<PAGE> 1
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
U.S.
GOVERNMENT
CASH
RESERVE
ANNUAL REPORT
May 31, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. Dicarlo
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
B.J. Willingham
Senior Vice President
Edgar M. Larsen
Senior Vice President
James K. Ho
Senior Vice President
Anne M. McDonley
Vice President
Barry H. Evans
Vice President
David S. Beckwith
Vice President
Frank A. Lucibella
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Ernst & Young llp
200 Clarendon Street
Boston, Massachusetts 02116
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following a favorable
shareholder vote. At that time, all of the Transamerica mutual funds became part
of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $15 billion in assets under management and more than 1 million
shareholders. Now with 60 open-end funds, 9 closed-end funds and a full array of
retirement and private account services, John Hancock Funds offers you a broader
selection of investment choices to meet your long-term financial needs. What's
more, the union of the Hancock and Transamerica investment teams gives you
access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as a
valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way we
work with you. Not only do we strive to ensure that your investments are
well-managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
All of the former Transamerica funds are now fully integrated into John
Hancock's internal shareholder service organization, John Hancock Investor
Services Corporation. Not only do you have full exchange privileges into all
John Hancock funds, but your account will be handled by one of the top-rated
service organizations in the industry. To show you how seriously we take our
commitment to quality, we offer a service guarantee. If we make an error in
processing a transaction in your account, we will deposit $25 into it. Or if you
have a retirement account, we will waive the annual fee.
We value your business and look forward to serving your investment needs in
the years to come.
Sincerely,
/s/ Edward J Boudreau, Jr.
- --------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
U.S. GOVERNMENT
CASH RESERVE
MONEY MARKET YIELDS APPROACH HIGHEST LEVEL IN FOUR YEARS
After the Federal Reserve's seven interest-rate increases, money market
yields have approached their highest levels in almost four years. In fact, they
have nearly doubled since February 1994 when the Fed first began raising
interest rates to rein in the economy. With yields now close to 6%, money market
investors are earning a real rate of return -- that is, the return after
inflation -- of nearly 3.5%. At that level, money market funds have become more
attractive investments than they've been in recent memory, especially relative
to more risky stock and bond funds.
By May 31, 1995, John Hancock U.S. Government Cash Reserve had a 7-day
average yield of 5.81%(1). By comparison, the average U.S. government/agency
money market fund had a 7-day average yield of 5.35%, according to
IBC/Donoghue's Money Fund Report.
[A 2 1/2" x 2 1/2" photo of Dawn Baillie at bottom center. Caption reads: "Dawn
Baillie."]
SHIFTING GEARS
During the period, our strategy has shifted gears. In the last quarter of 1994
and early this year, we kept the Fund's average maturity relatively short, in
the 25- to 30-day range. Staying short allowed us to buy higher-yielding
securities as interest rates were rising, especially at year end when short-term
financing pressures caused yields to spike temporarily.
With the last rate hike in early February of this year, however, the market
began to anticipate that the Fed may soon be done raising rates. That
phenomenon,
[CAPTION]
"...MONEY MARKET FUNDS HAVE BECOME MORE ATTRACTIVE INVESTMENTS..."
3
<PAGE> 4
John Hancock Funds - U.S. Government Cash Reserve
[Bar chart with heading "7-Day Yield" at top of left hand column. Under the
heading is the footnote: "As of May 31, 1995." The chart is scaled in increments
of 2% from top to bottom, with 6% on the top and 0% at the bottom. Within the
chart, there are two solid bars. The first represents the 5.81% 7-day yield for
John Hancock U.S. Government Cash Reserve. The second represents the 5.35% 7-day
yield for the average U.S. government/agency money market fund. Footnote below
reads: "The average U.S. government/agency money market fund is tracked by
IBC/Donoghue's Money Fund Report."]
coupled with signs of a slowing economy and positive technical factors in the
market, caused short-term rates to drop off slightly. In response, money fund
managers began to get a bit more aggressive by lengthening their average
maturities.
At John Hancock Funds U.S. Government Cash Reserve, we gradually lengthened
our average maturity, extending out to almost 53 days by the end of April. That
was slightly longer than the Donoghue's average for U.S. government/agency
money market funds but we're comfortable with it because it reflects our
expectation of a slower economy and a possible interest-rate cut by the Federal
Reserve.
