FILE NO. 2-66461
FILE NO. 811-2995
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 21 (X)
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 24 (X)
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JOHN HANCOCK CASH RESERVE, INC.
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, (617) 375-1700
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SUSAN S. NEWTON
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and Address of Agent for Service)
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on (date) pursuant to paragraph (b) of Rule 485
( ) 75 days after filing pursuant to paragraph (a) of Rule 485
(X) on May 1, 1999 pursuant to paragraph (a) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
John Hancock
Cash Reserve,
Inc.
[JHF LOGO] Prospectus
May 1, 1999
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As with all mutual funds, the Securities and Exchange Commission has not judged
whether this fund is a good investment or whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.
On September 10, 1996, the Directors voted to close the Fund to new purchases,
except shares purchased with reinvested Fund dividends effective October 1,
1996.
[JHF LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, Massachusetts 02199-7603
<PAGE>
Contents
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A summary of the fund's Cash Reserve, Inc. 4
goals, strategies, risks,
performance and expenses.
Policies and instructions for Your account
opening, maintaining and Selling shares 6
closing an account in the Transaction policies 8
fund. Dividends and account policies 8
Additional investor services 9
Fund details
Business structure 10
Further information on the
fund. For more information back cover
<PAGE>
Overview
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JOHN HANCOCK CASH RESERVE, INC.
This fund seeks current income and preservation of capital. It invests primarily
in money market instruments, strives to maintain a stable $1 share price and
offers checkwriting for easy liquidity.
WHO MAY WANT TO INVEST
The fund may be appropriate for investors who:
o require stability of principal
o are seeking a mutual fund for the money market portion of an asset allocation
portfolio
o need to "park" their money temporarily
o consider themselves savers rather than investors
o are investing emergency reserves
The fund may NOT be appropriate if you:
o want federal deposit insurance
o are seeking an investment that is likely to outpace inflation
o are investing for growth or maximum current income
RISK OF MUTUAL FUNDS
Mutual funds are not bank deposits and are not insured or guaranteed by the FDIC
or any other government agency. Because you could lose money by investing in
this fund, be sure to read all risk disclosure carefully before investing.
THE MANAGEMENT FIRM
The fund is managed by John Hancock Advisers, Inc. Founded in 1968, John Hancock
Advisers is a wholly owned subsidiary of John Hancock Mutual Life Insurance
Company and manages more than $30 billion in assets.
FUND INFORMATION KEY
A concise fund description begins on the next page. The description provides the
following information:
Goal and strategy
[clipart] The fund's particular investment goal and the strategy it intends to
use in pursuing those goals.
Main risks
[clipart] The major risk factors associated with the fund.
Past performance
[clipart] The fund's total return, measured year-by-year and over time.
Your expenses
[clipart] The overall costs borne by an investor in the fund, including annual
expenses.
<PAGE>
Cash Reserve, Inc.
GOAL AND STRATEGY
[clipart] The fund seeks maximum current income consistent with capital
preservation and liquidity. It invests only in high-quality money market
instruments seeks to maintain a stable share price of $1.
The fund invests only in dollar-denominated securities rated within the two
highest short-term credit categories (and their unrated equivalents). These
securities have a maximum remaining maturity of 365 days and may be issued by:
o U.S. corporations
o U.S. and Canadian banks and their foreign branches
o U.S. savings and loan associations
o U.S. and Canadian governments
o U.S. agencies, states, and municipalities
The fund may also invest in repurchase agreements based on these securities. The
fund maintains an average dollar-weighted maturity of 90 days or less.
The fund may invest more than 25% of its assets in finance companies or domestic
banks.
In managing the portfolio, the managers search aggressively for the best values
on securities that meet the find's credit and maturity requirements. The
managers tends to favor corporate securities and looks for relative yield
advantages between, for example, a company's secured and unsecured short-term
debt obligations.
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YIELD INFORMATION
For the fund's 7-day effective yield, call the Easi-Line 1-800-225-5291
PORTFOLIO MANAGERS
Team of money market research analysts and portfolio managers
PAST PERFORMANCE
[clipart] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time. On December 22,1994, John
Hancock Advisers, Inc. became the investment adviser of the fund. The fund's
total returns for the previous periods during which the fund was advised by
another adviser are not shown. All figures assume dividend reinvestment. Past
performance does not indicate future results.
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Year-by-year total returns -- calendar years
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1995 1996 1997 1998
5.38% 5.00% 5.20% 4.91%
Best quarter: Q4 '97, 1.32% Worst quarter: Q2 '96, 1.08%
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Average annual total returns -- for periods ending 12/31/98
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1 year 4.91%
Life of fund x.xx%
4
<PAGE>
MAIN RISKS
[clipart] The value of your investment will be most affected by short-term
interest rates. If interest rates rise sharply, the fund could underperform its
peers or lose money.
An issuer of securities held by the fund could default, or have its credit
rating downgraded.
Foreign investments carry additional risks, including inadequate or inaccurate
financial information, and social or political upheavals.
o If the fund concentrates in finance companies or banks, its performance could
be tied more closely to those industries than to the market as a whole.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 share, it is possible to lose
money by investing in the fund.
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YOUR EXPENSES
[clipart] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
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Shareholder transaction expenses
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Maximum sales charge (load) on purchases
as a % of purchase price none
Maximum deferred sales charge (load)
(as a % of purchase or sales price, whichever is less) none
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Annual operating expenses
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Management fee 0.35%
Distribution fees 0.00%
Other expenses 0.40%
Total fund operating expenses 0.75%
The hypothetical example below shows what your expenses would be if you invested
$10,000 over the time frames indicated, assuming you reinvested all
distributions and that the average annual return was 5%. The example is for
comparison only, and does not represent the fund's actual expenses and returns,
either past or future.
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Expenses Year 1 Year 3 Year 5 Year 10
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$ 77 $240 $417 $930
Fund Codes
Ticker --
CUSIP 41014T104
Newspaper --
SEC number 811-2995
5
<PAGE>
Your Account
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Selling shares
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Designed for To sell some or all of your shares
By letter
[clipart] o Accounts of any type. o Write a letter of instruction or
o Sales of any amount. complete a stock power indicating
the fund name, your account number,
the name(s) in which the account is
registered and the dollar value or
number of shares you wish to sell.
o Include all signatures and any
additional documents that may be
required (see next page).
o Mail the materials to Signature
Services.
o A check will be mailed to the
name(s) and address in which the
account is registered, or otherwise
according to your letter of
instruction.
By phone
[clipart] o Most accounts. o For automated service 24 hours a
o Sales of up to $100,000. day using your touch-tone phone,
call the EASI-Line at
1-800-338-8080.
o To place your order with a
representative at John Hancock
Funds, call Signature Services
between 8 a.m. and 4 p.m. Eastern
Time on most business days.
By wire or electronic funds transfer (EFT)
[clipart] o Requests by letter to o To verify that the telephone
sell any amount (accounts redemption privilege is in place on
of any type). an account, or to request the form
to add it to an existing account,
o Requests by phone to sell call Signature Services.
up to $100,000 (accounts
with telephone redemption o Amounts of $1,000 or more will be
privileges). wired on the next business day. A
$4 fee will be deducted from your
account.
o Amounts of less than $1,000 may
be sent by EFT or by check. Funds
from EFT transactions are generally
available by the second business
day. Your bank may charge a fee for
this service.
By exchange
[clipart] o Accounts of any type. o Obtain a current prospectus for
o Sales of any amount. the fund into which you are
exchanging by calling your
financial representative or
Signature Services.
o Call your financial
representative or Signature
Services to request an exchange.
To sell shares through a systematic
withdrawal plan, see "Additional
investor services."
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Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
Phone Number: 1-800-225-5291
Or contact your financial representative
for instructions and assistance.
