John Hancock Funds
Money
Market
Fund
ANNUAL REPORT
March 31, 1997
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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
After two years of spectacular performance, the stock market has
recently given investors its starkest reminder in some time of one of
investing's basic tenets: markets move down, as well as up. It's
understandable if investors had lost sight of that fact. The bull market
that began six years ago has given investors annual double-digit returns
and more modest price declines than usual. And in the two years
encompassing 1995 and 1996, the S&P 500 Index gained more than 50%. This
Pollyanna environment has tracked along with a sustained economic
recovery, now entering its seventh year, that has been marked by
moderate growth, low interest rates and tame inflation.
But recently, many have begun to wonder if the bull market is running
out of steam. Since reaching new highs in early March, the Dow Jones
Industrial Average tumbled by more than 7% at the end of March and wiped
out nearly all the market had gained since the start of the year. It was
the worst decline that the market had seen since 1990. In early April,
the Dow was down by 9.8% for the year, within shouting distance of a 10%
correction.
As the market continues to fret over possible interest-rate hikes and
the potential for an inflation spike, investors should be prepared for
more volatility. It also makes sense to do something we've always
advocated: set realistic expectations. Keep in mind that the stock
market's historic yearly average has been about 10%, not the 20%-plus
annual average of the last two years or even the 16% annual average over
the last 10 years. Remember that the kind of market volatility we've
seen lately is more like the way the market really works. Fluctuations
go with the territory. And market corrections can be healthy, serving to
bring inflated stock prices down to more reasonable levels, thereby
reducing some of the market's risk.
If you use this time of heightened volatility as an opportunity to
review your portfolio's asset allocations with your investment
professional, some long-term gain will come from the market's recent
short-term pain. Make sure that your investment strategies reflect your
individual time horizons, objectives and risk tolerance, and that they
are based upon your needs. Despite turbulence, one thing remains
constant. A well-constructed plan and a cool head can be the best tools
for reaching your financial goals.
A 1 1/4" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Money Market Fund
Federal Reserve raises interest rates for the first time in two
years, prompted by strong economic growth and inflation fears
"...money
market yields
rose during
the first
quarter of
1997."
Recently, the Fund's fiscal year end changed from October to March.
What follows is a discussion of the Fund's performance for the 12 months
ended March 31, 1997.
After remaining relatively steady for the first nine months of the
Fund's fiscal year, money market yields rose during the first quarter of
1997. The move came as the Federal Reserve was setting the stage for a
hike in short-term interest rates meant to ward off inflation. The Fed's
warnings were in response to signs that the economy was growing at a
pace considered uncomfortably fast and poised to spark inflation. Those
same fears had roiled interest rates and the bond market in 1996 as
well, but the Fed took no rate action then, believing that the economy's
growth rate and inflation were under control. That was true in the
second half of 1996, and interest rates fell accordingly. Nonetheless,
the Fed made it clear that it was prepared to act if the economy showed
signs of overheating, and that's exactly what happened. Early in 1997,
key economic data including employment and retail sales figures showed a
buoyant economy. So in late March it came as no surprise when the Fed
raised the federal funds rate by one quarter percentage point to 5.50%.
The federal funds rate, which banks charge each other for overnight
loans, is not only a key short-term interest rate but is also a
benchmark for pricing money market securities. In implementing its first
rate increase in two years, the Fed cited "persistent strength in
demand" and left the door open for even further increases to prevent an
inflation outbreak.
A 2 1/4" x 3 1/2" 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."
Bar chart with heading "7-Day Yield" at top left hand column. Under the
heading is the footnote: "As of March 31, 1997." 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 4.78% 7-Day yield for John Hancock Money Market Fund:
Class A. The second represents the 3.93% 7-Day yield for John Hancock
Money Market Fund: Class B. The third represents the 4.82% 7-Day yield
for the average first tier taxable money fund. Footnote below reads:
"The average first tier taxable money fund is tracked by IBC Financial
Data, Inc."
"...we plan to
maintain our
conservative
posture in
the near
term."
On March 31, 1997, John Hancock Money Market Fund had a 7-day average
yield of 4.78% for Class A shares and 3.93% for Class B shares. By
comparison, the average first tier taxable money fund had a 7-day
average yield of 4.82%, according to IBC Financial Data, Inc.
Shorter maturity, more exposure to floating-rate securities
Twelve months ago, the Fund's maturity was around 50 days, which was in
line with the average IBC first tier taxable money fund. That relatively
neutral stance gave us flexibility as interest rates were rising last
spring. But in early summer we began lengthening the Fund's maturity and
kept it longer than average for the rest of the year, to higher than 80
days at some points. This more aggressive stance helped us lock in
higher yields as interest rates fell in the second half of 1996. But
with the new year and in anticipation of a Fed rate hike, we reverted to
a conservative stance. We began shortening the Fund's maturity to
between five and 10 days shorter than average. On March 31, 1997, the
Fund's average maturity stood at 53 days, compared to 57 days for the
average first-tier taxable money fund.