INFLATION PICTURE
It is evident that the economy has slowed sharply after the Fed's seven
interest-rate increases. Economic growth was 2.7% in the first quarter of this
year, after running at 4.1% in 1994. So for the foreseeable future, we believe
inflation will remain under control.
However, one thing that isn't clear yet is how the decline in the U.S.
dollar relative to the Japanese yen will impact inflation later this year.
Investors fear a falling dollar because it's considered inflationary. (A lower
dollar tends to make imports more expensive, which, in turn, can force domestic
prices up.) Given that, the Fed's likely to keep a close eye on the dollar's
impact in the months ahead.
LOOKING AHEAD
With more evidence of a slowdown, we could see the Fed cut rates in the months
ahead. Given that, we will keep the Fund's average maturity slightly longer than
average, between 60 to 65 days. We will also continue to employ a barbell
strategy -- that is, concentrating on money market securities with short
maturities (30 days) and long maturities (nine to 13 months). We believe this
will position the Fund well because we'll be able to take advantage of
short-term money market securities that are priced off the current federal funds
rate target of 6%, while locking in higher yields on the longer-term securities
in the event the Fed lowers rates.
- --------------------------------------------------------------------------------
(1) During the period of this report, the Adviser voluntarily agreed to limit
the Fund's expenses to 0.35% of its daily net asset value. Without the subsidy,
the 7-day average yield as of 5/31/95 would have been 5.43%.
The Fund is neither insured nor guaranteed by the U.S. government. There can be
no assurance that the Fund will be able to maintain a net asset value of $1.00
per share.
[CAPTION]
"...WE BELIEVE INFLATION WILL REMAIN UNDER CONTROL."
4
<PAGE> 5
FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON MAY 31, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE PER SHARE AS OF THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, in money market instruments, at value - Note C:
U.S. government obligations (cost - $26,195,597)............... $26,195,597
Joint repurchase agreement (cost - $2,640,000)................. 2,640,000
-----------
28,835,597
Interest receivable.............................................. 385,458
Receivable from John Hancock Advisers, Inc. - Note B............. 126,751
Other assets..................................................... 26,208
-----------
Total Assets.............................. 29,374,014
-------------------------------------------------------
LIABILITIES:
Temporary overdraft of cash...................................... 54,110
Dividend payable................................................. 77,788
Payable to John Hancock Advisers, Inc. and affiliates - Note B... 77,964
Accounts payable and accrued expenses ........................... 33,437
-----------
Total Liabilities......................... 243,299
-------------------------------------------------------
NET ASSETS:
Capital paid-in.................................................. 29,130,715
-----------
Net Assets................................ $29,130,715
=======================================================
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE:
(based on 29,130,715 shares of beneficial interest
outstanding - unlimited number of shares authorized
with $0.01 per share par value).................................. $ 1.00
=======================================================
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND FOR THE PERIOD STATED.
<TABLE>
STATEMENT OF OPERATIONS
Year ended May 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $4,523,480
----------
Expenses:
Investment management fee - Note B............................. 440,398
Custodian fee.................................................. 68,961
Auditing fee................................................... 47,932
Registration and filing fees................................... 23,970
Trustees' fees................................................. 17,697
Transfer agent fee - Note B.................................... 16,874
Miscellaneous.................................................. 9,832
Printing....................................................... 9,538
Legal fees..................................................... 6,567
Advisory board fee............................................. 3,349
----------
Total Expenses............................ 645,118
Less Expenses Reimburseable by John
Hancock Advisers, Inc. - Note B........... (336,846)
-------------------------------------------------------
Net Expenses.............................. 308,272
-------------------------------------------------------
Net Investment Income..................... 4,215,208
-------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations........................... $4,215,208
=======================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 6
FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31,
---------------------------
1995 1994
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment Income............................................................... $ 4,215,208 $ 4,087,425
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.0495 and $0.0300 per share, respectively).. (4,215,208) (4,087,425)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*.................................................. (65,276,832) (28,698,933)
