SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Money Market
Fund
SEPTEMBER 30, 1998
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
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 and Chief Operating Officer
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
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 02109-1803
<PAGE>
========================CHAIRMAN'S MESSAGE======================================
DEAR FELLOW SHAREHOLDERS:
An often-used analogy for stock market performance over the short term is a
roller coaster. That is because, while long-term history suggests the market`s
general direction is up, its swings over the short term can be dramatic and, at
times, violent. Recently, the market has given us a stark example of this
phenomenon. From the new highs set in mid-July, the major indices plunged by 15%
through the end of September. It was the worst such fall since 1990. For the
first time in a number of years, some bonds and bond mutual funds outperformed
stocks and stock mutual funds. Seeking safety in a world of global economic
uncertainties, investors everywhere converged on U.S. Treasury bonds and pushed
their yields to historic lows.
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
For the record-breaking number of investors who have entered the market
for the first time since 1990, it was their worst taste of stock market reality.
We are pleased to report that most individual investors did not panic, and we
hope that means they`ve taken our words to heart. Over the long term, markets
do not move up or down in a straight line. That`s why after watching the market
charge ahead almost uninterrupted for so many years, we have been striking a
more cautionary stance in this space over the last several months.
Analysts are still pondering whether the global turmoil and the
prospects for slower U.S. economic and corporate earnings growth are signs that
the long bull market has finally run its course. While we don`t make a practice
of opining on what the market will do next, we continue to believe it would be
wise for investors to set more realistic expectations. Over the long term, the
market`s historical results have been more in the 10% per year range, which is
still a solid result, considering it has been produced despite wars, depressions
and other social upheavals along the way.
There is no doubt, however, that the market`s heightened volatility
and recent dramatic moves have been cause for concern. In these uncertain times,
it becomes even harder to remember to "stay the course" and stick to your
long-term investment plan. But this remains the essential tenet of successful
investing. Now could also be a good time to review your asset allocation with
your investment professional, keeping in mind that the last six months`
divergence in performance of stocks and high-quality bonds is a perfect example
of why all your eggs shouldn`t be in one basket.
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
Money market funds provide safety and
competitive yields in volatile market
Money market funds turned in competitive results over the last six months, as
investors sought safe havens from growing economic turmoil in Asia, Russia and
other emerging markets. Right from the start of the period in April, the
financial markets became increasingly volatile, and reached fever pitch in
August after Russia`s debt default and currency devaluation. In a global flight
from financial risk, investors fled all but the safest securities, causing stock
markets worldwide to plummet. As a result, U.S. Treasury bonds` prices soared,
and yields, which move in the opposite direction from prices, fell. In
particular, the bellwether 30-year Treasury bond`s yield fell to 5.0% by the
end of September, the first time it was that low in more than 30 years.
Investors also fled to another safe haven - money market securities - driving
their prices up and yields down. But long-term interest rates fell more, to
levels that were lower than the yields on shorter-term securities - a rare
occurrence known as an inverted yield curve. The result was that money market
funds were able to provide investors with both a very competitive return and
safety.
[A 3 3/4" x 2 1/4" photo at bottom of page of fund management team members.
Caption below reads "Fund management team members (l - r): Jeff Given, Dawn
Baillie, Bill Larkin, Jr. and Barry Evans."]
The global turmoil also prompted the Federal Reserve to reverse course
and lower the federal funds rate by one quarter percentage point to 5.25% on
September 29. The federal funds rate is the rate banks charge each other for
overnight loans, and it is also a key pricing benchmark for money market
securities. Until now, the Fed`s recent bias had been toward raising rates to
prevent inflation in the face of a strong U.S. economy and low unemployment.
However, its inflation concerns have since been overshadowed by a desire to ease
the potential for the overseas slowdown to serve as a drag on the U.S. economy.
"Money market funds turned in competitive results..."
3
<PAGE>
================================================================================
John Hancock Funds - Money Market Fund
"...the prospect for U.S. interest rates to fall further remains real."
[Bar chart at top of left hand column with the heading "7-Day Effective Yield".
Under the heading is a note that reads "As of September 30, 1998". The chart is
scaled in increments of 2% with 0% at the bottom and 6% at the top. The first
bar represents the 4.74% total return for John Hancock Money Market Fund Class
A. The second bar represents the 3.86% total return for John Hancock Money
Market Fund Class B. The third bar represents the 3.86% total return for John
Hancock Money Market Fund Class C and the fourth bar represents the 4.87% total
return for Average taxable money market fund. A note below the chart reads "The
average taxable money market fund is tracked by Lipper Analytical Services, Inc.
Past performance is no guarantee of future results."
On September 30, 1998, John Hancock Money Market Fund had a 7-day
effective yield of 4.74% for Class A shares, 3.86% for Class B shares and 3.86%
for Class C shares. By comparison, the average taxable money market fund had a
7-day effective yield of 4.87%, according to Lipper Analytical Services, Inc.
