SEMIANNUAL REPORT
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[GRAPHIC OMITTED]
U.S.
Government
Cash Reserve
SEPTEMBER 30, 1997
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
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TRUSTEES
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 and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
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 LLP
60 State Street
Boston, Massachusetts 02109
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
The Taxpayer Relief Act of 1997 recently signed into law by President Clinton
includes new twists and important changes to Individual Retirement Account (IRA)
laws. The provisions will, among other things, allow more people to qualify for
annual tax-deductible IRA contributions and to save tax-free for college. They
also allow IRA investors to withdraw money penalty-free from all IRAs to buy a
first home or pay for college expenses.
For existing deductible IRAs, the law doubles income limits over the next
eight to 10 years for those eligible to deduct an annual IRA contribution of up
to $2,000. For individuals, the annual income cap will increase incrementally
from the current $25,000 to $50,000 by 2005. For couples, the limit would
increase from $40,000 today to $80,000 in 2007. The new law allows non-working
spouses to make IRA contributions even if their spouse is covered by a pension
plan at work, provided the couple's joint income is less than $150,000.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
The law also creates two new IRA investment vehicles. One, called the "Roth
IRA" after its principal congressional sponsor, allows for non-deductible annual
contributions up to a $2,000 maximum. But income accumulates tax-free and if the
account has been open for five years, distributions are tax-free if they are
used after age 591/2 or upon death, disability or a first-time home purchase.
Withdrawals for higher-education expenses would not be subject to a 10% penalty.
Eligible investors must earn less than $95,000 per year individually or $150,000
per couple.
A second new IRA plan, called the "Education IRA," allows non-deductible
contributions of up to $500 per year, per child under age 18. Earnings in the
account accumulate tax-free, and withdrawals are also not taxed when applied
toward undergraduate or graduate-level expenses. Eligible investors are subject
to the same income restrictions that apply to the Roth IRA.
The law has also made some important changes in capital gains tax rates and
estate tax laws. But the devil is in the details, and so we recommend exploring
how you can benefit from the changes with your investment professional and tax
advisor. The Taxpayer Relief Act of 1997 gives investors new options toward
savings. It's a move we applaud.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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by Dawn Baillie for the Portfolio Management Team
John Hancock
U.S. Government
Cash Reserve
Ideal economic conditions keep the
----------------------------------
Federal Reserve on the sidelines
--------------------------------
As the Fund's six-month period began in April, interest rates were moving up.
Fears that a too-vibrant economy would spark inflation had caused the Federal
Reserve to raise short-term rates in late March as a pre-emptive strike. Many
thought it would be the first of several Fed "tightening" moves aimed at slowing
down the economy, which had grown at the sizzling rate of 5.6% in the first
quarter of 1997. Within weeks of the Fed action, however, investor sentiment
reversed course. Signs emerged that the economy's growth had slowed, and it
became clear that inflation remained almost non-existent. Despite monthly
jitters surrounding the latest economic data -- and how, or if, the Fed would
react to it -- inflation remained dormant. As a result, the Fed made no further
attempts to rein in the economy, and left the federal funds rate unchanged at
5.50% during the six-month period. The federal funds rate, which banks charge
each other for overnight loans, is a key short-term interest rate and also a
benchmark for pricing money market securities.
"Despite monthly jitters...inflation remained dormant."
On September 30, 1997, John Hancock U.S. Government Cash Reserve had a 7-day
effective
[A 2 1/4" x 3 1/4" photo of the fund management team at bottom right.. Caption
reads: "U.S. Government Cash Reserve management team (l-r): Barry Evans, Dawn
Baillie, Bill Larkin, Jr., and Bruce Pickett."]
3
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John Hancock Funds - U.S. Government Cash Reserve
[Bar chart with heading "7-Day Effective Yield" at top of left hand column.
Under the heading is the footnote: "As of September 30, 1997." The chart is
scaled in increments of 1% 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
5.51% 7-day yield for John Hancock U.S. Government Cash Reserve. The second
represents the 4.94% 7-day yield for the average U.S. government money market
fund. Footnote below reads: "The average U.S. government/agency money market
fund is tracked by Lipper Analytical Services, Inc."]
"We'll be watching the monthly economic and inflation data for guidance..."
yield of 5.51%. By comparison, the average taxable money fund had a seven-day
effective yield of 4.94%, according to Lipper Analytical Services, Inc.
Managing maturity
During the last six months, we kept the Fund's maturity longer than average in
an effort to lock in solid yields, believing that rates were not going to move
much. That said, we adjusted the Fund's maturity slightly in response to market
conditions. For the first two months of the period, we held the Fund's maturity
in to slightly ahead of average until we had a better sense of the economic
data. But by the end of April, as the economy showed signs of slowing, we became
more aggressive in seeking yield. Assuming that the Fed would not raise rates
any further, we lengthened the Fund's maturity to almost 10 days longer than
average and kept it there through the period's end.
A look ahead
Given the current near-perfect economic environment -- steady growth and tame
inflation -- in our view it appears unlikely that the Federal Reserve will feel
compelled to raise interest rates for the remainder of this year. Against that
backdrop, we will continue to aggressively seek yield by keeping the Fund's
maturity longer than average. But we'll shorten maturity slightly -- to about
five to seven days longer than average -- in the near term to take advantage of
the typically favorable year-end buying environment for money market securities.
At the same time, we are aware that the Fed remains hyper-vigilant for the
first hint of inflation and continues to maintain its bias toward raising rates.
