 1933 Headquarters Marine Corps;
Commanding General III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
11
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
John P. Toolan Trustee (3) Director, The Smith Barney Muni Bond
13 Chadwell Place Funds, The Smith Barney Tax-Free
Morristown, NJ 07960 Money Funds, Inc., Vantage Money
September 1930 Market Funds (mutual funds), The
Inefficient-Market Fund, Inc.
(closed-end investment company) and
Smith Barney Trust Company of
Florida; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member of
the Executive Committee, Smith
Barney, Harris Upham & Co.,
Incorporated (investment bankers)
(until 1991).
Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, SAMCorp.,
Insurance Agency, Inc.,
Southeastern Thrift & Bank Fund and
NM Capital; Senior Vice President,
The Berkeley Group; President, the
Adviser (until December 1994);
Director, Signature Services (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
12
<PAGE>
Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds.
February 1935
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services and John Hancock
July 1950 Funds; Secretary, NM Capital and
SAMCorp.; Clerk, Insurance Agency,
Inc.; Counsel, John Hancock Mutual
Life Insurance Company (until
February 1996), and Vice President
of John Hancock Distributors, Inc.
(until April 1994).
Susan S. Newton Vice President and Secretary Vice President, the Adviser; John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group; Vice
March 1950 President, John Hancock
Distributors, Inc. (until April
1994).
James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946
</TABLE>
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.
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 July 10, 1997, the officers and Trustees of the Trust as a group
beneficially owned less than 1% of the outstanding shares of the Fund. As of
that date, no person or entity owned beneficially or of record 5% or more of the
outstanding shares of the Fund.
From December 22, 1994 until December 22, 1996, the Trustees established an
Advisory Board to facilitate a smooth transition between Transamerica Fund
Management Company ("TFMC"), the prior investment adviser, and the Adviser. The
members of the Advisory Board were distinct from the Trustees, do not serve the
Fund in any other capacity and are persons who had no power to determine what
securities are purchased or sold on behalf of the Fund.
Compensation of the Trustees and Advisory Board. The following tables provide
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, 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/or
its affiliates and receive no compensation from the Fund for their services.
Total Compensation
from all Funds in
John Hancock Fund
Aggregate Compensation Complex to
Trustees from the Fund* Trustees**
- -------- -------------- ----------
James F. Carlin $ 442 $ 74,250
William H. Cunningham + $ 446 $ 74,250
Charles F. Fretz $ 442 $ 74,500
Harold R. Hiser, Jr. + $ 413 $ 70,250
Charles L. Ladner $ 442 $ 74,500
Leo E. Linbeck, Jr. $ 446 $ 74,250
Patricia P. McCarter + $ 442 $ 74,250
Steven R. Pruchansky + $ 458 $ 77,500
Norman H. Smith + $ 458 $ 77,500
John P. Toolan + $ 442 $ 74,250
------ --------
Total $4,431 $745,500
* Compensation is for the period from June 1, 1996 to March 31, 1997.
**The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is as of the calendar year ended December 31, 1996. On that
date, there were sixty-seven funds in the John Hancock Fund Complex, of which
each of these Independent Trustees served on thirty-two.
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+ As of December 31, 1996, the value of the aggregate accrued deferred
compensation from all Funds in the John Hancock Fund Complex for Mr. Cunningham
was $131,741, for Mr. Hiser was $90,972, for Ms. McCarter was $67.548, for Mr.
Pruchansky was $28,731, for Mr. Smith was $32,314 and for Mr. Toolan was
$163,385 under the John Hancock Deferred Compensation Plan for Trustees.
Total Compensation
from all Funds in John
Aggregate Compensation Hancock Fund Complex to
Advisory Board from the Fund(1) Advisory Board(2)
- -------------- ---------------- -----------------
R Trent Campbell $ -- $ 47,000
Mrs. Lloyd Bentsen $ -- $ 47,000
Thomas R. Powers $ -- $ 47,000
Thomas B. McDade $ -- $ 47,000
----- --------
Total $ -- $188,000
(1) Compensation is for the period from June 1, 1996 to March 31, 1997. The
Advisory Board was discontinued as of December 22, 1996.
(2) The total compensation paid by the John Hancock Fund Complex is as of the
calendar year ended December 31, 1996.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $22 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 more than $100
billion, the Life Company is one of the ten largest life insurance companies in
the United States and carries a high rating from Standard & Poor's and A.M.
Best's. Founded in 1862, the Life Company has been serving clients for over 130
years.
The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser will (a) furnish continuously an
investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.
The Fund bears all costs of its organization and operation, including expenses
of preparing, printing and mailing all shareholders' reports, notices,
prospectuses, proxy statements and reports to regulatory agencies; expenses
relating to the issuance, registration and qualification of shares; government
fees; interest charges; expenses of furnishing to shareholders their account
statements; taxes; expenses of redeeming shares; brokerage and other expenses
connected with the execution of portfolio securities transactions; expenses
pursuant to the Fund's plan of distribution; fees and expenses of custodians
including those for keeping books and accounts and calculating the net asset
value of shares; fees and expenses of transfer agents and dividend disbursing
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agents; legal, accounting, financial, management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of the
Adviser's employees rendering such services to the Fund; the compensation and
expenses of Trustees who are not otherwise affiliated with the Trust, the
Adviser or any of their affiliates; expenses of Trustees' and shareholders'
meetings; trade association memberships; insurance premiums; and any
extraordinary expenses.
As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser a fee, which is accrued daily and paid monthly in arrears, equal on an
annual basis to a stated percentage of the average daily net assets of the Fund
as follows:
Fee
Average Daily Net Assets of the Fund (Annual Rate)
- ------------------------------------ -------------
First $500 million......................................... 0.500%
Next $250 million.......................................... 0.425%
Next $250 million.......................................... 0.375%
Next $500 million.......................................... 0.350%
Next $500 million.......................................... 0.325%
Next $500 million.......................................... 0.300%
Amount Over $2.5 billion................................... 0.275%
From time to time, the Adviser may reduce its fees or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The Adviser has agreed to limit Fund expenses. The Adviser retains the right to
reimpose 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.
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.
Pursuant to the Advisory Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the contract relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from its reckless disregard of the obligations
and duties under the applicable contract.
Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the contract
is no longer in effect, the Fund (to the extent that it lawfully can) will cease
to use such 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.
