================================================================================
John Hancock Funds
- --------------------------------------------------------------------------------
Money
Market
Fund
ANNUAL REPORT
October 31, 1996
<PAGE>
DIRECTORS
EDWARD J. BOUDREAU, JR.
JAMES F. CARLIN*
WILLIAM H. CUNNINGHAM*
CHARLES F. FRETZ*
HAROLD R. HISER, JR.*
ANNE C. HODSDON
CHARLES L. LADNER*
LEO E. LINBECK, JR.*
PATRICIA P. MCCARTER*
STEVEN R. PRUCHANSKY*
RICHARD S. SCIPIONE
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
JAMES B. LITTLE
Senior Vice President and
Chief Financial Officer
SUSAN S. NEWTON
Vice President and Secretary
JAMES J. STOKOWSKI
Vice President and Treasurer
THOMAS H. CONNORS
Second Vice President and Compliance Officer
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
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 02116-5072
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Since late 1994, prospectus simplification has been a major topic in the mutual
fund industry. At that time, Securities and Exchange Commission Chairman Arthur
Levitt called on fund companies to make their prospectuses more user-friendly.
He noted that prospectuses are often overloaded with technical detail and are
hard for most investors to understand. Many industry observers agreed, and
rightly so.
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
So it is my pleasure to let you know that after being under development for
a year, John Hancock Funds has introduced new simplified and consolidated
prospectuses. The prospectuses feature shorter, clearer language with a
streamlined design, and they incorporate several funds with similar investment
objectives into one document. They cover our income, growth, growth and income,
tax-free income, international/global and money market funds. We are gratified
at the favorable reviews that our new prospectuses have received from
shareholders, financial advisers, industry analysts and the press. We believe
they are a bold but sensible step forward. And while they are easier to read,
they still comply with all federal and state guidelines.
We have taken the initiative to create a prospectus that dramatically
departs from the norm. Among its most innovative features is a two-page spread
highlighting each fund's goals and investment strategy, the types of securities
it buys, its portfolio management and risk factors, all in plainer language.
Fund expenses and financial highlights are now found here, too, as is a new bar
chart that shows year-to-year volatility for each fund. Other features include a
better presentation of fund services, a new glossary of investment risks and a
discussion about how funds are organized, including a diagram showing the
connection of the various players that provide services to your Hancock fund(s).
We believe we have made a significant advancement in the drive toward
better mutual fund prospectuses. We hope you will agree because in the end, we
did it for you, our shareholders.
Sincerely,
/s/Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
BY DAWN BAILLIE, FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Money Market Fund
Mixed economic signals cause inflation fears, but no inflation
Money market yields remained fairly steady during the last 12 months, even
though the financial environment and market sentiment changed dramatically
during the period. At the beginning of the Fund's fiscal year in November 1995,
the economic outlook was for continued slow growth and low inflation, conditions
that are typically positive for financial markets. In fact, the Federal Reserve
cut short-term interest rates last December and January to spur the economy and
ensure that it did not slip into recession.
But in March, sentiment changed dramatically, as the first in a series of
monthly employment reports provoked concerns that the economy was growing at a
stronger-than-expected pace. That triggered inflation fears and sent interest
rates up. Investors also started to wonder if the Fed would reverse course and
begin raising rates to cool down the economy and prevent an inflation outbreak.
As the year progressed, mixed economic signals kept the bond market volatile.
But the Fed left short-term rates alone, believing that the economy's growth
rate was under control. Even though unemployment is at its lowest level in
years, that has not translated into wage inflation, one key factor that the Fed
watches in determining when to tweak the federal funds rate. This important
short-term interest rate is the rate that banks charge each other for overnight
loans and is also a benchmark for pricing money market securities. At the end of
October, the federal funds rate remained at its January level of 5.25%.
"Money market yields remained fairly
steady during the last 12 months..."