We'll be watching the monthly economic and inflation data for guidance, although
after such a long stretch of favorable inflation news, we think it would take a
couple of months of disquieting data to prompt the next Fed action. We'll keep
our targets set on providing shareholders with a competitive level of current
income, while maintaining liquidity and stability of principal.
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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
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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 September 30, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
September 30, 1997 (Unaudited)
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Assets:
Investments, in money market instruments,
at value - Note C:
U.S. government obligations (cost - $52,506,074) ........... $52,506,074
Joint repurchase agreement (cost - $7,106,000) ............. 7,106,000
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59,612,074
Cash ......................................................... 112,199
Interest receivable .......................................... 1,331,331
Other assets ................................................. 13,965
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Total Assets ..................... 61,069,569
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Liabilities:
Payable for investments purchased ............................ 1,678,923
Dividend payable ............................................. 9,773
Payable to John Hancock Advisers, Inc. and affiliates --
Note B ..................................................... 11,581
Accounts payable and accrued expenses ........................ 33,975
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Total Liabilities ................ 1,734,252
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Net Assets:
Capital paid-in ................................................ 59,335,317
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Net Assets ....................... $59,335,317
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Net Asset Value, Offering Price and
Redemption Price Per Share:
(Based on 59,335,317 shares of beneficial interest
outstanding - unlimited number of shares authorized
with $0.01 par value) ...................................... $1.00
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The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund for the period stated.
Statement of Operations
Six months ended September 30, 1997 (Unaudited)
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Investment Income:
Interest ..................................................... $1,591,602
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Expenses:
Investment management fee - Note B ......................... 140,464
Registration and filing fees ............................... 19,144
Transfer agent fee - Note B ................................ 17,438
Custodian fee .............................................. 16,804
Auditing fee ............................................... 11,155
Financial services fee - Note B ............................ 5,114
Printing ................................................... 2,115
Trustees' fees ............................................. 1,613
Miscellaneous .............................................. 456
Legal fees ................................................. 377
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Total Expenses ................... 214,680
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Less Expense Reductions -
Note B ........................... (116,355)
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Net Expenses ..................... 98,325
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Net Investment Income ............ 1,493,277
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Net Increase in Net Assets
Resulting from Operations ........ $1,493,277
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SEE NOTES TO FINANCIAL STATEMENTS.
5
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FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED JUNE 1, 1996 TO SEPTEMBER 30, 1997
MAY 31, 1996 MARCH 31, 1997 (1) (UNAUDITED)
------------ ------------------ -----------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ................................................ $1,550,405 $2,003,583 $1,493,277
Distributions to Shareholders:
Dividends from net investment income ($0.0548, $0.0423
and $0.0267 per share, respectively) ............................... (1,550,405)
(2,003,583) (1,493,277)
From Fund Share Transactions - Net:* ................................... (223,951) 26,414,429 4,014,124
Net Assets:
Beginning of period .................................................. 29,130,715 28,906,764 55,321,193
End of period ........................................................ $28,906,764 $55,321,193 $59,335,317
* Analysis of Fund Share Transactions at $1 Per Share:
Shares sold .......................................................... $368,510,358 $656,013,788 $175,587,939
Shares issued to shareholders in reinvestment of distributions ....... 1,191,507 1,626,808 1,369,263
369,701,865 657,640,596 176,957,202
Less shares repurchased .............................................. (369,925,816) (631,226,167) (172,943,078)
Net increase (decrease) .............................................. ($223,951) $26,414,429 $4,014,124
(1) Effective March 31, 1997, the fiscal period end changed from May 31 to March 31.
</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 number of Fund shares sold, reinvested, and repurchased during the last
three periods, along with the corresponding dollar values.
SEE NOTES TO FINANCIAL STATEMENTS.
6
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FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios, and supplemental data are
listed as follows:
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<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED MAY 31, JUNE 1, 1996 SEPTEMBER 30,
---------------------------------------------- TO MARCH 31, 1997
1992 1993 1994 1995(1) 1996 1997(5) (UNAUDITED)
--------- --------- -------- -------- -------- ------------ -----------
<S> <C> <C> <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 $1.00 $1.00
Net Investment Income .............................. 0.05 0.03 0.03 0.05 0.05 0.04 0.03
Less Distributions:
Dividends from Net Investment Income ............... (0.05) (0.03) (0.03) (0.05) (0.05) (0.04) (0.03)
Net Asset Value, End of Period ..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total Investment Return at Net Asset Value(2) ...... 4.95% 3.25% 3.04% 5.07% 5.59% 4.37%(6) 2.69
Total Adjusted Investment Return at Net Asset
Value(2,3) ....................................... 4.62% 2.93% 2.74% 4.69% 4.84% 3.93%(6) 2.49%(6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ........... $109,358 $123,106 $94,408 $29,131 $28,907 $55,321 $59,335
Ratio of Expenses to Average Net Assets 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%(7) 0.35
Ratio of Adjusted Expenses to Average Net Assets(4) 0.68% 0.67% 0.65% 0.73% 1.10% 0.88%(7) 0.76
Ratio of Net Investment Income to Average Net Assets 4.86% 3.19% 2.96% 4.79% 5.41% 5.15%(7) 5.32
Ratio of Adjusted Net Investment Income to Average
Net Assets(4) .................................... 4.53% 2.87% 2.66% 4.41% 4.66% 4.62%(7) 4.91
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser of the Fund.