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The continuation of the Advisory Agreement was approved by all of the Trustees.
The Advisory Agreement and the Distribution Agreement discussed will continue in
effect from year to year, provided that its continuance is approved annually
both (I) by holders of a majority of the outstanding voting securities of the
Trust or by the Trustees, and (ii) by a majority of the Trustees who are not
parties to the Agreement or "interested persons" of any such parties. Both
agreements may be terminated on 60 days written notice by either party or by
vote of a majority of the outstanding securities of the Fund and will terminate
automatically if assigned.
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, and
for the period from June 1, 1996 to March 31, 1997, advisory fees paid by the
Fund to the Adviser amounted to $130,358, $143,299 and $194,696, respectively.
However, all or 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.
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the period from June 1, 1996 to March 31, 1997, the Fund
paid the Adviser $6,664 for services under this agreement.
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.
DISTRIBUTION CONTRACTS
The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of the Fund. Shares of the Fund are also sold by selected brokers (the
"Selling Brokers") which have entered into selling agreements with John Hancock
Funds. John Hancock Funds accepts orders for the purchase of the Fund which are
17
<PAGE>
continually offered at net asset value next determined, plus an applicable
charge, if any. In connection with the sale of Fund shares, John Hancock Funds
and Selling Brokers receive compensation in the form of a sales charge imposed
at the time of sale. John Hancock Funds may pay extra compensation to financial
services firms selling large amounts of fund shares. This compensation would be
calculated as a percentage of fund shares sold by the firm.
The Fund's Trustees adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Investment Company Act").
Under the Plan, the Fund will pay distribution and service fees at an aggregate
annual rate of 0.15% of the Fund's daily net assets. The service fee will not
exceed 0.15% of the Fund's average daily net assets. Therefore, up to 0.15% is
for service expenses and the remaining amount is for 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, and (ii) marketing, promotional and overhead
expenses incurred in connection with the distribution of Fund shares. The
service fees will be used to compensate Selling Brokers and others for providing
personal and account maintenance services to shareholders. In the event that
John Hancock Funds is not fully reimbursed for payments or expenses they incur
under the Plan, these expenses will not be carried beyond twelve months from the
date they were incurred. The payment of fees by the Fund under the Plan has been
indefinitely suspended.
The Plan was approved by a majority of the voting securities of the Fund. The
Plan and all amendments were approved by the Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan (the "Independent
Trustees"), by votes cast in person at meetings called for the purpose of voting
on such Plan.
Pursuant to the Plan, at least quarterly, John Hancock Funds provides the Fund
with a written report of the amounts expended under the Plan and the purpose for
which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.
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 without
penalty, (a) by vote of a majority of the Independent Trustees, (b) by a vote of
a majority of the Fund's outstanding shares upon 60 days written notice to John
Hancock Funds and (c) automatically in the event of assignment. 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 be effective unless it is approved by a vote of a majority of the
Trustees and the Independent Trustees of the Fund. In adopting the Plan, the
Trustees concluded that, in their judgment, there is a reasonable likelihood
that the Plan will benefit the holders of the shares of the Fund.
From time to time, the Fund may participate in joint distribution activities
with other Funds and the costs of those activities will be borne by each Fund in
proportion to the relative net asset value of the participating Funds.
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<PAGE>
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized whenever applicable.
The Fund utilizes the amortized cost valuation method of valuing portfolio
instruments in the absence of extraordinary or unusual circumstances. Under the
amortized cost method, assets are valued by constantly amortizing over the
remaining life of an instrument the difference between the principal amount due
at maturity and the cost of the instrument to the Fund. The Trustees will from
time to time review the extent of any deviation of the net asset value, as
determined on the basis of the amortized cost method, from net asset value as it
would be determined on the basis of available market quotations. If any
deviation occurs which may result in unfairness either to new investors or
existing shareholders, the Trustees will take such actions as they deem
appropriate to eliminate or reduce such unfairness to the extent reasonably
practicable. These actions may include selling portfolio instruments prior to
maturity to realize gains or losses or to shorten the Fund's average portfolio
maturity, withholding dividends, splitting, combining or otherwise
recapitalizing outstanding shares or utilizing available market quotations to
determine net asset value per share.
Since a dividend is declared to shareholders each time net asset value is
determined, the net asset value per share of the Fund will normally remain
constant at $1.00 per share. There is no assurance that the Fund can maintain
the $1.00 per share value. Monthly, any increase in the value of a shareholder's
investment from dividends is reflected as an increase in the number of shares in
the shareholder's account or is distributed as cash if a shareholder has so
elected.
It is expected that the Fund's net income will be positive each time it is
determined. However, if because of a sudden rise in interest rates or for any
other reason the net income of the Fund determined at any time is a negative
amount, the Fund will offset the negative amount against income accrued during
the month for each shareholder account. If at the time of payment of a
distribution such negative amount exceeds a shareholder's portion of accrued
income, the Fund may reduce the number of its outstanding shares by treating the
shareholder as having contributed to the capital of the Fund that number of full
or fractional shares which represents the amount of excess. By investing in the
Fund, shareholders are deemed to have agreed to make such a contribution. This
procedure is intended to permit the Fund to maintain its net asset value at
$1.00 per share.
If in the view of the Trustees it is inadvisable to continue the practice of
maintaining net asset value at $1.00 per share, the Trustees reserve the right
to alter the procedures for determining net asset value. The Fund will notify
shareholders of any such alteration.
The NAV for the Fund is determined twice each business day at 12 noon and at the
close of regular trading on the New York Stock Exchange (typically 4 p.m.
Eastern Time), by dividing the net assets by the number of its shares
outstanding. To help the Fund maintain its $1 constant share price, portfolio
investments are valued at cost, and any discount or premium created by market
movements is amortized to maturity.
PURCHASE OF SHARES
Shares of the Fund are offered at a price equal to their net asset value per
share which will normally be constant at $1.00. Share certificates will not be
issued unless requested by the shareholder in writing, and then only will be
issued for full shares.
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SPECIAL REDEMPTIONS
Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
charge. Any such securities would be valued for the purposes of making such
payment at the same value as used in determining net asset value. The Fund has
elected to be governed by Rule 18f-1 under the Investment Company Act, pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the Fund during any 90 day period
for any one account.
