HANCOCK JOHN CURRENT INTEREST, 497, 2000-05-05

HANCOCK JOHN CURRENT INTEREST
497, 2000-05-05

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John Hancock Money Market Funds

Supplement to the Prospectus Dated March 1, 2000

On page 5 "Your Expenses" and on page 8 certain sections of "Your Account" for
the John Hancock Money Market Fund have been changed as follows:

YOUR EXPENSES

[Clip art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.

- -----------------------------------------------------------------------------------------
Shareholder transaction expenses+ Class A Class B Class C
- -----------------------------------------------------------------------------------------
Maximum sales charge (load) on purchases
as a % of purchase price none none 1.00%
Maximum deferred sales charge (load)
as a % of purchase or sale price, whichever is less none 5.00% 1.00%

- -----------------------------------------------------------------------------------------
Annual operating expenses Class A Class B Class C
- -----------------------------------------------------------------------------------------
Management fee 0.50% 0.50% 0.50%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
Other expenses 0.36% 0.36% 0.36%
Total fund operating expenses 1.11% 1.86% 1.86%
Expense reduction (at least until 8/1/00)* 0.20% 0.10% 0.10%
Annual operating expenses 0.91% 1.76% 1.76%

The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.

- -----------------------------------------------------------------------------------------
Expenses Year 1 Year 3 Year 5 Year 10
- -----------------------------------------------------------------------------------------
Class A $ 93 $ 333 $ 592 $ 1,334
Class B - with redemption $ 679 $ 875 $1,197 $ 1,975
- without redemption $ 179 $ 575 $ 997 $ 1,975
Class C - with redemption $ 376 $ 669 $1,087 $ 2,250
- without redemption $ 277 $ 669 $1,087 $ 2,250

* Reflects advisers agreement to limit maximum rate of management fee to 0.40%
and distributors agree-ment to limit 12b-1 fee on Class A shares to 0.15%
until at least 8/1/00.

+ A $4.00 fee may be charged for wire redemptions.
</TABLE>

May 1, 2000

MNYPS 5/00

<PAGE>

Your account

- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS

Each share class has its own cost structure including a Rule 12b-1 plan that
allows it to pay fees for the sale, distribu-tion and service of its shares.
Your financial representative can help you decide which share class is best for
you.

- --------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------
o No sales charges.

o Distribution and service (12b-1) fees of 0.15% for Money Market Fund and 0.00%
for U.S. Government Cash Reserve (fees are net of reductions by the
distributor).

- --------------------------------------------------------------------------------
Class B - for Money Market Fund only
- --------------------------------------------------------------------------------
o No front-end sales charge.

o Distribution and service (12b-1) fees of 1.00%.

o A deferred sales charge, as described at right.

o Automatic conversion to Class A shares after eight years, thus reducing future
annual expenses.

- --------------------------------------------------------------------------------
Class C - for Money Market Fund only
- --------------------------------------------------------------------------------
o A front-end sales charge, as described below.

o Distribution and service (12b-1) fees of 1.00%.

o A 1.00% contingent deferred sales charge on shares sold within
one year of purchase.

o No automatic conversion to Class A shares, so annual expenses continue at the
Class C level throughout the life of your investment.

For actual past expenses of each share class, see the fund-by-fund information
earlier in this prospectus.

Because 12b-1 fees are paid on an ongoing basis, Class B and Class C
shareholders will end up paying more expenses over the long term than Class A
shareholders.

Investors purchasing $1 million or more of Class B or Class C shares may want to
consider the lower operating expenses of Class A shares.

Your broker receives a percentage of these sales charges and fees. In addition,
John Hancock Funds may pay significant compensation out of its own resources to
your broker.

Your broker or agent may charge you a fee to effect transactions in fund shares.

- --------------------------------------------------------------------------------
HOW SALES CHARGES ARE CALCULATED

Class C Money Market Fund front-end sales charges are as follows:

- --------------------------------------------------------------------------------
Money Market Fund Class C sales charges
- --------------------------------------------------------------------------------
As a % of As a % of your
Your investment offering price investment

Up to $1,000,000 1.00% 1.01%
$1,000,000 and over none

Investments of $1 million or more Class C shares are available with no front-end
sales charge.

Class B and Class C Money Market Fund shares may be charged a contingent
deferred sales charge (CDSC) on Class B or Class C shares sold within a certain
time after you bought them, as described in the tables below. 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 CDSCs are as follows:

- --------------------------------------------------------------------------------
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 6th year None

- --------------------------------------------------------------------------------
Money Market Fund Class C deferred charges
- --------------------------------------------------------------------------------
Years after purchase CDSC on shares being sold

1st year 1.00%
After 1st year 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.

For purposes of this CDSC, all purchases made during a calendar month are
counted as having been made on the first day of that month.

