ITEM 1. REPORT TO STOCKHOLDERS
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John Hancock
U.S. Government
CASH RESERVE
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SEMI
ANNUAL
REPORT
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9.30.03
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[LOGO] John Hancock
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[A photo of Maureen Ford Goldfarb, Chairman and Chief Executive Officer, flush
left next to first paragraph.]
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Table of contents
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Your fund at a glance
page 1
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Managers' report
page 2
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Fund's investments
page 5
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Financial statements
page 7
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For your information
page 22
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Dear Fellow Shareholders,
The stock market has made a strong recovery in 2003. Historically low interest
rates, improving corporate earnings and government stimulus in the form of tax
cuts gave investors hope that the economy would soon begin to strengthen. The
market's move up began in April and the breadth of the rally was enormous. As a
result, the major indexes were able to wipe out their first-quarter losses and
post solid gains for the first nine months of the year. With technology leading
the way, the tech-heavy Nasdaq Composite Index rose 33.80% through September,
while the Dow Jones Industrial Average was up 13.18% and the Standard & Poor's
500 Index returned 14.71%. With falling interest rates, bonds also did well,
although they reversed course in July and August. High yield bonds led the pack,
returning 21.77% through September, as measured by the Lehman Brothers High
Yield Index.
In other news, we are pleased to inform you that on September 28, 2003, the
Boards of Directors of Canada-based Manulife Financial Corporation and
Boston-based John Hancock Financial Services, Inc., the parent company of John
Hancock Funds, unanimously voted to merge the two companies.
Please be assured that the completion of the merger - anticipated to occur in
the first half of 2004 - will have no effect on your investment in our John
Hancock mutual funds. Your fund's adviser and board of trustees will remain the
same, as will your relationship with your financial adviser.
The merger is subject to customary closing conditions, including receipt of
required regulatory approvals and approval by John Hancock stockholders. If you
only own shares in a John Hancock mutual fund, you are not affected and will not
receive a proxy.
Additional information on this transaction is available on our Web site:
www.jhfunds.com. If you have questions about the merger, you may also call
1-800-732-5543. Separately, for information about your investments in John
Hancock mutual funds, please contact your financial adviser or our Customer
Service representatives at 1-800-225-5291.
Sincerely,
/s/Maureen Ford Goldfarb
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Maureen Ford Goldfarb,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of September 30, 2003. They are
subject to change at any time.
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YOUR FUND
AT A GLANCE
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The Fund seeks the maximum current income that is consistent with maintaining
liquidity and preserving capital. The Fund intends to maintain a stable $1 share
price.
Over the last six months
[ ] Money market yields began to stabilize after falling, with interest rates,
to 45-year lows.
[ ] The Federal Reserve cut rates in June, but an improving economy and
corporate earnings picture sparked the belief that it would be the last cut
for a while.
[ ] The Fund was positioned to capture extra yield by investing in
callable and floating-rate money market securities.
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[Bar chart with heading "John Hancock U.S. Government Cash Reserve". Under the
heading is a note that reads "Fund performance for the six months ended
September 30, 2003." The chart is scaled in increments of 0.25% with 0.00% at
the bottom and 0.50% at the top. The first bar represents the 0.16% total return
for John Hancock U.S. Government Cash Reserve. A note below the chart reads "The
total return for the Fund is at net asset value with all distributions
reinvested. Past performance is no guarantee of future results"]
[Bar chart with heading "7-day effective yield". Under the heading is a note
that reads "As of September 30, 2003." The chart is scaled in increments of
0.25% with 0.00% at the bottom and 0.50% at the top. The first bar represents
the 0.33% total return for John Hancock U.S. Government Cash Reserve."]
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1
BY MATTHEW R. SAWATZKY AND DAVID A. BEES FOR THE PORTFOLIO MANAGEMENT TEAM
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MANAGERS'
REPORT
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John Hancock
U.S. Government
Cash Reserve
During the six months ending September 30, 2003, money market yields finally
started to stabilize after having fallen, with interest rates, to 45-year lows.