[A 2" x 3" photo of portfolio management team at bottom center. Caption reads:
"Members of the Fund management team (l-r): Barry Evans, Jamie Kellogg, Bruce
Pickett and Dawn Baillie".]
3
<PAGE>
================================================================================
John Hancock Funds - Money Market Fund
"...our view is that
money market investors
are in for more of
the same...."
- --------------------------------------------------------------------------------
[Bar chart with heading "7-Day Yield" at top of left hand column. Under the
heading is the footnote "As of October 31, 1996." The chart is scaled in
increments of 2% from top to bottom with 6% at the top and 0% at the bottom.
Within the chart, there are three solid bars. The first represents the 4.20% 7-
day yield for John Hancock Money Management Fund: Class A. The second
represents the 3.35% 7-day yield for John Hancock Money Management Fund: Class
B. The third represents the 4.85% yield for the average taxable money fund.
Footnote below reads: "The average money market fund is tracked by
IBC/Donoghue's Money Fund Report."]
- --------------------------------------------------------------------------------
On October 31, 1996, John Hancock Money Market Fund had a 7-day average
yield of 4.20% for Class A shares and 3.35% for Class B shares. By comparison,
the average taxable money fund had a 7-day average yield of 4.85%, according to
IBC/Donoghue's Money Fund Report.
Fund maintains longer-than-average maturity
For most of the Fund's fiscal year, we kept the Fund's maturity longer than the
average Donaghue money fund. This helped us lock in higher yields in a falling
interest-rate environment. At the beginning of the year, the Fund's average
maturity was as long as 60 days. In the spring, when market fears sent interest
rates up, we briefly returned to a more neutral average of 50 days in order to
have added flexibility. But in May, we began lengthening the Fund's maturity
again, bringing it to an average 82 days by the end of October, compared to a
54-day maturity for the average taxable money fund. We did this because we
believed that the economy was continuing to grow at a moderate pace and that
there was not enough evidence of the kinds of pricing pressures that would
prompt the Fed to raise short-term rates.
Going forward
We continue to hold the view that the economy will maintain its moderate growth
path with no signs of inflation through the end of this year and into next. As
long as that's the case, we do not expect the Fed to change short-term interest
rates, although their inclination appears to remain toward raising rates if they
did anything. Based on this assumption, we intend to keep the Fund's maturity
longer than average until the economic data tells us we should change course. If
we begin to see signs of inflation on the horizon, we'll shorten our maturity so
that we'll be able to take advantage of any changes in the economic environment.
But for now, our view is that money market fund investors are in for more of the
same. We'll try to capture as much yield as we can, while maintaining stability
of principal.
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. Of course, the team's views
are subject to change as market and other conditions warrant.
The Fund is neither insured nor guaranteed by the U.S. government. There can be
no assurances that the Fund will be able to maintain a net asset value of $1.00
per share.
4
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
Statement of Assets and Liabilities
October 31, 1996
- --------------------------------------------------------------------------------
Assets:
Investments, in money market instruments,
at value - Note C:
Commercial paper (cost - $153,650,391) ................... $153,650,391
Negotiable bank certificates of deposit
(cost - $97,926,520) .................................. 97,926,520
Corporate interest-bearing obligations
(cost - $104,853,870) .................................. 104,853,870
U.S. government obligations (cost - $38,557,459) ......... 38,557,459
Joint repurchase agreement (cost - $728,000) ............. 728,000
------------
395,716,240
Cash ....................................................... 1,476
Receivable for shares sold ................................. 50,000
Interest receivable ........................................ 2,706,642
Other assets ............................................... 24,944
------------
Total Assets .......................... 398,499,302
---------------------------------------------------------
Liabilities:
Payable for investments purchased .......................... 27,190,000
Payable for fund shares repurchased ........................ 180,724
Accrued expenses ........................................... 210,095
Dividend payable ........................................... 35,540
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ...................................... 245,989
------------
Total Liabilities ..................... 27,862,348
---------------------------------------------------------
Net Assets:
Capital paid-in ............................................ 370,636,954
------------
Net Assets ............................ $370,636,954
=========================================================
Net Asset Value, Offering Price and
Redemption Price Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - 3,500,000,000 shares
authorized with $0.01 per share par value)
Class A - $262,475,003/262,554,149 ......................... $ 1.00
==============================================================================
Class B - $108,161,951/108,180,459 ......................... $ 1.00
==============================================================================
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 October 31, 1996. You'll
also find the net asset value as of that date.