We also increased by about 10% the Fund's exposure to floating rate
securities as a way to maintain a competitive yield. Floating-rate
securities are attractive investments in a rising interest rate
environment because their interest rates, which are linked to the
federal funds rate, automatically adjust when the federal funds
rate changes.
Outlook
With the Federal Reserve holding out the prospect of further rate
increases, we plan to maintain our conservative posture in the near
term. Any Fed action will depend on the monthly flow of economic data
and whether signs of inflation, such as wage pressures, begin to emerge.
Given this uncertain environment, we will keep the Fund's maturity close
to the average, if not shorter, for now. That way, we'll have maximum
flexibility to react to further changes in the economic landscape. As
always, we'll remain focused on enhancing the Fund's yield 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.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
John Hancock Funds - Money Market Fund
Statement of Assets and Liabilities
March 31, 1997
<S> <C>
Assets:
Investments, in money market instruments, at value -- Note C:
Commercial paper (cost -- $104,640,833) $104,640,833
Negotiable bank certificates of deposit (cost -- $64,368,718) 64,368,718
Corporate interest-bearing obligations (cost -- $149,411,439) 149,411,439
U.S. government obligations (cost -- $76,189,284) 76,189,284
Joint repurchase agreement (cost -- $100,835,000) 100,835,000
-------------
495,445,274
Cash 374,475
Receivable for shares sold 16,700
Interest receivable 4,065,260
Other assets 32,913
-------------
Total Assets 499,934,622
- ----------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 8,999,100
Payable for fund shares repurchased 611,133
Accounts payable and accrued expenses 277,441
Dividend payable 264,973
Payable to John Hancock Advisers, Inc. and affiliates -- Note B 272,986
-------------
Total Liabilities 10,425,633
- ----------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 489,508,989
-------------
Net Assets $489,508,989
==============================================================================================
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 -- $359,452,573/359,531,745 $1.00
==============================================================================================
Class B -- $130,056,416/130,074,924 $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 March 31, 1997. You'll also find
the net asset value and the maximum offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD FROM
OCTOBER 31, NOVEMBER 1, 1996 TO
1996 MARCH 31, 1997(1)
------------- -------------
<S> <C> <C>
Investment Income:
Interest $18,418,485 $9,636,375
------------- -------------
Expenses:
Investment management fee - Note B 1,327,385 694,373
Transfer agent fee - Note B 1,147,142 490,642
Distribution and service fee - Note B
Class A 380,976 200,227
Class B 740,837 401,087
Registration and filing fees 379,982 318,413
Printing 141,731 21,697
Legal fees 115,418 3,773
Custodian fee 105,684 39,927
Financial services fee - Note B 54,014 32,549
Trustees' fees 39,291 35,000
Auditing fee 37,109 17,500
Advisory board fee 23,444 --
Miscellaneous 6,564 5,892
------------- -------------
Total Expenses 4,499,577 2,261,080
- -----------------------------------------------------------------------------------------------------------------
Net Investment Income 13,918,908 7,375,295
- -----------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $13,918,908 $7,375,295
=================================================================================================================
(1) Effective March 31, 1997, the fiscal period end changed from October 31 to March 31.
The Statement of Operations summarizes the Fund's investment income earned
and expenses incurred in operating the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD FROM
------------------------------- NOVEMBER 1, 1996 TO
1995 1996 MARCH 31, 1997(1)
------------- ------------- -------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $2,184,101 $13,918,908 $7,375,295
------------- ------------- -------------
Distributions to Shareholders:
Dividends from net investment income
Class A** -- ($0.0066, $0.0444 and
$0.0178 per share, respectively) (71,384) (11,196,942) (5,933,244)
Class B -- ($0.0401, $0.0363 and
$0.0144 per share, respectively) (2,112,717) (2,721,966) (1,442,051)
Distributions in excess of net
investment income
Class A** -- (none, $0.0003 and
none per share, respectively) -- (79,146) --
Class B -- (none, $0.0020 and
none per share, respectively) -- (18,508) --
------------- ------------- -------------
Total Distributions to Shareholders (2,184,101) (14,016,562) (7,375,295)
------------- ------------- -------------
From Fund Share Transactions -- Net* 16,889,418 295,479,601 118,872,035
------------- ------------- -------------
Net Assets:
Beginning of year 58,365,589 75,255,007 370,636,954
------------- ------------- -------------
End of year $75,255,007 $370,636,954 $489,508,989
============= ============= =============
* Analysis of Fund Share Transactions at $1 Per Share:
CLASS A **
Shares sold $47,205,231 $2,599,973,181 $3,214,973,176
Shares issued in reorganization -- Note D -- 241,738,468 --
Shares issued to shareholders
in reinvestment of distributions 55,602 9,488,362 4,449,617
------------- ------------- -------------
47,260,833 2,851,200,011 3,219,422,793
Less shares repurchased (26,318,771) (2,609,587,924) (3,122,445,223)
------------- ------------- -------------
Net Increase $20,942,062 $241,612,087 $96,977,570
============= ============= =============
CLASS B
Shares sold $223,741,024 $859,812,437 $453,653,930
Shares issued to shareholders
in reinvestment of distributions 1,684,942 1,868,335 966,286
------------- ------------- -------------
225,425,966 861,680,772 454,620,216
Less shares repurchased (229,478,610) (807,813,258) (432,725,751)
------------- ------------- -------------
Net Increase (Decrease) ($4,052,644) $53,867,514 $21,894,465
============= ============= =============
(1) Effective March 31, 1997, the fiscal period end changed from October 31 to March 31.