------------ ------------
NET ASSETS:
Beginning of period................................................................. 94,407,547 123,106,480
------------ ------------
End of period....................................................................... $ 29,130,715 $ 94,407,547
============ ============
* ANALYSIS OF FUND SHARE TRANSACTIONS:
Shares sold......................................................................... $215,745,531 $447,900,058
Shares issued to shareholders in reinvestment of distributions...................... 2,455,376 1,376,895
------------ ------------
218,200,907 449,276,953
Less shares repurchased............................................................. (283,477,739) (477,975,886)
------------ ------------
Net decrease........................................................................ $(65,276,832) $(28,698,933)
============ ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, DISTRIBUTIONS PAID TO SHAREHOLDERS, AND ANY INCREASE OR
DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES
THE FUND SHARES SOLD, REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS, ALONG
WITH THE CORRESPONDING DOLLAR VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are as
follows:
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------- --------
Net Investment Income.............................................. 0.05 0.03 0.03 0.05 0.07
------- ------- ------- -------- --------
Less Distributions:
Dividends from Net Investment Income............................... (0.05) (0.03) (0.03) (0.05) (0.07)
------- ------- ------- -------- --------
Net Asset Value, End of Period .................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ======== ========
Total Investment Return at Net Asset Value......................... 5.07% 3.04% 3.25% 4.95% 7.42%
Total Adjusted Investment Return at Net Asset Value (a)............ 4.69% 2.74% 2.93% 4.62% 7.11%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted).......................... $29,131 $94,408 $123,106 $109,358 $200,092
Ratio of Expenses to Average Net Assets ........................... 0.35% 0.35% 0.35% 0.35% 0.35%
Ratio of Adjusted Expenses to Average Net Assets (a)............... 0.73% 0.65% 0.67% 0.68% 0.66%
Ratio of Net Investment Income to Average Net Assets............... 4.79% 2.96% 3.19% 4.86% 7.21%
Ratio of Adjusted Net Investment Income to Average Net Assets (a).. 4.41% 2.66% 2.87% 4.53% 6.90%
<FN>
(a) Net of any fee reductions.
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZE THE IMPACT OF NET INVESTMENT INCOME AND
DIVIDENDS ON A SINGLE SHARE FOR THE PERIOD INDICATED. ADDITIONALLY, IMPORTANT
RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS ARE
EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
FUND ON MAY 31, 1995. IT'S DIVIDED INTO TWO TYPES OF SHORT-TERM INVESTMENTS.
<TABLE>
SCHEDULE OF INVESTMENTS
May 31, 1995
- -------------------------------------------------------------------------------------------------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
U. S. GOVERNMENT OBLIGATIONS
GOVERNMENTAL - U. S. AGENCIES (89.93%)
Federal Farm Credit Bank, 07-05-95................ 6.670% $1,000 $ 1,000,321
Federal Farm Credit Bank, 08-01-95................ 6.650 1,000 1,000,080
Federal Home Loan Bank, 06-02-95.................. 10.344 300 285,174
Federal Home Loan Bank, 06-12-95.................. 7.521 300 288,593
Federal Home Loan Bank, 06-13-95.................. 5.190 1,000 999,665
Federal Home Loan Bank, 07-21-95.................. 7.070 2,000 1,913,198
Federal Home Loan Bank, 08-08-95.................. 7.500 250 250,560
Federal Home Loan Bank, 09-22-95.................. 4.370 515 511,698
Federal Home Loan Bank, 09-25-95.................. 4.500 135 134,310
Federal Home Loan Bank, 10-25-95.................. 5.000 215 214,080
Federal Home Loan Bank, 11-20-95.................. 5.130 1,000 992,514
Federal Home Loan Bank, 01-19-96.................. 7.305 455 456,500
Federal Home Loan Bank, 01-26-96.................. 5.030 500 496,765
Federal Home Loan Mortgage Corp., 06-01-95........ 6.000 290 287,148
Federal Home Loan Mortgage Corp., 06-01-95........ 6.050 160 157,849
Federal Home Loan Mortgage Corp., 06-01-95........ 6.100 1,000 999,831
Federal Home Loan Mortgage Corp., 06-02-95........ 5.900 7,000 6,996,558
Federal Home Loan Mortgage Corp., 06-02-95........ 6.000 453 448,470
Federal Home Loan Mortgage Corp., 07-06-95........ 8.700 250 250,554
Federal Home Loan Mortgage Corp., 02-28-96........ 6.840 1,000 1,001,733
Federal National Mortgage Association, 06-09-95... 5.200% $1,000 $ 999,732
Federal National Mortgage Association, 06-15-95... 6.050 160 157,472
Federal National Mortgage Association, 06-16-95... 6.050 305 300,131
Federal National Mortgage Association, 08-07-95... 6.100 275 268,197
Federal National Mortgage Association, 11-10-95... 10.600 100 101,910
Federal National Mortgage Association, 02-28-96... 6.720 1,000 999,901
Federal National Mortgage Association, 03-10-97... 7.050 4,050 4,050,433
Financing Corp., 06-30-95......................... 8.908 480 456,246
Financing Corp., 07-24-95......................... 6.100 180 175,974
-----------
26,195,597
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $26,195,597) (89.93%) 26,195,597
------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
JOINT REPURCHASE AGREEMENT
Investment in a joint repurchase agreement
transaction with BT Securities Corp. -- Dated
05-31-95, Due 06-01-95 (secured by U.S.
