ANNUAL REPORT
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[GRAPHIC OMITTED]
Money Market
Fund
MARCH 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
----------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
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
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
-----------------------------------------
================================CHAIRMAN'S MESSAGE==============================
DEAR FELLOW SHAREHOLDERS:
The stock market continues to show its resilience. At the end of March,
the Dow Jones Industrial Average reached a new high and broke an important
psychological barrier by passing the 10,000 mark. This feat was particularly
impressive since just six months earlier last August and September - the
volatile market had tumbled from its July highs to the edge of what appeared to
many as bear-market territory.
In the last six months, investor sentiment has fluctuated dramatically,
going from fears of global economic meltdown last fall, to today's euphoria at
the strength of the U.S. economy and surprisingly solid earnings reports. As has
often been the case in recent years, high-growth technology stocks grabbed most
of the headlines during the market's latest advance. Large-capitalization growth
stocks have also continued their domination over small-cap stocks, many of which
have been out of favor with investors for three years and remain so - at least
for now.
- --------------------------------------------------------------------------------
[A 1" x 1 1/2" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
Once again, the market's latest moves are a reminder that successful
investing is a long-term proposition. History shows that despite several
well-known exceptions, the general direction of the market has been up. Indeed,
the axiom that "the market climbs a wall of worry" is being borne out once again
in the face of our contemporary political scandals and military crises. Concerns
will always be with us. But an investment strategy that properly aligns one's
goals with one's tolerance for risk is the sensible way to plan for the future.
We encourage you to work with your investment professional to make sure your
personal portfolio is thoughtfully allocated among stocks, bonds and money
market investments. This strategy could help you weather any short-term
uncertainties and still capitalize on any pleasant surprises the market might
offer.
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 yields fall after Federal Reserve cuts interest rates
------------------------------------------------------------------
Money-market yields fell along with interest rates over the last 12 months, as
the Federal Reserve took steps to prevent the healthy U.S. economy from
stalling. The Fed was reacting to growing economic turmoil that started in Asia
and moved to Russia and Latin America in 1998. As the year progressed, concerns
mounted that the slowdowns overseas would stunt corporate profit growth at home
and put the brakes on the vibrant U.S. economy. Investors' fears reached a fever
pitch last August when Russia's debt default and currency devaluation sent stock
markets plunging worldwide. In response, the Fed lowered the federal funds rate
three times between late September and November, which helped stabilize
financial markets worldwide.
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Money
Market Fund. Caption below reads "Money Market Fund management team (l-r):
"Barry Evans, Dawn Baillie and Bill Larkin, Jr."]
- --------------------------------------------------------------------------------
The Fed's actions brought the federal funds rate (the rate banks charge
each other for overnight loans) down by a total of 0.75% to 4.75%. It also
caused money market yields to fall, because the federal funds rate serves as a
key pricing benchmark for money-market securities. Until this point, the Fed had
been more inclined to raise interest rates to prevent a spike in inflation in
response to the strong U.S. economy and low unemployment. But unlike other
economic cycles, the low unemployment and wage gains did not re-ignite
inflation, and the Fed's inflation-fighting instincts became overshadowed by its
desire to ease the potential for overseas slowdowns to serve as a drag on the
U.S. economy. Any bias toward further "easing" was muted in the first three
months of 1999, however, as the U.S. economy continued to chug along at a very
healthy rate. By the end of March, the Federal Reserve had moved back to a
neutral stance, with no bias toward what its next step would be.
"Throughout most of the year, we kept the Fund's maturity slightly longer than
average..."
3
<PAGE>
================================================================================
John Hancock Funds - Money Market Fund
"The countervailing forces at work on the market appear likely to keep the Fed
on the sidelines..."
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "7-Day Effective Yield".
Under the heading is a note that reads "As of March 31, 1999." The chart is
scaled in increments of 2% with 0% at the bottom and 6% at the top. The first
bar represents the 4.06% total return for John Hancock Money Market Fund Class
A. The second bar represents the 3.18% total return for John Hancock Money
Market Fund Class B. The third bar represents the 3.18% total return for John
Hancock Money Market Fund Class C. The fourth bar represents the 4.21% total
return for Average taxable money market fund. A note below the chart reads "The
average taxable money market fund is tracked by Lipper, Inc. Past performance is
no guarantee of future results."]
- --------------------------------------------------------------------------------
On March 31, 1999, John Hancock Money Market Fund's Class A, Class B
and Class C shares had 7-day effective yields of 4.06%, 3.18% and 3.18%,
respectively. By comparison, the average taxable money-market fund had a 7-day
effective yield of 4.21%, according to Lipper, Inc.