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6 YOUR ACCOUNT
<PAGE>
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. You may need to include additional items with
your request, as shown in the table below. You may also need to include a
signature guarantee, which protects you against fraudulent orders. You will need
a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
o you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You will need to obtain your signature guarantee from a member of the Signature
Guarantee Medallion Program. Most brokers and securities dealers are members of
this program. A notary public CANNOT provide a signature guarantee.
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Seller Requirements for written requests
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Owners of individual, joint, o Letter of instruction.
sole proprietorship, UGMA/UTMA
(custodial accounts for minors) o On the letter, the signatures and
or general partner accounts. titles of all persons authorized to
sign for the account, exactly as
the account is registered.
o Signature guarantee if applicable
(see above).
Owners of corporate or association o Letter of instruction.
accounts.
o Corporate resolution, certified
within the past 12 months.
o On the letter and the resolution,
the signature of the person(s)
authorized to sign for the account.
o Signature guarantee if applicable
(see above).
Owners or trustees of trust accounts. o Letter of instruction.
o On the letter, the signature(s)
of the trustee(s).
o Provide a copy of the trust
document certified within the past
12 months.
o Signature guarantee if applicable
(see above).
Joint tenancy shareholders with o Letter of instruction signed by
rights of surviorship whose co- surviving tenant.
tenants are deceased.
o Copy of death certificate.
o Signature guarantee if applicable
(see above).
Executors of shareholder estates. o Letter of instruction signed by
executor.
o Copy of order appointing
executor, certified within the past
12 months.
o Signature guarantee if applicable
(see above).
Administrators, conservators, guardians o Call 1-800-225-5291 for
and other sellers or account types not instructions.
listed above.
YOUR ACCOUNT 7
<PAGE>
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TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for the fund is
determined twice each business day at 12 noon and at the close of regular
trading on the New York Stock Exchange (typically 4 p.m. Eastern Time), by
dividing 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.
EXECUTION OF REQUESTS The fund is open on those days when the New York Stock
Exchange is open, typically Monday through Friday. Buy and sell requests are
executed at the next NAV to be calculated after Signature Services receives your
request in good order.
At times of peak activity, it may be difficult to place requests by phone.
During these times, consider using EASI-Line or sending your request in writing.
In unusual circumstances, any fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.
TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. Also for your protection, telephone
transactions are not permitted on accounts whose names or addresses have changed
within the past 30 days. Proceeds from telephone transactions can only be mailed
to the address of record.
EXCHANGES You may exchange shares of one John Hancock fund for shares of the
same class of any other, generally without paying any additional sales charges.
The registration for both accounts involved must be identical.
To protect the interests of other investors in the fund, a fund may cancel the
exchange privileges of any parties that, in the opinion of the fund, are using
market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. A fund may also refuse any exchange order.
A fund may change or cancel its exchange policies at any time, upon 60 days'
notice to its shareholders.
CERTIFICATED SHARES All money market fund shares are electronically recorded.
Certificated shares are not available.
SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the fund will not release the proceeds to you
until your purchase payment clears. This may take up to ten business days after
the purchase.
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DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
o after every transaction (except a dividend reinvestment) that affects your
account balance
o after any changes of name or address of the registered owner(s)
o in all other circumstances, every quarter
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS The fund generally declares dividends daily and pay them monthly.
Purchases by wire or other federal funds that are accepted before 12 noon
Eastern Time will receive the dividend declared that day. Other orders,
including those that are not accompanied by federal funds, will begin receiving
dividends the following day. Redemption orders accepted before 12 noon Eastern
Time will not receive that day's dividends.
DIVIDEND REINVESTMENTS Most investors have their dividends reinvested in
additional shares of the same fund. If you choose this option, or if you do not
indicate any choice, your dividends will be reinvested on the dividend record
date. Alternatively, you can choose to have a check for your dividends mailed to
you. However, if the check is not deliverable, your dividends will be
reinvested.
8 YOUR ACCOUNT
<PAGE>
TAXABILITY OF DIVIDENDS Dividends you receive from a money market fund, whether
reinvested or taken as cash, are generally considered taxable as ordinary
income. Some dividends paid in January may be taxable as if they had been paid
the previous December.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. However, as long as the fund maintains a
stable share price, you will not have a gain or loss on shares you sell or
exchange.
SAMLL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
YEAR 2000 COMPLIANCE The adviser and the fund's service providers are taking
steps to address any year 2000-related computer problems. However, there is some
risk that these problems could disrupt the issuers in which the fund invests,
the fund's operations or financial markets generally.
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ADDITIONAL INVESTOR SERVICES
MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP) MAAP lets you set up regular
investments from your paycheck or bank account to the John Hancock fund(s) of
your choice. You determine the frequency and amount of your investments, and you
can terminate your program at any time. To establish:
o Complete the appropriate parts of your account application.
o If you are using MAAP to open an account, make out a check for your first
investment amount payable to "John Hancock Signature Services, Inc." Deliver
your check and application to your financial representative or Signature
Services.
SYSTEMATIC WITHDRAWAL PLAN This plan may be used for routine bill payments or
periodic withdrawals from your account. To establish:
o Make sure you have at least $5,000 worth of shares in your account.
o Specify the payee(s). The payee may be yourself or any other party, and there
is no limit to the number of payees you may have, as long as they are all on
the same payment schedule.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Fill out the relevant part of the account application. To add a systematic
withdrawal plan to an existing account, contact your financial representative
or Signature Services.
RETIREMENT PLANS John Hancock Funds offers a range of retirement plans,
including traditional and Roth IRAs, SIMPLE Plans, SEPs, 401(k) Plans, and other
pension and profit-sharing plans. Using these plans, you can invest in any John
Hancock fund (except this fund and the tax-free income funds) with a low minimum
investment of $250 or, for some group plans, no minimum investment at all. To
find out more, call Signature Services at 1-800-225-5291.
YOUR ACCOUNT 9
<PAGE>
Fund details
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Business Structure
The diagram below shows the basic business structure used by the fund. The
fund's board of directors oversees the fund's business activities and retains
the services of the various firms that carry out the fund's operations.
MANAGEMENT FEE For the last fiscal year the fund paid management fees of ___% to
the investmet adviser.
[The following information was represented as a flow chart in the printed
material.]
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Shareholders
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Distribution and
shareholder services
-------------------------------------------------
Financial services firms and
their representatives
Advise current and prospective share-
holders on their fund investments, often
in the context of an overall financial plan.
-------------------------------------------------
-------------------------------------------------
Principal distributor
John Hancock Funds, Inc.
Markets the fund and distributes shares
through selling brokers, financial planners
and other financial representatives.
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------------------------------------------------------
Transfer agent
John Hancock Signature Services, Inc.
Handles shareholder services, including record-
keeping and statements, distribution of dividends,
and processing of buy and sell requests.
------------------------------------------------------
Asset
management
------------------------------------
Investment adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the fund's business and
investment activities.
------------------------------------
------------------------------------
Custodian
State Street Bank and Trust Co.
Holds the fund's assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating each fund's NAV.
------------------------------------
------------------------------------
Directors
Oversee the fund's activities.
------------------------------------
10 FUND DETAILS
<PAGE>
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FINANCIAL HIGHLIGHTS
This table details the performance of the fund's shares, including total return
information showing how much an investment in the fund has increased or
decreased each year.
Cash Reserve, Inc.
Figures audited by _______________________
<TABLE>
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Period ended: 1994(1) 1995 1996 1997 1998
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<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
Net investment income 0.04 0.05 0.05 0.05
Less distributions:
Dividends from net investment income (0.04) (0.05) (0.05) (0.05)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
Total investment return at net asset value(2) (%) 3.74 5.38 5.00 5.20
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 142,301 119,763 67,003 37,822
Ratio of expenses to average net assets (%) 0.62 0.73 0.65 0.61
Ratio of net investment income (loss) to average net assets (%) 3.72 5.30 4.85 5.07
</TABLE>
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(2) Total investement return assumes dividend reinvestment.