ADDITIONAL SERVICES AND PROGRAMS
Exchange Privilege. The Fund permits exchanges of Fund shares for shares of
other funds and portfolios managed by the Adviser.
The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.
The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.
An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".
Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares. 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 John Hancock Signature Services, Inc. ("Signature Services").
Monthly Automatic Accumulation Program ("MAAP"). This program is explained in
the Prospectus. The program, as it relates to automatic investment checks, is
subject to the following conditions:
The investments will be drawn on or about the day of the month indicated.
The privilege of making investments through the MAAP may be revoked by Signature
Services without prior notice if any investment is not honored by the
shareholder's bank. The bank shall be under no obligation to notify the
shareholder as to the non-payment of any checks.
The program may be discontinued by the shareholder either by calling Signature
Services or upon written notice to Signature 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
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number of full and fractional shares of beneficial interest of the Fund without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have authorized shares of the Fund and one other
series. Additional series may be added in the future. The Declaration of Trust
also authorizes the Trustees to classify and reclassify the shares of the Fund,
or any 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 Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts, obligations or affairs of the Fund. The
Declaration of Trust also provides for indemnification out of the Fund's assets
for all losses and expenses of any shareholder held personally liable by reason
of being or having been a shareholder. The Declaration of Trust also provides
that no series of the Trust shall be liable for the liabilities of any other
series. Furthermore, no Fund included in this Fund's prospectus shall be liable
for the liabilities of any other John Hancock Fund. Liability is therefore
limited to circumstances in which the Fund itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.
The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or policies of any regulatory authority. Use of
information provided on the account application may be used by the Fund to
verify the accuracy of the information or background or financial history
purposes. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.
TAX STATUS
The Fund is treated as a separate entity for accounting and tax purposes. The
Fund has qualified and has elected to be treated as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and intends to continue to so qualify in the future. As such and
by complying with the applicable provisions of the Code regarding the sources of
its income, the timing of its distributions, and the diversification of its
21
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assets, the Fund will not be subject to Federal income tax on taxable income
(including net realized capital gains, if any) which is distributed to
shareholders in accordance with the timing requirements of the Code.
The Fund will be subject to a four percent nondeductible federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. The
Fund intends under normal circumstances to seek to avoid or minimize liability
for such tax by satisfying such distribution requirements.
Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss investment company taxable income is all taxable income
and capital gains or losses, other than those gains or losses taken into account
in computing net capital gain, after reduction by deductible expenses. It is not
likely that the Fund will earn or distribute any net capital gain.) Some
distributions may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. Distributions from
the Fund will not qualify for the dividends-received deduction for any corporate
shareholder. The tax treatment described above will apply without regard to
whether distributions are received in cash or reinvested in additional shares of
the Fund.
Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.
Upon a redemption of shares (including by exercise of the exchange privilege) a
shareholder ordinarily will not realize a taxable gain or loss if, as
anticipated, the Fund maintains a constant net asset value per share. If the
Fund is not successful in maintaining a constant net asset value per share, a
redemption may produce a taxable gain or loss.
For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in Federal income tax liability
to the Fund and would not be distributed as such to shareholders.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
A state income ( and possibly local income and/or intangible property) tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obligations, provided in
some states that certain thresholds for holdings of such obligations and/or
reporting requirements are satisfied. The Fund will not seek to satisfy any
threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.
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The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions may be subject to backup
withholding of federal income tax at the rate of 31% in the case of non-exempt
shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholders
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions, whether taken in
cash or reinvested in shares, will be reduced by the amounts required to be
withheld. Any amounts withheld may be credited against a shareholder's U.S.
federal income tax liability. Investors should consult their tax advisers about
the applicability of the backup withholding provisions.
The Fund is not subject to Massachusetts corporate excise or franchise taxes.
Provided that the Fund qualifies as a regulated investment company under the
Code, the Fund will also not be required to pay any Massachusetts income tax.
The foregoing discussion relates solely to U.S. Federal income tax laws
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions (if any), and ownership of
or gains realized (if any) on the redemption (including an exchange) of shares
of the Fund may also be subject to state and local taxes. Shareholders should
consult their own tax advisers as to the federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from, the
Fund in their particular circumstances.
Non-U.S. investors not engaged in U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to nonresident alien withholding tax at the rate of 30% (or a lower rate
under an applicable tax treaty) on amounts treated as ordinary dividends from
the Fund and, unless an effective IRS Form W-8 or authorized substitute for Form
W-8 is on file, to 31% backup withholding on certain other payments from the
Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.
CALCULATION OF PERFORMANCE
For the purposes of calculating yield, daily income per share consists of
interest and discount earned on the Fund's investments less provision for
amortization of premiums and applicable expenses, divided by the number of
shares outstanding, but does not include realized or unrealized appreciation or
depreciation.
In any case in which the Fund reports its annualized yield, it will also furnish
information as to the average portfolio maturities of the Fund. It will also
report any material effect of realized gains or losses or unrealized
appreciation on dividends which have been excluded from the computation of
yield.
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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 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
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commission are made by the Adviser pursuant to
24
<PAGE>
recommendations made by its investment committee of the Adviser and affiliates
and Trustees who are interested persons of the Fund. Orders for purchases and
sales of securities are placed in a manner which, in the opinion of the Adviser,
will offer the best price and market for the execution of each such transaction.
Purchases from underwriters of portfolio securities may include a commission or
commissions paid by the issuer and transactions with dealers serving as market
makers reflect a "spread." Debt securities are generally traded on a net basis
through dealers acting for their own account as principals and not as brokers;
no brokerage commissions are payable on these transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and other policies that the Trustees may determine, the Adviser may consider
sales of shares of the Fund as a factor in the selection of broker-dealers to
execute the Fund's portfolio transactions.
To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser of the Fund, and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will make no commitments to allocate portfolio transactions upon any
prescribed basis. While the Adviser'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 May 31,
1996, 1995 and 1994, no negotiated brokerage commissions were paid on portfolio
transactions. Also, for the period from June 1, 1996 to March 31, 1997, 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 period from June 1, 1996 to March 31,
1997, 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., a broker dealer ("Distributors"
or "Affiliated Broker"). 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 Affiliated Brokers. For the
period from June 1, 1996 to March 31, 1997, the Fund did not execute any
portfolio transactions with any Affiliated Brokers.