Long and short maturity
We kept the Fund`s average maturity approximately five days longer than its
peers` during the period. This more aggressive strategy was based on our
ongoing belief that the Fed would not raise interest rates, given the potential
for a slowing economy. With interest rates staying low, and potentially falling
more, we wanted to lock in higher yields by lengthening our maturity. Although
our maturity was longer than our peers`, overall the Fund`s average maturity
shortened by about 15 days. This might seem like a paradox, since shortening
maturity does not normally get us better yield in a falling rate environment.
But the situation this period was anything but normal. In this rare moment when
the short-term federal funds rate remained unchanged while longer-term rates
fell below it, we were able to maintain a higher yield by staying shorter. We
did this by keeping a larger portion than usual of the Fund`s assets in
overnight money market securities pegged directly to the federal funds rate.
This strategy helped us keep the Fund`s yield approximately the same from the
beginning of the period to the end.
A look ahead
With investor uncertainty abounding and global economies still struggling, the
prospect for U.S. interest rates to fall further remains real. Even though the
U.S. economy remains vibrant, with the lowest unemployment rate in years, the
Fed is now less concerned about inflation. Indeed, many analysts have already
concluded that if global turmoil persists, the Federal Reserve will lower
short-term rates even more to help the U.S. economy ward off the effects of
slower global growth. In this environment, we`ll keep our maturity longer than
average until we get closer to year end, when technical market considerations
always cause us to briefly shorten maturity to take advantage of buying
opportunities. As always, we maintain our focus on providing shareholders with a
competitive level of current income, 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 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, 1998. 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments, in money market instruments, at value -
Note C:
Commercial paper (cost - $243,644,826) ............. $243,644,826
Negotiable bank certificates of deposit
(cost - $6,671,281) ................................ 6,671,281
Corporate interest-bearing obligations
(cost - $128,792,942) .............................. 128,792,942
U.S. government obligations (cost - $91,969,190) ... 91,969,190
Joint repurchase agreement (cost - $134,732,000) ... 134,732,000
------------
605,810,239
Cash ................................................... 19,225
Receivable for shares sold ............................. 24,966
Interest receivable .................................... 3,823,271
Other assets ........................................... 54,966
------------
Total Assets ..................... 609,732,667
__________________________________________________________
Liabilities:
Payable for shares repurchased ..................... 513,625
Dividend payable ................................... 67,223
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ................................ 326,971
Accounts payable and accrued expenses .................. 191,087
------------
Total Liabilities ................ 1,098,906
__________________________________________________________
Net Assets:
Capital paid-in .................................... 608,633,761
------------
Net Assets ....................... $608,633,761
==========================================================
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 - $414,848,997 / 414,928,170.................... $1.00
================================================================================
Class B - $193,031,596 / 193,050,107.................... $1.00
================================================================================
Class C* - $753,168 / 753,168........................... $1.00
================================================================================
* Class C shares commenced operations on May 1, 1998.
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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest ................................. $12,852,483
-----------
Expenses:
Investment management fee - Note B ..... 914,757
Distribution and service fee - Note B
Class A .............................. 257,193
Class B .............................. 570,781
Class C .............................. 904
Transfer agent fee - Note B ............ 581,514
Registration and filing fees ........... 187,550
Custodian fee .......................... 53,199
Financial services fee - Note B ........ 36,359
Auditing fee ........................... 17,626
Printing ............................... 13,998
Trustees` fees ......................... 11,819
Miscellaneous .......................... 4,578
Legal fees ............................. 3,019
-----------
Net Expenses .............. 2,653,297
_________________________________________
Net Investment Income ..... 10,199,186
_________________________________________
Net Increase in Net Assets
Resulting from Operations.. $ 10,199,186
=========================================
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
===========================FINANCIAL STATEMENTS=================================
John Hancock Funds - Money Market Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1998
MARCH 31, 1998 (UNAUDITED)
-------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income .......................................... $ 18,341,303 $ 10,199,186
--------------- ---------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.0482 and $0.0234 per share, respectively)...... (14,426,990) (8,010,815)
Class B - ($0.0397 and $0.0192 per share, respectively)...... (3,914,313) (2,184,871)
