---------------------------
The latest report from your
Fund's management team
---------------------------
ANNUAL REPORT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
U.S.
Government
Cash Reserve
MARCH 31, 2000
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
---------------------------------------
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Osbert M. Hood
Executive 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
--------------------------------------------
==================================CEO CORNER====================================
DEAR FELLOW SHAREHOLDERS:
Over the last 12 months, New Economy technology stocks dominated the
business-news headlines and the stock market's performance. Red-hot tech stocks
pushed the NASDAQ Composite Index to the stratosphere, as investors
single-mindedly pursued anything technology related. But after setting a new
high on March 10 amid significantly heightened volatility, the tables started to
turn rapidly. Concerns about Microsoft's antitrust ruling and out-of-sight
valuation levels finally triggered waves of selling that sent the index down by
25% in a month, while Old Economy blue-chip stocks began to make a comeback.
In this same period, fixed-income securities of all types, including bonds and
preferred stocks, struggled as interest rates rose on fears that the roaring
U.S. economy and the rebound of many others around the world would spark an
inflation outbreak. Money-market fund investors benefited each time the Federal
Reserve raised short-term rates, which it did five times in the last year to try
to rein in the economy.
--------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
flush right next to second paragraph.]
--------------------------------------------------------------------------------
While the battle between old and new rages on, several things are clear: More
than ever, diversification and a long-term investment perspective are two of an
investor's best allies. Since not all parts of your portfolio will perform
equally well all the time, we believe it is important to allocate your assets
among different types of investments and funds that target a variety of stock-
and bond-market segments. This strategy, executed under the guidance of a
seasoned investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing conditions.
Sincerely,
/s/ Maureen R. Ford
-------------------
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By Dawn Baillie for the Portfolio Management Team
John Hancock U.S.
Government Cash Reserve
Inflation fears cause interest rates and
----------------------------------------
money-market yields to rise in last 12 months
---------------------------------------------
Money-market yields rose over the last 12 months as the result of several
important changes in the economic environment. Global economies began to
stabilize from the turmoil in 1998 that had caused the U.S. Federal Reserve
Board and governments around the world to lower rates to prevent global
recession. At the same time, the U.S. economy grew ever stronger, aided in part
by the booming stock market and the wealth effect it has created.
Fed stays active
The sizzling economic growth, coupled with low unemployment, sparked growing
fears that inflation would resurface. As a result, investors began to push
interest rates up last April in anticipation that the Fed would raise rates to
prevent an inflation outbreak. The market's moves alone did not dampen the
economy, so the Fed stepped in and raised short-term interest rates five times
between last June and March. Its actions, which moved the federal funds rate
that banks charge each other for overnight loans from 4.75% at the start of the
Fund's fiscal year to 6.00% by the end, came as no surprise. Chairman Alan
Greenspan had said for months that he would continue to raise rates in slow,
steady increments until there were signs that the supercharged economy was
cooling off. With its last increase in March, the Fed indicated it was still in
a "tightening" mode. So far, the moves have been preemptive, since an inflation
spike has yet to materialize.
--------------------------------------------------------------------------------
[A 3" x 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
members: Barry Evans and Dawn Baillie."]
--------------------------------------------------------------------------------
"...the Fed stepped in and raised short-term interest rates five times..."
3
<PAGE>
================================================================================
John Hancock Funds - U.S. Government Cash Reserve
"...keep the Fund's maturity shorter than average to take advantage of any
further increases."
--------------------------------------------------------------------------------
[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, 2000." The chart is
scaled in increments of 2% with 0% at the bottom and 6% at the top. The first
bar represents the 5.61% total return for John Hancock U.S. Government Cash
Reserve. The second bar represents the 5.34% 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."]
--------------------------------------------------------------------------------
7-day effective yield
Over the last year, money-market fund investors were the beneficiaries of rising
yields, since money-market securities are pegged to moves in the federal funds
rates. On March 31, 2000, John Hancock U.S. Government Cash Reserve had a 7-day
effective yield of 5.61%. By comparison, the average U.S. government
money-market fund had a 7-day effective yield of 5.34%, according to Lipper,
Inc.
Short maturity provides flexibility
Since it became clear that the Fed was going to continue to push rates up in
response to the steaming economy, we maintained a conservative stance through
much of the last 12 months. By keeping the Fund's maturity about five or so days
shorter than average, we didn't have our money locked up for as long, and were
able to reinvest in higher-yielding securities after each rate hike.