Long maturity, corporate issues
Throughout most of the year, we kept the Fund's maturity slightly longer than
average - in the mid 50-day range - based on our ongoing belief that the Fed
would not raise interest rates, given the potential for a slowing economy. As
the turmoil grew and it became more likely that the Fed would in fact lower
rates, we became even more intent on extending the Fund's maturity to lock in
higher yields before rates fell. Given our comfort level with the robust economy
and its positive effects on corporate well-being, we also focused more on
short-dated corporate securities, which carry a yield advantage over commercial
paper.
A look ahead
The countervailing forces at work on the market appear likely to keep the Fed on
the sidelines until at least the second half of the year. On the one hand, the
U.S. economy continues to produce its robust growth, which could at any moment
provoke inflation. On the other, although overseas markets have stabilized, the
U.S. economy remains susceptible to ongoing weakness overseas in countries like
Japan and Russia.
For now, we'll keep the Fund's maturity longer than average until there
are signs that the Fed is inclined to raise rates to prevent the economy from
overheating. In that instance, we would shorten our maturity to be better
positioned to buy higher-yielding securities. We'll continue to monitor the
monthly economic data for clues about the U.S. economy's strength. As always,
we'll stay focused on providing a competitive level of current income, while
preserving 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. Although the
Fund seeks to maintain a net asset value of $1.00 per share, it is possible to
lose money by investing in the Fund.
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 March 31, 1999. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
March 31, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, in money market instruments,
at value - Note C:
Commercial paper (cost - $146,385,226).................... $146,385,226
Corporate interest-bearing obligations
(cost - $45,229,253)...................................... 45,229,253
U.S. government obligations (cost - $277,166,601)......... 277,166,601
Joint repurchase agreement (cost - $86,437,000)........... 86,437,000
---------------
555,218,080
Cash....................................................... 515
Receivable for shares sold ................................ 43,213
Interest receivable........................................ 2,727,899
Other assets............................................... 54,966
---------------
Total Assets ....................... 558,044,673
-----------------------------------------------------
Liabilities:
Payable for shares repurchased............................. 470,191
Dividend payable........................................... 49,375
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................. 316,010
Accounts payable and accrued expenses...................... 166,872
---------------
Total Liabilities................... 1,002,448
-----------------------------------------------------
Net Assets:
Capital paid-in............................................ 557,042,225
---------------
Net Assets.......................... $557,042,225
=====================================================
Net Asset Value 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 - $373,633,709/373,712,883........................ $1.00
===========================================================================
Class B - $182,061,531/182,080,044 ....................... $1.00
===========================================================================
Class C* - $1,346,985/1,346,985........................... $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
Year ended March 31, 1999
- --------------------------------------------------------------------------------
Investment Income:
Interest................................................... $26,365,168
------------
Expenses:
Investment management fee - Note B........................ 2,466,099
Distribution and service fee - Note B
Class A.................................................. 857,286
Class B.................................................. 1,497,962
Class C.................................................. 5,093
Transfer agent fee - Note B .............................. 1,270,510
Registration and filing fees.............................. 216,418
Custodian fee............................................. 113,636
Financial services fee - Note B........................... 74,478
Trustees' fees............................................ 35,719
Auditing fee ............................................. 34,746
Printing.................................................. 23,209
Miscellaneous............................................. 9,150
Legal fees................................................ 4,744
-----------
Total Expenses................ 6,609,050
-----------------------------------------------
Less Expense Reductions -
Note B ....................... (836,135)
-----------------------------------------------
Net Expenses ................. 5,772,915
-----------------------------------------------
Net Investment Income ........ 20,592,253
-----------------------------------------------
Net Increase in Net Assets
Resulting from Operations .... $20,592,253
===============================================
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Money Market Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------
1998 1999
-------- --------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ........................ $18,341,303 $20,592,253
------------- -------------
Distributions to Shareholders:
Distributions from net investment income
Class A - ($0.0482 and $0.0445 per share,
respectively)............................... (14,426,990) (15,252,899)
Class B - ($0.0397 and $0.0360 per share,
respectively)................................ (3,914,313) (5,321,711)
Class C** - (none and $0.0323 per share,
respectively)................................ - (17,643)
------------- -------------
Total Distributions to Shareholders.......... (18,341,303) (20,592,253)
------------- -------------
From Fund Share Transactions - Net: * ......... (95,720,210) 163,253,446
------------- -------------
Net Assets:
Beginning of period .......................... 489,508,989 393,788,779
------------- -------------
End of period................................. $393,788,779 $557,042,225
============= =============
* Analysis of Fund Share Transactions at $1 Per Share:
CLASS A
Shares sold................................... $3,870,818,878 $4,384,953,074
Shares reinvested............................. 12,110,373 12,884,455
-------------- --------------
3,882,929,251 4,397,837,529
Less shares repurchased....................... (3,929,619,558) (4,336,966,087)
-------------- --------------
Net increase (decrease)....................... ($46,690,307) $60,871,442
============== ==============
CLASS B
Shares sold................................... $619,548,975 $577,227,808
Shares reinvested ............................ 3,015,287 4,300,006
-------------- --------------
622,564,262 581,527,814
Less shares repurchased....................... (671,594,165) (480,492,795)
-------------- --------------
Net increase (decrease)....................... ($49,029,903) $101,035,019
============== ==============
CLASS C **
Shares sold .................................. - $3,247,356
Shares reinvested............................. - 12,504
-------------- --------------
- 3,259,860
Less shares repurchased ...................... - (1,912,875)