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund.
Statement of Operations
Year ended October 31, 1996
- --------------------------------------------------------------------------------
Investment Income:
Interest ................................................... $18,418,485
-----------
Expenses:
Investment management fee - Note B ....................... 1,327,385
Transfer agent fee - Note B .............................. 1,147,142
Distribution/service fee - Note B
Class A ................................................ 380,976
Class B ................................................ 740,837
Registration and filing fees ............................. 379,982
Custodian fee ............................................ 105,684
Printing ................................................. 141,731
Legal fees ............................................... 115,418
Financial services fee - Note B .......................... 54,014
Trustees' fees ........................................... 39,291
Auditing fee ............................................. 37,109
Advisory board fee ....................................... 23,444
Miscellaneous ............................................ 6,564
-----------
Total Expenses ........................ 4,499,577
---------------------------------------------------------
Net Investment Income ................. 13,918,908
---------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ............. $13,918,908
=========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1995 1996
------------- -------------
<S> <C> <C>
From Operations:
Increase (Decrease) in Net Assets:
Net investment Income ......................................... $ 2,184,101 $ 13,918,908
------------- -------------
Distributions to Shareholders:
Dividends from net investment income
Class A** - ($0.0066 and $0.0444 per share, respectively) ... (71,384) (11,196,942)
Class B - ($0.0401 and $0.0363 per share, respectively) .... (2,112,717) (2,721,966)
------------- -------------
Distributions in excess of net investment income
Class A** - (none and $0.0003) .............................. -- (79,146)
Class B - (none and $0.002) ................................ -- (18,508)
------------- -------------
-- (97,654)
------------- -------------
Total Distributions to Shareholders ....................... (2,184,101) (13,918,908)
------------- -------------
From Fund Share Transactions -- Net* ............................ 16,889,418 295,479,601
------------- -------------
Net Assets:
Beginning of year ............................................. 58,365,589 75,255,007
------------- -------------
End of year ................................................... $ 75,255,007 $ 370,636,954
============= =============
</TABLE>
* Analysis of Fund Share Transactions:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
1995 1996
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CLASS A **
Shares sold ................................. 47,205,231 $ 47,205,231 2,599,973,181 $ 2,599,973,181
Shares issued in reorganization - Note E .... -- -- 241,738,468 241,738,468
Shares issued to shareholders in reinvestment
of distributions .......................... 55,602 55,602 9,488,362 9,488,362
--------------- --------------- --------------- ---------------
47,260,833 47,260,833 2,851,200,011 2,851,200,011
Less shares repurchased ..................... (26,318,771) (26,318,771) (2,609,587,924) (2,609,587,924)
--------------- --------------- --------------- ---------------
Net increase ................................ 20,942,062 $ 20,942,062 241,612,087 $ 241,612,087
=============== =============== =============== ===============
CLASS B
Shares sold ................................. 223,741,024 $ 223,741,024 859,812,437 $ 859,812,437
Shares issued to shareholders in reinvestment
of distributions .......................... 1,684,942 1,684,942 1,868,335 1,868,335
--------------- --------------- --------------- ---------------
225,425,966 225,425,966 861,680,772 861,680,772