As the period began in April 2003, the Federal Reserve remained concerned about
the possibility and strength of an economic recovery in the United States. The
uncertainty of such a recovery, coupled with war with Iraq, continued to
suppress market and consumer confidence. Determined to do what it could to help
bolster a recovery, the Federal Reserve lowered the federal funds rate from
1.25% to 1% at its June FOMC meeting. It was the only action the Federal Reserve
took in the six-month period. As the period progressed, investors grew
encouraged by growing signs of economic strength, a relatively quick end to
major military action in Iraq, and solid second-quarter corporate earnings. The
optimism played out in a strong stock-market rally and an upward shift in
interest rates in July and August. Money market rates stabilized as the market
came to believe that the Federal Reserve would leave the federal funds rate
unchanged for the rest of 2003.
"Emoney market yields finally started to stabilize after having fallen, with
interest rates, to 45-year lows."
FUND YIELD AND PERFORMANCE
On September 30, 2003, John Hancock U.S. Government Cash Reserve had a 7-day
effective yield of 0.33%. By comparison, the average U.S. government money
market fund had a 7-day effective yield of 0.40%, according to Lipper, Inc.
For the six months ended September 30, 2003, the Fund posted a total return of
0.16% at net asset value, compared with the 0.22% return of the average U.S.
government money market fund, according to Lipper, Inc. Keep in mind that your
net asset
2
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[Photos of Matthew Sawatzky and David Bees]
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value return will be different from the Fund's performance if you were not
invested in the Fund for the entire period and did not reinvest all
distributions.
FUND MOVES
As the economic environment began to improve, and short-term rates began to
stabilize, investors were compensated more for investing further into the
future. To take advantage of this, we lengthened the Fund's weighted average
days to maturity. This shift in the Fund's maturity structure allowed the Fund
to take advantage of higher-yielding opportunities and positioned the Fund for
what we believed would be a stable-to-rising rate environment. We began to buy
floating rate securities, which reset their interest rates monthly or quarterly
based on prevailing benchmark interest rates at the time. These securities
provide the Fund with the opportunity to capture the benefits of a rise in
interest rates.
OUTLOOK
We believe that the economy is on a path to recovery and that conditions will
continue to improve. Inflation has, thus far, been of no concern. Economic
growth was strong in the second quarter and is expected to continue in the third
quarter as well. Corporate earnings are improving and we are starting to see
signs of increased corporate spending. After three consecutive down years, the
stock market has enjoyed double-digit returns so far in 2003. Although the
unemployment rate remains a concern, investor and consumer attitudes are
increasingly positive. As long as these trends continue, we believe the Federal
Reserve will remain accommodative and keep the fed funds rate unchanged. We will
continue to position the Fund in a way that will allow us to take advantage of
all opportunities to capture additional yield while, as always, maintaining
liquidity and striving to preserve capital.
"We believe that the economy is on a path to recovery and that conditions will
continue to improve."
3
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[Pie chart in middle of page with heading "Portfolio diversification As a
percentage of net assets on 9-30-03." The chart is divided into two sections
(from top to left): U.S. government obligations 96% and Joint repurchase
agreements 4%.]
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This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. The team's statements reflect
their own opinions. As such, they are in no way guarantees of future events, and
are not intended to be used as investment advice or a recommendation regarding
any specific security. They are also subject to change at any time 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
FINANCIAL STATEMENTS
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FUND'S
INVESTMENTS
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Securities owned
by the Fund on
September 30, 2003
(unaudited)
This schedule is a complete list of all securities owned by the Fund. It's
divided into two types of short-term investments: U.S. government obligations
and joint repurchase agreements.