-------------- --------------
Net increase.................................. - $1,346,985
============== ==============
** Class C shares commenced operations on May 1, 1998.
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>
FOR THE PERIOD
SEPTEMBER 12, 1995 PERIOD FROM
(COMMENCEMENT OF YEAR ENDED NOVEMBER 1, 1996 YEAR ENDED MARCH 31,
OPERATIONS) TO OCTOBER 31, TO MARCH 31, -----------------------
OCTOBER 31, 1995 1996 1997(5) 1998 1999
---------------- ---------- ------------ -------- --------
<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 0.04
--------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net Investment Income .............. (0.01) (0.05) (0.02) (0.05) (0.04)
--------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period..................... $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Total Investment Return at Net Asset Value (2)..... 0.64%(3) 4.56% 1.80%(3) 4.92% 4.54%
Total Adjusted Investment Return at
Net Asset Value (2,6)............................. 0.54%(3) 4.36% 1.60%(3) 4.72% 4.34%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)........... $20,942 $262,475 $359,453 $312,762 $373,634
Ratio of Expenses to Average Net Assets............ 1.07%(4) 1.17% 1.10%(4) 0.89% 0.91%
Ratio of Adjusted Expenses to Average Net Assets (7) 1.17%(4) 1.37% 1.30%(4) 1.09% 1.11%
Ratio of Net Investment Income to Average Net Assets 4.94%(4) 4.41% 4.44%(4) 4.82% 4.44%
Ratio of Adjusted Net Investment Income to
Average Net Assets (7)............................ 4.84%(4) 4.21% 4.24%(4) 4.62% 4.24%
PERIOD FROM
YEAR ENDED OCTOBER 31, NOVEMBER 1, 1996 YEAR ENDED MARCH 31,
---------------------------------------- TO MARCH 31, ----------------------
1994 1995(1) 1996 1997(5) 1998 1999
--------- --------- -------- ---------- ---------- ---------
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 0.04 0.04 0.01 0.04 0.04
--------- --------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net Investment Income ............ (0.02) (0.04) (0.04) (0.01) (0.04) (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)... 1.87% 4.07% 3.71% 1.45%(3) 4.04% 3.66%
Total Adjusted Investment Return at
Net Asset Value (2,6).......................... - - 3.61% 1.35%(3) 3.94% 3.56%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)......... $58,366 $54,313 $108,162 $130,056 $81,027 $182,062
Ratio of Expenses to Average Net Assets ......... 2.06% 1.92% 2.00% 1.96%(4) 1.74% 1.76%
Ratio of Adjusted Expenses to
Average Net Assets (7).......................... - - 2.10% 2.06%(4) 1.84% 1.86%
Ratio of Net Investment Income to
Average Net Assets.............................. 1.97% 3.96% 3.58% 3.60%(4) 3.97% 3.54%
Ratio of Adjusted Net Investment Income to
Average Net Assets (7).......................... - - 3.48% 3.50%(4) 3.87% 3.44%
</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
MARCH 31, 1999
--------------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period......................... $1.00
----------
Net Investment Income........................................ 0.03
----------
Less Distributions:
Dividends from Net Investment Income......................... (0.03)
----------
Net Asset Value, End of Period............................... $1.00
==========
Total Investment Return at Net Asset Value (2)............... 3.29%(3)
Total Adjusted Investment Return at Net Asset Value (2,6).... 3.19%(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)..................... $1,347
Ratio of Expenses to Average Net Assets...................... 1.75%(4)
Ratio of Adjusted Expenses to Average Net Assets (7)......... 1.85%(4)
Ratio of Net Investment Income to Average Net Assets ........ 3.46%(4)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7)..................................... 3.36%(4)
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(2) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(3) Not annualized.
