HANCOCK JOHN BOND FUND, 497, 1996-06-05

HANCOCK JOHN BOND FUND
497, 1996-06-05

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JOHN HANCOCK
INTERMEDIATE MATURITY
GOVERNMENT FUND

CLASS A AND CLASS B SHARES
PROSPECTUS
JUNE 10, 1996
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Expense Information................................................................... 2
The Fund's Financial Highlights....................................................... 3
Investment Objective and Policies..................................................... 5
Organization and Management of the Fund............................................... 7
Alternative Purchase Arrangements..................................................... 7
The Fund's Expenses................................................................... 9
Dividends and Taxes................................................................... 10
Performance........................................................................... 11
How to Buy Shares..................................................................... 12
Share Price........................................................................... 13
How to Redeem Shares.................................................................. 19
Additional Services and Programs...................................................... 21
Investments, Techniques and Risk Factors.............................................. 24
</TABLE>

This Prospectus sets forth the information about John Hancock Intermediate
Maturity Government Fund (the "Fund"), a diversified series of John Hancock Bond
Fund (the "Trust"), that you should know before investing. Please read and
retain it for future reference.
Additional information about the Fund and the Trust has been filed with the
Securities and Exchange Commission (the "SEC"). You can obtain a copy of the
Fund's Statement of Additional Information, dated June 10, 1996, and
incorporated by reference into this Prospectus, free of charge by writing or
telephoning: John Hancock Investor Services Corporation, P.O. Box 9116, Boston,
Massachusetts 02205-9116, 1-800-225-5291 (1-800-554-6713 TDD).
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

EXPENSE INFORMATION
The purpose of the following information is to help you to understand the
various fees and expenses you will bear, directly or indirectly, when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Fund's Class A
and Class B shares for the fiscal year ended March 31, 1996, adjusted to reflect
current fees and expenses. Actual fees and expenses in the future of Class A and
Class B shares may be greater or less than those indicated.

<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price)......................... 3.00 % None
Maximum sales charge imposed on reinvested dividends.................................................. None None
Maximum deferred sales charge......................................................................... None* 3.00 %
Redemption fee+....................................................................................... None None
Exchange fee.......................................................................................... None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management fee (after expense limitation)............................................................. 0.00 % 0.00 %
12b-1 fee**........................................................................................... 0.25 % 0.90 %
Other expenses (after expense reduction)***........................................................... 0.50 % 0.50 %
------- -------
Total Fund operating expenses (after expense limitation)(a)........................................... 0.75 % 1.40 %
</TABLE>

(a) Expenses reflect a temporary agreement by the Fund's investment adviser to
limit expenses, not including Rule 12b-1 fees or any other class-specific
expenses. Without such a limitation, the management fee, other expenses and
total fund operating expenses of the Class A and Class B shares,
respectively, would have been estimated as 0.40% and 0.40%; 0.77% and 0.77%;
and 1.42% and 2.07%.
* No sales charge is payable at the time of purchase on investments of $1
million or more, but for these investments a contingent deferred sales
charge may be imposed, in the event of certain redemption transactions
within one year of purchase.
** The amount of the 12b-1 fee used to cover service expenses will be up to
0.25% of the Class's average net assets, and the remaining portion will be
used to cover distribution expenses. The Fund's distributor agreed to reduce
Class B Rule 12b-1 fees to 0.90% of average net assets attributable to Class
B until December 31, 1996, after which these fees may be increased to as
much as 1.00% of such assets and total Fund operating expenses would be
2.17% of such assets.
*** Other Expenses include transfer agent, legal, audit, custody and other
expenses.
+ Redemption by wire fee (currently $4.00) not included.

<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment, assuming 5% annual return:
Class A Shares............................................................... $ 37 $53 $70 $120
Class B Shares
-- Assuming complete redemption at end of period......................... $ 44 $64 $69 $118
-- Assuming no redemption................................................ $ 14 $44 $69 $118
</TABLE>

(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.)

The Fund's payment of a distribution fee may result in a long-term shareholder
indirectly paying more than the economic equivalent of the maximum front-end
sales charge permitted under the National Association of Securities Dealers,
Rules of Fair Practice.

The management and 12b-1 fees referred to above are more fully explained in
this Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the captions "Investment Advisory and Other
Services" and "Distribution Contracts."

<PAGE>

THE FUND'S FINANCIAL HIGHLIGHTS
The following table of Financial Highlights has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose unqualified report is included in
the Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's Annual Report to Shareholders
that may be obtained free of charge by writing or telephoning John Hancock
Investor Services Corporation ("Investor Services") at the address or telephone
number listed on the front page of this Prospectus.
Selected data for shares of the Fund outstanding during the periods indicated
is as follows.

<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1991
YEAR ENDED MARCH 31 (COMMENCEMENT
---------------------------------------------------- OF OPERATIONS)
CLASS A 1996(E) 1995(D) 1994 1993 TO MARCH 31, 1992
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............. $ 9.79 $ 9.89 $ 10.05 $ 10.03 $ 10.00(b)
---------- ---------- ---------- ---------- -------
Net Investment Income............................. 0.62 0.49 0.41 0.58 0.17
Net Realized and Unrealized Gain (Loss) on
Investments..................................... (0.08) (0.11) (0.16) 0.02 0.03
---------- ---------- ---------- ---------- -------
Total from Investment Operations................ 0.54 0.38 0.25 0.60 0.20
---------- ---------- ---------- ---------- -------
Less Distributions:
Dividends from Net Investment
Income.......................................... (0.64) (0.48) (0.41) (0.58) (0.17)
---------- ---------- ---------- ---------- -------
Net Asset Value, End of Period.................... $ 9.69 $ 9.79 $ 9.89 $ 10.05 $ 10.03
======== ======== ======== ======== ==============
Total Investment Return at Net Asset Value(f)..... 5.60% 3.98% 2.51% 6.08% 1.96%(c)
Total Adjusted Investment Return at Net Asset
Value(a)(f)..................................... 4.83% 3.43% 2.27% 5.53% 0.84%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......... $ 29,024 $ 12,950 $ 24,310 $ 33,273 $13,775
Ratio of Expenses to Average Net Assets(e)........ 0.75% 0.80% 0.75% 0.50% 0.50%*
Ratio of Adjusted Expenses to Average Net
Assets(a)(e).................................... 1.45% 1.35% 0.99% 1.05% 1.62%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 6.49% 4.91% 4.09% 5.47% 6.47%*
Ratio of Adjusted Net Investment Income to Average
Net Assets(a)................................... 5.79% 4.36% 3.85% 4.92% 5.35%*
Portfolio Turnover Rate........................... 423%(g) 341% 244% 186% 1%
</TABLE>

* On an annualized basis.
(a) On an unreimbursed basis.
(b) Initial price to commence operations.
(c) Not annualized.
(d) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(e) Beginning on December 31, 1991 (commencement of operations) through March
31, 1995, the expenses used in the ratios represented the expenses of the
Fund plus expenses incurred indirectly from the Adjustable U.S. Government
Fund (the "Portfolio"), the mutual fund in which the Fund invested all of
its assets. On September 22, 1995, the Portfolio collapsed into the Fund and
the Fund changed its name to the John Hancock Intermediate Government Fund.
The expenses used in the ratios for the fiscal year ended March 31, 1996
include the expenses of the Portfolio through September 22, 1995.
(f) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(g) Portfolio turnover rate excludes merger activity.

<PAGE>

THE FUND'S FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1991
YEAR ENDED MARCH 31 (COMMENCEMENT
---------------------------------------------------- OF OPERATIONS)
CLASS B 1996 1995(e) 1994 1993 TO MARCH 31, 1992
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............. $ 9.79 $ 9.89 $ 10.05 $ 10.03 $ 10.00(b)
---------- ---------- ---------- ---------- ------
Net Investment Income............................. 0.57 0.43 0.34 0.51 0.15
Net Realized and Unrealized Gain (Loss) on
Investments..................................... (0.10) (0.11) (0.16) 0.02 0.03
---------- ---------- ---------- ---------- ------
Total from Investment Operations................ 0.47 0.32 0.18 0.53 0.18
---------- ---------- ---------- ---------- ------
Less Distributions:
Dividends from Net Investment
Income.......................................... (0.57) (0.42) (0.34) (0.51) (0.15)
---------- ---------- ---------- ---------- ------
Net Asset Value, End of Period.................... $ 9.69 $ 9.79 $ 9.89 $ 10.05 $ 10.03
======== ======== ======== ======== ==============
Total Investment Return at Net Asset Value(f)..... 4.92% 3.33% 1.85% 5.40% 1.80%(c)
Total Adjusted Investment Return at Net Asset
Value(a)(f)..................................... 4.15% 2.78% 1.61% 4.85% 0.68%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......... $ 8,532 $ 9,506 $ 11,626 $ 13,753 $ 1,630
Ratio of Expenses to Average Net Assets(e)........ 1.40% 1.45% 1.40% 1.15% 1.15%*
Ratio of Adjusted Expenses to Average Net
Assets(a)....................................... 2.10% 2.00% 1.64% 1.70% 2.27%*
Ratio of Net Investment Income to Average Net
Assets.......................................... 5.80% 4.26% 3.44% 4.82% 5.85%*
Ratio of Adjusted Net Investment Income to Average
Net Assets(a)................................... 5.10% 3.71% 3.20% 4.27% 4.73%*
Portfolio Turnover Rate........................... 423%(g) 341% 244% 186% 1%
</TABLE>

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to achieve a high level of current income,
consistent with preservation of capital and maintenance of liquidity. The Fund
seeks to achieve its investment objective by investing primarily in U.S.
Government securities, including mortgage-backed securities issued or guaranteed
by U.S. Government agencies. The Fund may also invest in medium-term debt
obligations of governmental issuers. Under normal market conditions, the Fund
intends to maintain a weighted average remaining maturity or remaining average
life of three to ten years. There is no assurance that the Fund will achieve its
investment objective.

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THE FUND SEEKS TO ACHIEVE A HIGH LEVEL OF
CURRENT INCOME, CONSISTENT WITH
PRESERVATION OF CAPITAL AND MAINTENANCE OF
LIQUIDITY.
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Under normal market conditions, the Fund intends to invest primarily (at least
65% of its total assets) in U.S. Government securities. U.S. Government
securities consist of the following:

1. U.S. Treasury obligations, which differ only in their interest rates,
maturities and time of issuance, including U.S. Treasury bills (maturity of
one year or less), U.S. Treasury notes (maturity of one to ten years), and
U.S. Treasury bonds (generally maturities greater than ten years); and

2. Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities which are supported by: (i) the full faith and credit of
the U.S. Government (e.g., securities issued by the Government National
Mortgage Association ("GNMA")); (ii) the right of the issuer to borrow an
amount limited to a specific line of credit from the U.S. Government (e.g.,
securities of the Federal Home Loan Bank Board); or (iii) the credit of the
instrumentality (e.g., bonds issued by the Federal Home Loan National
Mortgage Association ("FHLMC") or the Federal National Mortgage Association
("FNMA")).

GNMA, FHLMC and FNMA are mortgage-backed securities which provide monthly
payments that are, in effect, a "pass-through" of the monthly interest and
principal payments (including prepayments) made by the individual borrowers on
the pooled mortgage loans. The Fund's investments in mortgage-backed securities
may also include certain classes of multiple class collateralized mortgage
obligations and "stripped" mortgage-backed securities ("SMBS"). During periods
of declining interest rates, principal and interest on mortgage-backed
securities may be prepaid at faster-than-expected rates. The proceeds of these
prepayments typically can only be invested in lower-yielding securities.
Therefore, mortgage-backed securities may be less effective at maintaining
yields during periods of declining interest rates than traditional debt
obligations of similar maturity. Different types of mortgage-backed securities
are subject to different combinations of prepayment, extension, interest rate
and/or other market risks. See "Investments, Techniques and Risk Factors" for a
further discussion of U.S. Government securities and these risks.

Under normal conditions, the Fund may invest the remainder of its assets in
other U.S. Government securities and asset-backed securities and debt
obligations of corporate issuers each of which is rated in the highest rating
category by a

<PAGE>

nationally recognized statistical rating organization or, if unrated, determined
by the investment adviser to be of comparable quality.

The Fund may also buy and sell options contracts, financial futures contracts
and options on these futures contracts for hedging and non-hedging purposes.
These contracts may be based on securities and securities indices. All of the
Fund's futures contracts and options on futures contracts will be traded on a
U.S. commodity exchange or board of trade.

Options, futures contracts and mortgage-backed securities are generally
considered to be "derivative" instruments because they derive their value from
the performance of an underlying asset, index or other economic benchmark. See
"Investments, Techniques and Risk Factors" for additional discussion of
derivative instruments.

The Fund may also lend its portfolio securities; enter into repurchase
agreements, mortgage dollar rolls and reverse repurchase agreements; purchase
securities on a forward commitment or when-issued basis; and purchase restricted
and illiquid securities.

See "Investments, Techniques and Risk Factors" for more information about the
Fund's investments.

The Fund has adopted certain investment restrictions that are detailed in the
Statement of Additional Information where they are designated as fundamental or
nonfundamental. Those restrictions designated as fundamental may not be changed
without shareholder approval. The Fund's investment objective and its policies,
including its policy of investing at least 65% of its assets in U.S. Government
securities, are nonfundamental and may be changed by a vote of the Trustees
without shareholder approval.

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THE FUND FOLLOWS CERTAIN POLICIES WHICH
MAY HELP TO REDUCE INVESTMENT RISK.
- -------------------------------------------------------------------------------

When choosing brokerage firms to carry out the Fund's transactions, John Hancock
Advisers, Inc. (the "Adviser") gives primary consideration to execution at the
most favorable prices, taking into account the broker's professional ability and
quality of service. Consideration may also be given to the broker's sales of
Fund shares. Pursuant to procedures established by the Trustees, the Adviser may
place securities transactions with brokers affiliated with the Adviser. These
brokers include Tucker Anthony Incorporated, John Hancock Distributors, Inc. and
Sutro & Company Inc. They are indirectly owned by John Hancock Mutual Life
Insurance Company (the "Life Company"), which in turn indirectly owns the
Adviser.

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BROKERS ARE CHOSEN ON BEST PRICE AND
EXECUTION.
- -------------------------------------------------------------------------------

<PAGE>

ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is a diversified series of the Trust, an open-end management investment
company organized as a Massachusetts business trust in 1984. The Trust reserves
the right to create and issue a number of series of shares, or funds or classes
of these series, which are separately managed and have different investment
objectives. The Trustees have authorized the issuance of two classes of the
Fund, designated as Class A and Class B. The shares of each class represent an
interest in the same portfolio of investments of the Fund. Each class has equal
rights as to voting, redemption, dividends and liquidation. Class A and Class B
shareholders have exclusive voting rights with respect to their distribution
plans. The Fund is not required to hold annual meetings of shareholders although
special meetings may be held for such purposes as electing or removing Trustees,
changing fundamental policies or approving a management contract. The Fund,
under certain circumstances, will assist in shareholder communications with
other Fund shareholders.

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THE TRUSTEES ELECT OFFICERS AND RETAIN THE
INVESTMENT ADVISER WHO IS RESPONSIBLE FOR
THE DAY-TO-DAY OPERATIONS OF THE FUND,
SUBJECT TO THE TRUSTEES' POLICIES AND
SUPERVISION.
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The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the Life Company, a financial services company. The Adviser provides the Fund,
and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. John Hancock Funds, Inc.
("John Hancock Funds") distributes shares for all of the John Hancock funds
through selected broker-dealers ("Selling Brokers"). Certain Fund officers are
also officers of the Adviser and John Hancock Funds. Pursuant to an order
granted by the Securities and Exchange Commission, the Fund has adopted a
deferred compensation plan for its independent trustees which allows Trustees'
fees to be invested by the Fund in other John Hancock funds.

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JOHN HANCOCK ADVISERS, INC. ADVISES
INVESTMENT COMPANIES HAVING A TOTAL ASSET
VALUE OF MORE THAN $18 BILLION.
- -------------------------------------------------------------------------------

Roger Hamilton is primarily responsible for the management of the Fund and is
assisted by a team of portfolio managers and analysts. Mr. Hamilton is also a
member of the taxable fixed income investment management team for the Adviser
and has been associated with the Adviser since 1994. Previously, for five years,
he was a senior portfolio manager at Transamerica Fund Management Company.

In order to avoid conflicts with portfolio trades for the Fund, the Adviser and
the Fund have adopted extensive restrictions on personal securities trading by
personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their net asset value
per share plus a sales charge. At your election, this charge may be imposed
either at the time of the purchase (see "Initial Sales Charge Alternative --
Class A Shares") or on a contingent deferred basis (the "Contingent Deferred
Sales Charge Alternative -- Class B Shares"). If you do not specify on your
account application the class of shares you are purchasing, it will be assumed
that you are investing in Class A shares.

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AN ALTERNATIVE PURCHASE PLAN ALLOWS YOU TO
CHOOSE THE METHOD OF PAYMENT THAT IS BEST
FOR YOU.
- -------------------------------------------------------------------------------

<PAGE>

CLASS A SHARES. If you elect Class A shares, you will incur an initial sales
charge unless the amount you purchase is $1 million or more. If you purchase $1
million or more of Class A shares, you will not be subject to an initial sales
charge, but you will incur a sales charge if you redeem your shares within one
year of purchase. Class A shares are subject to ongoing distribution and service
fees at a combined annual rate of up to 0.25% of the Fund's average daily net
assets attributable to the Class A shares. Certain purchases of Class A shares
qualify for reduced initial sales charges. See "Share Price -- Qualifying for a
Reduced Sales Charge."

- -------------------------------------------------------------------------------
INVESTMENTS IN CLASS A SHARES ARE SUBJECT
TO AN INITIAL SALES CHARGE.
- -------------------------------------------------------------------------------

CLASS B SHARES. You will not incur a sales charge when you purchase Class B
shares, but the shares are subject to a sales charge if you redeem them within
four years of purchase (the "contingent deferred sales charge" or the "CDSC").
Class B shares are subject to ongoing distribution and service fees at a
combined annual rate of up to 1.00% of the Fund's average daily net assets
attributable to the Class B shares. John Hancock Funds and the Fund have agreed
until further notice to limit the Fund's 12b-1 fee for Class B shares to 0.90%
of the Fund's Class B average daily net assets. Investing in Class B shares
permits all of your dollars to work from the time you make your investment, but
the higher ongoing distribution fee will cause these shares to have higher
expenses than Class A shares. To the extent that any dividends are paid by the
Fund, these higher expenses will also result in lower dividends than those paid
on Class A shares.