INTEREST PAR VALUE
ISSUER, MATURITY DATE RATE (000S OMITTED) VALUE
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U.S. GOVERNMENT OBLIGATIONS 95.55% $60,818,818
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(Cost $60,818,818)
Governmental - U.S. Agencies 95.55% 60,818,818
Federal Home Loan Bank,
10-22-03 1.010% $4,000 3,997,643
Federal Home Loan Bank,
11-05-03 1.020 5,000 4,995,042
Federal Home Loan Bank,
11-14-03 3.125 3,340 3,348,101
Federal Home Loan Mortgage Corp.,
10-09-03 1.000 3,000 2,999,333
Federal Home Loan Mortgage Corp.,
10-10-03 1.040 5,000 4,998,700
Federal Home Loan Mortgage Corp.,
10-14-03 1.020 5,000 4,998,158
Federal Home Loan Mortgage Corp.,
10-23-03 1.030 5,000 4,996,853
Federal Home Loan Mortgage Corp.,
11-12-03 1.040 5,000 4,993,933
Federal Home Loan Mortgage Corp.,
04-15-04 3.750 2,000 2,027,792
Federal National Mortgage Assn.,
10-02-03 1.000 2,200 2,199,939
Federal National Mortgage Assn.,
10-02-03 1.020 3,295 3,294,908
Federal National Mortgage Assn.,
10-08-03 1.000 4,360 4,359,147
Federal National Mortgage Assn.,
10-15-03 1.020 5,000 4,998,017
Federal National Mortgage Assn.,
11-15-03 3.125 584 585,441
Federal National Mortgage Assn.,
04-15-04 3.625 2,000 2,025,811
See notes to
financial statements.
5
FINANCIAL STATEMENTS
INTEREST PAR VALUE
ISSUER, MATURITY DATE RATE (000S OMITTED) VALUE
Governmental - U.S. Agencies (continued)
Federal National Mortgage Assn.,
08-17-04 1.200% $2,000 $2,000,000
Federal National Mortgage Assn.,
08-30-04 1.300 1,000 1,000,000
Federal National Mortgage Assn.,
09-21-04 1.500 3,000 3,000,000
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JOINT REPURCHASE AGREEMENT 4.35% $2,769,000
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(Cost $2,769,000)
Investment in a joint repurchase agreement
transaction with Barclays Capital,
Inc. - Dated 09-30-03 due 10-01-03
(Secured by U.S. Treasury Inflation
Indexed Bonds, 3.000% through 3.875%,
due 01-15-11 through 04-15-29) 0.970 2,769 2,769,000
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TOTAL INVESTMENTS 99.90% $63,587,818
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OTHER ASSETS AND LIABILITIES, NET 0.10% $64,000
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TOTAL NET ASSETS 100.00% $63,651,818
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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.
6
FINANCIAL STATEMENTS
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ASSETS AND
LIABILITIES
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September 30, 2003
(unaudited)
This Statement of Assets and Liabilities is the Fund's balance sheet. It shows
the value of what the Fund owns, is due and owes. You'll also find the net asset
value for each share.
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ASSETS
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Investments at value (cost $63,587,818) $63,587,818
Cash 946
Interest receivable 125,411
Other assets 64,417
Total assets 63,778,592
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LIABILITIES
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Payable for shares repurchased 6,301
Dividends payable 632
Payable to affiliates
Management fee 29,365
Other 26,816
Other payables and accrued expenses 63,660
Total liabilities 126,774
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NET ASSETS
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Capital paid-in 63,651,818
Net assets $63,651,818
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NET ASSET VALUE PER SHARE
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Based on net asset values and shares outstanding
($63,651,818 / 63,669,862 shares) $1.00
See notes to
financial statements.
7
FINANCIAL STATEMENTS
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OPERATIONS
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For the period ended
September 30, 2003
(unaudited)1
This Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund for the period stated.
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INVESTMENT INCOME
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Interest $387,919
Total investment income 387,919
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EXPENSES
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Investment management fee 170,797
Distribution and service fee 51,239
Transfer agent fee 43,914
Custodian fee 14,363
Registration and filing fee 14,132
Auditing fee 12,275
Accounting and legal services fee 10,248
Printing 5,019
Trustees' fee 2,509
Miscellaneous 1,046
Legal fee 665
Total expenses 326,207
Less expense reductions (51,239)
Net expenses 274,968
Net investment income 112,951
Increase in net assets from operations $112,951
1 Semiannual period from 4-1-03 through 9-30-03.
See notes to
financial statements.