** 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 repurchased during the last three periods, along
with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each period indicated,
investment returns, key ratios and supplemental data are as follows:
FOR THE
PERIOD
SEPT. 12, 1995
(COMMENCEMENT
OF PERIOD FROM
OPERATIONS) YEAR ENDED NOV. 1 1996
TO OCTOBER 31, TO
OCT. 31, 1995 1996 MARCH 31, 1997(5)
------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00
--------- --------- ---------
Net Investment Income 0.01 0.05 0.02
--------- --------- ---------
Less Distributions:
Dividends from Net Investment Income (0.01) (0.05) (0.02)
--------- --------- ---------
Net Asset Value, End of Period $1.00 $1.00 $1.00
========= ========= =========
Total Investment Return at Net Asset Value (2) 0.64%(3) 4.56% 1.80%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $20,942 $262,475 $359,453
Ratio of Expenses to Average Net Assets 1.07%(4) 1.17% 1.10%(4)
Ratio of Net Investment Income to Average
Net Assets 4.94%(4) 4.41% 4.44%(4)
PERIOD FROM
YEAR ENDED OCTOBER 31, NOVEMBER 1, 1996
--------------------------------------------------------- TO
1992 1993 1994 1995(1) 1996 MARCH 31, 1997(5)
--------- --------- --------- --------- --------- ---------
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $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
--------- --------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income (0.02) (0.01) (0.02) (0.04) (0.04) (0.01)
--------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period $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)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $31,480 $31,546 $58,366 $54,313 $108,162 $130,056
Ratio of Expenses to Average Net Assets 2.47% 2.44% 2.06% 1.92% 2.00% 1.96%(4)
Ratio of Net Investment Income to Average
Net Assets 1.69% 0.85% 1.97% 3.96% 3.58% 3.60%(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) On an annualized basis.
(5) Effective March 31, 1997, the fiscal period end changed from October 31 to March 31.
The Financial Highlights summarize the impact of net investment income and dividends
on a single share for the period indicated. Additionally, important relationships
between some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
March 31, 1997
- ------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Money Market Fund
on March 31, 1997. It's divided into five types of short-term investments. Most categories
of short-term investments are further broken down by industry group.
PAR VALUE
INTEREST QUALITY (000'S
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- --------------------------------------- ----------- ------- ------------ -------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Banking - Foreign (4.08%)
Unifunding Corp.,
04-09-97 5.390% Tier 1 $20,000 $19,976,044
-------------
Broker Services (1.02%)
Merrill Lynch & Co., Inc.,
04-01-97 6.250 Tier 1 5,000 5,000,000
-------------
Finance (4.82%)
American Honda Finance Corp.,
04-01-97 5.350 Tier 1 3,600 3,600,000
Heller Financial Inc.,
04-10-97 5.350 Tier 1 11,000 10,985,288
Heller Financial Inc.,
04-17-97 5.420 Tier 1 9,000 8,978,320
-------------
23,563,608
-------------
Mortgage Banking (3.06%)
Countrywide Home Loans
04-01-97 5.330 Tier 1 10,000 10,000,000
Countrywide Home Loans
04-21-97 5.400 Tier 1 5,000 4,985,000
-------------
14,985,000
-------------
Utilities - Telephone (8.40%)
GTE Corp.,
04-01-97 5.740 Tier 1 12,000 12,000,000
GTE Corp.,
04-08-97 5.340 Tier 1 7,000 6,992,732
GTE Corp.,
04-11-97 5.380 Tier 1 5,000 4,992,528
GTE Corp.,
04-17-97 5.350 Tier 1 2,136 2,130,921
NYNEX Corp.,
04-01-97 5.680 Tier 1 15,000 15,000,000
-------------
41,116,181
-------------
TOTAL COMMERCIAL PAPER
(Cost $104,640,833) (21.38%) 104,640,833
-------- -------------
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
U.S Branches of Foreign Banks (13.15%)
Bank of Tokyo Ltd.,
04-15-97 5.610 Tier 1 8,000 8,000,124
Bank of Tokyo Ltd.,
04-16-97 5.610 Tier 1 15,000 15,000,185
Industrial Bank of Japan Ltd.,
04-07-97 5.560 Tier 1 17,000 16,999,852
Industrial Bank of Japan Ltd.,
04-22-97 5.590 Tier 1 7,000 7,000,081
Midland PLC,
10-28-97 5.910 Tier 1 10,000 10,000,000
Sanwa Bank Ltd.,
04-28-97 5.680 Tier 1 7,400 7,368,476
-------------
64,368,718