FUND DETAILS 11
<PAGE>
For more information
Two documents are available that offer further information on John Hancock Cash
Reserve, Inc.:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affect performance, as well as the
auditors' report (in annual report only).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the fund. The
current annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.
To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:
By mail:
John Hancock Signature
Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By phone: 1-800-225-5291
By EASI-Line: 1-800-338-8080
By TDD: 1-800-544-6713
On the Internet: www.jhancock.com/funds
Or you may view or obtain these documents from the SEC:
In person: at the SEC's Public
Reference Room in Washington, DC
By phone: 1-800-SEC-0330
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
On the Internet: www.sec.gov
[JHF LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue
Boston, Massachusetts
02199-7603
(C) 1999 John Hancock Funds, Inc.
420PN 5/99
<PAGE>
JOHN HANCOCK CASH RESERVE, INC.
Statement of Additional Information
May 1, 1999
On September 10, 1996, the Directors voted to close the Fund to new purchases,
except shares purchased with reinvested Fund dividends effective October 1,
1996.
This Statement of Additional Information provides information about John Hancock
Cash Reserve Fund, Inc. (the "Fund") in addition to the information that is
contained in the Prospectus (the "Prospectus"), dated May 1, 1999.
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
Organization of the Fund................................................. 2
Investment Objective and Policies........................................ 2
Investment Restrictions.................................................. 5
Those Responsible for Management......................................... 7
Investment Advisory and Other Services................................... 16
Distribution Contract.................................................... 17
Net Asset Value.......................................................... 18
Description of the Fund's Shares......................................... 19
Tax Status............................................................... 20
Calculation of Yield..................................................... 21
Brokerage Allocation..................................................... 22
Transfer Agent Services.................................................. 24
Custody of Portfolio..................................................... 24
Independent Auditors..................................................... 24
Appendix................................................................. A-1
Financial Statements..................................................... F-1
<PAGE>
ORGANIZATION OF THE FUND
The Fund is a diversified open-end investment management company organized as a
corporation under the laws of the state of Maryland on January 17, 1980. Prior
to the approval of John Hancock Advisers, Inc. (the "Adviser") an indirect
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company (the "Life
Company"), a Massachusetts life insurance company chartered in 1862, with
national headquarters at John Hancock Place, Boston, Massachusetts as the Fund's
Adviser, effective December 22, 1994, the Fund was known as Transamerica Cash
Reserve, Inc.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Funds investment
objective and policies discussed in the Prospectus. The Funds investment
objective policies and restrictions except as noted are fundamental and may only
be changed with shareholder approval. There is no assurance that the Fund will
achieve its investment objective.
The Fund's investment objective is to obtain maximum current income consistent
with the preservation of capital and maintenance of liquidity. The Fund seeks to
achieve its objective by investing in high quality money market instruments
maturing within one year from the date of purchase with an average portfolio
maturity of 90 days or less. Securities in which the Fund may invest may not
earn as high a level of current income as long-term or lower quality securities
which generally have less liquidity, greater market risk and more fluctuation in
market value.
The Fund will invest only in U.S. dollar denominated securities determined by
the Board of Directors to present minimal credit risk and which are rated high
quality by any major rating service or, if unrated, determined to be of
comparable quality by the Board of Directors. These include commercial paper and
similar short-term obligations of U.S. issuers which generally meet the highest
quality standards at the time of investment, in conformity with securities
regulations governing money market mutual funds. The Fund may also purchase
other marketable, non-convertible corporate debt securities of U.S. issuers.
These investments include bonds, debentures, floating rate obligations, and
issues with optional maturities which in each case must have remaining
maturities of one year or less and be rated at least AA by Standard and Poors
Ratings Group (S&P) or Aa by Moodys Investor Services, Inc. (Moodys) at the time
of investment, see Appendix A.
Investments will also include bank obligations such as certificates of deposit,
time or demand deposits and bankers acceptances. Bank obligations are limited to
U.S. or Canadian banks having total assets over $1 billion. Investments in
savings association obligations are limited to U.S. savings and loan
associations with total assets over $1 billion. Investments in bank obligations
may include instruments issued by foreign branches of U.S. or Canadian banks.
The Fund may invest in U.S. Government securities. In addition, the Fund may
invest in U.S. dollar denominated securities issued or guaranteed by the
Government of Canada, a Province of Canada, or their instrumentalities in an
amount not to exceed 10% of its total assets at the time of purchase of such
government securities. The Fund may enter into repurchase agreements, invest in
restricted securities and is authorized to invest in participation interests and
to purchase securities on a delayed delivery basis. In addition, the Fund is
authorized, but presently does not intend, to engage in reverse repurchase
agreements and invest in variable amount master notes.
Government Securities. U.S. Government obligations are issued or guaranteed as
to principal and interest by the U.S. Government or one of its agencies or
instrumentalities. Treasury bills, bonds and notes and certain obligations of
Government agencies and instrumentalities, such as Government National Mortgage
Association pass through certificates are supported by the full faith and credit
2
<PAGE>
of the Treasury. Other obligations such as securities of the Federal Home Loan
Bank are supported by the right of the issuer to borrow from the Treasury; while
others such as bonds issued by the Federal National Mortgage Association, which
is a private corporation, are supported only by the credit of the issuing
instrumentality. Obligations not backed by the full faith and credit of the
United States may be secured, in whole or part, by a line of credit with the
U.S. Treasury or collateral consisting of cash or other securities which are
backed by the full faith and credit of the United States. In the case of other
obligations, the agency issuing or guaranteeing the obligation must be looked to
for ultimate repayment.
Corporate Obligations. For a description of the ratings of securities which are
eligible for investment by the Fund, see Appendix A.
Short-term corporate obligations may also include variable amount master demand
notes. Variable amount master notes are obligations that permit the investment
of fluctuating amounts by the Fund at varying rates of interest pursuant to
direct arrangements between the Fund, as lender, and the borrower. These notes
permit daily changes in the amounts borrowed. The Fund has the right to increase
the amount under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. The borrower is typically a large industrial
or finance company which also issues commercial paper. Typically these notes
provide that the interest rate is set daily by the borrower; the rate is usually
the same as or similar to the interest rate on commercial paper being issued by
the borrower. Because variable amount master notes are direct lending
arrangements between the lender and borrower, it is not generally contemplated
that such instruments will be traded, and there is no secondary market for these
notes, although they are redeemable (and thus immediately repayable by the
borrower) at the face value, plus accrued interest, at any time. Accordingly,
the Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In connection with master demand note
arrangements, the Fund considers earning power, cash flow, and other liquidity
ratios of the issuer. The Fund will only invest in master demand notes of U.S.
issuers. While master demand notes, as such, are not typically rated by credit
rating agencies, if not so rated the Fund may invest in them only if at the time
of an investment the issuer meets the criteria set forth in the Prospectus for
all other commercial paper issuers. The Fund will not invest more than 25% of
its assets in master demand notes. Although the Fund has previously invested in
one master demand note and might again own this type of note, it has no current
intention of doing so in the foreseeable future.
Participation Interests. The Fund may invest in participations issued by an
intermediary, usually a bank, which evidence ownership of a fractional interest
in a large, underlying money market instrument of a type in which the Fund is
otherwise permitted to invest. The Fund's ability to exercise its rights as a
lender and to trade these participations and any fractional notes from the
underlying issuer in the secondary market is normally less than if the Fund
owned the entire investment directly.