(2) Total investment return assumes dividend reinvestment.
(3) An estimated total return calculation that does not take into consideration fee reductions
by the adviser during the periods shown.
(4) Unreimbursed, without fee reduction.
(5) Effective March 31, 1997, the fiscal period changed from May 31 to March 31.
(6) Not annualized.
(7) Annualized.
</TABLE>
The Financial Highlights summarizes the impact of net investment income and
dividends on a single share for each period indicated. Additionally, important
relationships between some items presented in the financial statements are
expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
7
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FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
Schedule of Investments
September 30, 1997 (Unaudited)
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The Schedule of Investments is a complete list of all securities owned by the
Fund on September 30, 1997. It's divided into two types of short-term
investments.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (88.49%)
Federal Farm Credit Bank
01-02-98 ..................................................... 5.510%* $3,000 $2,999,517
Federal Home Loan Bank
10-06-97 ..................................................... 6.860 150 150,020
Federal Home Loan Bank
10-15-97 ..................................................... 5.720 2,000 1,999,903
Federal Home Loan Bank
10-16-97 ..................................................... 5.700 3,000 2,999,654
Federal Home Loan Bank
10-21-97 # ................................................... 5.800 7,400 7,399,923
Federal Home Loan Bank
11-06-97 ..................................................... 5.820 1,500 1,500,000
Federal Home Loan Bank
11-07-97 # ................................................... 6.210 3,400 3,400,814
Federal Home Loan Bank
12-02-97 ..................................................... 5.440 250 249,852
Federal Home Loan Bank
12-03-97 ..................................................... 5.625 1,500 1,499,236
Federal Home Loan Bank
12-15-97 ..................................................... 7.870 1,000 1,004,391
Federal Home Loan Bank
12-23-97 ..................................................... 7.890 500 502,349
Federal Home Loan Bank
01-16-98 ..................................................... 5.592 400 399,775
Federal Home Loan Bank
01-23-98 ..................................................... 5.570 1,000 999,158
Federal Home Loan Bank
01-23-98 ..................................................... 5.810 1,500 1,500,000
Federal Home Loan Bank
01-26-98 ..................................................... 5.507 2,000 1,998,066
Federal Home Loan Bank
01-30-98 ..................................................... 5.335 450 449,230
Federal Home Loan Bank
01-30-98 ..................................................... 5.810 2,500 2,500,000
Federal Home Loan Bank
01-30-98 ..................................................... 5.875 2,000 2,000,000
SEE NOTES TO FINANCIAL STATEMENTS.
8
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FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
Federal Home Loan Bank
02-12-98 ..................................................... 5.643% $300 $299,820
Federal Home Loan Bank
03-17-98 ..................................................... 5.850 1,000 1,000,000
Federal Home Loan Bank
03-26-98 ..................................................... 5.905 150 150,137
Federal Home Loan Bank
04-07-98 ..................................................... 5.955 1,000 1,000,145
Federal Home Loan Bank
08-12-98 ..................................................... 5.875 2,000 2,000,000
Federal Home Loan Bank
08-13-98 ..................................................... 5.800 2,000 2,000,000
Federal Home Loan Bank
09-30-98 ..................................................... 5.900 2,000 2,000,000
Federal Home Loan Bank
10-15-98 + ................................................... 5.815 1,000 1,000,000
Federal Home Loan Mortgage Corp. ...............................
10-27-97 # ................................................... 8.470 1,000 1,001,958
Federal Home Loan Mortgage Corp. ...............................
03-16-98 ..................................................... 5.400 1,200 1,198,444
Federal National Mortgage Association
10-03-97 ..................................................... 6.840 750 750,049
Federal National Mortgage Association
10-29-97 ..................................................... 5.530 500 499,900
Federal National Mortgage Association
11-10-97 ..................................................... 9.550 500 502,060
Federal National Mortgage Association
04-21-98 ..................................................... 5.590* 2,000 2,000,000
Private Export Funding Corp. ...................................
10-31-97 ..................................................... 8.950 900 902,207
Student Loan Marketing Association
11-10-97 ..................................................... 5.240* 1,500 1,499,921
Student Loan Marketing Association
12-12-97 ..................................................... 5.630 650 649,545
Student Loan Marketing Association
01-08-98 ..................................................... 5.750 500 500,000
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TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $52,506,074) (88.49%) 52,506,074
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SEE NOTES TO FINANCIAL STATEMENTS.
9
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PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
JOINT REPURCHASE AGREEMENT (11.98%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets, Inc. - Dated 09-30-97,
Due 10-01-97 (Secured by U.S.
Treasury Notes 6.875% and
9.25%, Due 2-15-16 and 8-15-25) --
Note A ........................................................... 6.070% 7,106 $7,106,000
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TOTAL JOINT REPURCHASE AGREEMENT
(Cost $7,106,000) (11.98%) 7,106,000
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TOTAL INVESTMENTS (100.47%) $59,612,074
======= ===========
</TABLE>
* Floating rate note, interest rate effective September 30, 1997.
# Call Date.
+ This security, having a value of $1,000,000 or 1.69% of the Fund's net assets,
has been purchased as a forward commitment. The Fund has agreed, on the trade
date, to take delivery of and make payment on a delayed basis subsequent to the
date of this schedule. The purchase price and interest rate of the security is
fixed at the trade date. The Fund does not earn any interest on this security
until its settlement date. The Fund has instructed its Custodian Bank to
segregate assets with the current value at least equal to the amount of its
forward commitment. Accordingly, $1,000,000 of the value of the Fund's
investment in Federal Home Loan Bank, 5.85% due 03-17-98, has been segregated to
cover the forward commitment.