Less shares repurchased ..................... (229,478,610) (229,478,610) (807,813,258) (807,813,258)
--------------- --------------- --------------- ---------------
Net increase (decrease) ..................... (4,052,644) ($ 4,052,644) 53,867,514 $ 53,867,514
=============== =============== =============== ===============
</TABLE>
** Class A shares commenced operations on September 12, 1995
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 number of Fund shares sold, reinvested and redeemed during the last two
periods.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
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:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 12, 1995
(COMMENCEMENT OF YEAR ENDED
OPERATIONS) TO OCTOBER 31,
OCTOBER 31, 1995 1996
---------------- -----------
<S> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ............... $ 1.00 $ 1.00
----------- -----------
Net Investment Income .............................. 0.01 0.05
----------- -----------
Less Distributions:
Dividends from Net Investment Income ............... (0.01) (0.05)
----------- -----------
Net Asset Value, End of Period ..................... $ 1.00 $ 1.00
=========== ===========
Total Investment Return at Net Asset Value (2) ..... 0.64%(3) 4.56%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) .......... $ 20,942 $ 262,475
Ratio of Expenses to Average Net Assets ............ 1.07%(4) 1.17%
Ratio of Net Investment Income to Average Net Assets 4.94%(4) 4.41%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
1992 1993 1994 1995(1) 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
Net Investment Income .............................. 0.02 0.01 0.02 0.04 0.04
----------- ----------- ----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income ............... (0.02) (0.01) (0.02) (0.04) (0.04)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Investment Return at Net Asset Value (2) ..... 1.73% 0.85% 1.87% 4.07% 3.71%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) .......... $ 31,480 $ 31,546 $ 58,366 $ 54,313 $ 108,162
Ratio of Expenses to Average Net Assets ............ 2.47% 2.44% 2.06% 1.92% 2.00%
Ratio of Net Investment Income to Average Net Assets 1.69% 0.85% 1.97% 3.96% 3.58%
</TABLE>
(1) On December 22, 1994 John Hancock Advisers, Inc. became the Investment
Adviser of the Fund.
(2) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(3) Not annualized.
(4) On an annualized basis.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
Schedule of Investments
October 31, 1996
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Money
Market Fund on October 31, 1996. It's divided into five types of short-term
investments. Most categories of short-term investments are further broken down
by industry group.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Automotive (1.59%)
Chrysler Financial Corp.,
11-12-96 ........................... 5.250% Tier 1 $ 5,900 $ 5,890,535
-----------
Banking (11.31%)
Barnett Banks Inc.,
11-05-96 ........................... 5.320 Tier 1 17,000 16,989,951
PNC Bank Corp.,
11-13-96 ........................... 5.430 Tier 1 10,000 9,981,900
PNC Bank Corp.,
12-03-96 ........................... 5.290 Tier 1 15,000 14,929,467
-----------
41,901,318
-----------
Banking - Foreign (2.92%)
Unifunding Corp.,
01-22-97 ........................... 5.350 Tier 1 10,960 10,826,440
-----------
Broker Services (2.67%)
Bear Stearns Cos., Inc.,
11-01-96 ........................... 5.320 Tier 1 1,000 1,000,000
Bear Stearns Cos., Inc.,
11-14-96 ........................... 5.260 Tier 1 7,900 7,884,994
Merrill Lynch & Co., Inc.,
11-01-96 ........................... 5.650 Tier 1 1,000 1,000,000
-----------
9,884,994
-----------
Finance (10.20%)
American Honda Finance Corp.,
11-12-96 ........................... 5.300 Tier 1 5,000 4,991,903
Heller Financial Inc. ................
11-07-96 ........................... 5.310 Tier 1 13,000 12,988,495
Heller Financial Inc. ................