Waiver for certain investors Class C shares may be offered without front-end
sales charges to various individu-als and institutions, including certain
retirement plans.

To utilize: if you think you may be eligible for a sales charge waiver, contact
Signature Services, or consult the SAI (see back cover of this prospectus).

<PAGE>

JOHN HANCOCK MONEY MARKET FUND

Class A, Class B and Class C Shares
Statement Of Additional Information

May 1, 2000

This Statement of Additional Information provides information about John Hancock
Money Market Fund (the "Fund"), in addition to the information that is contained
in the combined Money Market Funds' current Prospectus (the "Prospectus"). The
Fund is a diversified series of John Hancock Current Interest (the "Trust").

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 .................................. 18
Distribution Contracts .................................................. 20
Sales Compensation ...................................................... 22
Net Asset Value ......................................................... 24
Purchase of Class A and Class C ......................................... 25
Deferred Sales Charge on Class B and Class C Shares ..................... 25
Special Redemptions ..................................................... 29
Additional Services and Programs ........................................ 29
Purchases and Redemptions Through Third Parties ......................... 30
Description of the Fund's Shares ........................................ 31
Tax Status .............................................................. 32
Calculation of Performance .............................................. 35
Brokerage Allocation .................................................... 36
Transfer Agent Services ................................................. 38
Custody of Portfolio .................................................... 38
Independent Auditors .................................................... 38
Appendix A .............................................................. A-1
Appendix B .............................................................. B-1
Financial Statements ................................................... F-1

1
<PAGE>

ORGANIZATION OF THE FUND

The Fund is a series of the Trust, 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.

John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser, an
indirect wholly-owned subsidiary of John Hancock Life Insurance Company
(formerly 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. The Life Company is
wholly owned by John Hancock Financial Services, Inc., a Delaware Corporation
organized in February, 2000.

INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risk. The investment objective of the Fund is
non-fundamental and may be changed by vote of the Trustees without shareholder
approval. However, the 25% investment limitation on foreign bank obligations is
fundamental and may only be changed with shareholder approval. There is no
assurance that the Fund will achieve its investment objective.

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.

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 international 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

2
<PAGE>

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.

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 B 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.

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,

3
<PAGE>

that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Fixed time deposits are bank obligations payable at a stated maturity
date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn
on demand by the investor, but may be subject to early withdrawal penalties
which vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party, although there is
no market for such deposits. Bank notes and bankers' acceptances rank junior to
domestic deposit liabilities of the bank and pari passu with other senior,
unsecured obligations of the bank. Bank notes are not insured by the Federal
Deposit Insurance Corporation or any other insurer. Deposit notes are insured by
the Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositor per bank.

Municipal Obligations. The Fund may invest in a variety of municipal obligations
which consist of municipal bonds, municipal notes and municipal commercial
paper.

Municipal Bonds. Municipal bonds are issued to obtain funds for various public
purposes including the construction of a wide range of public facilities such as
airports, highways, bridges, schools, hospitals, housing, mass transportation,
streets and water and sewer works. Other public purposes for which municipal
bonds may be issued include refunding outstanding obligations, obtaining funds
for general operating expenses and obtaining funds to lend to other public
institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds for many types of local, privately operated facilities. Such debt
instruments are considered municipal obligations if the interest paid on them is
exempt from federal income tax. The payment of principal and interest by issuers
of certain obligations purchased by the Fund may be guaranteed by a letter of
credit, note repurchase agreement, insurance or other credit facility agreement
offered by a bank or other financial institution. Such guarantees and the
creditworthiness of guarantors will be considered by the Adviser in determining
whether a municipal obligation meets the Fund's investment quality 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,

4
<PAGE>

if any, which may be enacted by Congress or state legislatures extending the
time for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations. There is also the possibility
that as a result of litigation or other conditions the power or ability of any
one or more issuers to pay when due the principal of and interest on their
municipal obligations may be affected.

The yields of municipal bonds depend upon, among other things, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, the maturity of the obligation and rating of the issue. The
ratings of S&P, Moody's and Fitch 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
net results on its portfolio

5
<PAGE>

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 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 this purpose, collateral arrangements

6
<PAGE>

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 have adopted guidelines and delegated 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
result, the Fund

7
<PAGE>

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 engage in short-term trading in response to market
conditions, changes in interest rates or other income trends and developments or
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. 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 the approval of a majority of the Fund's outstanding
voting securities which, as used in the Prospectus and this Statement of
Additional Information, means the 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.

(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

8
<PAGE>

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.)

(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

9
<PAGE>

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.

(13) Purchase the securities of issuers conducting their principal activity in
the same industry if, immediately after such purchase, the value of its
investments in such industry would equal or exceed 25% of its total assets
taken at market value at the time of such investment. This limitation does
not apply to investments in obligations of the U.S. Government or any of
its agencies, instrumentalities or authorities.