A look ahead
With the economy still dynamic, it's very possible that the Fed will continue on
its path of rate hikes through the second quarter of 2000. After all, three of
the last five increases were actually reversals of cuts the Fed made during
1998's global economic uncertainty. And it will take until at least the end of
the summer for the effects of the two latest hikes to have an impact on the
economy.
For indications of what the Fed will do next, we'll watch the
first-quarter gross domestic product numbers and employment figures. Another
Greenspan favorite is the purchasing managers' report, with its vendor delivery
supply index number that is an indicator of the strength in consumer demand. And
if the stock market's fortunes change for the worse, that could speed up
Greenspan's job.
As the interest-rate hikes work their way through the economy, we do
expect a slowdown later in the year. Until it's clear that the Fed has finished
raising rates, we will keep the Fund's maturity shorter than average to take
advantage of any further increases. As always, we will focus not only on
providing the Fund with a competitive yield, but also on 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 - 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, 2000. 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, 2000
--------------------------------------------------------------------------------
Assets:
Investments, in money market instruments,
at value - Note C:
U.S. government obligations (cost - $92,263,093)................ $92,263,093
Joint repurchase agreement (cost - $14,175,000) ................ 14,175,000
-------------
106,438,093
Cash ............................................................ 358
Interest receivable ............................................. 801,415
Other assets .................................................... 19,406
-------------
Total Assets ....................... 107,259,272
-------------------------------------------------
Liabilities:
Payable for shares repurchased .................................. 1,325,984
Dividend payable ................................................ 14,684
Payable to John Hancock Advisers, Inc. and affiliates -
Note B ......................................................... 14,888
Accounts payable and accrued expenses ........................... 37,785
-------------
Total Liabilities .................. 1,393,341
-------------------------------------------------
Net Assets:
Capital paid-in ................................................. 105,865,931
-------------
Net Assets ......................... $105,865,931
=================================================
Net Asset Value, Offering Price and
Redemption Price Per Share:
(Based on 105,865,931 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, 2000
--------------------------------------------------------------------------------
Investment Income:
Interest ........................................................ $5,952,637
-------------
Expenses:
Investment management fee - Note B ............................. 566,447
Distribution and service fee - Note B .......................... 169,934
Transfer agent fee - Note B .................................... 92,947
Custodian fee .................................................. 41,555
Registration and filing fees ................................... 40,803
Auditing fee ................................................... 21,202
Accounting and legal services fee - Note B ..................... 20,164
Trustees' fees ................................................. 7,415
Printing ....................................................... 5,279
Legal fees ..................................................... 3,993
Miscellaneous .................................................. 1,120
-------------
Total Expenses ..................... 970,859
-------------------------------------------------
Less Expense Reductions -
Note B ............................. (573,896)
-------------------------------------------------
Net Expenses ....................... 396,963
-------------------------------------------------
Net Investment Income .............. 5,555,674
-------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .......... $5,555,674
=================================================
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>
YEAR ENDED MARCH 31,
------------------------------------
1999 2000
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income.......................................................... $4,759,013 $5,555,674
---------------- ----------------
Distributions to Shareholders:
Dividends from net investment income
($0.0497 and $0.0490 per share, respectively) ................................ (4,759,013) (5,555,674)
---------------- ----------------
From Fund Share Transactions - Net:* ........................................... 33,768,548 (2,350,094)
---------------- ----------------
Net Assets:
Beginning of period ........................................................... 74,447,477 108,216,025
---------------- ----------------
End of period ................................................................. $108,216,025 $105,865,931
================ ================
* Analysis of Fund Share Transactions at $1 Per Share:
Shares sold .................................................................. $236,419,609 $220,727,725
Shares issued to shareholders in reinvestment of distributions ............... 4,405,830 5,063,071
---------------- ----------------
............................................................................... 240,825,439 225,790,796
Less shares repurchased ...................................................... (207,056,891) (228,140,890)
---------------- ----------------
Net increase (decrease) ...................................................... $33,768,548 ($2,350,094)
================ ================