11-12-96 ........................... 5.280 Tier 1 4,900 4,892,095
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
Finance (continued)
International Business
Machines Credit Corp.,
11-08-96 ........................... 5.250% Tier 1 $ 15,000 $14,984,688
-----------
37,857,181
-----------
Mortgage Banking (3.50%)
Countrywide Funding Corp.,
11-04-96 ........................... 5.330 Tier 1 3,000 2,998,668
Countrywide Funding Corp.,
11-25-96 ........................... 5.270 Tier 1 10,000 9,964,867
-----------
12,963,535
-----------
Retail Stores (3.23%)
Sears Roebuck Acceptance Corp.,
11-07-96 ........................... 5.260 Tier 1 4,000 3,996,493
Sears Roebuck Acceptance Corp.,
11-12-96 ........................... 5.260 Tier 1 8,000 7,987,142
-----------
11,983,635
-----------
Utilities - Telephone (6.03%)
GTE Corp.,
11-04-96 ........................... 5.340 Tier 1 17,000 16,992,435
GTE Corp.,
11-15-96 ........................... 5.270 Tier 1 860 858,238
NYNEX Corp.,
11-13-96 ........................... 5.280 Tier 1 4,500 4,492,080
-----------
22,342,753
-----------
TOTAL COMMERCIAL PAPER
(Cost $153,650,391) (41.45%) 153,650,391
----- -----------
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
U.S. Branches of Foreign Banks (19.68%)
Abbey National PLC
02-03-97 ........................... 8.000 Tier 1 5,000 5,025,732
Banque Nationale de Paris,
08-27-97 ........................... 5.870 Tier 1 10,000 10,000,000
Deutsche Bank., AG
01-22-97 ........................... 5.530 Tier 1 10,000 10,000,000
Industrial Bank of Japan Ltd.,
11-04-96 ........................... 5.450 Tier 1 22,900 22,900,213
Midland PLC.,
10-28-97 ........................... 5.910 Tier 1 10,000 10,000,000
Sanwa Bank Ltd.,
11-15-96 ........................... 5.360 Tier 1 15,000 15,000,075
-----------
72,926,020
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
U.S. Dollar Euro Certificates of Foreign Banks (6.74%)
Bank of Tokyo Ltd.,
01-13-97 ........................... 5.520% Tier 1 $ 25,000 $25,000,500
-----------
TOTAL NEGOTIABLE BANK
CERTIFICATES OF DEPOSIT
(Cost $97,926,520) (26.42%) 97,926,520
------- - -----------
CORPORATE INTEREST BEARING OBLIGATIONS
Automotive (8.84%)
Chrysler Financial Corp.,
03-17-97 ........................... 7.260 Tier 1 4,100 4,118,619
Ford Holdings, Inc. ..................
07-15-97 ........................... 9.250 Tier 1 1,250 1,276,326
Ford Motor Credit Co.,
01-15-97 ........................... 7.875 Tier 1 1,010 1,014,197
Ford Motor Credit Co.,
03-06-97 ........................... 7.650 Tier 1 2,000 2,012,881
Ford Motor Credit Co.,
05-07-97 ........................... 9.200 Tier 1 1,500 1,524,318
General Motors Acceptance Corp.,
11-13-96 ........................... 7.800 Tier 1 5,000 5,003,449
General Motors Acceptance Corp.,
01-13-97 ........................... 8.250 Tier 1 5,000 5,024,820
General Motors Acceptance Corp.,
02-03-97 ........................... 4.950 Tier 1 2,025 2,020,328
General Motors Acceptance Corp.,
04-10-97 ........................... 8.000 Tier 1 6,550 6,615,958
General Motors Acceptance Corp.,
04-18-97 ........................... 6.700 Tier 1 3,125 3,136,397
General Motors Acceptance Corp.,
07-01-97 ........................... 7.125 Tier 1 1,000 1,005,626
-----------
32,752,919
-----------
Banking (4.68%)
BankAmerica Corp.,
02-03-97 ........................... 7.250 Tier 1 2,200 2,210,746
First National Bank of Boston
01-23-97 ........................... 5.410 Tier 1 10,000 10,000,000
Norwest Corp.,
08-15-97 ........................... 6.000 Tier 1 5,125 5,135,374
-----------
17,346,120
-----------
Broker Services (4.05%)
Bear Stearns Cos., Inc.,