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 the Fund is managed by its Trustees, who elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Trustees. Several of the officers and Trustees of the Fund 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>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>

Stephen L. Brown* Trustee and Chairman Chairman and Chief Executive Officer,
John Hancock Place John Hancock Life Insurance Company;
P.O. Box 111 Chairman and Director, John Hancock
Boston, MA 02117 Advisers, Inc. (The Adviser), John
July 1937 Hancock Funds, Inc. (John Hancock
Funds), The Berkeley Financial Group,
Inc. (The Berkeley Group); Director,
John Hancock Subsidiaries, Inc.; John
Hancock Insurance Agency, Inc.;
(Insurance Agency), (until June
1999); Federal Reserve Bank of
Boston (until March 1999); John
Hancock Signature Services, Inc.
(Signature Services) (until January
1997); Trustee, John Hancock Asset
Management (until March 1997).

Maureen R. Ford * Trustee, Vice Chairman and Chief President, Broker/Dealer Distributor,
101Huntington Avenue Executive Officer John Hancock Life Insurance Company;
Boston, MA Vice Chairman, Director and Chief
April 1955 Executive Officer, the Advisers, The
Berkeley Group, John Hancock Funds;
Chairman, Director and President,
Insurance Agency, Inc.; Chairman,
Director and Chief Executive Officer,
Sovereign Asset Management
Corporation (SAMCorp.); Senior Vice
President, MassMutual Insurance Co.
(until 1999); Senior Vice President,
Connecticut Mutual Insurance Co.
(until 1996).
</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.

11
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>

James F. Carlin Trustee Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual (insurance), Health
Plan Services, Inc., Massachusetts
Health and Education Tax Exempt
Trust, Flagship Healthcare, Inc.,
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995), Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (until July 1999).

William H. Cunningham Trustee 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)
(1985-1998); Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ Foundation
Board (education foundation);
Advisory Director, Chase Bank
(formerly Texas Commerce Bank -
Austin).
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>

Ronald R. Dion Trustee President and Chief Executive
250 Boylston Street Officer, R.M. Bradley & Co., Inc.;
Boston, MA 02116 Director, The New England Council
March 1946 and Massachusetts Roundtable;
Trustee, North Shore Medical Center;
Director, BJ's Wholesale Club, Inc.
and a corporator of the Eastern
Bank; Trustee, Emmanuel College.

Charles L. Ladner Trustee Senior Vice President and Chief
UGI Corporation Financial Officer, UGI Corporation
P.O. Box 858 (Public Utility Holding Company)
Valley Forge, PA 19482 (retired 1998); Vice President and
February 1938 Director for AmeriGas, Inc. (retired
1998); Vice President of AmeriGas
Partners, L.P. (until 1997);
Director, EnergyNorth, Inc. (until
1995).
</TABLE>

13
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>

Steven R. Pruchansky Trustee (1) Director and President, Mast
4327 Enterprise Avenue Holdings, Inc. (since 1991);
Naples, FL 34104 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 Insurance Company; Director, the
P.O. Box 111 Adviser, John Hancock Funds,
Boston, MA 02117 Signator Investors, Inc., John
August 1937 Hancock Subsidiaries, Inc.,
SAMCorp., NM Capital, The Berkeley
Group, JH Networking Insurance
Agency, Inc.; Insurance Agency, Inc.
(until June 1999), Signature
Services (until January 1997).

Norman H. Smith Trustee 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).
</TABLE>

14
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
John P. Toolan Trustee 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).

Osbert M. Hood Executive Vice President and Chief Executive Vice President and Chief
101 Huntington Avenue Financial Officer Financial Officer, each of the John
Boston, MA 02199 Hancock Funds; Executive Vice
August 1952 President, Treasurer and Chief
Financial Officer of the Adviser, the
Berkeley Group, John Hancock Funds,
SAMCorp. And NM Capital; Senior Vice
President, Chief Financial Officer
and Treasurer, Signature Services;
Director IndoCam Japan Limited; Vice
President and Chief Financial
Officer, John Hancock Life Insurance
Company, Retail Sector (until 1997).

</TABLE>

15
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Susan S. Newton Vice President, Secretary and Chief Vice President, Secretary and Chief
101 Huntington Avenue Legal Officer Legal Officer and Secretary, the
Boston, MA 02199 Adviser; John Hancock Funds,
March 1950 Signature Services, The Berkeley
Group, NM Capital and SAMCorp.