Bank Obligations. The Fund's ownership of obligations issued by banks may
involve social considerations. Normally, large domestic banks are members of the
Federal Reserve System and the Federal Deposit Insurance Corporation, but these
are not investment requirements. The purchase of obligations issued by foreign
branches of domestic banks and by Canadian banks or their foreign branches
involves special investment considerations, including the possible imposition of
withholding taxes on interest income, expropriation, confiscatory taxation, the
possible adoption of foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations, limitations on
the removal of funds, or other adverse political or economic developments. In
addition, it may be more difficult to obtain and enforce a judgment against a
Canadian bank or foreign branch of a domestic or Canadian bank. The Fund will
not invest more than 25% of its assets in Canadian banks, including their
foreign branches. Some investments in foreign branches of domestic banks may be
considered to have the same investment risk as investing in instruments of the
3
<PAGE>
domestic bank when the parent is unconditionally liable for the obligations of
its foreign branch; in all other cases the Fund will not invest more than 25% of
its assets in the instruments of foreign branches of domestic banks.
Repurchase Agreements. For the purpose of realizing additional (taxable) income,
the Fund may enter into repurchase agreements. In a repurchase agreement, the
Fund buys a security subject to the right and obligation to sell it back to the
issuer at the same price plus accrued interest. The transaction must be fully
collateralized at all times. The Fund may reinvest any cash collateral in
short-term highly liquid debt securities. However, reverse repurchase agreements
may involve some credit risk to the Fund if the other party should default on
its obligation and the Fund is delayed in or prevented from recovering the
collateral.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements which involve the sale of any of the money market securities held by
the Fund and an agreement to repurchase those securities at an agreed upon
price, date, and interest payment. The Fund would then use the proceeds of
reverse repurchase agreements to make other investments which either mature or
are under an agreement to resell at a date simultaneous with or prior to the
expiration of the reverse repurchase agreement. The Fund may utilize reverse
repurchase agreements only if the interest income to be earned from the
investment of proceeds of the transaction is greater than the interest expense
of the reverse repurchase transaction. In the view of the staff of the
Securities and Exchange Commission ("SEC") (a) reverse repurchase arrangements
are borrowings under the Investment Company Act of 1940 and (b) if entered into
with other than banks, the Fund must maintain, in a segregated account,
marketable shortterm securities equal to the aggregate amount of its reverse
repurchase obligations. If the Fund enters into reverse repurchase arrangements
with other than banks, it will maintain such a segregated account. In addition,
the Fund would not enter into reverse repurchase agreements exceeding in the
aggregate (provided that overall borrowings do not exceed 1/3 of the Fund's
total assets) more than 20% of the value of its total net assets. To avoid the
potential leveraging effects of the Fund's borrowings, additional investments
will not be made while borrowings (including reverse repurchase agreements) are
in excess of 5% of the Fund's total assets. In addition, the Fund would enter
into reverse repurchase agreements only with financial institutions which are
approved in advance as being creditworthy by the Board of Directors. Under
procedures established by the Board of Directors, the Investment Adviser will
monitor the creditworthiness of the firms involved. The Fund has not invested in
reverse repurchase agreements in the past and has no current intention of doing
so.
When-Issued and Forward Commitments. Although it is not typically the practice
with respect to money market securities, some new issues of the securities in
which the Fund may invest could be offered on a delayed delivery (including a
whenissued) basis, that is, delivery and payment for the securities would be
scheduled to take place after a typical settlement date with the price, interest
rate, and settlement date being fixed at the time of commitment. The Fund will
not effect delayed delivery transactions with scheduled delivery dates of more
than one year after the date of its commitment. The Fund would only make such
commitments to purchase securities with the intention of actually acquiring
them, and no new commitment will be made if, as a result, more than 20% of the
Fund's net assets would be so committed. The Fund will at all times maintain in
a segregated account cash or liquid, highgrade money market instruments in an
amount equal to these commitments. However, the Fund could meet its obligations
to pay for delayed delivery securities from sale of the delayed delivery
securities themselves, which may have a value greater or less than the Fund's
payment obligation and thus produce a realized gain or loss.
The Fund's investment restrictions permit it to invest more than 25% of its
assets in all finance companies as a group and all domestic banks as a group
when, in the opinion of the Investment Adviser, yield differentials and money
market conditions suggest and when cash is available for such investment and
instruments are available for purchase which fulfill the Fund's objectives in
terms of quality and marketability.
4
<PAGE>
Restricted Illiquid Securities. The Fund may invest up to 10% of its net assets
in illiquid investments, which include repurchase agreements maturing in more
than seven days, restricted securities and securities not readily marketable.
Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. Short-term trading may have the effect of increasing portfolio
turnover and may increase net short-term capital gains, distributions from which
would be taxable to shareholders as ordinary income. The Fund does not intend to
invest for the purpose of seeking short-term profits. The Funds portfolio
securities may be changed, however, without regard to the holding period of
these securities (subject to certain tax restrictions), when the Adviser deems
that this action will help achieve the Funds objective given a change in an
issuers operations or changes in general market conditions.
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 except from banks for temporary or emergency purposes
(including meeting redemptions without immediately selling securities,
but not to purchase investment securities) in an amount not to exceed
1/3 of the value (including the proceeds of the loan) of the Fund's
total assets;
2. Mortgage, pledge, or hypothecate assets, except to an extent not
greater than 10% of total assets to secure borrowings made in
accordance with restriction 1 above;
3. Invest more than 5% of its total assets in the securities of any one
issuer, except for: securities issued or guaranteed by the United
States government or by one of its agencies or instrumentalities; and,
with respect to 25% of its total assets, obligations of domestic
commercial banks (although under current regulations, an investment in
the obligations of any one commercial bank may not exceed 5% of the
Fund's total assets, subject to an exception permitting investment in
certain obligation of any one such bank at any one time for a period of
up to three business days);
4. Invest more than 25% of the Fund's total assets in the securities of
issuers (other than domestic banks and the U.S. Government, its
agencies, and instrumentalities) in the same industry. Electric,
natural gas distribution, natural gas pipeline, combined electric and
natural gas, and telephone utilities are considered separate industries
for purposes of this restriction, and finance companies as a group
shall not be considered a single industry;
5. Make loans to others, except through the purchase of various kinds of
publicly distributed debt obligations, investments in variable amount
master demand notes, participations, and repurchase agreement
transactions;
6. Purchase or sell real estate; however, the Fund may purchase marketable
securities issued by companies which invest in real estate or interest
therein;
7. Purchase securities on margin or sell short;
5
<PAGE>
8. Purchase or sell commodities or commodity futures contracts, or oil,
gas, or mineral exploration or development programs;
9. Underwrite securities of other issuers;
10. Acquire more than 10% of any class of securities of an issuer. For this
purpose, all outstanding bonds and other evidences of indebtedness
shall be deemed within a single class regardless of maturities,
priorities, coupon rates, series, designations, conversion rights,
security, or other differences;
11. Purchase securities (other than under repurchase agreements of not more
than one week's duration - considering only the remaining days to
maturity of each existing repurchase agreement) for which there exists
no readily available market, or for which there are legal or
contractual restrictions on resale (excepting from this restriction
securities which are subject to such resale restrictions but which, in
the judgment of the Fund's investment adviser, are readily redeemable
on demand), if as a result of any such purchase, more than 10% of the
Fund's net assets would be invested in such securities;
12. Purchase warrants, or write, purchase or sell puts, calls,
straddles, spreads, or combinations thereof; and
13. Enter into reverse repurchase agreements, if as a result, the Fund's
obligations with respect to all reverse repurchase agreements would be
greater than 20% of net assets.
Non-Fundamental Investment Restrictions. The following restrictions are
designated as non-fundamental and may be changed by the Directors without
shareholder approval.
The Fund may not:
(a) 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 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.
(b) Purchase securities of any issuer for the purpose of exercising control
or management;
With respect to investment restrictions (a) and (b), to avoid the potential
leveraging effects of the Fund's borrowings, additional investments will not be
made while borrowings (including reverse repurchase agreements) are in excess of
5% of the Fund's total assets.