09-17-97** ......................... 5.500 Tier 1 5,000 5,000,000
Bear Stearns Cos., Inc.,
11-05-97** ......................... 5.480 Tier 1 10,000 10,000,000
-----------
15,000,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
Finance (4.08%)
American Express Credit Corp.,
03-01-97 ........................... 7.750% Tier 1 $ 1,700 $ 1,713,805
Associates Corp. of
North America,
11-30-96 ........................... 4.625 Tier 1 200 199,811
Associates Corp. of
North America,
01-15-97 ........................... 6.875 Tier 1 4,135 4,145,570
Heller Financial Inc.,
05-15-97 ........................... 7.750 Tier 1 5,000 5,049,837
International Business
Machines Credit Corp.,
11-01-97 ........................... 6.375 Tier 1 2,000 2,010,480
International Lease
Finance Corp.,
01-15-97 ........................... 4.750 Tier 1 2,000 1,996,580
-----------
15,116,083
-----------
Insurance (0.82%)
American General
Finance Corp.,
11-15-96 ........................... 7.375 Tier 1 1,000 1,000,622
American General
Finance Corp.,
08-25-97 ........................... 6.980 Tier 1 2,000 2,017,709
-----------
3,018,331
-----------
Retail Stores (2.95%)
Sears Roebuck Acceptance Corp.,
02-24-97 ........................... 5.250 Tier 1 3,000 2,995,224
Sears Roebuck Acceptance Corp.,
08-01-97 ........................... 9.250 Tier 1 7,742 7,927,124
-----------
10,922,348
-----------
Tobacco (2.07%)
Philip Morris Cos., Inc.,
12-01-96 ........................... 8.750 Tier 1 2,000 2,004,771
Philip Morris Cos., Inc.,
04-02-97 ........................... 7.500 Tier 1 2,600 2,616,596
Philip Morris Cos., Inc.,
05-01-97 ........................... 9.750 Tier 1 3,000 3,056,387
-----------
7,677,754
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
Utilities - Electric (0.81%)
Houston Lighting & Power Co.,
03-01-97 ........................... 7.625% Tier 1 $ 3,000 $ 3,020,315
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TOTAL CORPORATE INTEREST
BEARING OBLIGATIONS
(Cost $104,853,870) (28.30%) 104,853,870
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U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (10.40%)
Federal Home Loan Mortgage Corp.,
09-19-97 ........................... 6.210 Tier 1 3,000 3,005,671
Federal Home Loan Mortgage Corp.,
09-26-97 ........................... 6.200 Tier 1 4,055 4,064,316
Federal Home Loan Mortgage Corp.,
11-06-97 ........................... 5.820 Tier 1 8,500 8,500,000
Federal National Mortgage Association,
08-22-97** ......................... 5.380 Tier 1 10,000 9,995,125
Student Loan Marketing Association,
12-12-96# .......................... 6.000 Tier 1 4,500 4,496,515
Student Loan Marketing Association,
11-10-97** ......................... 5.360 Tier 1 8,500 8,495,832
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38,557,459
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TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Cost $38,557,459) (10.40%) 38,557,459
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JOINT REPURCHASE AGREEMENT
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets, Inc.,
Dated 10-31-96, Due 11-01-96
(Secured by U.S. Treasury Bonds
7.25% due 5-15-16, and 6.25%
due 08/15/23) Note A ............... 5.540 -- 728 728,000
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TOTAL JOINT REPURCHASE AGREEMENT
(Cost $728,000) (0.20%) 728,000
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TOTAL INVESTMENTS (106.77%) $395,716,240
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</TABLE>
* Quality ratings indicate the categories of eligible securities, as defined
by Rule 2a-7 of the Investment Company Act of 1940, owned by the Fund.