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:
--------------------------------------------------------------------------------
YEAR ENDED MAY 31, PERIOD FROM YEAR ENDED MARCH 31,
---------------------- JUNE 1, 1996 TO -----------------------------
1995(1) 1996 MARCH 31, 1997(5) 1998 1999 2000
---------- ---------- ----------------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ----------
Net Investment Income .................................... 0.05 0.05 0.04 0.05 0.05 0.05
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net Investment Income ..................... (0.05) (0.05) (0.04) (0.05) (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) ............ 5.07% 5.59% 4.37%(6) 5.43% 5.08% 4.98%
Total Adjusted Investment Return at Net Asset Value(2,3) . 4.54% 4.69% 3.78%(6) 4.87% 4.55% 4.47%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................. $29,131 $28,907 $55,321 $74,447 $108,216 $105,866
Ratio of Expenses to Average Net Assets .................. 0.35% 0.35% 0.35%(7) 0.35% 0.35% 0.35%
Ratio of Adjusted Expenses to Average Net Assets(4) ...... 0.88% 1.25% 1.03%(7) 0.91% 0.88% 0.86%
Ratio of Net Investment Income to Average Net Assets ..... 4.79% 5.41% 5.15%(7) 5.30% 4.94% 4.90%
Ratio of Adjusted Net Investment Income to
Average Net Assets(4) ................................... 4.26% 4.51% 4.47%(7) 4.74% 4.41% 4.39%
(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, 2000
--------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Fund on March 31, 2000. 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 (87.15%)
Federal Home Loan Bank,
04-07-00 .................................................... 5.070% $1,000 $999,860
Federal Home Loan Bank,
04-20-00 .................................................... 4.970 7,500 7,496,916
Federal Home Loan Bank,
04-26-00 .................................................... 5.050 5,000 4,996,515
Federal Home Loan Bank,
04-28-00 .................................................... 5.010 12,500 12,491,023
Federal Home Loan Bank,
07-14-00 .................................................... 5.500 15,000 14,966,467
Federal Home Loan Bank,
08-24-00 .................................................... 5.560 3,000 2,990,890
Federal Home Loan Mortgage Corp.,
04-25-00 .................................................... 5.980 6,302 6,276,876
Federal National Mortgage Association,
05-11-00 .................................................... 5.788 15,000 14,903,527
Federal National Mortgage Association,
05-25-00 .................................................... 5.825 12,000 11,895,150
Federal National Mortgage Association,
06-01-00 .................................................... 5.970 8,400 8,315,027
Federal National Mortgage Association,
06-22-00 .................................................... 5.960 5,000 4,932,122
Student Loan Marketing Association,
12-01-00 .................................................... 5.900 2,000 1,998,720
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $92,263,093) 92,263,093
----------
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
------------------- -------- --------- -------
<S> <C> <C> <C>
JOINT REPURCHASE AGREEMENT (13.39%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. - Dated
03-31-00, due 04-03-00 (Secured by U.S.
Treasury Bonds 14.000% due 11-15-11 and
7.250% due 05-15-16) - Note A............................. 6.100% $14,175 $14,175,000
-----------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $14,175,000) (100.54%) 14,175,000
---------- -----------
TOTAL INVESTMENTS (100.54%) 106,438,093
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.54%) (572,162)
---------- -----------
TOTAL NET ASSETS (100.00%) $105,865,931
========== ============
</TABLE>
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 qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is 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, at least until August 1, 2000. Accordingly, for the year ended
March 31, 2000, 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 $403,962. 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
10
<PAGE>
==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - U.S. Government Cash Reserve
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 Conduct Rules, curtailment of
a portion of the Fund's 12b-1 payments could occur under certain circumstances.
Payments of fees under the Distribution Plan has been suspended at least until
August 1, 2000. For the year ended March 31, 2000, the fee reduction amounted to
$169,934.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of John Hancock
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,
accounting and legal 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. Stephen L. Brown, Ms. Maureen R. Ford 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, including discount earned on
investment securities, during the year ended March 31, 2000 aggregated
$4,411,927,298 and $4,413,805,063, respectively.
The cost of investments owned at March 31, 2000 (including the joint
repurchase agreement) for federal income tax purposes was $106,438,093.
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, 2000, 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 auditing standards generally
accepted in the United States. 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, 2000, 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, 2000, 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 accounting
principles generally accepted in the United States.
/s/Ernst & Young LLP
--------------------
Boston, Massachusetts
May 5, 2000
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,
2000.
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 2000 U.S. Treasury Department Form
1099-DIV in January of 2001. This will reflect the total of all distributions
which are taxable for calendar year 2000.