6
<PAGE>
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
value of the Fund's portfolio securities or a later change in the rating of a
portfolio security will not be considered a violation of policy.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of the Fund is managed by its Directors who elect officers who are
responsible for the day-to-day operations of the Fund and who execute policies
formulated by the Directors. Several of the officers and Directors 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").
7
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman, Director and Chief
101 Huntington Avenue Executive Officer (1, 2) Executive Officer, the Adviser;
Boston, MA 02199 Chairman, Director and Chief
October 1944 Executive Officer, The Berkeley
Financial Group, Inc. ("The
Berkeley Group"); Chairman and
Director, NM Capital Management,
Inc. ("NM Capital"), John Hancock
Advisers International Limited
("Advisers International") and
Sovereign Asset Management
Corporation ("SAMCorp"); Chairman
and Chief Executive Officer, John
Hancock Funds, Inc. ("John Hancock
Funds"); Chairman, First Signature
Bank and Trust Company; Director,
John Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Advisers International
(Ireland) Limited ("International
Ireland"), John Hancock Capital
Corporation and New England/Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science;
Director, John Hancock Freedom
Securities Corporation (until
September 1996); Director, John
Hancock Signature Services, Inc.
("Signature Services") (until
January 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
8
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Stephen L. Brown* Trustee Chairman and Chief Executive
John Hancock Place Officer, John Hancock Mutual Life
P.O. Box 111 Insurance Company; Director, the
Boston, MA 02117 Adviser, John Hancock Funds,
July 1937 Insurance Agency, John Hancock
Subsidiaries, Inc., The Berkley
Group, Federal Reserve Bank of
Boston, Signature Services (until
January 1997); Trustee, John
Hancock Asset Management (until
March 1997).
James F. Carlin Trustee Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual Insurance Company
(insurance), 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 (since 1995).
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);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Texas Commerce Bank - Austin.
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
9
<PAGE>
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
and a corporator of the Eastern
Bank; Trustee, Emmanuel College.
Harold R. Hiser, Jr. Trustee Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hill, NJ 07078 (pharmaceuticals) (retired 1996).
October 1931
Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser, The
Boston, MA 02199 Berkeley Group; Executive Vice
August 1953 President and Director, John Hancock
Funds; Director, Advisers
International, Insurance Agency,
Inc. and International Ireland;
President and Director, SAMCorp. and
NM Capital; Executive Vice
President, the Adviser (until
December 1994); Director, Signature
Services (until January 1997).
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 Vice President and Director for
February 1938 AmeriGas, Inc.; Director,
EnergyNorth, Inc. (until 1992).
- -------------------
* 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.
10
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Leo E. Linbeck, Jr. Trustee Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company
August 1934 engaged in various phases of the
construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board, Linbeck Construction
Corporation; Director, Duke Energy
Corporation (a diversified energy
company), Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest International
Holdings, Inc. (a geophysical
consulting firm); Director, Greater
Houston Partnership.
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).
- -------------------
* 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>
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, Signator Investors, Inc.,
August 1937 Insurance Agency, Inc., John Hancock
Subsidiaries, Inc., SAMCorp. and NM
Capital; Director, The Berkeley
Group; Director, JH Networking
Insurance Agency, Inc.; Director,
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).
- -------------------
* 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.
12
<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 Senior Vice President and Chief Senior Vice President , Chief
101 Huntington Avenue Financial Officer Financial Officer and Treasurer, the
Boston, MA 02199 Adviser, the Berkeley Group and John
August 1952 Hancock Funds, Inc.; Vice President
and Chief Financial Officer, John
Hancock Mutual Life Insurance
Company Retail Sector (until 1997).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
13
<PAGE>
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services, John Hancock
July 1950 Funds, NM Capital and SAMCorp.;
Clerk, Insurance Agency, Inc.;
Counsel, John Hancock Mutual Life
Insurance Company (until February
1996).
Susan S. Newton Vice President and Secretary Vice President, the Adviser; John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group.
March 1950
James J. Stokowski Vice President, Treasurer and Chief Vice President, the Adviser.
101 Huntington Avenue Accounting Officer
Boston, MA 02199
November 1946
- -------------------
* 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.
</TABLE>
14
<PAGE>
The following table provides information regarding the compensation paid by the
Fund and the other investment companies in the John Hancock Fund Complex to the
Independent Directors. The three non-Independent Directors, Messrs. Boudreau,
Scipione and Ms. Hodsdon, and each of the officers of the Fund 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. The compensation to
the Director from the Fund shown below is for the fiscal year ended December 31,
1998.
Total Compensation from
Compensation all Funds in John
Aggregate Hancock Fund Complex to
Directors from the Fund(1) Directors(2)
--------- ---------------- ------------
James F. Carlin
William H. Cunningham*
Charles F. Fretz
Harold R. Hiser, Jr.*
Charles L. Ladner
Leo E. Linbeck, Jr.
Patricia P. McCarter*
Steven R. Pruchansky*
Norman H. Smith*
John P. Toolan*
(1) Compensation is for the fiscal year ended December 31, 1998.
(2) Total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is for 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-two
funds.
* As of December 31, 1998, the value of the aggregate accrued deferred
compensation from all Funds in the John Hancock Fund Complex for Mr.
Cunningham was $ , Mr. Hiser was $ , for Ms. McCarter was
$ , for Mr.Pruchansky was $ , for Mr. Smith was $ and
for Mr. Toolan was $ under the John Hancock Deferred Compensation
Plan for Independent Trustees (the "Plan").
All of the officers listed are officers or employees of the Adviser or the
Affiliated Companies. Some of the Directors 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 January 22, 1999, the officers and Directors of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund. As of
that date, no person or entity owned beneficially or of record 5% or more of the
outstanding shares of the Fund.
15
<PAGE>
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 mutual funds and
publicly traded investment companies in the John Hancock group of funds having a
combined total of over 1,400,000 shareholders. The Adviser is an affiliate of
the Life Company, one of the most recognized and respected financial
institutions in the nation. With total assets under management of over $100
billion, the Life Company is one of the ten largest life insurance companies in
the United States, and carries high ratings from Standard & Poor's and A.M.
Best.
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. 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 Directors, 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; 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 fees computed at the annual percentage rate of 0.35% of the
Fund's average daily net assets. Fees are calculated and accrued daily and, at
the end of each month, the Adviser is entitled to a portion of the annual fee,
based on the average daily net assets of the Fund through the last day of the
month for which payment is made, less any previous payments made to the Adviser
for the fiscal year.
Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser or for other funds or clients for which the Adviser
renders investment advice arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
extent that transactions on behalf of more than one client of the Adviser or its
respective affiliates may increase the demand for securities being purchased or
the supply of securities being sold, there may be an adverse effect on price.
Pursuant to the Advisory Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the Advisory Agreement relates, except a loss
16
<PAGE>
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 so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Fund's
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 Directors. The Advisory Agreement and Distribution
Agreement will continue in effect from year to year, provided that its
continuance is approved annually both (i) by a vote of a majority of the
Directors of the Fund who are not interested persons of one of the parties to
the contract, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by either a majority of the Directors or the holders of
a majority of the Fund's outstanding voting securities. Both agreements may be
terminated on 60 days written notice by any party or by a majority of
outstanding voting securities of the Fund by the Directors or by the Adviser and
will terminate automatically if assigned.
For the fiscal year ended December 31, 1998, 1997 and 1996, the advisory fee
paid to the Adviser amounted to $ , $170,018 and $363,452.
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 December 31, 1998, 1997 and 1996,
the Fund paid the Adviser $ , $8,877 and $19,471 for services under this
Agreement.