-------------
TOTAL NEGOTIABLE BANK
CERTIFICATES OF DEPOSIT
(COST $64,368,718) (13.15%) 64,368,718
-------- -------------
CORPORATE INTEREST BEARING OBLIGATIONS
Automotive (9.15%)
Chrysler Financial Corp.,
08-07-97 6.270 Tier 1 5,000 5,013,156
Chrysler Financial Corp.,
02-24-98 7.750 Tier 1 7,000 7,111,784
Ford Holdings, Inc.,
07-15-97 9.250 Tier 1 1,250 1,260,798
Ford Motor Credit Co.,
05-07-97 9.200 Tier 1 1,500 1,504,682
Ford Motor Credit Co.,
12-01-97 8.000 Tier 1 5,000 5,077,090
General Motors Acceptance Corp.,
04-10-97 8.000 Tier 1 6,550 6,553,805
General Motors Acceptance Corp.,
04-18-97 6.700 Tier 1 3,125 3,126,153
General Motors Acceptance Corp.,
06-09-97 7.350 Tier 1 3,050 3,059,652
General Motors Acceptance Corp.,
07-01-97 7.125 Tier 1 1,000 1,002,116
General Motors Acceptance Corp.,
12-22-97 5.700 Tier 1 1,000 999,227
General Motors Acceptance Corp.,
02-02-98 7.300 Tier 1 10,000 10,100,569
-------------
44,809,032
-------------
Banking (4.62%)
Society National Bank of Cleveland,
04-15-97 7.125 Tier 1 7,500 7,504,123
Morgan Guaranty Trust Co., NY,
03-25-98 6.022 Tier 1 10,000 9,992,696
Norwest Corp.,
08-15-97 6.000 Tier 1 5,125 5,129,916
-------------
22,626,735
-------------
Beverage (0.86%)
PepsiCo, Inc.,
01-15-98 6.125 Tier 1 4,200 4,206,837
-------------
Broker Services (4.70%)
Bear Stearns Cos., Inc.,
09-17-97 5.730** Tier 1 5,000 5,000,000
Bear Stearns Cos., Inc.,
11-05-97 5.710** Tier 1 10,000 10,000,000
Bear Stearns Cos., Inc.,
01-22-98 5.730** Tier 1 8,000 8,000,000
-------------
23,000,000
-------------
Finance (5.17%)
Beneficial Corp.,
02-15-98 9.125 Tier 1 6,110 6,272,952
CIT Group Holdings, Inc.,
01-28-98 5.610** Tier 1 10,000 9,992,800
Heller Financial Inc.,
05-15-97 7.750 Tier 1 5,000 5,011,245
International Business Machines Credit Corp.,
11-01-97 6.375 Tier 1 2,000 2,006,144
International Lease Finance Corp.,
07-15-97 6.500 Tier 1 2,000 2,005,578
-------------
25,288,719
-------------
Insurance (0.41%)
American General Finance Corp.,
08-25-97 6.980 Tier 1 2,000 2,008,705
-------------
Retail Stores (2.21%)
Sears Roebuck Acceptance Corp.,
08-01-97 9.250 Tier 1 7,742 7,824,729
Wal Mart Stores, Inc.,
09-15-97 5.500 Tier 1 3,000 2,999,408
-------------
10,824,137
-------------
Tobacco (1.56%)
Philip Morris Cos., Inc.,
04-02-97 7.500 Tier 1 2,600 2,600,109
Philip Morris Cos., Inc.,
05-01-97 9.750 Tier 1 4,000 4,012,622
Philip Morris Cos., Inc.,
12-01-97 9.250 Tier 1 1,000 1,022,542
-------------
7,635,273
-------------
Utilities - Electric (1.84%)
Southern California Edison Co.,
07-15-97 6.125 Tier 1 8,000 8,013,565
Southern California Edison Co.,
02-01-98 5.875 Tier 1 1,000 998,436
-------------
9,012,001
-------------
TOTAL CORPORATE INTEREST
BEARING OBLIGATIONS
(Cost $149,411,439) (30.52%) 149,411,439
-------- -------------
U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (15.56%)
Federal Home Loan Bank,
07-10-97#+ 6.000 Tier 1 9,000 8,999,100
Federal Home Loan Bank,
07-26-97# 5.507 Tier 1 2,000 1,995,040
Federal Home Loan Bank,
11-06-97 5.820 Tier 1 8,500 8,500,000
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 Mortgage Corp.,
04-01-97 6.500 Tier 1 20,000 20,000,000
Federal National Mortgage Association,
08-22-97 5.610** Tier 1 10,000 9,997,629
Federal National Mortgage Association,
04-10-97# 5.700 Tier 1 4,000 4,000,000
Student Loan Marketing Association,
11-10-97 5.590** Tier 1 8,500 8,497,515
-------------
76,189,284
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $76,189,284) (15.56%) 76,189,284
-------- -------------
<CAPTION>
PAR VALUE
INTEREST (000'S
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ---------------------------------------------------------- -------- ------------ -------------
<S> <C> <C> <C>
JOINT REPURCHASE AGREEMENT
Investment in a joint repurchase agreement transaction with
Toronto Dominion Securities -- Dated 03-31-97, Due 04-01-97
(Secured by U.S.Treasury Bond 7.875% due 02-15-21 and
U.S.Treasury Notes, 5.375% and 8.250% due 11-30-97 and
07-15-98) -- Note A 6.750% $100,835 $100,835,000
-------------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $100,835,000) (20.60%) 100,835,000
-------- -------------
TOTAL INVESTMENTS (101.21%) $495,445,274
======== =============
* 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 March 31, 1997.