12
<PAGE>
=====================================NOTES======================================
John Hancock Funds - U.S. Government Cash Reserve
13
<PAGE>
=====================================NOTES======================================
John Hancock Funds - U.S. Government Cash Reserve
14
<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.jhfunds.com Permit No. 75
-----------------
--------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
U.S. Government Cash Reserve. It may be used as sales literature when preceded
or accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[LOGO] Printed on Recycled Paper 4300A 3/00
5/00
<PAGE>
---------------------------
The latest report from your
Fund's management team
---------------------------
ANNUAL REPORT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Money Market
Fund
MARCH 31, 2000
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
---------------------------------------------
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Osbert M. Hood
Executive 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
-------------------------------------------------
===================================CEO CORNER===================================
DEAR FELLOW SHAREHOLDERS:
Over the last 12 months, New Economy technology stocks dominated the
business-news headlines and the stock market's performance. Red-hot tech stocks
pushed the NASDAQ Composite Index to the stratosphere, as investors
single-mindedly pursued anything technology related. But after setting a new
high on March 10 amid significantly heightened volatility, the tables started to
turn rapidly. Concerns about Microsoft's antitrust ruling and out-of-sight
valuation levels finally triggered waves of selling that sent the index down by
25% in a month, while Old Economy blue-chip stocks began to make a comeback.
In this same period, fixed-income securities of all types, including bonds and
preferred stocks, struggled as interest rates rose on fears that the roaring
U.S. economy and the rebound of many others around the world would spark an
inflation outbreak. Money-market fund investors benefited each time the Federal
Reserve raised short-term rates, which it did five times in the last year to try
to rein in the economy.
--------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
flush right next to second paragraph.]
--------------------------------------------------------------------------------
While the battle between old and new rages on, several things are clear: More
than ever, diversification and a long-term investment perspective are two of an
investor's best allies. Since not all parts of your portfolio will perform
equally well all the time, we believe it is important to allocate your assets
among different types of investments and funds that target a variety of stock-
and bond-market segments. This strategy, executed under the guidance of a
seasoned investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing conditions.
Sincerely,
/s/Maureen R. Ford
------------------
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By Dawn Baillie for the Portfolio Management Team
John Hancock
Money Market Fund
Inflation fears cause interest rates and
----------------------------------------
money-market yields to rise in last 12 months
---------------------------------------------
Money-market yields rose over the last 12 months as the result of several
important changes in the economic environment. Global economies began to
stabilize from the turmoil in 1998 that had caused the U.S. Federal Reserve
Board and governments around the world to lower rates to prevent global
recession. At the same time, the U.S. economy grew ever stronger, aided in part
by the booming stock market and the wealth effect it created.
Fed stays active
The sizzling economic growth, coupled with low unemployment and rising
commodities prices, sparked growing fears that inflation would resurface. As a
result, investors began to push interest rates up last April in anticipation
that the Fed would raise rates to prevent an inflation outbreak. The market's
moves alone did not dampen the economy, so the Fed stepped in and raised
short-term interest rates five times between last June and March. Its actions,
which moved the federal funds rate that banks charge each other for overnight
loans from 4.75% at the start of the Fund's fiscal year to 6.00% by the end,
came as no surprise. Chairman Alan Greenspan had said for months that he would
continue to raise rates in slow, steady increments until there were signs that
the supercharged economy was cooling off. With its last increase in March, the
Fed indicated it was still in a "tightening" mode. So far, the moves have been
preemptive, since an inflation spike has yet to materialize.
--------------------------------------------------------------------------------
[A 3" x 2" photo at bottom right side of page of John Hancock Money Market Fund.
Caption below reads "Money Market Fund management team members: Barry Evans and
Dawn Baillie."]
--------------------------------------------------------------------------------
"...the Fed stepped in and raised short-term interest rates five times..."
3
<PAGE>
================================================================================
John Hancock Funds - Money Market Fund
"...keep the Fund's maturity shorter than average to take advantage of any
further increases."
--------------------------------------------------------------------------------
[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, 2000." The chart is
scaled in increments of 2% with 0% at the bottom and 6% at the top. The first
bar represents the 5.06% total return for John Hancock Money Market Fund Class
A. The second bar represents the 4.17% total return for John Hancock Money
Market Fund Class B. The third bar represents the 4.17% total return for John
Hancock Money Market Fund Class C. The fourth bar represents the 5.36% 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."]
--------------------------------------------------------------------------------
7-day effective yield
Over the last year, money-market fund investors were the beneficiaries of rising
yields, since money-market securities are pegged to moves in the federal funds
rates. On March 31, 2000, John Hancock Money Market Fund's Class A, Class B and
Class C shares had 7-day effective yields of 5.06%, 4.17% and 4.17%,
respectively. By comparison, the average taxable money- market fund had a 7-day
effective yield of 5.36%, according to Lipper, Inc.
Short maturity provides flexibility
Since it became clear that the Fed was going to continue to push rates up in
response to the steaming economy, we maintained a conservative stance through
much of the last 12 months. By keeping the Fund's maturity about five or so days
shorter than average, we didn't have our money locked up for as long, and were
able to reinvest in higher-yielding securities after each rate hike.