In order to avoid conflicts with portfolio trades for the Fund, the Adviser and
the Fund have adopted extensive restrictions on personal securities trading by
personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
DISTRIBUTION CONTRACT
The Fund has a Distribution Agreement with John Hancock Funds. Under the
Distribution Agreement, John Hancock Funds is obligated to use its best efforts
to sell shares on behalf of the Fund. Shares of the Fund are also sold by
selected broker-dealers (the "Selling Brokers") which have entered into selling
agency agreements with John Hancock Funds. John Hancock Funds accepts orders for
the purchase of the shares of the Fund which are continually offered at net
asset value (normally $1.00 per share). The Fund is a no-load Fund and John
Hancock Funds and Selling Brokers' representatives do not receive any sales
commissions in connection with the sales of shares of the Fund.
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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 Directors will from
time to time review the extent of any deviation of the net asset value, as
determined on the basis of the amortized cost method, from net asset value as it
would be determined on the basis of available market quotations. If any
deviation occurs which may result in unfairness either to new investors or
existing shareholders, the Directors will take such actions as they deem
appropriate to eliminate or reduce such unfairness to the extent reasonably
practicable. These actions may include selling portfolio instruments prior to
maturity to realize gains or losses or to shorten the Fund's average portfolio
maturity, withholding dividends, splitting, combining or otherwise
recapitalizing outstanding shares or utilizing available market quotations to
determine net asset value per share.
Since a dividend is declared to shareholders each time net asset value is
determined, the net asset value per share of the Fund will normally remain
constant at $1.00 per share. There is no assurance that the Fund can maintain
the $1.00 per share value. Monthly, any increase in the value of a shareholder's
investment from dividends is reflected as an increase in the number of shares in
the shareholder's account or is distributed as cash if a shareholder has so
elected.
It is expected that the Fund's net income will be positive each time it is
determined. However, if because of a sudden rise in interest rates or for any
other reason the net income of the Fund determined at any time is a negative
amount, the Fund will offset the negative amount against income accrued during
the month for each shareholder account. If at the time of payment of a
distribution such negative amount exceeds a shareholder's portion of accrued
income, the Fund may reduce the number of its outstanding shares by treating the
shareholder as having contributed to the capital of the Fund that number of full
or fractional shares which represent the amount of excess. By investing in 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 Directors it is inadvisable to continue the practice of
maintaining net asset value at $1.00 per share, the Directors reserve the right
to alter the procedures for determining net asset value. The Fund will notify
shareholders of any such alteration.
The Fund is permitted to redeem shares in kind. Nevertheless, the Fund has filed
with the Securities and Exchange Commission a notification of election
committing itself to pay in cash on redemption by a shareholder of record,
limited during any 90-day period to the lesser of $250,000 or 1% of the net
asset value of the Fund at the beginning of such period.
The 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 $1 constant share price, portfolio
investments are valued at cost, and any discount or premium created by market
movements is amortized to maturity.
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DESCRIPTION OF THE FUND'S SHARES
Capitalization and Voting Rights. The Fund's total authorized capital stock is
4,000,000,000 common shares of the par value of one cent ($.01) per share. The
Board of Directors has the authority to designate additional series of Common
Stock without seeking the approval of shareholders.
All shares have equal rights as to voting, dividends and liquidation. The voting
rights of shares of the Fund are noncumulative. Consequently, holders of more
than 50% of the shares voting for the election of directors can elect all of the
directors of the Fund if they choose to do so, and in such event, the holders of
the remaining less than 50% of the shares voting will not be able to elect any
person or persons to the Board of Directors. In addition, shareholders may
request in writing that the Fund call a special meeting of shareholders for
various purposes, including removal of a director provided that such request
represents at least 10% of all the votes entitled to be cast at the meeting. The
Fund will assist shareholders with any communications, including shareholder
proposals, in accordance with provisions of Section 16 of the Investment Company
Act of 1940. All shares of the Fund issued and outstanding are, and all shares
offered by the Prospectus, when issued, will be fully paid and nonassessable.
Shares have no conversion, preemptive or other subscription rights and are
freely transferable on the books of the Fund.
Reports to Shareholders. Shareholders of the Fund will receive annual and
semiannual reports showing diversification of investments, securities owned and
other information regarding the Fund's activities. The financial statements of
the Fund are audited at least once a year by the Fund's independent auditors.
Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Fund's
Registration Statement filed with the SEC. The complete Registration Statement
may be obtained from the SEC upon payment of the fee prescribed by the rules and
regulations of the SEC.
The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept credit card, starter 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. Use of information provided on the account application may be used by the
Fund to verify the accuracy of the information or for background or financial
history purposes. A 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.
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TAX STATUS
The Fund has qualified and has elected to be treated as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and intends to continue to so qualify 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 at least annually in accordance with the timing requirements of the
Code.
The Fund will be subject to a 4% nondeductible Federal excise tax on certain
amounts not distributed (and not treated as having been distributed) on a timely
basis in accordance with annual minimum distribution requirements. The Fund
intends under normal circumstances to avoid liability for such tax by satisfying
such distribution requirements.
Distributions of net investment income (which include original issue discount
and accrued, recognized market discount) and any net realized short-term capital
gains, as computed for Federal income tax purposes, will be taxable as described
in the Prospectus whether taken in shares or in cash. Although the Fund does not
expect to realize any net long-term capital gains, distributions from such
gains, if any, would be taxable as long-term capital gains. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for Federal income tax purposes in each share so received equal to
the amount of cash they would have received had they elected the distribution in
cash, divided by the number of shares received.
Upon a redemption of shares (including by exercise of the exchange privilege) a
shareholder ordinarily will not realize a taxable gain or loss if, as
anticipated, the Fund maintains a constant net asset value per share. If the
Fund is not successful in maintaining a constant net asset value per share, a
redemption may produce a taxable gain or loss.
Distributions from the Fund will not qualify for the dividends-received
deduction for corporate shareholders.
For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses, they would not result in Federal income tax liability to
the Fund and would not be distributed as such to shareholders.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions and certain
prohibited transactions, is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments, if any, in foreign securities. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes.
If more than 50% of the value of the total assets of the Fund at the close of
any taxable year consists of securities of foreign corporations, the Fund may
file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends actually received) their pro rata
shares of foreign income taxes paid by the Fund even though not actually
received, and (ii) treat such respective pro rata portions as foreign income
taxes paid by them.
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If the election is made, shareholders of the Fund may then deduct such pro rata
portions of foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign taxes paid by the Fund, although such
shareholders will be required to include their shares of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Fund as a separate
category of income for purposes of computing the limitations on the foreign tax
credit. Tax-exempt shareholders will ordinarily not benefit from this election.
Each year that the Fund files the election described above, its shareholders
will be notified of the amount of (i) each shareholder's pro rata share of
foreign income taxes paid by the Fund and (ii) the portion of Fund dividends
which represents income from each foreign country.
The foregoing discussion relates solely to U.S. Federal income tax laws
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions (if any), and ownership of
or gains realized (if any) on the exchange or redemption of shares of the Fund
may also be subject to state and local taxes. Shareholders should consult their
own tax advisers as to the Federal, state or local tax consequences of ownership
of shares of, and receipt of distribution from, the Fund in their particular
circumstances.
Non-U.S. investors not engaged in U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to non-resident 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. 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 not be required to pay any
Massachusetts income tax.
CALCULATION OF YIELD
For the purposes of calculating yield, daily income per share consists of
interest and discount earned on the Fund's investments less provision for
amortization of premiums and applicable expenses, divided by the number of
shares outstanding, but does not include realized or unrealized appreciation or
depreciation.
In any case in which the Fund reports its annualized yield, it will also furnish
information as to the average portfolio maturities of the Fund. It will also
report any material effect of realized gains or losses or unrealized
appreciation on dividends which have been excluded from the computation of
yield.
Yield calculations are based on the value of a hypothetical preexisting account
with exactly one share at the beginning of the seven day period. Yield 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.