James J. Stokowski Vice President, Treasurer and Chief Vice President, the Adviser.
101 Huntington Avenue Accounting Officer
Boston, MA 02199
November 1946

Thomas H. Connors Vice President and Compliance Vice President and Compliance
101 Huntington Avenue Officer Officer, the Adviser; Vice
Boston, MA 02199 President, John Hancock Funds, Inc.
September 1959
</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.

16
<PAGE>

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 for their services. Messrs. Brown, Scipione and Ms. Ford,
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
Trustees From the Fund* to the Trustees**
- -------- -------------- -----------------
James F. Carlin $ 3,137 $ 74,000
William H. Cunningham + 3,137 74,000
Ronald R. Dion 3,469 18,500
Charles F. Fretz 318 57,121
Harold R. Hiser. Jr. + ** 2,827 70,000
Charles L. Ladner 3,267 77,100
Leo E. Linbeck, Jr.** 3,137 74,000
Patricia P. McCarter + 137 43,696
Steven R. Pruchansky + 3,267 77,100
Norman H. Smith + 3,393 79,350
John P. Toolan + 3,267 77,100
--------- ---------
Total $29,356 $721,967

* Compensation is for the fiscal year ended March 31, 1999.

** The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees as of the calendar year ended December 31, 1998. As
of this date, there were sixty-seven funds in the John Hancock Fund
Complex, with each of these Independent Trustees serving on thirty-three
funds. Effective October 1, 1998, Mr. Fretz and Ms. McCarter resigned as
Trustees of the Complex. Effective December 31, 1999, Messrs. Hiser and
Linbeck resigned as Trustee of the Complex.

+ As of December 31, 1998, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Fund Complex for
Mr. Cunningham was $320,943, for Mr. Hiser was $115,084, for Ms. McCarter
was $183,645, for Mr. Pruchansky was $75,016, for Mr. Smith was $109,807
and for Mr. Toolan was $403,714 under the John Hancock Deferred
Compensation Plan for Independent Trustees.

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 8, 1999, 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, the following shareholders beneficially owned 5% or more
of the outstanding shares of the Fund:

17
<PAGE>

- ----------------------------------------------------------------------------------------------------------------------
Percentage of total Outstanding
Name and Address of Shareholder Class of Shares Shares of the Class of the Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lyon Electric Co., Inc. 401K Plan C 28.52%
Att: Sandra Cruz
1690 A Brandywine Avenue
Chula Vista CA 91911-60201-000

- ----------------------------------------------------------------------------------------------------------------------
G. David Miller C 27.62%
4004 S Spring Loop
Roswell NM 88201-9625
- ----------------------------------------------------------------------------------------------------------------------

Prudential Securities Inc. FBO C 8.04%
Jeff Filmore
87 Lothrop St
Beverly MA 0915-5226

- ----------------------------------------------------------------------------------------------------------------------
Janet M. Fillion C 5.64%
PO Box 384
Franklin NH 03235-0384

- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

INVESTMENT ADVISORY AND OTHER SERVICES

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $30 billion in assets under management
in its capacity as investment adviser to the Fund and the other funds in the
John Hancock group of funds as well as institutional accounts. 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. 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 but not
limited to 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 ,
maintaining a committed line of credit and calculating the net asset value of
shares;

18
<PAGE>

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.

As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser monthly a 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 fiscal year ended October 31, 1996 and for the period from November 1,
1996 to March 31, 1997 and for the fiscal years ended March 31, 1998 and 1999,
advisory fees payable by the Fund to the Adviser, were $1,327,385, $694,373,
$1,592,755 and $2,466,099, respectively.

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 Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from its reckless disregard of
the obligations and duties under the Advisory Agreement.

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,

19
<PAGE>

renewal or amendment thereof remains in effect. If the Advisory Agreement is no
longer in effect, the Fund (to the extent that it lawfully can) will cease to
use such name or any other name indicating that it is advised by or otherwise
connected with the Adviser. In addition, the Adviser or the Life Company may
grant the non-exclusive right to use the name "John Hancock" or any similar name
to any other corporation or entity, including but not limited to any investment
company of which the Life Company or any subsidiary or affiliate thereof or any
successor to the business of any subsidiary or affiliate thereof shall be the
investment adviser.

The continuation of the Advisory Agreement and Distribution Agreement (discussed
below) was approved by all of the Trustees. The Advisory Agreement and the
Distribution Agreement 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.

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. For the fiscal years ended March 31, 1998 and
1999, the Fund paid the Adviser $71,537 and $74,478, respectively.

Personnel of the Adviser and its affiliates may trade securities for their
personal accounts. The Fund also may hold, or may be buying or selling, the same
securities. To prevent the Fund from being disadvantaged, the Adviser and its
affiliates and the Fund have adopted a code of ethics which restricts the
trading activity of those personnel.