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.
10
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Current Interest (the "Trust") is a diversified open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of two series: John Hancock U.S. Government Cash Reserve (the
"Fund"), and John Hancock Money Market Fund (collectively, the "Funds"). The
other series of the Trust is reported in separate financial statements. The
investment objective of the Fund is to obtain maximum current income to the
extent consistent with maintaining liquidity and preserving capital.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS The Board of Trustees has 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.
EXPENSES The majority of the expenses of the Trust 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.
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.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. These agreements enable
the Fund to participate with other funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $600 million,
collectively. Interest is charged to each Fund, based on its borrowings, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at a
rate of 0.075% per annum based on the average daily unused portion of the line
of credit, is allocated among the participating Funds. The Fund had no borrowing
activity for the period ended September 30, 1997.
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) 0.500% of the
11
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
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.
The Adviser has agreed to limit Fund expenses to the extent required to
prevent expenses from exceeding 0.35% of the Fund's average daily net asset
value. Accordingly, for the period ended September 30, 1997, the reduction in
the Fund's expenses collectively with any additional amounts not borne by the
Fund by virtue of the expense limit amounted to $116,355. The Adviser reserves
the right to terminate this limitation in the future.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. To reimburse 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 to JH Funds for distribution and
service expenses, at an annual rate not to exceed 0.15% of the Fund's average
daily net assets. Under the amended Rules of Fair Practice, curtailment of a
portion of the Fund's 12b-1 payments could occur under certain circumstances.
Payments of fees under the Distribution Plan has been suspended until further
notice is given to the shareholders.
The Fund has a transfer agent agreement with John Hancock Signature Services,
Inc., ("Signature Services"), an indirect subsidiary of John Hancock Mutual Life
Insurance Company. The Fund pays Signature Services a fee based on the number of
shareholder accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione
are directors and/or officers of the Adviser and/or its affiliates as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees 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 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 had no impact on the operations of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities, including discount earned on
investment securities, during the period ended September 30, 1997 aggregated
$1,265,805,884 and $1,263,291,563, respectively.
The cost of investments owned at September 30, 1997 (including the joint
repurchase agreement) for federal income tax purposes was $59,612,074.
12
<PAGE>
================================================================================
NOTES
John Hancock Funds - U.S. Government Cash Reserve
13
<PAGE>
================================================================================
NOTES
John Hancock Funds - U.S. Government Cash Reserve
14
<PAGE>
================================================================================
NOTES
John Hancock Funds - U.S. Government Cash Reserve
15
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
1-800-225-5291 1-800-554-6713(TDD) Randolph, MA
INTERNET: www.jhancock.com/funds Permit No. 75
- --------------------------------------------------------------------------------
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.
[RECYCLE LOGO] Printed on Recycled Paper 430SA 9/97
11/97
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Money Market
Fund
SEPTEMBER 30, 1997
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<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 Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
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 LLP
60 State Street
Boston, Massachusetts 02109
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
The Taxpayer Relief Act of 1997 recently signed into law by President Clinton
includes new twists and important changes to Individual Retirement Account (IRA)
laws. The provisions will, among other things, allow more people to qualify for
annual tax-deductible IRA contributions and to save tax-free for college. They
also allow IRA investors to withdraw money penalty-free from all IRAs to buy a
first home or pay for college expenses.
For existing deductible IRAs, the law doubles income limits over the next
eight to 10 years for those eligible to deduct an annual IRA contribution of up
to $2,000. For individuals, the annual income cap will increase incrementally
from the current $25,000 to $50,000 by 2005. For couples, the limit would
increase from $40,000 today to $80,000 in 2007. The new law allows non-working
spouses to make IRA contributions even if their spouse is covered by a pension
plan at work, provided the couple's joint income is less than $150,000.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
The law also creates two new IRA investment vehicles. One, called the "Roth
IRA" after its principal congressional sponsor, allows for non-deductible annual
contributions up to a $2,000 maximum. But income accumulates tax-free and if the
account has been open for five years, distributions are tax-free if they are
used after age 591/2 or upon death, disability or a first-time home purchase.
Withdrawals for higher-education expenses would not be subject to a 10% penalty.
Eligible investors must earn less than $95,000 per year individually or $150,000
per couple.
A second new IRA plan, called the "Education IRA," allows non-deductible
contributions of up to $500 per year, per child under age 18. Earnings in the
account accumulate tax-free, and withdrawals are also not taxed when applied
toward undergraduate or graduate-level expenses. Eligible investors are subject
to the same income restrictions that apply to the Roth IRA.
The law has also made some important changes in capital gains tax rates and
estate tax laws. But the devil is in the details, and so we recommend exploring
how you can benefit from the changes with your investment professional and tax
advisor. The Taxpayer Relief Act of 1997 gives investors new options toward
savings. It's a move we applaud.
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
Ideal economic conditions keep the
----------------------------------
Federal Reserve on the sidelines
--------------------------------
As the Fund's six-month period began in April, interest rates were moving up.