# Call date.
+ The security having a value of $8,999,100 or 1.84% 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, the Fund's
investment in Federal National Mortgage Association, 5.61% Due 08-22-97, valued at $9,997,629 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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
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"). Until August 30, 1996, the Fund was a
series of the John Hancock Series, Inc. The other series of the Trust is
reported in separate financial statements. On June 25, 1996 the Trustees
voted to change the fiscal period end from October 31 to March 31. This
change was effective March 31, 1997. The investment objective of the
Fund is to provide maximum current income consistent with capital
preservation and liquidity.
The Board of Trustees have 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 have determined
appropriate methods for valuing portfolio securities. Accordingly,
portfolio securities are valued at amortized cost, in accordance with
Rule 2a-7 of the Investment Company Act of 1940, which approximates
market value. The amortized cost method involves valuing a security at
its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount
due at maturity and the cost of the security to the Fund. Interest
income on certain portfolio securities such as negotiable bank
certificates of deposit and interest bearing notes is accrued daily and
included in interest receivable.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (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 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.
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 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 March 31, 1997, contingent deferred sales
charges paid to JH Funds amounted to $263,808.
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
fiscal year was at an annual rate of 0.01875% 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
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 March 31, 1997,
aggregated $9,717,182,886 and $9,661,017,964, respectively. Purchases
and proceeds from maturities of obligations of the U.S. government and
its agencies aggregated $112,695,306 and $70,565,560, respectively,
during the period ended March 31, 1997.
The cost of investments owned at March 31, 1997 for federal income tax
purposes was $495,445,274.
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.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Current Interest
John Hancock Money Market Fund
We have audited the accompanying statement of assets and liabilities of
the John Hancock Money Market Fund (the "Fund"), one of the portfolios
constituting John Hancock Current Interest, including the schedule of
investments, as of March 31, 1997, and the related statement of
operations for the period from November 1, 1996 to March 31, 1997 and
for the year ended October 31, 1996, and the statement of changes in net
assets 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 March 31, 1997, 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 Current Interest at March 31, 1997, the results of its
operations for the period from November 1, 1996 to March 31, 1997 and
the year ended October 31, 1996, and the changes in its net assets and
the financial highlights for each of the indicated periods, in
conformity with generally accepted accounting principles.
/S/ERNST & YOUNG LLP
Boston, Massachusetts
May 9, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished
with respect to the dividends of the Fund during the fiscal year ended
March 31, 1997.
All of the dividends paid for the fiscal year are taxable as ordinary
income. None of the 1997 dividends qualify for the dividends received
deduction available to corporations.
Shareholders will be mailed a 1997 U.S. Treasury Department Form 1099-
DIV in January of 1998. This will reflect the total of all distributions
which are taxable for calendar year 1997.
NOTES
John Hancock Funds - Money Market Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - Money Market Fund
[THIS PAGE INTENTIONALLY LEFT BLANK]
A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diagram in lower
right. A tag line below reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhancock.com/funds
Bulk Rate
U.S. Postage
PAID
Randolph, MA
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.
A recycled logo in lower left hand corner with the caption "Printed on
recycled Paper." 4400A 3/97
5/97
John Hancock Funds
U.S.
Government
Cash
Reserve
ANNUAL REPORT
March 31, 1997
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 02111
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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
After two years of spectacular performance, the stock market has
recently given investors its starkest reminder in some time of one of
investing's basic tenets: markets move down, as well as up. It's
understandable if investors had lost sight of that fact. The bull market
that began six years ago has given investors annual double-digit returns
and more modest price declines than usual. And in the two years
encompassing 1995 and 1996, the S&P 500 Index gained more than 50%. This
Pollyanna environment has tracked along with a sustained economic
recovery, now entering its seventh year, that has been marked by
moderate growth, low interest rates and tame inflation.
But recently, many have begun to wonder if the bull market is running
out of steam. Since reaching new highs in early March, the Dow Jones
Industrial Average tumbled by more than 7% at the end of March and wiped
out nearly all the market had gained since the start of the year. It was
the worst decline that the market had seen since 1990. In early April,
the Dow was down by 9.8% for the year, within shouting distance of a 10%
correction.
