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. 23 (X)
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 26 (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
(X) on May 1, 2000 pursuant to paragraph (b) of Rule 485
( ) 75 days after filing pursuant to paragraph (a) of Rule 485
( ) on (date) 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.
Prospectus
May 1, 2000
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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.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these funds or determined whether the information in
this prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
Contents
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A summary of the fund's goals, Cash Reserve, Inc. 4
strategies, risks, performance
and expenses.
Policies and instructions for Your account
opening, maintaining and
closing an account in the Selling shares 6
fund. Transaction policies 8
Dividends and account policies 8
Additional investor services 9
Further information on the Fund details
fund.
Business structure 10
Financial highlights 11
For more information back cover
3
<PAGE>
Cash Reserve, Inc.
GOAL AND STRATEGY
[Clip Art] The fund seeks maximum current income consistent with capital
preservation and liquidity. It invests only in high-quality money market
instruments and 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 fund's credit and maturity requirements. The
managers tend to favor corporate securities and look for relative yield
advantages between, for example, a company's secured and unsecured short-term
debt obligations.
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PORTFOLIO MANAGERS
Team of money market research
analysts and portfolio
managers
YIELD INFORMATION
For the fund's 7-day effective
yield, call 1-800-225-5291
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time. This information may help
provide an indication of the fund's risk. 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 1999
5.38% 5.00% 5.20% 4.91% 4.47%
1999 total return as of March 31: 1.30%
Best quarter: Q4 '97, 1.32% Worst quarter: Q1 '99, 1.05%
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Average annual total returns for periods ending 12/31/99
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1 year 4.47%
Life of fund 5.00%
4
<PAGE>
MAIN RISKS
[Clip Art] 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 instability.
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 per share, it is possible to lose
money by investing in the fund.
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YOUR EXPENSES
[Clip Art] Transaction expenses are charged directly to your account. Operating
expenses are paid from the fund's assets, and therefore are paid by shareholders
indirectly.
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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 0.43%
Total fund operating expenses 0.78%
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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$80 $249 $433 $966
FUND CODES
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Ticker --
CUSIP 41014T104
Newspaper --
SEC number 811-2995
JH fund number 42
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
[Clip Art] o Accounts of any type. o Write a letter of instruction
or complete a stock power
o Sales of any amount. 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
[Clip Art] o Most accounts. o Call EASI-Line for
automated service 24 hours
o Sales of up to $100,000. a day using your
touch-tone phone, at
1-800-338-8080.
o Call your financial
representative or Signature
Services between 8 A.M. and 4
P.M. Eastern Time on most
business days.
By wire or electronic funds transfer (EFT)
[Clip Art] o Requests by letter o To verify that the telephone
to sell any amount redemption privilege is in
(accounts of any place on an account, or to
type). request the form to add it to
an existing account, call
o Requests by phone to Signature Services.
sell up to $100,000
(accounts with o Amounts of $1,000 or more will
telephone redemption be wired on the next business
privileges). 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
[Clip Art] o Accounts of any o Obtain a current prospectus
type. for the fund into which you
are exchanging by calling your
o Sales of any amount. financial representative or
Signature Services.
o Call your financial
representative or Signature
Services to request an
exchange.
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Address:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
To sell shares through a Boston, MA 02217-1000
systematic withdrawal plan,
see "Additional investor Phone Number: 1-800-225-5291
services."
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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[Clip Art]
Owners of individual, joint or o Letter of instruction.
UGMA/UTMA accounts (custodial
accounts for minors). o On the letter, the signatures and 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, sole o Letter of instruction.
proprietorship, general
partner or association o Corporate business/organization
accounts. resolution, certified within the past
12 months, or a John Hancock Funds
business/ organization certification
form.
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 o Letter of instruction.
accounts.
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 o Letter of instruction signed by
with rights of surviorship surviving tenant.
whose co-tenants are deceased.
o Copy of death certificate.
o Signature guarantee if applicable (see
above).
Executors of shareholder o Letter of instruction signed by
estates. executor.
o Copy of order appointing executor,
certified within the past 12 months.
o Signature guarantee if applicable (see
above).
Administrators, conservators, o Call 1-800-225-5291 for instructions.
guardians and other sellers or
account types not 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, the 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, the 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. The fund may also refuse any exchange
order. The 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.
Small accounts (non-retirement only) If you draw down a non-retirement account
so that its total value is less than $1,000, you may be asked to purchase more
shares within 30 days. If you do not take action, your fund may close out your
account and mail you the proceeds. Alternatively, Signature Services may charge
you $10 a year to maintain your account. You will not be charged a CDSC if your
account is closed for this reason, and your account will not be closed if its
drop in value is due to fund performance or the effects of sales charges.
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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, Roth and Education 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 at an
annual rate of 0.35% to the investment adviser.
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
Financial Services, Inc. and manages more than $30 billion in assets.
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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 funds 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.
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Asset
management
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Investment adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the fund's business and
investment activities.
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------------------------------------
Custodian
State Street Bank & Trust Co.
Holds the fund's assets, settles all
portfolio trades and collects most of
the valuation data required for
calculating the fund's NAV.
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Directors
Oversee the fund's activities.
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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 Ernst & Young LLP
<TABLE>
<CAPTION>
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Period ended: 12/95 12/96 12/97 12/98 12/99
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<S> <C> <C> <C> <C> <C>
Per share operating performance
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income 0.05 0.05 0.05 0.05 0.04
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.04)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
Total investment return at net asset value(1) (%) 5.38 5.00 5.20 4.91 4.47
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 119,763 67,003 37,822 29,708 24,320
Ratio of expenses to average net assets (%) 0.73 0.65 0.61 0.75 0.78
Ratio of net investment income (loss) to average net assets (%) 5.30 4.85 5.07 4.81 4.38
</TABLE>
(1) Total investment return assumes dividend reinvestment.
FUND DETAILS 11
<PAGE>
For more information
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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 affected 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.jhfunds.com
Or you may view or obtain these documents from the SEC:
In person: at the SEC's Public Reference Room in Washington, DC. For access to
the Reference Room call 1-202-942-8090
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic request:
[email protected]
(duplicating fee required)
On the Internet: www.sec.gov
[LOGO] JOHN HANCOCK FUNDS John Hancock Funds, Inc.
A Global Investment Management Firm 101 Huntington Avenue
Boston MA 02199-7603
(C)2000 John Hancock Funds, Inc.
420PN 5/00
<PAGE>
JOHN HANCOCK CASH RESERVE, INC.
Statement of Additional Information
May 1, 2000
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 current Prospectus (the "Prospectus.
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
1-800-225-5291
TABLE OF CONTENTS
Organization of the Fund............................................. 2
Investment Objective and Policies.................................... 2
Investment Restrictions.............................................. 5
Those Responsible for Management..................................... 7
Investment Advisory and Other Services............................... 11
Distribution Contract................................................ 13
Net Asset Value...................................................... 13
Description of the Fund's Shares..................................... 14
Tax Status........................................................... 15
Calculation of Yield................................................. 17
Brokerage Allocation................................................. 18
Transfer Agent Services.............................................. 20
Custody of Portfolio................................................. 20
Independent Auditors................................................. 20
Appendix............................................................. A-1
Financial Statements................................................. F-1
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. John
Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser. The
Adviser is an indirect wholly-owned subsidiary of John Hancock Life Insurance
Company (formerly John Hancock Mutual Life Insurance Company) (the "Life
Company"), a Massachusetts life insurance company chartered in 1862, with
national headquarters at John Hancock Place, Boston, Massachusetts. The Life
Company is wholly owned by John Hancock Financial Services, Inc., a Delaware
corporation organized in February, 2000.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. The Fund's 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 Poor's
Ratings Group ("S&P") or Aa by Moody's Investor Services, Inc. ("Moody's") 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
of the Treasury. Other obligations such as securities of the Federal Home Loan
2
<PAGE>
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
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.