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. These Selling Brokers are authorized to
designate other intermediaries to receive purchase and redemption orders on
behalf of the Fund. John Hancock Funds accepts orders for the purchase of the
shares of the Fund which are continually offered at net asset value next
determined, plus an applicable sales charge, if any. In connection with the sale
of Fund shares, John Hancock Funds and Selling Brokers receive compensation from
a sales charge imposed, in the case of Class A shares, at the time of sale. In
the case of Class B and Class C shares, the broker receives compensation
immediately but John Hancock Funds is compensated on a deferred basis.

The Fund's Trustees adopted Distribution Plans with respect to each class of
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% for Class A shares and 1.00%, for Class B and Class C
shares, respectively, of the Fund's average 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 average daily net assets.
The service fee will not exceed 0.15% or 0.25% of the Fund's average daily net
assets attributable to each of

20
<PAGE>

shares 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 and Class C 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 they make 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 and Class C Plans 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 and Class C
Plans as a liability of the Fund because the Trustees may terminate Class B
and/or Class C Plans at any time with no additional liability for these expenses
to the shareholders and the Fund. For the fiscal year ended March 31, 1999, an
aggregate of $433,174 of distribution expenses or of 0.29% 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. For the period from May 1, 1998 to March 31, 1999, there
were no aggregate distribution expenses of the Class C shares of the Fund that
was not reimbursed or recovered by John Hancock Funds through the receipt of
deferred sales charges or 12b-1 fees.

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
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, Class B and Class C 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,

21
<PAGE>

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 fiscal year ended March 31, 1999, the Fund paid John Hancock Funds
the following amounts of expenses in connection with their services of the Fund.

Expense Items
-------------

<TABLE>
<CAPTION>
Printing and
Mailing of Interest,
Prospectuses Compensation Expenses of Carrying or
to New To Selling John Hancock Other Finance
Shares Advertising Shareholders Brokers Funds Charges
- ------ ----------- ------------ ------------ ------------- --------------

<S> <C> <C> <C> <C> <C>
Class A $52,909 $14,263 $314,846 $132,353 $0
Class B $31,536 $ 6,353 $368,503 $ 67,836 $23,734
Class C* $1,251 $ 475 $0 $3,366 $0
</TABLE>

*Commenced operations May 1, 1998.

SALES COMPENSATION

As part of their business strategies, the Fund, along with John Hancock Funds,
pay compensation to financial services firms that sell the Fund's 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 Fund's 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 Fund. The sales charges and 12b-1 fees paid by investors are detailed in the
fund-by-fund information.

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.

Whenever you make an investment in Class C shares of Money Market Fund, the
financial services firm receives a commission equal to 1.75% 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 Class A shares and 0.25% of its total
eligible net assets in Class B and Class C shares. This fee is paid quarterly in
arrears by the Fund.

22
<PAGE>

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.

In addition, from time to time, John Hancock Funds, at its expense, may provide
significant additional compensation to financial services firms which sell or
arrange for the sale of shares of the Fund. Such compensation provided by John
Hancock Funds may include, for example, financial assistance to financial
services firms in connection with their conferences or seminars, sales or
training programs for invited registered representatives and other employees,
payment for travel expenses, including lodging, incurred by registered
representatives and other employees for such seminars or training programs,
seminars for the public, advertising and sales campaigns regarding one or more
Funds, and/or other financial services firms-sponsored events or activities.
From time to time, John Hancock Funds may make expense reimbursements for
special training of a financial services firm's registered representatives and
other employees in group meetings or to help pay the expenses of sales contests.
Other compensation, such as asset retention fees, finder's fees and
reimbursement for wire transfer fees, may be offered to the extent not
prohibited by law or any self-regulatory agency, such as the NASD.

<TABLE>
<CAPTION>
First year
Sales charge Maximum Service fee Maximum total
paid by investors (% Reallowance (% of net compensation (1)
Class B investments of offering price) (% of offering rice) investment) (2) (% of offering price)
- ------------------- ------------------ -------------------- --------------- ---------------------

<S> <C> <C> <C> <C>
All amounts -- 3.75% 0.25% 4.00%

<CAPTION>
First year
Maximum Service fee Maximum total
Reallowance (% of net compensation (1)
Class C investments (% of offering rice) investment) (2) (% of offering price
- ------------------- -------------------- --------------- --------------------

<S> <C> <C> <C> <C>
Amounts purchased at NAV -- 0.75% 0.25% 1.00%
All other amounts 1.00% 1.75% 0.25% 2.00%
</TABLE>

(1) Reallowance and service fee percentages are calculated from different
amounts, and therefore may not equal total compensation percentages if combined
using simple addition.

(2) After first year subsequent service fees are paid quarterly in arrears.

CDSC revenues collected by John Hancock Funds may be used to pay commissions
when there is no initial sales charge.

23
<PAGE>

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.