Distributors may act as broker for the Fund on exchange transactions, subject,
however, to the general policy of the Fund set forth above and the procedures
adopted by the Trustees pursuant to the Investment Company Act. Commissions paid
25
<PAGE>
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 Investment Company
Act) of the Fund, the Adviser or the Affiliated Brokers. Because the Adviser,
which is affiliated with the Affiliated Brokers, has, as an investment adviser
to the Fund, the obligation to provide investment management services, which
includes elements of research and related investment skills, such research and
related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria.
Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund of the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1000, Boston,
MA 02217- 1000, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$20.00 per shareholder, plus out-of-pocket expenses. These expenses are
aggregated and charged to the Fund and allocated 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 Fund and State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110. Under the custodian agreement, the custodian
performs custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. The financial statements of the Fund
included in the Prospectus and this Statement of Additional Information as of
the Fund's fiscal period ended March 31, 1997 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.
26
<PAGE>
The financial statements listed below are included in and incorporated by
reference into Part B of the Registration Statement for Money Market Fund and
U.S. Government Cash Reserve 1997 Annual Report to Shareholders for the year
ended March 31, 1997; (filed electronically on May 20, 1997; file nos. 811-2485
and 2-50931; accession number 000092816-97-000153).
John Hancock Current Interest
John Hancock U.S. Cash Reserve
Statement of Assets and Liabilities as of March 31, 1997.
Statement of Operations for the period from June 1, 1996 to
March 31, 1997.
Statement of Changes in Net Asset for each of the periods indicated
therein.
Financial Highlights for each of the periods indicated therein.
Schedule of Investments as of March 31, 1997.
Notes to Financial Statements.
Report of Independent Auditors.
27
<PAGE>
FINANCIAL STATEMENTS
F-1
<PAGE>
JOHN HANCOCK CURRENT INTEREST
PART C.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The financial statements listed below are included in and incorporated
by reference into Part B of the Registration Statement for Money Market Fund and
U.S. Government Cash Reserve 1997 Annual Reports to Shareholders for the year
ended March 31, 1997; (filed electronically on May 20, 1997; file nos. 811-2485
and 2-50931; accession number 0000928816-97-000153).
John Hancock Money Market Fund
Statement of Assets and Liabilities as of March 31, 1997.
Statement of Operations for the period from November 1, 1996 to
March 31, 1997.
Statement of Changes in Net Asset for each of the periods indicated
therein.
Financial Highlights for each of the periods indicated therein.
Schedule of Investments as of March 31, 1997.
Notes to Financial Statements.
Report of Independent Auditors.
John Hancock U.S. Government Cash Reserve
Statement of Assets and Liabilities as of March 31, 1997.
Statement of Operations for the period from June 1, 1996 to March 31, 1997.
Statement of Changes in Net Asset for each of the periods indicated
therein.
Financial Highlights for each of the periods indicated therein.
Schedule of Investments as of March 31, 1997.
Notes to Financial Statements.
Report of Independent Auditors.
(b) Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
No person is directly or indirectly controlled by or under common control
with the Registrant.
Item 26. Number of Holders of Securities
As of July 10, 1997, the number of record holders of shares of Registrant
was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
U.S. Government Cash Reserve 1,555
Money Market Fund - Class A 37,212
Money Market Fund - Class B 12,826
C-1
<PAGE>
Item 27. Indemnification
(a) Indemnification provisions relating to the Registrant's Trustees,
officers, employees and agents is set forth in Article VII of the Registrant's
By Laws included as Exhibit 2 herein.
(b) Under Section 12 of the Distribution Agreement, John Hancock Funds,
Inc. ("John Hancock Funds" ) has agreed to indemnify the Registrant and its
Trustees, officers and controlling persons against claims arising out of certain
acts and statements of John Hancock Funds.
Section 9(a) of the By-Laws of John Hancock Mutual Life Insurance Company
("Insurance Company") provides, in effect, that the Insurance Company will,
subject to limitations of law, indemnify each present and former director,
officer and employee of the of the Insurance Company who serves as a Trustee or
officer of the Registrant at the direction or request of the Insurance Company
against litigation expenses and liabilities incurred while acting as such,
except that such indemnification does not cover any expense or liability
incurred or imposed in connection with any matter as to which such person shall
be finally adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interests of the Insurance Company. In addition,
no such person will be indemnified by the Insurance Company in respect of any
liability or expense incurred in connection with any matter settled without
final adjudication unless such settlement shall have been approved as in the
best interests of the Insurance Company either by vote of the Board of Directors
at a meeting composed of directors who have no interest in the outcome of such
vote, or by vote of the policyholders. The Insurance Company may pay expenses
incurred in defending an action or claim in advance of its final disposition,
but only upon receipt of an undertaking by the person indemnified to repay such
payment if he should be determined not to be entitled to indemnification.
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."
C-2
<PAGE>
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the Registrant's Declaration of Trust and By-Laws of John
Hancock Funds, the Adviser, or the Insurance Company or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Advisers
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Adviser,
reference is made to Forms ADV (801-8124) filed under the Investment Advisers
Act of 1940, which is incorporated herein by reference.
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 Trust, 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 Special Equities Fund, John Hancock Sovereign
Bond Fund, John Hancock Tax-Exempt Series, John Hancock Strategic Series, John
Hancock World Fund, John Hancock Investment Trust, John Hancock Institutional
Series Trust, John Hancock Investment Trust II, John Hancock Investment Trust
III and John Hancock Investment Trust IV.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-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 Vice Chairman and Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts
Stephen M. Blair Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
Osbert M. Hood Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer
David A. King Director None
101 Huntington Avenue
Boston, Massachusetts
James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts
William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
John A. Morin Vice President and Secretary Vice President
101 Huntington Avenue
Boston, Massachusetts
Susan S. Newton Vice President Vice President
101 Huntington Avenue and Secretary
Boston, Massachusetts
C-4
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Christopher M. Meyer Vice President and Treasurer None
101 Huntington Avenue
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
Anne C. Hodsdon Director and Executive President
101 Huntington Avenue Vice President
Boston, Massachusetts
Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-5
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers Executive Vice President None
101 Huntington avenue
Boston, Massachusetts
Anthony P. Petrucci Executive 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
J. William Benintende Vice President None
101 Huntington Avenue
Boston, Massachusetts
Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts
Karen Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
(c) None.