3
<PAGE>
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 short-term 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
when-issued) 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, high-grade 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 Fund's portfolio
securities may be changed, however, without regard to the holding period of
these securities (subject to certain tax restrictions), when the Adviser deems
that this action will help achieve the Fund's objective given a change in an
issuer's operations or changes in general market conditions.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. The following investment restrictions will
not be changed without the approval of 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.
14. Issue any senior security (as that term is defined in the Investment
Company Act of 1940) if such issuance is specifically prohibited by the
1940 Act or the rules and regulations promulgated thereunder. For the
purpose of this restriction, collateral arrangements with respect to
options, futures contracts and options on futures contracts and
collateral arrangements with respect to initial and variation margins
are not deemed to be the issuance of a senior security.
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>
James F. Carlin Director Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual (insurance), Health
Plan Services, Inc., Massachusetts
Health and Education Tax Exempt
Trust, Flagship Healthcare, Inc.,
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May
1995), Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education (until July 1999).
William H. Cunningham Director Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair of Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company)
(1985-1998); Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Chase Bank (formerly Texas Commerce
Bank - Austin).
Ronald R. Dion Director President and Chief Executive
250 Boylston Street Officer, R.M. Bradley & Co., Inc.;
Boston, MA 02116 Director, The New England Council
March 1946 and Massachusetts Roundtable;
Trustee, North Shore Medical Center;
Director, BJ's Wholesale Club, Inc.
and a corporator of the Eastern
Bank; Trustee, Emmanuel College.
- -------------------
* Directors 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 Directors.
(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>
Charles L. Ladner Director Senior Vice President and Chief
UGI Corporation Financial Officer, UGI Corporation
P.O. Box 858 (Public Utility Holding Company)
Valley Forge, PA 19482 (retired 1998); Vice President and
February 1938 Director for AmeriGas, Inc. (retired
1998); Vice President of AmeriGas
Partners, L.P. (until 1997);
Director, EnergyNorth, Inc. (until
1995).
Steven R. Pruchansky Director (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).
Norman H. Smith Director 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).
John P. Toolan Director 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).
- -------------------
* Directors 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 Directors.
(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>
Osbert M. Hood Executive Vice President and Chief Executive Vice President and Chief
101 Huntington Avenue Financial Officer Financial Officer, each of the John
Boston, MA 02199 Hancock Funds; Executive Vice
August 1952 President, Treasurer and Chief
Financial Officer of the Adviser,
the Berkeley Group, John Hancock
Funds, and SAMCorp.; Senior Vice
President, Chief Financial Officer
and Treasurer, Signature Services,
NM Capital; Director Indocam Japan
Limited; Vice President and Chief
Financial Officer, John Hancock
Life Insurance Company, Retail
Sector (until 1997).
Thomas H. Connors Vice President and Compliance Vice President and Compliance Officer,
101 Huntington Avenue Officer the Adviser; Vice President, John
Boston, MA 02199 Hancock Funds, Inc.
September 1959
Susan S. Newton Vice President, Secretary and Vice President, Chief Legal Officer
101 Huntington Avenue Chief Legal Officer and Secretary, the Adviser; John
Boston, MA 02199 Hancock Funds, Signature Services,
March 1950 The Berkeley Group, NM Capital and
SAMCorp.
James J. Stokowski Vice President, Treasurer and Vice President, the Adviser.
101 Huntington Avenue Chief Accounting Officer
Boston, MA 02199
November 1946
- -------------------
* Directors 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 Directors.
(2) A member of the Investment Committee of the Adviser.
</TABLE>
The following table provides information regarding the compensation paid by the
Fund and other investment companies in the John Hancock Fund Complex to the
Independent Directors for their services. Each a non-Independent Directors, and
each of the officers of the Fund are interested persons of the Adviser, and/or
affiliates are compensated by the Adviser and receive no compensation from the
Fund for their services.
10
<PAGE>
Total
Compensation
from all Funds in
Aggregate John Hancock
Compensation Fund Complex to
Trustees from the Fund(1) Trustees (2)
James F. Carlin $ 178 $ 72,600
William H. Cunningham* 178 72,250
Ronald R. Dion* 178 72,350
Harold R. Hiser, Jr.* (3) 169 68,450
Charles L. Ladner 185 75,450
Leo E. Linbeck, Jr.(3) 169 68,100
Steven R. Pruchansky* 185 75,350
Norman H. Smith* 191 78,500
John P. Toolan* 185 75,600
------- ----------
Total $1,618 $658,650
(1) Compensation is for fiscal period ended December 31, 1999.
(2) Total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is for the calendar year ended December 31,
1999 As of that date, there were sixty-five funds in the John
Hancock Fund Complex, with each of these Independent Trustees
serving on thirty-four funds.
(3) Effective December 31, 1999, Messrs. Hiser and Linbeck resigned as
Trustees of the Complex.
(*) As of December 31, 1999 the value of the aggregate accrued deferred
compensation from all Funds in the John Hancock fund complex for
Mr. Cunningham was $440,889, for Mr. Dion was $38,687, for Mr.
Hiser was $166,369, for Ms. McCarter was $208,971 (resigned as of
October 1, 1998), for Mr. Pruchansky was $125,715, for Mr. Smith
was $149,232 and for Mr. Toolan was $607,294 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
affiliated companies. Some of the Trustees and officers may also be officers
and/or Directors and/or Trustees of one or more other funds for which the
Adviser serves as investment adviser.
As of April 3, 2000, 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.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $30 billion in assets under management
in its capacity as investment adviser to the Fund and the other funds and in the
John Hancock group of funds as well as institutional accounts. The Adviser is an
affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of more
than $100 billion, the Life Company is one of the ten largest life insurance
companies in the United States, and carries a high rating with Standard & Poor's
and A. M. Best. Founded in 1862, the Life Company has been serving clients for
over 130 years.
11
<PAGE>
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
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.
12
<PAGE>
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, 1997, 1998, and 1999, the advisory fee
paid to the Adviser amounted to $170,018, $115,468, and $93,356.
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, 1997, 1998 and 1999,
the Fund paid the Adviser $8,877, $5,321, and $4,673 for services under this
Agreement.
Personnel of the Adviser and its affiliates may trade securities for their
personal accounts. The Fund also may hold, or may be buying or selling, the same
securities. To prevent the Fund from being disadvantaged, the Adviser and its
affiliates and the Fund have adopted a code of ethics which restricts the
trading activity of those personnel.
DISTRIBUTION 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.
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.
13
<PAGE>
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 $1 constant share price, portfolio
investments are valued at cost, and any discount or premium created by market
movements is amortized to maturity.
DESCRIPTION OF THE FUND'S SHARES
Capitalization and Voting Rights. The Fund's total authorized capital stock is
4,000,000,000 common shares of the par value of one cent ($.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.
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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.
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.
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<PAGE>
Upon a redemption of shares (including by exercise of the exchange privilege) a
shareholder ordinarily will not realize a taxable gain or loss if, as
anticipated, the Fund maintains a constant net asset value per share. If the
Fund is not successful in maintaining a constant net asset value per share, a
redemption may produce a taxable gain or loss.
Distributions from the Fund will not qualify for the dividends-received
deduction for corporate shareholders.
For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent 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.
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.
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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.
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.
17
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Performance rankings and ratings, reported periodically in and excerpts from,
national financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK,
THE WALL STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and 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.
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,
1997, 1998 and 1999, 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, 1999, 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.
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The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of Signator Investors, Inc. (until January 1, 1999, John Hancock
Distributors, 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, 1997, 1998 and 1999, 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
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.