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 any
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.

24
<PAGE>

PURCHASE OF CLASS A AND CLASS C SHARES

Class A shares of the Fund will be sold at their net asset value without a sales
charge. The sales charges applicable to purchases of Class C shares of the Fund
are described in the Prospectus. Methods of obtaining reduced sales charges
referred to generally in the Prospectus are described in detail below. 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.

Class C shares will be sold with a 1.00% sales charge except for the following:

o Retirement plans for which John Hancock Signature Services performs
employer sponsored plan recordkeeping services. (These types of
plans include 401(k), money purchase pension, profit sharing and
SIMPLE 401k.)

o An investor who buys through a Merrill Lynch omnibus account.
However, a CDSC may apply if the shares are sold within 12 months of
purchase.

Class C shares may also be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies

DEFERRED SALES CHARGE ON CLASS B AND CLASS C SHARES

Investments in Class B shares are purchased at net asset value per share without
the imposition of an initial sales charge so the Fund will receive the full
amount of the purchase payment.

Contingent Deferred Sales Charge. Class B and Class C shares which are redeemed
within six years or one year of purchase, respectively, 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 or Class C shares being redeemed. No
CDSC will be imposed on increases in account value above the initial purchase
prices or on shares derived from reinvestment of dividends or capital gains
distributions.

Class B shares are not available to full-service retirement 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 both Class B and Class C
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 for Class B or one year CDSC
redemption period for Class C 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 Class B shares. For this purpose, the amount of any increase
in a

25
<PAGE>

share's value above its initial purchase price is not subject to a CDSC. Thus,
when a share that has appreciated in value is redeemed during the CDSC period, a
CDSC is assessed only on its initial purchase price.

When requesting a redemption for a specific dollar amount please indicate if you
require the proceeds to equal the dollar amount requested. If not indicated,
only the specified dollar amount will be redeemed from your account and the
proceeds will be less any applicable CDSC.

Example:

You have purchased 100 Class B 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 and Class C shares, such as the payment of compensation to select
Selling Brokers for selling Class B and Class C shares. The combination of the
CDSC and the distribution and service fees facilitates the ability of the Fund
to sell the Class B and Class C 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 C shares 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.

* Redemptions made under certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.

* Redemptions due to death or disability. (Does not apply to Trust accounts
unless trust is being dissolved.)

* Redemptions made under the Reinstatement Privilege, as described in "Sales
Charge Reductions and Waivers" in the Prospectus.

* Redemptions of Class B (but not Class C) shares made under a periodic
withdrawal plan, or redemptions for fees charged by planners or advisors
for advisory services, 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 or Class C shares that are
subject to a CDSC.)

26
<PAGE>

* Redemption of Class A shares made after one year from the inception date
of a retirement plan at John Hancock for which John Hancock is the
recordkeeper.

For Retirement Accounts (such as traditional, Roth and Education IRAs, SIMPLE
IRAs, SIMPLE 401(k), Rollover IRA, TSA, 457, 403(b), 401(k), Money Purchase
Pension Plan, Profit-Sharing Plan and other plans as described in the Internal
Revenue Code) unless otherwise noted.

* Redemptions made to effect mandatory or life expectancy distributions
under the Internal Revenue 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) (such as
Money Purchase Pension Plans, and Profit Sharing Plan 401(k) Plans), 457
and 408 (SEPs and SIMPLE IRAs) of the Internal Revenue Code.

* 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 some examples.

27
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Type of 401 (a) Plan 403 (b) 457 IRA, IRA Non-retirement
Distribution (401 (k), MPP, Rollover
PSP)457 & 408
(SEPs & Simple
IRAs)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Death or Disability Waived Waived Waived Waived Waived
- ------------------------------------------------------------------------------------------------------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually
distributions in periodic
or 12% of payments
account value
annually in
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 for Waived for Waived for Waived for 12% of account
(Class B only) annuity annuity annuity annuity value annually
payments (72t) payments (72t) payments (72t) payments (72t) in periodic
or 12% of or 12% of or 12% of or 12% of payments
account value account value account value account value
annually in annually in annually in annually in
periodic periodic periodic periodic
payments payments. payments. payments.
- ------------------------------------------------------------------------------------------------------------------
Loans Waived Waived N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Termination of Plan Not Waived Not Waived Not Waived Not Waived N/A
- ------------------------------------------------------------------------------------------------------------------
Hardships Waived Waived Waived N/A N/A
- ------------------------------------------------------------------------------------------------------------------
Qualified Domestic Waived Waived Waived N/A N/A
Relations Orders
- ------------------------------------------------------------------------------------------------------------------
Termination of Waived Waived Waived N/A N/A
Employment Before
Normal Retirement Age
- ------------------------------------------------------------------------------------------------------------------
Return of Excess Waived Waived Waived Waived N/A
- ------------------------------------------------------------------------------------------------------------------
</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.