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<PAGE>
Effective yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1
The yield of the Fund is not fixed or guaranteed. Yield quotations should not be
considered to be representations of yield of the Fund for any period in the
future. The yield of the Fund is a function of available interest rates on money
market instruments, which can be expected to fluctuate, as well as of the
quality, maturity and types of portfolio instruments held by the Fund and of
changes in operating expenses. The Fund's yield may be affected if, through net
sales of its shares, there is a net investment of new money in the Fund which
the Fund invests at interest rates different from that being earned on current
portfolio instruments. Yield could also vary if the Fund experiences net
redemptions, which may require the disposition of some of the Fund's current
portfolio instruments.
From time to time, in reports and promotional literature, the Fund's yield and
total return will be ranked or compared to indices of mutual funds and bank
deposit vehicles such as Lipper Analytical Services, Inc. "Lipper-Fixed Income
Fund Performance Analysis," a monthly publication which tracks net assets, total
return, and yield on fixed income mutual funds in the United States or
"IBC/Donahue's Money Fund Report," a similar publication. Comparisons may also
be made to bank Certificates of Deposit, which differ from mutual funds like the
Fund, in several ways. The interest rate established by the sponsoring bank is
fixed for the term of a CD, there are penalties for early withdrawal from CD's
and the principal on a CD is insured. Unlike CD's, which are insured as to
principal, an investment in the Fund is not insured or guaranteed.
Performance rankings and ratings, reported periodically in national financial
publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL STREET
JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRONS, will also be
utilized.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities are made by
the Adviser pursuant to recommendations made by an investment committee of the
Adviser, which consists of officers and directors of the Adviser and affiliates
and officers and Directors who are interested persons of the Fund. Orders for
purchases and sales of securities are placed in a manner which, in the opinion
of the officers of the Fund, will offer the best price and market for the
execution of each such transaction. Purchases from underwriters of portfolio
securities may include a commission or commissions paid by the issuer and
transactions with dealers serving as market makers reflect a "spread." Debt
securities are generally traded on a net basis through dealers acting for their
own account as principals and not as brokers; no brokerage commissions are
payable on such transactions.
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the NASD and other policies that the Directors may
determine, the Adviser may consider sales of shares of the Fund as a factor in
the selection of broker-dealers to execute the Fund's portfolio transactions.
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To the extent consistent with the foregoing, the Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser of the Fund, and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will make no commitments to allocate portfolio transactions upon any
prescribed basis. While the Adviser's officers will be primarily responsible for
the allocation of the Fund's brokerage business, their policies and practices in
this regard must be consistent with the foregoing and will at all times be
subject to review by the Directors. For the fiscal years ended December 31,
1998, 1997 and 1996, no negotiated brokerage commissions were paid on portfolio
transactions.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the Fund
may pay to a broker which provides brokerage and research services to the Fund
an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Directors that the price is
reasonable in light of the services provided and to policies that the Directors
may adopt from time to time. During the fiscal year ended December 31, 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 Investors, Inc. a broker-dealer ("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. During the
years ended December 31, 1998, 1997 and 1996, the Fund did not execute any
portfolio transactions with the 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 1940 Act. Commissions paid to an
Affiliated Broker must be at least as favorable as those which the Trustees
believe to be contemporaneously charged by other brokers in connection with
comparable transactions involving similar securities being purchased or sold. A
transaction would not be placed with an Affiliated broker if the Fund would have
to pay a commission rate less favorable than the Affiliated Broker's
contemporaneous charges for comparable transactions for its other most favored,
but unaffiliated, customers, except for accounts for which the Affiliated Broker
acts as a clearing broker for another brokerage firm, and any customers of the
Affiliated Broker not comparable to the Fund as determined by a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund, the Adviser or the Affiliated 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. In some
23
<PAGE>
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other clients managed by it in order to obtain best execution.
TRANSFER AGENT SERVICES
John Hancock Signature Services, Inc. ("Signature Services"), 1 John Hancock
Way, Suite 1000, Boston MA 02217-1000, a wholly owned indirect subsidiary of the
Life Company, is the transfer and dividend paying agent for the Fund. The Fund
pays Signature Services monthly a transfer agent fee equal to $20.00 per
shareholder account, on an annual basis, plus certain out-of-pocket expenses.
CUSTODY OF PORTFOLIO
State Street Bank and Trust Company ("SSB"), 225 Franklin Street, Boston,
Massachusetts, serves as custodian of the cash and investment securities of the
Fund. SSB is also responsible for, among other things, receipt and delivery of
the Fund's investment securities in accordance with procedures and conditions
specified in the custody agreement.
INDEPENDENT AUDITORS
has been selected as the independent auditor of the Trusts.
The financial statements of the Funds for the fiscal year ended December 31,
1998 included in the Prospectus and this Statement of Additional Information
have been audited by for the periods indicated in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon authority of such firm as experts in accounting and auditing.
24
<PAGE>
APPENDIX A
CORPORATE AND TAX-EXEMPT BOND RATINGS
Moody's Investors Service, Inc. ("Moody's")
Aaa, Aa, A and Baa - Tax-exempt bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to bonds that are of "high quality by all
standards," but long-term risks appear somewhat larger than Aaa rated bonds. The
Aaa and Aa rated bonds are generally known as "high grade bonds." The foregoing
ratings for tax-exempt bonds are sometimes presented in parentheses preceded
with a "con" indicating that the 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 parenthetical
ratings denotes 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 as 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 Corporation ("S&P")
AAA, AA, A and BBB - Bonds rated AAA bear the highest rating assigned to debt
obligations and 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 or
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 of
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.
A-1
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Fitch Investors Service ("Fitch")
AAA, AA, A, BBB - Bonds rated AAA are considered to be investment grade and of
the highest quality. The obligor has an extraordinary ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal, while very
strong, is somewhat less than for AAA rated securities or more subject to
possible change over the term of the issue. Bonds rated A are considered to be
investment grade and of good quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher
ratings. Bonds rated BBB are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds with
higher ratings.
TAX-EXEMPT NOTE RATINGS
Moody's - MIG-1 and MIG-2. Notes rated MIG-1 are judged to be of the best
quality, enjoying strong protection from established cash flow of 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, through 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 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 rating may have different yields and municipal securities
of the same maturity and coupon with different ratings may have the same yield.
A-2
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FINANCIAL STATEMENTS
F-1
<PAGE>
JOHN HANCOCK CASH RESERVE, INC.
PART C.
OTHER INFORMATION
Item. 23. Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.
Item 24. Persons Controlled by or under Common Control with Registrant.
No person is directly or indirectly controlled by or under common control with
Registrant.
Item 25. Indemnification
(a) Indemnification provisions relating to the Registrant's Directors,
officers, employees and agents is set forth in Article V of the Registrant's By
Laws included as Exhibit 2 herein.
(b) Under Section 12 of the Distribution Agreement, John Hancock Funds,
Inc. ("John Hancock Funds" ) has agreed to indemnify the Registrant and its
Directors, officers and controlling persons against claims arising out of
certain acts and statements of John Hancock Funds.
Section 9(a) of the By-Laws of the John Hancock Mutual Life Insurance
Company (" the "Insurance Company") provides, in effect, that the Insurance
Company will, subject to limitations of law, indemnify each present and former
director, officer and employee of the of the Insurance Company who serves as a
Directors or officer of the Registrant at the direction or request of the
Insurance Company against litigation expenses and liabilities incurred while
acting as such, except that such indemnification does not cover any expense or
liability incurred or imposed in connection with any matter as to which such
person shall be finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interests of the Insurance
Company. In addition, no such person will be indemnified by the Insurance
Company in respect of any liability or expense incurred in connection with any
matter settled without final adjudication unless such settlement shall have been
approved as in the best interests of the Insurance Company either by vote of the
Board of Directors at a meeting composed of directors who have no interest in
the outcome of such vote, or by vote of the policyholders. The Insurance Company
may pay expenses incurred in defending an action or claim in advance of its
final disposition, but only upon receipt of an undertaking by the person
indemnified to repay such payment if he should be determined to be entitled to
indemnification.