(4) Annualized.
(5) Effective March 31, 1997, the fiscal period end changed from October 31 to
March 31.
(6) An estimated total return calculation that does not take into consideration
fee reductions by the Adviser during the periods shown.
(7) Unreimbursed, without fee reduction.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Money Market Fund
Schedule of Investments
March 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Money
Market Fund on March 31, 1999. It's divided into four types of short-term
investments. The categories of short-term investments are further broken down by
industry group.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Automobile/Trucks (4.46%)
General Motors Acceptance Corp.,
05-20-99..................................... 4.800% Tier 1 $25,000 $24,836,667
-----------
Beverages (4.28%)
Coca-Cola Co.,
05-24-99..................................... 4.790 Tier 1 24,000 23,830,753
-----------
Broker Services (8.60%)
Bear Stearns Cos., Inc.,
04-05-99 .................................... 4.810 Tier 1 23,000 22,987,708
Merrill Lynch & Co., Inc.,
04-26-99 .................................... 4.830 Tier 1 25,000 24,916,146
-----------
47,903,854
-----------
Mortgage Banking (4.46%)
Countrywide Home Loans,
05-20-99..................................... 4.870 Tier 1 25,000 24,834,285
-----------
Utilities (4.48%)
Bell Atlantic Network Funding,
04-07-99..................................... 4.880 Tier 1 25,000 24,979,667
-----------
TOTAL COMMERCIAL PAPER
(Cost $146,385,226) (26.28%) 146,385,226
-------- -----------
CORPORATE INTEREST-BEARING OBLIGATIONS
Automotive (0.45%)
Chrysler Financial Corp.,
06-17-99 .................................... 6.350 Tier 1 2,500 2,506,703
----------
Banking - U.S.(0.20%)
Security Pacific Corp.,
05-15-99..................................... 9.750 Tier 1 1,100 1,105,009
----------
Banking - Foreign (0.90%)
Abbey National Treasury Services,
06-11-99 .................................... 5.720 Tier 1 5,000 5,005,933
----------
Finance (3.87%)
Household Finance Corp.,
06-01-99..................................... 7.750 Tier 1 2,000 2,009,086
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Money Market Fund
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
Finance (continued)
International Business Machines Credit Corp.,
09-22-99 .................................... 6.000% Tier 1 $16,460 $16,531,811
NYNEX Capital Funding Co.,
07-19-99 .................................... 7.610 Tier 1 3,000 3,016,609
----------
21,557,506
----------
Food (0.36%)
Heinz (H.J. Heinz) Co.,
10-15-99 .................................... 6.750 Tier 1 2,000 2,016,749
----------
Machinery (0.90%)
John Deere Capital Corp.,
06-01-99..................................... 6.300 Tier 1 5,000 5,011,219
----------
Mortgage Banking (0.54%)
American General Finance Corp.,
06-25-99 .................................... 7.390 Tier 1 3,000 3,015,534
----------
Retail Stores (0.54%)
Penny (J.C.) Co., Inc.,
06-15-99 .................................... 6.875 Tier 1 3,000 3,006,774
----------
Utilities (0.36%)
Duke Power Co.,
07-08-99 .................................... 5.780 Tier 1 2,000 2,003,826
----------
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS
(Cost $45,229,253) (8.12%) 45,229,253
-------- ----------
U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (49.75%)
Federal Home Loan Bank,
04-27-99 #................................... 4.920 Tier 1 30,000 30,000,000
Federal Home Loan Bank,
04-28-99 # .................................. 5.000 Tier 1 35,000 34,999,473
Federal Home Loan Bank,
05-26-99 # .................................. 5.025 Tier 1 10,000 9,997,103
Federal Home Loan Bank,
05-26-99 # .................................. 5.050 Tier 1 25,000 25,000,000
Federal Home Loan Bank,
06-01-99 #................................... 5.050 Tier 1 20,000 20,000,000
Federal Home Loan Bank,
06-08-99 # .................................. 5.140 Tier 1 20,000 20,000,000
Federal Home Loan Bank,
07-30-99..................................... 5.600 Tier 1 2,000 2,002,135
Federal Home Loan Bank,
10-08-99..................................... 5.070 Tier 1 17,000 16,997,235
Federal Home Loan Bank,
03-17-00..................................... 5.230 Tier 1 12,180 12,170,655
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
=============================FINANCIAL STATEMENTS===============================
John Hancock Funds - Money Market Fund
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
Governmental - U.S. Agencies (continued)
Student Loan Marketing Association,
04-01-99..................................... 4.800% Tier 1 $100,000 $100,000,000
Student Loan Marketing Association,
01-19-00 .................................... 5.051 Tier 1 6,000 6,000,000
---------------
277,166,601
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $277,166,601) (49.75%) 277,166,601
----------- ---------------
JOINT REPURCHASE AGREEMENT (15.52%)
Investment in a joint repurchase
agreement transaction with
ABN AMRO, Inc. - Dated 03-31-99,
due 04-01-99 (Secured by U.S. Treasury
Bonds, 8.875% due 08-15-17, 11.25%
due 02-15-15, and U.S. Treasury Note,
6.625% due 05-15-07) - Note A ............... 4.900 86,437 86,437,000
---------------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $86,437,000) (15.52%) 86,437,000
--------- ---------------
TOTAL INVESTMENTS (99.67%) 555,218,080
--------- ---------------
OTHER ASSETS AND LIABILITIES, NET (0.33%) 1,824,145
--------- ---------------
TOTAL NET ASSETS (100.00%) $557,042,225
========= ===============
</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.