As the market continues to fret over possible interest-rate hikes and
the potential for an inflation spike, investors should be prepared for
more volatility. It also makes sense to do something we've always
advocated: set realistic expectations. Keep in mind that the stock
market's historic yearly average has been about 10%, not the 20%-plus
annual average of the last two years or even the 16% annual average over
the last 10 years. Remember that the kind of market volatility we've
seen lately is more like the way the market really works. Fluctuations
go with the territory. And market corrections can be healthy, serving to
bring inflated stock prices down to more reasonable levels, thereby
reducing some of the market's risk.
If you use this time of heightened volatility as an opportunity to
review your portfolio's asset allocations with your investment
professional, some long-term gain will come from the market's recent
short-term pain. Make sure that your investment strategies reflect your
individual time horizons, objectives and risk tolerance, and that they
are based upon your needs. Despite turbulence, one thing remains
constant. A well-constructed plan and a cool head can be the best tools
for reaching your financial goals.
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., chairman and Chief
Executive Officer, flush right next to second paragraph.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
U.S. Government
Cash Reserve
Money market yields rise as the Federal Reserve
raises interest rates for the first time in two years
"...it came as
no surprise
when the Fed
raised the
federal funds
rate..."
Recently, the Fund's fiscal year end changed from May to March. What
follows is a discussion of the Fund's performance for the 12 months
ended March 31, 1997.
After remaining relatively steady for the first nine months of the
Fund's fiscal year, money market yields rose during the first quarter of
1997. The move came as the Federal Reserve was setting the stage for a
hike in short-term interest rates meant to ward off inflation. The Fed's
warnings were in response to signs that the economy was growing at a
pace considered uncomfortably fast and poised to spark inflation. Those
same fears had roiled interest rates and the bond market in 1996 as
well, but the Fed took no rate action then, believing that the economy's
growth rate and inflation were under control. That was true in the
second half of 1996, and interest rates fell accordingly. Nonetheless,
the Fed made it clear that it was prepared to act if the economy showed
signs of overheating, and that's exactly what happened. Early in 1997,
key economic data including employment and retail sales figures showed a
buoyant economy. So in late March it came as no surprise when the Fed
raised the federal funds rate by one quarter percentage point to 5.50%.
The federal funds rate, which banks charge each other for overnight
loans, is not only a key short-term interest rate, but is also a
benchmark for pricing money market securities. In implementing its first
rate increase in two years, the Fed cited "persistent strength in
demand" and left the door open for even further increases to prevent an
inflation outbreak.
A 2 1/4" x 3 1/2" photo of Cash Reserve Management team members. Caption
reads: "U.S. Government Cash Reserve Management team members (l-r) Barry
Evans, Jamie Kellogg, Bruce Picket, Dawn Baillie."
Bar chart with heading "7-Day Yield" at top of left hand column. Under
the heading is the footnote: "As of March 31, 1997." The chart is scaled
in increments of 1% from top to bottom with 6% at the top and 0% at the
bottom. Within the chart, there are two solid bars. The first represents
the 5.33% 7-day yield for John Hancock U.S. Government Cash reserve. The
second represents the 4.80% 7-day yield for the average U.S. Government
/ Agency Money Market Fund. Footnote below reads: "The average U.S.
government / agency money market fund is tracked by IBC Financial Data,
Inc."
"...we plan to
maintain our
conservative
posture in
the near
term."
On March 31, 1997, John Hancock U.S. Government Cash Reserve had a 7-day
average yield of 5.33%. By comparison, the average U.S. government/
agency money market fund had a 7-day average yield of 4.80%, according
to IBC Financial Data, Inc.
Shorter maturity, more exposure to floating-rate securities
Twelve months ago, the Fund's maturity was 41 days, which was shorter
than the IBC government/agency money market fund average. That more
conservative stance gave us added flexibility as interest rates were
rising last spring. But in early summer we began lengthening the Fund's
maturity and kept it longer than average for the rest of the year, to
higher than 80 days at some points. This more aggressive stance helped
us lock in higher yields as interest rates fell in the second half of
1996. With the new year, however, and in anticipation of a Fed rate
hike, we reverted to a conservative stance. We began shortening the
Fund's maturity to just shy of the average. On March 31, 1997, the
Fund's average maturity stood at 46 days, compared to 47 days for
the average U.S. government/agency money market fund.
Outlook
With the Federal Reserve holding out the prospect of further rate
increases, we plan to maintain our conservative posture in the near
term. Any Fed action will depend on the monthly flow of economic data
and whether signs of inflation, such as wage pressures, begin to emerge.