8
FINANCIAL STATEMENTS
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CHANGES IN
NET ASSETS
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These Statements of Changes in Net Assets show how the value of the Fund's net
assets has changed during the last two periods. The difference reflects earnings
less expenses, distributions paid to shareholders, if any, and any increase or
decrease in money shareholders invested in the Fund.
YEAR PERIOD
ENDED ENDED
3-31-03 9-30-03 1
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INCREASE (DECREASE) IN NET ASSETS
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From operations
Net investment income $730,476 $112,951
Distributions to shareholders
From net investment income (730,476) (112,951)
From Fund share transactions (21,082,762) (9,813,969)
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NET ASSETS
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Beginning of period 94,548,549 73,465,787
End of period $73,465,787 $63,651,818
1 Semiannual period from 4-1-03 through 9-30-03. Unaudited.
See notes to
financial statements.
9
FINANCIAL HIGHLIGHTS
COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share has
changed since the end of the previous period.
PERIOD ENDED 3-31-99 1 3-31-00 1 3-31-01 1 3-31-02 1 3-31-03 9-30-03 2
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PER SHARE OPERATING PERFORMANCE
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Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income3 0.05 0.05 0.06 0.03 0.01 __ 4
Less distributions
From net investment income (0.05) (0.05) (0.06) (0.03) (0.01) __ 4
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return 5,6 (%) 5.08 4.98 5.82 2.60 0.91 0.16 7
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RATIOS AND SUPPLEMENTAL DATA
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Net assets, end of period
(in millions) $108 $106 $92 $95 $73 $64
Ratio of expenses to
average net assets (%) 0.35 0.35 0.64 0.72 0.73 0.80 8
Ratio of adjusted expenses
to average net assets 9 (%) 0.88 0.86 0.91 0.87 0.88 0.95 8
Ratio of net investment
income to average
net assets (%) 4.94 4.90 5.71 2.55 0.92 0.33 8
1 Audited by previous auditor.
2 Semiannual period from 4-1-03 through 9-30-03. Unaudited.
3 Based on the average of the shares outstanding.
4 Less than 0.01 per share.
5 Assumes dividend reinvestment.
6 Total returns would have been lower had certain expenses not been reduced
during the periods shown.
7 Not annualized.
8 Annualized.
9 Does not take into consideration expense reductions during the periods shown.
See notes to
financial statements.
10
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NOTES TO
STATEMENTS
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Unaudited
NOTE A
Accounting policies
John Hancock U.S. Government Cash Reserve (the "Fund") is a diversified series
of John Hancock Current Interest, an open-end management investment company
registered under the Investment Company Act of 1940. The investment objective of
the Fund is to provide maximum current income consistent with maintaining
liquidity and preserving capital.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio 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, LLC (the "Adviser"), a wholly owned
subsidiary of The Berkeley Financial Group, LLC, may participate in a joint
repurchase agreement transaction. Aggregate cash balances are invested in one or
more large 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.
Expenses
The majority of expenses are directly identifiable to an individual fund.
Expenses that are not readily identifiable to a specific fund will be 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.
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 that is distributed to shareholders.
Therefore, no federal income tax provision is required.
Distributions
The Fund's net investment income is declared daily as dividends to shareholders
of record as of the close of business on the
11
preceding day, and distributed monthly.
Such distributions, on a tax basis, are determined in conformity with income tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. Distributions in excess of tax basis earnings and
profits, if any, are reported in the Fund's financial statements as a return of
capital.
Use of estimates
The preparation of these financial statements, in accordance with accounting
principles generally accepted in the United States of America, incorporates
estimates made by management in determining the reported amount 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
The Fund has an investment management contract with the Adviser. Under the
investment management contract, the Fund pays a monthly management fee to the
Adviser 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 Fund has a distribution plan with John Hancock Funds, LLC ("JH Funds"), a
wholly owned subsidiary of the Adviser. The Fund has adopted a distribution plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940 to reimburse JH
Funds for the services it provides as distributor of shares of the Fund at an
annual rate not to exceed 0.15% of the Fund's average daily net asset value. JH
Funds has agreed to suspend the distribution and service ("12b-1") fee, at least
until July 31, 2004. Accordingly, the expense reductions related to the 12b-1
fee amounted to $51,239 for the period ended September 30, 2003. JH Funds
reserves the right to terminate this limitation in the future.