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INVESTMENTS IN CLASS B SHARES ARE SUBJECT
TO A CONTINGENT DEFERRED SALES CHARGE.
- -------------------------------------------------------------------------------

Class B shares are not available for full-service defined contribution plans
administered by Investor Services or the Life Company that had more than 100
eligible employees at the inception of the Fund account.

FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE. The alternative purchase
arrangement allows you to choose the most beneficial way to buy shares, given
the amount of your purchase, the length of time you expect to hold your shares
and other circumstances. You should consider whether, during the anticipated
life of your Fund investment, the CDSC and accumulated fees on Class B shares
would be less than the initial sales charge and accumulated fees on Class A
shares purchased at the same time, and to what extent this differential would be
offset by the Class A shares' lower expenses. To help you make this
determination, the table under the caption "Expense Information" on the inside
cover page of this Prospectus gives examples of the charges applicable to each
class of shares. Class A shares normally will be more beneficial if you qualify
for reduced sales charges. See "Share Price -- Qualifying for a Reduced Sales
Charge."

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YOU SHOULD CONSIDER WHICH CLASS OF SHARES
WILL BE MORE BENEFICIAL TO YOU.
- -------------------------------------------------------------------------------

Class A shares are subject to lower distribution and service fees and,
accordingly, pay correspondingly higher dividends per share, to the extent that
any dividends are paid. However, because initial sales charges are deducted at
the time of purchase, you would not have all of your funds invested initially
and, therefore, would initially own fewer shares. If you do not qualify for
reduced initial sales charges and expect to maintain your investment for an
extended period of time, you might consider purchasing Class A shares. This is
because the accumulated distribution and service charges on Class B shares may
exceed the initial sales

<PAGE>

charge and accumulated distribution and service charges on Class A shares during
the life of your investment.

Alternatively, you might determine that it is more advantageous to purchase
Class B shares to have all of your funds invested initially. However, you will
be subject to higher distribution fees and, for a four-year period, a CDSC.

In the case of Class A shares, the distribution expenses that John Hancock Funds
incurs in connection with the sale of the shares will be paid from the proceeds
of the initial sales charge and ongoing distribution and service fees. In the
case of Class B shares, the expenses will be paid from the proceeds of the
ongoing distribution and service fees, as well as from the CDSC incurred upon
redemption within four years of purchase. The purpose and function of the Class
B shares' CDSC and ongoing distribution and service fees are the same as those
of the Class A shares' initial sales charge and ongoing distribution and service
fees. Sales personnel distributing the Fund's shares may receive different
compensation for selling each class of shares.

Dividends, if any, on Class A and Class B shares will be calculated in the same
manner, at the same time and on the same day. They also will be in the same
amount, except for differences resulting from each class bearing only its own
distribution and service fees and shareholder meeting expenses. See "Dividends
and Taxes."

THE FUND'S EXPENSES

For managing its investment and business affairs, the Fund pays a monthly fee to
the Adviser equal to 0.40%.

During the Fund's fiscal year ended March 31, 1996, the advisory fee paid by the
Fund was equal to 0.00% of the Fund's average daily net assets, reflecting the
agreement by the Adviser and the former investment adviser to reduce operating
expenses and not to impose a portion of the management fee during that year. The
Adviser has temporarily agreed to continue to limit the Fund's aggregate
operating expenses until December 31, 1996 and not to impose its management fee
or to make other arrangements to the extent necessary to limit the total of the
management fees and the aggregate operating expenses of the Fund to 0.75% and
1.40% of the average net assets attributable to the Class A and Class B shares,
respectively.

The Class A and Class B shareholders have adopted distribution plans (each a
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). Under these Plans, the Fund will pay distribution and service fees
at an aggregate annual rate of up to 0.25% of the Class A shares' average daily
net assets and an aggregate annual rate of up to 1.00% of the Class B shares'
average daily net assets. The Fund's distributor agreed to reduce the
distribution and services fees pursuant to the Class B Plan to 0.90% of average
daily net assets. In each case, up to 0.25% is for service expenses and the
remaining amount is for distribution expenses. The distribution fees will be
used to reimburse John Hancock Funds for its distribution expenses, including
but not limited to: (i) initial

- -------------------------------------------------------------------------------
THE FUND PAYS DISTRIBUTION AND SERVICE
FEES FOR MARKETING AND SALES-RELATED
SHAREHOLDER SERVICING.
- -------------------------------------------------------------------------------

<PAGE>
and ongoing sales compensation to Selling Brokers and others (including
affiliates of John Hancock Funds) engaged in the sale of Fund shares; (ii)
marketing, promotional and overhead expenses incurred in connection with the
distribution of Fund shares; (iii) unreimbursed distribution expenses under the
Fund's prior distribution plans; (iv) distribution expenses incurred by other
investment companies which sell all or substantially all of their assets to,
merge with or otherwise engage in a reorganization transaction with the Fund;
and (v) with respect to Class B shares only, interest expenses on unreimbursed
distribution expenses. The service fees are paid to compensate Selling Brokers
and others for providing personal and account maintenance services to
shareholders.

In the event John Hancock Funds is not fully reimbursed for payments it makes or
expenses it incurs under the Class A Plan, these expenses will not be carried
beyond one year from the date they were incurred. These unreimbursed expenses
under the Class B Plan will be carried forward together with interest on the
balance of these unreimbursed expenses.

For the fiscal year ended March 31, 1996, an aggregate of $289,146 of
distribution expenses or 3.12% of the average net assets of the Fund's Class B
shares was not reimbursed or recovered by John Hancock Funds through the receipt
of deferred sales charges or Rule 12b-1 fees in prior periods.

Information on the Fund's total expenses is in the Financial Highlights section
of this Prospectus.

DIVIDENDS AND TAXES
DIVIDENDS. Dividends from the Fund's net investment income are generally
declared daily and distributed monthly. The Fund will distribute net realized
long-term and short-term capital gains, if any, at least annually.

Dividends are reinvested in additional shares of your class unless you elect the
option to receive cash. If you elect the cash option and the U.S. Postal Service
cannot deliver your checks, your election will be converted to the reinvestment
option. Because of the higher expenses associated with Class B shares, any
dividend on these shares will be lower than those on the Class A shares. See
"Share Price."

TAXATION. Dividends from the Fund's net investment income and net short-term
capital gains are taxable to you as ordinary income. Dividends from the Fund's
net long-term capital gains are taxable as long-term capital gains. These
dividends are taxable whether received in cash or reinvested in additional
shares. Certain dividends may be paid in January of a given year but may be
taxable as if you received them the previous December. The Fund will send you a
statement by January 31 showing the tax status of the dividends you received for
the prior year.

The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a regulated investment company, the Fund will not be
subject to Federal income tax on any net investment income and net realized
capital gains

<PAGE>

that are distributed to its shareholders within the time period prescribed by
the Code. When you redeem (sell) or exchange shares, you may realize a taxable
gain or loss.

On the account application, you must certify that the social security or other
taxpayer identification number you provide is correct and that you are not
subject to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, the Fund may be
required to withhold 31% of your dividends and the proceeds of redemptions and
exchanges.

In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investment in and distributions from the Fund. In
many states, a portion of the Fund's dividends that represent interest received
by the Fund on direct U.S. Government obligations may be exempt from tax.
Non-U.S. shareholders and tax-exempt shareholders are subject to a different tax
treatment not described above. You should consult your tax adviser for specific
advice.

PERFORMANCE
Yield reflects the Fund's rate of income on portfolio investments as a
percentage of its share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30 day period by the maximum
offering price per share on the last day of that period. Yield is also
calculated according to accounting methods that are standardized for all stock
and bond funds. Because yield accounting methods differ from the methods used
for other accounting purposes, the Fund's yield may not equal the income paid on
shares or the income reported in the Fund's financial statements.

- -------------------------------------------------------------------------------
THE FUND MAY ADVERTISE ITS YIELD AND TOTAL
RETURN.
- -------------------------------------------------------------------------------

Total return shows the overall dollar or percentage change in value of a
hypothetical investment in the Fund, assuming the reinvestment of all dividends.
Cumulative total return shows the Fund's performance over a period of time.
Average annual total return shows the cumulative return divided by the number of
years included in the period. Because average annual total return tends to
smooth out variations in the performance, you should recognize that it is not
the same as actual year-to-year results.

Both total return and yield calculations for Class A shares generally include
the effect of paying the maximum sales charge of 3% (except as shown in "The
Fund's Financial Highlights"). Investments at a lower sales charge would result
in higher performance figures. Total return and yield for the Class B shares
reflect the deduction of the applicable CDSC imposed on a redemption of shares
held for the applicable period. All calculations assume that all dividends are
reinvested at net asset value on the reinvestment dates during the periods.
Total return and yield of Class A and Class B shares will be calculated
separately and, because each class is subject to different expenses, the total
return or yield with respect to each class for the same period may differ. The
relative performance of the Class A and Class B shares will be affected by a
variety of factors, including the higher operating expenses attributable to the
Class B shares, whether the Fund's investment performance is better in the
earlier or later portions of the period

<PAGE>

measured and the level of net assets of the classes during the period. The Fund
will include the total return of both classes in any advertisement or
promotional materials including Fund performance data. The value of Fund's
shares, when redeemed, may be more or less than their original cost. Both yield
and total return are historical calculations, and are not an indication of
future performance. See "Alternative Purchase Arrangements -- Factors to
Consider in Choosing an Alternative."

HOW TO BUY SHARES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
The minimum initial investment is $1,000 ($250 for group investments and
retirement plans). Complete the Account Application attached to this Prospectus.
Indicate whether you are purchasing Class A or Class B shares. If you do not
specify which class of shares you are purchasing, Investor Services will assume
that you are investing in Class A shares.
</TABLE>

- -------------------------------------------------------------------------------
OPENING AN ACCOUNT
- -------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation, P.O. Box 9115
Boston, MA, 02205-9115.
2. Deliver the completed application and check to your registered
representative or Selling Broker or mail it directly to
Investor Services.
- ---------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative or Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Intermediate Maturity Government
Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative or Selling Broker or mail it directly to
Investor Services.
</TABLE>

- -------------------------------------------------------------------------------
BUYING ADDITIONAL CLASS A AND CLASS B
SHARES
- -------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
MONTHLY 1. Complete the "Automatic Investing" and "Bank Information"
AUTOMATIC sections on the Account Privileges Application, designating a
ACCUMULATION bank account from which funds may be drawn.
PROGRAM 2. The amount you elect to invest will be withdrawn automatically
(MAAP) from your bank or credit union account.
- ---------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information" sections
on the Account Privileges Application, designating a bank
account from which your funds may be drawn. Note that in order
to invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House system
(ACH).
2. After your authorization form has been processed, you may
purchase additional Class A or Class B shares by calling
Investor Services toll-free 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, the class of shares
you own, your account number, and the amount you wish to
invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- ---------------------------------------------------------------------------------
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C>
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, the class of shares you own, your account
number and the name(s) in which the account is registered.
2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
- ---------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Intermediate Maturity Government
Fund
Class A or Class B shares
Your Account Number
Name(s) under which account is registered
- ---------------------------------------------------------------------------------
Other Requirements: All purchases must be made in U.S. dollars. Checks written on
foreign banks will delay purchases until U.S. funds are received, and a collection
charge may be imposed. Shares of the Fund are priced at the offering price based
on the net asset value computed after Investor Services receives notification of
the dollar equivalent from the Fund's custodian bank. Wire purchases normally take
two or more hours to complete and, to be accepted the same day, must be received
by 4:00 P.M., New York time. Your bank may charge a fee to wire funds. Telephone
transactions are recorded to verify information. Certificates are not issued
unless a request is made in writing to Investor Services.
- ---------------------------------------------------------------------------------
</TABLE>

You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.

- -------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS THAT
YOU SHOULD KEEP TO HELP WITH YOUR PERSONAL
RECORDKEEPING.
- -------------------------------------------------------------------------------

SHARE PRICE
The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of each class by the number of outstanding
shares of that class. The NAV of each class can differ. Securities in the Fund's
portfolio are valued on the basis of market quotations, valuations provided by
independent pricing services or at fair value as determined in good faith
according to procedures approved by the Trustees. Short-term debt investments
maturing within 60 days are valued at amortized cost, which the Board of
Trustees has determined to approximate market value. The NAV is calculated once
daily as of the close of regular trading on the New York Stock Exchange (the
"Exchange") (generally at 4:00 P.M., New York time) on each day that the
Exchange is open.

- -------------------------------------------------------------------------------
THE OFFERING PRICE OF YOUR SHARES IS THEIR
NET ASSET VALUE PLUS A SALES CHARGE, IF
APPLICABLE, WHICH WILL VARY WITH THE
PURCHASE ALTERNATIVE YOU CHOOSE.
- -------------------------------------------------------------------------------

Shares of the Fund are sold at the offering price based on the NAV computed
after your investment request is received in good order by John Hancock Funds.
If you buy shares of the Fund through a Selling Broker, the Selling Broker must
receive your investment before the close of regular trading on the Exchange and
transmit it

<PAGE>

to John Hancock Funds before its close of business to receive that day's
offering price.

INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES. The offering price you pay
for Class A shares of the Fund equals the NAV plus a sales charge as follows:

<TABLE>
<CAPTION>
COMBINED
SALES CHARGE AS REALLOWANCE REALLOWANCE TO
AMOUNT INVESTED SALES CHARGE AS A PERCENTAGE OF AND SERVICE FEE AS SELLING BROKERS AS
(INCLUDING SALES A PERCENTAGE OF THE AMOUNT A PERCENTAGE OF A PERCENTAGE OF
CHARGE) OFFERING PRICE INVESTED OFFERING PRICE(+) THE OFFERING PRICE(*)
- ------------------------------------- --------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.50% 2.26%
$100,000 to $499,999 2.50% 2.56% 2.25% 2.01%
$500,000 to $999,999 2.00% 2.04% 1.75% 1.51%
$1,000,000 and over 0.00%(**) 0.00(**) (***) 0.00(***)
</TABLE>

(*) Upon notice to Selling Brokers with whom it has sales agreements, John
Hancock Funds may reallow an amount up to the full applicable sales
charge. A Selling Broker to whom substantially the entire sales charge is
reallowed may be deemed to be an underwriter under the Securities Act of
1933.

(**) No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions within one year of purchase.

(***) John Hancock Funds may pay a commission and the first year's service
fee (as described in (+) below) to Selling Brokers who initiate and
are responsible for purchases of Class A shares of $1 million or more
in aggregate as follows: 1% on sales to $4,999,999, 0.50% on the next
$5 million and 0.25% on amounts of $10 million and over.

(+) At the time of sale, John Hancock Funds pays to Selling Brokers the first
year's service fee in advance in an amount equal to 0.25% of the net
assets invested in the Fund. Thereafter, it pays the service fee
periodically in arrears in an amount up to 0.25% of the Fund's average
annual net assets. Selling Brokers receive the fee as compensation for
providing personal and account maintenance services to shareholders.

Sales charges ARE NOT APPLIED to any dividends that are reinvested in additional
Class A shares of the Fund.

In addition, John Hancock Funds will pay certain affiliated Selling Brokers at
an annual rate of up to 0.05% of the daily net assets of accounts attributable
to these brokers.

Under certain circumstances described below, investors in Class A shares may be
entitled to pay reduced sales charges. See "Qualifying for a Reduced Sales
Charge."

CONTINGENT DEFERRED SALES CHARGE -- INVESTMENTS OF $1 MILLION OR MORE IN CLASS A
SHARES. Purchases of $1 million or more of the Fund's Class A shares will be
made at net asset value with no initial sales charge, but if the shares are
redeemed within 12 months after the end of the calendar month in which the

<PAGE>

purchase was made (the CDSC period), a CDSC will be imposed. The rate of the
CDSC will depend on the amount invested as follows:

<TABLE>
<CAPTION>
AMOUNT INVESTED CDSC RATE
- ---------------------------------------------------------------------------------
<S> <C>
$1 million to $4,999,999................................................ 1.00%
Next $5 million to $9,999,999........................................... 0.50%
Amounts of $10 million and over......................................... 0.25%
</TABLE>

Existing full service clients of the Life Company who were group annuity
contract holders as of September 1, 1994 and participant directed defined
contribution plans with at least 100 eligible employees at the inception of the
Fund account, may purchase Class A shares with no initial sales charge. However,
if the shares are redeemed within 12 months after the end of the calendar year
in which the purchase was made, a CDSC will be imposed at the above rate.

The CDSC will be assessed on an amount equal to the lesser of the current market
value or the original purchase cost of the redeemed Class A shares. Accordingly,
no CDSC will be imposed on increases in account value above the initial purchase
price, including any distributions which have been reinvested in additional
Class A shares.

In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
Therefore, it will be assumed that the redemption is first made from any shares
in your account that are not subject to the CDSC. The CDSC is waived on
redemptions in certain circumstances. See "Waiver of Contingent Deferred Sales
Charges" below.

QUALIFYING FOR A REDUCED SALES CHARGE. If you invest more than $100,000 in
Class A shares of the Fund or a combination of John Hancock funds (except money
market funds), you may qualify for a reduced sales charge on your investments in
Class A shares through a LETTER OF INTENTION. You may also be able to use the
ACCUMULATION PRIVILEGE and the COMBINATION PRIVILEGE to take advantage of the
value of your previous investments in shares of the John Hancock funds in
meeting the breakpoints for a reduced sales charge. For the ACCUMULATION and
COMBINATION PRIVILEGE, the applicable sales charge will be based on the total
of:

- -------------------------------------------------------------------------------
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE
ON YOUR INVESTMENT IN CLASS A SHARES.
- -------------------------------------------------------------------------------

1. Your current purchase of Class A shares of the Fund;

2. The net asset value (at the close of business on the previous day) of (a) all
Class A shares of the Fund you hold, and (b) all Class A shares of any other
John Hancock funds you hold; and

3. The net asset value of all shares held by another shareholder eligible to
combine his or her holdings with you into a single "purchase."