Class C - (none and $0.0156 per share, respectively)......... -- (3,500)
------------- ---------------
Total Distributions to Shareholders ....................... (18,341,303) (10,199,186)
------------- ---------------
From Fund Share Transactions - Net: * ............................. (95,720,210) 214,844,982
------------- ---------------
Net Assets:
Beginning of period ............................................. 489,508,989 393,788,779
------------- ---------------
End of period ................................................... $ 393,788,779 $ 608,633,761
=============== ===============
* Analysis of Fund Share Transactions at $1 Per Share:
CLASS A
Shares sold .................................................... $3,870,818,878 $ 2,146,228,400
Shares issued to shareholders in reinvestment of distributions . 12,110,373 6,669,566
-------------- ---------------
3,882,929,251 2,152,897,966
Less shares repurchased ........................................ (3,929,619,558) (2,050,811,235)
--------------- ---------------
Net increase (decrease) ........................................ ($ 46,690,307) $ 102,086,731
=============== ===============
CLASS B
Shares sold .................................................... $ 619,548,975 $ 300,206,626
Shares issued to shareholders in reinvestment of distributions . 3,015,287 1,790,789
------------- ---------------
622,564,262 301,997,415
Less shares repurchased ........................................ (671,594,165) (189,992,332)
------------- ---------------
Net increase (decrease) ........................................ ($ 49,029,903) $ 112,005,083
=============== ===============
CLASS C**
Shares sold .................................................... -- $ 883,919
Shares issued to shareholders in reinvestment of distributions . -- 2,422
--------------- ---------------
-- 886,341
Less shares repurchased ........................................ -- (133,173)
--------------- ---------------
Net increase ................................................... -- $ 753,168
============== ===============
** Class C shares commenced operations on May 1, 1998
</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 two
periods.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - Money Market Fund
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 12, 1995 PERIOD FROM SIX MONTHS ENDED
(COMMENCEMENT OF YEAR ENDED NOVEMBER 1, 1996 YEAR ENDED SEPTEMBER 30,
OPERATIONS) TO OCTOBER 31, TO MARCH 31, MARCH 31, 1998
OCTOBER 31, 1995 1996 1997(5) 1998 (UNAUDITED)
---------------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period... $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
Net Investment Income.................. 0.01 0.05 0.02 0.05 0.02
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income... (0.01) (0.05) (0.02) (0.05) (0.02)
-------- -------- -------- -------- --------
Net Asset Value, End of Period......... $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
Total Investment Return at Net Asset
Value (2).............................. 0.64%(3) 4.56% 1.80%(3) 4.92% 2.34%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $20,942 $262,475 $359,453 $312,762 $414,849
Ratio of Expenses to Average Net Assets 1.07%(4) 1.17% 1.10%(4) 0.89% 0.95%(4)
Ratio of Net Investment Income to
Average Net Assets..................... 4.94%(4) 4.41% 4.44%(4) 4.82% 4.67%(4)
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, NOVEMBER 1, 1996 YEAR ENDED SEPTEMBER 30,
___________________________________ TO MARCH 31, MARCH 31, 1998
1993 1994 1995(1) 1996 1997(5) 1998 (UNAUDITED)
-------- -------- -------- -------- -------- -------- --------
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................ 0.01 0.02 0.04 0.04 0.01 0.04 0.02
-------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income. (0.01) (0.02) (0.04) (0.04) (0.01) (0.04) (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).................... 0.85% 1.87% 4.07% 3.71% 1.45%(3) 4.04% 1.91%(3)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted)........................ $31,546 $58,366 $54,313 $108,162 $130,056 $81,027 $193,032
Ratio of Expenses to Average
Net Assets........................... 2.44% 2.06% 1.92% 2.00% 1.96%(4) 1.74% 1.80%(4)
Ratio of Net Investment Income to
Average Net Assets................... 0.85% 1.97% 3.96% 3.58% 3.60%(4) 3.97% 3.83%(4)
</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
Financial Highlights (continued)
- --------------------------------------------------------------------------------
PERIOD
FROM MAY 1, 1998
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 1998
(UNAUDITED)
-------------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period.......................... $1.00
--------
Net Investment Income......................................... 0.02
--------
Less Distributions:
Dividends from Net Investment Income.......................... (0.02)
--------
Net Asset Value, End of Period................................ $1.00
========
Total Investment Return at Net Asset Value (2)................ 1.55%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)...................... $753
Ratio of Expenses to Average Net Assets....................... 1.80%(4)
Ratio of Net Investment Income to Average Net Assets.......... 3.85%(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)ffective March 31, 1997, the fiscal period end changed from October 31 to
March 31.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Money Market Fund
Schedule of Investments
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Money
Market Fund on September 30, 1998. It `s divided into five 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
Banking - Foreign (2.46%)
Unifunding,
10-21-98.................... 5.550% Tier 1 $15,000 $14,953,750
-----------
