HANCOCK JOHN SOVEREIGN BOND FUND, 497, 1998-11-02

HANCOCK JOHN SOVEREIGN BOND FUND
497, 1998-11-02

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JOHN HANCOCK BOND FUND

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

November 1, 1998

This Statement of Additional Information provides information about John Hancock
Bond Fund (the "Fund"), a diversified open-end investment company, in addition
to the information that is contained in the combined Income Funds' Prospectus
(the "Prospectus") dated October 1, 1998.

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:

John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
1-800-225-5291

TABLE OF CONTENTS
Page

Organization of the Fund.............................................. 2
Investment Objective and Policies..................................... 2
Investment Restrictions............................................... 14
Those Responsible for Management...................................... 16
Investment Advisory and Other Services................................ 25
Distribution Contracts................................................ 27
Sales Compensation.................................................... 28
Net Asset Value....................................................... 30
Initial Sales Charge on Class A Shares................................ 30
Deferred Sales Charge on Class B and Class C Shares................... 33
Special Redemptions................................................... 36
Additional Services and Programs...................................... 36
Description of the Fund's Shares...................................... 38
Tax Status............................................................ 39
Calculation of Performance............................................ 43
Brokerage Allocation.................................................. 44
Transfer Agent Services............................................... 46
Custody of Portfolio.................................................. 47
Independent Auditors.................................................. 47
Appendix A- Description of Investment Risk............................ A-1
Appendix B-Description of Bond Ratings................................ B-1
Financial Statements.................................................. F-1

<PAGE>

ORGANIZATION OF THE FUND

The Fund is a diversified open-end investment management company organized as a
Massachusetts business trust under the laws of The Commonwealth of
Massachusetts. The Fund was organized in 1984. Prior to October 1, 1998, the
Fund was called John Hancock Sovereign Bond Fund.

John Hancock Advisers, Inc. (the "Adviser") is the Fund's investment adviser.
The Adviser is an indirect wholly-owned subsidiary of John Hancock Mutual Life
Insurance Company (the "Life Company"), a Massachusetts life insurance company
chartered in 1862, with national headquarters at John Hancock Place, Boston,
Massachusetts.

INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the discussion of the Fund's investment
objective and policies discussed in the Prospectus. Appendix A contains further
information describing investment risks. There is no assurance that the Fund
will achieve its investment objective. The investment objective is fundamental
and may only be changed with shareholder approval.

The Fund's investment objective is to generate a high level of current income,
consistent with prudent investment risk, through investment in a diversified
portfolio of freely marketable debt securities. The Adviser seeks high current
income consistent with the moderate level of risk associated with a portfolio
consisting primarily of investment grade debt securities.

Under normal conditions, at least 65% of the value of the Fund's assets will be
in bonds and/or debentures. In addition, the Fund contemplates at least 75% of
the value of its total assets will be in (1) debt securities that have, at the
time of purchase, a rating within the four highest grades as determined by
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or Standard &
Poor's ("S&P") (AAA, AA, A, or BBB); (2) debt securities of banks, the U.S.
Government and its agencies or instrumentalities and other issuers which,
although not rated as a matter of policy by either Moody's or S&P, are
considered by the Fund to have investment quality comparable to securities
receiving ratings within the four highest grades; and (3) cash and cash
equivalents. Debt securities rated Baa or BBB are considered medium-grade
obligations with speculative characteristics and adverse economic conditions or
changing circumstances may weaken the issuers' capacity to pay interest and
repay principal. The Fund will, when feasible, purchase debt securities which
are non-callable. It is anticipated that under normal conditions, the Fund will
not invest more than 25% of its total assets in U.S. dollar-denominated foreign
securities (excluding U.S. dollar-denominated Canadian securities). The Fund
will diversify its investments among a number of industry groups without
concentration in any particular industry. The Fund's investments, and
consequently its net asset value, will be subject to the market fluctuations and
risks inherent in all securities.

The Fund may purchase corporate debt securities bearing fixed or fixed and
contingent interest as well as those which carry certain equity features, such
as conversion or exchange rights or warrants for the acquisition of stock of the
same or a different issuer, or participations based on revenues, sales or
profits. The Fund may purchase preferred stock. The Fund will not exercise any
such conversion, exchange or purchase rights if, at the time, the value of all
equity interests so owned would exceed 10% of the Fund's total assets taken at
market value.

For liquidity and flexibility, the Fund may place up to 35% of total assets in
investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The market value
of debt securities which carry no equity participation usually reflects yields
generally available on securities of similar quality and type. When such yields
decline, the market value of a portfolio already invested at higher yields can
be expected to rise if such securities are protected against early call.
Similarly, when such yields increase, the market value of a portfolio already
invested can be expected to decline. The Fund's portfolio may include debt
securities which sell at substantial discounts from par. These securities are
low coupon bonds which, during periods of high interest rates, because of their
lower acquisition cost tend to sell on a yield basis approximating current
interest rates.

<PAGE>

Ratings as Investment Criteria. In general, the ratings of Moody's and S&P
represent the opinions of these agencies as to the quality of the securities
which they rate. It should be emphasized, however, that such ratings are
relative and subjective and are not absolute standards of quality. These ratings
will be used by the Fund as initial criteria for the selection of portfolio
securities. Among the factors which will be considered are the long-term ability
of the issuer to pay principal and interest and general economic trends.
Appendix B contains further information concerning the ratings of Moody's and
S&P and their significance.

Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by the
Fund, but the Adviser will consider the event in its determination of whether
the Fund should continue to hold the securities.

Participation Interests. Participation interests, which may take the form of
interests in, or assignments of certain loans, are acquired from banks who have
made these loans or are members of a lending syndicate. The Fund's investments
in participation interests may be subject to its 15% limitation on investments
in illiquid securities.

Structured Securities. The Fund may invest in structured securities including
notes, bonds or debentures, the value of the principal of and/or interest on
which is to be determined by reference to changes in the value of specific
currencies, interest rates, commodities, indices or other financial indicators
(the "Reference") or the relative change in two or more References. The interest
rate or the principal amount payable upon maturity or redemption may be
increased or decreased depending upon changes in the applicable Reference. The
terms of the structured securities may provide that in certain circumstances no
principal is due at maturity and, therefore, may result in the loss of the
Fund's investment. Structured securities may be positively or negatively
indexed, so that appreciation of the Reference may produce an increase or
decrease in the interest rate or value of the security at maturity. In addition,
the change in interest rate or the value of the security at maturity may be a
multiple of the change in the value of the Reference. Consequently, structured
securities entail a greater degree of market risk than other types of debt
obligations. Structured securities may also be more volatile, less liquid and
more difficult to accurately price than less complex fixed income investments.

Lower Rated High Yield Debt Obligations. The Fund may invest up to 25% of the
value of its total assets in fixed income securities rated below Baa by Moody's,
or below BBB by S&P, or in securities which are unrated. The Fund may invest in
securities rated as low as Ca by Moody's or CC by S&P, which may indicate that
the obligations are highly speculative and in default. Lower rated securities
are generally referred to as junk bonds. See the Appendix attached to this
Statement of Additional Information, for the distribution of securities in the
various ratings categories and a description of the characteristics of the
categories. The Fund is not obligated to dispose of securities whose issuers
subsequently are in default or which are downgraded below the above-stated
ratings. The Fund may invest in unrated securities which, in the opinion of the
Adviser, offer comparable yields and risks to those securities which are rated.

Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income. In
addition, lower ratings reflect a greater possibility of an adverse change in
financial condition affecting the ability of the issuer to make payments of
interest and principal.

<PAGE>

The market price and liquidity of lower rated fixed income securities generally
respond to short-term economic, corporate and market developments to a greater
extent than do higher rated securities. In the case of lower-rated securities,
these developments are perceived to have a more direct relationship to the
ability of an issuer of lower rated securities to meet its ongoing debt
obligations.

Reduced volume and liquidity in the high yield bond market, or the reduced
availability of market quotations, will make it more difficult to dispose of the
bonds and value accurately the Fund's assets. The reduced availability of
reliable, objective data may increase the Fund's reliance on management's
judgment in valuing the high yield bonds. To the extent that the Fund invests in
these securities, the achievement of the Fund's objective will depend more on
the Adviser's judgment and analysis than would otherwise be the case. In
addition, the Fund's investments in high yield securities may be susceptible to
adverse publicity and investor perceptions, whether or not the perceptions are
justified by fundamental factors. In the past, economic downturns and increases
in interest rates have caused a higher incidence of default by the issuers of
lower-rated securities and may do so in the future, particularly with respect to
highly leveraged issuers. The market prices of zero coupon and payment-in-kind
bonds are affected to a greater extent by interest rate changes, and thereby
tend to be more volatile than securities that pay interest periodically and in
cash. Increasing rate note securities are typically refinanced by the issuers
within a short period of time. The Fund accrues income on these securities for
tax and accounting purposes, which is required to be distributed to
shareholders. Because no cash is received while income accrues on these
securities, the Fund may be forced to liquidate other investments to make the
distributions.

The Fund may acquire individual securities of any maturity and is not subject to
any limits as to the average maturity of its overall portfolio. The longer the
Fund's average portfolio maturity, the more the value of the portfolio and the
net asset value of the Fund's shares will fluctuate in response to changes in
interest rates. An increase in interest rates will generally reduce the value of
the Fund's portfolio securities and the Fund's shares, while a decline in
interest rates will generally increase their value.

Securities of Domestic and Foreign Issuers. The Fund may invest in U.S.
dollar-denominated securities of foreign and United States issuers that are
issued in or outside of the United States. Foreign companies may not be subject
to accounting standards and government supervision comparable to U.S. companies,
and there is often less publicly available information about their operations.
Foreign markets generally provide less liquidity than U.S. markets (and thus
potentially greater price volatility) and typically provide fewer regulatory
protections for investors. Foreign securities can also be affected by political
or financial instability abroad. It is anticipated that under normal conditions,
the Fund will not invest more than 25% of its total assets in U.S.
dollar-denominated foreign securities (excluding U.S. dollar-denominated
Canadian securities).

Mortgage-backed and Derivative Securities. Mortgage-backed securities represent
participation interests in pools of adjustable and fixed rate mortgage loans
which are guaranteed by agencies or instrumentalities of the U.S. government.
Unlike conventional debt obligations, mortgage-backed securities provide monthly
payments derived from the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. The
mortgage loans underlying mortgage-backed securities are generally 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 and prepayment scenarios, the Fund may fail
to recover the full amount of its investment

<PAGE>

in mortgage-backed securities notwithstanding any direct or indirect
governmental or agency guarantee. Since faster than expected prepayments must
usually be invested in lower yielding securities, mortgage-backed securities are
less effective than conventional bonds in "locking in" a specified interest
rate. In a rising interest rate environment, a declining prepayment rate may
extend the average life of many mortgage-backed securities. Extending the
average life of a mortgage-backed security increases the risk of depreciation
due to future increases in market interest rates.