For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of account
objective, account size ( a small account's allocation may be increased to
provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, duration benchmarks and credit and sector exposure. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate securities to be
sold or purchased for the Fund with those to be sold or purchased for other
clients managed by it in order to obtain best execution.
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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
Ernst & Young LLP has been selected as the independent auditor of the Trusts.
The Fund statements of the Fund for the fiscal year ended December 31, 1999
included in the Prospectus and this Statement of Additional Information have
been audited by Ernst & Young LLP for the periods indicated in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon authority of such firm as experts in accounting and auditing.
20
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APPENDIX A
CORPORATE AND TAX-EXEMPT BOND RATINGS
Moody's Investors Service, Inc. ("Moody's")
Aaa, Aa, A and Baa - Tax-exempt bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to bonds that are of "high quality by all
standards," but long-term risks appear somewhat larger than Aaa rated bonds. The
Aaa and Aa rated bonds are generally known as "high grade bonds." The foregoing
ratings for tax-exempt bonds are 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
<PAGE>
FINANCIAL STATEMENTS
The financial statements listed below are included in and incorporated in the
Fund's 1999 Annual Report to Shareholders for the year ended December 31, 1999
(filed electronically on February 29, 2000, accession number
0001010521-00-000203) and are included in and incorporated by reference into
Part B of this registration statement of John Hancock Cash Reserve, Inc. (file
nos. 811-2995 and 2-66461).
John Hancock Cash Reserve, Inc.
Statement of Assets and Liabilities as of December 31, 1999.
Statement of Operations for the year ended December 31, 1999.
Statement of Changes in Net Assets for each of the periods indicated
therein.
Financial Highlights for each of the five years indicated therein.
Schedule of Investments as of December 31, 1999.
Notes to Financial Statements.
Report of Independent Auditors.
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.
Indemnification provisions relating to the Registrant's Trustees, officers,
employees and agents is set forth in Article VII of the Registrant's By Laws
included as Exhibit 2 herein.
Under Section 12 of the Distribution Agreement, John Hancock Funds, Inc. ("John
Hancock Funds") has agreed to indemnify the Registrant and its Trustees,
officers and controlling persons against claims arising out of certain acts and
statements of John Hancock Funds.
Section 9(a) of the By-Laws of John Hancock 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 Insurance Company who serves as a Trustee or officer
of the Registrant at the direction or request of the Insurance Company against
litigation expenses and liabilities incurred while acting as such, except that
such indemnification does not cover any expense or liability incurred or imposed
in connection with any matter as to which such person shall be finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Insurance Company. In addition, no such
person will be indemnified by the Insurance Company in respect of any final
adjudication unless such settlement shall have been approved as in the best
interests of the Insurance Company either by vote of the Board of Directors at a
meeting composed of directors who have no interest in the outcome of such vote,
or by vote of the policyholders. The Insurance Company may pay expenses incurred
in defending an action or claim in advance of its final disposition, but only
upon receipt of an undertaking by the person indemnified to repay such payment
if he should be determined not to be entitled to indemnification.
Article IX of the respective By-Laws of John Hancock Funds and John Hancock
Advisers, Inc. ("the Adviser") provide as follows:
C-1
<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 Trustees, officers and controlling persons of the
Registrant pursuant to the Registrant's Declaration of Trust and By-Laws of John
Hancock Funds, the Adviser, or the Insurance Company or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
Item 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 Sovereign Bond
Fund, John Hancock Tax-Exempt Series, John Hancock Strategic Series, John
Hancock World Fund, John Hancock Special Equities Fund, John Hancock Investment
C-2
<PAGE>
Trust, John Hancock Institutional Series Trust, John Hancock Investment Trust II
and John Hancock Investment Trust III.
(b) The following table lists, for each director and officer of John Hancock
Funds, the information indicated.
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
------------------ ---------------------
Business Address Positions and Offices with Registrant
---------------- --------------------- ---------------
with Underwriter
----------------
<S> <C> <C>
Stephen L. Brown Director and Chairman None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Maureen R. Ford Director, Vice Chairman Chief Executive Officer
101 Huntington Avenue and Chief Executive
Boston, Massachusetts Officer
Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief
P.O. Box 111 Compliance Officer
Boston, Massachusetts
Osbert M. Hood Executive Vice President and Executive Vice President and
101 Huntington Avenue Chief Financial Officer Chief Financial Officer
Boston, Massachusetts and Treasurer
David A. King Director None
380 Stuart Street
Boston, Massachusetts
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
------------------ ---------------------
Business Address Positions and Offices with Registrant
---------------- --------------------- ---------------
With Underwriter
----------------
<S> <C> <C>
Susan S. Newton Vice President Vice President and
101 Huntington Avenue and Secretary Secretary
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 None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
------------------ ---------------------
Business Address Positions and Offices with Registrant
---------------- --------------------- ---------------
With Underwriter
----------------
<S> <C> <C>
John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Foster L. Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
William C. Fletcher Director None
53 State Street
Boston, Massachusetts
James V. Bowhers President None
101 Huntington Avenue
Boston, Massachusetts
Keith F. Hartstein Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts
J. William Bennintende Vice President None
101 Huntington Avenue
Boston, Massachusetts
Kathleen M. Graveline Senior Vice President None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
Renee M. Humphrey Vice President None
101 Huntington Avenue
Boston, Massachusetts
Peter F. Mawn Senior Vice President None
John Hancock Place
P.O. Box 111
Boston, Massachusetts
C-6
<PAGE>
Karen F. Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts
Gary Cronin Vice President None
101 Huntington Avenue
Boston, Massachusetts
Kristine Pancare Vice President None
101 Huntington Avenue
Boston, Massachusetts
Thomas H. Connors Vice President Vice President and
101 Huntington Avenue and Compliance Compliance Officer
Boston, Massachusetts Officer
(c) None.
</TABLE>
Item 28. Location of Accounts and Records.
The Registrant maintains the records required to be maintained by it
under Rules 31a-1 (a), 31a-a(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 office of Registrant's Transfer Agent and
Custodian.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certified that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston and The Commonwealth of Massachusetts on
the 25th day of April, 2000.
JOHN HANCOCK CASH RESERVE, INC.
By: *
-------------------------------------
Maureen R. Ford
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
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>
*
- ----------------------- Executive Vice President April 25, 2000
Osbert M. Hood and Chief Financial Officer
/s/James J. Stokowski
- ------------------------
James J. Stokowski Vice President, Treasurer
(Chief Accounting Officer)
* Trustee
- ------------------------
James F. Carlin
* Trustee
- ------------------------
William H. Cunningham
* Trustee
- ------------------------
Ronald R. Dion
* Trustee
- ------------------------
Charles L. Ladner
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Trustee
- ------------------------
Steven R. Pruchansky
* Trustee
- ------------------------
Norman H. Smith
* Trustee
- ------------------------
John P. Toolan
*By: /s/Susan S. Newton
------------------ April 25, 2000
Susan S. Newton
Attorney-in-Fact
Powers of Attorney
filed herewith
C-9
<PAGE>
John Hancock Bank and Thrift Opportunity Fund John Hancock Patriot Global Dividend Fund
John Hancock Bond Trust John Hancock Patriot Preferred Dividend Fund
John Hancock California Tax-Free Income Fund John Hancock Patriot Premium Dividend Fund I
John Hancock Cash Reserve, Inc. John Hancock Patriot Premium Dividend Fund II
John Hancock Current Interest John Hancock Patriot Select Dividend Trust
John Hancock Institutional Series Trust John Hancock Series Trust
John Hancock Investment Trust John Hancock Tax-Free Bond Trust
POWER OF ATTORNEY
The undersigned Trustee/Director/Officer of each of the above listed
Trusts, each a Massachusetts business trust, and Corporations, each a Maryland
Corporation, does hereby severally constitute and appoint Susan S. Newton and
James J. stokowski, and each acting singly, to be my true, sufficient and lawful
attorneys, with full power to each of them, and each acting singly, to sign for
me, in my name and in the capacity indicated below, any Registration Statement
on Form N-1A and any Registration Statement on Form N-14 to be filed by the
Trust under the Investment Company Act of 1940, as amended (the "1940 Act"), and
under the Securities Act of 1933, as amended (the "1933 Act"), and any and all
amendments to said Registration Statements, with respect to the offering of
shares and any and all other documents and papers relating thereto, and
generally to do all such things in my name and on my behalf in the capacity
indicated to enable the Trust to comply with the 1940 Act and the 1933 Act, and
all requirements of the Securities and Exchange Commission thereunder, hereby
ratifying and confirming my signature as it may be signed by said attorneys or
each of them to any such Registration Statements and any and all amendments
thereto.