Given this uncertain environment, we will keep the Fund's maturity close
to the average, if not shorter, for now. That way, we'll have maximum
flexibility to react to further changes in the economic landscape. As
always, we'll remain focused on enhancing the Fund's yield 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.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
John Hancock Funds - U.S. Government Cash Reserve
Statement of Assets and Liabilities
March 31, 1997
<S> <C>
Assets:
Investments, in money market instruments, at value -- Note C:
U.S. government obligations (cost -- $46,097,922) $46,097,922
Joint repurchase agreement (cost -- $11,033,000) 11,033,000
-------------
57,130,922
Cash 30,779
Interest receivable 456,404
Other assets 13,965
-------------
Total Assets 57,632,070
- -----------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,924,808
Payable for shares repurchased 276,810
Dividend payable 37,014
Payable to John Hancock Advisers, Inc. and affiliates -- Note B 21,769
Accounts payable and accrued expenses 50,476
-------------
Total Liabilities 2,310,877
- -----------------------------------------------------------------------------------
Net Assets:
Capital paid-in 55,321,193
-------------
Net Assets $55,321,193
===================================================================================
Net Asset Value, Offering Price and Redemption Price Per Share:
(based on 55,321,193 shares of beneficial interest
outstanding -- unlimited number of shares authorized
with $0.01 par value) $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 March 31, 1997. You'll also find
the net asset value and the maximum offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- ----------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED JUNE 1, 1996 TO
MAY 31, 1996 MARCH 31, 1997(1)
------------ ----------------
<S> <C> <C>
Investment Income:
Interest $1,650,714 $2,140,216
------------- -------------
Expenses:
Investment management fee - Note B 143,299 194,696
Registration and filing fees 47,836 42,572
Custodian fee 28,711 34,343
Auditing fee 22,275 20,000
Printing 19,911 13,705
Financial services fee - Note B -- 6,664
Legal fees 17,432 1,835
Transfer agent fee - Note B 14,781 24,063
Trustees' fees 9,291 4,431
Advisory board fee 8,624 --
Miscellaneous 1,695 1,166
------------- -------------
Total Expenses 313,855 343,475
Less Expense Reductions - Note B (213,546) (206,842)
- ----------------------------------------------------------------------------------------------------
Net Expenses 100,309 136,633
- ----------------------------------------------------------------------------------------------------
Net Investment Income 1,550,405 2,003,583
- ----------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $1,550,405 $2,003,583
====================================================================================================
(1) Effective March 31, 1997, the fiscal period end changed from May 31 to March 31.
The Statement of Operations summarizes the Fund's investment income earned and expenses
incurred in operating the Fund for the periods stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31, PERIOD FROM
------------------------------ JUNE 1, 1996 TO
1995 1996 MARCH 31, 1997(1)
------------- ------------- -----------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $4,215,208 $1,550,405 $2,003,583
------------- ------------- -------------
Distributions to Shareholders:
Dividends from net investment income
($0.0495, $0.0548 and $0.0423 per share,
respectively) (4,215,208) (1,550,405) (2,003,583)
------------- ------------- -------------
From Fund Share Transactions - Net* (65,276,832) (223,951) 26,414,429
------------- ------------- -------------
Net Assets:
Beginning of period 94,407,547 29,130,715 28,906,764
------------- ------------- -------------
End of period $29,130,715 $28,906,764 $55,321,193
============= ============= =============
* Analysis of Fund Share Transactions at
$1 Per Share:
Shares sold $215,745,531 $368,510,358 $656,013,788
Shares issued to shareholders in
reinvestment of distributions 2,455,376 1,191,507 1,626,808
------------- ------------- -------------
218,200,907 369,701,865 657,640,596
Less shares repurchased (283,477,739) (369,925,816) (631,226,167)
------------- ------------- -------------
Net Increase (Decrease) ($65,276,832) ($223,951) $26,414,429
============= ============= =============
(1) Effective March 31, 1997, the fiscal period end changed from May 31 to March 31.
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.
</TABLE>
<TABLE>
<CAPTION>
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:
PERIOD FROM
YEAR ENDED MAY 31, JUNE 1, 1996
--------------------------------------------------------- TO MARCH 31,
1992 1993 1994 1995(1) 1996 1997(5)
--------- --------- --------- --------- --------- ---------
<S> <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
--------- --------- --------- --------- --------- ---------
Net Investment Income 0.05 0.03 0.03 0.05 0.05 0.04
--------- --------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income (0.05) (0.03) (0.03) (0.05) (0.05) (0.04)
--------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period $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)
Total Adjusted Investment Return at
Net Asset Value (2,3) 4.62% 2.93% 2.74% 4.69% 4.84% 3.93%(6)
Ratios and Supplemental Data
Net Assets, End of Period (000's
omitted) $109,358 $123,106 $94,408 $29,131 $28,907 $55,321
Ratio of Expenses to Average Net
Assets 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%(7)
Ratio of Adjusted Expenses to
Average Net Assets (4) 0.68% 0.67% 0.65% 0.73% 1.10% 0.88%(7)
Ratio of Net Investment Income to
Average Net Assets 4.86% 3.19% 2.96% 4.79% 5.41% 5.15%(7)
Ratio of Adjusted Net Investment
Income to Average Net Assets (4) 4.53% 2.87% 2.66% 4.41% 4.66% 4.62%(7)
(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.
The Financial Highlights summarize the impact of net investment income and dividends on
a single share for the period indicated. Additionally, important relationships between
some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
March 31, 1997
- --------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Fund on
March 31, 1997. It's divided into two types of short-term investments.