The Fund's investments in mortgage-backed securities may include conventional
mortgage passthrough securities and certain classes of multiple class
collateralized mortgage obligations ("CMOs"). In order to reduce the risk of
prepayment for investors, CMOs are issued in multiple classes, each having
different maturities, interest rates, payment schedules and allocations of
principal and interest on the underlying mortgages. Senior CMO classes will
typically have priority over residual CMO classes as to the receipt of principal
and/or interest payments on the underlying mortgages. The CMO classes in which
the Fund may invest include but are not limited to sequential and parallel pay
CMOs, including planned amortization class ("PAC") and target amortization class
("TAC") securities.

Different types of mortgage-backed securities are subject to different
combinations of prepayment, extension, interest rate and/or other market risks.
Conventional mortgage passthrough securities and sequential pay CMOs are subject
to all of these risks, but are typically not leveraged. PACs, TACs and other
senior classes of sequential and parallel pay CMOs 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."

Repurchase Agreements. In a repurchase agreement the Fund would buys a security
for a relatively short period (usually not more than 7 days) subject to the
obligation to sell it back to the issuer at a fixed time and price plus accrued
interest. The Fund will enter into repurchase agreements only with member banks
of the Federal Reserve System and with "primary dealers" in U.S. Government
securities. The Adviser will continuously monitor the creditworthiness of the
parties with whom the Fund enters into repurchase agreements.

The Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, the Fund could experience delays in
liquidating the underlying securities during the period in which the Fund seeks
to enforce its rights thereto, possible subnormal levels of income decline in
value of the underlying securities or lack of access to income during this
period as well as the expense of enforcing its rights.

Reverse Repurchase Agreements. The Fund may also enter into reverse purchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by the Fund. Reverse repurchase agreements
involve the risk that the market value of securities purchased by the Fund with
proceeds of the transaction may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. The Fund will
also continue to be subject to the risk of a decline in the market value of the
securities sold under the agreements because it will reacquire those securities
upon effecting their repurchase. To minimize various risks associated with
reverse repurchase agreements, the Fund will establish and maintain with the
Fund's custodian a separate account

<PAGE>

consisting of liquid securities, of any type or maturity, in an amount at least
equal to the repurchase prices of the securities (plus any accrued interest
thereon) under such agreements. In addition, the Fund will not enter into
reverse repurchase agreements or borrow money, except from banks as a temporary
measure for extraordinary emergency purposes in amounts not to exceed 33 1/3% of
the Fund's total assets (including the amount borrowed) taken at market value.
The Fund will not use leverage to attempt to increase income. The Fund will not
purchase securities while outstanding borrowings exceed 5% of the Fund's total
assets. The Fund will enter into reverse repurchase agreements only with
federally insured banks which are approved in advance as being creditworthy by
the Trustees. Under the procedures established by the of Trustees, the Adviser
will monitor the creditworthiness of the banks involved.

Restricted Securities. The Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of the 1933 Act ("1933 Act"),
including commercial paper issued in reliance on Section 4(2) of the 1933 Act.
However, the Fund will not invest more than 15% limit on illiquid investments.
If the Trustees determine, based upon a continuing review of the trading markets
for specific Section 4(2) paper or Rule 144A securities, that they are liquid,
they will not be subject to the 15% limit in illiquid investments. The Trustees
may adopt guidelines and delegate to the Adviser the daily function of
determining the monitoring and liquidity of restricted investments. The
Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations. The Trustees will carefully monitor the
Fund's liquidity and availability of information. This investment practice could
have the effect of increasing the level of liquidity in the Fund if qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.

Options on Securities and Securities Indices. The Fund may purchase and write
(sell) call and put options on any securities in which it may invest or on any
securities index based on securities in which it may invest. These options may
be listed on national domestic securities exchanges or traded in the
over-the-counter market. The Fund may write covered put and call options and
purchase put and call options to enhance total return, as a substitute for the
purchase or sale of securities, or to protect against declines in the value of
portfolio securities and against increases in the cost of securities to be
acquired.

Writing Covered Options. A call option on securities written by the Fund
obligates the Fund to sell specified securities to the holder of the option at a
specified price if the option is exercised at any time before the expiration
date. A put option on securities written by a Fund obligates the Fund to
purchase specified securities from the option holder at a specified price if the
option is exercised at any time before the expiration date. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options requires cash settlement payments and does
not involve the actual purchase or sale of securities. In addition, securities
index options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations in
a single security. Writing covered call options may deprive the Fund of the
opportunity to profit from an increase in the market price of the securities in
its portfolio. Writing covered put options may deprive the Fund of the
opportunity to profit from a decrease in the market price of the securities to
be acquired for its portfolio.

All call and put options written by the Funds are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities in a
segregated account with a value at least equal to the Fund's obligation under
the option, (ii) entering into an offsetting forward commitment and/or (iii)
purchasing an offsetting option or any other option which, by virtue of its
exercise price or otherwise, reduces the Fund's net exposure on its written
option position. A written call option on securities is typically covered by
maintaining the securities that are subject to the option in a segregated
account. The Fund may cover call options on a securities index by owning
securities whose price changes are expected to be similar to those of the
underlying index.

<PAGE>

The Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."

Purchasing Options. The Fund would normally purchase call options in
anticipation of an increase, or put options in anticipation of a decrease
("protective puts") in the market value of securities of the type in which it
may invest. The Fund may also sell call and put options to close out its
purchased options.

The purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. The Fund would ordinarily realize a gain on the purchase of a call
option if, during the option period, the value of such securities exceeded the
sum of the exercise price, the premium paid and transaction costs; otherwise the
Fund would realize either no gain or a loss on the purchase of the call option.

The purchase of a put option would entitle the Fund, in exchange for the premium
paid, to sell specified securities at a specified price during the option
period. The purchase of protective puts is designed to offset or hedge against a
decline in the market value of the Fund's portfolio securities. Put options may
also be purchased by the Fund for the purpose of affirmatively benefiting from a
decline in the price of securities which it does not own. The Fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise the Fund would realize either no
gain or a loss on the purchase of the put option. Gains and losses on the
purchase of put options may be offset by countervailing changes in the value of
the Fund's portfolio securities.

The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.

Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or are
exercised. Similarly, if the Fund is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit and will incur transaction costs upon the
purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or

<PAGE>

other restrictions may be imposed with respect to particular classes or series
of options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

The Fund's ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.

The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities markets.

Futures Contracts and Options on Futures Contracts. To seek to increase total
return or hedge against changes in interest rates or securities prices, the Fund
may purchase and sell futures contracts, and purchase and write call and put
options on these futures contracts. The Fund may also enter into closing
purchase and sale transactions with respect to any of these contracts and
options. The futures contracts may be based on various securities (such as U.S.
Government securities), securities indices and any other financial instruments
and indices. All futures contracts entered into by the Fund are traded on U.S.
exchanges or boards of trade that are licensed, regulated or approved by the
Commodity Futures Trading Commission ("CFTC").

Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments for an
agreed price during a designated month (or to deliver the final cash settlement
price, in the case of a contract relating to an index or otherwise not calling
for physical delivery at the end of trading in the contract).

Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities will usually be liquidated in
this manner, the Fund may instead make, or take, delivery of the underlying
securities whenever it appears economically advantageous to do so. A clearing
corporation associated with the exchange on which futures contracts are traded
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.

Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire. When
interest rates are rising or securities prices are falling, the Fund can seek to
offset a decline in the value of its current portfolio securities through the
sale of futures contracts. When interest rates are falling or securities prices
are rising, the Fund, through the purchase of futures contracts, can attempt to
secure better rates or prices than might later be available in the market when
it effects anticipated purchases.

The Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated rise in
interest rates or a decline in market prices that would adversely affect the
value of the Fund's portfolio securities. Such futures contracts may include
contracts for the future delivery of securities held by the Fund or securities
with characteristics similar to those of the Fund's portfolio securities.

<PAGE>

If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for the Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in the Fund's portfolio
may be more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this volatility difference based on
historical patterns and compensate for any differential by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's portfolio
securities.

When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of the Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.

On other occasions, the Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices then available in the applicable market to be less favorable
than prices that are currently available. The Fund may also purchase futures
contracts as a substitute for transactions in securities, to alter the
investment characteristics of portfolio securities or to gain or increase its
exposure to a particular securities market.

Options on Futures Contracts. The Fund may purchase and write options on futures
for the same purposes as its transactions in futures contracts. The purchase of
put and call options on futures contracts will give the Fund the right (but not
the obligation) for a specified price to sell or to purchase, respectively, the
underlying futures contract at any time during the option period. As the
purchaser of an option on a futures contract, the Fund obtains the benefit of
the futures position if prices move in a favorable direction but limits its risk
of loss in the event of an unfavorable price movement to the loss of the premium
and transaction costs.

The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of the Fund's assets. By writing a call
option, the Fund becomes obligated, in exchange for the premium (upon exercise
of the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that the Fund intends to purchase. However,
the Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by the Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.

The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.

Other Considerations. The Fund will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that the Fund is using futures
and related options for hedging purposes, futures contracts will be sold to
protect against a decline in the price of

<PAGE>

securities that the Fund owns or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
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 securities or instruments which
it expects to purchase. As evidence of its hedging intent, the Fund expects that
on 75% or more of the occasions on which it takes 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 in the cash market at the time when the futures 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.

To the extent that the Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions 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.

Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating the Fund to purchase securities, require the Fund to establish a
segregated account consisting of cash or liquid securities in an amount equal to
the underlying value of such contracts and options.

While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates or securities prices may result
in a poorer overall performance for the Fund than if it had not entered into any
futures contracts or options transactions.

Perfect correlation between the Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and the Fund may be exposed to risk
of loss.

Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Fund from closing out
positions and limiting its losses.

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

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

<PAGE>

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

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" 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.

Asset-Backed Securities. The Fund may invest a portion of its assets in
asset-backed securities. 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 servicers to retain possession of the underlying obligations. If the
servicer 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
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.

Swaps, Caps, Floors and Collars. As one way of managing its exposure to
different types of investments, the Fund may enter into interest rate swaps,
currency swaps, and other types of swap agreements such as caps, collars and
floors. In a typical interest rate swap, one party agrees to make regular
payments equal to a floating interest rate times a "notional principal amount,"
in return for payments equal to a fixed rate times the same amount, for a
specified period of time. If a swap agreement provides for payment in different
currencies, the parties might agree to exchange the notional principal amount as
well. Swaps may also depend on other prices or rates, such as the value of an
index or mortgage prepayment rates.

<PAGE>

In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.

Swap agreements will tend to shift the Fund's investment exposure from one type
of investment to another. For example, if the Fund agreed to exchange payments
in dollars for payments in a foreign currency, the swap agreement would tend to
decrease the Fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a Fund's investments and its
share price and yield.

Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on the
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. The Fund may also suffer losses if
it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions. The Fund will maintain in a segregated account
with its custodian, cash or liquid, high grade debt securities equal to the net
amount, if any, of the excess of the Fund's obligations over its entitlements
with respect to swap, cap, collar or floor transactions.