Article IX of the respective By-Laws of John Hancock Funds and John Hancock
Advisers, Inc. (the "Adviser") provide as follows:
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<PAGE>
"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a director, officer, employee or agent of the
Corporation, or is or was at any time since the inception of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified by the Corporation against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and the liability was not incurred by reason of gross
negligence or reckless disregard of the duties involved in the conduct of his
office, and expenses in connection therewith may be advanced by the Corporation,
all to the full extent authorized by the law."
"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Directors, officers and controlling persons of the
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation and By-Laws, the Distribution Agreement, the By-Laws of John
Hancock Funds, the Adviser, or the Insurance Company or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Directors, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Investment Advisers
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Adviser,
reference is made to Form ADV (801-8124) filed under the Investment Advisers Act
of 1940, which is incorporated herein by reference.
Item 27. Principal Underwriters
(a) John Hancock Funds acts as principal underwriter for the Registrant and also
serves as principal underwriter or distributor of shares for John Hancock Cash
Reserve, Inc., John Hancock Bond Trust, John Hancock Current Interest, John
Hancock Series Trust, John Hancock Tax-Free Bond Trust, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Special Equities
Fund, John Hancock Sovereign Bond Fund, John Hancock Tax-Exempt Series, John
Hancock Strategic Series, John Hancock Series Trust and John Hancock World Fund,
John Hancock Investment Trust, John Hancock Institutional Series Trust, John
Hancock Investment Trust II, and Hancock Investment Trust III.
(b) The following table lists, for each director and officer of John
Hancock Funds, the information indicated.
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<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman, President and Chief Director, Chairman and Chief
101 Huntington Avenue Executive Officer Executive Officer
Boston, Massachusetts
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts
James V. Bowhers President None
101 Huntington Avenue
Boston, Massachusetts
Osbert M. Hood Senior Vice President, Senior Vice President and
101 Huntington Avenue Chief Financial Officer Chief Financial Officer
Boston, Massachusetts and Treasurer
David A. King Director None
101 Huntington Avenue
Boston, Massachusetts
Richard O. Hansen Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
John A. Morin Vice President and Secretary Vice President
101 Huntington Avenue
Boston, Massachusetts
C-3
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
Susan S. Newton Vice President Vice President
101 Huntington Avenue and Secretary
Boston, Massachusetts
Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Richard S. Scipione Director Director
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Anne C. Hodsdon Director and President
101 Huntington Avenue Executive Vice President
Boston, Massachusetts
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
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<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
Renee M. Humphrey Vice President None
101 Huntington Avenue
Boston, Massachusetts
Kathleen M. Graveline Senoir Vice President None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Peter F. Mawn Senior Vice President None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Charles H. Womack Senior Vice President None
6501 Americas Parkway
Suite 950
Albuquerque, New Mexico
Anthony P. Petrucci Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts
Keith F. Harstein Vice President None
101 Huntington Avenue
Boston, Massachusetts
Karen F. Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
J. William Benintende Vice President None
101 Huntington Avenue
Boston, Massachusetts
Gary Cronin Vice President None
101 Huntington Avenue
Boston, Massacusetts
Kristine Pancare Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>
C-5
<PAGE>
(c) None.
Item 30. Location of Accounts and Records
The Registrant maintains the records required to be maintained by it
under Rules 31a-1 (a), 31a-1(b), and 31a-2(a) under the Investment
Company Act of 1940 at its principal executive offices at 101
Huntington Avenue, Boston Massachusetts 02199-7603. Certain records,
including records relating to Registrant's shareholders and the
physical possession of its securities, may be maintained pursuant to
Rule 31a-3 at the main offices of Registrant's Transfer Agent and
Custodian.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable
(b) Not applicable
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a copy
of the latest annual report to shareholders with respect to that series upon
request and without charge.
(d) Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940, as amended which relates to the assistance to be rendered
to shareholders by the Trustees of the Registrant in calling a meeting of
shareholders for the purpose of voting upon the question of the removal of a
trustee.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Boston, and the Commonwealth of
Massachusetts on the 26th day of February, 1999.
JOHN HANCOCK CASH RESERVE, INC.
By: *
------------------------------------
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman and Chief Executive
- -------------------------- Officer (Principal Executive
Edward J. Boudreau, Jr. Officer)
/s/ James J. Stokowski Vice President, Treasurer February 26, 1999
- -------------------------- and Chief Accounting Officer
James J. Stokowski
* Director
- --------------------------
James F. Carlin
* Director
- --------------------------
William H. Cunningham
* Director
- --------------------------
Charles F. Fretz
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<PAGE>
Signature Title Date
--------- ----- ----
* Director
- --------------------------
Harold R. Hiser, Jr.
Director
- --------------------------
Anne C. Hodsdon
* Director
- --------------------------
Charles L. Ladner
* Director
- --------------------------
Leo E. Linbeck
* Director
- --------------------------
Patricia P. McCarter
* Director
- --------------------------
Steven R. Pruchansky
* Director
- --------------------------
Norman H. Smith
* Director
- --------------------------
John P. Toolan
*By: /s/ Susan S. Newton February 26, 1999
-----------------------
Susan S. Newton,
Attorney-in-Fact under
Power of Attorney dated
June 25, 1996, filed herewith.
</TABLE>
C-8
<PAGE>
John Hancock Cash Reserve, Inc.
EXHIBIT INDEX
99.(a) Articles of Incorporation.*
99.(b) By-laws. Amended By-Laws of Registrant.**
99.(c) Instruments Defining Rights of Securities Holders. See Exhibits
99.(a) and 99.(b).
99.(d) Investment Advisory Agreement between John Hancock Advisers, Inc.
and the Registrant.**
99.(d).1 Administrative Services Agreement between John Hancock Advisers,
Inc. and the Registrant.**
99.(d).2 Sub-Advisory Agreement.**
99.(e) Underwriting Contracts. Distribution Agreement between
Registrant and John Hancock Funds, Inc. and the Registrant.**
99.(e).1 Soliciting Dealer Agreement between John Hancock Funds, Inc. and
the John Hancock funds.**
99.(e).2 Form of Financial Institution Sales and Service Agreement between
John Hancock Fund's, Inc. and the John Hancock funds.**
99.(f) Bonus or Profit Sharing Contracts. Not Applicable.
99.(g) Custodian Agreements. Master Custodian Agreement between the
John Hancock funds and State Street Bank.**
99.(h) Other Material Contracts. Transfer Agency Agreement.*
99.(h).1 Accounting and Legal Services Agreement between John Hancock
Advisers, Inc. and the Registrant as of January 1, 1996.***
99.(i) Legal Opinions. Not Applicable.
99.(j) Other Opinions. Not Applicable.
99.(k) Omitted Financial Statements. Not Applicable.
99.(l) Initial Capital Agreements. Not Applicable.
99.(m) Rule 12b-1 Plan. Not Applicable.
99.(n) Financial Data Schedule. Not Applicable.
99.(o) Rule 18f-3. Not Applicable.
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<PAGE>
Exhibit No. Description
- ----------- -----------
* Previously filed with Pre-Effective Amendment #1 and incorporated herein by
reference.
** Previoiusly filed electronically with post-effective number 17 (file nos.
811-2995 and 2-66461) on April 24, 1995, accession number
0000950135-95-000990.
*** Previously filed electronically with post-effective amendment number 18
(file nos. 811-2995 and 2-66461) on April 30, 1996, accession number
0001010521-96-000050.
+ Filed herewith.
C-10