Fears that a too-vibrant economy would spark inflation had caused the Federal
Reserve to raise short-term rates in late March as a pre-emptive strike. Many
thought it would be the first of several Fed "tightening" moves aimed at slowing
down the economy, which had grown at the sizzling rate of 5.6% in the first
quarter of 1997. Within weeks of the Fed action, however, investor sentiment
reversed course. Signs emerged that the economy's growth had slowed, and it
became clear that inflation remained almost non-existent.Despite monthly jitters
surrounding the latest economic data -- and how, or if, the Fed would react to
it -- inflation remained dormant. As a result, the Fed made no further attempts
to rein in the economy, and left the federal funds rate unchanged at 5.50%
during the six-month period. The federal funds rate, which banks charge each
other for overnight loans, is a key short-term interest rate and also a
benchmark for pricing money market securities.
"...the Fed made no further attempts to rein in the economy..."
On September 30, 1997, John Hancock Money Market Fund had a 7-day effective
yield of 4.96% for Class A shares and 4.07% for Class B shares. By comparison,
the average taxable money fund had a 7-day effective yield of 4.92%, according
to Lipper Analytical Services, Inc.
[A 2 1/4" x 3 1/4" photo of Money Market Fund Management team. Caption reads:
"Money Market Fund management team (l-r): Barry Evans, Dawn Baillie, Bill
Larkin, Jr., and Bruce Pickett."]
3
<PAGE>
================================================================================
John Hancock Funds - Money Market Fund
[Bar chart with heading "7-Day Yield" at top of left hand column. Under the
heading is the footnote: "As of September 30, 1997." 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 three solid bars. The first represents the 4.96%
7-day yield for John Hancock Money Market Fund: Class A. The second represents
the 4.07% 7-day yield for John Hancock Money Market Fund: Class B. The third
represents the 4.92% 7-day yield for the average taxable money market fund.
Footnote below reads: "The average taxable money market fund is tracked by
Lipper Analytical Services, Inc."]
"We'll be watching the monthly economic and inflation data for guidance..."
Managing maturity
During the last six months, we kept the Fund's maturity longer than average in
an effort to lock in solid yields, believing that rates were not going to move
much. That said, we adjusted the Fund's maturity slightly in response to market
conditions. For the first two months of the period, we held the Fund's maturity
in to slightly ahead of average until we had a better sense of the economic
data. But by the end of April, as the economy showed signs of slowing, we became
more aggressive in seeking yield. Assuming that the Fed would not raise rates
any further, we lengthened the Fund's maturity to almost 10 days longer than
average and kept it there through the period's end.
A look ahead
Given the current near-perfect economic environment -- steady growth and tame
inflation -- in our view it appears unlikely that the Federal Reserve will feel
compelled to raise interest rates for the remainder of this year. Against that
backdrop, we will continue to aggressively seek yield by keeping the Fund's
maturity longer than average. But we'll shorten maturity slightly -- to about
five to seven days longer than average -- in the near term to take advantage of
the typically favorable year-end buying environment for money market securities.
At the same time, we are aware that the Fed remains hyper-vigilant for the
first hint of inflation and continues to maintain its bias toward raising rates.
We'll be watching the monthly economic and inflation data for guidance, although
after such a long stretch of favorable inflation news, we think it would take a
couple of months of disquieting data to prompt the next Fed action. We'll keep
our targets set on providing shareholders with a competitive level of current
income, while maintaining liquidity and 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 assurance 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
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 September 30, 1997. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
September 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments, in money market instruments, at value -
Note C:
Commercial paper (cost - $106,615,901) ...................... $106,615,901
Negotiable bank certificates of deposit
(cost - $14,993,401) ...................................... 14,993,401
Corporate interest-bearing obligations
(cost - $173,359,528) ..................................... 173,359,528
U.S. government obligations
(cost - $63,760,088) ...................................... 63,760,088
------------
358,728,918
Cash ........................................................ 327,896
Receivable for shares sold .................................. 824,067
Interest receivable ......................................... 5,354,194
Other assets ................................................ 24,944
Total Assets .................... 365,260,019
--------------------------------------------------
Liabilities:
Payable for investments purchased ........................... 301,172
Dividend payable ............................................ 39,797
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ....................................... 246,383
Accounts payable and accrued expenses ....................... 174,648
------------
Total Liabilities ............... 762,000
--------------------------------------------------
Net Assets:
Capital paid-in ............................................. 364,498,019
------------
Net Assets ...................... $364,498,019
==================================================
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 - $257,197,878 / 257,277,050 ........................ $1.00
==============================================================================
Class B - $107,300,141 / 107,318,649 ........................ $1.00
==============================================================================
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund.