# Call date.
The percentage shown for each investment category is the total value of that
category expressed as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - Money Market Fund
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
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 of 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'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. 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
12
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - Money Market Fund
estimates made by management in determining the reported amounts of assets,
liabilities, revenues and expenses of the Fund. Actual results could differ from
these estimates.
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. Accordingly, for the year ended March 31, 1999, the reduction in the
Fund's management fee amounted to $493,220.
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. Accordingly, for the year ended
March 31, 1999, contingent deferred sales charges paid to JH Funds amounted to
$1,330,922.
Class C shares which are redeemed within one year of purchase 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. Accordingly, for the
year ended March 31, 1999, contingent deferred sales charges paid to JH Funds
amounted to $4,884.
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
0.25% 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. Accordingly, for the year ended March 31, 1999, the reduction
in the Fund's 12b-1 expense amounted to $342,915. 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 less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, 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
13
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - Money Market Fund
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 year ended
March 31, 1999, aggregated $44,141,268,245 and $44,149,147,844, respectively.
Purchases and proceeds from maturities of obligations of the U.S. government and
its agencies aggregated $409,568,852 and $246,730,000, respectively, during the
year ended March 31, 1999.
The cost of investments owned at March 31, 1999 (including the joint
repurchase agreement) for federal income tax purposes was $555,218,080.
14
<PAGE>
================================================================================
John Hancock Funds - Money Market Fund
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,
1999, and the related statement of operations for the year then ended, 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, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the John Hancock Money Market Fund portfolio of John Hancock Current
Interest at March 31, 1999, the results of its operations for the year then
ended, 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
- --------------------
Ernst & Young LLP
Boston, Massachusetts
May 7, 1999
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,
1999.
All of the dividends paid for the fiscal year are taxable as ordinary
income. None of the dividends qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1999 U.S. Treasury Department Form
1099-DIV in January of 2000. This will reflect the total of all distributions
which are taxable for calendar year 1999.
15
<PAGE>
================================================================================
[LOGO] JOHN HANCOCK FUNDS ---------------
A Global Investment Management Firm Bulk Rate
U.S. Postage
101 HUNTINGTON AVENUE, BOSTON, MA 02199-7603 PAID
1-800-225-5291 1-800-554-6713 (TDD) Randolph, MA
INTERNET: www.jhancock.com/funds Permit No. 75
---------------
- --------------------------------------------------------------------------------
This reoprt 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.
[LOGO] Printed on Recycled Paper 4400A 3/99
5/99
<PAGE>
ANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
U.S.
Government
Cash Reserve
MARCH 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
------------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
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
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
-----------------------------------------
==============================CHAIRMAN'S MESSAGE================================
DEAR FELLOW SHAREHOLDERS:
The stock market continues to show its resilience. At the end of March,
the Dow Jones Industrial Average reached a new high and broke an important
psychological barrier by passing the 10,000 mark. This feat was particularly
impressive since just six months earlier - last August and September - the
volatile market had tumbled from its July highs to the edge of what appeared to
many as bear-market territory.
In the last six months, investor sentiment has fluctuated dramatically,
going from fears of global economic meltdown last fall, to today's euphoria at
the strength of the U.S. economy and surprisingly solid earnings reports. As has
often been the case in recent years, high-growth technology stocks grabbed most
of the headlines during the market's latest advance. Large-capitalization growth
stocks have also continued their domination over small-cap stocks, many of which
have been out of favor with investors for three years and remain so - at least
for now.