Treasury Bonds, 13.25% due 05-15-14, 11.25% due
02-15-15, 9.125% due 05-15-09, and U.S.
Treasury Note 6.75% due 05-31-97).................. 6.150% $2,640 $ 2,640,000
-----------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $2,640,000) ( 9.06%) 2,640,000
------ -----------
TOTAL INVESTMENTS (98.99%) $28,835,597
====== ===========
</TABLE>
The percentage shown for each investment category is the total value of that
category expressed as a percentage of total net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
NOTE A --
ACCOUNTING POLICIES
John Hancock Current Interest Trust (the "Trust") is a diversified, open-end
management investment company, registered under the Investment Company Act of
1940, as amended. John Hancock U.S. Government Cash Reserve (the "Fund") is the
only series in the Trust presently issuing shares. The Trustees may authorize
the creation of additional Funds from time to time to satisfy various investment
objectives. Effective December 22, 1994 (see Note B), the Trust and Fund changed
names by replacing the word Transamerica with John Hancock.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS The Trustees have determined appropriate methods for
valuing portfolio securities. Accordingly, portfolio securities are valued at
amortized cost, in accordance with Rule 2a-7 of the Investment Company Act of
1940, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the security to the Fund. Interest income on
certain portfolio securities such as negotiable bank certificates of deposit and
interest bearing notes is accrued daily and included in interest receivable.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc., a wholly-owned subsidiary of The Berkeley Financial Group, may participate
in a joint repurchase agreement transaction. Aggregate cash balances are
invested in one or more repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Fund's custodian
bank receives delivery of the underlying securities for the joint account on the
Fund's behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis for both financial
reporting and federal income tax purposes.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders.
DIVIDENDS The Fund's net investment income is declared daily as dividends to
shareholders of record as of the close of business on the preceding day and
distributed monthly.
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES AND TRANSACTIONS WITH AFFILIATES
AND OTHERS
On December 22, 1994, John Hancock Advisers, Inc. (the "Adviser"), a wholly
owned subsidiary of The Berkeley Financial Group, became the investment adviser
for the Fund with approval of the Trustees and shareholders of the Fund. The
Fund's former investment manager was Transamerica Fund Management Company
("TFMC").
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of (a) 0.500% of the first $500,000,000 of the
Fund's average daily net asset value, (b) 0.425% of the next $250,000,000, (c)
0.375% of the next $250,000,000, (d) 0.350% of the next $500,000,000, (e) 0.325%
of the next $500,000,000, (f) 0.300% of the next $500,000,000 and (g) 0.275% in
excess of $2,500,000,000. This fee structure is consistent with the former
agreement with TFMC. For the period ended May 31, 1995, the advisory fee earned
by the Adviser and TFMC amounted to $130,358 and $310,040, respectively,
resulting in a total fee of $440,398.
The Adviser and TFMC, for their respective periods, provided administrative
services to the Fund pursuant to an administrative service agreement through
January 16, 1995 on which day the agreement was terminated.
10
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
The Adviser and TFMC, for their respective periods, agreed to limit the
Fund's expenses further to the extent required to prevent the aggregate expenses
of the Fund from exceeding on an annual basis 0.35% of the Fund's average daily
net asset value. Accordingly, for the period ended May 31, 1995, the reduction
to the Adviser's and TFMC's fees, collectively with any amounts not borne by the
Fund by virtue of the most restrictive state expense limit, amounted to $128,744
and $208,102, respectively. The limit may be discontinued at any time.
On December 22, 1994 John Hancock Funds, Inc. ("JH Funds"), a
wholly owned subsidiary of the Adviser, became the principal underwriter of the
Fund. Prior to this date, Transamerica Fund Distributors, Inc. ("TFD") served
as the principal underwriter and distributor of the Fund.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Accordingly,
the Fund will make payments for distribution and service expenses which in total
will not exceed on an annual basis 0.15% of the Fund's average daily net assets.