PAR VALUE
INTEREST (000'S
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- -------------------------------------------------- ----------- ----------- --------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
Governmental -- U.S. Agencies (83.33%)
Federal Farm Credit Bank
05-01-97 5.340% $805 $804,979
Federal Farm Credit Bank
05-01-97 5.500 500 500,009
Federal Farm Credit Bank
01-02-98 5.390* 3,000 2,998,567
Federal Home Loan Bank
04-21-97 # 5.800 7,400 7,399,740
Federal Home Loan Bank
05-05-97 # 5.765 2,000 2,000,425
Federal Home Loan Bank
05-09-97 5.680 545 545,066
Federal Home Loan Bank
06-18-97 5.250 200 199,729
Federal Home Loan Bank
07-10-97 # + 6.000 1,925 1,924,808
Federal Home Loan Bank
09-22-97 5.370 250 249,353
Federal Home Loan Bank
09-30-97 5.925 1,495 1,496,901
Federal Home Loan Bank
11-06-97 5.820 1,500 1,500,000
Federal Home Loan Bank
12-15-97 7.870 1,000 1,015,104
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 1,995,040
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
Federal Home Loan Bank
03-17-98 5.850 1,000 1,000,000
Federal Home Loan Bank
03-24-98 5.910 1,650 1,650,000
Federal Home Loan Mortgage Corp.
04-01-97 6.500 8,000 8,000,000
Federal Home Loan Mortgage Corp.
04-10-97 # 5.400 500 499,303
Federal National Mortgage Association
07-16-97 5.590* 1,000 999,904
Federal National Mortgage Association
07-25-97 8.800 800 808,189
Federal National Mortgage Association
08-22-97 5.610* 1,000 999,763
Federal National Mortgage Association
11-10-97 9.550 500 511,481
Federal National Mortgage Association
11-25-97 5.700 1,000 1,000,000
Student Loan Marketing Association
11-10-97 5.590* 1,500 1,499,561
Student Loan Marketing Association
01-08-98 5.750 500 500,000
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $46,097,922) (83.33%) 46,097,922
------- ------------
JOINT REPURCHASE AGREEMENT (19.94%)
Investment in a joint repurchase agreement transaction with
Toronto Dominion Securities -- Dated 03-31-97 due 04-01-97
(Secured by U.S. Treasury Bond 7.875% due 02-15-21 and
and U.S. Treasury Notes, 5.375% and 8.250% due 11-30-97
and 07-15-98) Note A 6.750% 11,033 11,033,000
------------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $11,033,000) (19.94%) 11,033,000
------- ------------
TOTAL INVESTMENTS (103.27%) $57,130,922
======= ============
* Floating rate note, interest rate effective March 31, 1997.
# Call Date.
+ The security having a value of $1,924,808 or 3.48% 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, $1,999,959 of the value of the Fund's investment in Federal
Home Loan Bank, 5.80% due 04-21-97, 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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
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. On June 25, 1996, the Trustees voted
to change the fiscal period end from May 31 to March 31. This change was
effective March 31, 1997. 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.
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 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 further to the extent
required to prevent expenses from exceeding 0.35% of the Fund's average
daily net asset value, exclusive of certain expenses prescribed by state
law. Accordingly, for the period ended March 31, 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 $206,842. 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
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
fiscal year was 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 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 March 31, 1997
aggregated $2,924,696,892 and $2,897,426,964, respectively.
The cost of investments owned at March 31, 1997 (including the joint
repurchase agreement) for Federal income tax purposes was $57,130,922.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Current Interest
John Hancock U.S. Government Cash Reserve
We have audited the accompanying statement of assets and liabilities of
the John Hancock U.S. Government Cash Reserve (the "Fund"), one of the
portfolios constituting John Hancock Current Interest, including the
schedule of investments, as of March 31, 1997, and the related statement
of operations for the period from June 1, 1996 to March 31, 1997 and for
the year ended May 31, 1996, and the statement of changes in net assets
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 March 31, 1997, 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 U.S. Government Cash Reserve
portfolio of John Hancock Current Interest at March 31, 1997, the
results of its operations for the period from June 1, 1996 to March 31,
1997 and the year ended May 31, 1996, and the changes in its net assets
and the financial highlights for each of the indicated periods, in
conformity with generally accepted accounting principles.
/S/ERNST & YOUNG LLP
Boston, Massachusetts
May 9, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income tax purposes, the following information is furnished
with respect to the dividends of the Fund during the fiscal year ended
March 31, 1997.
All of the dividends paid for the fiscal year are taxable as ordinary
income. None of the 1997 dividends qualify for the dividends received
deduction available to corporations.
Shareholders will be mailed a 1997 U.S. Treasury Department Form 1099-
DIV in January of 1998. This will reflect the total of all distributions
which are taxable for calendar year 1997.
NOTES
John Hancock Funds - U.S. Government Cash Reserve
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - U.S. Government Cash Reserve
[THIS PAGE INTENTIONALLY LEFT BLANK]
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