Pay-In-Kind, Delayed and Zero Coupon Bonds. The Fund may invest in pay-in- kind,
delayed and zero coupon bonds. These are securities issued at a discount from
their face value because interest payments are typically postponed until
maturity. The amount of the discount rate varies depending on factors including
the time remaining until maturity, prevailing interest rates, the security's
liquidity and the issuer's credit quality. These securities also may take the
form of debt securities that have been stripped of their interest payments. A
portion of the discount with respect to stripped tax-exempt securities or their
coupons may be taxable. The market prices in pay-in-kind, delayed and zero
coupon bonds generally are more volatile than the market prices of
interest-bearing securities and are likely to respond to a greater degree to
changes in interest rates than interest-bearing securities having similar
maturities and credit quality. The Fund's investments in pay-in-kind, delayed
and zero coupon bonds may require the Fund to sell certain of its portfolio
securities to generate sufficient cash to satisfy certain income distribution
requirements. See "TAX STATUS."

Brady Bonds. The Fund may invest in Brady Bonds and other sovereign debt
securities of countries that have restructured or are in the process of
restructuring sovereign debt pursuant to the Brady Plan. Brady Bonds are debt
securities described as part of a restructuring plan created by U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external indebtedness (generally, commercial bank
debt). In restructuring its external debt under the Brady Plan framework, a
debtor nation negotiates with its existing bank lenders as well as multilateral
institutions such as the World Bank and the International Monetary Fund (the
"IMF"). The Brady Plan facilitates the exchange of commercial bank debt for
newly issued bonds (known as Brady Bonds). The World Bank and the IMF provide
funds pursuant to loan agreements or other arrangements which enable the debtor
nation to collateralize the new Brady Bonds or to

<PAGE>

repurchase outstanding bank debt at a discount. Under these arrangements the IMF
debtor nations are required to implement domestic monetary and fiscal reforms.
These reforms have included the liberalization of trade and foreign investment,
the privatization of state-owned enterprises and the setting of targets for
public spending and borrowing. These policies and programs seek to promote the
debtor country's ability to service its external obligations and promote its
economic growth and development. The Brady Plan only sets forth general guiding
principles for economic reform and debt reduction, emphasizing that solutions
must be negotiated on a case-by-case basis between debtor nations and their
creditors. The Adviser believes that economic reforms undertaken by countries in
connection with the issuance of Brady Bonds make the debt of countries which
have issued or have announced plans to issue Brady Bonds an attractive
opportunity for investment.

Brady Bonds have recently been issued by Argentina, Brazil, Bulgaria, Costa
Rica, Dominican Republic, Ecuador, Jordan, Mexico, Nigeria, Poland, the
Philippines, Uruguay and Venezuela and may be issued by other countries. Over
$130 billion in principal amount of Brady Bonds have been issued to date, the
largest portion having been issued by Argentina and Brazil. Brady Bonds may
involve a high degree of risk, may be in default or present the risk of default.
As of January 1, 1997, the Fund is not aware of the occurrence of any payment
defaults on Brady Bonds. Investors should recognize however, that Brady Bonds
have been issued only recently, and, accordingly, they do not have a long
payment history. Agreements implemented under the Brady Plan to date are
designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial
packages offered by each country differ. The types of options have included the
exchange of outstanding commercial bank debt for bonds issued at 100% of face
value of such debt, bonds issued at a discount of face value of such debt, bonds
bearing an interest rate which increases over time and bonds issued in exchange
for the advancement of new money by existing lenders. Certain Brady Bonds have
been collateralized as to principal due at maturity by U.S. Treasury zero coupon
bonds with a maturity equal to the final maturity of such Brady Bonds, although
the collateral is not available to investors until the final maturity of the
Brady Bonds. Collateral purchases are financed by the IMF, the World Bank and
the debtor nations' reserves. In addition, the first two or three interest
payments on certain types of Brady Bonds may be collateralized by cash or
securities agreed upon by creditors. Although Brady Bonds may be collateralized
by U.S. Government securities, repayment of principal and interest is not
guaranteed by the U.S. Government.

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

Rights and Warrants. The Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
to entail greater investment risk than certain other types of investments. In
addition, the value of warrants and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of the Fund's assets as compared with investing the same
amount in the underlying stock.

<PAGE>

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. The Fund may engage in short-term trading in response to stock
market conditions, changes in interest rates or other economic trends and
developments, or to take advantage of yield disparities between various fixed
income securities in order to realize capital gains or improve income. Short
term trading may have the effect of increasing portfolio turnover rate. A high
rate of portfolio turnover (100% or greater) involves correspondingly greater
brokerage expenses. The Fund's portfolio turnover rate is set forth in the table
under the caption "Financial Highlights" in the Prospectus.

The Fund intends to use short-term trading of securities as a means of managing
its portfolio to achieve its investment objective. The Fund, in reaching a
decision to sell one security and purchase another security at approximately the
same time, will take into account a number of factors, including the quality
ratings, interest rates, yields, maturity dates, call prices, and refunding and
sinking fund provisions of the securities under consideration, as well as
historical yield spreads and current economic information. The success of
short-term trading will depend upon the ability of the Fund to evaluate
particular securities, to anticipate relevant market factors, including trends
of interest rates and earnings and variations from such trends, to obtain
relevant information, to evaluate it promptly, and to take advantage of its
evaluations by completing transactions on a favorable basis. It is expected that
the expenses involved in short-term trading, which would not be incurred by an
investment company which does not use this portfolio technique, will be
significantly less than the profits and other benefits which will accrue to
shareholders.

The portfolio turnover rate will depend on a number of factors, including the
fact that the Fund intends to continue to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund intends to limit its short-term trading so that less than
30% of the Fund's gross annual income (including all dividend and interest
income and gross realized capital gains, both short and long-term, without being
offset for realized capital losses) will be derived from gross realized gains on
the sale or other disposition of securities held for less than three months.
This limitation, which must be met by all mutual funds in order to obtain such
Federal tax treatment, at certain times may prevent the Fund from realizing
capital gains on some securities held for less than three months.

INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions. The following investment restrictions will
not be changed without approval of a majority of the Fund's outstanding voting
securities which, as used in the Prospectus and this Statement of Additional
Information, means approval by the lesser of (1) the holders of 67% or more of
the Fund's shares represented at a meeting if more than 50% of the Fund's
outstanding shares are present in person or by proxy at that meeting or (2) more
than 50% of the Fund's outstanding shares.

The Fund may not:

(1) Issue senior securities, except as permitted by paragraphs (2), (6)
and (7) below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale of
options, futures contracts and options on futures contracts, forward
commitments, forward foreign exchange contracts and repurchase agreements
entered into in accordance with the Fund's investment policy, and the pledge,
mortgage or hypothecation of the Fund's assets within the meaning of paragraph
(3) below are not deemed to be senior securities.

<PAGE>

(2) Borrow money, except from banks as a temporary measure for
extraordinary emergency purposes in amounts not to exceed 33 1/3% of the Fund's
total assets (including the amount borrowed) taken at market value. The Fund
will not use leverage to attempt to increase income. The Fund will not purchase
securities while outstanding borrowings exceed 5% of the Fund's total assets.

(3) Pledge, mortgage, or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such pledging,
mortgaging or hypothecating does not exceed 33 1/3% of the Fund's total assets
taken at market value.

(4) Act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the 1933 Act.
(5) Purchase or sell real estate or any interest therein, except that
the Fund may invest in securities of corporate or governmental entities secured
by real estate or marketable interests therein or issued by companies that
invest in real estate or interests therein.

(6) Make loans, except that the Fund (1) may lend portfolio securities
in accordance with the Fund's investment policies up to 33 1/3% of the Fund's
total assets taken at market value, (2) enter into repurchase agreements, and
(3) purchase all or a portion of an issue of publicly distributed debt
securities, bank loan participation interests, bank certificates of deposit,
bankers' acceptances, debentures or other securities, whether or not the
purchase is made upon the original issuance of the securities.

(7) Invest in commodities or commodity contracts or in puts, calls, or
combinations of both, except interest rate futures contracts, options on
securities, securities indices, currency and other financial instruments and
options on such futures contracts, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment policies.

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

(9) Purchase securities of an issuer, (other than the U.S. Government,
its agencies or instrumentalities) if

(a) Such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the securities of such issuer, or

(b) Such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the Fund.

In connection with the lending of portfolio securities under item (6) above,
such loans must at all times be fully collateralized by cash or securities of
the U.S. Government or its agencies or instrumentalities and the Fund's
custodian must take possession of the collateral either physically or in book
entry form. Any cash collateral will consist of short-term high quality debt
instruments. Securities used as collateral must be marked to market daily.

Non-fundamental Investment Restrictions. The following investment restrictions
are designated as non-fundamental and may be changed by the Trustees without
shareholder approval: The Fund may not:

<PAGE>

(a) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the Adviser to
save commissions or to average prices among them is not deemed to result in a
securities trading account.

(b) Purchase securities on margin or make short sales, except margin
deposits in connection with transactions in options, futures contracts, options
on futures contracts and other arbitrage transactions or unless by virtue of its
ownership of other securities, the Fund has the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions, except that the Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities and in connection with transactions involving
forward foreign currency exchange transactions.

(d) Invest more than 15% of its net assets in illiquid securities.

(e) Purchase a security if, as a result, (i) more than 10% of the
Fund's total assets would be invested in the securities of other investment
companies, (ii) the Fund would hold more than 3% of the total outstanding voting
securities of any one investment company, or (iii) more than 5% of the Fund's
total assets would be invested in the securities of any one investment company.
These limitations do not apply to (a) the investment of cash collateral,
received by the Fund in connection with lending the Fund's portfolio securities,
in the securities of open-end investment companies or (b) the purchase of shares
of any investment company in connection with a merger, consolidation,
reorganization or purchase of substantially all of the assets of another
investment company. Subject to the above percentage limitations, the Fund may,
in connection with the John Hancock Group of Funds Deferred Compensation Plan
for Independent Trustees/Directors, purchase securities of other investment
companies within the John Hancock Group of Funds.

If a percentage restriction on investment or utilization of assets as set forth
above is adhered to at the time an investment is made, a later change in
percentage resulting from changes in the value of the Fund's assets will not be
considered a violation of the restriction.

THOSE RESPONSIBLE FOR MANAGEMENT

The business of the Fund is managed by its Trustees of the Trust, who elect
officers who are responsible for the day-to-day operations of the Fund and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Fund are also Officers and Directors of the Adviser or Officers
and Directors of the Fund's principal distributor, John Hancock Funds, Inc.
("John Hancock Funds").

Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman, Director and Chief
101 Huntington Avenue Executive Officer (1, 2) Executive Officer, the Adviser;
Boston, MA 02199 Chairman, Trustee and Chief
October 1944 Executive Officer, The Berkeley
Financial Group ("The Berkeley
Group"); Chairman and Director, NM
Capital Management, Inc. ("NM
Capital"), John Hancock Advisers
International Limited ("Advisers
International") and Sovereign Asset
Management Corporation ("SAMCorp");
Chairman, Chief Executive Officer
and President, John Hancock Funds,
Inc. ("John Hancock Funds");
Chairman, First Signature Bank and
Trust Company; Director, John
Hancock Insurance Agency, Inc.
("Insurance Agency, Inc."), John
Hancock Advisers International
(Ireland) Limited ("International
Ireland"), John Hancock Capital
Corporation and New England/Canada
Business Council; Member,
Investment Company Institute Board
of Governors; Director, Asia
Strategic Growth Fund, Inc.;
Trustee, Museum of Science;
Director, John Hancock Freedom
Securities Corporation (until
September 1996); Director, John
Hancock Signature Services, Inc.
("Signature Services") (until
January 1997).

- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined
in the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
</TABLE>

Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Dennis S. Aronowitz Trustee Professor of Law, Emeritus, Boston
1216 Falls Boulevard University School of Law (as of
Fort Lauderdale, FL 33327 1997); Trustee, Brookline Savings
June 1931 Bank.

Richard P. Chapman, Jr. Trustee (1) President, Brookline Savings Bank;
160 Washington Street Director, Federal Home Loan Bank of
Brookline, MA 02147 Boston (lending); Director, Lumber
February 1935 Insurance Companies (fire and
casualty insurance); Trustee,
Northeastern University (education);
Director, Depositors Insurance Fund,
Inc. (insurance).

William J. Cosgrove Trustee Vice President, Senior Banker and
20 Buttonwood Place Senior Credit Officer, Citibank,
Saddle River, NJ 07458 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.; EVP
Resource Evaluation, Inc.
(consulting) (until October 1993);
Trustee, the Hudson City Savings
Bank (since 1995).

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

Douglas M. Costle Trustee (1) Director, Chairman of the Board and
RR2 Box 480 Distinguished Senior Fellow,
Woodstock, VT 05091 Institute for Sustainable
July 1939 Communities, Montpelier, Vermont
(since 1991); Dean Vermont Law
School (until 1991); Director, Air
and Water Technologies Corporation
(environmental services and
equipment), Niagara Mohawk Power
Company (electric services) and
Mitretek Systems (governmental
consulting services).

Leland O. Erdahl Trustee Director, Santa Fe Ingredients
8046 Mackenzie Court Company of California, Inc. and
Las Vegas, NV 89129 Santa Fe Ingredients Company, Inc.
December 1928 (private food processing companies),
Uranium Resources, Inc.; President,
Stolar, Inc. (1987-1991); President,
Albuquerque Uranium Corporation
(1985-1992); Director,
Freeport-McMoRan Copper & Gold
Company, Inc., Hecla Mining Company,
Canyon Resources Corporation and
Original Sixteen to One Mines, Inc.
(1984-1987 and 1991-1995)
(management consultant).

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

Richard A. Farrell Trustee President of Farrell, Healer & Co.,
Venture Capital Partners (venture capital management firm)
160 Federal Street (since 1980); Prior to 1980, headed
23rd Floor the venture capital group at Bank of
Boston, MA 02110 Boston Corporation.
November 1932

Gail D. Fosler Trustee Vice President and Chief Economist,
3054 So. Abingdon Street The Conference Board (non-profit
Arlington, VA 22206 economic and business research);
December 1947 Director, Unisys Corp.; and H.B.
Fuller Company.

William F. Glavin Trustee President Emeritus, Babson College
120 Paget Court - John's Island (as of 1997); Vice Chairman,
Vero Beach, FL 32963 Xerox Corporation (until June
March 1932 1989); Director, Caldor Inc.,
Reebok, Ltd. (since 1994) and Inco
Ltd.

Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser; Trustee,
Boston, MA 02199 The Berkeley Group; Director, John
April 1953 Hancock Funds, Advisers
International, Insurance Agency,
Inc. and International Ireland;
President and Director, SAMCorp. and
NM Capital; Executive Vice
President, the Adviser (until
December 1994); Director, Signature
Services (until January 1997).

Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Dr. John A. Moore Trustee President and Chief Executive
Institute for Evaluating Health Risks Officer, Institute for Evaluating
1629 K Street NW Health Risks, (nonprofit
Suite 402 institution) (since September 1989).
Washington, DC 20006-1602
February 1939

Patti McGill Peterson Trustee Executive Director, Council for
Council for International Exchange of International Exchange of Scholars
Scholars (since January 1998), Vice
3007 Tilden Street, N.W., Suite 5L President, Institute of
Washington, DC 20008-3009 International Education (since
May 1943 January 1998); Cornell Institute of
Public Affairs, Cornell University
(until December 1997); President
Emeritus of Wells College and St.
Lawrence University; Director,
Niagara Mohawk Power Corporation
(electric utility) and Security
Mutual Life (insurance).

John W. Pratt Trustee Professor of Business Administration
2 Gray Gardens East at Harvard University Graduate
Cambridge, MA 02138 School of Business Administration
September 1931 (since 1961).

Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, John Hancock Distributors,
August 1937 Inc., Insurance Agency, Inc., John
Hancock Subsidiaries, Inc., SAMCorp.
and NM Capital; Trustee, The
Berkeley Group; Director, JH
Networking Insurance Agency, Inc.;
Director, Signature Services (until
January 1997).

Edward J. Spellman, CPA Trustee Partner, KPMG Peat Marwick LLP
259C Commercial Bld. (retired June 1990).
Lauderdale, FL 33308
November 1932

Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, SAMCorp.,
Insurance Agency, Inc.,
Southeastern Thrift & Bank Fund and
NM Capital; Senior Vice President,
The Berkeley Group; President, the
Adviser (until December 1994);
Director, Signature Services (until
January 1997).

Positions Held Principal Occupations(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds.
February 1935

John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services and John Hancock
July 1950 Funds; Secretary, NM Capital and
SAMCorp.; Clerk, Insurance Agency,
Inc.; Counsel, John Hancock Mutual
Life Insurance Company (until
February 1996), and Vice President
of John Hancock Distributors, Inc.
(until April 1994).

Susan S. Newton Vice President and Secretary Vice President, the Adviser; John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group; Vice
March 1950 President, John Hancock
Distributors, Inc. (until April
1994).

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

<PAGE>

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

Aggregate Total Compensation From the
Compensation Fund and John Hancock Fund
Independent Trustees From the Fund(1) Complex to Trustees*
- -------------------- ---------------- --------------------
Dennis S. Aronowitz $ 6,868 $ 72,000
Richard P. Chapman, Jr.+ $ 7,148 $ 75,000
William J. Cosgrove + $ 6,868 $ 72,000
Douglas M. Costle $ 7,148 $ 75,000
Leland O. Erdahl $ 6,868 $ 72,000
Richard A. Farrell $ 7,152 $ 75,000
Gail D. Fosler $ 6,868 $ 72,000
William F. Glavin + $ 6,868 $ 72,000
Dr. John A. Moore+ $ 6,868 $ 72,000
Patti McGill Peterson $ 6,998 $ 72,000
John W. Pratt $ 6,868 $ 72,000
Edward J. Spellman $ 7,152 $ 75,000
-------- --------
Total $83,674 $876,000

(1) Compensation for the fiscal year ended May 31, 1998.

* Compensation for the calendar year ended December 31, 1997.

The total compensation paid by the John Hancock Fund Complex to the Independent
Trustees is for the calendar year ended December 31, 1997. On this date, there
were sixty-seven funds in the John Hancock Complex of which each of these
independent trustees served on thirty-two of the funds.

+ On December 31, 1997 the value of the aggregate deferred compensation
from all funds in the John Hancock Fund Complex for Mr. Chapman was $69,148 and
for Mr. Cosgrove was $167,829 and for Mr. Glavin was $193,514 and for Dr. Moore
was $84,315 under the John Hancock Deferred Compensation Plan for Independent
Trustees.

As of September 1, 1998, the officers and Trustees of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund. As of
that date, the following shareholders beneficially owned 5% of or more of the
outstanding shares of the Funds listed below:

Percentage of Total
Outstanding Shares of the
Name and Address of Shareholders Class of Shares Class of the Fund
- -------------------------------- ----------------- -------------------------
MLPF&S For The Sole B 17.61%
Benefit of Its Customers
Attn Fund Administration
4800 Deer Lake Drive East
Jacksonville FL 32246-6484

<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $30 billion in assets under management
in its capacity as investment adviser to the Fund and the other mutual funds and
publicly traded investment companies in the John Hancock group of funds having a
combined total of over 1,400,000 shareholders. The Adviser is an affiliate of
the Life Company, one of the most recognized and respected financial
institutions in the nation. With total assets under management of more than $100
billion, the Life Company is one of the ten largest life insurance companies in
the United States, and carries a high rating from Standard & Poor's and A. M.
Best. Founded in 1862, the Life Company has been serving clients for over 130
years

The Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser which was approved by the Fund's shareholders.
Pursuant to the Advisory Agreement, the Adviser will: (a) furnish continuously
an investment program for the Fund and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged and (b) provide supervision over all aspects of the
Fund's operations except those which are delegated to a custodian, transfer
agent or other agent.

The Fund bears all costs of its organization and operation, including but not
limited to expenses of preparing, printing and mailing all shareholders'
reports, notices, prospectuses, proxy statements and reports to regulatory
agencies; expenses relating to the issuance, registration and qualification of
shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses of redeeming shares;
brokerage and other expenses connected with the execution of portfolio
securities transactions; expenses pursuant to the Fund's plan of distribution;
fees and expenses of custodians including those for keeping books and accounts,
maintaining a committed line of credit and calculating the net asset value of
shares; fees and expenses of transfer agents and dividend disbursing agents;
legal, accounting, financial, management, tax and auditing fees and expenses of
the Fund (including an allocable portion of the cost of the Adviser's employees
rendering such services to the Fund); the compensation and expenses of Trustees
who are not otherwise affiliated with the Trust, the Adviser or any of their
affiliates; expenses of Trustees' and shareholders' meetings; trade association
memberships; insurance premiums; and any extraordinary expenses.

As compensation for its services under the Advisory Agreement, the Fund pays the
Adviser monthly a fee based on a stated percentage of the average of the daily
net assets of the Fund as follows:

Net Asset Value Annual Rate
--------------- -----------
First $1,500,000,000 0.50%
Next $500,000,000 0.45%
Next $500,000,000 0.40%
Amount Over $2,500,000,000 0.35%

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.

For the fiscal years ended December 31, 1996, the Adviser received fees of
$7,799,825. For the period from January 1, 1997 to May 31, 1997, the Adviser
received fees of $3,116,997 and for the fiscal year ended May 31, 1998, the
Adviser received fees of $7,529,287.

<PAGE>

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 are selling the same security. If opportunities for the purchase or sale of
securities by the Adviser for the Fund for other funds or clients, for which the
Adviser renders investment advice, arise for consideration at or about the same
time, transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
extent that transactions on behalf of more than one client of the Adviser or its
affiliates may increase the demand for securities being purchased or the supply
of securities being sold, there may be an adverse effect on price.

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

Under the Advisory Agreement, the Fund may use the name "John Hancock" or any
name derived from or similar to it only for so long as the Advisory Agreement or
any extension, renewal or amendment thereof remains in effect. If the Advisory
Agreement is no longer in effect, the Fund (to the extent that it lawfully can)
will cease to use such a 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 nonexclusive right to use the name "John Hancock" or any
similar name to any other corporation or entity, including but not limited to
any investment company of which the Life Company or any subsidiary or affiliate
thereof or any successor to the business of any subsidiary or affiliate thereof
shall be the investment adviser.