Under the amended Rules of Fair Practice of the National Association of
Securities Dealers, curtailment of a portion of the Fund's 12b-1 payments could
occur under certain circumstances. This fee structure and plan is similar to the
former arrangements with TFD. Payments of fees under the Distribution Plan has
been suspended until further notice is given to the shareholders.
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995, the
Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund will pay Investor Services a fee based on transaction volume and
number of shareholder accounts.
A partner with Baker & Botts was an officer of the Trust until December 22,
1994. During the period ended May 31, 1995, legal fees paid to Baker & Botts
amounted to $4,552.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates as well as Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The Fund will
make investments into other John Hancock Funds, as applicable, to cover its
liability with regard to the deferred compensation. Investments to cover the
Fund's deferred compensation liability will be recorded on the Fund's books as
other assets. The deferred compensation liability will be marked to market on a
periodic basis and income earned by the investment will be recorded on the
Fund's books.
The Fund has an independent advisory board composed of certain members of
the former Transamerica Board of Trustees who provide advice to the current
Trustees in order to facilitate a smooth management transition for which the
Fund pays the advisory board and its counsel a fee.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities, including discount earned on
investment securities, during the period ended May 31, 1995 aggregated
$4,311,269,484 and $4,378,139,990, respectively.
The cost of investments owned at May 31, 1995 for Federal income tax
purposes was $28,835,597.
11
<PAGE> 12
John Hancock Funds - U.S. Government Cash Reserve
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Current Interest Trust --
John Hancock U.S. Government Cash Reserve
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the John Hancock U.S. Government Cash Reserve
(formerly the Transamerica U.S. Government Cash Reserve) (the "Fund"), as of May
31, 1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1995, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
John Hancock U.S. Government Cash Reserve at May 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
five years in the period then ended, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Boston, Massachusetts
July 10, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished with
respect to the dividends of the Fund during its fiscal year ended May 31, 1995.
All of the dividends paid for the fiscal year are taxable as ordinary income.
None of the 1995 dividends qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for calendar year 1995.
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ADDITIONAL INFORMATION
John Hancock Funds - U.S. Government Cash Reserve
On December 16, 1994 , a special meeting of John Hancock (formerly Transamerica)
Current Interest (the "Trust") in respect of John Hancock (formerly
Transamerica) U.S. Government Cash Reserve (the "Fund") was held involving the
election of trustees and certain other matters concerning the Fund.
Specifically, shareholders first approved a new investment management
agreement between the Trust on behalf of the Fund and John Hancock Advisers,
Inc. on substantially similar terms of the prior investment management
agreement, to take effect on December 22, 1994, the date of the consummation of
Transamerica Fund Management Company by The Berkeley Financial Group. The
shareholder votes tallied were 62,163,904 FOR, 40,961 AGAINST and 712,966
ABSTAINING.
The shareholders next approved new Plans of Distribution for the Fund, also
effective on December 22, 1994, and also on substantially the same terms as the
prior Plans of Distribution. The shareholder votes tallied were 62,163,904 FOR,
40,961 AGAINST and 712,966 ABSTAINING.
The shareholders also voted to ratify the selection of Ernst & Young, LLP as
independent auditors for the Fund for the fiscal year ending May 31, 1995, and
the votes tallied were 62,823,023 FOR, 0 AGAINST and 94,810 ABSTAINING.
Lastly, the following trustees were elected to serve until their respective
successors shall become duly elected and qualified, with the votes tabulated as
indicated:
<TABLE>
<CAPTION>
NAME OF TRUSTEE FOR WITHHOLD
- --------------- --- --------
<S> <C> <C>
Edward J. Boudreau, Jr.......... 62,108,364 809,468
James F. Carlin................. 62,108,364 809,468
William H. Cunningham........... 62,108,364 809,468
Charles L. Ladner............... 62,108,364 809,468
Leo E. Linbeck, Jr.............. 62,108,364 809,468
Patricia P. McCarter............ 62,108,364 809,468
Steven R. Pruchansky............ 62,108,364 809,468
Norman H. Smith................. 62,108,364 809,468
John P. Toolan.................. 62,108,364 809,468
</TABLE>
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NOTES
John Hancock Funds - U.S. Government Cash Reserve
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NOTES
John Hancock Funds - U.S. Government Cash Reserve
15
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[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 Huntington Avenue Boston, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
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right, a cube in lower left and a diamond in lower right. A tag line below
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- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock U.S.
Government Cash Reserve. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
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Recycled Paper."]
JHD 4300A 5/95