Item 30. Location of Accounts and Records
The Registrant maintains the records required to be maintained by it under
Rules 31a-1 (a), 31a-1(b), and 31a-2(a) under the Investment Company Act of
1940 at its principal executive offices at 101 Huntington Avenue, Boston
Massachusetts 02199-7603. Certain records, including records relating to
Registrant's shareholders and the physical possession of its securities,
may be maintained pursuant to Rule 31a-3 at the main offices of
Registrant's Transfer Agent and Custodian.
C-6
<PAGE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable
(b) Not applicable
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a
copy of the latest annual report to shareholders with respect to that
series upon request and without charge.
(d) Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940, as amended which relates to the assistance to be
rendered to shareholders by the Trustees of the Registrant in calling a
meeting of shareholders for the purpose of voting upon the question of the
removal of a trustee.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston and The Commonwealth of Massachusetts on
the 25th day of July, 1997.
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 July 25, 1997
James B. Little Financial Officer (Principal
Financial and Accounting Officer)
*
- ------------------------ Trustee
James F. Carlin
*
- ------------------------ Trustee
William H. Cunningham
*
- ------------------------ Trustee
Charles F. Fretz
*
- ------------------------ Trustee
Harold R. Hiser, Jr.
*
- ------------------------ 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
------------------- July 25, 1997
Susan S. Newton,
Attorney-in-Fact under
Powers of Attorney dated
June 25, 1996.
</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 and Restated By-Laws dated November 19, 1996.***
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.B5.1 Investment Management Contract between John Hancock Adviser, Inc.
and the Registrant of behalf of Money Market Fund.***
99.B6 Distribution Agreement between John Hancock Broker Distribution
Services, Inc. and the Registrant dated December 22, 1994.*
99.B6.1 Amendment to Distribution Agreement dated December 2, 1996.***
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 Master Transfer Agency and Service Agreement between John Hancock
Funds, Inc. and the John Hancock Signature Services, Inc. dated
June 3, 1997.+
99.B10 Not Applicable
99.B11 Consent of Independent Auditors.+
C-10
<PAGE>
99.B12 Not Applicable
99.B13 Not Applicable
99.B14 Not Applicable
99.B15 Class A Distribution Plan between John Hancock Money Market Fund
and John Hancock Funds, Inc. dated December 2, 1996.***
99.B15.1 Class B Distribution Plan between John Hancock Money Market Fund
and John Hancock Funds, Inc. dated December 2, 1996.***
99.B16 Schedule of Computation of Yield and Total Return.**
99.27.1A Money Market - Annual+
99.27.1B Money Market - Annual+
99.27.2 U.S. Government Cash Reserve - Annual+
* Previously filed electronically with post-effective amendment number 48
(file nos. 811-02485 and 2-50931 ) on September 27, 1995, accession number
0000950135-95-001114.
** Previously filed electronically with post-effective amendment number 51
(file numbers 811-02485 and 2-50931) on August 26, 1996, accession number
0001010521-96-000145).
*** Previously filed electronically with post-effective amendment number 54
(file numbers 811-02485 and 2-50931) on February 28, 1997, accession number
0001010521-97-000231.
+ Filed herewith.
C-11
MASTER TRANSFER AGENCY AND SERVICE AGREEMENT BETWEEN JOHN HANCOCK
FUNDS AND JOHN HANCOCK SIGNATURE SERVICES, INC.
AGREEMENT made as of the 3rd day of June, 1997 by and between each investment
company advised by John Hancock Advisers, Inc., having its principal office and
place of business at 101 Huntington Avenue, Boston, Massachusetts, 02199, and
John Hancock Signature Services, Inc., a Delaware corporation having its
principal office and place of business at 101 Huntington Avenue, Boston,
Massachusetts 02199 ("JHSS").
WITNESSETH:
WHEREAS, each investment company desires to appoint JHSS as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities;
and
WHEREAS, JHSS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
Article 1 Definitions
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
(a)"Fund" shall mean the investment company which has adopted this
agreement and is listed on Appendix A hereto. If the Fund is a
Massachusetts business trust or Maryland corporation, it may in the
future establish and designate other separate and distinct series of
shares, each of which may be called a "series" or a "portfolio"; in
such case, the term "Fund" shall also refer to each such separate
series or portfolio.
(b)"Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
Article 2 Terms of Appointment; Duties of JHSS
2.01 Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints JHSS to act, and JHSS agrees to act, as transfer
agent and dividend dispersing agent with respect to the authorized and issued
shares of beneficial interest ("Shares") of the Fund subject to this Agreement
and to provide to the shareholders of the Fund ("Shareholders") such services in
connection therewith as may be set out in the prospectus of the Fund from time
to time.
2.02 JHSS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and JHSS, JHSS shall:
1
<PAGE>
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
therefor to the Fund's Custodian authorized pursuant to the
Fund's Declaration of Trust or Articles of Incorporation (the
"Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance, redemption requests and redemption
directions and deliver the appropriate documentation therefor to
the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over
or cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund, processing the reinvestment
of distributions on the Fund at the net asset value per share for
the Fund next computed after the payment (in accordance with the
Fund's then-current prospectus);
(vii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) of the rules and regulations of the
Securities Exchange Act of 1934 a record of the total number of
Shares of the Fund which are authorized, based upon data provided
to it by the Fund, and issued and outstanding. JHSS shall also
provide the Fund, on a regular basis, with the total number of
Shares which are authorized and issued and outstanding and shall
have no obligation, when recording the issuance of Shares, to
monitor the issuance of these Shares or to take cognizance of any
laws relating to the issue or sale of these Shares, which
functions shall be the sole responsibility of the Fund.
(b) In calculating the number of Shares to be issued on purchase or
reinvestment, or redeemed or repurchased, or the amount of the purchase
payment or redemption or repurchase payments owed, JHSS shall use the
net asset value per share (as described in the Fund's then-current
prospectus) computed by it or such other person as may be designated by
the Fund's Board. All issuances, redemptions or repurchases of the
Funds' shares shall be effected at net asset values per share next
computed after receipt of the orders therefore and said orders shall
become irrevocable at the time as of which said value is next computed.
(c) In addition to and not in lieu of the services set forth in the
above paragraph (a), JHSS shall: (i) perform all of the customary
services of a transfer agent and dividend disbursing agent including
but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating
proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with respect
to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements
of account to Shareholders for all purchases and redemptions of Shares
2
<PAGE>
and other confirmable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of the Fund's Shares sold
in each State.