- --------------------------------------------------------------------------------
[A 1" x 1 1/2" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
Once again, the market's latest moves are a reminder that successful
investing is a long-term proposition. History shows that despite several
well-known exceptions, the general direction of the market has been up. Indeed,
the axiom that "the market climbs a wall of worry" is being borne out once again
in the face of our contemporary political scandals and military crises. Concerns
will always be with us. But an investment strategy that properly aligns one's
goals with one's tolerance for risk is the sensible way to plan for the future.
We encourage you to work with your investment professional to make sure your
personal portfolio is thoughtfully allocated among stocks, bonds and money
market investments. This strategy could help you weather any short-term
uncertainties and still capitalize on any pleasant surprises the market might
offer.
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 yields fall after Federal Reserve cuts interest rates
Money-market yields fell along with interest rates over the last 12 months, as
the Federal Reserve took steps to prevent the healthy U.S. economy from
stalling. The Fed was reacting to growing economic turmoil that started in Asia
and moved to Russia and Latin America in 1998. As the year progressed, concerns
mounted that the slowdowns overseas would stunt corporate profit growth at home
and put the brakes on the vibrant U.S. economy. Investors' fears reached a fever
pitch last August when Russia's debt default and currency devaluation sent stock
markets plunging worldwide. In response, the Fed lowered the federal funds rate
three times between late September and November, which helped stabilize
financial markets worldwide.
The Fed's actions brought the federal funds rate (the rate banks charge
each other for overnight loans) down by a total of 0.75% to 4.75%. It also
caused money market yields to fall, because the federal funds rate serves as a
key pricing benchmark for money-market securities. Until this point, the Fed had
been more inclined to raise interest rates to prevent a spike in inflation in
response to the strong U.S. economy and low unemployment. But unlike other
economic cycles, the low unemployment and wage gains did not re-ignite
inflation, and the Fed's inflation-fighting instincts became overshadowed by its
desire to ease the potential for overseas slowdowns to serve as a drag on the
U.S. economy. Any bias toward further "easing" was muted in the first three
months of 1999, however, as the U.S. economy continued to chug along at a very
healthy rate. By the end of March,
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock U.S.
Government Cash Reserve. Caption below reads "U.S. Government Cash Reserve
management team (l-r): "Barry Evans, Dawn Baillie and Bill Larkin, Jr."]
- --------------------------------------------------------------------------------
"Throughout most of the year, we kept the Fund's maturity slightly longer than
average..."
3
<PAGE>
================================================================================
John Hancock Funds - U.S. Government Cash Reserve
"The countervailing forces at work on the market appear likely to keep the Fed
on the sidelines..."
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "7-Day Effective Yield".
Under the heading is a note that reads "As of March 31, 1999." The chart is
scaled in increments of 2% with 0% at the bottom and 6% at the top. The first
bar represents the 4.64% total return for John Hancock U.S. Government Cash
Reserve. The second bar represents the 4.29% 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, Inc. Past performance is no
guarantee of future results."]
- --------------------------------------------------------------------------------
the Federal Reserve had moved back to a neutral stance, with no bias toward what
its next step would be.
On March 31, 1999, John Hancock U.S. Government Cash Reserve had a
7-day effective yield of 4.64%. By comparison, the average U.S. government
money-market fund had a 7-day effective yield of 4.29%, according to Lipper,
Inc.
Long maturity
Throughout most of the year, we kept the Fund's maturity slightly longer than
average - in the mid 50-day range - based on our ongoing belief that the Fed
would not raise interest rates, given the potential for a slowing economy. As
the turmoil grew and it became more likely that the Fed would in fact lower
rates, we became even more intent on extending the Fund's maturity to lock in
higher yields before rates fell.
The countervailing forces at work on the market appear likely to keep
the Fed on the sidelines until at least the second half of the year. On the one
hand, the U.S. economy continues to produce its robust growth, which could at
any moment provoke inflation. On the other, although overseas markets have
stabilized, the U.S. economy remains susceptible to ongoing weakness overseas in
countries like Japan and Russia.
For now, we'll keep the Fund's maturity longer than average until there
are signs that the Fed is inclined to raise rates to prevent the economy from
overheating. In that instance, we would shorten our maturity to be better
positioned to buy higher-yielding securities. We'll continue to monitor the
monthly economic data for clues about the U.S. economy's strength. As always,
we'll stay focused on providing a competitive level of current income, while
preserving stability of principal.
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio management teams through the
end of the Fund's period discussed in this report. Of course, the teams' views
are subject to change as market and other conditions warrant.
The Fund is neither insured nor guaranteed by the U.S. government. Although the
Fund seeks to maintain a net asset value of $1.00 per share, it is possible to
lose money by investing in the Fund.