** Floating rate note, interest rate effective October 31, 1996.
# Call date.
The percentage shown for each investment category is the total value of that
category expressed as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
12
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Series, Inc. (the "Corporation") is a diversified, open-end
management investment company, registered under the Investment Company Act of
1940. The Corporation consists of two series: John Hancock Money Market Fund
(the "Fund"), and the John Hancock Emerging Growth Fund (collectively, the
"Funds"). The other series of the Corporation is reported in separate financial
statements. The investment objective of the Fund is to provide maximum current
income consistent with capital preservation and liquidity.
The Board of Directors have authorized the issuance of multiple classes of
shares of the Fund, designated as Class A, Class B and Class S shares. Effective
November 19, 1996, Class S shares of the Fund will be abolished. The shares of
each class represent an interest in the same portfolio of investments of the
Fund and have equal rights to voting, redemptions, dividends, and liquidation,
except that certain expenses, subject to the approval of the Board of Directors,
may be applied differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission and the Internal Revenue
Service. Shareholders of a class which bears distribution and service expenses
under terms of a distribution plan have exclusive voting rights to that
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS The Board of Directors 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.
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. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement. 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.
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.
Accordingly, the Fund will not be subject to federal income tax on taxable
earnings which are distributed to shareholders. Therefore, no federal income tax
provision is required.
DIVIDENDS The Fund records all distributions to shareholders from net investment
income on the ex-dividend date. Such distributions are determined in conformity
with income tax regulations, which may differ from generally accepted accounting
principles. Dividends paid by the Fund with respect to each class of shares will
be calculated in the same manner, at the same time and will be in the same
amount, except for the effect of expenses that may be applied differently to
each class as explained previously.
EXPENSES The majority of the expenses of the Corporation are directly
identifiable to an individual fund. Expenses which are not readily identifiable
to a specific fund are allocated in such a manner as deemed equitable, taking
into consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are calculated at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution and service fees if any, are calculated daily at the class level
based on the appropriate net assets of each class and the specific expense
rate(s) applicable to each class.
13
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues,
and expenses of the Fund. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
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) 0.50% 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) 0.35% of the next $500,000,000, (e) 0.325% of the
next $500,000,000, (f) 0.30% of the next $500,000,000, and (g) 0.275% of the
average daily net asset value in excess of $2,500,000,000. Effective November
22, 1995, the fee has been reduced to 0.40% of the Fund's average daily net
assets and can not be restated to 0.50% without Trustees' consent.
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, 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.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, is the principal underwriter of the Fund.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses for providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended October 31,
1996, contingent deferred sales charges paid to JH Funds amounted to $423,160.
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 with
respect to Class A and Class B pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Accordingly, the Fund will make payments to JH Funds for
distribution and service expenses, at an annual rate not to exceed 0.15% of
Class A average daily net assets and 1.00% of Class B average daily net assets
to compensate JH Funds for its distribution and service costs. Up to a maximum
of 0.25% of such payments may be service fees as defined by the amended Rules of
Fair Practice of the National Association of Securities Dealers. Under the
amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. The Fund pays Investor Services a fee based on the number of
shareholder accounts and certain out-of-pocket expenses.
On March 26, 1996, the Board of Directors approved retroactively to January
1, 1996, an agreement with the Adviser to perform necessary tax and financial
management services for the Fund. The compensation for 1996 is estimated to be
at an annual rate of 0.01875% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione, and Ms. Anne C.
Hodsdon are directors and/or officers of the Adviser and/or its affiliates, as
well as a Directors of the Fund. The compensation of unaffiliated Directors is
borne by the Fund. Effective with the fees paid for 1995, the unaffiliated
Directors may elect to defer for tax purposes their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes
investments into other John Hancock funds, as applicable, to cover
14
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
its liability for the deferred compensation. Investments to cover the Fund's
deferred compensation liability are recorded on the Fund's books as an other
asset. The deferred compensation liability and the related other asset are
always equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
investment has no impact on the operations of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities other than obligations of the
U.S. Government and its agencies, during the period ended October 31, 1996,
aggregated $11,732,175,112 and $11,440,172,528, respectively. Purchases and
proceeds from maturities of obligations of the U.S. government and its agencies
aggregated $59,365,820 and $39,810,100, respectively, during the period ended
October 31, 1996.