IN WITNESS WHEREOF, I have hereunder set my hand on this Instrument as
of the 7th day of December, 1999.
/s/ Stephen L. Brown /s/ Osbert M. Hood
- -------------------- ------------------
Stephen L. Brown, as Trustee and Chairman Osbert M. Hood, as Chief Financial Officer
/s/Maureen R. Ford /s/Charles L. Ladner
- ------------------ --------------------
Maureen R. Ford, as Trustee, Charles L. Ladner
Vice Chairman, Chief Executive Officer
/s/James F. Carlin /s/Steven R. Pruchansky
- ------------------ -----------------------
James F. Carlin Steven R. Pruchansky
/s/William H. Cunningham /s/Richard S. Scipione
- ------------------------ ----------------------
William H. Cunningham Richard S. Scipione
/s/Ronald R. Dion /s/Norman H. Smith
- ----------------- ------------------
Ronald R. Dion Norman H. Smith
/s/Harold R. Hiser, Jr. /s/ John P. Toolan
- ----------------------- ------------------
Harold R. Hiser, Jr. John P. Toolan
/s/ Anne C. Hodsdon
- -------------------
Anne C. Hodsdon, as Trustee and President
<PAGE>
The Declaration of Trust, a copy of which, together with all amendments
thereto, is on file in the office of the Secretary of State of The Commonwealth
of Massachusetts, provides that no Trustee, officer, employee or agent of the
Trust or any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard of his/her duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the Trust Property of one or more
specific Series of the Trust if the claim arises from the conduct of such
Trustee, officer, employee or agent with respect to only such Series, for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
COMMONWEALTH OF MASSACHUSETTS )
)ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named Stephen L. Brown, Maureen L.
Ford, James F. Carlin, William H. Cunningham, Ronald R. Dion, Harold R. Hiser,
Jr., Anne C. Hodsdon, Osbert M. Hood, Charles L. Ladner, Leo E. Linbeck, Jr.,
Steven R. Pruchansky, Richard S. Scipione, Norman H. Smith, and John P. Toolan,
who acknowledged the foregoing instrument to be his or her free act and deed,
before me, this 7th day of December, 1999.
/s/Ann Marie White
------------------
Notary Public
My Commission Expires: 10/20/00
</TABLE>
<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.(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) Amended and Restated Master Custodian Agreement between John
Hancock Mutual Funds and State Street Bank and Trust Company
dated March 9, 1999.****
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.+
99.(j) Other Opinions. Auditors Consent.+
99.(k) Omitted Financial Statements. Not Applicable.
99.(l) Initial Capital Agreements. Not Applicable.
99.(m) Rule 12b-1 Plan. Not Applicable.
99.(o) Rule 18f-3. Not Applicable.
99.(p) Code of Ethics for John Hancock and John Hancock Investment
Companies.+
C-9
<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.
**** Previously filed electronically with post-effective amendment number 22
(file nos. 811-2995 and 2-66461) on April 27, 1999, accession number
0001010521-99-000193.
+ Filed herewith.
C-10
AMENDED AND RESTATED MASTER TRANSFER AGENCY AND SERVICE
AGREEMENT BETWEEN JOHN HANCOCK FUNDS AND JOHN HANCOCK SIGNATURE
SERVICES, INC.
Amended and Restated Master Transfer Agency and Service Agreement made as of the
1st day of June, 1998 by and between each investment company advised by John
Hancock Advisers, Inc., having its principal office and place of business at 101
Huntington Avenue, Boston, Massachusetts, 02199, and John Hancock Signature
Services, Inc., a Delaware corporation having its principal office and place of
business at 101 Huntington Avenue, Boston, Massachusetts 02199 ("JHSS").
WITNESSETH:
WHEREAS, each investment company desires to appoint JHSS as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities;
and
WHEREAS, JHSS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
Article 1 Definitions
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
(a)"Fund" shall mean the investment company which has adopted this
agreement and is listed on Appendix A hereto. If the Fund is a
Massachusetts business trust or Maryland corporation, it may in the
future establish and designate other separate and distinct series of
shares, each of which may be called a "series" or a "portfolio"; in
such case, the term "Fund" shall also refer to each such separate
series or portfolio.
(b)"Board" shall mean the board of directors/trustees/managing general
partners/director general partners of the Fund, as the case may be.
Article 2 Terms of Appointment; Duties of JHSS
------------------------------------
2.01 Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints JHSS to act, and JHSS agrees to act, as transfer
agent and dividend dispersing agent with respect to the authorized and issued
shares of beneficial interest ("Shares") of the Fund subject to this Agreement
and to provide to the shareholders of the Fund ("Shareholders") such services in
connection therewith as may be set out in the prospectus of the Fund from time
to time.
2.02 JHSS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and JHSS, JHSS shall:
(i)Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
therefor to the Fund's Custodian authorized pursuant to the
Fund's Declaration of Trust or Articles of Incorporation (the
"Custodian");
<PAGE>
(ii)Pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate Shareholder
account;
(iii)Receive for acceptance, redemption requests and
redemption directions and deliver the appropriate
documentation therefor to the Custodian;
(iv)At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption,
pay over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;
(v)Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi)Prepare and transmit payments for dividends and
distributions declared by the Fund, processing the
reinvestment of distributions on the Fund at the net asset
value per share for the Fund next computed after the payment
(in accordance with the Fund's then-current prospectus);
(vii)Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
(viii)Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) of the rules and regulations of
the Securities Exchange Act of 1934 a record of the total
number of Shares of the Fund which are authorized, based upon
data provided to it by the Fund, and issued and outstanding.
JHSS shall also provide the Fund, on a regular basis, with the
total number of Shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of these Shares or
to take cognizance of any laws relating to the issue or sale
of these Shares, which functions shall be the sole
responsibility of the Fund.
(b) In calculating the number of Shares to be issued on purchase or
reinvestment, or redeemed or repurchased, or the amount of the purchase
payment or redemption or repurchase payments owed, JHSS shall use the
net asset value per share (as described in the Fund's then-current
prospectus) computed by it or such other person as may be designated by
the Fund's Board. All issuances, redemptions or repurchases of the
Funds' shares shall be effected at net asset values per share next
computed after receipt of the orders therefore and said orders shall
become irrevocable at the time as of which said value is next computed.
(c) In addition to and not in lieu of the services set forth in the
above paragraph (a), JHSS shall: (i) perform all of the customary
services of a transfer agent and dividend disbursing agent including
but not limited to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating
proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with respect
to dividends and distributions by federal authorities for all
Shareholders, preparing and mailing confirmation forms and statements
of account to Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of the Fund's Shares sold
in each State.
<PAGE>
(d) In addition, the Fund shall (i) identify to JHSS in writing those
transactions and assets to be treated as exempt from the blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of JHSS for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions
subject to blue sky compliance by the Fund and the reporting of these
transactions to the Fund as provided above.