A look ahead
With the economy still dynamic, it's very possible that the Fed will continue on
its path of rate hikes through the second quarter of 2000. After all, three of
the last five increases were actually reversals of cuts the Fed made during
1998's global economic uncertainty. And it will take until at least the end of
the summer for the effects of the two latest hikes to have an impact on the
economy.
For indications of what the Fed will do next, we'll watch the
first-quarter gross domestic product numbers and employment figures. Another
Greenspan favorite is the purchasing managers' report, with its vendor delivery
supply index number that is an indicator of the strength in consumer demand. And
if the stock market's fortunes change for the worse, that could speed up
Greenspan's job.
As the interest-rate hikes work their way through the economy, we do
expect a slowdown later in the year. Until it's clear that the Fed has finished
raising rates, we will keep the Fund's maturity shorter than average to take
advantage of any further increases. As always, we will focus not only on
providing the Fund with a competitive yield, but also on 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 Operations summarizes the Fund's investment income earned and
expenses incurred in operating the 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, 2000. You'll also find the net asset value per share as of
that date.
Statement of Assets and Liabilities
March 31, 2000
--------------------------------------------------------------------------------
Assets:
Investments, in money market instruments,
at value - Note C:
Commercial paper (cost - $236,827,468)......................... $236,827,468
Corporate interest-bearing obligations
(cost - $74,449,345) ......................................... 74,449,345
U.S. government obligations
(cost - $113,327,807) ........................................ 113,327,807
Joint repurchase agreement (cost - $98,887,000) ............... 98,887,000
--------------
523,491,620
Cash ........................................................... 358
Receivable for shares sold ..................................... 22,038
Interest receivable ............................................ 3,143,816
Other assets ................................................... 67,225
--------------
Total Assets ...................... 526,725,057
-------------------------------------------------
Liabilities:
Payable for shares repurchased ................................. 665,516
Dividend payable ............................................... 61,059
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ....................................... 300,706
Accounts payable and accrued expenses ......................... 58,215
--------------
Total Liabilities ................. 1,085,496
-------------------------------------------------
Net Assets:
Capital paid-in ................................................ 525,639,561
--------------
Net Assets ........................ $525,639,561
=================================================
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 - $361,753,853/361,833,027 ............................. $1.00
==============================================================================
Class B - $157,908,940/157,927,453 ............................. $1.00
==============================================================================
Class C - $5,976,768/5,976,768 - Note A ........................ $1.00
==============================================================================
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, 2000
--------------------------------------------------------------------------------
Investment Income:
Interest ....................................................... $28,228,821
--------------
Expenses:
Investment management fee - Note B ............................ 2,658,523
Distribution and service fee - Note B
Class A ...................................................... 844,406
Class B ...................................................... 1,874,434
Class C ...................................................... 30,476
Transfer agent fee - Note B ................................... 1,378,996
Registration and filing fees .................................. 210,542
Custodian fee ................................................. 110,047
Accounting and legal services fee - Note B .................... 98,753
Auditing fee .................................................. 36,664
Trustees' fees ................................................ 23,834
Printing ...................................................... 22,500
Miscellaneous ................................................. 15,047
Legal fees .................................................... 5,798
--------------
Total Expenses .................... 7,310,020
-------------------------------------------------
Less Expense Reductions -
Note B ............................ (869,467)
-------------------------------------------------
Net Expenses ...................... 6,440,553
-------------------------------------------------
Net Investment Income ............. 21,788,268
-------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ......... $21,788,268
=================================================
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Money Market Fund
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------
1999 2000
------------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income.......................................................... $20,592,253 $21,788,268
------------------- -------------------
Distributions to Shareholders:
Distributions from net investment income
Class A - ($0.0445 and $0.0439 per share, respectively) ...................... (15,252,899) (14,872,789)
Class B - ($0.0360 and $0.0356 per share, respectively) ...................... (5,321,711) (6,803,676)
Class C** - ($0.0323 and $0.0354 per share, respectively) .................... (17,643) (111,803)
------------------- -------------------
Total Distributions to Shareholders .......................................... (20,592,253) (21,788,268)
------------------- -------------------
From Fund Share Transactions - Net: * .......................................... 163,253,446 (31,402,664)
------------------- -------------------
Net Assets:
Beginning of period ........................................................... 393,788,779 557,042,225