EXAMPLE:
If you hold Class A shares of a John Hancock fund with a net asset value of
$20,000 and, subsequently, invest $80,000 in Class A shares of the Fund, the
sales charge on this subsequent investment would be 2.50% and not 3.00%. (The

<PAGE>

rate that would otherwise be applicable to investments of less than $100,000.
See "Initial Sales Charge Alternative -- Class A Shares.")

If you are in one of the following categories, you may purchase Class A shares
of the Fund without paying a sales charge:
- - A Trustee or officer of the Trust; a Director or officer of the Adviser and
its affiliates or Selling Brokers; employees or sales representatives of any
of the foregoing; retired officers, employees or Directors of any of the
foregoing; a member of the immediate family of any of the foregoing; or any
fund, pension, profit sharing or other benefit plan for the individuals
described above.

- -------------------------------------------------------------------------------
CLASS A SHARES MAY BE AVAILABLE WITHOUT A
SALES CHARGE TO CERTAIN INDIVIDUALS AND
ORGANIZATIONS.
- -------------------------------------------------------------------------------
- - Any state, county, city or any instrumentality, department, authority, or
agency of these entities that is prohibited by applicable investment laws from
paying a sales charge or commission when it purchases shares of any registered
investment management company.*
- - A bank, trust company, credit union, savings institution or other type of
depository institution, its trust departments or common trust funds if it is
purchasing $1 million or more for non-discretionary customers or accounts.*
- - A broker, dealer, financial planner, consultant or registered investment
adviser that has entered into an agreement with John Hancock Funds providing
specifically for the use of Fund shares in fee-based investment products or
services made available to their clients.
- - A former participant in an employee benefit plan with John Hancock Funds, when
he or she withdraws from his or her plan and transfers any or all of his or
her plan distributions directly to the Fund.
- - A member of an approved affinity group financial services plan.*

- ------------------
*For investments made under these provisions, John Hancock Funds may make a
payment out of its own resources to the Selling Broker in an amount not to
exceed 0.25% of the amount invested.

Class A shares of the Fund may be purchased without an initial sales charge in
connection with certain liquidation, merger or acquisition transactions
involving other investment companies or personal holding companies.

CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES. Class B shares
are offered at net asset value per share without an initial sales charge, so
that your entire investment will go to work at the time of purchase. However,
Class B shares redeemed within four years of purchase will be subject to a CDSC
at the rates set forth below. The charge will be assessed on an amount equal to
the lesser of the current market value or the original purchase cost of the
shares being redeemed. Accordingly, you will not be assessed a CDSC on increases
in account value above the initial purchase price, including shares derived from
dividend reinvestment.

In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the four-year CDSC redemption period or those you acquired through

<PAGE>

dividend reinvestment, and next from the shares you have held the longest during
the four-year period. The CDSC is waived on redemptions in certain
circumstances. See the discussion "Waiver of Contingent Deferred Sales Charges"
below.

EXAMPLE:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 shares at this time, your CDSC will be calculated as follows:

<TABLE>
<S> <C>
- - Proceeds of 50 shares redeemed at $12 per share........................ $600
- - Minus proceeds of 10 shares not subject to CDSC because they were
acquired through dividend reinvestment (10 x $12)...................... -120
- - Minus appreciation on remaining shares, also not subject to CDSC (40 x
$2).................................................................... -80
----
- - Amount subject to CDSC................................................. $400
</TABLE>

Proceeds from the CDSC are paid to John Hancock Funds. John Hancock Funds uses
them to defray its expenses related to providing the Fund with distribution
services in connection with the sale of Class B shares, such as compensating
Selling Brokers for selling these shares. The combination of the CDSC and the
distribution and service fees makes it possible for the Fund to sell Class B
shares without an initial sales charge.

The amount of the CDSC, if any, will vary depending on the number of years from
the time you purchase your Class B shares until the time you redeem them. Solely
for determining this holding period, any payment you make during the month will
be aggregated and deemed to have been made on the last day of the month.

YEAR IN WHICH
CLASS B SHARES CONTINGENT DEFERRED SALES
REDEEMED FOLLOWING CHARGE AS A PERCENTAGE OF
PURCHASE DOLLAR AMOUNT SUBJECT TO CDSC
- ----------------------------------------------------------------------------------
<S> <C>
First 3.0%
Second 2.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
</TABLE>

A commission equal to 2.75% of the amount invested and a first year's service
fee equal to 0.25% of the amount invested are paid to Selling Brokers. The
initial service fee is paid in advance at the time of sale for the provision of
personal and account maintenance services to shareholders during the twelve
months following the sale, and thereafter the service fee is paid in arrears.

<PAGE>

WAIVER OF CONTINGENT DEFERRED SALES CHARGES. The CDSC will be waived on
redemptions of Class B shares and of Class A shares that are subject to a CDSC,
unless indicated otherwise, in the circumstances defined below:

- - Redemptions of Class B shares made under a Systematic Withdrawal Plan (see
"How to Redeem Shares"), as long as your annual redemptions do not exceed 10%
of your account value at the time you established your Systematic Withdrawal
Plan and 10% of the value of your subsequent investments (less redemptions) in
that account at the time you notify Investor Services. This waiver does not
apply to Systematic Withdrawal Plan redemptions of Class A shares that are
subject to a CDSC.

- -------------------------------------------------------------------------------
UNDER CERTAIN CIRCUMSTANCES, THE CDSC ON
CLASS B AND CLASS A SHARE REDEMPTIONS WILL
BE WAIVED.
- -------------------------------------------------------------------------------
- - Redemptions made to effect distributions from an Individual Retirement Account
either before or after age 59 1/2, as long as the distributions are based on
your life expectancy or the joint-and-last survivor life expectancy of you and
your beneficiary. These distributions must be free from penalty under the
Code.

- - Redemptions made to effect mandatory distributions under the Code after age
70 1/2 from a tax-deferred retirement plan.

- - Redemptions made to effect distributions to participants or beneficiaries from
certain employer-sponsored retirement plans including those qualified under
Section 401(a) of the Code, custodial accounts under Section 403(b)(7) of the
Code and deferred compensation plans under Section 457 of the Code. The waiver
also applies to certain returns of excess contributions made to these plans.
In all cases, the distributions must be free from penalty under the Code.

- - Redemptions due to death or disability.

- - Redemptions made under the Reinvestment Privilege, as described in "Additional
Services and Programs" of this Prospectus.

- - Redemptions made pursuant to the Fund's right to liquidate your account if you
have less than $100 invested in the Fund.

- - Redemptions made in connection with certain liquidation, merger or acquisition
transactions involving other investment companies or personal holding
companies.

- - Redemptions from certain IRA and retirement plans that purchased shares prior
to October 1, 1992.

If you qualify for a CDSC waiver under one of these situations, you must notify
Investor Services either directly or through your Selling Broker at the time you
make your redemption. The waiver will be granted once Investor Services has
confirmed that you are entitled to the waiver.

<PAGE>

CONVERSION OF CLASS B SHARES. Your Class B shares and an appropriate portion of
reinvested dividends on those shares will be converted into Class A shares
automatically. This will occur no later than the month following four years
after the shares were purchased, and will result in lower annual distribution
fees. If you exchanged Class B shares into this Fund from another John Hancock
fund, the calculation will be based on the time you purchased the shares in the
original fund. The Fund has been advised that the conversion of Class B shares
into Class A shares of the Fund should not be taxable for Federal income tax
purposes and should not change a shareholder's tax basis or tax holding period
for the converted shares.

HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Investor Services, less any applicable CDSC. The Fund
may hold payment until reasonably satisfied that investments recently made by
check or Invest-by-Phone have been collected (which may take up to 10 calendar
days).

- -------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION
REQUEST, PLEASE FOLLOW THESE PROCEDURES.
- -------------------------------------------------------------------------------

Once your shares are redeemed, the Fund generally sends you payment on the next
business day. When you redeem your shares, you may realize a taxable gain or
loss depending usually on the difference between what you paid for them and what
you receive for them, subject to certain tax rules. Under unusual circumstances,
the Fund may suspend redemptions or postpone payment for up to three business
days or longer, as permitted by Federal securities laws.
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
BY TELEPHONE All Fund shareholders are eligible automatically for the
telephone redemption privilege. Call 1-800-225-5291, from 8:00
A.M. to 4:00 P.M. (New York time), Monday through Friday,
excluding days on which the Exchange is closed. Investor Services
employs the following procedures to confirm that instructions
received by telephone are genuine. Your name, the account number,
taxpayer identification number applicable to the account and
other relevant information may be requested. In addition,
telephone instructions are recorded.

You may redeem up to $100,000 by telephone, but the address on
the account must not have changed for the last thirty days. A
check will be mailed to the exact name(s) and address shown on
the account.

If reasonable procedures, such as those described above, are not
followed, the Fund may be liable for any loss due to unauthorized
or fraudulent telephone instructions. In all other cases, neither
the Fund nor Investor Services will be liable for any loss or
expense for acting upon telephone instructions made according to
the telephone transaction procedures mentioned above.

Telephone redemption is not available for IRAs or other
tax-qualified retirement plans or shares of the Fund that are in
certificated form.

During periods of extreme economic conditions or market changes,
telephone requests may be difficult to implement due to a large
volume of calls. During these times, you should consider placing
redemption requests in writing or use EASI-Line. EASI-Line's
telephone number is 1-800-338-8080.
- ---------------------------------------------------------------------------------
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY WIRE If you have a telephone redemption form on file with the Fund,
redemption proceeds of $1,000 or more can be wired on the next
business day to your designated bank account, and a fee
(currently $4.00) will be deducted. You may also use electronic
funds transfer to your assigned bank account, and the funds are
usually collectible after two business days. Your bank may or may
not charge a fee for this service. Redemptions of less than
$1,000 will be sent by check or electronic funds transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
included with this Prospectus.
- ---------------------------------------------------------------------------------
IN WRITING Send a stock power or "letter of instruction" specifying the name
of the Fund, the dollar amount or the number of shares to be
redeemed, your name, class of shares, your account number and the
additional requirements listed below that apply to your
particular account.
</TABLE>
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
TYPE OF
REGISTRATION REQUIREMENTS
------------- -----------------------------------------------------------------
<S> <C> <C>
Individual, Joint Tenants, Sole A letter of instruction signed (with titles
Proprietorship, Custodial where applicable) by all persons authorized
(Uniform Gifts or Transfer to to sign for the account, exactly as it is
Minors Act), General Partners registered with the signature(s) guaranteed.
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s) authorized
to act on the account with the signature(s)
guaranteed.
Trusts A letter of instruction signed by the
trustee(s) with the signature(s) guaranteed.
(If the trustee's name is not registered on
your account, also provide a copy of the
trust document, certified within the last 60
days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
</TABLE>

- --------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR SIGNATURE.
- -------------------------------------------------------------------------------

A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. If the net asset value of the shares redeemed is $100,000 or less, John
Hancock Funds may guarantee the signature. The following institutions may
provide you with a signature guarantee, provided that the institution meets
credit standards established by Investor Services: (i) a bank; (ii) a securities
broker or dealer, including a government or municipal securities broker or
dealer, that is a member of a clearing corporation or meets certain net capital
requirements; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency.

- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------

THROUGH YOUR BROKER. Your broker may be able to initiate the redemption. Contact
your broker for instructions.

If you have certificates for your shares, you must submit them with your stock
power or a letter of instructions. Unless you specify to the contrary, any
outstanding Class A shares will be redeemed before Class B shares. You may not
redeem certificated shares by telephone. Due to the proportionately high cost of
maintaining small accounts, the Fund reserves the right to redeem at net asset
value all shares in an account which holds less than $100 (except accounts under
retirement plans) and to mail the proceeds to the shareholder, or the transfer
agent may impose an annual fee of $10.00. No account will be involuntarily
redeemed or additional fee imposed, if the value of the account is in excess of
the Fund's minimum initial investment or if the value of the account falls below
the required minimum as a result of market action. No CDSC will be imposed on
involuntary redemptions of shares. Shareholders will be notified before these
redemptions are to be made or this fee is imposed, and will have 30 days to
purchase additional shares to bring their account balance to the required
minimum. Unless the number of shares acquired by additional purchases and any
dividend reinvestments, if any, exceeds the number of shares redeemed, repeated
redemptions from a smaller account may eventually trigger this policy.
- --------------------------------------------------------------------------------

<PAGE>

ADDITIONAL SERVICES AND PROGRAMS

EXCHANGE PRIVILEGE
If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of the Fund only for shares of the same class of another John Hancock fund. For
this purpose, John Hancock funds with only one class of shares will be treated
as Class A, whether or not they have been so designated.

- -------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF THE FUND FOR
SHARES OF THE SAME CLASS OF ANOTHER
JOHN HANCOCK FUND.
- -------------------------------------------------------------------------------

Exchanges between funds that are not subject to a CDSC are based on their
respective net asset values. No sales charge or transaction charge is imposed.
Class B shares of the Fund that are subject to a CDSC may be exchanged into
Class B shares of another John Hancock fund without incurring the CDSC; however,
these shares will be subject to the CDSC schedule of the shares acquired (except
that exchanges into this Fund, John Hancock Short-Term Strategic Income Fund and
John Hancock Limited-Term Government Fund will be subject to the initial fund's
CDSC). For purposes of computing the CDSC payable upon redemption of shares
acquired in an exchange, the holding period of the original shares is added to
the holding period of the shares acquired in an exchange. However, if you
exchange Class B shares purchased prior to January 1, 1994 for Class B shares of
any other John Hancock Fund, you will be subject to the CDSC schedule in effect
on your initial purchase date.

The Fund reserves the right to require that you keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted a
new exchange. The Fund may also terminate or alter the terms of the exchange
privilege, upon 60 days' notice to shareholders.

An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal income tax purposes. An exchange may
result in a taxable gain or loss.

When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.

Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and John Hancock Funds' right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.

Because Fund performance and shareholders can be hurt by excessive trading, the
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that

<PAGE>

coincide with a "market timing" strategy that may disrupt the Fund's ability to
invest effectively according to its investment objective and policies, or might
otherwise affect the Fund and its shareholders adversely. The Fund may also
temporarily or permanently terminate the exchange privilege for any person who
makes seven or more exchanges out of the Fund per calendar year. Accounts under
common control or ownership will be aggregated for this purpose. Although the
Fund will attempt to give you prior notice whenever it is reasonably able to do
so, it may impose these restrictions at any time.

BY TELEPHONE
1. When you complete the application for your initial purchase of Fund shares,
you authorize exchanges automatically by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.

2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.

3. Your name, the account number, taxpayer identification number applicable to
the account and other relevant information may be requested. In addition,
telephone instructions are recorded.

IN WRITING
1. In a letter, request an exchange and list the following:
-- the name and class of the Fund whose shares you currently own

-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or dollar amount you wish to exchange
Sign your request exactly as the account is registered.
2. Mail the request and information to:

John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116

<PAGE>

REINVESTMENT PRIVILEGE
1. You will not be subject to a sales charge on Class A shares that you reinvest
in a John Hancock fund that is otherwise subject to a sales charge, as long
as you reinvest within 120 days of the redemption date. If you paid a CDSC
upon a redemption, you may reinvest at net asset value in the same class of
shares from which you redeemed within 120 days. Your account will be credited
with the amount of the CDSC previously charged, and the reinvested shares
will continue to be subject to a CDSC. For purposes of computing the CDSC
payable upon a subsequent redemption, the holding period of the shares
acquired through reinvestment will include the holding period of the redeemed
shares.

- -------------------------------------------------------------------------------
IF YOU REDEEM SHARES OF
THE FUND, YOU MAY BE ABLE
TO REINVEST ALL OR PART OF
THE PROCEEDS IN SHARES OF
THIS FUND OR ANOTHER
JOHN HANCOCK FUND WITHOUT PAYING AN
ADDITIONAL SALES CHARGE.
- -------------------------------------------------------------------------------

2. Any portion of your redemption may be reinvested in Fund shares or in shares
of other John Hancock funds, subject to the minimum investment limit of that
fund.

3. To reinvest, you must notify Investor Services in writing. Include the Fund's
name, the account number and class from which your shares were originally
redeemed.

SYSTEMATIC WITHDRAWAL PLAN
1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain this application from your registered representative or by
calling 1-800-225-5291.

2. To be eligible, you must have at least $5,000 in your account.

- -------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS FROM YOUR
ACCOUNT, OR MAKE PERIODIC DISBURSEMENTS
FROM YOUR RETIREMENT ACCOUNT TO COMPLY
WITH IRS REGULATIONS.
- -------------------------------------------------------------------------------

3. Payments from your account can be made monthly, quarterly, semi-annually or
annually or on a selected monthly basis to yourself or any other designated
payee.

4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.

5. It is not advantageous to maintain a Systematic Withdrawal Plan concurrently
with purchases of additional Class A or Class B shares, because you may be
subject to an initial sales charges on your purchases of Class A shares or to
a CDSC on your redemptions of Class B shares. In addition, your redemptions
are taxable events.

6. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks or if deposits to a bank account are returned for any reason.

MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)

1. You can authorize an investment to be withdrawn automatically each month on
your bank for investment in Fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.

- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND
SIMPLIFY YOUR INVESTING.
- -------------------------------------------------------------------------------

<PAGE>

2. You can also authorize automatic investment through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.

3. You can terminate your Monthly Automatic Accumulation Program at any time.

4. There is no charge to you for this program, and there is no cost to the Fund.

5. If you have payments withdrawn from a bank account and we are notified that
the account has been closed, your withdrawals will be discontinued.

GROUP INVESTMENT PROGRAM

1. An individual account will be established for each participant, but the
initial sales charge for Class A shares will be based on the aggregate dollar
amount of all participants' investments. To determine how to qualify for this
program, contact your registered representative or call 1-800-225-5291.