(e) Additionally, JHSS shall:
(i) Utilize a system to identify all share transactions which
involve purchase and redemption orders that are processed at a
time other than the time of the computation of net asset value
per share next computed after receipt of such orders, and
shall compute the net effect upon the Fund of the transactions
so identified on a daily and cumulative basis.
(ii) If upon any day the cumulative net effect of such
transactions upon the Fund is negative and exceeds a dollar
amount equivalent to 1/2 of 1 cent per share, JHSS shall
promptly make a payment to the Fund in cash or through the use
of a credit in the manner described in paragraph (iv) below,
in such amount as may be necessary to reduce the negative
cumulative net effect to less than 1/2 of 1 cent per share.
(iii) If on the last business day of any month the cumulative
net effect upon the Fund of such transactions (adjusted by the
amount of all prior payments and credits by JHSS and the Fund)
is negative, the Fund shall be entitled to a reduction in the
fee next payable under the Agreement by an equivalent amount,
except as provided in paragraph (iv) below. If on the last
business day in any month the cumulative net effect upon the
Fund of such transactions (adjusted by the amount of all prior
payments and credits by JHSS and the Fund) is positive, JHSS
shall be entitled to recover certain past payments and
reductions in fees, and to a credit against all future
payments and fee reductions that may be required under the
Agreement as herein described in paragraph (iv) below.
(iv) At the end of each month, any positive cumulative net
effect upon a Fund of such transactions shall be deemed to be
a credit to JHSS which shall first be applied to permit JHSS
to recover any prior cash payments and fee reductions made by
it to the Fund under paragraphs (ii) and (iii) above during
the calendar year, by increasing the amount of the monthly fee
under the Agreement next payable in an amount equal to prior
payments and fee reductions made by JHSS during such calendar
year, but not exceeding the sum of that month's credit and
credits arising in prior months during such calendar year to
the extent such prior credits have not previously been
utilized as contemplated by this paragraph. Any portion of a
credit to JHSS not so used by it shall remain as a credit to
be used as payment against the amount of any future negative
cumulative net effects that would otherwise require a cash
payment or fee reduction to be made to the Fund pursuant to
paragraphs (ii) or (iii) above (regardless of whether or not
the credit or any portion thereof arose in the same calendar
year as that in which the negative cumulative net effects or
any portion thereof arose).
(v) JHSS shall supply to the Fund from time to time, as
mutually agreed upon, reports summarizing the transactions
identified pursuant to paragraph (i) above, and the daily and
cumulative net effects of such transactions, and shall advise
the Fund at the end of each month of the net cumulative effect
at such time. JHSS shall promptly advise the Fund if at any
time the cumulative net effects exceeds a dollar amount
equivalent to 1/2 of 1 cent per share.
<PAGE>
(vi) In the event that this Agreement is terminated for
whatever cause, or this provision 2.02 (d) is terminated
pursuant to paragraph (vii) below, the Fund shall promptly pay
to JHSS an amount in cash equal to the amount by which the
cumulative net effect upon the Fund is positive or, if the
cumulative net effect upon the Fund is negative, JHSS shall
promptly pay to the Fund an amount in cash equal to the amount
of such cumulative net effect.
(vii) This provision 2.02 (e) of the Agreement may be
terminated by JHSS at any time without cause, effective as of
the close of business on the date written notice (which may be
by telex) is received by the Fund.
Procedures applicable to certain of these services may be established from time
to time by agreement between the Fund and JHSS.
Article 3 Fees and Expenses
3.01 For performance by JHSS pursuant to this Agreement, the Fund agrees to pay
JHSS a fee as set out in Appendix A attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 3.02 below may be changed from
time to time subject to mutual written agreement between the Fund and JHSS.
3.02 In addition to the fee paid under Section 3.01 above, the Fund agrees to
reimburse JHSS for out-of-pocket expenses or advances incurred by JHSS for the
items set out in the fee schedule attached hereto. In addition, any other
expenses incurred by JHSS at the request or with the consent of the Fund, will
be reimbursed by the Fund.
3.03 The Fund agrees to pay all fees and reimbursable expenses promptly
following the mailing of the respective billing notice. Postage for mailing of
proxies to all shareholder accounts shall be advanced to JHSS by the Funds at
least seven (7) days prior to the mailing date of such materials.
Article 4 Representations and Warranties of JHSS
--------------------------------------
JHSS represents and warrants to the Fund that:
4.01 It is a corporation duly organized and existing and in good standing under
the laws of the State of Delaware, and is duly qualified and in good standing as
a foreign corporation under the Laws of The Commonwealth of Massachusetts.
4.02 It has corporate power and authority to enter into and perform its
obligations under this Agreement.
4.03 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
4.04 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
<PAGE>
Article 5 Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to JHSS that:
5.01 It is a business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts or, in the case of John
Hancock Cash Reserve, Inc., a Maryland corporation duly organized and existing
and in good standing under the laws of the State of Maryland.
5.02 It has power and authority to enter into and perform this Agreement.
5.03 All proceedings required by the Fund's Declaration of Trust or Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
5.04 It is an open-end investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
5.05 A registration statement under the Securities Act of 1933, as amended, with
respect to the shares of the Fund subject to this Agreement has become
effective, and appropriate state securities law filings have been made and will
continue to be made.
Article 6 Indemnification
6.01 JHSS shall not be responsible for, and the Fund shall indemnify and hold
JHSS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or attributable
to:
(a) All actions of JHSS or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misfeasance.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's bad faith, gross negligence
or willful misfeasance or which arise out of the reckless disregard of
any representation or warranty of the Fund hereunder.
(c) The reliance on or use by JHSS or its agents or subcontractors of
information, records and documents which (i) are received by JHSS or
its agents or subcontractors and furnished to it by or on behalf of the
Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by JHSS or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that Fund Shares be registered in that state
or in violation of any stop order or other determination or ruling by
any federal agency or any state with respect to the offer or sale of
Shares in that state.
(f) It is understood and agreed that the assets of the Fund may be used
to satisfy the indemnity under this Article 6 only to the extent that
the loss, damage, cost, charge, counsel fee, payment, expense and
liability arises out of or is attributable to services hereunder with
respect to the Shares of such Fund.
<PAGE>
6.02 JHSS shall indemnify and hold harmless the Fund from and against any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributed to any action or failure or omission to
act by JHSS as a result of JHSS's lack of good faith, negligence or willful
misfeasance.
6.03 At any time JHSS may apply to any officer of the Fund for instructions, and
may consult with legal counsel with respect to any matter arising in connection
with the services to be performed by JHSS under this Agreement, and JHSS and its
agents or subcontractors shall not be liable and shall be indemnified by the
Fund for any action taken or omitted by it in reliance upon such instructions or
upon the opinion of such counsel. JHSS, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided JHSS or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund. JHSS, its agents
and subcontractors shall also be protected and indemnified in recognizing share
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officer of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
6.04 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
6.05 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
6.06 In order that the indemnification provisions contained in this Article 6
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
<PAGE>
Article 7 Covenants of the Fund and JHSS
------------------------------
7.01 The Fund shall promptly furnish to JHSS the following:
(a) A certified copy of the resolution(s) of the Trustees of the Trust
or the Directors of the Corporation authorizing the appointment of JHSS
and the execution and delivery of this Agreement.
(b) A copy of the Fund's Declaration of Trust or Articles of
Incorporation and By-Laws and all amendments thereto.
7.02 JHSS hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of share certificates and
facsimile signature imprinting devices, if any; and for the preparation or use,
and for keeping account of, such certificates and devices.
7.03 JHSS shall keep records relating to the services to be performed hereunder,
in the form and manner as it may deem advisable. To the extent required by
Section 31 of the Investment Company Act of 1940 and the rules and regulations
of the Securities and Exchange Commission thereunder, JHSS agrees that all such
records prepared or maintained by JHSS relating to the services to be performed
by JHSS hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such Act and rules, and will be
surrendered to the Fund promptly on and in accordance with the Fund's request.