------------------- -------------------
End of period ................................................................. $557,042,225 $525,639,561
=================== ===================
* Analysis of Fund Share Transactions at $1 Per Share:
CLASS A
Shares sold .................................................................. $4,384,953,074 $2,453,254,071
Shares issued to shareholders in reinvestment of distributions ............... 12,884,455 12,993,336
------------------- -------------------
4,397,837,529 2,466,247,407
Less shares repurchased ...................................................... (4,336,966,087) (2,478,127,263)
------------------- -------------------
Net increase (decrease) ...................................................... $60,871,442 ($11,879,856)
=================== ===================
CLASS B
Shares sold .................................................................. $577,227,808 $486,293,263
Shares issued to shareholders in reinvestment of distributions ............... 4,300,006 5,606,652
------------------- -------------------
581,527,814 491,899,915
Less shares repurchased ...................................................... (480,492,795) (516,052,506)
------------------- -------------------
Net increase (decrease) ...................................................... $101,035,019 ($24,152,591)
=================== ===================
CLASS C **
Shares sold .................................................................. $3,247,356 $16,161,146
Shares issued to shareholders in reinvestment of distributions ............... 12,504 81,573
------------------- -------------------
3,259,860 16,242,719
Less shares repurchased ...................................................... (1,912,875) (11,612,936)
------------------- -------------------
Net increase ................................................................. $1,346,985 $4,629,783
=================== ===================
** 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:
--------------------------------------------------------------------------------
FOR THE PERIOD
SEPTEMBER 12, 1995 PERIOD FROM
(COMMENCEMENT OF NOVEMBER 1,
OPERATIONS) TO YEAR ENDED 1996 TO YEAR ENDED MARCH 31,
OCTOBER 31, OCTOBER 31, MARCH 31, ----------------------------
1995 1996 1997(5) 1998 1999 2000
---------- ------------ ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period ..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- --------
Net Investment Income .................................... 0.01 0.05 0.02 0.05 0.04 0.04
---------- ---------- ---------- ---------- ---------- --------
Less Distributions:
Dividends from Net Investment Income ..................... (0.01) (0.05) (0.02) (0.05) (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) ........... 0.64%(3) 4.56% 1.80%(3) 4.92% 4.54% 4.45%
Total Adjusted Investment Return at Net Asset Value (2,6) 0.54%(3) 4.36% 1.60%(3) 4.72% 4.34% 4.25%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................. $20,942 $262,475 $359,453 $312,762 $373,634 $361,754
Ratio of Expenses to Average Net Assets .................. 1.07%(4) 1.17% 1.10%(4) 0.89% 0.91% 0.91%
Ratio of Adjusted Expenses to Average Net Assets (7) ..... 1.17%(4) 1.37% 1.30%(4) 1.09% 1.11% 1.11%
Ratio of Net Investment Income to Average Net Assets ..... 4.94%(4) 4.41% 4.44%(4) 4.82% 4.44% 4.40%
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) ................................. 4.84%(4) 4.21% 4.24%(4) 4.62% 4.24% 4.20%
PERIOD FROM
NOVEMBER 1,
YEAR ENDED OCTOBER 31, 1996 TO YEAR ENDED MARCH 31,
------------------------ MARCH 31, ----------------------------
1995(1) 1996 1997(5) 1998 1999 2000
---------- ---------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ---------- ---------- ---------- ---------- -------
Net Investment Income ...................................... 0.04 0.04 0.01 0.04 0.04 0.04
-------- ---------- ---------- ---------- ---------- -------
Less Distributions:
Dividends from Net Investment Income ....................... (0.04) (0.04) (0.01) (0.04) (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) ............. 4.07% 3.71% 1.45%(3) 4.04% 3.66% 3.59%
Total Adjusted Investment Return at Net Asset Value (2,6) .. - 3.61% 1.35%(3) 3.94% 3.56% 3.49%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................... $54,313 $108,162 $130,056 $81,027 $182,062 $157,909
Ratio of Expenses to Average Net Assets .................... 1.92% 2.00% 1.96%(4) 1.74% 1.76% 1.74%
Ratio of Adjusted Expenses to Average Net Assets (7) ....... - 2.10% 2.06%(4) 1.84% 1.86% 1.84%
Ratio of Net Investment Income to Average Net Assets ....... 3.96% 3.58% 3.60%(4) 3.97% 3.54% 3.56%
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) .................................... - 3.48% 3.50%(4) 3.87% 3.44% 3.46%
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 YEAR ENDED
MARCH 31, 1999 MARCH 31, 2000
-------------- --------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period ............................................... $1.00 $1.00
---------- ----------
Net Investment Income .............................................................. 0.03 0.04
---------- ----------
Less Distributions:
Dividends from Net Investment Income ............................................... (0.03) (0.04)
---------- ----------
Net Asset Value, End of Period ..................................................... $1.00 $1.00
========== ==========
Total Investment Return at Net Asset Value (2) ..................................... 3.29%(3) 3.58%
Total Adjusted Investment Return at Net Asset Value (2,6) .......................... 3.19%(3) 3.48%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ........................................... $1,347 $5,977
Ratio of Expenses to Average Net Assets ............................................ 1.75%(4) 1.76%
Ratio of Adjusted Expenses to Average Net Assets (7) ............................... 1.85%(4) 1.86%
Ratio of Net Investment Income to Average Net Assets ............................... 3.46%(4) 3.67%
Ratio of Adjusted Net Investment Income to Average Net Assets (7) .................. 3.36%(4) 3.57%
(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, 2000
--------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Money
Market Fund on March 31, 2000. It's divided into four types of short-term
investments. The categories of short-term investments are further broken down by
industry group.