Statement of Operations
Six months ended September 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest ..................................................... $11,679,577
-----------
Expenses:
Investment management fee - Note B ......................... 821,213
Distribution and service fee - Note B
Class A .................................................. 224,031
Class B .................................................. 559,491
Transfer agent fee - Note B ................................ 526,323
Custodian fee .............................................. 42,879
Financial services fee - Note B ............................ 37,454
Registration and filing fees ............................... 25,454
Auditing fee ............................................... 15,786
Printing ................................................... 9,717
Trustees' fees ............................................. 4,325
Miscellaneous .............................................. 3,013
Legal fees ................................................. 1,023
-----------
Net Expenses ..................... 2,270,709
--------------------------------------------------
Net Investment Income ............ 9,408,868
--------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ........ $9,408,868
==================================================
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED NOVEMBER 1, 1996 TO SEPTEMBER 30, 1997
OCTOBER 31, 1996 MARCH 31, 1997 (1) (UNAUDITED)
---------------- ------------------- ------------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ................................................ $13,918,908 $7,375,295 $9,408,868
-------------- -------------- --------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.0444, $0.0178 and $0.0241 per share, respectively) ... (11,196,942) (5,933,244) (7,190,670)
Class B - ($0.0363, $0.0144 and $0.0199 per share, respectively) ... (2,721,966) (1,442,051) (2,218,198)
Distributions in excess of net investment income
Class A - ($0.0003, none and none per share, respectively) ......... (79,146) -- --
Class B - ($0.0020, none and none per share, respectively) ......... (18,508) -- --
-------------- -------------- --------------
Total Distributions to Shareholders ................................ (14,016,562) (7,375,295) (9,408,868)
-------------- -------------- --------------
From Fund Share Transactions - Net:* ................................... 295,479,601 118,872,035 (125,010,970)
-------------- -------------- --------------
Net Assets:
Beginning of period .................................................. 75,255,007 370,636,954 489,508,989
End of period ........................................................ $370,636,954 $489,508,989 $364,498,019
============== ============== ==============
* Analysis of Fund Share Transactions at $1 Per Share:
CLASS A
Shares sold .......................................................... $2,599,973,181 $3,214,973,176 $2,252,262,512
Shares issued in reorganization - Note D ............................. 241,738,468 -- --
Shares issued to shareholders in reinvestment of distributions ....... 9,488,362 4,449,617 6,126,302
-------------- -------------- --------------
2,851,200,011 3,219,422,793 2,258,388,814
Less shares repurchased .............................................. (2,609,587,924) (3,122,445,223) (2,360,643,509)
-------------- -------------- --------------
Net increase (decrease) .............................................. $241,612,087 $96,977,570 $(102,254,695)
============== ============== ==============
CLASS B
Shares sold .......................................................... $859,812,437 $453,653,930 $435,678,980
Shares issued to shareholders in reinvestment of distributions ....... 1,868,335 966,286 1,669,521
-------------- -------------- --------------
861,680,772 454,620,216 437,348,501
Less shares repurchased .............................................. (807,813,258) (432,725,751) (460,104,776)
-------------- -------------- --------------
Net increase (decrease) .............................................. $53,867,514 $21,894,465 $(22,756,275)
============== ============== ==============
(1) Effective March 31, 1997, the fiscal period end changed from May 31 to March 31.
</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 number of Fund shares sold, reinvested and repurchased during the last three
periods, along with the corresponding dollar value.
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 each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 12, 1995 PERIOD FROM SIX MONTHS
(COMMENCEMENT OF YEAR ENDED NOVEMBER 1, 1996 ENDED
OPERATIONS) TO OCTOBER 31, TO MARCH 31, SEPTEMBER 30, 1997
OCTOBER 31, 1995 1996 1997(5) (UNAUDITED)
---------------- ---- ------- -----------
<S> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $1.00 $1.00 $1.00 $1.00
------- -------- -------- --------
Net Investment Income ...................................... 0.01 0.05 0.02 0.02
------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ....................... (0.01) (0.05) (0.02) (0.02)
------- -------- -------- --------
Net Asset Value, End of Period ............................. $1.00 $1.00 $1.00 $1.00
======= ======== ======== ========
Total Investment Return at Net Asset Value (2) ............. 0.64%(3) 4.56% 1.80%(3) 2.44%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ..................... $20,942 $262,475 $359,453 $257,198
Ratio of Expenses to Average Net Assets .................... 1.07%(4) 1.17% 1.10%(4) 0.87%(4)
Ratio of Net Investment Income to Average Net Assets ....... 4.94%(4) 4.41% 4.44%(4) 4.81%(4)
<CAPTION>
PERIOD FROM SIX MONTHS
YEAR ENDED OCTOBER 31, NOVEMBER 1, 1996 ENDED
------------------------------------------------- TO MARCH 31, SEPTEMBER 30, 1997
1992 1993 1994 1995(1) 1996 1997(5) (UNAUDITED)
-------- -------- -------- -------- --------- ---------------- ------------------
<S> <C> <C> <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 $1.00 $1.00
Net Investment Income ..................... 0.02 0.01 0.02 0.04 0.04 0.01 0.02
Less Distributions:
Dividends from Net Investment Income ...... (0.02) (0.01) (0.02) (0.04) (0.04) (0.01) (0.02)
Net Asset Value, End of Period ............ $1.00 $1.00 $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% 1.45%(3) 2.00%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) .. $31,480 $31,546 $58,366 $54,313 $108,162 $130,056 $107,300
Ratio of Expenses to Average Net Assets ... 2.47% 2.44% 2.06% 1.92% 2.00% 1.96%(4) 1.72%(4)
Ratio of Net Investment Income to Average
Net Assets .............................. 1.69% 0.85% 1.97% 3.96% 3.58% 3.60%(4) 3.96%(4)
(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) Annualized.
(5) Effective March 31, 1997, the fiscal period end changed from October 31 to March 31.