The continuation of the Advisory Agreement and Distribution Agreement was
approved by all of the Trustees. The Advisory Agreement, and the Distribution
Agreement discussed below, will continue in effect from year to year, provided
that its continuance is approved annually both (i) by the holders of a majority
of the outstanding voting securities of the Trust or by the Trustees, and (ii)
by a majority of the Trustees who are not parties to the Agreement or
"interested persons" of any such parties. Both agreements may be terminated on
60 days written notice by any party or by a vote of a majority of the
outstanding voting securities of the Fund and will terminate automatically if
assigned.

Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal year ended December 31, 1996, the Fund paid
the Adviser $291,977 for services under this agreement. For the period from
January 1, 1997 to May 31, 1997, the Fund paid the Adviser $116,998 for services
under this agreement. For the fiscal year ended May 31, 1998, the Fund paid the
Adviser $267,540 for services under this agreement.

In order to avoid conflicts with portfolio trades for the Fund, the Adviser and
the Fund have adopted extensive restrictions on personal securities trading by
personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.

<PAGE>

DISTRIBUTION CONTRACTS

The Fund has a Distribution Agreement with John Hancock Funds. Under the
agreement, John Hancock Funds is obligated to use its best efforts to sell
shares of each class of the Fund. Shares of the Fund are also sold by selected
broker-dealers (the "Selling Brokers") which have entered into selling agency
agreements with John Hancock Funds. John Hancock Funds accepts orders for the
purchase of the shares of the Fund which are continually offered at net asset
value next determined, plus any applicable sales charge, if any. In connection
with the sale of Fund shares, John Hancock Funds and Selling Brokers receive
compensation from a sales charge imposed, in the case of Class A shares, at the
time of sale. In the case of Class B or Class C shares, the broker receives
compensation immediately but John Hancock Funds is compensated on a deferred
basis.

Total underwriting commissions for sales of the Fund's Class A shares for the
fiscal years ended December 31, 1996 was $2,391,266, for the period from January
1, 1997 to May 31, 1997 was $695,419 and for the fiscal year ended May 31, 1998
was $1,444,580. Of such amounts $215,658, $80,489 and $164,116, were retained by
John Hancock Funds in 1996, for the period from January 1, 1997 to May 31, 1997
and 1998. The remainder of the underwriting commissions were reallowed to
selling brokers.

The Fund's Trustees adopted Distribution Plans with respect to each class of
shares (the "Plans") pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "Investment Company Act"). Under the Plans, the Fund will pay
distribution and service fees at an aggregate annual rate of up to 0.30% for
Class A shares and 1.00% for Class B and Class C shares of the Fund's average
daily net assets attributable to shares of that class. However, the service fee
will not exceed 0.25% of the Fund's average daily net assets attributable to
each class of shares. The distribution fees will be used to reimburse the John
Hancock Funds for its distribution expenses, including but not limited to: (i)
initial and ongoing sales compensation to Selling Brokers and others (including
affiliates of the John Hancock Funds) engaged in the sale of Fund shares; (ii)
marketing, promotional and overhead expenses incurred in connection with the
distribution of Fund shares; and (iii) with respect to Class B and Class C
shares only, interest expenses on unreimbursed distribution expenses. The
service fees will be used to compensate Selling Brokers and others for providing
personal and account maintenance services to shareholders. In the event that
John Hancock Funds is not fully reimbursed for payments or expenses they incur
under the Class A Plan, these expenses will not be carried beyond twelve months
from the date they were incurred. Unreimbursed expenses under the Class B and
Class C Plans will be carried forward together with interest on the balance of
these unreimbursed expenses. The Fund does not treat the unreimbursed expenses
under the Class B/or Class C Plans as a liability of the Fund because the
Trustees may terminate the Class B Plan at any time. For the fiscal year ended
May 31, 1998, an aggregate of $4,243,771 of distribution expenses or 2.84% of
the average net assets of the Class B shares of the Fund, was not reimbursed or
recovered by John Hancock Funds through the receipt of deferred sales charges or
Rule 12b-1 fees in prior periods. Class C shares of the Fund did not commence
operations until October 1, 1998; therefore, there are no unreimbursed expenses
to report.

The Plans were approved by a majority of the voting securities of the Fund. The
Plans and all amendments were approved by the Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plans (the "Independent
Trustees"), by votes cast in person at meetings called for the purpose of voting
on these Plans.

Pursuant to the Plans, at least quarterly, John Hancock Funds provides the Fund
with a written report of the amounts expended under the Plans and the purpose
for which these expenditures were made. The Trustees review these reports on a
quarterly basis to determine their continued appropriateness.

<PAGE>

The Plans provide that they will continue in effect only so long as their
continuance is approved at least annually by a majority of both the Trustees and
the Independent Trustees. The Plans provide that they may be terminated without
penalty (a) by vote of a majority of the Independent Trustees, (b) by a vote of
a majority of the Fund's outstanding shares of the applicable class in each case
upon 60 days' written notice to John Hancock Funds, and (c) automatically in the
event of assignment. The Plans further provide that they may not be amended to
increase the maximum amount of the fees for the services described therein
without the approval of a majority of the outstanding shares of the class of the
Fund which has voting rights with respect to the Plan. Each Plan provides that
no material amendment to the Plans will be effective unless it is approved by a
vote of a majority of the Trustees and the Independent Trustees of the Fund. The
holders of Class A, Class B and Class C shares have exclusive voting rights with
respect to the Plan applicable to their respective class of shares. In adopting
the Plans the Trustees concluded that, in their judgment, there is a reasonable
likelihood that the Plans will benefit the holders of the applicable class of
shares of the Fund.

Amounts paid to John Hancock Funds by any class of shares of the Fund will not
be used to pay the expenses incurred with respect to any other class of shares
of the Fund; provided, however, that expenses attributable to the Fund as a
whole will be allocated, to the extent permitted by law, according to a formula
based upon gross sales dollars and/or average daily net assets of each such
class, as may be approved from time to time by vote of a majority of the
Trustees. From time to time, the Fund may participate in joint distribution
activities with other Funds and the costs of those activities will be borne by
each Fund in proportion to the relative net asset value of the participating
Funds.

During the fiscal year ended May 31, 1998, the Fund paid John Hancock Funds the
following amounts of expenses in connection with their services for the Fund.
Class C shares did not commence operations until October 1, 1998; therefore,
there are no expenses to report.
<TABLE>
<CAPTION>

Expense Items
<S> <C> <C> <C> <C> <C>
Printing and
Mailing of Compensa- Expenses of Interest
Prospectus to tion to John Carrying or
New Selling Hancock Other Finance
Advertising Shareholders Brokers Funds Charges
----------- ------------ ------- ----- -------
Class A Shares $293,175 $14,079 $3,109,805 $652,262 $0
Class B Shares $254,103 $13,387 $ 667,526 $563,678 $0
</TABLE>

SALES COMPENSATION

As part of their business strategies, each of the John Hancock funds, along with
John Hancock Funds, pay compensation to financial services firms that sell the
funds' shares. These firms typically pass along a portion of this compensation
to your financial representative.

Compensation payments originate from two sources: from sales charges and from
12b-1 fees that are paid out of the funds' assets. The sales charges and 12b-1
fees paid by investors are detailed in the prospectus and under "Distribution
Contracts" in this Statement of Additional Information. The portions of these
expenses that are reallowed to financial services firms are shown on the next
page.

<PAGE>

Whenever you make an investment in the fund, the financial services firm
receives either a reallowance from the initial sales charge or a commission, as
described below. The firm also receives the first year's service fee at this
time. Beginning with the second year after an investment is made, the financial
services firm receives an annual service fee of 0.25% of its total eligible net
assets. This fee is paid quarterly in arrears.

Financial services firms selling large amounts of fund shares may receive extra
compensation. This compensation, which John Hancock Funds pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.

Maximum
Sales charge reallowance First year Maximum
paid by investors or commission service fee total compensation (1)
Class A investments (% of offering price) (% of offering price) (% of net investment) (% of offering price)
- ------------------- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Up to $99,999 4.50% 3.76% 0.25% 4.00%
$100,000 - $249,999 3.75% 3.01% 0.25% 4.00%
$250,000 - $499,999 2.75% 2.06% 0.25% 2.30%
$500,000 - $999,999 2.00% 1.51% 0.25% 1.75%

Regular investments of $1
million or more

First $1M - $4,999,999 -- 0.75% 0.25% 1.00%
Next $1M - $5M above that -- 0.25% 0.25% 0.50%
Next $1 or more above that -- 0.00% 0.25% 0.25%

Maximum
reallowance First year Maximum
or commission service fee total compensation (1)
Class B investments (% of offering price) (% of net investment) (% of offering price)
- ------------------- --------------------- --------------------- ---------------------

All amounts 3.75% 0.25% 4.00%

Maximum
reallowance First year Maximum
or commission service fee total compensation (1)
Class C investments (% of offering price) (% of net investment) (% of offering price)
- ------------------- --------------------- --------------------- ---------------------

All amounts 0.75% 0.25% 1.00%
</TABLE>

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

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

<PAGE>

NET ASSET VALUE

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

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.

Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the custodian bank based
on London currency exchange quotations as of 5:00 p.m., London time (12:00 noon,
New York time) on the date of any determination of a Fund's NAV. If quotations
are not readily available, or the value has been materially affected by the
events occurring after closing of a foreign market, assets are valued by a
method that Trustees believe accurately reflects fair value.

The NAV of each fund and class is determined each business day at the close of
regular trading on the New York Stock Exchange (typically 4:00 p.m. Eastern
Time) by dividing a class's net assets by the number of its shares outstanding.
On any day an international market is closed and the New York Stock Exchange is
open, any foreign securities will be valued at the prior day's close with the
current day's exchange rate. Trading of foreign securities may take place on
Saturdays and U.S. business holidays on which a Fund's NAV is not calculated.
Consequently, a Fund's portfolio securities may trade and the NAV of the Fund's
redeemable securities may be significantly affected on days when a shareholder
has no access to the Fund.

INITIAL SALES CHARGE ON CLASS A SHARES

Shares of the Fund are offered at a price equal to their net asset value plus a
sales charge which, at the option of the purchaser, may be imposed either at the
time of purchase (the "initial sales charge alternative") or on a contingent
deferred basis (the "deferred sales charge alternative"). Share certificates
will not be issued unless requested by the shareholder in writing, and then they
will only be issued for full shares. The Trustees reserve the right to change or
waive a Fund's minimum investment requirements and to reject any order to
purchase shares (including purchase by exchange) when in the judgment of the
Adviser such rejection is in the Fund's best interest.

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 accumulate 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 Signature Services, Inc. ("Signature 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.

<PAGE>

Without Sales Charges. Class A shares may be offered with out a front-end sales
charge or CDSC to various individuals and institutions as follows:

o 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 (spouse, children,
grandchildren, mother, father, sister, brother, mother-in-law,
father-in-law, daughter-in-law, son-in-law, niece, nephew and same-sex
domestic partner) of any of the foregoing; or any fund, pension, profit
sharing or other benefit plan for the individuals described above.