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
------------------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Automobile/Trucks (6.45%)
Ford Motor Credit Co.,
05-18-00 .......................................... 5.850% Tier 1 $10,000 $9,923,625
General Motors Acceptance Corp.,
04-07-00 ........................................... 5.850 Tier 1 24,000 23,976,600
----------
33,900,225
----------
Banks - Foreign (4.31%)
Deutsche Bank Financial,
06-26-00 ........................................... 6.060 Tier 1 23,000 22,667,037
----------
Beverages (4.54%)
Coca-Cola Co.,
05-11-00 ........................................... 6.010 Tier 1 24,000 23,839,733
----------
Broker Services (8.31%)
Goldman Sachs Group, L.P.,
04-03-00 ........................................... 5.850 Tier 1 20,000 19,993,500
Merrill Lynch & Co.,
05-02-00 ........................................... 5.920 Tier 1 10,000 9,949,022
Merrill Lynch & Co.,
07-31-00 ........................................... 6.080 Tier 1 14,000 13,713,902
----------
43,656,424
----------
Chemicals (3.80%)
DuPont (E.I.) de Nemours & Co.,
04-18-00 ........................................... 5.770 Tier 1 20,000 19,945,506
----------
Finance (9.30%)
General Electric Capital Corp.,
04-10-00 ........................................... 5.830 Tier 1 15,000 14,978,137
Heller Financial, Inc.,
04-10-00 ........................................... 5.880 Tier 1 20,000 19,970,600
International Lease Finance Corp.,
04-25-00 ........................................... 5.810 Tier 1 14,000 13,945,773
----------
48,894,510
----------
Medical (4.55%)
Becton Dickinson & Co.,
04-18-00 ........................................... 5.850 Tier 1 24,000 23,933,700
----------
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
------------------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Utilities (3.80%)
Bell Atlantic Financial Services,
04-04-00 ........................................... 5.800% Tier 1 $20,000 $19,990,333
----------
TOTAL COMMERCIAL PAPER
(Cost $236,827,468) (45.06%) 236,827,468
-------- -----------
CORPORATE INTEREST-BEARING OBLIGATIONS
Automotive (1.95%)
Ford Motor Credit Co.,
06-05-00 ........................................... 6.840 Tier 1 10,225 10,238,354
----------
Banks - U.S. (0.73%)
KeyCorp,
04-05-00 ........................................... 7.450 Tier 1 3,850 3,850,580
----------
Finance (5.53%)
Associates Corp. N.A.,
04-01-00 ........................................... 9.125 Tier 1 5,069 5,069,000
Associates Corp. N.A.,
06-15-00 ........................................... 6.375 Tier 1 10,000 10,000,664
General Electric Capital Corp.,
04-15-00 ........................................... 6.875 Tier 1 2,000 2,000,506
General Electric Capital Corp.,
05-15-00 ........................................... 5.890 Tier 1 4,000 3,999,524
Household Finance Co.,
05-30-00 ........................................... 6.790 Tier 1 3,000 3,003,383
Household Finance Co.,
06-30-00 ........................................... 6.375 Tier 1 5,000 5,003,173
----------
29,076,250
----------
Insurance (1.90%)
American General Finance Corp.,
04-15-00 ........................................... 7.250 Tier 1 5,000 5,001,902
American General Finance Corp.,
07-01-00 ........................................... 5.875 Tier 1 5,000 4,995,074
----------
9,996,976
----------
Retail (4.05%)
Sears Roebuck Acceptance Corp.,
08-29-00 ........................................... 6.740 Tier 1 2,750 2,754,051
Sears Roebuck Acceptance Corp.,
09-20-00 ........................................... 6.160 Tier 1 18,550 18,533,134
----------
21,287,185
----------
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS
(Cost $74,449,345) (14.16%) 74,449,345
-------- ----------
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
------------------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (21.56%)
Federal Home Loan Bank,
05-03-00 ........................................... 5.780% Tier 1 $20,000 $19,897,244
Federal Home Loan Bank,
05-10-00 ........................................... 5.150 Tier 1 10,000 10,000,000
Federal Home Loan Bank,
05-22-00 ........................................... 5.900 Tier 1 40,000 39,665,667
Federal Home Loan Bank,
05-26-00 ........................................... 5.200 Tier 1 20,000 20,000,000
Federal Home Loan Bank,
07-14-00 ........................................... 5.705 Tier 1 10,000 10,000,000
Federal Home Loan Bank,
08-28-00 ........................................... 5.525 Tier 1 10,000 9,965,103
Federal National Mortgage Association,
04-20-00 ........................................... 5.640 Tier 1 3,800 3,799,793
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $113,327,807) (21.56%) 113,327,807
--------- ------------
INTEREST
RATE
-------------
JOINT REPURCHASE AGREEMENT (18.81%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. - Dated
03-31-00, due 04-03-00 (Secured by U.S.