- -------------------------------------------------------------------------------
ORGANIZED GROUPS OF AT LEAST FOUR PERSONS
MAY ESTABLISH ACCOUNTS.
- -------------------------------------------------------------------------------

2. The initial aggregate investment of all participants in the group must be at
least $250.

3. There is no additional charge for this program. There is no obligation to
make investments beyond the minimum, and you may terminate the program at any
time.

RETIREMENT PLANS

1. You may use the Fund for various types of qualified retirement plans, such as
Individual Retirement Accounts, Keogh plans (H.R. 10), pension and profit
sharing plans (including 401(k) plans), Tax Sheltered Annuity retirement
plans (403(b) plan) and Section 457 plans.

2. The initial investment minimum or aggregate minimum for any of these plans is
$250. However, accounts being established as group IRA, SEP, SARSEP, TSA,
401(k) and Section 457 plans will be accepted without an initial minimum
investment.

INVESTMENTS, TECHNIQUES AND RISK FACTORS
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed securities.
A mortgage-backed security is an obligation of an issuer which is backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Some mortgage-backed securities, such as collateralized mortgage
obligations ("CMOs"), make payments of both principal and interest at a variety
of intervals; others make semiannual interest payments at a predetermined rate
and repay principal at maturity (like a typical bond). Mortgage-backed
securities are based on different types of mortgages including those on
commercial real estate or residential properties. Mortgage-backed securities may
have less potential for capital appreciation than comparable fixed-income
securities, due to the likelihood of increased prepayments of mortgages as
interest rates decline. If the Fund buys mortgage-backed securities at a
premium, mortgage foreclosures and

<PAGE>

prepayments of principal by mortgagors (which may be made at any time without
penalty) may result in some loss of the Fund's principal investment to the
extent of the premium paid. The value of mortgage-backed securities may also
change due to shifts in the market's perception of issuers. In addition,
regulatory or tax changes may adversely affect the mortgage securities market as
a whole.

The Fund may also invest in "stripped" mortgage-backed securities ("SMBS"). SMBS
are created when a U.S. Government agency or a financial institution separates
the interest and principal components of a mortgage-backed security and sells
them as individual securities. The holder of the "principal-only" security
("PO") receives the principal payments made by the underlying mortgage-backed
security, while the holder of the "interest-only" security ("IO") receives
interest payments from the same underlying security. The prices of stripped
mortgage-backed securities may be particularly affected by changes in interest
rates. As interest rates fall, prepayment rates tend to increase, which tends to
reduce prices of IOs and increase prices of POs. Rising interest rates can have
the opposite effect. Although the markets for such securities is increasingly
liquid, the Adviser may, in accordance with guidelines adopted by the Board of
Trustees, determine that certain stripped mortgage-backed securities issued by
the U.S. Government, its agencies or instrumentalities are not readily
marketable. If so, these securities, together with privately-issued stripped
mortgage-backed securities, will be considered illiquid for purposes of the
Fund's limitation of investments of illiquid securities.

Other types of mortgage-backed securities will likely be developed in the
future, and the Fund may invest in them if the Adviser determines they are
consistent with the Fund's investment objectives and policies.

RESTRICTED SECURITIES. The Fund may purchase restricted securities, including
those eligible for resale to "qualified institutional buyers" pursuant to Rule
144A under the Securities Act of 1933 (the "Securities Act"). The Trustees will
monitor the Fund's investments in these securities, focusing on certain factors,
including valuation, liquidity and availability of information. Purchases of
other restricted securities are subject to an investment restriction limiting
all the Fund's illiquid securities to not more than 15% of its net assets.

LENDING OF SECURITIES. The Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. The
Fund may reinvest any cash collateral in short-term securities and interests in
money market funds. When the Fund lends portfolio securities, there is a risk
that the borrower may fail to return the loaned securities. As a result, the
Fund may incur a loss or in the event of the borrower's bankruptcy the Fund may
be delayed in or prevented from liquidating the collateral. It is a fundamental
policy of the Fund not to lend portfolio securities having a total value in
excess of 33 1/3% of its total assets.

REPURCHASE AGREEMENTS, FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The Fund
may enter into repurchase agreements and may purchase

<PAGE>

securities on a forward commitment or when-issued basis. In a repurchase
agreement, the Fund buys a security subject to the right and obligation to sell
it back to the seller at a higher price. These transactions must be fully
collateralized at all times, but involve some credit risk to the Fund if the
other party defaults on its obligation and the Fund is delayed in or prevented
from liquidating the collateral. The Fund will segregate in a separate account
cash or liquid, high grade debt securities equal in value to its forward
commitments and when-issued securities. Purchasing debt securities for future
delivery or on a when-issued basis may increase the Fund's overall investment
exposure and involves a risk of loss if the value of the securities declines
before the settlement date.

REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement involves the sale
of a security by the Fund and its agreement to repurchase the instrument at a
specified time and price. The Fund will maintain a segregated account consisting
of highly liquid, marketable debt securities to cover its obligations under
reverse repurchase agreements with selected firms approved in advance by the
Board of Trustees. The Fund will use the proceeds to purchase other investments.
Reverse repurchase agreements are considered to be borrowings by the Fund. As an
investment practice reverse repurchase agreements may have the effect of
leveraging the Fund's assets and may be considered speculative. Leveraging may
magnify the potential for gain or loss on the portfolio securities of the Fund
and therefore increase the possibility of fluctuation in the Fund's net asset
value. The Fund will limit its investments in reverse repurchase agreements and
other borrowings to no more than 33 1/3% of its total net assets.

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 rate. Short-term trading of fixed-income
securities should not increase direct transaction costs since fixed-income
securities are normally traded on a principal basis without brokerage
commissions. The Fund does not invest for the purpose of seeking short-term
profits. The Fund's investment 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. A rate of turnover of 100% would occur if the value of the
lesser of purchases and sales of investment securities for a particular year
equaled the average monthly value of investment securities owned during the year
(excluding short-term securities). A high rate of portfolio turnover (100% or
more) may make it more difficult for the Fund to qualify as a regulated
investment company under the Code. The Fund's portfolio turnover rate is set
forth in the table under "Financial Highlights."

MORTGAGE "DOLLAR ROLL" TRANSACTIONS. The Fund may enter into mortgage "dollar
roll" transactions with selected banks and broker-dealers pursuant to which the
Fund sells mortgage-backed securities and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. The Fund will only enter into covered rolls. A "covered roll"

<PAGE>

is a specific type of dollar roll for which there is an offsetting cash position
or a cash equivalent security position which matures on or before the forward
settlement date of the dollar roll transaction. Covered rolls are not treated as
a borrowing or other senior security and will be excluded from the calculation
of the Fund's borrowings and other senior securities. For financial reporting
and tax purposes, the Fund treats mortgage dollar rolls as two separate
transactions; one involving the purchase of a security and a separate
transaction involving a sale. The Fund does not currently intend to enter into
mortgage dollar roll transactions that are accounted for as a financing.

OPTIONS AND FUTURES TRANSACTIONS. The Fund may buy and sell options contracts,
financial futures contracts and options on futures contracts. Options and
futures contracts are bought and sold to manage the Fund's exposure to changing
interest rates, and security prices. Some options and futures strategies,
including selling futures, buying puts, and writing calls, tend to hedge the
Fund's investments against price fluctuations. Other strategies, including
buying futures, writing puts, and buying calls, tend to increase market
exposure. Options and futures may be combined with each other or with forward
contracts to adjust the risk and return characteristics of the overall strategy.
The Fund may invest in options and futures based on securities or indices,
including options and futures traded on foreign exchanges and options not traded
on exchanges.

Options and futures can be volatile investments and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges market conditions
incorrectly, options and futures strategies may lower the Fund's return. The
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other investments, or if it could not
close out its positions because of an illiquid secondary market. Options and
futures do not pay interest, but may produce capital gains.

The Fund will not engage in a transaction in futures or options on futures for
non-hedging purposes if, immediately thereafter, the sum of initial margin
deposits and premiums required to establish speculative positions in futures
contracts and options on futures would exceed 5% of the Fund's net assets. The
loss incurred by the Fund investing in futures contracts and in writing options
on futures is potentially unlimited and may exceed the amount of any premium
received. The Fund's transactions in options and futures contracts may be
limited by the requirements of the Code or qualification as a regulated
investment company.

RISKS ASSOCIATED WITH OPTIONS, FUTURES AND OTHER DERIVATIVE INSTRUMENTS. The
risks associated with the Fund's transactions in options, futures and other
derivative instruments, including mortgage-backed securities, may include some
or all of the following:

Market Risk. Options and futures transactions, as well as other derivative
instruments, involve the risk that the applicable market will move against the
Fund's derivative position and that the Fund will incur a loss. For derivative
contracts other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Fund. Investments in

<PAGE>

mortgage-backed securities are subject to the prepayment, extension, interest
rate and other market risks described above.

Leverage and Volatility Risk. Derivative instruments may increase or leverage
the Fund's exposure to a particular market risk, which may increase the
volatility of the Fund's net asset value. The Fund may partially offset the
leverage inherent in derivative instruments by maintaining a segregated account
consisting of cash and liquid, high grade debt securities, by holding offsetting
portfolio securities or currency positions or by covering written options.

Correlation Risk. The Fund's success in using derivative instruments to hedge
portfolio assets depends on the degree of price correlation between the
derivative instrument and the hedged asset. Imperfect correlation may be caused
by several factors, including temporary price disparities among the trading
markets for the derivative instruments, the assets underlying the derivative
instrument and the Fund's portfolio assets.

Credit Risk. Over-the-counter instruments involve a risk that the issuer or
counterparty will fail to perform its contractual obligations.

Liquidity and Valuation Risk. Some derivative instruments are not readily
marketable or may become illiquid under adverse market conditions. In addition,
during periods of extreme market volatility, an exchange may suspend or limit
trading in an exchange-traded derivative instrument, which may make the contract
temporarily illiquid and difficult to price. The staff of the SEC takes the
position that certain over-the-counter options are subject to the Fund's 15%
limit on illiquid investments. The Fund's ability to terminate over-the-counter
derivative instruments may depend on the cooperation of the counterparties to
these instruments. For derivative instruments that are not heavily traded, the
only source of price quotations may be the selling dealer or counterparty.

<PAGE>

(NOTES)

<PAGE>

(NOTES)

<PAGE>

(NOTES)

<PAGE>

JOHN HANCOCK INTERMEDIATE
MATURITY GOVERNMENT FUND

INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, Massachusetts 02110

TRANSFER AGENT
John Hancock Investor Services
Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116

INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116

HOW TO OBTAIN INFORMATION
ABOUT THE FUND

For Service Information
For Telephone Exchange call
1-800-225-5291
For Investment-by-Phone
For Telephone Redemption
For TDD call 1-800-554-6713

5500P 6/96 [RECYCLE LOGO] Printed on Recycled Paper

JOHN HANCOCK
INTERMEDIATE
MATURITY
GOVERNMENT FUND

CLASS A AND CLASS B SHARES
PROSPECTUS
JUNE 10, 1996

FOR INVESTORS SEEKING TO
ACHIEVE A HIGH LEVEL OF
CURRENT INCOME, CONSISTENT WITH
PRESERVATION OF CAPITAL AND
MAINTENANCE OF LIQUIDITY.

101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291
<PAGE>

JOHN HANCOCK INTERMEDIATE MATURITY GOVERNMENT FUND

Class A and Class B Shares
Statement Of Additional Information
June 10, 1996

This Statement of Additional Information ("SAI") provides information about
the John Hancock Intermediate Maturity Government Fund (the "Fund"), a
diversified series of John Hancock Bond Fund (the "Trust"), in addition to the
information that is contained in the Fund's Class A and Class B Prospectus (the
"Prospectus"), dated June 10, 1996

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 Investor Services Corporation
P.O. Box 9116 Boston, Massachusetts 02205-9116 1-800-225-5291

TABLE OF CONTENTS
Statement of
Additional
Information
Page
Organization of the Trust 2
Investment Objective and Policies 2
Certain Investment Practices 2
Investment Restrictions 13
Those Responsible for Management 15
Investment Advisory and Other Services 24
Distribution Contracts 27
Net Asset Value 30
Initial Sales Charge on Class A Shares 30
Deferred Sales Charge on Class B Shares 32
Special Redemptions 32
Additional Services and Programs 32
Description of the Fund's Shares 34
Tax Status 35
Calculation of Performance 38
Brokerage Allocation 40
Transfer Agent Services 42
Custody of Portfolio 42
Independent Auditors 42
Appendix A --
Financial Statements --

<PAGE>

ORGANIZATION OF THE TRUST

The John Hancock Bond Fund (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust under a
Declaration of Trust dated December 12, 1984. The Trust currently has only one
series, the John Hancock Intermediate Maturity Government Fund ( the "Fund.")
Prior to September 22, 1995, the Fund was called John Hancock Adjustable U.S.
Government Trust. Prior to December 22, 1994, the Fund was called Transamerica
Adjustable U.S. Government Trust.

The Fund is managed by John Hancock Advisers, Inc. (the "Adviser"), a
wholly-owned indirect subsidiary of John Hancock Mutual Life Insurance Company
(the "Life Company"), a Massachusetts life insurance company chartered in 1862,
with national headquarters at John Hancock Place, Boston, Massachusetts. John
Hancock Funds, Inc. ("John Hancock Funds") acts as principal distributor of the
shares of the Fund.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to achieve a high level of current
income, consistent with preservation of capital and maintenance of liquidity.
The Fund seeks to achieve its investment objective by investing primarily in
U.S. Government securities, including mortgage-backed securities issued or
guaranteed by U.S. Government agencies. Since the U.S. Government has never
defaulted on its obligations, its securities are considered unmatched as a safe
and reliable income source. The Fund may also invest in obligations of the
Tennessee Valley Authority and the World Bank and medium-term debt obligations
of governmental issuers. Under normal market conditions, the Fund intends to
maintain a weighted average remaining maturity or average remaining life of
three to ten years. In general, investments in shorter and intermediate term
(three to ten years) debt securities are less sensitive to interest rate changes
and provide more stability than longer-term (ten years or more) investments.
There is no assurance that the Fund will achieve its investment objective.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.

CERTAIN INVESTMENT PRACTICES

Mortgage Backed Securities. The Fund may invest in mortgage pass-through
certificates and multiple-class pass-through securities, such as real estate
mortgage investment conduits ("REMIC") pass-through certificates, collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities ("SMBS"),
and other types of "Mortgage-Backed Securities" that may be available in the
future.

Guaranteed Mortgage Pass-Through Securities. Guaranteed mortgage
pass-through securities represent participation interests in pools of
residential mortgage loans and are issued by U.S. Governmental or private

2
<PAGE>

lenders and guaranteed by the U.S. Government or one of its agencies or
instrumentalities, including but not limited to the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"). GNMA certificates are
guaranteed by the full faith and credit of the U.S. Government for timely
payment of principal and interest on the certificates. FNMA certificates are
guaranteed by FNMA, a federally chartered and privately owned corporation, for
full and timely payment of principal and interest on the certificates. FHLMC
certificates are guaranteed by FHLMC, a corporate instrumentality of the U.S.
Government, for timely payment of interest and the ultimate collection of all
principal of the related mortgage loans.

Multiple-Class Pass-Through Securities and Collateralized Mortgage
Obligations. CMOs and REMIC pass-through or participation certificates may be
issued by, among others, U.S. Government agencies and instrumentalities as well
as private lenders. CMOs and REMIC certificates are issued in multiple classes
and the principal of and interest on the mortgage assets may be allocated among
the several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.

Typically, CMOs are collateralized by GNMA, FNMA or FHLMC certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.

A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code of 1986, as amended (the "Code") and invests in certain
mortgages primarily secured by interests in real property and other permitted
investments.

Stripped Mortgage-Backed Securities. SMBS are derivative multiple-class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of interest and principal distributions on a pool
of mortgage assets. A typical SMBS will have one class receiving some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class) while the other
class will receive all of the principal (the "principal only" class). The yields
and market risk of interest only and principal only SMBS, respectively, may be
more volatile than those of other fixed income securities. The staff of the
Securities and Exchange Commission ("SEC") considers privately issued SMBS to be
illiquid.

Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the

3
<PAGE>

effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed-income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.

Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, the Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental, agency or other guarantee. When the Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.

Conversely, in a rising interest rate environment, a declining prepayment
rate will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.

Risk Associated With Specific Types of Derivative Debt Securities.
Different types of derivative debt securities are subject to different
combinations of prepayment, extension and/or interest rate risk. Conventional
mortgage pass-through securities and sequential pay CMOs are subject to all of
these risks, but are typically not leveraged. Thus, the magnitude of exposure
may be less than for more leveraged Mortgage-Backed Securities.

Planned amortization class ("PAC") and target amortization class ("TAC")
CMO bonds involve less exposure to prepayment, extension and interest rate risk
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches of
PAC and TAC CMOs assume the extra prepayment, extension and interest rate risk
associated with the underlying mortgage assets.

The risk of early prepayments is the primary risk associated with interest
only debt securities ("IOs"), super floaters, other leveraged floating rate
instruments and Mortgage-Backed Securities purchased at a premium to their par
value. In some instances, early prepayments may result in a complete loss of
investment in certain of these securities. The primary risks associated with

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<PAGE>

certain other derivative debt securities are the potential extension of average
life and/or depreciation due to rising interest rates.

These securities include floating rate securities based on the Cost of
Funds Index ("COFI floaters"), other "lagging rate" floating rate securities,
floating rate securities that are subject to a maximum interest rate ("capped
floaters"), Mortgage-Backed Securities purchased at a discount, leveraged
inverse floating rate securities ("inverse floaters"), principal only debt
securities ("POs"), certain residual or support tranches of CMOs and index
amortizing notes. Index amortizing notes are not Mortgage-Backed Securities, but
are subject to extension risk resulting from the issuer's failure to exercise
its option to call or redeem the notes before their stated maturity date.
Leveraged inverse IOs combine several elements of the Mortgage-Backed Securities
described above and thus present an especially intense combination of
prepayment, extension and interest rate risks.

Other types of floating rate derivative debt securities present more
complex types of interest rate risks. For example, range floaters are subject to
the risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. X-reset
floaters have a coupon that remains fixed for more than one accrual period.
Thus, the type of risk involved in these securities depends on the terms of each
individual X-reset floater.