(d) In addition, the Fund shall (i) identify to JHSS in writing those
transactions and assets to be treated as exempt from the blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of JHSS for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting of these
transactions to the Fund as provided above.
(e) Additionally, JHSS shall:
(i) Utilize a system to identify all share transactions which
involve purchase and redemption orders that are processed at a
time other than the time of the computation of net asset value
per share next computed after receipt of such orders, and shall
compute the net effect upon the Fund of the transactions so
identified on a daily and cumulative basis.
(ii) If upon any day the cumulative net effect of such
transactions upon the Fund is negative and exceeds a dollar
amount equivalent to 1/2 of 1 cent per share, JHSS shall promptly
make a payment to the Fund in cash or through the use of a credit
in the manner described in paragraph (iv) below, in such amount
as may be necessary to reduce the negative cumulative net effect
to less than 1/2 of 1 cent per share.
(iii) If on the last business day of any month the cumulative net
effect upon the Fund of such transactions (adjusted by the amount
of all prior payments and credits by JHSS and the Fund) is
negative, the Fund shall be entitled to a reduction in the fee
next payable under the Agreement by an equivalent amount, except
as provided in paragraph (iv) below. If on the last business day
in any month the cumulative net effect upon the Fund of such
transactions (adjusted by the amount of all prior payments and
credits by JHSS and the Fund) is positive, JHSS shall be entitled
to recover certain past payments and reductions in fees, and to a
credit against all future payments and fee reductions that may be
required under the Agreement as herein described in paragraph
(iv) below.
(iv) At the end of each month, any positive cumulative net effect
upon a Fund of such transactions shall be deemed to be a credit
to JHSS which shall first be applied to permit JHSS to recover
any prior cash payments and fee reductions made by it to the Fund
under paragraphs (ii) and (iii) above during the calendar year,
by increasing the amount of the monthly fee under the Agreement
next payable in an amount equal to prior payments and fee
reductions made by JHSS during such calendar year, but not
exceeding the sum of that month's credit and credits arising in
prior months during such calendar year to the extent such prior
credits have not previously been utilized as contemplated by this
paragraph. Any portion of a credit to JHSS not so used by it
shall remain as a credit to be used as payment against the amount
of any future negative cumulative net effects that would
otherwise require a cash payment or fee reduction to be made to
the Fund pursuant to paragraphs (ii) or (iii) above (regardless
of whether or not the credit or any portion thereof arose in the
same calendar year as that in which the negative cumulative net
effects or any portion thereof arose).
3
<PAGE>
(v) JHSS shall supply to the Fund from time to time, as mutually
agreed upon, reports summarizing the transactions identified
pursuant to paragraph (i) above, and the daily and cumulative net
effects of such transactions, and shall advise the Fund at the
end of each month of the net cumulative effect at such time. JHSS
shall promptly advise the Fund if at any time the cumulative net
effects exceeds a dollar amount equivalent to 1/2 of 1 cent per
share.
(vi) In the event that this Agreement is terminated for whatever
cause, or this provision 2.02 (d) is terminated pursuant to
paragraph (vii) below, the Fund shall promptly pay to JHSS an
amount in cash equal to the amount by which the cumulative net
effect upon the Fund is positive or, if the cumulative net effect
upon the Fund is negative, JHSS shall promptly pay to the Fund an
amount in cash equal to the amount of such cumulative net effect.
(vii) This provision 2.02 (e) of the Agreement may be terminated
by JHSS at any time without cause, effective as of the close of
business on the date written notice (which may be by telex) is
received by the Fund.
Procedures applicable to certain of these services may be established from time
to time by agreement between the Fund and JHSS.
Article 3 Fees and Expenses
3.01 For performance by JHSS pursuant to this Agreement, the Fund agrees to pay
JHSS an annual maintenance fee for each Shareholder account, except that for
Class C and the Institutional Series Trust, the Fund agrees to pay JHSS a
percentage of that Class' daily net assets, as set out in Appendix A attached
hereto. Such fees and out-of-pocket expenses and advances identified under
Section 3.02 below may be changed from time to time subject to mutual written
agreement between the Fund and JHSS.
3.02 In addition to the fee paid under Section 3.01 above, the Fund agrees to
reimburse JHSS for out-of-pocket expenses or advances incurred by JHSS for the
items set out in the fee schedule attached hereto. In addition, any other
expenses incurred by JHSS at the request or with the consent of the Fund, will
be reimbursed by the Fund.
3.03 The Fund agrees to pay all fees and reimbursable expenses promptly
following the mailing of the respective billing notice. Postage for mailing of
proxies to all shareholder accounts shall be advanced to JHSS by the Funds at
least seven (7) days prior to the mailing date of such materials.
Article 4 Representations and Warranties of JHSS
JHSS represents and warrants to the Fund that:
4.01 It is a corporation duly organized and existing and in good standing under
the laws of the State of Delaware, and is duly qualified and in good standing as
a foreign corporation under the Laws of The Commonwealth of Massachusetts.
4.02 It has corporate power and authority to enter into and perform its
obligations under this Agreement.
4
<PAGE>
4.03 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
4.04 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 5 Representations and Warranties of the Fund
The Fund represents and warrants to JHSS that:
5.01 It is a business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts or, in the case of John
Hancock Cash Reserve, Inc., a Maryland corporation duly organized and existing
and in good standing under the laws of the State of Maryland.
5.02 It has power and authority to enter into and perform this Agreement.
5.03 All proceedings required by the Fund's Declaration of Trust or Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
5.04 It is an open-end investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
5.05 A registration statement under the Securities Act of 1933, as amended, with
respect to the shares of the Fund subject to this Agreement has become
effective, and appropriate state securities law filings have been made and will
continue to be made.
Article 6 Indemnification
6.01 JHSS shall not be responsible for, and the Fund shall indemnify and hold
JHSS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or attributable
to:
(a) All actions of JHSS or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misfeasance.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's bad faith, gross
negligence or willful misfeasance or which arise out of the reckless
disregard of any representation or warranty of the Fund hereunder.