Broker Services (12.63%)
Bear Stearns Cos., Inc.,
10-08-98.................... 5.510 Tier 1 27,000 26,971,073
Goldman Sachs Group, L.P.,
10-05-98.................... 5.500 Tier 1 25,000 24,984,722
Merrill Lynch & Co., Inc.,
10-16-98.................... 5.520 Tier 1 25,000 24,942,500
-----------
76,898,295
-----------
Chemical (3.94%)
DuPont (E.I.) de Nemours & Co.,
10-08-98.................... 5.500 Tier 1 24,000 23,974,333
Finance (12.38%)
American Express Credit Corp.,
10-05-98.................... 5.500 Tier 1 10,000 9,993,889
American Honda Finance Corp.,
10-01-98.................... 5.520 Tier 1 3,025 3,025,000
American Honda Finance Corp.,
10-06-98.................... 5.500 Tier 1 6,988 6,982,662
American Honda Finance Corp.,
10-16-98.................... 5.520 Tier 1 19,900 19,854,230
Heller Financial, Inc.,
10-09-98.................... 5.580 Tier 1 22,500 22,472,100
International Business Machines
Credit Corp.,
10-02-98.................... 5.500 Tier 1 13,000 12,998,014
------------
75,325,895
------------
Mortgage Banking (4.84%)
Countrywide Home Loans,
10-02-98.................... 5.530 Tier 1 28,000 27,995,699
Countrywide Home Loans,
10-08-98.................... 5.530 Tier 1 1,500 1,498,387
------------
29,494,086
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Money Market Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
Retail Stores (1.64%)
Sears Roebuck Acceptance Corp.,
10-02-98.................... 5.520% Tier 1 $10,000 $9,998,467
------------
Utilities - Telephone (2.14%)
GTE Corp.,
10-01-98.................... 5.550 Tier 1 13,000 13,000,000
------------
TOTAL COMMERCIAL PAPER
(Cost $243,644,826) (40.03%) 243,644,826
--------- ------------
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
U.S Branches of Foreign Banks (1.10%)
Abbey National Treasury Services,
12-21-98.................... 6.500 Tier 1 1,024 1,025,038
Abbey National Treasury Services,
01-19-99.................... 5.375 Tier 1 647 646,374
Deutsche Bank, AG,
10-26-98.................... 5.950 Tier 1 5,000 4,999,869
------------
6,671,281
------------
TOTAL NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
(Cost $6,671,281) (1.10%) 6,671,281
--------- -------------
CORPORATE INTEREST-BEARING OBLIGATIONS
Automotive (4.93%)
Chrysler Financial Corp.,
10-15-98.................... 5.375 Tier 1 5,000 4,999,326
Chrysler Financial Corp.,
01-21-99.................... 5.650 Tier 1 5,000 4,998,359
Ford Motor Credit Co.,
01-15-99.................... 5.625 Tier 1 15,000 14,994,126
General Motors Acceptance Corp.,
02-26-99.................... 5.950 Tier 1 5,000 5,003,986
-------------
29,995,797
-------------
Banking (4.12%)
Norwest Corp.,
10-13-98.................... 6.000 Tier 1 8,000 8,000,523
PNC Funding Corp.,
01-11-99.................... 5.180 Tier 1 15,950 15,926,038
Security Pacific Corp.,
05-15-99.................... 9.750 Tier 1 1,100 1,125,729
--------------
25,052,290
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
Finance (3.74%)
Beneficial Corp.,
11-30-98.................... 8.230% Tier 1 $5,000 $5,019,316
Heller Financial, Inc.,
12-15-98.................... 8.000 Tier 1 4,656 4,676,079
Nynex Capital Funding Co.,
07-19-99.................... 7.610 Tier 1 3,000 3,044,342
Nynex Credit Co.,
09-15-99.................... 6.200 Tier 1 10,000 10,047,607
--------------
22,787,344
--------------
Machinery (3.10%)
John Deere Capital Corp.,
02-01-99.................... 6.000 Tier 1 3,900 3,903,101
John Deere Capital Corp.,
04-19-99.................... 6.680 Tier 1 14,900 14,974,053
--------------
18,877,154
--------------
Retail Stores (3.63%)
Penney (J.C.) Co., Inc.,
11-15-98.................... 5.375 Tier 1 2,000 1,998,608
Penney (J.C.) Co., Inc.,
06-15-99.................... 6.875 Tier 1 3,000 3,023,212
Sears Roebuck Acceptance Corp.,
10-26-98.................... 6.110 Tier 1 2,030 2,030,300
Sears Roebuck Acceptance Corp.,
11-01-98.................... 8.450 Tier 1 15,000 15,031,006
--------------
22,083,126
--------------
Utilities - Electric (1.64%)
Southern California Edison Co.,
12-15-98.................... 5.600 Tier 1 10,000 9,997,231
--------------
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS
(Cost $128,792,942) (21.16%) 128,792,942
--------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
Governmental-U.S. Agencies (15.11%)
Federal Home Loan Bank,
10-08-98 #....................... 5.750% Tier 1 $5,000 $5,000,000
Federal Home Loan Bank,
03-02-99 #....................... 5.610 Tier 1 20,000 20,000,000
Student Loan Marketing Association,
11-06-98......................... 4.793** Tier 1 5,500 5,499,022
Student Loan Marketing Association,
11-06-98 #....................... 4.743** Tier 1 37,000 36,972,420
Student Loan Marketing Association,
11-10-98......................... 4.733** Tier 1 10,000 9,997,748
Student Loan Marketing Association,
12-16-98 #....................... 5.510 Tier 1 14,500 14,500,000
------------
91,969,190
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $91,969,190) (15.11%) 91,969,190
--------- ------------
INTEREST
RATE
-----------
JOINT REPURCHASE AGREEMENT
Investment in a joint repurchase
agreement transaction with
Toronto Dominion Securities
USA, Inc. - Dated 09-30-98, due 10-01-98
(Secured by U.S.Treasury Bond, 8.875%,
due 02-15-19 and U.S. Treasury Notes,
5.75% thru 7.50%,
due 01-15-00 thru 11-15-01)- Note A 5.58% 134,732 134,732,000
------------ ------------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $134,732,000) (22.14%) 134,732,000
------------ ------------
TOTAL INVESTMENTS (99.54%) 605,810,239
------------ ------------
OTHER ASSETS AND LIABILITIES, NET (0.46%) 2,823,522
------------ ------------
TOTAL NET ASSETS (100.00%) $608,633,761
============ ============
</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. Stated interest rate in effect as of September 30, 1998.