Asset-Backed Securities. The Fund may invest a portion of its assets in
asset-backed securities which are rated in the highest rating category by a
nationally recognized statistical rating organization (e.g., Standard & Poor's
Corporation or Moody's Investors Services, Inc.) or if not so rated, of
equivalent investment quality in the opinion of the Adviser.

Asset-backed securities are often subject to more rapid repayment than
their stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. During periods of declining
interest rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, the Fund's ability to maintain positions in
these securities will be affected by reductions in the principal amount of such
securities resulting from prepayments, and its ability to reinvest the returns
of principal at comparable yields is subject to generally prevailing interest
rates at that time.

Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan services to retain possession of the underlying obligations. If the service
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles

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<PAGE>

involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in the underlying automobiles. Therefore, there is the
possibility that, in some cases, recoveries on repossessed collateral may not be
available to support payments on these securities.

When-Issued and Forward Commitment Securities. The Fund may purchase
securities on a when-issued or forward commitment basis. "When-issued" refers to
securities whose terms are available and for which a market exists, but which
have not been issued. The Fund will engage in when-issued transactions with
respect to securities purchased for its portfolio in order to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
For when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, the Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.

When the Fund engages in forward commitment and when-issued transactions,
it relies on the seller to consummate the transaction. The failure of the issuer
or seller to consummate the transaction may result in the Fund losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued and forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.

On the date the Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid, high grade debt securities equal in value to the Fund's
commitment. These assets will be valued daily at market, and additional cash or
securities will be segregated in a separate account to the extent that the total
value of the assets in the account declines below the amount of the when-issued
commitments. Alternatively, the Fund may enter into offsetting contracts for the
forward sale of other securities that it owns.

Repurchase Agreements. A repurchase agreement is a contract under which the
Fund would acquire a security for a relatively short period (usually not more
than 7 days) subject to the obligation of the seller to repurchase and the Fund
to resell such security at a fixed time and price (representing the Fund's cost
plus interest). The Fund will enter into repurchase agreements only with member
banks of the Federal Reserve System and with securities dealers. The Adviser
will continuously monitor the creditworthiness of the parties with whom the Fund
enters into repurchase agreements.

The Fund has established a procedure providing that the securities serving
as collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities and could experience losses, including the

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<PAGE>

possible decline in the value of the underlying securities during the period in
which the Fund seeks to enforce its rights thereto, possible subnormal levels of
income and lack of access to income during this period, and the expense of
enforcing its rights.

Reverse Repurchase Agreements. The Fund may also enter into reverse
repurchase agreements which involve the sale of securities held in its portfolio
to a bank or securities firm with an agreement that the Fund will buy back the
securities at a fixed future date at a fixed price plus an agreed amount of
interest which may be reflected in the repurchase price. Reverse repurchase
agreements are considered to be borrowings by the Fund. The Fund will use
proceeds obtained from the sale of securities pursuant to reverse repurchase
agreements to purchase other investments. The use of borrowed funds to make
investments is a practice known as "leverage," which is considered speculative.
Use of reverse repurchase agreements is an investment technique that is intended
to increase income. Thus, the Fund will enter into a reverse repurchase
agreement only when the Adviser determines that the interest income to be earned
from the investment of the proceeds is greater than the interest expense of the
transaction. However, there is a risk that interest expense will nevertheless
exceed the income earned. Reverse repurchase agreements involve the risk that
the market value of securities purchased by the Fund with proceeds of the
transaction may decline below the repurchase price of the securities sold by the
Fund which it is obligated to repurchase. The Fund would also continue to be
subject to the risk of a decline in the market value of the securities sold
under the agreements because it will reacquire those securities upon effecting
their repurchase. To minimize various risks associated with reverse repurchase
agreements, the Fund will establish and maintain with the Fund's custodian a
separate account consisting of highly liquid, marketable debt securities in an
amount at least equal to the repurchase prices of the securities (plus any
accrued interest thereon) under such agreements. In addition, the Fund will not
enter into reverse repurchase agreements exceeding in the aggregate 33 1/3% of
the value of its total net assets (including for this purpose other borrowings
of the Fund). The Fund will enter into reverse repurchase agreements only with
selected registered broker/dealers or with federally insured banks or savings
and loan associations which are approved in advance as being creditworthy by the
Trustees. Under procedures established by the Trustees, the Adviser will monitor
the creditworthiness of the firms involved.

Financial Futures Contracts. The Fund may buy and sell futures contracts
(and related options) on securities in which it may invest, interest rate
indices, and other instruments. The Fund may hedge its portfolio by selling or
purchasing financial futures contracts as an offset against the effects of
changes in interest rates or in security values. Although other techniques could
be used to reduce exposure to interest rate fluctuations, the Fund may be able
to hedge its exposure more effectively and perhaps at a lower cost by using
financial futures contracts. The Fund may enter into financial futures contracts
for hedging and speculative purposes to the extent permitted by regulations of
the Commodity Futures Trading Commission ("CFTC").

Financial futures contracts have been designed by boards of trade which
have been designated "contract markets" by the CFTC. Futures contracts are
traded on these markets in a manner that is similar to the way a stock is traded
on a stock exchange. The boards of trade, through their clearing corporations,

7
<PAGE>

guarantee that the contracts will be performed. Currently, financial futures
contracts are based on interest rate instruments such as long-term U.S. Treasury
bonds, U.S. Treasury notes, GNMA modified pass-through mortgage-backed
securities, three-month U.S. Treasury bills, 90-day commercial paper, bank
certificates of deposit and Eurodollar certificates of deposit. It is expected
that if other financial futures contracts are developed and traded the Fund may
engage in transactions in such contracts.

Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts are
closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts (same exchange, underlying security and delivery
month). Other financial futures contracts, such as futures contracts on
securities indices, by their terms call for cash settlements. If the offsetting
purchase price is less than a Fund's original sale price, the Fund realizes a
gain, or if it is more, the Fund realizes a loss. Conversely, if the offsetting
sale price is more than the Fund's original purchase price, the Fund realizes a
gain, or if it is less, the Fund realizes a loss. The transaction costs must
also be included in these calculations. Each Fund will pay a commission in
connection with each purchase or sale of financial futures contracts, including
a closing transaction. For a discussion of the Federal income tax considerations
of trading in financial futures contracts, see the information under the caption
"Tax Status" below.

At the time the Fund enters into a financial futures contract, it is
required to deposit with its custodian a specified amount of cash or U.S.
Government securities, known as "initial margin", ranging upward from 1.1% of
the value of the financial futures contract being traded. The margin required
for a financial futures contract is set by the board of trade or exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the financial futures contract which is returned to the Fund
upon termination of the contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on their initial margin
deposits. Each day, the futures contract is valued at the official settlement
price of the board of trade or exchange on which it is traded. Subsequent
payments, known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract fluctuates.
This process is known as "mark to market." Variation margin does not represent a
borrowing or lending by the Fund but is instead settlement between the Fund and
the broker of the amount one would owe the other if the financial futures
contract expired. In computing net asset value, the Fund will mark to market its
open financial future positions.

Successful hedging depends on a strong correlation between the market for
the underlying securities and the futures contract market for those securities.
There are several factors that may prevent this correlation from being perfect,
and even a correct forecast of general interest rate trends may not result in a
successful hedging transaction. There are significant differences between the
securities and futures markets which could create an imperfect correlation
between the markets and which could affect the success of a given hedge. The
degree of imperfection will be affected by variations in speculative market
demand for financial futures and debt securities, including technical influences

8
<PAGE>

in futures trading. Differences between the financial instruments being hedged
and the instruments underlying the standard financial futures contracts
available for trading will be affected by interest rate levels, maturities and
creditworthiness of issuers. The degree of imperfection may be increased where
the underlying debt securities are lower-rated and, therefore, subject to
greater fluctuation in price than higher-rated securities.

A decision as to whether, when and how to hedge involves the exercise of
skill and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected interest rate trends. The Fund
will bear the risk that the price of the securities being hedged will not move
in complete correlation with the price of the futures contracts used as a
hedging instrument. Although the Adviser believes that the use of financial
futures contracts will benefit the Fund, an incorrect prediction could result in
a loss on both the hedged securities in the Fund's portfolio and the hedging
vehicle so that the Fund's return might have been better had hedging not been
attempted. However, in the absence of the ability to hedge, the Adviser might
have taken portfolio actions in anticipation of the same market movements with
similar investment results but, presumably, at greater transaction costs. The
low margin deposits required for futures transactions permit an extremely high
degree of leverage. A relatively small movement in a futures contract may result
in losses or gains in excess of the amount invested.

Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount the price of a futures contract may vary either up or down
from the previous day's settlement price, at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day
and, therefore, does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example, futures prices
have occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of positions
and subjecting some holders of futures contracts to substantial losses.

Finally, although the Fund engages in financial futures transactions only
on boards of trade or exchanges where there appears to be an adequate secondary
market, there is no assurance that a liquid market will exist for a particular
futures contract at any given time. The liquidity of the market depends on
participants closing out contracts rather than making or taking delivery. In the
event participants decide to make or take delivery, liquidity in the market
could be reduced. In addition, the Fund could be prevented from executing a buy
or sell order at a specified price or closing out a position due to limits on
open positions or daily price fluctuation limits imposed by the exchanges or
boards of trade. If the Fund cannot close out a position, it will be required to
continue to meet margin requirements until the position is closed.

Options on Financial Futures Contracts. The Fund may buy and sell options
on financial futures contracts on securities in which it may invest, interest
rate indices, and other instruments. An option on a futures contract gives the

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<PAGE>

purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time during the period of
the option. Upon exercise, the writer of the option delivers the futures
contract to the holder at the exercise price. The Fund would be required to
deposit with its custodian initial and variation margin with respect to put and
call options on futures contracts written by it. Options on futures contracts
involve risks similar to the risks relating to transactions in financial futures
contracts. Also, an option purchased by the Fund may expire worthless, in which
case the Fund would lose the premium it paid for the option.

Other Considerations. The Fund will engage in futures and options
transactions for bona fide hedging or speculative purposes to the extent
permitted by CFTC regulations. The Fund will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Fund or which it expects to purchase. Except as stated below, the Fund's
futures transactions will be entered into for traditional hedging purposes --
i.e., futures contracts will be sold to protect against a decline in the price
of securities that the Fund owns, or futures contracts will be purchased to
protect the Fund against an increase in the price of securities, or the currency
in which they are denominated, the Fund intends to purchase. As evidence of this
hedging intent, the Fund expects that on 75% or more of the occasions on which
they take a long futures or option position (involving the purchase of futures
contracts), the Fund will have purchased, or will be in the process of
purchasing equivalent amounts of related securities at the time when the futures
contract or option position is closed out. However, in particular cases, when it
is economically advantageous for the Fund to do so, a long futures position may
be terminated or an option may expire without the corresponding purchase of
securities or other assets.

As an alternative to literal compliance with the bona fide hedging
definition, a FTC regulation permits the Fund to elect to comply with a
different test, under which the aggregate initial margin and premiums required
to establish speculative positions in futures contracts and options on futures
will not exceed 5% of the net asset value of the Fund's portfolio, after taking
into account unrealized profits and losses on any such positions and excluding
the amount by which such options were in-the-money at the time of purchase. The
Fund will engage in transactions in futures contracts only to the extent such
transactions are consistent with the requirements of the Code for maintaining
their qualifications as regulated investment companies for Federal income tax
purposes.

When the Fund purchases financial futures contracts, or write put options
or purchase call options thereon, cash or liquid, high grade debt securities
will be deposited in a segregated account with the Fund's custodian in an amount
that, together with the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contracts.

Options Transactions. The Fund may write listed and over-the-counter
covered call options and covered put options on securities in order to earn
additional income from the premiums received. In addition, this Fund may
purchase listed and over-the-counter call and put options. The extent to which

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<PAGE>

covered options will be used by the Fund will depend upon market conditions and
the availability of alternative strategies. The Fund may write listed and
over-the-counter call and put options on up to 100% of its net assets.

The Fund will write listed and over-the-counter call options only if they
are "covered," which means that the Fund owns or has the immediate right to
acquire the securities underlying the options without additional cash
consideration upon conversion or exchange of other securities held in its
portfolio. A call option written by the Fund may also be "covered" if the Fund
holds on a share-for-share basis a covering call on the same securities where
(i) the exercise price of the covering call held is equal to or less than the
exercise price of the call written if the difference is maintained by the Fund
in cash, U.S. Treasury bills or high grade liquid debt obligations in a
segregated account with the Fund's custodian, and (ii) the covering call expires
at the same time as the call written. If a covered call option is not exercised,
the Fund would keep both the option premium and the underlying security. If the
covered call option written by the Fund is exercised and the exercise price,
less the transaction costs, exceeds the cost of the underlying security, the
Fund would realize a gain in addition to the amount of the option premium it
received. If the exercise price, less transaction costs, is less than the cost
of the underlying security, the Fund's loss would be reduced by the amount of
the option premium.

As the writer of a covered put option, the Fund will write a put option
only with respect to securities it intends to acquire for its portfolio and will
maintain in a segregated account with its custodian bank cash, U.S. Government
securities or high-grade liquid debt securities with a value equal to the price
at which the underlying security may be sold to the Fund in the event the put
option is exercised by the purchaser. The Fund may also write a "covered" put
option by purchasing on a share-for-share basis a put on the same security as
the put written by the Fund if the exercise price of the covering put held is
equal to or greater than the exercise price of the put written and the covering
put expires at the same time or later than the put written.

When writing listed and over-the-counter covered put options on securities,
the Fund would earn income from the premiums received. If a covered put option
is not exercised, the Fund would keep the option premium and the assets
maintained to cover the option. If the option is exercised and the exercise
price, including transaction costs, exceeds the market price of the underlying
security, the Fund would realize a loss, but the amount of the loss would be
reduced by the amount of the option premium.

If the writer of an exchange-traded option wishes to terminate its
obligation prior to its exercise, it may effect a "closing purchase
transaction." This is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that the Fund's
position will be offset by the Options Clearing Corporation. The Fund may not
effect a closing purchase transaction after they have been notified of the
exercise of an option. There is no guarantee that a closing purchase transaction
can be effected. Although the Fund will generally write only those options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange or board of trade will exist for any

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<PAGE>

particular option or at any particular time, and for some options no secondary
market on an exchange may exist.

In the case of a written call option, effecting a closing transaction will
permit the Fund to write another call option on the underlying security with
either a different exercise price, expiration date or both. In the case of a
written put option, it will permit the Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction will permit the
cash or proceeds from the concurrent sale of any securities subject to the
option to be used for other investments. If the Fund desires to sell a
particular security from its portfolio on which it has written a call option, it
will effect a closing transaction prior to or concurrent with the sale of the
security.

The Fund will realize a gain from a closing transaction if the cost of the
closing transaction is less than the premium received from writing the option.
The Fund will realize a loss from a closing transaction if the cost of the
closing transaction is more than the premium received for writing the option.
However, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by appreciation of the underlying security owned by the Fund.

Over-the-Counter Options. The Fund may engage in options transactions on
exchanges and in the over-the-counter markets. In general, exchange-traded
options are third-party contracts (i.e., performance of the parties' obligations
is guaranteed by an exchange or clearing corporation) with standardized strike
prices and expiration dates. Over-the-counter ("OTC") transactions are two-party
contracts with price and terms negotiated by the buyer and seller. The Fund will
acquire only those OTC options for which management believes the Fund can
receive on each business day at least two separate bids or offers (one of which
will be from an entity other than a party to the option) or those OTC options
valued by an independent pricing service. The Fund will write and purchase OTC
options only with member banks of the Federal Reserve System and primary dealers
in U.S. Government securities or their affiliates which have capital of at least
$50 million or whose obligations are guaranteed by an entity having capital of
at least $50 million. The SEC has taken the position that OTC options are
illiquid securities subject to the restriction that illiquid securities are
limited to not more than 15% of the Fund's net assets. The SEC, however, has a
partial exemption from the above restrictions on transactions in OTC options.
The SEC allows the Fund to exclude from the 15% limitation on illiquid
securities a portion of the value of the OTC options written by the Fund,
provided that certain conditions are met. First, the other party to the OTC
options has to be a primary U.S. Government securities dealer designated as such
by the Federal Reserve Bank. Second, the Fund must have an absolute contractual
right to repurchase the OTC options at a formula price. If the above conditions
are met, the Fund may treat as illiquid only that portion of the OTC option's
value (and the value of its underlying securities) which is equal to the formula
price for repurchasing the OTC option, less the OTC option's intrinsic value.

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<PAGE>

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental investment restrictions.
These restrictions may not be changed without approval by holders of a "majority
of the outstanding shares" of the Fund. A majority for this purpose means the
holders of: (a) more than 50% of the outstanding shares, or (b) 67% or more of
the shares represented at a meeting where more that 50% of the outstanding
shares are represented, whichever is less.