7.04 JHSS and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person without
the consent of the other party to this Agreement, except as may be required by
law.
7.05 JHSS agrees that, from time to time or at any time requested by the Fund,
JHSS will make reports to the Fund, as requested, of JHSS's performance of the
foregoing services.
7.06 JHSS will cooperate generally with the Fund to provide information
necessary for the preparation of registration statements and periodic reports to
be filed with the Securities and Exchange Commission, including registration
statements on Form N-1A, semi-annual reports on Form N-SAR, periodic statements,
shareholder communications and proxy materials furnished to holders of shares of
the Fund, filings with state "blue sky" authorities and with United States and
foreign agencies responsible for tax matters, and other reports and filings of
like nature.
7.07 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, JHSS will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection. JHSS
reserves the right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be held liable for the failure
to exhibit the Shareholder records to such person.
<PAGE>
Article 8 No Partnership or Joint Venture
-------------------------------
8.01 The Fund and JHSS are not currently partners of or joint venturers with
each other and nothing in this Agreement shall be construed so as to make them
partners or joint venturers or impose any liability as such on them.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party upon one hundred twenty
(120) days' written notice to the other party.
9.02 Should the Fund exercise its right to terminate, all out-of-pocket expenses
associated with the movement of records and material will be borne by the Fund.
Additionally, JHSS reserves the right to charge for any other reasonable
expenses associated with such termination.
Article 10 Assignment
10.01 Except as provided in Section 10.03 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.03 JHSS may, without further consent on the part of the Fund, subcontract for
the performance hereof with (i) Boston Finanacial Data Services, Inc., a
Massachusetts corporation ("BE") which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934 ("Section
17A(c)(1)") or any other entity registered as a transfer agent under Section
17A(c)(1) JHSS deems appropriate in order to comply with the terms and
conditions of this Agreement; provided, however, that JHSS shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as it is
for its own acts and omissions.
Article 11 Amendment
11.01 This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Trustees of
the Trust or Directors of the Corporation.
Article 12 Massachusetts Law to Apply
12.01 This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the internal substantive laws of The Commonwealth
of Massachusetts.
Article 13 Merger of Agreement
13.01 This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
Article 14 Limitation on Liability
<PAGE>
14.01 If the Fund is a Massachusetts business trust, JHSS expressly acknowledges
the provision in the Fund's Declaration of Trust limiting the personal liability
of the trustees and shareholders of the Fund; and JHSS agrees that it shall have
recourse only to the assets of the Fund for the payment of claims or obligations
as between JHSS and the Fund arising out of this Agreement, and JHSS shall not
seek satisfaction of any such claim or obligation from the trustees or
shareholders of the Fund. In any case, each Fund, and each series or portfolio
of each Fund, shall be liable only for its own obligations to JHSS under this
Agreement and shall not be jointly or severally liable for the obligations of
any other Fund, series or portfolio hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf under their seals by and through their duly
authorized officers, as of the day and year first above written.
JOHN HANCOCK FUNDS Listed on Appendix A
By: /s/Anne C/ Hodsdon
------------------
Anne C. Hodsdon
President
JOHN HANCOCK SIGNATURE SERVICES, INC.
By: /s/Charles J. McKenney, Jr.
---------------------------
Charles J. McKenney, Jr.
Vice President
s:\agrcont\agreement\transagt\98master.doc
April 24, 2000
John Hancock Cash Reserve, Inc.
101 Huntington Avenue
Boston, MA 02199
RE: John Hancock Cash Reserve, Inc.
File Nos. 2-66461; 811-2995 (0000314721)
Ladies and Gentlemen:
In connection with the filing of Post-Effective Amendment No. 23 under the
Securities Act of 1933, as amended, Amendment No. 26 under the Investment
Company Act of 1940, as amended, John Hancock Cash Reserve, Inc. (the "Fund") it
is the opinion of the undersigned that such shares when sold will be legally
issued, fully paid and nonassessable.
In connection with this opinion it should be noted that the Fund is an entity of
the type generally known as a "Maryland corporation". The Corporation has been
duly organized and is validly existing under the laws of Maryland
Sincerely,
/s/Alfred P. Ouellette
----------------------
Alfred P. Ouellette
Assistant Secretary
Member of Massachusetts Bar
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the John Hancock Cash Reserve, Inc. prospectus and "Independent
Auditors" and "Financial Statements" in the John Hancock Cash Reserve, Inc.,
Statement of Additional Information and to the incorporation by reference in
Post-Effective Amendment Number 23 to the Registration Statement (Form N-1A, No.
2-66461) of our report dated February 10, 2000 on the financial statements and
financial highlights of John Hancock Cash Reserve, Inc.
/s/ERNST & YOUNG LLP
--------------------
ERNST & YOUNG LLP
Boston, Massachusetts
April 24, 2000
JOHN HANCOCK FUNDS
and
JOHN HANCOCK INVESTMENT COMPANIES
CODE OF ETHICS
CONCEPT
The conduct of officers, directors, trustees and employees of John
Hancock Funds, its subsidiaries and sub-advisers on behalf of all registered
investment companies and advisory accounts (the "Funds") is governed by one
basic principle: the interests of the shareholders of the Funds are paramount.
The personal interests of the officers, directors, trustees and employees must
be subordinated to those of the shareholders and investors (collectively the
"shareholders"). Thus, no John Hancock Funds officer, director, trustee or
employee may make personal use of information available by reason of his or her
position with John Hancock Funds until after the Funds have acted upon the
information. In addition, each investment opportunity which comes to the
attention of any such officer, director, trustee or employee and which is
appropriate for consideration by any of the Funds must be first made available
for the benefit of such Fund before the officer, director, trustee or employee
can take any personal advantage of the opportunity. A conflict between the
interest of an individual and that of one of the Funds can arise when the
individual by virtue of his or her association with John Hancock Funds
anticipates action on the part of the Fund and places himself or herself in a
position to profit by the Fund's action. A conflict can also arise when an
individual by reason of a pre-existing securities position in a personal
account, has an interest in whether the Fund buys, sells or holds a particular
security. The following guidelines are designed to assist those affiliated with
John Hancock Funds in their personal transactions by clearly specifying some,
but not all, of the areas where personal investment transactions might raise
questions of conflict with the best interests of the Funds and the shareholders.
APPLICATION OF THE CODE OF ETHICS
This Code of Ethics applies to everyone who is a director, officer,
trustee or employee, whether full- or part-time, of John Hancock Funds. In
addition, the Code applies to each employee of John Hancock Mutual Life
Insurance Company or of any of its direct or indirect subsidiaries who, in
connection with the employee's regular functions or duties makes, participates
in, or obtains information regarding, the purchase or sale of a security by any
of the Funds, or whose functions relate to the making of any recommendations
with respect to such purchases or sales, and to anyone who obtains information
concerning recommendations made to such Fund with regard to the purchase or sale
of a security and has the power to exercise a controlling influence over the
management or policies of either Hancock or any of its subsidiaries unless such
power is solely the result of an official position with Hancock or the
subsidiary. Sub-advisers to John Hancock Funds affiliates, either by the
adoption of this Code of Ethics or procedures consistent with the Code's intent,
are required to protect the interests of the shareholders.
<PAGE>
GUIDELINES
An employee ("associate") or person considered an associate under this
Code of Ethics should observe the following rules:
1. PRE-CLEARANCE FOR ALL TRADES
- ALL ASSOCIATES AND FAMILY MEMBERS1
Pre-clearance for Public Securities2:
Any personal trades, whether equity or debt, MUST be approved in advance.