</TABLE>
The Financial Highlights summarizes the impact of net investment income and
dividends on a single share for each 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>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
Schedule of Investments
September 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Money
Market Fund on September 30, 1997. It's divided into four types of short-term
investments. The categories of short-term investments are further broken down by
industry group.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Automotive (5.48%)
Ford Motor Credit Co.,
10-06-97 ............................ 5.460% Tier 1 $13,000 $12,990,142
General Motors Acceptance Corp.,
10-20-97 ............................ 5.800 Tier 1 7,000 6,978,572
------------
19,968,714
------------
Broker Services (5.38%)
Goldman Sachs Group, L.P.,
10-01-97 ............................ 6.350 Tier 1 3,500 3,500,000
Merrill Lynch & Co., Inc.,
10-02-97 ............................ 5.510 Tier 1 13,000 12,998,010
Merrill Lynch & Co., Inc.,
10-08-97 ............................ 5.530 Tier 1 3,122 3,118,643
19,616,653
------------
Finance (8.57%)
American Honda Finance Corp.,
10-20-97 ............................ 5.540 Tier 1 10,300 10,269,884
Heller Financial Inc.,
10-08-97 ............................ 5.590 Tier 1 6,000 5,993,478
International Lease Finance Corp.,
10-14-97 ............................ 5.500 Tier 1 15,000 14,970,208
------------
31,233,570
------------
Mortgage Banking (5.21%)
Countrywide Home Loans,
10-09-97 ............................ 5.530 Tier 1 8,000 7,990,169
Countrywide Home Loans,
10-09-97 ............................ 5.540 Tier 1 11,000 10,986,458
------------
18,976,627
------------
Utilities - Telephone (4.62%)
GTE Corp.,
10-21-97 ............................ 5.540 Tier 1 9,000 8,972,300
GTE Corp.,
10-29-97 ............................ 5.540 Tier 1 7,882 7,848,037
------------
16,820,337
------------
TOTAL COMMERCIAL PAPER
(Cost $106,615,901) (29.26%) 106,615,901
------- ------------
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
U.S Branches of Foreign Banks (4.11%)
Midland PLC,
10-28-97 ............................ 5.910% Tier 1 $10,000 $10,000,000
Swedish Export Credit Corp.,
04-28-98 ............................ 5.750 Tier 1 5,000 4,993,401
-----------
14,993,401
-----------
TOTAL NEGOTIABLE BANK
CERTIFICATES OF DEPOSIT
(Cost $14,993,401) (4.11%) 14,993,401
------- -----------
CORPORATE INTEREST BEARING OBLIGATIONS
Automotive (8.65%)
Chrysler Financial Corp.,
11-28-97 ............................ 6.050 Tier 1 5,000 5,001,193
Chrysler Financial Corp.,
02-24-98 ............................ 7.750 Tier 1 7,000 7,049,606
Ford Motor Credit Co.,
12-01-97 ............................ 8.000 Tier 1 5,000 5,019,272
General Motors Acceptance Corp.,
10-15-97 ............................ 7.800 Tier 1 3,400 3,402,211
General Motors Acceptance Corp.,
12-22-97 ............................ 5.700 Tier 1 1,000 999,761
General Motors Acceptance Corp.,
02-02-98 ............................ 7.300 Tier 1 10,000 10,040,621
-----------
31,512,664
-----------
Banking (9.77%)
BankAmerica Corp.,
11-20-97 ............................ 6.875 Tier 1 2,100 2,102,668
BankBoston,
10-06-97 ............................ 5.560 Tier 1 19,000 19,000,000
Barclays American Corp.,
12-01-97 ............................ 9.125 Tier 1 2,000 2,010,812
Morgan Guaranty Trust Co., NY,
03-25-98 ............................ 6.022 Tier 1 10,000 9,996,430
Norwest Corp.,
03-15-98 ............................ 5.750 Tier 1 2,500 2,499,751
-----------
35,609,661
-----------
Beverage (1.15%)
PepsiCo, Inc.,
01-15-98 ............................ 6.125 Tier 1 4,200 4,202,508
-----------
Broker Services (4.94%)
Bear Stearns Cos., Inc.,
11-05-97 ............................ 5.360 ** Tier 1 10,000 10,000,000
Bear Stearns Cos., Inc.,
01-22-98 ............................ 5.380 ** Tier 1 8,000 8,000,000
-----------
18,000,000
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
Finance (13.71%)
Associates Corp. of North America,
03-15-98 ............................ 7.300% Tier 1 $500 $503,245
Beneficial Corp.,
11-24-97 ............................ 6.890 Tier 1 5,900 5,908,668
Beneficial Corp.,
02-15-98 ............................ 9.125 Tier 1 6,110 6,179,764
Beneficial Corp.,
06-15-98 ............................ 8.220 Tier 1 2,895 2,940,693
CIT Group Holdings, Inc.,
01-28-98 ............................ 5.610 ** Tier 1 10,000 9,997,163
CIT Group Holdings, Inc.,
04-15-98 ............................ 8.750 Tier 1 2,478 2,515,755
General Electric Capital Corp.,
12-16-97 ............................ 6.440 Tier 1 10,000 10,014,864
Heller Financial Inc.,
05-20-98 ............................ 6.270 Tier 1 7,000 7,013,636
Household Finance Corp.,
10-15-97 ............................ 6.250 Tier 1 1,000 1,000,172
Household Finance Corp.,
02-06-98 ............................ 7.910 Tier 1 600 604,109
International Business Machines
Credit Corp., 11-01-97 .............. 6.375 Tier 1 2,000 2,000,890
International Business Machines
Credit Corp., 04-20-98 .............. 6.750 Tier 1 1,000 1,004,161
International Lease Finance Corp.,
03-15-98 ............................ 5.750 Tier 1 270 269,857
-----------
49,952,977
-----------
Food (0.83%)
Heinz (H.J.) Co.,
01-05-98 ............................ 8.000 Tier 1 3,025 3,039,646
-----------
Insurance (3.21%)
American General Finance Corp.,
11-15-97 ............................ 7.700 Tier 1 4,400 4,408,712
American General Finance Corp.,
05-11-98 ............................ 6.850 Tier 1 6,000 6,036,444
American General Finance Corp.,
07-28-98 ............................ 5.450 Tier 1 1,270 1,265,559
-----------
11,710,715
-----------
Retail Stores (1.44%)
Sears Roebuck Acceptance Corp.,
04-15-98 ............................ 9.250 Tier 1 5,160 5,239,322
-----------
Tobacco (2.48%)
Philip Morris Cos., Inc.,