0 A broker, dealer, financial planner, consultant or registered investment
advisor that has entered into a signed 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.

o 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.

o A member of a class action lawsuit against insurance companies who is
investing settlement proceeds.

o Retirement plans participating in Merrill Lynch servicing programs, if the
Plan has more than $3 million in assets or 500 eligible employees at the
date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement. See your Merrill Lynch financial consultant for further
information.

o Retirement plans investing through the PruArray Program sponsored by
Prudential Securities.

o Pension plans transferring assets from a John Hancock variable annuity
contract to the Fund pursuant to an exemptive application approved by the
Securities Exchange Commission.

o 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
following rate:

Amount Invested CDSC RATE
--------------- ---------

$1 to $4,999,000 1.00%
Next $5 million to $9,999,999 0.50%
Amounts of $10 million and over 0.25%

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

Combination Privilege. In calculating the sales charge applicable to purchases
of Class A shares made at one time, the purchases will be combined to reduce
sales charges if made by (a) an individual, his or her spouse and their children
under the age of 21, purchasing securities for his or their own account, (b) a
trustee or other fiduciary purchasing for a single trust, estate or fiduciary
account and (c) groups which qualify for the Group Investment Program (see
below). Further information about combined purchases, including certain
restrictions on combined group purchases, is available from Signature Services
or a Selling Broker's representative.

<PAGE>

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 investor's purchase price or current value of the Class A shares of all
John Hancock funds which carry a sales charge already held by such person. Class
A shares of John Hancock money market funds will only be eligible for the
accumulation privilege if the investor has previously paid a sales charge on the
amount of those shares. Retirement plan investors may include the value of Class
B shares if Class B shares held are greater than $1 million. Retirement plans
must notify Signature Services to utilize.

Group Investment Program. Under the Combination and Accumulation Privileges, all
members of a group may combine their individual purchases of Class A shares to
potentially qualify for breakpoints in the sales charge schedule. This feature
is provided to any group which (1) has been in existence for more than six
months, (2) has a legitimate purpose other than the purchase of mutual fund
shares at a discount for its members, (3) utilizes salary deduction or similar
group methods of payment, and (4) agrees to allow sales materials of the fund in
its mailings to members at a reduced or no cost to John Hancock Funds.

Letter of Intention. Reduced sales charges are also applicable to investments
made pursuant to a Letter of Intention (the "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 retirement
plans include Traditional, Roth and Education IRAs, SEP, SARSEP, 401(k), 403(b)
(including TSAs) SIMPLE IRA, SIMPLE 401(k), Money Purchase Pension, Profit
Sharing and Section 457 plans. Non-qualified and qualified retirement plan
investments cannot be combined to satisfy an LOI of 48 months. Such an
investment (including accumulations and combinations but not including
reinvested dividends) must aggregate $100,000 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 Signature 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 applied (including accumulations and combinations) had the
LOI been for the amount actually invested.

The LOI authorizes Signature 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 escrow 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 Signature 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.

<PAGE>

DEFERRED SALES CHARGE ON CLASS B and CLASS C SHARES

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

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

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

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

In determining whether a CDSC applies to a redemption, the calculation will be
determined in a manner that results in the lowest possible rate being charged.
It will be assumed that your redemption comes first from shares you have held
beyond the six-year CDSC redemption period for Class B or one year CDSC
redemption period for Class C, or those you acquired through dividend and
capital gain reinvestment, and next from the shares you have held the longest
during the six-year period for Class B shares. For this purpose, the amount of
any increase in a share's value above its initial purchase price is not regarded
as a share exempt from CDSC. Thus, when a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial purchase
price.

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

Example:

You have purchased 100 shares at $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:

oProceeds of 50 shares redeemed at $12 per share (50 x 12) $ 600.00
o*Minus Appreciation ($12 - $10) x 100 shares (200.00)
o Minus proceeds of 10 shares not subject to CDSC
(dividend reinvestment) (120.00)
-------
oAmount subject to CDSC $280.00

*The appreciation is based on all 100 shares in the lot not just the shares
being redeemed.

<PAGE>

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 Funds in connection with the sale of the
Class B and Class C shares, such as the payment of compensation to select
Selling Brokers for selling Class B and Class C shares. The combination of the
CDSC and the distribution and service fees facilitates the ability of the Fund
to sell the Class B and Class C shares without a sales charge being deducted at
the time of the purchase.

Waiver of Contingent Deferred Sales Charge. The CDSC will be waived on
redemptions of Class B and Class C shares and of Class A shares that are subject
to CDSC, unless indicated otherwise, in the circumstances defined below:

For all account types:

* Redemptions made pursuant to the Funds' right to liquidate your
account if you own shares worth less than $1,000.

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

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

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

* Redemptions where the proceeds are used to purchase a John Hancock
Declaration Variable Annuity.

* Redemptions of Class B (but not Class C) shares made under a periodic
withdrawal plan or redemptions for fees charged by planners or
advisors for advisory services, as long as your annual redemptions do
not exceed 12% of your account value, including reinvested dividends,
at the time you established your periodic withdrawal plan and 12% of
the value of subsequent investments (less redemptions) in that
account at the time you notify Signature Services. (Please note, this
waiver does not apply to periodic withdrawal plan redemptions of
Class A shares that are subject to a CDSC.)

* Redemptions by Retirement plans participating in Merrill Lynch
servicing programs, if the Plan has less than $3 million in assets or
500 eligible employees at the date the Plan Sponsor signs the Merrill
Lynch Recordkeeping Service Agreement. See your Merrill Lynch
financial consultant for further information.

* Redemptions of Class A shares by retirement plans that invested
through the PruArray Program sponsored by Prudential Securities.

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

* Redemptions made to effect mandatory or life expectancy distributions
under the Internal Revenue Code.

* Returns of excess contributions made to these plans.

<PAGE>

* Redemptions made to effect distributions to participants or
beneficiaries from employer sponsored retirement plans under section
401(a) (such as Money Purchase Pension Plans and Profit-Sharing/401(k)
Plans), 457 and 408 (SEPs and SIMPLE IRAs of the Internal Revenue Code

* Redemptions from certain IRA and retirement plans that purchased shares
prior to October 1, 1992 and certain IRA plans that purchased shares
prior to May 15, 1995.

Please see matrix for reference.

CDSC Waiver Matrix for Class B and Class C.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Type of 401(a) Plan 403(b) 457 IRA, IRA Rollover Non-
Distribution (401(k), MPP, Retirement
PSP)
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Death or Waived Waived Waived Waived Waived
Disability
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Over 70 1/2 Waived Waived Waived Waived for 12% of account
mandatory value annually
distributions or in periodic
12% of account payments
value annually in
periodic payments.
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Between 59 1/2 Waived Waived Waived Waived for Life 12% of account
and 70 1/2 Expectancy or 12% value annually
of account value in periodic
annually in payments
periodic payments.
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Under 59 1/2 Waived for Waived for Waived for Waived for 12% of account
(Class B only) annuity annuity annuity annuity value annually
payments (72t) payments (72t) payments (72t) payments (72t) in periodic
or 12% of or 12% of or 12% of or 12% of payments
account value account value account value account value
annually in annually in annually in annually in
periodic periodic periodic periodic
payments. payments. payments. payments.
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Loans Waived Waived N/A N/A N/A
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Termination of Not Waived Not Waived Not Waived Not Waived N/A
Plan
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Hardships Waived Waived Waived N/A N/A
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
Return of Waived Waived Waived Waived N/A
Excess
- --------------------- -------------------- ----------------- ----------------- ------------------- ---------------------
</TABLE>

<PAGE>

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

SPECIAL REDEMPTIONS

Although it would not normally do so, the Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, the shareholder will incur a brokerage
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,
however, elected to be governed by Rule 18f-1 under the Investment Company Act.
Under that rule, the Fund must redeem its shares for cash except to the extent
that the redemption payments to any shareholder during any 90-day period would
exceed the lesser of $250,000 or 1% of the Fund's net asset value at the
beginning of such period.

ADDITIONAL SERVICES AND PROGRAMS

Exchange Privilege. The Fund permits exchanges of shares of any class of a fund
for shares of the same class in any other John Hancock fund offering that class.

Exchanges between funds with shares that are not subject to a CDSC are based on
their respective net asset values. No sales charge or transaction charge is
imposed. Shares of the Fund which are subject to a CDSC may be exchanged into
shares of any of the other John Hancock funds that are subject to a CDSC without
incurring the CDSC; however, the shares acquired in an exchange will be subject
to the CDSC schedule of the shares acquired if and when such shares are redeemed
(except that shares exchanged into John Hancock Short-Term Strategic Income Fund
and John Hancock Intermediate Maturity Government Fund will retain the exchanged
fund's CDSC schedule). For purposes of computing the CDSC payable upon
redemption of shares acquired in an exchange, the holding period of the original
shares is added to the holding period of the shares acquired in an exchange.

If a shareholder exchanges Class B shares purchased prior to January 1, 1994
(except John Hancock Short-Term Strategic Income Fund) for Class B shares of any
other John Hancock fund, the acquired shares will continue to be subject to the
CDSC schedule that was in effect when the exchanged shares were purchased.

The Fund reserves the right to require that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.

The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days' notice to its shareholders.

An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal Income Tax purposes. An exchange may
result in a taxable gain or loss. See "TAX STATUS".

Systematic Withdrawal Plan. The Fund permits the establishment of a Systematic
Withdrawal Plan. Payments under this plan represent proceeds arising from the
redemption of Fund shares. Since the redemption price of the Fund shares may be
more or less than the shareholder's cost, which may result in realization of
gain or loss for purposes of Federal, state and local income taxes. The
maintenance of a Systematic Withdrawal Plan concurrently with purchases of
additional shares of the Fund could be disadvantageous to a shareholder because
of the

<PAGE>

initial sales charge payable on such purchases of Class A shares and the CDSC
imposed on redemptions of Class B and Class C shares and because redemptions are
taxable events. Therefore, a shareholder should not purchase 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 Signature Services.

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

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

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

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

Reinstatement or Reinvestment Privilege. If Signature Services is notified prior
to reinvestment, 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
another John Hancock fund, 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 any John Hancock fund. 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.

To protect the interests of other investors in the Fund, the Fund may cancel the
reinvestment privilege of any parties that, in the opinion of the Fund, are
using market timing strategies or making more than seven exchanges per owner or
controlling party per calendar year. Also, the Fund may refuse any reinvestment
request.

The Fund may change or cancel its reinvestment policies at any time.

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

Retirement plans participating in Merrill Lynch's servicing programs:

Class A shares are available at net asset value for plans with $3 million in
plan assets or 500 eligible employees at the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement. If the plan does not meet either
of these limits, Class A shares are not available.

<PAGE>

For participating retirement plans investing in Class B shares, shares will
convert to Class A shares after eight years, or sooner if the plan attains
assets of $5 million (by means of a CDSC-free redemption/purchase at net asset
value).

DESCRIPTION OF THE FUND'S SHARES

The Trustees of the Trust are responsible for the management and supervision of
the Fund. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Fund, without
par value. Under the Declaration of Trust, the Trustees have the authority to
create and classify shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have not authorized any additional series of the Fund,
other than the Fund, although they may do so in the future. The Declaration of
Trust also authorizes the Trustees to classify and reclassify the shares of the
Fund, or any new series of the Trust, into one or more classes. As of the date
of this Statement of Additional Information, the Trustees have authorized the
issuance of three classes of shares of the Fund, designated as Class A, Class B
and Class C.