28
<PAGE>

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 security would 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 500 Index Fund and John Hancock
Intermediate 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 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 from the redemption
of Fund shares which may result in realization of gain or loss for purposes of
Federal, state and local income taxes. The maintenance of a Systematic
Withdrawal Plan concurrently with purchases of additional shares of the Fund
could be disadvantageous to a shareholder because of the CDSC imposed on
redemptions of Class B and Class C shares. Therefore, a shareholder should not
purchase 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

29
<PAGE>

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:

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 order date of any investment.

Reinstatement and Reinvestment Privilege. If Signature Services is notified
prior to reinvestment, a shareholder who has redeemed Fund shares 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 same 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".

PURCHASES AND REDEMPTIONS THROUGH THIRD PARTIES

Shares of the Fund may be purchased or redeemed through certain broker-dealers.
Brokers may charge for their services or place limitations on the extent to
which you may use the services of the Fund. The Fund will be deemed to have
received a purchase or redemption order when an authorized broker, or if
applicable, a broker's authorized designee, receives the order. If a broker is
an agent or designee of the Fund, orders are processed at the NAV next
calculated after the broker receives the order. The broker must segregate any
orders it receives after the close of regular trading on the New York Stock
Exchange and transmit those orders to the Fund for execution at NAV next
determined. Some brokers that maintain nominee accounts with the Fund for their
clients charge an annual fee on the average net assets held in such accounts for

30
<PAGE>

accounting, servicing, and distribution services they provide with respect to
the underlying Fund shares. The Adviser, the Fund, and John Hancock Funds, Inc.
(the Fund's principal distributor), share in the expense of these fees.

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 and classes
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 Trustees have
also authorized the issuance of three classes of shares of the fund, designated
as Class A, Class B and Class C.

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
each class of shares have certain exclusive voting rights on matters relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.

Dividends paid by the Fund, if any, with respect to each class of shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except for differences resulting from the facts that (i) the
distribution and service fees relating to each class will be borne exclusively
by that class (ii) Class B and Class C shares will pay higher distribution and
service fees than Class A shares and (iii) each class of shares will bear any
class expenses properly allocable to that class of shares, subject to the
conditions the Internal Revenue Service imposes with respect to the
multiple-class structures. Similarly, the net asset value per share may vary
depending on which class of shares are purchased. No interest will be paid on
uncashed dividend or redemption checks.

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

31
<PAGE>

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. John Hancock
Funds does not accept starter, credit card or third party checks. All checks
returned by the post office as undeliverable will be reinvested at net asset
value in the fund or funds from which a redemption was made or dividend paid.
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 joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify Signature Services of a different
intent. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions, the transfer agent will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent 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.

Selling activities for the Fund may not take place outside the U.S. except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.

TAX STATUS

The Fund is treated as a separate entity for accounting and tax purposes, has
qualified and elected to be treated as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
intends to continue to so qualify for each taxable year. As such and by
complying with the applicable provisions of the Code regarding the sources of
its income, the timing of its distributions, and the diversification of its
assets, the Fund will not be subject to Federal income tax on taxable income
(including net realized capital gains, if any ) which is distributed to
shareholders in accordance with the timing requirements of the Code.

The Fund will be subject to a 4% non-deductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to seek to avoid or minimize liability for
such tax by satisfying such distribution requirements.

Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as long-term capital gain. (Net
capital gain is the excess (if any) of net long-term capital gain over net
short-term capital loss and 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

32
<PAGE>

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 or other disposition 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.
Also, 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. Shareholders should consult their own tax advisers regarding their
particular circumstances to determine whether a disposition of Fund shares is
properly treated as a sale for tax purposes, as is assumed in the foregoing
discussion. Also, future Treasury Department guidance issued to implement the
Act may contain additional rules for determining the tax treatment of sales of
Fund shares held for various periods including the treatment of losses on the
sales of shares held for six months or less that are recharacterized as
long-term capital losses, as described above.

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. The
Fund does not have any capital loss carryforwards.

Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.

The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments, if any, in foreign securities. Some
tax conventions between certain countries and the U.S. may reduce or eliminate
such taxes. It is not likely that the Fund will

33
<PAGE>

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 types 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, Form W-8BEN or
authorized withholding certificates on file, to 31% backup withholding on
certain other payments from the Fund. Non-U.S. investors should consult their
tax advisers regarding such treatment and the application of foreign taxes to an
investment in the Fund.

The Fund is not subject to Massachusetts corporate excise or franchise taxes.
The Fund anticipates that, provided that the Fund qualifies as a regulated
investment company under the Code, it will also not be required to pay any
Massachusetts income.