The Fund may not:

1. borrow money, except that as a temporary measure for extraordinary or
emergency purposes the Fund may borrow from banks in aggregate amounts at
any one time outstanding not exceeding 33 1/3% of the total assets
(including the amount borrowed) of the Fund valued at market; and the Fund
may not purchase any securities at any time when borrowings exceed 5% of
the total assets of the Fund (taken at market value). This borrowing
restriction does not prohibit the use of reverse repurchase agreements (see
"Reverse Repurchase Agreements"). For purposes of this investment
restriction, forward commitment transactions shall not constitute
borrowings. Interest paid on any borrowings will reduce the Fund's net
investment income;

2. make short sales of securities or purchase any security on margin, except
that the Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of securities (this restriction does not
apply to securities purchased on a when-issued basis);

3. underwrite securities issued by other persons, except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of 1933
in selling a security, and except that the Fund may invest all or
substantially all of its assets in another registered investment company
having substantially the same investment objectives as the Fund;

4. make loans to other persons except (a) through the lending of securities
held by the Fund, (b) through the purchase of debt securities in accordance
with the investment policies of the Fund (the entry into repurchase
agreements is not considered a loan for purposes of this restriction);

5. with respect to 75% of its total assets, purchase the securities of any one
issuer (except securities issued or guaranteed by the U.S. Government and
its agencies or instrumentalities, as to which there are no percentage
limits or restrictions) if immediately after and as a result of such
purchase (a) more than 5% of the value of its assets would be invested in
that issuer, or (b) the Fund would hold more than 10% of the outstanding
voting securities of that issuer, except that the Fund may invest all or
substantially all of its assets in another registered investment company
having substantially the same investment objectives as the Fund;

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<PAGE>

6. purchase or sell real estate (including limited partnership interests)
other than securities secured by real estate or interests therein including
mortgage-related securities or interests in oil, gas or mineral leases in
the ordinary course of business (the Fund reserves the freedom of action to
hold and to sell real estate acquired as a result of the ownership of
securities);

7. invest more than 25% of its total assets in the securities of issuers whose
principal business activities are in the same industry (excluding
obligations of the U.S. Government, its agencies and instrumentalities and
repurchase agreements) except that the Fund may invest all or substantially
all of its assets in another registered investment company having
substantially the same objectives as the Fund;

8. issue any senior security (as that term is defined in the Investment
Company Act of 1940 (the "1940 Act")) if such issuance is specifically
prohibited by the 1940 Act or the rules and regulations promulgated
thereunder; or

9. invest in securities of any company if, to the knowledge of the Trust, any
officer or director of the Trust or its Adviser owns more than 1/2 of 1% of
the outstanding securities of such company, and all such officers and
directors own in the aggregate more than 5% of the outstanding securities
of such company.

The following restrictions are designated as nonfundamental and may be
changed by the Board of Trustees without shareholder approval.

The Fund may not:

(a) invest in companies for the purpose of exercising control or management,
except that the Fund may invest all or substantially all of its assets in
another registered investment company having substantially the same
investment restrictions as the Fund;

(b) make investments in the securities of other investment companies, except as
otherwise permitted by the 1940 Act or in connection with a merger,
consolidation, or reorganization;

(c) invest in securities of issuers (other than U.S. Government Securities)
having a record of less than three years of continuous operation (for this
purpose, the period of operation of any issuer shall include the period of
operation of any predecessor or unconditional guarantor of such issuer) if,
regarding all securities, more than 5% of the total assets (taken at market
value at the time of each investment) of the Fund would be invested in such
securities, except that the Fund may invest all or substantially all of its
assets in another registered investment company having substantially the
same investment restrictions as the Fund;

(d) invest in commodities, except that the Fund may purchase and sell: options
on securities and securities indices, futures contracts on securities and
securities indices and options on these futures, forward commitments,

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<PAGE>

when-issued securities, securities index put or call warrants and
repurchase agreements entered into in accordance with the Fund's investment
policies;

(e) mortgage, pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned by the Fund except as may be necessary
in connection with borrowings mentioned in investment restriction no. 1
above;

(f) purchase warrants of any issuer, except on a limited basis, if, as a
result, more than 2% of the value of its total assets would be invested in
warrants which are not listed on the New York Stock Exchange and more than
5% of the value of its total assets would be invested in warrants, whether
or not so listed, such warrants in each case to be valued at the lesser of
cost or market, but assigning no value in each case to warrants acquired by
the Fund in units or attached to debt securities; or

(g) purchase any security, including any repurchase agreement maturing in more
than seven days, which is not readily marketable, if more than 15% of the
net assets of the Fund, taken at market value, would be invested in such
securities.

(h) Notwithstanding any investment restriction to the contrary, 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 provided that,
as a result (i) no more than 10% of the Fund's assets would be invested in
securities of all other investment companies, (ii) such purchase would not
result in more than 3% of the total outstanding voting securities of any
one such investment company being held by the Fund and (iii) no more than
5% of the Fund's assets would be invested in any one such investment
company.

THOSE RESPONSIBLE FOR MANAGEMENT

The business of the Fund is managed by the Trustees who elect officers who
are responsible for the day-to-day operations of the Fund and who execute
policies formulated by the Trustees. Several of the officers and Trustees of the
Fund are also officers and directors of the Adviser or officers and directors of
John Hancock Funds.

Set forth below is the principal occupation or employment of the Trustees
and officers of the Trust during the past five years.

15
<PAGE>
<TABLE>
<CAPTION>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr.* Chairman (1,2) Chairman and Chief Executive
101 Huntington Avenue Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
Group"); Chairman, NM Capital
Management, Inc. ("NM Capital");
John Hancock Advisers International
Limited ("Advisers International");
John Hancock Funds, Inc., ("John
Hancock Funds"), John Hancock
Investor Services Corporation
("Investor Services") and Sovereign
Asset Management Corporation
("SAMCorp") (herein after the
Adviser, The Berkeley Group, NM
Capital, Advisers International,
John Hancock Funds, Investor
Services and SAMCorp collectively
referred to as the "Affiliated
Companies"); Chairman, First
Signature Bank & Trust; Director,
John Hancock Freedom Securities
Corp., John Hancock Capital Corp.,
New England/Canada Business
Council; Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; President, the Adviser
(until July 1992); Chairman, John
Hancock Distributors, Inc. (until
April 1994).

- -------------------
* An "interested person" of the Company as such term is defined in the
Investment Company Act of 1940, as amended ("The Investment Company Act").
(1) Member of the Executive Committee. Under the Company's charter, 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.
(3) Member of the Audit and Administration Committees.

16
<PAGE>

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

James F. Carlin Trustee(3) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc. (insurance);
Natick, MA 01760 Chairman, Massachusetts Higher
Education Coordinating Council
(since 1995); Trustee,
Massachusetts Health and Education
Tax-Exempt Trust (Financial);
Director, Rizzo Associates, Inc.
(Engineering), Arbella Mutual
Insurance Company (insurance),
Consolidated Group Trust (group
health plan), Carlin Insurance
Agency, Inc., West Insurance
Agency, Inc., Allied American
Agency, Inc. (insurance);
Treasurer, Alpha Analytical, Inc.
(Chemistry Lab); Receiver, the City
of Chelsea (until August 1992).

William H. Cunningham Trustee(3) Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Regents Chair for Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company); LBJ Foundation
Board (education foundation); and
Advisory Director, Texas Commerce
Bank - Austin.

Charles F. Fretz Director (3) Consultant, self employed; Vice
RD #5, Box 300B President and Director, Towers,
Clothier Springs Road Perrin, Foster & Crosby, Inc.
Malvern, PA 19355 (international management
consultants) (until 1985).

17
<PAGE>

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

Harold R. Hiser, Jr. Trustee Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hills, NJ 07078 (pharmaceuticals) (until 1995);
Director, ReCapital Corporation
(reinsurance).

Anne C. Hodsdon* Trustee and President President and Chief Operating
101 Huntington Avenue (1,2) Officer, the Adviser; Executive
Boston, MA 02199 Vice President, the Adviser (until
December 1994); Senior Vice
President; the Adviser (until
December 1993); Vice President, the
Adviser, 1991.

Charles L. Ladner Trustee(3) Director, Energy North, Inc.
UGI Corporation (public utility holding company)
P.O. Box 858 (until 1992); Senior Vice President
Valley Forge, PA 19482 and Chief Financial Officer of UGI
Corp. (public utility holding
company).

Leo E. Linbeck, Jr. Trustee(3) Chairman, President, Chief
3810 W. Alabama Executive Officer and Director,
Houston, TX 77027 Linbeck Corporation (a holding
company engaged in various phases
of the construction industry and
warehousing interests); Director
and Chairman, Federal Reserve Bank
of Dallas; Chairman of the Board
and Chief Executive Officer,
Linbeck Construction Corporation;
Director, Panhandle Eastern
Corporation (a diversified energy
company); Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment); GeoQuest International,
Inc. (a geophysical consulting
firm); and Director, Greater
Houston Partnership.

18
<PAGE>

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

Patricia P. McCarter Trustee(3) Director and Secretary of the
1230 Brentford Road McCarter Corp. (machine
Malvern, PA 19355 manufacturer).

Steven R. Pruchansky Trustee (1,3) Director and President, Mast
6920 Daniel Road Holdings, Inc.; Director, First
Naples, FL 33942 Signature Bank & Trust Company
(until August 1991); Director, Mast
Realty Trust (until 1994);
President, Maxwell Building Corp.
(until 1991).

*Richard S. Scipione Trustee (3) General Counsel, the Life Company;
John Hancock Place Director, the Adviser, the
P.O. Box 111 Affiliated Companies, John Hancock
Boston, Massachusetts Distributors, Inc., JH Networking
Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp, NM Capital and John
Hancock Property and Casualty
Insurance and its affiliates (until
November, 1993); Trustee, The
Berkeley Group.

Norman H. Smith Trustee(3) Retired. Lieutenant General, United
243 Mt. Oriole Lane States Marine Corps; Deputy Chief
Linden, VA 22642 of Staff for Manpower and Reserve
Affairs, Headquarters Marine Corps;
Commanding General, III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).

John P. Toolan Trustee(3) Director, The Muni Bond Funds,
13 Chadwell Place National Liquid Reserves, Inc., The
Morristown, NJ 07960 Tax Free Money Fund, Inc. and
Vantage Money Market Funds (mutual
funds), and The Inefficient-Market
Fund, Inc. (closed-end investment
company; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (until
December 1991).

- -------------------
* An "interested person" of the Company as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, 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.
(3) Member of the Audit and Administration Committees.

19
<PAGE>

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

Robert G. Freedman* Vice Chairman and Chief Vice Chairman and Chief Investment
101 Huntington Avenue Investment Officer (2) Officer, the Adviser; President,
Boston, MA 02199 the Adviser (until December 1994).

Thomas H. Drohan* Senior Vice President and Senior Vice President and Secretary
101 Huntington Avenue Secretary of the Adviser.
Boston, MA 02199

James B. Little* Senior Vice President and Senior Vice President, the Adviser.
101 Huntington Avenue Chief Financial Officer
Boston, MA 02199

James J. Stokowski* Vice President and Vice President, the Adviser.
101 Huntington Avenue Treasurer
Boston, MA 02199

Susan S. Newton* Vice President and Vice President and Assistant
101 Huntington Avenue Compliance Officer Secretary, the Adviser.
Boston, MA 02199

John A. Morin* Vice President Vice President, the Adviser;
101 Huntington Avenue Counsel, the Life Company (until
Boston, MA 02199 1995).
</TABLE>

- ----------------
* An "interested person" of the Company as such term is defined in the
Investment Company Act of 1940, as amended ("The Investment Company Act").
(1) Member of the Executive Committee. Under the Company's charter, 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.
(3) Member of the Audit and Administration Committees.

20
<PAGE>

All of the officers listed are officers or employees of the Adviser or
affiliated companies. Some of the Trustees and officers may also be officers
and/or directors and/or trustees of one or more of the other funds for which the
Adviser serves as investment adviser.

As of May 10, 1996, there were 2,945,261 Class A and 829,324 Class B shares
of the Fund outstanding and officers and trustees of the Fund as a group
beneficially owned less than 1% of these outstanding shares. At such date, the
following shareholders held, as record owner, 5% or more of the Fund's shares:

Percentage Ownership
Class A of Outstanding Shares
- ------- ---------------------

Merrill Lynch Pierce 12.76%
Fenner & Smith Inc.
Trade House Account-Book Entry
Team B - 3rd Floor
4800 Deer Lake Dr East
Jacksonville, FL 32246-6484

Merchants & Marine Bank 8.29%
Attn Mike Dickson
PO Box 729
Pascagoula, MS 39568-0729

River Production Co. Inc. 5.49%
PO Box 909
Columbia, MS 39429-0909

Class B
- -------

Merrill Lynch Pierce 5.84%
Fenner & Smith Inc.
Trade House Account-Book Entry
Team B - 3rd Floor
4800 Deer Lake Dr East
Jacksonville, FL 32246-6484

At such date, no other person owned of record or beneficially as much as 5%
of the outstanding shares of the Fund.

As of December 22, 1994, the Trustees have established an Advisory Board
which acts to facilitate a smooth transition of management over a two-year
period between Transamerica Fund Management Company ("TFMC"), the prior

21
<PAGE>

investment adviser of the Fund, and the Adviser. The members of the Advisory
Board are distinct from the Board of Trustees, do not serve the Fund in any
other capacity and are persons who have no power to determine what securities
are purchased or sold on behalf of the Fund. Each member of the Advisory Board
may be contacted at 101 Huntington Avenue, Boston, Massachusetts 02199.

Members of the Advisory Board and their respective principal occupations
during the past five years are as follows:

R. Trent Campbell, President, FMS, Inc. (financial and management
services); former Chairman of the Board, Mosher Steel Company.

Mrs. Lloyd Bentsen, Formerly National Democratic Committeewoman
from Texas; co-founder, Houston Parents' League; former board member of
various civic and cultural organizations in Houston, including the
Houston Symphony, Museum of Fine Arts and YWCA. Mrs. Bentsen is
presently active in various civic and cultural activities in the
Washington, D.C. area, including membership on the Area Board for The
March of Dimes and is a National Trustee for the Botanic Gardens of
Washington, D.C.

Thomas R. Powers, Formerly Chairman of the Board, President and
Chief Executive Officer, TFMC; Director, West Central Advisory Board,
Texas Commerce Bank; Trustee, Memorial Hospital System; Chairman of the
Board of Regents of Baylor University; Member, Board of Governors,
National Association of Securities Dealers, Inc.; Formerly, Chairman,
Investment Company Institute; formerly, President, Houston Chapter of
Financial Executive Institute.

Thomas B. McDade, Chairman and Director, TransTexas Gas Company;
Director, Houston Industries and Houston Lighting and Power Company;
Director, TransAmerican Companies (natural gas producer and
transportation); Member, Board of Managers, Harris County Hospital
District; Advisory Director, Commercial State Bank, El Campo; Advisory
Director, First National Bank of Bryan; Advisory Director, Sterling
Bancshares; Former Director and Vice Chairman, Texas Commerce
Bancshares; and Vice Chairman, Texas Commerce Bank.

Compensation of the Board of Trustees and Advisory Board. The following
table provides information regarding the compensation paid by the Fund and the
other investment companies in the John Hancock Fund Complex to the Independent
Trustees and the Advisory Board members for their services. The three non
Independent Trustees, Messrs. Boudreau, Scipione, and Ms. Hodsdon and each of
the officers of the Fund who are interested persons of the Adviser, are
compensated by the Adviser and/or its affiliates and received no compensation
from the Fund for their services.

22
<PAGE>

Total Compensation
from all Funds in
Aggregate John Hancock
Compensation Fund Complex to
Trustees from the Fund Trustees*
- -------- ------------- ---------

James F. Carlin $ 281 $60,700
William H. Cunningham (**) 375 69,700
Charles F. Fretz 281 56,200
Harold R. Hiser, Jr. (**) 281 60,200
Charles L. 281 60,700
Leo E. Linbeck, Jr. 375 73,200
Patricia P. McCarter 281 60,700
Steven R. Pruchansky 281 62,700
Norman H. Smith 281 62,700
John P. Toolan (**) 281 60,700
------ --------
TOTAL $2,998 $627,500

* The total compensation paid by the John Hancock Fund Complex to the
Independent Trustees was $627,500 as of the calendar year ended December
31, 1995. All Trustees/Directors except Messrs. Cunningham and Linbeck are
Trustees/Directors of 31 funds in the John Hancock Fund Complex. Messrs.
Cunningham and Linbeck are Trustees/Directors of 30 funds.

** As of December 31, 1995, the value of the aggregate accrued deferred
compensation from all funds in the John Hancock fund complex for Mr.
Cunningham was $54,413, for Mr. Hiser was $31,324, and for Mr. Toolan was
$71,437 under the John Hancock Deferred Compensation Plan for Independent
Trustees (the "Plan").

Total Compensation
from all Funds in
Aggregate John Hancock
Compensation Fund Complex to
Advisory Board from the Fund Advisory Board***

R. Trent Campbell $ 541 $ 54,000
Mrs. Lloyd Bentsen 541 54,000
Thomas R. Powers 541 54,000
Thomas B. McDade 541 54,000
------ --------
TOTAL $2,164 $216,000

*** For the calendar year ended December 31, 1995.

23
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

Investment Management Contract. As described in the Prospectus, the Fund
receives investment advice from the Adviser. Investors should refer to the
Prospectus and below for a description of certain information concerning the
investment management contract. Each of the Trustees and principal officers
affiliated with the Fund who is also an affiliated person of the Adviser is
named above, together with the capacity in which such person is affiliated with
the Fund, the Adviser or TFMC (the Fund's prior investment adviser).

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and has more than $18 billion in assets under
management in its capacity as investment adviser to the Fund and the other
mutual funds and publicly traded investment companies in the John Hancock group
of funds, having a combined total of over 1,080,000 shareholders. The Adviser is
an affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of $80
billion, the Life Company is one of the ten largest life insurance companies in
the United States and carries high ratings from Standard & Poor's and A.M. Best.
Founded in 1862, the Life Company has been serving clients for over 130 years.

The Trust on behalf of the Fund has entered into an investment management
contract with the Adviser. Under the investment management contract, the Adviser
provides the Fund with (i) a continuous investment program, consistent with the
Fund's stated investment objective and policies, (ii) supervision of all aspects
of the Fund's operations except those that are delegated to a custodian,
transfer agent or other agent and (iii) such executive, administrative and
clerical personnel, officers and equipment as are necessary for the conduct of
the Fund's business. See "Organization and Management of the Fund" and "The
Fund's Expenses" in the Prospectus for a description of certain information
concerning the Fund's investment management contract.

No person other than the Adviser and its directors and employees regularly
furnishes advice to the Fund with respect to the desirability of the Fund
investing in, purchasing or selling securities. The Adviser may from time to
time receive statistical or other similar factual information, and information
regarding general economic factors and trends, from the Life Company and its
affiliates.