The shares of each class of the Fund represent an equal proportionate interest
in the aggregate net assets attributable to that class of the Fund. Holders of
each class of shares have certain exclusive voting rights on matters relating to
their respective distribution plans. The different classes of the Fund may bear
different expenses relating to the cost of holding shareholder meetings
necessitated by the exclusive voting rights of any class of shares.

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

In the event of liquidation, shareholders of each class are entitled to share
pro rata in the net assets of the Fund available for distribution to these
shareholders. Shares entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights. When
issued, shares are fully paid and non-assessable, except as set forth below.

Unless otherwise required by the Investment Company Act or the Declaration of
Trust, the Fund has no intention of holding annual meetings of shareholders.
Fund shareholders may remove a Trustee by the affirmative vote of at least
two-thirds of the Trust's outstanding shares and the Trustees shall promptly
call a meeting for such purpose when requested to do so in writing by the record
holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
However, at any time that less than a majority of the Trustees holding office
were elected by the shareholders, the Trustees will call a special meeting of
shareholders for the purpose of electing Trustees.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts, obligations or affairs of the Fund. The
Declaration of Trust also provides for indemnification out of the

<PAGE>

Fund's assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Trust shall be liable for the liabilities of
any other series. Furthermore, no fund included in this Fund's prospectus shall
be liable for the liabilities of any other John Hancock Fund. Liability is
therefore limited to circumstances in which the Fund itself would be unable to
meet its obligations, and the possibility of this occurrence is remote.

The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested at net
asset value in the fund or funds from which a redemption was made or dividend
paid. Information provided on the account application may be used by the Fund to
verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify Signature Services of a different
intent. A shareholder's account is governed by the laws of The Commonwealth of
Massachusetts. For telephone transactions the transfer agent will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or other taxpayer ID number and other relevant information. If
appropriate measures are taken, the transfer agent is not responsible for any
losses that may occur to any account due to an unauthorized telephone call. Also
for your protection telephone transactions are not permitted on accounts whose
names or addresses have changed within the past 30 days. Proceeds from telephone
transactions can only be mailed to the address of record.

TAX STATUS

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

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

Distributions from the Fund's current or accumulated earnings and profits
("E&P") will be taxable under the Code for investors who are subject to tax. If
these distributions are paid from the Fund's "investment company taxable
income," they will be taxable as ordinary income; and if they are paid from the
Fund's "net capital gain," they will be taxable as capital gain. (Net capital
gain is the excess (if any) of net long-term capital gain over net short-term
capital loss, and investment company taxable income is all taxable income and
capital gains, other than net capital gain, after reduction by deductible
expenses.) Some distributions from investment company taxable income and/or net
capital gain may be paid in January but may be taxable to shareholders as if
they had been received on December 31 of the previous year. The tax treatment
described above will apply without regard to whether distributions are received
in cash or reinvested in additional shares of the Fund.

Distributions, if any, in excess of E&P will constitute a return of capital
under the Code, which will first reduce an investor's federal tax basis in Fund
shares and then, to the extent such basis is exceeded, will generally give rise
to capital gains. Shareholders who have chosen automatic reinvestment of their
distributions will have a federal tax basis in each share received pursuant to
such a reinvestment equal to the amount of cash they would have received had
they elected to receive the distribution in cash, divided by the number of
shares received in the reinvestment.

<PAGE>

The amount of net realized 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 interest of the Fund to dispose of portfolio
securities that will generate capital gains or to enter into options or futures
transactions. 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. Consequently, subsequent distributions on these shares
from such appreciation 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 or other disposition of shares of the Fund (including by
exercise of the exchange privilege) in a transaction that is treated as a sale
for tax purposes, a shareholder will ordinarily realize a taxable gain or loss
depending upon the amount of the proceeds and the investor's 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. 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
ninety (90) days after their purchase to the extent Class A 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 sixty- one (61) days beginning
thirty (30) days before and ending thirty (30) days after the shares are
disposed of, such as pursuant to automatic dividend reinvestments. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized upon the redemption of shares with a tax
holding period of six months or less will be treated as a long-term capital loss
to the extent of any amounts treated as distributions of long-term capital gain
with respect to such shares. Shareholders should consult their own tax advisers
regarding their particular circumstances to determine whether a disposition of
Fund shares is properly treated as a sale for tax purposes, as is assumed in the
foregoing discussion.

Although its present intention is to distribute, at least annually, all net
capital gain, if any, the Fund reserves the right to retain and reinvest all or
any portion of 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 capital gain 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. Upon proper designation of this amount by
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 capital gain
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 this excess and his pro rata share of these taxes.

For Federal income tax purposes, the Fund is permitted to carry forward a net
capital loss in any year to offset net capital gains, if any, during the eight
years following the year of the loss. To the extent subsequent net capital gains
are offset by such losses, they would not result in Federal income tax liability
to the Fund and, as noted above, would not be distributed to shareholders. The
Fund has $22,827,929 of capital loss carryforwards available, to the extent
provided by regulations, to offset future net realized capital gains. These
carryforwards expire at various amounts and times from 2001 through 2005.

<PAGE>

Dividends and capital gain distributions from the Fund will not qualify for the
dividends-received deduction for corporations.

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

The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to the Fund's investments in certain foreign securities,
if any. Tax conventions between certain countries and the U.S. may reduce or
eliminate such taxes in some cases. Because more than 50% of the Fund's assets
at the close of any taxable year will generally not consist of stocks or
securities of foreign corporations, the Fund will generally be unable to pass
through such taxes to its shareholders, who will therefore generally not be
entitled to any foreign tax credit or deduction with respect to their investment
in the Fund. The Fund will deduct such taxes in determining the amount it has
available for distribution to shareholders.

The Fund is required to accrue income on any debt securities that have more than
a de minimus amount of original issue discount (or debt securities acquired at a
market discount, if the Fund elects to include market discount in income
currently) prior to the receipt of the corresponding cash payments. The mark to
market rules applicable to certain options and futures contracts may also
require the Fund to recognize gain within a concurrent receipt of cash. However,
the Fund must distribute to shareholders for each taxable year substantially all
of its net income and net capital gains, including such income or gain, to
qualify as a regulated investment company and avoid liability for any federal
income or excise tax. Therefore, the Fund may have to dispose of its portfolio
securities under disadvantageous circumstances to generate cash, or borrow cash,
to satisfy these distribution requirements.

A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent the Fund's distributions are
derived from interest on (or, in the case of intangibles property taxes, the
value of its assets is attributable to) certain U.S. Government obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. The Fund will not seek to satisfy
any threshold or reporting requirements that may apply in particular taxing
jurisdictions, although the Fund may in its sole discretion provide relevant
information to shareholders.

The Fund will be required to report to the Internal Revenue Service (the "IRS")
all taxable distributions to shareholders, as well as gross proceeds from the
redemption or exchange of Fund shares, except in the case of certain exempt
recipients, i.e., corporations and certain other investors distributions to
which are exempt from the information reporting provisions of the Code. Under
the backup withholding provisions of Code Section 3406 and applicable Treasury
regulations, all such reportable distributions and proceeds may be subject to
backup withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the Fund with their correct taxpayer
identification number and certain certifications required by the IRS or if the
IRS or a broker notifies the Fund that the number furnished by the shareholder
is incorrect or that the shareholder is subject to backup withholding as a
result of failure to report interest or dividend income. The Fund may refuse to
accept an application that does not contain any required taxpayer identification
number or certification that the number provided is correct. If the backup
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability. Investors should consult their
tax advisers about the applicability of the backup withholding provisions.

<PAGE>

The Fund may be required to account for its transactions in forward rolls or
swaps, caps, floors and collars in a manner that, under certain circumstances,
may limit the extent of its participation in such transactions. Additionally,
the Fund may be required to recognize gain, but not loss, if a swap or other
transaction is treated as a constructive sale of an appreciated financial
position in the Fund's portfolio. The Fund may have to sell portfolio securities
under disadvantageous circumstances to generate cash, or borrow cash, to satisfy
these distribution requirements.

The Fund may invest in debt obligations that are in the lower rating categories
or are unrated, including debt obligations of issuers not currently paying
interest as well as issuers who are in default. Investments in debt obligations
that are at risk of or in default present special tax issues for the Fund. Tax
rules are not entirely clear about issues such as when the Fund may cease to
accrue interest, original issue discount, or market discount, when and to what
extent deductions may be taken for bad debts or worthless securities, how
payments received on obligations in default should be allocated between
principal and income, and whether exchanges of debt obligations in a workout
context are taxable. These and other issues will be addressed by the Fund, in
the event it invests in such securities, in order to reduce the risk of
distributing insufficient income to preserve its status as a regulated
investment company and seek to avoid becoming subject to Federal income or
excise tax.

Limitations imposed by the Code on regulated investment companies like the Fund
may restrict the Fund's ability to enter into futures and options transactions.
Certain options and futures transactions undertaken by the Fund may cause the
Fund to recognize gains or losses from marking to market even though its
positions have not been sold or terminated and affect the character as long-term
or short-term and timing of some capital gains and losses realized by the Fund.
Also, some of the Fund's losses on its transactions involving options and
futures contracts and/or offsetting or successor portfolio positions may be
deferred rather than being taken into account currently in calculating the
Fund's taxable income or gain. Certain of such transactions may also cause the
Fund to dispose of investments sooner than would otherwise have occurred. These
transactions may thereafter affect the amount, timing and character of the
Fund's distributions to shareholders. Some of the applicable tax rules may be
modified if the Fund is eligible and chooses to make one or more of certain tax
elections that may be available. The Fund will take into account the special tax
rules (including consideration of available elections) applicable to options and
futures transactions in order to seek to minimize any potential adverse tax
consequences.

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 shares of the Fund may
also be subject to state and local taxes. Shareholders should consult their own
tax advisers as to the Federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Fund in their particular
circumstances.

Non-U.S. investors not engaged in a U.S. trade or business with which their Fund
investment is effectively connected will be subject to U.S. Federal income tax
treatment that is different from that described above. These investors may be
subject to nonresident alien withholding tax at the rate of 30% (or a lower rate
under an applicable tax treaty), on amounts treated as ordinary dividends from
the Fund and, unless an effective IRS Form W-8 or authorized substitute for Form
W-8 is on file, to 31% backup withholding on certain other payments from the
Fund. Non-U.S. investors should consult their tax advisors regarding such
treatment and the application of foreign taxes to an investment in the Fund.

<PAGE>

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 ending May 31, 1998, the yield on Class A and Class B
shares of the Fund was 5.95% and 5.53%, respectively. The average annual total
return of the Class A shares of the Fund for the 1 year, 5 year and 10 year
periods ended May 31, 1998 was 5.57%, 6.50% and 8.85%, respectively.

The average total return of Class B shares of the Fund for the period from
January 1, 1997 to May 31, 1998 and since inception on November 23, 1993 was
4.78% and 6.50%, respectively.