12-01-97 ............................ 9.250 Tier 1 9,000 9,047,431
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
Utilities - Electric (0.27%)
Southern California Edison Co.,
02-01-98 ............................ 5.875% Tier 1 $1,000 $999,371
Utilities - Telephone (1.11%)
GTE Corp.,
03-01-98 ............................ 8.850 Tier 1 4,000 4,045,233
TOTAL CORPORATE INTEREST
BEARING OBLIGATIONS
(Cost $173,359,528) (47.56%) 173,359,528
------- ------------
U.S.GOVERNMENT OBLIGATIONS
Governmental - U.S.Agencies (17.49%)
Federal Home Loan Bank,
11-06-97 ............................ 5.820 Tier 1 8,500 8,500,000
Federal Home Loan Bank,
11-07-97 # .......................... 6.210 Tier 1 5,000 4,999,843
Federal Home Loan Bank,
01-26-98 ............................ 5.507 Tier 1 2,000 1,998,065
Federal Home Loan Bank,
01-30-98 ............................ 5.810 Tier 1 5,200 5,200,000
Federal Home Loan Bank,
03-17-98 ............................ 5.850 Tier 1 9,000 9,000,000
Federal Home Loan Bank,
08-12-98 ............................ 5.875 Tier 1 8,000 8,000,000
Federal Home Loan Bank,
08-13-98 ............................ 5.800 Tier 1 8,545 8,545,000
Federal Home Loan Mortgage Corp.,
10-27-97 # .......................... 8.470 Tier 1 9,000 9,017,626
Student Loan Marketing Association,
11-10-97 ............................ 5.240 ** Tier 1 8,500 8,499,554
------------
63,760,088
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $63,760,088) (17.49%) 63,760,088
------- ------------
TOTAL INVESTMENTS (98.42%) $358,728,918
======= ============
</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 September 30, 1997.
# 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.
11
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Current Interest (the "Trust") is a diversified open-end management
investment company, registered under the Investment Company Act of 1940. The
Trust consists of two series: John Hancock Money Market Fund (the "Fund"), and
the John Hancock U.S. Government Cash Reserve (collectively, the "Funds"). The
other series of the Trust 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 Trustees has authorized the issuance of multiple classes of
shares of the Fund, designated as Class A and Class B shares. 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 Trustees, 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 Trustees has 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. (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.
EXPENSES The majority of the expenses of the Trust 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 their 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.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates
12
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
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.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. These agreements enable
the Fund to participate with other Funds managed by the Adviser in an unsecured
line of credit with banks which permit borrowings up to $600 million,
collectively. Interest is charged to each Fund, based on its borrowing, at a
rate equal to 0.50% over the Fed Funds Rate. In addition, a commitment fee, at a
rate of 0.075% per annum based on the average daily unused portion of the line
of credit, is allocated among the participating Funds. The Fund had no borrowing
activity for the period ended September 30, 1997.
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
17, 1995, the maximum fee of the first $750,000,000 of the Fund's average daily
net assets has been reduced to 0.40% of the Fund's average daily net assets and
cannot be reinstated to the original contracted amounts without the Trustees'
consent.
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 September 30, 1997, contingent deferred sales charges paid to
JH Funds amounted to $428,348.
In addition, to reimburse 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 0.25% of
Class A average daily net assets and 1.00% of Class B average daily net assets
to reimburse JH Funds for its distribution and service costs. Presently the
12b-1 expense rate on Class A has been reduced to 0.15% of the average daily net
assets and cannot be reinstated to 0.25% without the Trustees' consent. 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 Signature Services,
Inc. ("Signature Services"), an indirect subsidiary of John Hancock Mutual Life
Insurance Co. The Fund pays transfer agent fees based on the number of
shareholder accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione
are trustees and/or officers of the Adviser and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees 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
13
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
cover 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, including discount earned on
investment securities, other than obligations of the U.S. government and its
agencies, during the period ended September 30, 1997, aggregated $9,492,436,449
and $9,628,353,813, respectively. Purchases and proceeds from maturities of
obligations of the U.S. government and its agencies aggregated $97,638,524 and
$101,086,094, respectively, during the period ended September 30, 1997.
The cost of investments owned at September 30, 1997 for federal income tax
purposes was $358,728,918.
NOTE D --
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.
14
<PAGE>
================================================================================
NOTES
John Hancock Funds - Money Market Fund
15
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
1-800-225-5291 1-800-554-6713(TDD) Randolph, MA
INTERNET: www.jhancock.com/funds Permit No. 75
- --------------------------------------------------------------------------------
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.
[RECYCLE LOGO] Printed on Recycled Paper 440SA 9/97
11/97