The cost of investments owned at October 31, 1996 for federal income tax
purposes was $395,716,240.
NOTE D --
RECLASSIFICATION OF ACCOUNTS
During the year ended October 31, 1996, the Fund has reclassified amounts to
reflect a decrease in capital paid-in of $97,654. This represents the cumulative
amount necessary to report this balance on a tax basis as of October 31, 1996.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to the treatment of merger expenses in the computation of
distributable income under Federal tax rules versus generally accepted
accounting principles. The calculation of net investment income per share in the
financial highlights excludes these adjustments.
NOTE E --
REORGANIZATION
On November 15, 1995, the shareholders of John Hancock Cash Management Fund
("CMF") approved a plan of reorganization between CMF and the Fund providing for
the transfer of substantially all of the assets and liabilities of CMF to the
Fund in exchange solely for Class A shares of the Fund. The acquisition was
accounted for as a tax free exchange of 241,738,168 Class A shares of the Fund,
which amounted to $241,738,168 for the net assets of CMF, after the close of
business on November 17, 1995.
15
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John Hancock Funds - Money Market Fund
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
John Hancock Series, Inc.
John Hancock Money Market Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the John Hancock Money Market Fund (the "Fund),
one of the portfolios constituting John Hancock Series, Inc. as of October 31,
1996, 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 periods indicated therein.
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
October 31, 1996, by correspondence with the custodian and brokers, and other
auditing procedures when replies from brokers were not received. 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 Money Market Fund portfolio of John Hancock Series, Inc. at October
31, 1996, 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 the indicated periods, in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
Boston, Massachusetts
December 10, 1996
16
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John Hancock Funds - Money Market Fund
SHAREHOLDER MEETING (UNAUDITED)
On June 26, 1996, a special meeting of John Hancock Money Market Fund was held.
The Shareholders approved an Agreement and Plan of Reorganization for the
Fund. The shareholder votes were 167,733,229 FOR, 3,719,518 AGAINST and
16,951,550 ABSTAINING.
The Shareholders redesignated as nonfundamental the Fund's fundamental
investment restriction on investing in other investment companies. The
shareholder votes were 163,656,280 FOR, 7,188,378 AGAINST and 17,447,898
ABSTAINING.
The Shareholders elected the following Trustees with the votes as
indicated.
NAME OF TRUSTEE FOR WITHHELD
- --------------- --- --------
Edward J. Boudreau, Jr ................... 190,408,275 7,895,606
James F. Carlin .......................... 190,680,353 7,623,528
William H. Cunningham .................... 190,500,525 7,803,356
Charles F. Fretz ......................... 190,658,096 7,645,785
Harold R. Hiser, Jr ...................... 190,660,074 7,643,807
Anne C. Hodsdon .......................... 190,512,351 7,791,530
Charles L. Ladner ........................ 190,682,739 7,621,142
Leo E. Linbeck, Jr ....................... 190,542,194 7,761,687
Patricia P. McCarter ..................... 190,535,417 7,768,464
Steven R. Pruchansky ..................... 190,705,744 7,598,137
Richard S. Scipione ...................... 190,687,279 7,616,602
Norman H. Smith .......................... 190,572,265 7,731,616
John P. Toolan ........................... 190,668,525 7,635,356
17
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NOTES
John Hancock Funds - Money Market Fund
18
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NOTES
John Hancock Funds - Money Market Fund
19
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101 HUNTINGTON AVENUE BOSTON, MA 02199-7603
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This report is for the information of shareholders of the John Hancock Money
Market Fund. 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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4400A 10/96
12/96