Treasury Bonds 14.000% due 11-15-11 and
7.250% due 05-15-16) - Note A ......................................... 6.100% 98,887 98,887,000
-----------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $98,887,000) (18.81%) 98,887,000
--------- -----------
TOTAL INVESTMENTS (99.59%) 523,491,620
--------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.41%) 2,147,941
--------- -----------
TOTAL NET ASSETS (100.00%) $525,639,561
========= ============
</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.
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
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 have authorized the issuance of multiple classes
of shares of the Fund, designated as Class A, Class B and Class C shares. The
shares of each class represent an interest in the same portfolio of investments
of the Fund and have equal rights to voting, redemptions, dividends and
liquidation, except that certain expenses, subject to the approval of the Board
of Trustees, may be applied differently to each class of shares in accordance
with current regulations of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class which bears distribution and
service expenses under terms of a distribution plan have exclusive voting rights
to that distribution plan. Beginning May 1, 2000, all retail purchases of Class
C shares will be assessed a 1% up-front sales charge.
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, which approximates market value, in accordance with
Rule 2a-7 of the Investment Company Act of 1940. 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 qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is 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 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
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. 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, at least until August 1, 2000,
and cannot be reinstated to the original contracted amounts without the
Trustees' consent. Accordingly, for the year ended March 31, 2000, the reduction
in the Fund's management fee amounted to $531,705.
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 5.00% 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 B shares. For the year ended March 31, 2000,
contingent deferred sales charges paid to JH Funds amounted to $1,940,649.
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. For the year ended March
31, 2000, contingent deferred sales charges paid to JH Funds amounted to $8,965.
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, at least until August 1, 2000, and cannot be
reinstated to 0.25% without the Trustees' consent. Accordingly, for the year
ended March 31, 2000, the reduction in the Fund's 12b-1 expense amounted to
$337,762. A maximum of 0.25% of such payments may be service fees as defined by
the Conduct Rules of the National Association of Securities Dealers. Under the
Conduct Rules, 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
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,
accounting and legal 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. Stephen L. Brown, Ms. Maureen R. Ford 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
13
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - Money Market Fund
Deferred Compensation Plan. The Fund makes investments into other John Hancock
funds, as applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are recorded on
the Fund's books as an other asset. The deferred compensation liability and the
related other asset are always equal and are marked to market on a periodic
basis to reflect any income earned by the investment as well as any unrealized
gains or losses. The investment had no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities, other
than obligations of the U.S. government and its agencies, during the year ended
March 31, 2000, aggregated $31,645,207,078 and $31,626,305,785, respectively.
Purchases and proceeds from maturities of obligations of the U.S. government and
its agencies aggregated $332,959,013 and $391,298,000, respectively, during the
year ended March 31, 2000.
The cost of investments owned at March 31, 2000 (including the joint
repurchase agreement) for federal income tax purposes was $523,491,620.
14
<PAGE>
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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,
2000, 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 auditing standards generally
accepted in the United States. 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, 2000, 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, 2000, 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 accounting principles generally
accepted in the United States.
/s/Ernst & Young LLP
--------------------
Boston, Massachusetts
May 5, 2000
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,
2000.
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 2000 U.S. Treasury Department Form
1099-DIV in January of 2001. This will reflect the total of all distributions
which are taxable for calendar year 2000.
15
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This report is for the information of shareholders of the John Hancock
Money Market Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
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