This requirement applies to all associates and "access" trustees3. The
pre-clearance policy governs trades for all associates' personal
accounts, those of a spouse, "significant other" or family members
sharing a household, as well as all accounts over which the associate has
discretion or gives advice or information. The procedures for
pre-clearance are contained in a document attached to the Code of Ethics.
Given these pre-clearance restrictions, John Hancock Funds does not
permit employee participation in investment clubs.
Employees may invest in derivatives or sell short provided:
- they submit pre-clearance requests, receive pre-clearance approval
and
- the transaction period exceeds the 91 day holding period.
The procedures for pre-clearance for derivatives, including futures and
options, and selling short are attached.
1 For purposes of this Code, the term "family" or "family member" means an
associate's "significant other", spouse or other relative, whether related by
blood, marriage or otherwise, who either (i) shares the same home, or (ii) is
financially dependent upon the associate, or (iii) whose investments are
controlled by the associate. The term also includes any unrelated individual for
whom an associate controls investments and materially contributes to the
individual's financial support.
2 Excludes U.S. Government securities, bank Certificates of Deposit, commercial
paper, open-end mutual funds and physical commodities other than gold. Employees
must obtain pre-clear approval before trading in closed-end funds, unit
investment trusts, or Real Estate Investment Trusts ("REIT's").
3 "Access" trustees include outside trustees of the Funds who have been deemed
to have access to fund transactions or proprietary information. Susan S. Newton,
Chief Legal Officer/Funds and Private Accounts is the principal authority on who
is deemed to be an "access" trustee consistent with the Investment Company Act
of 1940 and the Advisors Act of 1940.
<PAGE>
YOU MAY NOT TRADE UNTIL CLEARANCE IS RECEIVED. Clearance
approval is valid only for the date granted.
Clearance for Private Placements and Derivatives:
Clearance for purchase of private placement securities and derivatives
may be obtained by contacting Investment Compliance via Microsoft Outlook
in writing. The procedures for private placement and derivatives
pre-clearance are contained in a document attached to the Code of Ethics.
Clearance of a private placement or a derivative may be denied if the
transaction would raise issues regarding the appearance of impropriety.
2. BAN ON SHORT-TERM TRADING PROFITS
Effective April 15, 1994, associates and their family members cannot
profit
from the purchase and sale or the sale and purchase of the same or
equivalent securities held 91 or fewer days. A gift from an associate is
considered a sale. Any profits realized on such short-term trades must be
disgorged and contributed to a charity approved by the Executive
Committee of John Hancock Funds. This restriction assures that personal
trading is for investment purposes. Any investments in an associate's or
family member's account prior to April 15, 1994 are not subject to this
ban.
3. Purchase of Initial Public Offerings ("IPO's")
No associate nor any member of his or her family acting on advice or
information from the associate should purchase any newly issued or
publicly-offered securities4 until the next business (trading) day after
the offering date and after receipt of pre-clearance approval. No
purchase should be at other than the market price prevailing on, or
subsequent to, such business day. This restriction shall apply also to
anyone with whom the associate or family member covered by this Code has
any contract, understanding, relationship, agreement or other arrangement
providing benefits substantially equivalent to those of ownership of the
securities in question and to any owner of securities in which the
associate or family member has the right to vest or revest title at once
or at some future time , and also to any trust of which the associate or
family member is an income beneficiary or remainderman and over which the
associate or family member has any direct influence or control
("controlled trust").
4. Proprietary Information
Investment opportunities and ideas brought to John Hancock Funds are
considered proprietary to John Hancock Funds and its Funds. Associates
have an obligation to share any proprietary information in their
possession with the Investment Staff prior to submitting a request for
pre-clearance. All written credit or company reports produced by John
Hancock Funds associates are also considered proprietary. This
information should not be used for personal trading until pre-clearance
has been received. An associate cannot make available to others any
4 This provision applies to all initial public offerings except those defined in
Footnote 2. Employees cannot invest in "when-issued" bonds as these are
considered initial offerings.
<PAGE>
information acquired solely by reason of his or her position with John
Hancock Funds even though the associate may have conflicting duties as a
director, trustee or agent of another entity with portfolio management or
investment responsibilities. Information not generally available and
obtained through an associate's position is not available to another
person or entity and may not be used in discharging duties to the other
person or entity.
5. Dealings with Brokers
No associate nor any family member, controlled trust or nominee shall
seek or accept favors or preferential treatment from securities brokers
or dealers or other organizations with which John Hancock Funds might
transact business. Occasional participation in lunches, dinners, cocktail
parties, sporting activities or similar gatherings conducted for business
purposes is not prohibited. For the protection of both the associate and
John Hancock Funds, however, the appearance of a possible conflict of
interest must be avoided. Caution is to be exercised in any instance in
which business travel and lodging are paid for by other than John Hancock
Funds. Associates, their family members, controlled trusts or nominees
may subscribe to private offerings placed through a securities firm or to
public offerings made to a restricted or limited number of investors,
subject to the pre-clearance provisions in Section 1 and the initial
public offering bar in Section 3. Compliance with Section 5 on Dealings
with Brokers minimizes the basis for any charge that John Hancock Funds
associates use their John Hancock Funds position to obtain for themselves
issues and opportunities which otherwise would not be offered to them.
6. Quarterly Reports
Associates deemed to be "advisory representatives"5 and others so
designated are required quarterly to file a report of individual security
transactions not otherwise excepted. See exceptions set forth below.6 An
advisory representative is not required to report transactions for an
account over which the advisory representative has no direct or indirect
influence or control. The report is due not later than 10 days after the
end of each calendar quarter in which a transaction to which the report
relates was effected. The quarterly reports of each of the trustees who
are not "interested persons" should be filed with the Chairman of
5 The definition of "advisory representative" is contained in Rule
204-2(a)(12)(A) of the Advisers Act of 1940. "Advisory representatives" include
any employee who makes any recommendation, who participates in the determination
of which recommendation shall be made, or whose functions or duties relate to
the determination of which recommendation shall be made; any employee who, in
connection with his [or her] duties, obtains any information concerning which
securities are being recommended prior to the effective dissemination of such
recommendations or the information concerning such recommendations.
6 Securities exempted from individual security transaction reporting
("Quarterlies") are those which are direct obligations of the United States and
shares of non-affiliated registered open-end investment companies.
<PAGE>
Committee on Administration of the Funds.7 All other advisory
representatives should file their reports with John Hancock Adviser's
Legal Department. To the extent not otherwise required by a Securities
and Exchange Commission Rule or Regulation, the securities transaction
reports will be kept confidential. The reports are required to be
preserved for a period of not less than 5 years from the end of the
fiscal year in which they are made and must remain in an easily
accessible place for the first 2 years.
7. REPORT OF BOARD, TRUSTEE OR LEADERSHIP POSITIONS IN COMPANIES ISSUING
SECURITIES
Those deemed to be "advisory representatives" as noted in Section 6 must
report promptly to the Compliance Officer for the Code of Ethics any
board, trustee or leadership position the "advisory representative" holds
in a private, public or private non-profit company which issues or plans
to issue any security. The Compliance Officer for the Code of Ethics will
in turn report such positions to the Trustees of the Funds.
8. ANNUAL DISCLOSURE OF PERSONAL HOLDINGS
BY QUARTERLY REPORTING PERSONS
All those deemed to be "advisory representatives" as noted in Section 6
must disclose all personal securities holdings upon commencement of
employment and thereafter by March 15 for holdings as of December 31 of
the prior calendar year.
9. BLACKOUT PERIOD FOR PORTFOLIO MANAGERS
Portfolio managers, including those designated as portfolio managers in
the pre-clear system, are prohibited from buying or selling a security
within seven calendar days before and after an investment company that he
or she manages trades in that security. Any profits realized on trades
within the proscribed periods are required to be disgorged by making a
check payable to John Hancock Advisers, Inc. The money will be donated to
a charity approved by the Executive Committee of The Berkeley Financial
Group. The names of portfolio managers subject to this provision will be
submitted annually by the Chief Investment Officer to the Compliance
Office and updated as needed.