34
<PAGE>

CALCULATION OF PERFORMANCE

For the purposes of calculating yield for the 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
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.

35
<PAGE>

Performance rankings and ratings reported periodically in, and excerpts from,
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 and 1995, the Fund did not pay negotiated brokerage commissions on
portfolio transactions. Also for the period from November 1, 1996 to March 31,
1997 and fiscal years ended March 31, 1999 and 1998, the Fund did not pay
negotiated brokerage commissions 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

36
<PAGE>

commission in excess of the commission which another broker would have charged
for effecting that transaction. This practice is subject to a good faith
determination by the Trustees that the price is reasonable in light of the
services provided and to policies that the Trustees may adopt from time to time.
During the fiscal years ended March 31, 1999 and 1998, 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 Signator Services, Inc., a broker-dealer (until January 1, 1999,
John Hancock Distributors, Inc.) ("Signator" 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 the Affiliated Broker. For the fiscal years ended March 31, 1999 and
1998, the Fund paid did not pay brokerage commissions to any Affiliated Broker.

Signator 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 Broker. Because the Adviser,
which is affiliated with the Affiliated Broker, 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 Broker 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. Because of
this, client accounts in a particular style may sometimes not sell or acquire
securities as quickly or at the same prices as they might if each were managed
and traded individually.

For fixed income accounts, generally securities will be allocated when
appropriate among accounts based on account size, except if the accounts have
different objectives or if an account is too small to get a meaningful
allocation. For new issues, when a complete order is not filled, a partial
allocation will be made to each account pro rata based on the order size.
However, if a partial allocation is too small to be meaningful, it may be
reallocated based on such factors as account objectives, duration benchmarks and
credit and sector exposure. 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 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.

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<PAGE>

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 of the Fund. The Fund pays Signature Services
an annual fee of $20.00 for each Class A shareholder account, $22.50 for each
Class B shareholder account and $21.50 for each Class C shareholder account. The
Fund also pays certain out-of-pocket expenses and 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 are as
of the Fund's fiscal year ended March 31, 1999 and have been audited by Ernst &
Young LLP for the periods indicated in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.

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<PAGE>

APPENDIX A

TYPES OF INVESTMENT RISK

Credit risk The risk that the issuer of a security, or the counterparty to a
contract, will default or other-wise 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.

Year 2000 risk The risk that the funds' operations could be disrupted by year
2000-related computer system problems. Although the adviser and the funds'
service providers are taking steps to address this issue, there may still be
some risk of adverse effects. Common to all mutual funds.

A-1
<PAGE>

APPENDIX B

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

A-2
<PAGE>

change over the term of the issue. Bonds rated A are considered to be investment
grade and of good quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with higher ratings.
Bonds rated BBB are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to weaken this ability than bonds with higher ratings.

TAX-EXEMPT NOTE RATINGS

Moody's - MIG-1 and MIG-2. Notes rated MIG-1 are judged to be of the best
quality, enjoying strong protection from established cash flow or funds for
their services or from established and broad-based access to the market for
refinancing or both. Notes rated MIG-2 are judged to be of high quality with
ample margins of protection, though not as large as MIG-1.

S&P - SP-1 and SP-2. SP-1 denotes a very strong or strong capacity to pay
principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+). SP-2 denotes a
satisfactory capacity to pay principal and interest.

Fitch - FIN-1 and FIN-2. Notes assigned FIN-1 are regarded as having the
strongest degree of assurance for timely payment. A plus symbol may be used to
indicate relative standing. Notes assigned FIN-2 reflect a degree of assurance
for timely payment only slightly less in degree than the highest category.

CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS

Moody's - Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Prime-1, indicates highest quality repayment capacity of
rated issue and Prime-2 indicates higher quality.

S&P - Commercial Paper ratings are a current assessment of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
Issues rated A have the greatest capacity for a timely payment and the
designation 1, 2 and 3 indicates the relative degree of safety. Issues rated
"A-1+" are those with an "overwhelming degree of credit protection."

Fitch - Commercial Paper ratings reflect current appraisal of the degree of
assurance of timely payment. F-1 issues are regarded as having the strongest
degree of assurance for timely payment. (+) is used to designate the relative
position of an issuer within the rating category. F-2 issues reflect an
assurance of timely payment only slightly less in degree than the strongest
issues. The symbol (LOC) may follow either category and indicates that a letter
of credit issued by a commercial bank is attached to the commercial paper note.

Other Considerations - The ratings of S&P, Moody's, and Fitch represent their
respective opinions of the quality of the municipal securities they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal securities with the same
maturity, coupon and ratings may have different yields and municipal securities
of the same maturity and coupon with different ratings may have the same yield.

A-3
<PAGE>

FINANCIAL STATEMENTS

F-1