Class C shares of the Fund commenced operations on October 1, 1998; therefore,
there is no average annual total return to report.

The Fund may advertise yield, where appropriate. 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, where
applicable) on the last day of the period, according to the following standard
formula:

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

Where:

a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares 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).

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 hypothetical $1,000 investment made
at the beginning of the 1 year, 5 year and 10 year periods.

Because each class has its own sales charge and fee structure, the classes have
different performance results. In the case of each class, this calculation
assumes the maximum sales charge is included in the initial investment or the
CDSC applied at the end of the period, respectively. This calculation 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. Excluding the Fund's sales charge from the distribution rate produces a
higher rate.

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 sales charge on Class A shares
or the CDSC on Class B or Class C shares into account. Excluding the Fund's
sales charge on Class A shares and the CDSC on Class B or Class C shares from a
total return calculation produces a higher total return figure.

From time to time, in reports and promotional literature, the Fund's total
return and/or yield will be compared to indices of mutual funds such as Lipper
Analytical Services, Inc.'s "Lipper"-Mutual Performance Analysis," a monthly
publication which tracks net assets, total return, and yield on equity mutual
funds in the United States. Ibottson and Associates, CDA Weisenberger and F.C.
Towers are also used for comparison purposes, as well as 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, MORNINGSTAR, and BARRON'S may also be utilized.

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

<PAGE>

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

In the U.S. and in some other countries, debt securities are traded principally
in the over-the-counter market on a net basis through dealers acting for their
own account and not as brokers. Ion other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.

The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
and other policies 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 of the Fund, and
their value and expected contribution to the performance of the Fund. It is not
possible to place a dollar value on information and services to be received from
brokers and dealers, since it is only supplementary to the research efforts of
the Adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser. The research information and
statistical assistance furnished by brokers and dealers may benefit the Life
Company or other advisory clients of the Adviser, and, conversely, brokerage
commissions and spreads paid by other advisory clients of the Adviser may result
in research information and statistical assistance beneficial to the Fund. The
Fund will make no commitment to allocate portfolio transactions upon any
prescribed basis. While the Adviser's officers will be primarily responsible for
the allocation of the Fund's brokerage business, the policies in this regard
must be consistent with the foregoing and will at all times be subject to review
by the Trustees. For the fiscal year ended December 31, 1996, negotiated
brokerage commission were $65,835. For the fiscal period from January 1, 1997 to
May 31, 1997, negotiated brokerage commissions were $26,486. For the fiscal year
ended May 31, 1998, negotiated brokerage commissions were $2,147.

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 such price is
reasonable in light of the services provided and to such policies as the
Trustees may adopt from time to time. During the fiscal year ended December 31,
1996, the Fund paid commissions of $43,425 to compensate brokers for research
services such as industry, economic and company reviews and evaluations of
securities. During the fiscal period from January 1, 1997 to May 31, 1997 and
for the fiscal year ended May 31, 1998, the Fund paid commissions of $35,075 to
compensate any brokers for research services such as industry, economic and
company reviews and evaluations of securities.

<PAGE>

The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Distributors, Inc., a broker-dealer ("Distributors"
or "Affiliated Broker"). Pursuant to procedures determined by the Trustees and
consistent with the above policy of obtaining best net results, the Fund may
execute portfolio transactions with or through Affiliated Brokers. During the
fiscal years ended December 31, 1996, the Fund did not execute any portfolio
transactions with Affiliated Brokers. For the fiscal period from January 1, 1997
to May 31, 1997 and for the fiscal year ended May 31, 1998, the Fund did not
execute any portfolio transactions with Affiliated Brokers.

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

Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other clients managed by it in order to obtain best execution.

TRANSFER AGENT SERVICES

John Hancock Signature Services, Inc., 1 John Hancock Way, Suite 1000, Boston,
MA 02217-1000, a wholly-owned indirect subsidiary of the Life Company, is the
transfer and dividend paying agent of the Fund. The Fund pays Signature Services
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 their
relative net asset values.

<PAGE>

CUSTODY OF PORTFOLIO

Portfolio securities of the Fund are held pursuant to a custodian agreement
between the Fund and Investors Bank & Trust Company, 200 Clarendon Street,
Boston, Massachusetts 02116. Under the custodian agreement, Investors Bank &
Trust Company performs custody, portfolio and fund accounting services.

INDEPENDENT AUDITORS

Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has been
selected as the independent auditors of the Fund. The financial statements of
the Fund included in the Prospectus and this Statement of Additional Information
as of the Fund's fiscal year ended May 31, 1998 have been audited by Ernst &
Young LLP for the periods indicated in their report, appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.

<PAGE>

APPENDIX-A

MORE ABOUT RISK

A fund's risk profile is largely defined by the fund's principal securities and
investment practices. You may find the most concise description of the fund's
risk profile in the prospectus.

A fund is permitted to utilize -- within limits established by the trustees --
certain other securities and investment practices that have higher risks and
opportunities associated with them. To the extent that the fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively. On the following pages are brief definitions of
certain associated risks with them, with examples of related securities and
investment practices included in brackets. See the "Investment Objectives and
Policies" and "Investment Restrictions" sections of this Statement of Additional
Information for a description of this Fund's investment policies. The fund
follows certain policies that may reduce these risks.

As with any mutual fund, there is no guarantee that the fund will earn income or
show a positive total return over any period of time -- days, months or years.

TYPES OF INVESTMENT RISK

Correlation risk The risk that changes in the value of a hedging instrument will
not match those of the asset being hedged (hedging is the use of one investment
to offset the effects of another investment). Incomplete correlation can result
in unanticipated risks. (e.g., currency contracts, futures and related options,
options on securities and indices, swaps, caps, floors and collars).

Credit risk The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. (e.g., non- investment-grade debt securities, borrowing; reverse
repurchase agreements, covered mortgage dollar roll transactions, repurchase
agreements, securities lending, brady bonds, foreign debt securities, in-kind,
delayed and zero coupon debt securities, asset-backed securities,
mortgage-backed securities, participation interest, options on securities,
structured securities and swaps, caps floors and collars).

Currency risk The risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency-denominated investments, and may widen any losses.(e.g., foreign debt
securities, currency contracts, swaps, caps, floors and collars).

Extension risk The risk that an unexpected rise in interest rates will extend
the life of a mortgage-backed security beyond the expected prepayment time,
typically reducing the security's value.(e.g. mortgage-backed securities and
structured securities).

Interest rate risk The risk of market losses attributable to changes in interest
rates. With fixed-rate securities, a rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values. (e.g.,
non-investment-grade debt securities, covered mortgage dollar roll transactions,
brady bonds, foreign debt securities, in-kind, delayed and zero coupon debt
securities, asset-backed securities, mortgage-backed securities, participation
interest, swaps, caps, floors and collars).

Leverage risk Associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value. (e.g.
borrowing; reverse repurchase agreements, covered mortgage dollar roll
transactions, when-issued securities and forward commitments, currency
contracts, financial futures and options; securities and index options,
structured securities, swaps, caps, floors and collars).

A-1

<PAGE>

o Hedged When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.

o Speculative To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater than
the derivative's original cost.

Liquidity risk The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead, or forego an investment
opportunity, any of which could have a negative effect on fund management or
performance. (e.g. non-investment-grade debt securities, restricted and illiquid
securities, mortgage-backed securities, participation interest, currency
contracts, futures and related options; securities and index options, structured
securities, swaps, caps, floors and collars).

Management risk The risk that a strategy used by a fund's management may fail to
produce the intended result. Common to all mutual funds.

Market risk The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. Market risk may affect a single issuer, an
industry, a sector of the bond market or the market as a whole. Common to all
stocks and bonds and the mutual funds that invest in them. (e.g. covered
mortgage dollar roll transactions, short-term trading, when-issued securities
and forward commitments, brady bonds, foreign debt securities, in-kind, delayed
and zero coupon debt securities, restricted and illiquid securities, rights and
warrants, financial futures and options; and securities and index options,
structured securities).

Natural event risk The risk of losses attributable to natural disasters, crop
failures and similar events.

Opportunity risk The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.(e.g. covered mortgage dollar roll transactions, when-issued
securities and forward commitments, currency contracts, financial futures and
options; securities and securities and index options).

Political risk The risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
(e.g., brady bonds and foreign debt securities).

Prepayment risk The risk that unanticipated prepayments may occur during periods
of falling interest rates, reducing the value of mortgage-backed securities.
(e.g., mortgage backed securities).

Valuation risk The risk that a fund has valued certain of its securities at a
higher price than it can sell them for. (e.g., non-investment-grade debt
securities, participation interest, structured securities, swaps, caps, floors
and collars).

A-2

<PAGE>

APPENDIX-B

Moody's describes its lower ratings for corporate bonds as follows:

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.

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 characterized
bonds in this class.

Bonds which are rated B generally lack characteristics of the 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.

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 principal or interest.

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

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 describes its lower ratings for corporate bonds as follows:

Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits 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 debt in this
category than in higher rated categories.

Debt rated 'BB,' 'B,' 'CCC,' or 'CC' is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. '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. Moody's describes its three highest ratings for commercial paper as
follows:

Issuers rated P-1 (or related supporting institutions) have a superior capacity
for repayment of short-term promissory obligations. P-1 repayment capacity will
normally be evidenced by the following characteristics: (1) leading market
positions in well- established industries; (2) high rates of return on funds
employed; (3) conservative capitalization structures with moderate reliance on
debt and ample asset protections; (4) broad margins in earnings coverage of
fixed financial charges and high internal cash generation; and (5) well
established access to a range of financial markets and assured sources of
alternate liquidity.

B-1

<PAGE>

Issuers rated P-2 (or related supporting institutions) have a strong capacity
for repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated P-3 (or supporting institutions) have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Standard & Poor's describes its lower ratings for corporate bonds as follows:

BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits 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
debt in this category than in higher rated categories.

BB, B, CCC, CC, C Debt rated 'BB', 'B', 'CCC', 'CC" and 'C' 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 'C' 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.

BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.

B Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.

CCC Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.

CC The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating.

C The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

B-2

<PAGE>

Standard & Poor's describes its three highest ratings for commercial paper as
follows:

A-1. This designation indicated that the degree of safety regarding timely
payment is very strong.

A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.

A-3. Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

B-3

<PAGE>

FINANCIAL STATEMENTS

F-1

<PAGE>

The financial statements listed below are included in the Fund's 1998 Annual
Report to Shareholders for the year ended May 31, 1998 (filed electronically
July 30, 1998, accession number 0001010521-98-000296) and are included in and
incorporated by reference into Part B of this registration statement of John
Hancock Sovereign Bond Fund (files nos. 811-2402 and 2-48925).

John Hancock Sovereign Bond Fund
John Hancock Bond Fund

Statement of Assets and Liabilities as of May 31, 1998. Statement of
Operations for the fiscal year ended May 31, 1998. Statement of Changes in
Net Assets for each of the periods indicated therein. Financial Highlights
for each of the periods indicated therein. Schedule of Investments as of
May 31, 1998.
Notes to Financial Statements.
Report to Independent Auditors.