Under the terms of the investment management contract with the Trust on
behalf of the Fund, the Adviser provides the Fund with office space, equipment
and supplies and other facilities and personnel required for the business of the
Fund. All expenses which are not specifically paid by the Adviser and which are
incurred in the operation of the Fund including, but not limited to, (i) the
fees of the Independent Trustees of the Trust, (ii) the fees of the members of
the Fund's Advisory Board (described above) and (iii) the continuous public
offering of the shares of the Fund are borne by the Fund. Subject to the
conditions set forth in a private letter ruling that the Fund has received from
the Internal Revenue Service relating to its multiple-class structure, class
expenses properly allocable to any Class A or Class B shares will be borne
exclusively by such class of shares.

<PAGE>

As provided by the investment management contract, the Fund pays the
Adviser an investment management fee, which is accrued daily and paid monthly in
arrears, equal on an annual basis to 0.40% of the Fund's average daily net asset
value. From time to time, the Adviser may reduce its fee or make other
arrangements to limit the Fund's expenses to a specified percentage of average
daily net assets. The Adviser retains the right to re-impose a fee and recover
any other payments to the extent that, at the end of any fiscal year, the Fund's
annual expenses fall below this limit.

If the total of all ordinary business expenses of the Fund for any fiscal
year exceeds the limitations prescribed by any state in which shares of the Fund
are qualified for sale, the fee payable to the Adviser will be reduced to the
extent required by these limitations. Currently, the most restrictive limit
imposed by a state is 2.5% of the first $30,000,000 of the Fund's average daily
net asset value, 2% of the next $70,000,000 and 1.5% of the remaining average
daily net asset value. When calculating this limit, the Fund may include
interest, brokerage commissions and extraordinary expenses.

Pursuant to the investment management contract, the Adviser is not liable
to the Fund or its shareholders for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which the
investment management contract relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties or from its reckless disregard by the Adviser of its
obligations and duties under the investment management contract.

The initial term of the investment management contract expires on September
25, 1997 and the investment management contract will continue in effect from
year to year thereafter if approved annually by a vote of a majority of the
Independent Trustees of the Trust cast in person at a meeting called for the
purpose of voting on such approval, and by either a majority of the Trustees or
the holders of a majority of the Fund's outstanding voting securities. The
management contract may, on 60 days' written notice, be terminated at any time
without the payment of any penalty to the Fund by vote of a majority of the
outstanding voting securities of the Fund, by the Trustees or by the Adviser.
The management contract terminates automatically in the event of its assignment.

Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provides 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 other funds or clients 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.

<PAGE>

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

Under the Fund's master/feeder structure (which was terminated on September
22, 1995 pursuant to an Agreement and Plan of Liquidation and Termination dated
June 13, 1995) existing for the fiscal years ended March 31, 1994, 1995 and 1996
(until September 22, 1995), the Fund invested all of its assets in Adjustable
U.S. Government Fund (the "Portfolio"). During these years, advisory fees
payable by the Portfolio to TFMC, the Portfolio's former investment adviser, and
borne indirectly by the Fund, amounted to $184,072, $86,085 and $0,
respectively. During the fiscal year ended March 31, 1996, advisory fees paid by
the Portfolio to the Adviser and borne indirectly by the Fund, amounted to
$137,927. A portion of these fees paid to TFMC and the Adviser during these
periods was not imposed pursuant to the expense limitation arrangements in
effect. (See "The Fund's Expenses" in the Prospectus.)

Administration Agreement. Pursuant to an administration agreement, dated
December 22, 1994, the Adviser provided the Fund with general office facilities
and supervised the overall administration of the Fund including, among other
responsibilities, the negotiation of contracts and fees with, and the monitoring
of performance and billings of the independent contractors and agents of the
Fund, the preparation and filing of all documents required for compliance by the
Fund with applicable laws and regulations and arranging for the maintenance of
books and records (other than accounting books and records) of the Fund. The
Adviser paid all compensation of the Trustees, officers and employees of the
Fund who were affiliated persons of the Adviser. The administration agreement
terminated in September 1995.

Under the administration agreement, the Adviser received from the Fund, a
fee at an annual rate of 0.10% of the Fund's average daily net assets, subject
to the expense limitation provisions descried below. For the fiscal years ended
March 31, 1994 and 1995, respectively, administration fees paid by the Fund to
TFMC, the Fund's former administrator, amounted to $46,091 and $21,511,
respectively; and the Adviser received $7,171 for the year ended March 31, 1995,
however, all such fees were not imposed pursuant to the fee and expense
limitation arrangements then in effect (see "The Portfolio's and the Fund's
Expenses" in the Prospectus).

Under the administration agreement, neither the Adviser nor its personnel
was liable for any error of judgment or mistake of law or for any act or
omission in the administration of the Fund except for willful misfeasance, bad
faith or gross negligence in the performance of its duties or from reckless
disregard of its obligations and duties under the administration agreement.

<PAGE>

Administrative Services Agreement. During the fiscal years ended March 31,
1994 and 1995, the Fund was a party to an administrative services agreement with
TFMC (the "Services Agreement"), pursuant to which TFMC performed bookkeeping
and accounting services and functions, including preparing and maintaining
various accounting books, records and other documents and keeping such general
ledgers and portfolio accounts as are reasonably necessary for the operation of
the Fund. Other administrative services included communications in response to
shareholder inquiries and certain printing expenses of various financial
reports. In addition, such staff and office space, facilities and equipment was
provided as necessary to provide the required administrative services. The
Services Agreement was amended in connection with the appointment of the Adviser
as administrator to the Fund to permit services under the Agreement to be
provided by the Adviser and its affiliates. The Services Agreement was
terminated during the fiscal year ended March 31, 1995.

For the fiscal years ended March 31, 1994 and 1995, the Fund paid to TFMC
(pursuant to the Services Agreement), $18,021 and $9,604, respectively, of which
$14,730 and $8,164, respectively, was paid to TFMC and $3,291 and $1,440,
respectively, was paid for certain data processing and pricing information
services.

For the fiscal years ended March 31, 1994 and 1995, the Portfolio paid TFMC
(pursuant to the Services Agreement), $38,012 and $24,461, respectively, of
which $26,722 and $17,704, respectively, was paid to TFMC and $11,290 and
$6,757, respectively, were paid for certain data processing and pricing
information services.

DISTRIBUTION CONTRACTS

Distribution Contracts. The Fund has a distribution contract with John
Hancock Funds. This contract was initially adopted on behalf of the Fund by the
Trustees on December 22, 1994. Under the contract, 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 next determined, plus any applicable
sales charge. In connection with the sale of Class A or Class B shares, John
Hancock Funds and Selling Brokers receive compensation in the form of a sales
charge imposed, in the case of Class A shares, at the time of sale or, in the
case of Class B shares, on a deferred basis. The sales charges are discussed
further in the Prospectus.

Total underwriting commissions for sales of the Fund's Class A shares for
the fiscal years ended March 31, 1994, 1995 and 1996 were $59,793, $24,555 and
$4,976, respectively. Of such amounts, $7,455, $4,090 and $0 respectively, were
retained by the Fund's former distributor, Transamerica Fund Distributors, Inc.
or the current distributor in 1995 and 1996, as the case may be, and the
remainder was reallowed to dealers.

<PAGE>

Distribution Plans. The Board of Trustees, including the Independent
Trustees of the Fund, approved new distribution plans pursuant to Rule 12b-1
under the 1940 Act. Such Plans were approved by a majority of the outstanding
shares of each respective class on December 16, 1994 and became effective on
December 22, 1994.

Under the Class A Plan, the distribution or service fee will not exceed an
annual rate of 0.25% of the average daily net asset value of the Class A shares
of the Fund. Any expenses under the Fund's Class A Plan not reimbursed within 12
months of being presented to the Fund for repayment are forfeited and not
carried over to future years. Under the Class B Plan, the distribution or
service fee to be paid by the Fund will not exceed an annual rate of 1.00% of
the average daily net assets of the Class B shares of the Fund; provided that
the portion of such fee used to cover Service Expenses (described below) shall
not exceed an annual rate of 0.25% of the average daily net asset value of the
Class B shares of the Fund. The Fund has determined that it will pay up to 0.90%
to John Hancock Funds but may in the future determine to pay up to 1.00% under
the Class B Plan. Under the Class B Plan, the fee covers the Distribution and
Service Expenses (described below) and interest expenses on unreimbursed
distribution expenses. In accordance with generally accepted accounting
principles, the Fund does not treat unreimbursed distribution expenses
attributable to Class B shares as a liability of the Fund and does not reduce
the current net assets of Class B by such amount although the amount may be
payable in the future.

The fee may be spent by John Hancock Funds on Distribution Expenses or
Service Expenses. "Distribution Expenses" include any activities or expenses
primarily intended to result in the sale of shares of the relevant class of the
Fund, including, but not limited to: (i) initial and ongoing sales compensation
payable out of such fee as such compensation is received by John Hancock Funds
or by Selling Brokers, (ii) direct out-of-pocket expenses incurred in connection
with the distribution of shares, including expenses related to printing of
prospectuses and reports; (iii) preparation, printing and distribution of sales
literature and advertising material; (iv) an allocation of overhead and other
branch office expenses of John Hancock Funds related to the distribution of Fund
shares (v) distribution expenses that were incurred by the Fund's former
distributor and not recovered through payments under the Class A or Class B
former plans or through receipt of contingent deferred sales charges; and (vi)
in the event that any other investment company (the "Acquired Fund") sells all
or substantially all of its assets to, merges with or otherwise engages in a
combination with the Fund, distribution expenses originally incurred in
connection with the distribution of the Acquired Fund's shares. Service Expenses
under the Plans include payments made to, or on account of, account executives
of selected broker-dealers (including affiliates of John Hancock Funds) and
others who furnish personal and shareholder account maintenance services to
shareholders of the relevant class of the Fund.

28
<PAGE>

Total payments made under the current Class A Rule 12b-1 plan to the
distributor during the fiscal year ended March 31, 1996 amounted to $56,470 and,
of such amount, (1) $2,093 represented payments for advertising and promotion
expenses, (2) $2,242 represented payments for the cost of printing and mailing
of prospectuses to other than current shareholders, (3) $45,993 represented
payments for compensation to selling brokers, (4) $6,142 represented expenses of
the distributor, and (5) $0 represented interest, carrying, or other finance
charges.

Total payments made under the current Class B Rule 12b-1 plan to the
distributor during the fiscal year ended March 31, 1996 amounted to $83,126 and,
of such amount, (1) $478 represented payments for advertising and promotion
expenses, (2) $1,154 represented payments for the cost of printing and mailing
of prospectuses to other than current shareholders, (3) $74,107 represented
payments for compensation to selling brokers, (4) $1,940 represented expenses of
the distributor, and (5) $5,447 represented interest, carrying, or other finance
charges.

For the fiscal year ended March 31, 1996, the distributor received an
aggregate of $34,262 in contingent deferred sales charges from redemption of the
Class B shares.

Each Plan provides that it will continue in effect only so long as its
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. Each Plan provides that it may be terminated (a) at
any time by vote of a majority of the Trustees, a majority of the Independent
Trustees, or a majority of the respective Class' outstanding voting securities
or (b) by John Hancock Funds on 60 days' notice in writing to the Fund. Each
Plan further provides that it may not be amended to increase the maximum amount
of the fees for the services described therein without the approval of a
majority of the outstanding shares of the class of the Fund which has voting
rights with respect to the Plan. Each Plan provides that no material amendment
to the Plan will, in any event, be effective unless it is approved by a majority
vote of the Trustees and the Independent Trustees of the Trust. The holders of
Class A and Class B shares have exclusive voting rights with respect to the Plan
applicable to their respective class of shares. By adopting the Plans, the Board
of Trustees has determined that, in its judgment, there is a reasonable
likelihood that each Plan will benefit the holders of the applicable class of
shares of the Fund.

Information regarding the services rendered under the Plans and the amounts
paid by each Class of the Fund are reviewed by the Trustees on a quarterly
basis.

When the Trust seeks an Independent Trustee to fill a vacancy or as a
nominee for election by shareholders, the selection or nomination of the
Independent Trustee is, under resolutions adopted by the Trustees
contemporaneously with their adoption of the Plan, committed to the discretion
of the Committee on Administration of the Trustees. The members of the Committee

<PAGE>

on Administration are all Independent Trustees and identified in this Statement
of Additional Information under the heading "Those Responsible for Management."

NET ASSET VALUE

For purposes of calculating the net asset value ("NAV") of the Fund's
shares, the following procedures are utilized wherever applicable.

Debt investment securities are valued on the basis of valuations furnished
by a principal market maker or a pricing service, both of which generally
utilize electronic data processing techniques to determine valuations for normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.

Short-term debt investments which have a remaining maturity of 60 days or
less are generally valued at amortized cost, which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of the security may be determined in good faith in accordance with
procedures approved by the Trustees.

The Fund will not price its securities on the following national holidays:
New Year's Day; Presidents' Day; Good Friday; Memorial Day; Independence Day;
Labor Day; Thanksgiving Day; and Christmas Day.

INITIAL SALES CHARGE ON CLASS A SHARES

Initial Sales Charge On Class A Shares. The sales charges applicable to
purchases of Class A shares of the Fund are described in the Prospectus. Methods
of obtaining reduced sales charges referred to generally in the Prospectus are
described in detail below. In calculating the sales charge applicable to current
purchases of Class A shares of the Fund, the investor is entitled to cumulate
current purchases with the greater of the current value (at offering price) of
the Class A shares of the Fund owned by the investor, or if John Hancock
Investor Services, Inc. ("Investor Services") is notified by the investor's
dealer or the investor at the time of the purchase, the cost of the Class A
shares owned.

Combined Purchases. In calculating the sales charge applicable to purchases
of Class A shares made at one time, the purchases will be combined if made by
(a) an individual, his or her spouse and their children under the age of 21,
purchasing securities for his or her own account, (b) a trustee or other
fiduciary purchasing for a single trust, estate or fiduciary account and (c)
certain groups of four or more individuals making use of salary deductions or
similar group methods of payment whose funds are combined for the purchase of
mutual fund shares. Further information about combined purchases, including
certain restrictions on combined group purchases, is available from Investor
Services or a Selling Broker's representative.

<PAGE>

Without Sales Charge. Class A shares of the Fund may be sold without a
sales charge to certain persons as described in the Prospectus.

Accumulation Privilege. Investors (including investors combining purchases)
who are already Class A shareholders may also obtain the benefit of the reduced
sales charge by taking into account not only the amount then being invested but
also the purchase price or current account value of the Class A shares already
held by such person.

Combination Privilege. Reduced sales charges (according to the schedule set
forth in the Prospectus) also are available to an investor based on the
aggregate amount of his concurrent and prior investments in Class A shares of
the Fund and shares of all other John Hancock funds which carry a sales charge.

Letter of Intention. Reduced sales charges are also applicable to
investments made over a specified period pursuant to a Letter of Intention
(LOI), which should be read carefully prior to its execution by an investor. The
Fund offers two options regarding the specified period for making investments
under the LOI. All investors have the option of making their investments over a
specified period of thirteen (13) months. Investors who are using the Fund as a
funding medium for a qualified retirement plan, however, may opt to make the
necessary investments called for by the LOI over a forty-eight (48) month
period. These qualified retirement plans include IRA's, SEP, SARSEP, TSA, 401(k)
plans, TSA plans and Section 457 plans. Such an investment (including
accumulations and combinations) must aggregate $50,000 or more invested during
the specified period from the date of the LOI or from a date within ninety (90)
days prior thereto, upon written request to Investor Services. The sales charge
applicable to all amounts invested under the LOI is computed as if the aggregate
amount intended to be invested had been invested immediately. If such aggregate
amount is not actually invested, the difference in the sales charge actually
paid and the sales charge payable had the LOI not been in effect is due from the
investor. However, for the purchases actually made within the specified period
(either 13 or 48 months), the sales charge applicable will not be higher than
that which would have been applied (including accumulations and combinations)
had the LOI been for the amount actually invested.

The LOI authorizes Investor Services to hold in escrow sufficient Class A
shares (approximately 5% of the aggregate) to make up any difference in sales
charges on the amount intended to be invested and the amount actually invested,
until such investment is completed within the specified period, at which time
the escrowed Class A shares will be released. If the total investment specified
in the LOI is not completed, the Class A shares held in escrow may be redeemed
and the proceeds used as required to pay such sales charge as may be due. By
signing the LOI, the investor authorizes Investor Services to act as his or her
attorney-in-fact to redeem any escrowed Class A shares and adjust the sales
charge, if necessary. A LOI does not constitute a binding commitment by an
investor to purchase, or by the Fund to sell, any additional Class A shares and
may be terminated at any time.

31
<PAGE>

DEFERRED SALES CHARGE ON CLASS B SHARES

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

Contingent Deferred Sales Charge. Class B shares which are redeemed within
four years of date of purchase will be subject to a contingent deferred sales
charge ("CDSC") at the rates set forth in the Prospectus as a percentage of the
dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the current market value or the original purchase cost of
the Class B shares being redeemed. Accordingly, no CDSC will be imposed on
increases in account value above the initial purchase prices, including Class B
shares derived from reinvestment of dividends or capital gains distributions.

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining this, all payments
during a month will be aggregated and deemed to have been made on the last day
of the month.

Proceeds from the CDSC are paid to John Hancock Funds and are used in whole
or in part by John Hancock Funds to defray its expenses related to providing
distribution-related services to the Fund in connection with the sale of the
Class B shares, such as the payment of compensation to select Selling Brokers
for selling Class B shares. The combination of the CDSC and the distribution and
service fees facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of the purchase. See the
Prospectus for additional information regarding the CDSC.

SPECIAL REDEMPTIONS

Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, he would incur a brokerage charge. Any such
securities would be valued for the purposes of making such payment at the same
value as used in determining net asset value. The Fund has elected to be
governed by Rule 18f-1 under the 1940 Act. Under that rule, the Fund must redeem
its shares for cash up to the lesser of $250,000 or 1% of the net asset value of
the Fund during any 90 day period for any one account.

ADDITIONAL SERVICES AND PROGRAMS

Exchange Privilege. As described more fully in the Prospectus, the Fund
permits exchanges of shares of any class of the Fund for shares of the same
class in any other John Hancock fund offering that class.