(c) The reliance on or use by JHSS or its agents or subcontractors of
information, records and documents which (i) are received by JHSS or
its agents or subcontractors and furnished to it by or on behalf of
the Fund, and (ii) have been prepared and/or maintained by the Fund or
any other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by JHSS or its agents or
subcontractors of, any instructions or requests of the Fund.
5
<PAGE>
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that Fund Shares be registered in that state
or in violation of any stop order or other determination or ruling by
any federal agency or any state with respect to the offer or sale of
Shares in that state.
(f) It is understood and agreed that the assets of the Fund may be
used to satisfy the indemnity under this Article 6 only to the extent
that the loss, damage, cost, charge, counsel fee, payment, expense and
liability arises out of or is attributable to services hereunder with
respect to the Shares of such Fund.
6.02 JHSS shall indemnify and hold harmless the Fund from and against any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributed to any action or failure or omission to
act by JHSS as a result of JHSS's lack of good faith, negligence or willful
misfeasance.
6.03 At any time JHSS may apply to any officer of the Fund for instructions, and
may consult with legal counsel with respect to any matter arising in connection
with the services to be performed by JHSS under this Agreement, and JHSS and its
agents or subcontractors shall not be liable and shall be indemnified by the
Fund for any action taken or omitted by it in reliance upon such instructions or
upon the opinion of such counsel. JHSS, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided JHSS or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund. JHSS, its agents
and subcontractors shall also be protected and indemnified in recognizing share
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officer of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
6.04 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
6.05 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
6.06 In order that the indemnification provisions contained in this Article 6
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6
<PAGE>
Article 7 Covenants of the Fund and JHSS
7.01 The Fund shall promptly furnish to JHSS the following:
(a) A certified copy of the resolution(s) of the Trustees of the Trust
or the Directors of the Corporation authorizing the appointment of
JHSS and the execution and delivery of this Agreement.
(b) A copy of the Fund's Declaration of Trust or Articles of
Incorporation and By-Laws and all amendments thereto.
7.02 JHSS hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of share certificates and
facsimile signature imprinting devices, if any; and for the preparation or use,
and for keeping account of, such certificates and devices.
7.03 JHSS shall keep records relating to the services to be performed hereunder,
in the form and manner as it may deem advisable. To the extent required by
Section 31 of the Investment Company Act of 1940 and the rules and regulations
of the Securities and Exchange Commission thereunder, JHSS agrees that all such
records prepared or maintained by JHSS relating to the services to be performed
by JHSS hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such Act and rules, and will be
surrendered to the Fund promptly on and in accordance with the Fund's request.
7.04 JHSS and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person without
the consent of the other party to this Agreement, except as may be required by
law.
7.05 JHSS agrees that, from time to time or at any time requested by the Fund,
JHSS will make reports to the Fund, as requested, of JHSS's performance of the
foregoing services.
7.06 JHSS will cooperate generally with the Fund to provide information
necessary for the preparation of registration statements and periodic reports to
be filed with the Securities and Exchange Commission, including registration
statements on Form N-1A, semi-annual reports on Form N-SAR, periodic statements,
shareholder communications and proxy materials furnished to holders of shares of
the Fund, filings with state "blue sky" authorities and with United States and
foreign agencies responsible for tax matters, and other reports and filings of
like nature.
7.07 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, JHSS will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection. JHSS
reserves the right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be held liable for the failure
to exhibit the Shareholder records to such person.
7
<PAGE>
Article 8 No Partnership or Joint Venture
8.01 The Fund and JHSS are not currently partners of or joint venturers with
each other and nothing in this Agreement shall be construed so as to make them
partners or joint venturers or impose any liability as such on them.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party upon one hundred twenty
(120) days' written notice to the other party.
9.02 Should the Fund exercise its right to terminate, all out-of-pocket expenses
associated with the movement of records and material will be borne by the Fund.
Additionally, JHSS reserves the right to charge for any other reasonable
expenses associated with such termination.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.03 JHSS may, without further consent on the part of the Fund, subcontract for
the performance hereof with (i) Boston Finanacial Data Services, Inc., a
Massachusetts corporation ("BE") which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934 ("Section
17A(c)(1)") or any other entity registered as a transfer agent under Section
17A(c)(1) JHSS deems appropriate in order to comply with the terms and
conditions of this Agreement; provided, however, that JHSS shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as it is
for its own acts and omissions.
Article 11 Amendment
11.01 This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Trustees of
the Trust or Directors of the Corporation.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the internal substantive laws of The Commonwealth
of Massachusetts.
Article 13 Merger of Agreement
13.01 This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
8
<PAGE>
Article 14 Limitation on Liability
14.01 If the Fund is a Massachusetts business trust, JHSS expressly acknowledges
the provision in the Fund's Declaration of Trust limiting the personal liability
of the trustees and shareholders of the Fund; and JHSS agrees that it shall have
recourse only to the assets of the Fund for the payment of claims or obligations
as between JHSS and the Fund arising out of this Agreement, and JHSS shall not
seek satisfaction of any such claim or obligation from the trustees or
shareholders of the Fund. In any case, each Fund, and each series or portfolio
of each Fund, shall be liable only for its own obligations to JHSS under this
Agreement and shall not be jointly or severally liable for the obligations of
any other Fund, series or portfolio hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf under their seals by and through their duly
authorized officers, as of the day and year first above written.
JOHN HANCOCK FUNDS Listed on Appendix A
By: /s/Anne C. Hodsdon
------------------
Anne C. Hodsdon
President
JOHN HANCOCK SIGNATURE SERVICES, INC.
By: /s/Charles J. McKenney, Jr.
---------------------------
Charles J. McKenney, Jr.