7 A trustee of a registered investment company who is not an "interested person"
within the meaning of the definition contained in the Investment Company Act of
1940 and who would be required to make a transaction report solely by reason of
being a trustee of the investment company, may dispense with the filing of a
report of a transaction in a security even where the investment company of which
she or he is a trustee purchased or sold such security or the company or John
Hancock Advisers, Inc. considered such purchase or sale, unless at the time of
the transaction the trustee knew or, in the ordinary course of fulfilling her or
his official duties as trustee, should have known that such purchase, sale or
consideration had occurred within 15 days before the transaction or would occur
within 15 days after it. 1 For purposes of these Guidelines, the term "family
member" means an associate's "significant other", spouse or other relative,
whether related by blood, marriage or otherwise, who either (i) shares the same
home, or (ii) is financially dependent upon the associate, or (iii) whose
investments are controlled by the associate. The term also includes any
unrelated individual for whom an associate controls investments and materially
contributes to the individual's financial support.
<PAGE>
10. INSIDE INFORMATION
All John Hancock Funds associates are subject to the Inside Information
Policies and Procedures. A copy may be obtained in "Public Folders" on MS
Mail under the heading "Compliance Policies".
11. CONFLICT OF INTEREST AND BUSINESS PRACTICE POLICY
Officer and letter grade employees are subject to the Conflict and
Business Practice Policy. A copy may be obtained in "Public Folders" on
MS Outlook under the heading "Compliance Policies".
INTERPRETATION AND ENFORCEMENT
The Code of Ethics cannot anticipate every situation in which personal
interests may be in conflict with the interests of the shareholders. Associates
should be responsive to the spirit and intent of the Code as well as its
specific provisions.
When any doubt exists regarding any provision of the Code or whether a
conflict of interest with shareholders might exist, the transaction should be
discussed beforehand with the Compliance Officer for the Code of Ethics, Thomas
H. Connors at (617) 375-1724 or Marcia Casey at (617) 572-9183.
The Code of Ethics is designed to detect and prevent fraud against fund
investors, and to avoid the appearance of impropriety. To provide assurance that
policies are effective, personal securities transaction reports will be
monitored and checked against fund portfolio transactions. Any deviations from
the policies will be reported to the Compliance Officer for the Code of Ethics.
In addition, other internal auditing procedures may be adopted from time to
time.
Violations of the Code will be referred by the Compliance Officer for the
Code of Ethics to the Executive Committee of John Hancock Funds or the
Administration Committee of the Fund or both for review and appropriate action.
The factors considered for a fine or other sanction for a Code violation
include:
- the employee's position and function;
- whether the employee is an officer, quarterly reporter or registered
person with the NASD;
- the amount of the trade;
- whether the funds or accounts hold the security and were trading the
same day;
- whether multiple violations occurred for the same transaction;
- whether the violation was by a "family member." Is the family member
employed in the securities industry and thus knowledgeable about
employee compliance requirements?
- whether the employee has had a prior violation and which Code provision
was involved.
<PAGE>
Code violations by NASD registered persons are reported to the NASD
Compliance Officer at John Hancock Mutual Life Insurance Company. Sanctions for
violations could include fines, suspension or termination of the violator's
position with John Hancock Funds and/or a report to the appropriate regulatory
authority.
Adopted by the boards of the companies of The Berkeley Financial Group on
October 19, 1994; revised and restated by the boards of the companies of The
Berkeley Financial Group on April 23, 1997; revised and restated by the boards
of the companies of The Berkeley Financial Group on October 1, 1998.
Adopted by the boards of the investment companies under the management
of John Hancock Advisers, Inc. on the following dates:
Panel A - September 27, 1994; Panel B - September 13, 1994; Panel C - September
27, 1994 and Southeastern Thrift and Bank Fund, Inc., on October 24, 1994.
Revised and restated by the boards of the investment companies under the
management of John Hancock Advisers, Inc., on the following dates:
Panel A - June 3, 1997; Panel B - June 2, 1997; and Southeastern Thrift and Bank
Fund, Inc., on May 1, 1997.
Revised and restated by the boards of the investment companies under the
management of John Hancock Advisers, Inc., on the following dates:
Panel A and Panel B - December 8, 1998; and Southeastern Thrift and Bank Fund,
Inc., on October 30, 1998.
<PAGE>
John Hancock Funds
Code of Ethics
PRE-CLEARANCE PROCEDURES
An employee ("associate") or person considered an associate under the
Code of Ethics should observe the following procedures:
PRE-CLEARANCE FOR ALL TRADES
- - ALL ASSOCIATES AND FAMILY MEMBERS1
Three categories of securities require pre-clearance: Public securities,
derivatives and private placements
1. Pre-clearance for Public Securities2:
Any personal trades, whether equity or debt, MUST be approved in
advance. This requirement applies to all associates and "access" Trustees3
("associates"). The pre-clearance policy governs trades for all associates'
personal accounts, or those of a spouse, "significant other" or other family
members sharing a household, as well as all accounts over which the associate
has discretion or gives advice or information.
Requests to pre-clear trades must be entered into the pre-clear
database on the day prior to the requested trade date. The database is located
in Microsoft Outlook under the Tools option, Preclear Personal Trades. It can be
accessed by entering your social security number in the appropriate field. If
Microsoft Outlook is unavailable, please contact the HELP Desk at 101 Huntington
Avenue at (617) 375-4357 for assistance.
<PAGE>
The following data must be entered:
- name of security to trade
- ticker symbol
- cusip number (9 alpha-numeric characters)
- trade type
- purchase date (required when selling a security)
- brokerage house
- brokerage account number
When all data has been entered, select SEND REQUEST which is located in
the top right corner of the screen. Associates will be notified by 11:00 A.M.
Boston time on the requested trade date via Microsoft Outlook as to whether
clearance has been granted.
If you have any questions or require assistance entering a trade,
please call Mary Ellen Logee at (617) 375-4967 or Fred Spring at (617) 375-4987
in the Internal Audit and Investment Compliance Department.
YOU MAY NOT TRADE UNTIL CLEARANCE IS RECEIVED. Clearance approval is valid only
for the date granted.
2. Pre-clearance Procedures for Derivatives, Futures, Options and Selling Short:
Clearance for the purchase, sale or related transactions for these securities
must be obtained by contacting Bill Sylva via Microsoft Outlook. The request
must include:
- the associate's name;
- the associate's John Hancock Funds' company;
- the date of request;
- the complete name of the security;
- a description of the security including its relationship to an
underlying common stock or stock index;
- the duration or description of the contract or exercise period;
- any potential conflict, present or future, with funds' trading
activity and whether the security might be offered an inducement to
later recommend publicly traded securities for any fund;
- the seller and whether or not the seller is one with whom the
associate does business on a regular basis.
<PAGE>
Clearance of such securities may be denied if the transaction would raise issues
regarding the appearance of impropriety.
3. Pre-clearance for Private Placements and Derivatives: Clearance for purchase
of private placement securities and derivatives may be obtained by contacting
Bill Sylva via Microsoft Outlook (please "cc." Mary Ellen Logee on all such
requests). The request must include:
- the associate's name;
- the associate's John Hancock Funds' company;
- the complete name of the security;
- the seller and whether or not the seller is one with whom the
associate does business on a regular basis;
- any potential conflict, present or future, with fund trading
activity and whether the security might be offered as inducement to
later recommend publicly traded securities for any fund; and
- the date of the request.
Clearance of private placements and derivatives may be denied if the
transaction would raise issues regarding the appearance of impropriety.
2/99
s:\corpsec/proced/codeofethics