# Call date.
The percentage shown for each investment category is the total value of that
category expressed as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
===========================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, Class B and Class C shares. The
Trustees authorized the issuance on Class C shares effective May 1, 1998. 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,
Inc., 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 size 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.
13
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - Money Market Fund
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 unsecured
lines of credit with banks which permit borrowings up to $1 billion,
collectively. The Fund is permitted to borrow only from the uncommitted portion
of the unsecured lines of credit, which totals $500 million. 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 rates ranging from 0.070% to
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, 1998.
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 September 30,
1998, contingent deferred sales charges paid to JH Funds amounted to $406,863.
Class C shares which are redeemed within one year of purchases will be
subject to a CDSC at a rate of 1.00% 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 C shares. For the period ended
September 30, 1998, contingent deferred sales charges paid to JH Funds amounted
to $476.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans with
respect to Class A, Class B and Class C pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to JH
Funds for distribution and service expenses, at an annual rate not to exceed
0.15% of Class A average daily net assets and 1.00% of Class B and Class C
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.
14
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - Money Market Fund
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.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities, other
than obligations of the U.S. government and its agencies, during the period
ended September 30, 1998, aggregated $15,109,333,214 and $14,898,239,597,
respectively. Purchases and proceeds from maturities of obligations of the U.S.
government and its agencies aggregated $80,934,326 and $84,480,000,
respectively, during the period ended September 30, 1998.
The cost of investments owned at September 30, 1998 for federal income
tax purposes was $605,810,239.
15
<PAGE>
================================================================================
---------------
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A Global Investment Management Firm U.S. Postage
PAID
101 Huntington Avenue, Boston, MA 02199-7603 Randolph, MA
1-800-755-4371 1-800-554-6713 (TDD) Permit No. 75
Internet: www.jhancock.com/funds ---------------
- --------------------------------------------------------------------------------
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 polices.
[Recycle Logo] Printed on Recycled Paper
44OSA 9/98
11/98
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
U.S.
Government
Cash Reserve
SEPTEMBER 30, 1998
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
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 and Chief Operating Officer
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
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 02109-1803
<PAGE>
===========================CHAIRMAN'S MESSAGE===================================
DEAR FELLOW SHAREHOLDERS:
An often-used analogy for stock market performance over the short term is a
roller coaster. That is because, while long-term history suggests the market's
general direction is up, its swings over the short term can be dramatic and, at
times, violent. Recently, the market has given us a stark example of this
phenomenon. From the new highs set in mid-July, the major indices plunged by 15%
through the end of September. It was the worst such fall since 1990. For the
first time in a number of years, some bonds and bond mutual funds outperformed
stocks and stock mutual funds. Seeking safety in a world of global economic
uncertainties, investors everywhere converged on U.S. Treasury bonds and pushed
their yields to historic lows.
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
For the record-breaking number of investors who have entered the market
for the first time since 1990, it was their worst taste of stock market reality.
We are pleased to report that most individual investors did not panic, and we
hope that means they've taken our words to heart. Over the long term, markets do
not move up or down in a straight line. That's why after watching the market
charge ahead almost uninterrupted for so many years, we have been striking a
more cautionary stance in this space over the last several months.
Analysts are still pondering whether the global turmoil and the
prospects for slower U.S. economic and corporate earnings growth are signs that
the long bull market has finally run its course. While we don't make a practice
of opining on what the market will do next, we continue to believe it would be
wise for investors to set more realistic expectations. Over the long term, the
market's historical results have been more in the 10% per year range, which is
still a solid result, considering it has been produced despite wars, depressions
and other social upheavals along the way.
There is no doubt, however, that the market's heightened volatility and
recent dramatic moves have been cause for concern. In these uncertain times, it
becomes even harder to remember to "stay the course" and stick to your long-term
investment plan. But this remains the essential tenet of successful investing.