Vice President
9
<PAGE>
APPENDIX A
TRANSFER AGENT FEE SCHEDULE, EFFECTIVE JUNE 3, 1997
Effective June 3, 1997, the transfer agent fees payable monthly under the
transfer agent agreement between each fund and John Hancock Signature Services,
Inc. shall be the following rates plus certain out-of-pocket expenses as
described to the Board:
Annual Rate Per Account
Equity Fund Class A Shares Class B Shares
John Hancock Capital Series $19.00 $21.50
- -JH Independence Equity Fund
- -JH Special Value Fund
- -JH Utilities Fund
John Hancock Special Equities Fund
John Hancock World Fund
- -JH Pacific Basin Fund
- -JH Global Rx Fund
- -JH Global Marketplace Fund
John Hancock Investment Trust
- -JH Growth & Income Fund
- -JH Sovereign Balanced Fund
- -JH Sovereign Investors Fund
John Hancock Investment Trust II
- -JH Disciplined Growth Fund
- -JH Financial Industries Fund
- -JH Regional Bank Fund
John Hancock Investment Trust III
- -John Hancock Global Fund
- -John Hancock Growth Fund
- -John Hancock International Fund
- -John Hancock Special Opportunities Fund
John Hancock Investment Trust IV
- -JH Discovery Fund
John Hancock Series Trust
- -JH Emerging Growth Fund
- -JH Global Technology Fund
10
<PAGE>
Annual Rate Per Account
Money Market Funds Class A Shares Class B Shares
John Hancock Current Interest $20.00 $22.50
- -JH Money Market Fund
- -JH US Government Cash Reserve
John Hancock Cash Reserve
Annual Rate Per Account
Tax Free Funds Class A Shares Class B Shares
John Hancock Tax-Exempt Series Fund $20.00 $22.50
- -JH Massachusetts Tax-Free Income Fund
- -JH New York Tax-Free Income Fund
John Hancock California Tax-Free
Income Fund
John Hancock Tax-Free Bond Trust
- -JH High Yield Tax-Free Fund
- -JH Tax Free Bond Fund
Annual Rate Per Account
Income Funds Class A Shares Class B Shares
John Hancock Limited Term Government Fund $20.00 $22.50
John Hancock Sovereign Bond Fund
John Hancock Strategic Series
- -JH Strategic Income Fund
- -JH Sovereign US Government Income Fund
John Hancock Investment Trust III
- -JH Short-Term Strategic Income Fund
- -JH World Bond Fund
John Hancock Bond Trust
- -JH Government Income Fund
- -JH HighYield Bond Fund
- -JH Intermediate Maturity Government Fund
11
<PAGE>
The following funds are at a % of daily net assets of the Fund.
Out-of-pocket expenses are paid by John Hancock Signature Services, Inc.
Class C Funds % of Daily Net Assets of the Fund
John Hancock Special Equities Fund 0.10%
John Hancock Sovereign Investors Fund
John Hancock Institutional Series Trust 0.05%
- -JH Active Bond fund
- -JH Dividend Performers Fund
- -JH Fundamental Value Fund
- -JH Global Bond Fund
- -JH Independence Balanced Fund
- -JH Independence Diversified Core Equity Fund II
- -JH Independence Growth Fund
- -JH Independence Medium Capitalization Fund
- -JH Independence Value Fund
- -JH International Equity Fund
- -JH Multi-Sector Growth Fund
- -JH Small Capitalization Equity Fund
These fees are agreed to by the undersigned as of June 3, 1997.
/s/Anne C. Hodsdon
------------------
Anne C. Hodsdon
President of Each Fund
/s/Charles McKenney, Jr.
------------------------
Charles McKenney, Jr.
Vice President of John Hancock
Signature Services, Inc.
12
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" for U.S. Government Cash Reserve in the John Hancock Money Market
Funds Prospectus and "Independent Auditors" in the John Hancock U.S. Government
Cash Reserve Statement of Additional Information in Post-Effective Amendment
No.55 to the Registration Statement (Form N-1A No. 2-50931) dated August 1,
1997.
We also consent to the incorporation by reference therein of our report dated
May 9, 1997, with respect to the financial statements and financial highlights
of the John Hancock U.S. Government Cash Reserve (one of the portfolios
constituting John Hancock Current Interest) in the Form N-1A.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
July 24, 1997
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" for John Hancock Money Market Funds Prospectus and "Independent
Auditors" in the John Hancock Money Market Fund Class A and Class B Shares
Statement of Additional Information in Post-Effective Amendment No. 55 to
Registration Statement (Form N-1A No. 2-50931) dated August 1, 1997.
We also consent to the incorporation by reference therein of our report dated
May 9, 1997, with respect to the financial statements and financial highlights
of the John Hancock Money Market Fund (one of the portfolios constituting John
Hancock Current Interest) in the Form N-1A.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
July 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> JOHN HANCOCK MONEY MARKET FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 495,445,274
<INVESTMENTS-AT-VALUE> 495,445,274
<RECEIVABLES> 4,081,960
<ASSETS-OTHER> 407,388
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 499,934,622
<PAYABLE-FOR-SECURITIES> 8,999,100
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<TOTAL-LIABILITIES> 10,425,633
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<PAID-IN-CAPITAL-COMMON> 489,508,989
<SHARES-COMMON-STOCK> 359,531,745
<SHARES-COMMON-PRIOR> 262,554,149
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<NET-ASSETS> 489,508,989
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,636,375
<OTHER-INCOME> 0
<EXPENSES-NET> 2,261,080
<NET-INVESTMENT-INCOME> 7,375,295
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,375,295
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,933,244
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,214,973,176
<NUMBER-OF-SHARES-REDEEMED> 3,122,445,223
<SHARES-REINVESTED> 4,449,617
<NET-CHANGE-IN-ASSETS> 118,872,035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 694,373
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,261,080
<AVERAGE-NET-ASSETS> 322,660,993
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> JOHN HANCOCK MONEY MARKET FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 495,445,274
<INVESTMENTS-AT-VALUE> 495,445,274
<RECEIVABLES> 4,081,960
<ASSETS-OTHER> 407,388
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 499,934,622
<PAYABLE-FOR-SECURITIES> 8,999,100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,426,533
<TOTAL-LIABILITIES> 10,425,633
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 489,508,989
<SHARES-COMMON-STOCK> 130,074,924
<SHARES-COMMON-PRIOR> 108,180,459
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 489,508,989
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,636,375
<OTHER-INCOME> 0
<EXPENSES-NET> 2,261,080
<NET-INVESTMENT-INCOME> 7,375,295
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,375,295
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,442,051
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 453,653,930
<NUMBER-OF-SHARES-REDEEMED> 432,725,751
<SHARES-REINVESTED> 966,286
<NET-CHANGE-IN-ASSETS> 118,872,035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 694,373
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,261,080
<AVERAGE-NET-ASSETS> 96,951,571
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 020
<NAME> JOHN HANCOCK US GOVERNMENT CASH RESERVE
<S> <C>
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<PERIOD-START> JUN-01-1996
<PERIOD-END> MAR-31-1997
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</TABLE>