<PAGE>

Systematic Withdrawal Plan. As described briefly in the Prospectus, the
Fund permits the establishment of a Systematic Withdrawal Plan. Payments under
this plan represent proceeds arising from the redemption of shares of the Fund.
Since the redemption price of shares of the Fund may be more or less than the
shareholder's cost, depending upon the market value of the securities owned by
the Fund at the time of redemption, the distribution of cash pursuant to this
plan may result in realization of gain or loss for purposes of Federal, state
and local income taxes. The maintenance of a Systematic Withdrawal Plan
concurrently with purchases of additional Class A or Class B shares of the Fund
could be disadvantageous to a shareholder because of the initial sales charge
payable on such purchases of Class A shares and the CDSC imposed on redemptions
of Class B shares and because redemptions are taxable events. Therefore, a
shareholder should not purchase Class A and Class B shares at the same time a
Systematic Withdrawal Plan is in effect. The Fund reserves the right to modify
or discontinue the Systematic Withdrawal Plan of any shareholder on 30 days'
prior written notice to such shareholder, or to discontinue the availability of
such plan in the future. The shareholder may terminate the plan at any time by
giving proper notice to Investor Services.

Monthly Automatic Accumulation Program ("MAAP"). This program is explained
fully in the Prospectus. The program, as it relates to automatic investment
checks, is subject to the following conditions:

The investments will be drawn on or about the day of the month indicated.

The privilege of making investments through the Monthly Automatic
Accumulation Program may be revoked by Investor Services without prior notice if
any investment is not honored by the shareholder's bank. The bank shall be under
no obligation to notify the shareholder as to the non-payment of any checks.

The program may be discontinued by the shareholder either by calling
Investor Services or upon written notice to Investor Services which is received
at least five (5) business days prior to the due date of any investment.

Reinvestment Privilege. A shareholder who has redeemed Fund shares may,
within 120 days after the date of redemption, reinvest without payment of a
sales charge any part of the redemption proceeds in shares of the same class of
the Fund or any other John Hancock funds, subject to the minimum investment
limit of that fund. The proceeds from the redemption of Class A shares may be
reinvested at net asset value without paying a sales charge in Class A shares of
the Fund or in Class A shares of other John Hancock funds. If a CDSC was paid
upon a redemption, a shareholder may reinvest the proceeds from this redemption
at net asset value in additional shares of the class from which the redemption
was made. The shareholder's account will be credited with the amount of any CDSC
charged upon the prior redemption and the new shares will continue to be subject
to the CDSC. The holding period of the shares acquired through reinvestment
will, for purposes of computing the CDSC payable upon a subsequent redemption,
include the holding period of the redeemed shares. The Fund may modify or
terminate the reinvestment privilege at any time.

<PAGE>

A redemption or exchange of the Fund is a taxable transaction for Federal
income tax purposes even if the reinvestment privilege is exercised, and any
gain or loss realized by a shareholder on the redemption or other disposition of
the Fund will be treated for tax purposes as described under the caption "Tax
Status."

DESCRIPTION OF THE FUND'S SHARES

The Declaration of Trust permits the Trustees to create an unlimited number
of series and classes of shares of the Trust and to issue an unlimited number of
full or fractional shares and to divide or combine the shares into a greater or
lesser number of shares without changing the proportionate beneficial interests
of the series.

Each share represents an equal proportionate interest in the aggregate net
assets attributable to each class or series. The interest of investors in the
various series or classes of the Trust is separate and distinct. All
consideration received for the sales of shares of a particular series or class
of the Trust, all assets in which such consideration is invested and all income,
earnings and profits derived from such investments will be allocated to and
belong to that series or class. As such, each such share is entitled to
dividends and distributions out of the net income belonging to that series or
class as declared by the Board of Trustees. Shares of the Trust have a par value
of $0.01 per share. The assets of each series are segregated on the Trust's
books and are charged with the liabilities of that series and with a share of
the Trust's general liabilities. The Board of Trustees determines those assets
and liabilities deemed to be general assets or liabilities of the Trust, and
these items are allocated among each series in proportion to the relative total
net assets of each series. In the unlikely event that the liabilities allocable
to a series exceed the assets of that series, all or a portion of such
liabilities may have to be borne by the other series.

Pursuant to the Declaration of Trust, the Trustees have established, the
Fund and may authorize the creation of additional series of shares (the proceeds
of which would be invested in separate, independently managed portfolios) and
additional classes within any series (which would be used to distinguish among
the rights of different categories of shareholders, as might be required by
future regulations or other unforeseen circumstances). As of the date of this
Statement of Additional Information, the Trustees have authorized the issuance
of two classes of shares of the Fund, designated as Class A and Class B. The
shares of each class of the Fund represent an equal proportionate interest in
the aggregate net asset values attributable to that class of the Fund.

The holders of Class A and Class B shares each have certain exclusive
voting rights on matters relating to their respective Rule 12b-1 distribution
plans. The different classes of the Fund may bear different expenses relating to
the cost of holding shareholder meetings necessitated by the exclusive voting
rights of any class of shares.

Dividends paid by the Fund, if any, with respect to each class of shares
will be calculated in the same manner, at the same time and on the same day and
will be in the same amount, except that (i) the distribution and service fees
relating to Class A and Class B shares will be borne exclusively by such class,

<PAGE>

(ii) Class B shares will pay higher distribution and service fees than Class A
shares and (iii) each class of shares will bear any other class expenses
properly attributable to that class of shares, subject to certain conditions
imposed by the Internal Revenue Service in issuing rulings to funds with a
multiple-class structure. Similarly, the net asset value per share may vary
depending on the class of shares purchased.

Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for acts or
obligations of the trust. However, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts, obligations and affairs of
the Trust. The Declaration of Trust also provides for indemnification out of the
Trust's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. Liability is therefore
limited to circumstances in which the Trust itself would be unable to meet its
obligations, and the possibility of this occurrence is remote.

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 and
as amended (the "Code") 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, each Fund will not be subject to Federal income
tax on its net income (including net short-term and long-term capital gains)
which is distributed to shareholders at least annually in accordance with the
timing requirements of the Code.

The Fund will be subject to a 4% 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 from the Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Prospectus whether taken in shares or in cash. Distributions,
if any, in excess of E&P will constitute a return of capital, which will first
reduce an investor's tax basis in Fund shares and thereafter (after such basis
is reduced to zero) will generally give rise to 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 to receive the
distributions in cash, divided by the number of shares received.

The amount of net short-term and long-term capital gains, if any, in any
given year will vary depending upon the Adviser's current investment strategy
and whether the Adviser believes it to be in the best interests of the Fund to
dispose of portfolio securities or enter into options or futures transactions
that will generate capital gains. At the time of an investor's purchase of Fund
shares, a portion of the purchase price is often attributable to realized or
unrealized appreciation in the Fund's portfolio or undistributed taxable income

<PAGE>

of the Fund. Consequently, subsequent distributions on these shares from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such shares, and the distributions in reality
represent a return of a portion of the purchase price.

Upon a redemption of shares of the Fund (including by exercise of the
exchange privilege) a shareholder may realize a taxable gain or loss depending
upon his basis in his shares. Such gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and will be
long-term or short-term, depending upon the shareholder's tax holding period for
the shares. A sales charge paid in purchasing Class A shares of the Fund cannot
be taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of the Fund or another John Hancock Fund are subsequently acquired
without payment of a sales charge pursuant to the reinvestment or exchange
privilege. This disregarded charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Also, any loss
realized on a redemption or exchange may be disallowed to the extent the shares
disposed of are replaced with other shares of the Fund within a period of 61
days beginning 30 days before and ending 30 days after the shares are disposed
of, such as pursuant to the Automatic Dividend Reinvestment Plan. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period of six months or less will be treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares.

Although its present intention is to distribute all net short-term and
long-term capital gains, if any, the Fund reserves the right to retain and
reinvest all or any portion of its "net capital gain," which is the excess, as
computed for Federal income tax purposes, of net long-term capital gain over net
short-term capital loss in any year. The Fund will not in any event distribute
net long-term capital gains realized in any year to the extent that a capital
loss is carried forward from prior years against such gain. To the extent such
excess was retained and not exhausted by the carryforward of prior years'
capital losses, it would be subject to Federal income tax in the hands of the
Fund. Each shareholder would be treated for Federal income tax purposes as if
the Fund had distributed to him on the last day of its taxable year his pro rata
share of such excess, and he had paid his pro rata share of the taxes paid by
the Fund and reinvested the remainder in the Fund. Accordingly, each shareholder
would (a) include his pro rata share of such excess as long-term capital gain
income in his return for his taxable year in which the last day of the Fund's
taxable year falls, (b) be entitled either to a tax credit on his return for, or
to a refund of, his pro rata share of the taxes paid by the Fund, and (c) be
entitled to increase the adjusted tax basis for his shares in the Fund by the
difference between his pro rata share of such excess and his pro rata share of
such taxes.

For Federal income tax purposes, the Fund is permitted to carryforward a
net capital loss in any year to offset its own net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in Federal income
tax liability to the Fund and, as noted above, would not be distributed as such
to shareholders. The Fund has $15,486,880 of capital loss carryforwards as of

<PAGE>

the tax year ended December 31, 1995, of which $3,014,883 expires in 1996,
$5,412,804 expires in 1997, $653,763 expires in 1998, $2,152,064 expires in
1999, $3,826,207 expires in 2001, and $427,159 expires in 2002, available to
offset future net capital gains.

The Fund's dividends and capital gain distributions will generally not
qualify for the corporate dividends received deduction.

If the Fund invests in certain PIKs, zero coupon securities or certain
increasing rate securities (and, in general, any other securities with original
issue discount or with market discount if the Fund elects to include market
discount in income currently) it must accrue income on such investments prior to
the receipt of the corresponding cash payments. However, the Fund must
distribute, at least annually, all or substantially all of its net income,
including such accrued income, to shareholders to qualify as a regulated
investment company under the Code and avoid Federal income and excise taxes.
Therefore, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.

The Fund may be required to account for its transactions in forward rolls
in a manner that, under certain circumstances, may limit the extent of its
participation in such transactions.

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.

Limitations imposed by the Code on regulated investment companies like the
Fund may restrict the Fund's ability to enter into futures and options.

The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. Shareholders should consult their own tax
advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.

Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from a Fund and, unless an effective IRS Form W-8 or authorized

<PAGE>

substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.

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

CALCULATION OF PERFORMANCE

For the 30-day period ended March 31, 1996, the annualized yield for the
Fund's Class A shares and Class B shares were 5.69% and 5.21%, respectively.
Average annual return for the Fund's Class A and Class B shares for the period
from December 31, 1991 (inception of the Fund) through March 31, 1996 was 3.99%
and 3.65%, respectively. For the one year period ended March 31, 1996 annual
returns were 2.43% and 1.90%, respectively, for Class A and Class B shares of
the Fund.

The Fund's yield is computed by dividing net investment income per share
determined for a 30-day period by the maximum offering price per share (which
includes the full sales charge) on the last day of the period, according to the
following standard formula:

Yield = 2 ( [ (a - b) + 1 ] 6 - 1 )
-----
cd

Where:

a = dividends and interest earned during the period.

b = net expenses accrued during the period.

c = the average daily number of shares of the Fund outstanding
during the period that would be entitled to receive dividends.

d = the maximum offering price per share on the last day of the
period (NAV where applicable).

The Fund's total return is computed by finding the average annual
compounded rate of return over the 1-year, 5-year, and 10-year periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula:

<PAGE>

n _______
T = \ /ERV / P - 1

Where:

P = a hypothetical initial investment of $1,000.

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1,000 investment
made at designated periods or fraction thereof.

In the case of Class A shares or Class B shares, this calculation assumes
the maximum sales charge is included in the initial investment or the CDSC
applied at the end of the period. This calculation also assumes that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The "distribution rate" is determined by
annualizing the result of dividing the declared dividends of the Fund during the
period stated by the maximum offering price or net asset value at the end of the
period.

In addition to average annual total returns, the Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Cumulative total returns may be quoted as a
percentage or as a dollar amount, and may be calculated for a single investment,
a series of investments, and/or a series of redemptions, over any time period.
Total returns may be quoted with or without taking the Fund's maximum sales
charge on Class A shares or the CDSC on Class B shares into account. Excluding
the Fund's sales charge on Class A shares and the CDSC on Class B shares from a
total return calculation produces a higher total return figure.

From time to time, in reports and promotional literature, the Fund's yield
and total return will be compared to indices of mutual funds and bank deposit
vehicles such as Lipper Analytical Services, Inc.'s "Lipper -- Fixed Income Fund
Performance Analysis," a monthly publication which tracks net assets, total
return, and yield on fixed income mutual funds in the United States. Ibbotson
and Associates, CDA Weisenberger and F.C. Towers are also used for comparison
purposes, as well a the Russell and Wilshire Indices.

Performance rankings and ratings reported periodically in national
financial publications such as MONEY Magazine, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S, may also be
utilized. The Fund's promotional and sales literature may make reference to the
Fund's "beta." Beta is a reflection of the market-related risk of the Fund by
showing how responsive the Fund is to the market.

<PAGE>

The performance of the Fund is not fixed or guaranteed. Performance
quotations should not be considered to be representations of performance of the
Fund for any period in the future. The performance of the Fund is a function of
many factors including its earnings, expenses and number of outstanding shares.
Fluctuating market conditions; purchases, sales and maturities of portfolio
securities; sales and redemptions of shares of beneficial interest; and changes
in operating expenses are all examples of items that can increase or decrease
the Fund's performance.

BROKERAGE ALLOCATION

Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser pursuant to
recommendations made by its investment committee, which consists of officers and
directors of the Adviser and affiliates and officers and Trustees who are
interested persons of the Fund. Orders for purchases and sales of securities are
placed in a manner which, in the opinion of the Adviser, will offer the best
price and market for the execution of each such transaction. Purchases from
underwriters of portfolio securities may include a commission or commissions
paid by the issuer and transactions with dealers serving as market maker to
reflect a "spread." Investments in debt securities are generally traded on a net
basis through dealers acting for their own account as principals and not as
brokers; no brokerage commissions are payable on such transactions.

The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. and such other policies as the Trustees may determine, the Adviser
may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.

To the extent consistent with the foregoing, the Fund will be governed in
the selection of brokers and dealers, and the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research information
and to a lesser extent statistical assistance furnished to the Adviser, and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will not make any commitments to allocate portfolio transactions upon any
prescribed basis. While the Adviser will be primarily responsible for the
allocation of the Fund's brokerage business, their policies and practices of the
Adviser in this regard must be consistent with the foregoing and will at all

<PAGE>

times be subject to review by the Trustees. For the years ended March 31, 1996,
1995, and 1994, no negotiated brokerage commissions were paid on portfolio
transactions.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Fund may pay to a broker which provides brokerage and research services to the
Fund an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Trustees that the price is
reasonable in light of the services provided and to policies that the Trustees
may adopt from time to time. During the fiscal year ended March 31, 1996, the
Fund did not pay commissions to compensate any brokers for research services
such as industry, economic and company reviews and evaluations of securities.

The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony
Incorporated ("Tucker Anthony") and Sutro & Company, Inc. ("Sutro"),
(collectively "Affiliated Brokers"). Pursuant to procedures established by the
Trustees and consistent with the above policy of obtaining best net results, the
Fund may execute portfolio transactions with or through Affiliated Brokers. For
the years ended March 31, 1996, 1995 and 1994, the Fund did not execute any
portfolio transactions with any Affiliated Brokers.

Any of the Affiliated Brokers may act as broker for the Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the Trustees pursuant to the 1940 Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers, except for accounts for which
the Affiliated Broker acts as a clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Trustees who are not interested persons (as defined in the
1940 Act) of the Fund, the Adviser or the Affiliated Brokers. Because the
Adviser, which is affiliated with the Affiliated Brokers, has, as an investment
adviser to the Fund, the obligation to provide investment management services,
which includes elements of research and related investment skills, such research
and related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria. The Fund will not effect principal transactions with
Affiliated Brokers. The Fund may, however, purchase securities from other
members of underwriting syndicates of which Tucker Anthony, Sutro and John
Hancock Distributors are members, but only in accordance with the policy set
forth above and procedures adopted and reviewed periodically by the Trustees.

<PAGE>

The turnover rate for the Fund for the fiscal years ended March 31, 1994,
1995, and 1996 were 244%, 341%, and 423%, respectively. Such rates reflect the
difference between the years' varying market conditions.

TRANSFER AGENT SERVICES

John Hancock Investor Services Corporation, P.O. Box 9116, Boston, MA
02205-9116, a wholly owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent for the Fund. The Fund pays an annual fee of
$20.00 for each Class A shareholder and $22.50 for each Class B shareholder,
plus certain out-of-pocket expenses. These expenses are aggregated and charged
to the Fund and allocated to each class on the basis of the relative net asset
values.

CUSTODY OF THE FUND

Portfolio securities of the Fund are held pursuant to custodian agreements
between the Trust on behalf of the Fund and Investors Bank & Trust Company
("IBT") 24 Federal Street, Boston, Massachusetts 02110. Under the custodian
agreements, IBT performs custody, portfolio and fund accounting services.

INDEPENDENT AUDITORS

The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. Ernst & Young LLP audits and renders an
opinion of the Fund's annual financial statements and prepares the Fund's annual
Federal income tax return.

42
<PAGE>

APPENDIX A

The ratings of Moody's Investors Service, Inc. and Standard & Poor's Corporation
represent their opinions as to the quality of various debt instruments. Their
ratings are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. Such limitations
include the following: the rating of an issue is heavily weighted by past
developments and does not necessarily reflect probable future conditions; there
is frequently a lag between the time a rating is assigned and the time it is
updated; and there are varying degrees of difference in credit risk of
securities in each rating category. Therefore, it should be understood, that
ratings are not absolute standards of quality. Consequently, debt instruments
with the same maturity, coupon and rating may have different yields while debt
instruments of the same maturity and coupon with different ratings may have the
same yield.

Description of Bond Ratings Moody's Investors Service, Inc.

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor 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.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated b generally lack the characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principle or
interest.

<PAGE>

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Standard & Poor's Ratings Group

AAA: Bonds rated AAA have the higher rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.

A: Bonds rated A have a very strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.

BB, B, CCC, CC: Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

C: The rating C is reserved for income bonds on which no interest is being paid.