Now could also be a good time to review your asset allocation with your
investment professional, keeping in mind that the last six months' divergence in
performance of stocks and high-quality bonds is a perfect example of why all
your eggs shouldn't be in one basket.
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
U.S. Government
Cash Reserve
Money market funds provide safety and
competitive yields in volatile market
Money market funds turned in competitive results over the last six months, as
investors sought safe havens from growing economic turmoil in Asia, Russia and
other emerging markets. Right from the start of the period in April, the
financial markets became increasingly volatile, and reached fever pitch in
August after Russia's debt default and currency devaluation. In a global flight
from financial risk, investors fled all but the safest securities, causing stock
markets worldwide to plummet. As a result, U.S. Treasury bonds' prices soared,
and yields, which move in the opposite direction from prices, fell. In
particular, the bellwether 30-year Treasury bond's yield fell to 5.0% by the end
of September, the first time it was that low in more than 30 years. Investors
also fled to another safe haven-money market securities - driving their prices
up and yields down. But long-term interest rates fell more, to levels that were
lower than the yields on shorter-term securities - a rare occurrence known as an
inverted yield curve. The result was that money market funds were able to
provide investors with both a very competitive return and safety.
[A 3 3/4" x 2 1/4" photo at bottom of page of fund management team members.
Caption below reads "Fund management team members (l - r): Jeff Given, Dawn
Baillie, Bill Larkin, Jr. and Barry Evans."]
The global turmoil also prompted the Federal Reserve to reverse course
and lower the federal funds rate by one quarter percentage point to 5.25% on
September 29. The federal funds rate is the rate banks charge each other for
overnight loans, and it is also a key pricing benchmark for money market
securities. Until now, the Fed's recent bias had been toward raising rates to
prevent inflation in the face of a strong U.S. economy and low unemployment.
However, its inflation concerns have since been overshadowed by a desire to ease
the potential for the overseas slowdown to serve as a drag on the U.S. economy.
"Money market funds turned in competitive results..."
3
<PAGE>
================================================================================
John Hancock Funds - U.S. Government Cash Reserve
"...the prospect for U.S. interest rates to fall further remains real."
[Bar chart at top of left hand column with the heading "7-Day Effective Yield".
Under the heading is a note that reads "As of September 30, 1998". The chart is
scaled in increments of 2% with 0% at the bottom and 6% at the top. The first
bar represents the 5.25% total return for John Hancock U.S. Government Cash
Reserve. The second bar represents the 4.85% total return for Average U.S.
government money market fund. A note below the chart reads "The average U.S.
government money market fund is tracked by Lipper Analytical Services, Inc. Past
performance is no guarantee of future results."]
On September 30, 1998, John Hancock U.S. Government Cash Reserve had a
7-day effective yield of 5.25%. By comparison, the average U.S. government money
market fund had a 7-day effective yield of 4.85%, according to Lipper Analytical
Services, Inc.
Long and short maturity
We kept the Fund's average maturity approximately five days longer than its
peers' during the period. This more aggressive strategy was based on our ongoing
belief that the Fed would not raise interest rates, given the potential for a
slowing economy. With interest rates staying low, and potentially falling more,
we wanted to lock in higher yields by lengthening our maturity. Although our
maturity was longer than our peers', overall the Fund's average maturity
shortened by about 15 days. This might seem like a paradox, since shortening
maturity does not normally get us better yield in a falling rate environment.
But the situation this period was anything but normal. In this rare moment when
the short-term federal funds rate remained unchanged while longer-term rates
fell below it, we were able to maintain a higher yield by staying shorter. We
did this by keeping a larger portion than usual of the Fund's assets in
overnight money market securities pegged directly to the federal funds rate.
This strategy helped us keep the Fund's yield approximately the same from the
beginning of the period to the end.
A look ahead
With investor uncertainty abounding and global economies still struggling, the
prospect for U.S. interest rates to fall further remains real. Even though the
U.S. economy remains vibrant, with the lowest unemployment rate in years, the
Fed is now less concerned about inflation. Indeed, many analysts have already
concluded that if global turmoil persists, the Federal Reserve will lower
short-term rates even more to help the U.S. economy ward off the effects of
slower global growth. In this environment, we'll keep our maturity longer than
average until we get closer to year end, when technical market considerations
always cause us to briefly shorten maturity to take advantage of buying
opportunities. As always, we maintain our focus on providing shareholders with a
competitive level of current income, 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 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 - 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, 1998. 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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments, in money market instruments,
at value - Note C:
U.S. government obligations (cost - $84,647,539) ............. $84,647,539
Joint repurchase agreement (cost - $14,143,000) .............. 14,143,000
-------------
98,790,539
Cash ............................................................ 635
Interest receivable ............................................. 911,962
Other assets .................................................... 17,015
-------------
Total Assets ................................. 99,720,151
_____________________________________________________________
Liabilities:
Payable for investments purchased ............................. 76,449
Dividend payable .............................................. 14,986
Payable to John Hancock Advisers, Inc. ........................