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 March 31, 1999. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
March 31, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, in money market instruments,
at value - Note C:
U.S. government obligations (cost - $94,335,632)........... $94,335,632
Joint repurchase agreement (cost - $13,112,000)............ 13,112,000
--------------
107,447,632
Cash ....................................................... 78
Interest receivable......................................... 970,220
Other assets ............................................... 17,014
--------------
Total Assets......................... 108,434,944
------------------------------------------------------
Liabilities:
Payable for shares repurchased.............................. 106,689
Dividend payable............................................ 13,978
Payable to John Hancock Advisers, Inc. and affiliates -
Note B..................................................... 45,117
Accounts payable and accrued expenses ...................... 53,135
-------------
Total Liabilities.................... 218,919
------------------------------------------------------
Net Assets:
Capital paid-in ............................................ 108,216,025
-------------
Net Assets........................... $108,216,025
======================================================
Net Asset Value, Offering Price and
Redemption Price Per Share:
(Based on 108,216,025 shares of beneficial interest
outstanding - unlimited number of shares authorized
with $0.01 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
Year ended March 31, 1999
- --------------------------------------------------------------------------------
Investment Income:
Interest ................................................... $5,096,836
------------
Expenses:
Investment management fee - Note B......................... 481,496
Distribution and service fee - Note B...................... 144,449
Transfer agent fee - Note B................................ 79,049
Registration and filing fees............................... 48,047
Custodian fee.............................................. 42,989
Auditing fee............................................... 18,096
Financial services fee - Note B............................ 14,560
Printing................................................... 13,414
Trustees' fees............................................. 6,731
Legal fees................................................. 1,796
Miscellaneous.............................................. 429
------------
Total Expenses............... 851,056
----------------------------------------------
Less Expense Reductions -
Note B ...................... (513,233)
----------------------------------------------
Net Expenses................. 337,823
---------------------------------------------
Net Investment Income........ 4,759,013
----------------------------------------------
Net Increase in Net Assets
Resulting from Operations.... $4,759,013
==============================================
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - U.S. Government Cash Reserve
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
----------------------
1998 1999
------ ------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income............................. $3,490,309 $4,759,013
------------- ------------
Distributions to Shareholders:
Dividends from net investment income
($0.0536 and $0.0497 per share, respectively).... (3,490,309) (4,759,013)
------------- ------------
From Fund Share Transactions - Net:*............... 19,126,284 33,768,548
------------- ------------
Net Assets:
Beginning of period............................... 55,321,193 74,447,477
------------- ------------
End of period .................................... $74,447,477 $108,216,025
============= =============
*Analysis of Fund Share Transactions at $1 Per Share:
Shares sold........................................ $293,684,385 $236,419,609
Shares issued to shareholders in
reinvestment of distributions..................... 3,240,503 4,405,830
------------- ------------
296,924,888 240,825,439
Less shares repurchased ........................... (277,798,604) (207,056,891)
------------- ------------
Net increase....................................... $19,126,284 $33,768,548
============= ============
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>
PERIOD FROM
YEAR ENDED MAY 31, JUNE 1, 1996 YEAR ENDED MARCH 31,
---------------------------------- TO MARCH 31, --------------------
1994 1995(1) 1996 1997(5) 1998 1999
-------- -------- -------- -------- -------- --------
<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 ......................... 0.03 0.05 0.05 0.04 0.05 0.05
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income .......... (0.03) (0.05) (0.05) (0.04) (0.05) (0.05)
-------- -------- -------- -------- -------- --------
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).. 3.04% 5.07% 5.59% 4.37%(6) 5.43% 5.08%
Total Adjusted Investment Return at
Net Asset Value(2,3).......................... 2.59% 4.54% 4.69% 3.78%(6) 4.87% 4.55%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted)....... $94,408 $29,131 $28,907 $55,321 $74,447 $108,216
Ratio of Expenses to Average Net Assets........ 0.35% 0.35% 0.35% 0.35%(7) 0.35% 0.35%
Ratio of Adjusted Expenses to
Average Net Assets(4)........................ 0.80% 0.88% 1.25% 1.03%(7) 0.91% 0.88%
Ratio of Net Investment Income to
Average Net Assets .......................... 2.96% 4.79% 5.41% 5.15%(7) 5.30% 4.94%
Ratio of Adjusted Net Investment Income to
Average Net Assets(4)........................ 2.51% 4.26% 4.51% 4.47%(7) 4.74% 4.41%
</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
March 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Fund on March 31, 1999. It's divided into two types of short-term investments.