and affiliates- Note B ....................................... 28,602
Accounts payable and accrued expenses ......................... 27,174
-------------
Total Liabilities ............................ 147,211
_____________________________________________________________
Net Assets:
Capital paid-in ................................................ 99,572,940
-------------
Net Assets ................................... $99,572,940
=============================================================
Net Asset Value, Offering Price and
Redemption Price Per Share:
(Based on 99,572,940 shares of beneficial interest
outstanding-unlimited number of shares authorized
with $0.01 per share par value).................................. $1.00
================================================================================
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, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest ............................................... $ 2,405,310
Expenses:
Investment management fee - Note B .................... 215,604
Transfer agent fee - Note B ........................... 36,793
Custodian fee .......................................... 20,260
Registration and filing fees ........................... 13,590
Auditing fee ........................................... 10,027
Financial services fee - Note B ....................... 6,897
Printing ............................................... 5,031
Trustees' fees ......................................... 3,448
Legal fees ............................................. 1,021
Miscellaneous .......................................... 835
Total Expenses .................... 313,506
---------------------------------------------------------
Less Expense Reductions -
Note B ............................ (161,807)
---------------------------------------------------------
Net Expenses ...................... 151,699
---------------------------------------------------------
Net Investment Income ............. 2,253,611
---------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ......... $ 2,253,611
=========================================================
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - U.S. Government Cash Reserve
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1998
MARCH 31, 1998 (UNAUDITED)
----------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ............................................................ $ 3,490,309 $ 2,253,611
------------- -------------
Distributions to Shareholders:
Dividends from net investment income ($0.0536 and $0.0262 per share, respectively) (3,490,309) (2,253,611)
------------- -------------
From Fund Share Transactions - Net: * ............................................ 19,126,284 25,125,463
------------- -------------
Net Assets:
Beginning of period .............................................................. 55,321,193 74,447,477
------------- -------------
End of period .................................................................... $ 74,447,477 $ 99,572,940
============= =============
* Analysis of Fund Share Transactions at $1 Per Share:
Shares sold ...................................................................... $ 293,684,385 $ 112,585,354
Shares issued to shareholders in reinvestment of distributions ................... 3,240,503 2,105,535
------------- -------------
296,924,888 114,690,889
Less shares repurchased .......................................................... (277,798,604) (89,565,426)
------------- -------------
Net increase ..................................................................... $ 19,126,284 $ 25,125,463
============= =============
</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 two
periods.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
==========================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:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIOD FROM SIX MONTHS ENDED
YEAR ENDED MAY 31, JUNE 1, 1996 YEAR ENDED SEPTEMBER 30,
_______________________________ TO MARCH 31, MARCH 31, 1998
1993 1994 1995(1) 1996 1997(5) 1998 (UNAUDITED)
-------- -------- -------- ------- -------- -------- -----------
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................................. 0.03 0.03 0.05 0.05 0.04 0.05 0.03
-------- -------- ------- ------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income.................. (0.03) (0.03) (0.05) (0.05) (0.04) (0.05) (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)......... 3.25% 3.04% 5.07% 5.59% 4.37%(6) 5.43% 2.62%(6)
Total Adjusted Investment Return at
Net Asset Value(2,3).................................. 2.93% 2.74% 4.69% 4.84% 3.93%(6) 5.02% 2.43%(6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)............ $123,106 $94,408 $29,131 $28,907 $55,321 $74,447 $99,573
Ratio of Expenses to Average Net Assets............... 0.35% 0.35% 0.35% 0.35% 0.35%(7) 0.35% 0.35%(7)
Ratio of Adjusted Expenses to Average Net Assets(4)... 0.67% 0.65% 0.73% 1.10% 0.88%(7) 0.76% 0.73%(7)
Ratio of Net Investment Income to Average Net Assets.. 3.19% 2.96% 4.79% 5.41% 5.15%(7) 5.30% 5.23%(7)
Ratio of Adjusted Net Investment Income to Average
Net Assets(4)...................................... 2.87% 2.66% 4.41% 4.66% 4.62%(7) 4.89% 4.85%(7)
</TABLE>
(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 end changed from May 31 to
March 31.
(6) Not annualized.
(7) Annualized.
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 - U.S. Government Cash Reserve
Schedule of Investments
September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by U.S.
Government Cash Reserve on September 30, 1998. 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 -D U.S. Agencies (85.01%)
Federal Farm Credit Bank,
10-01-98..................................... 5.530% $150 $150,000
Federal Farm Credit Bank,
11-02-98..................................... 5.353* 3,000 2,999,553
Federal Farm Credit Bank,
03-25-99..................................... 7.550 150 151,331
Federal Home Loan Bank,
10-01-98..................................... 5.400 25,000 25,000,000
Federal Home Loan Bank,
10-08-98 #................................... 5.750 2,000 2,000,000
Federal Home Loan Bank,
10-28-98..................................... 4.960 1,100 1,099,403
Federal Home Loan Bank,
11-25-98..................................... 9.250 2,170 2,181,111
Federal Home Loan Bank,
01-25-99..................................... 9.300 1,500 1,516,454
Federal Home Loan Bank,
02-26-99..................................... 5.450 275 274,709
Federal Home Loan Bank,
03-02-99..................................... 5.610 6,000 6,000,000
Federal Home Loan Mortgage Corp.,
01-25-99..................................... 5.340 120 119,848
Federal National Mortgage Association,
10-09-98..................................... 6.010 100 100,001
Federal National Mortgage Association,
10-13-98 #................................... 6.375 500 500,103
Federal National Mortgage Association,
10-14-98 #................................... 6.240 1,200 1,200,252
Federal National Mortgage Association,
10-15-98..................................... 4.875 1,500 1,499,537
Federal National Mortgage Association,
10-23-98..................................... 5.380* 5,130 5,128,934
Federal National Mortgage Association,
10-26-98..................................... 4.750 1,620 1,618,994
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - U.S. Government Cash Reserve
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
<S> <C> <C> <C>
Governmental - U.S. Agencies (continued)
Federal National Mortgage Association,
11-10-98..................................... 5.050% $400 $399,668
Federal National Mortgage Association,
11-20-98..................................... 5.660 595 594,951
Federal National Mortgage Association,
12-21-98..................................... 5.820 50 49,963
Federal National Mortgage Association,
02-23-99..................................... 5.410 748 746,830
Federal National Mortgage Association,
02-26-99..................................... 5.370 275 274,623
Federal National Mortgage Association,
05-05-99..................................... 5.630 1,000 999,615
Federal National Mortgage Association,
05-10-99..................................... 6.240 1,000 1,003,448
Federal National Mortgage Association,
06-24-99..................................... 6.600 985 991,572
Private Export Funding Corp.,
10-30-98..................................... 9.100 1,500 1,503,898
Private Export Funding Corp.,
03-31-99..................................... 9.500 75 76,429
Student Loan Marketing Association,
11-10-98..................................... 4.733* 5,000 4,998,603
Student Loan Marketing Association,
12-16-98 #................................... 5.510 10,000 10,000,000
Student Loan Marketing Association,
12-17-98..................................... 5.740 670 670,102
Student Loan Marketing Association,
01-25-99..................................... 7.723 800 805,010
Student Loan Marketing Association,
02-22-99..................................... 4.743* 10,000 9,992,597
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $84,647,539) (85.01%) 84,647,539
-------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
============================FINANCIAL STATEMENTS================================
John Hancock Funds - U.S. Government Cash Reserve
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
<S> <C> <C> <C>
JOINT REPURCHASE AGREEMENT (14.20%)
Investment in a joint repurchase agreement transaction
with Toronto Dominion Securities USA,
Inc.- Dated 09-30-98,
due 10-01-98 (Secured by U.S. Treasury Bond, 8.875%,
due 02-15-19 and U.S. Treasury Notes, 5.75% thru 7.50%,
due 01-15-00 thru 11-15-01)- Note A..................... 5.580% $14,143 $14,143,000
----------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $14,143,000) (14.20%) 14,143,000
-------- ----------
TOTAL INVESTMENTS (99.21%) 98,790,539
-------- ----------
OTHER ASSETS AND LIABILITIES, NET (0.79%) 782,401
-------- ----------
TOTAL NET ASSETS (100.00%) $99,572,940
======== ==========
* Floating rate note. Stated interest rate in effect as of September 30, 1998.
# 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
========================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,
Inc., 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's net investment income is declared daily as dividends to
shareholders of record as of the close of business on the preceding day and
distributed monthly.
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 size 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 unsecured
lines of credit with banks which permit borrowings up to $1 billion,
collectively. The Fund is permitted to borrow only from the uncommitted portion
of the unsecured lines of credit, which totals $500 million. 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 rates ranging from 0.070% to
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, 1998.
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% of
the average daily net asset value in excess of $2,500,000,000.
11
<PAGE>
========================NOTES TO FINANCIAL STATEMENTS===========================
John Hancock Funds - U.S. Government Cash Reserve
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. Accordingly, for the period ended September 30, 1998, 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 $161,807. 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. Payment 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 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 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.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturity of securities, including discount
earned on investment securities, during the period ended September 30, 1998,
aggregated $2,167,368,633 and $2,145,726,487, respectively.
The cost of investments owned at September 30, 1998 (including the
joint repurchase agreement) for federal income tax purposes was $98,790,539.
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
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- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
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objectives and operating polices.
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