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (87.17%)
Federal Farm Credit Bank,
05-03-99 ............................... 5.600% $2,000 $2,001,057
Federal Farm Credit Bank,
08-03-99................................ 5.500 4,000 4,006,659
Federal Farm Credit Bank,
10-01-99 ............................... 8.650 2,200 2,239,142
Federal Home Loan Bank,
04-06-99................................ 6.310 2,000 2,000,322
Federal Home Loan Bank,
04-28-99 #.............................. 5.000 2,000 2,000,000
Federal Home Loan Bank,
04-29-99 #.............................. 5.030 8,000 8,000,000
Federal Home Loan Bank,
05-26-99 #.............................. 5.050 20,000 20,000,000
Federal Home Loan Bank,
06-08-99 #.............................. 5.140 10,000 10,000,000
Federal Home Loan Bank,
06-25-99................................ 8.600 100 100,795
Federal Home Loan Bank,
07-26-99 ............................... 8.450 500 505,580
Federal Home Loan Bank,
09-20-99 ............................... 5.600 1,100 1,103,318
Federal Home Loan Bank,
10-25-99 ............................... 8.375 1,215 1,237,569
Federal Home Loan Bank,
10-28-99................................ 7.650 1,050 1,065,982
Federal Home Loan Bank,
12-01-99................................ 4.775 500 499,418
Federal Home Loan Mortgage Corp.,
07-21-99................................ 7.125 6,900 6,944,483
Federal Home Loan Mortgage Corp.,
08-13-99 ............................... 5.544 2,500 2,505,064
Federal National Mortgage Association,
05-05-99 ............................... 5.630 1,000 999,939
Federal National Mortgage Association,
05-10-99 ............................... 6.240 1,000 1,000,608
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
===============================FINANCIAL STATEMENTS=============================
John Hancock Funds - U.S. Government Cash Reserve
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
Governmental - U.S. Agencies (continued)
Federal National Mortgage Association,
06-10-99................................ 8.700% $1,000 $1,006,819
Federal National Mortgage Association,
06-24-99................................ 6.600 2,995 3,004,327
Federal National Mortgage Association,
07-12-99 ............................... 8.450 485 489,735
Federal National Mortgage Association,
08-03-99 ............................... 5.490 500 500,787
Federal National Mortgage Association,
08-16-99 ............................... 6.010 2,050 2,057,826
Student Loan Marketing Association,
04-01-99 ............................... 4.800 20,000 20,000,000
Tennessee Valley Authority,
10-01-99................................ 8.375 1,050 1,066,202
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $94,335,632) (87.17%) 94,335,632
--------- ----------
JOINT REPURCHASE AGREEMENT (12.12%)
Investment in a joint repurchase
agreement transaction with
ABN AMRO, Inc. - Dated 03-31-99,
due 04-01-99 (Secured by U.S. Treasury
Bonds, 8.875% due 08-15-17 and 11.250%
due 02-15-15, and U.S. Treasury Note,
6.625% due 05-15-07) - Note A........... 4.900 13,112 13,112,000
-----------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $13,112,000) (12.12% 13,112,000
-------- -----------
TOTAL INVESTMENTS (99.29%) 107,447,632
-------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.71%) 768,393
-------- -----------
TOTAL NET ASSETS (100.00%) $108,216,025
======== ============
# 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
9
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - U.S. Government Cash Reserve
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 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% of
the average daily net asset value 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. Accordingly, for the year ended March 31, 1999, the reduction
in the Fund's management fee amounted to $368,784. 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
10
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - U.S. Government Cash Reserve
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. For
the year ended March 31, 1999, the fee reduction amounted to $144,449.
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 year was at
an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, 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,
including discount earned on securities, during the year ended March 31, 1999
aggregated $6,110,519,532 and $6,077,614,687, respectively.
The cost of investments owned at March 31, 1999 (including the joint
repurchase agreement) for federal income tax purposes was $107,447,632.
11
<PAGE>
================================================================================
John Hancock Funds - U.S. Government Cash Reserve
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Current Interest
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, 1999, and the related statement of operations for
the year then ended, 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, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the John Hancock U.S. Government Cash Reserve portfolio of John
Hancock Current Interest at March 31, 1999, the results of its operations for
the year then ended, 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
- --------------------
Ernst & Young LLP
Boston, Massachusetts
May 7, 1999
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,
1999.
All of the dividends paid for the fiscal year are taxable as ordinary
income. None of the 1999 dividends qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1999 U.S. Treasury Department Form
1099-DIV in January of 2000. This will reflect the total of all distributions
which are taxable for calendar year 1999.
12
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==================================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>
================================================================================
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