The Fund has a transfer agent agreement with John Hancock Signature Services,
Inc., an indirect subsidiary of John Hancock Life Insurance Company. The Fund
pays a monthly transfer agent fee at an annual rate of 0.015% of the average
daily net asset value of the Fund, plus a fee based on the number of shareholder
accounts and reimbursement for 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 period was at an
annual rate of approximately 0.03% of the average net asset value of the Fund.
Ms. Maureen Ford Goldfarb and Mr. John M. DeCiccio 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
investments as well as any unrealized gains or losses. The Deferred Compensation
Plan investments had no impact on the operations of the Fund.
12
Note C
Fund share transactions
This listing illustrates the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the corresponding dollar
value. The Fund has an unlimited number of shares authorized with no par value.
YEAR ENDED 3-31-03 PERIOD ENDED 9-30-03 1
SHARES AMOUNT SHARES AMOUNT
Shares sold 59,539,540 $59,557,490 16,367,998 $16,368,023
Distributions reinvested 699,319 699,319 107,791 107,791
Shares repurchased (81,339,571) (81,339,571) (26,289,783) (26,289,783)
Net decrease (21,100,712) ($21,082,762) (9,813,994) ($9,813,969)
1 Semiannual period from 4-1-03 through 9-30-03. Unaudited.
NOTE D
Investment
transactions
Purchases and proceeds from sales or maturities of securities, including
discount earned on investment securities, during the period ended September 30,
2003, aggregated $1,338,928,873 and $1,349,072,628, respectively.
The cost of investments owned on September 30, 2003, including short-term
investments, for federal income tax purposes was $63,587,818.
13
- ----------
OUR FAMILY
OF FUNDS
- ----------
- --------------------------------------------------------------------------------
Equity Balanced Fund
Classic Value Fund
Core Equity Fund
Focused Equity Fund
Growth Trends Fund
International Fund
Large Cap Equity Fund
Large Cap Growth Fund
Large Cap Select Fund
Mid Cap Growth Fund
Multi Cap Growth Fund
Small Cap Equity Fund
Small Cap Growth Fund
Sovereign Investors Fund
U.S. Global Leaders Growth Fund
- --------------------------------------------------------------------------------
Sector Biotechnology Fund
Financial Industries Fund
Health Sciences Fund
Real Estate Fund
Regional Bank Fund
Technology Fund
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Income Bond Fund
Government Income Fund
High Income Fund
High Yield Bond Fund
Investment Grade Bond Fund
Strategic Income Fund
- --------------------------------------------------------------------------------
Tax-Free Income California Tax-Free Income Fund
High Yield Municipal Bond Fund
Massachusetts Tax-Free Income Fund
New York Tax-Free Income Fund
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
Money Market Money Market Fund
U.S. Government Cash Reserve
For more complete information on any John Hancock Fund and a prospectus, which
includes charges and expenses, call your financial professional, or John Hancock
Funds at 1-800-225-5291. Please read the prospectus carefully before investing
or sending money.
14
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ELECTRONIC
DELIVERY
- ----------
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15
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OUR WEB SITE
- ------------
A wealth of information - www.jhfunds.com
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View the latest information for your account.
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Transfer money from one account to another.
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Get current quotes for major market indexes.
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Use our online calculators to help you with your financial goals.
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Access forms, applications and tax information.
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16
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FOR YOUR
INFORMATION
- -----------
TRUSTEES
James F. Carlin
William H. Cunningham
John M. DeCiccio
Ronald R. Dion
Maureen Ford Goldfarb
Charles L. Ladner*
Steven R. Pruchansky
Lt. Gen. Norman H. Smith,
USMC (Ret.)
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Maureen Ford Goldfarb
Chairman, President
and Chief Executive Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President
and Secretary
William H. King
Vice President and Treasurer
Thomas H. Connors
Vice President and
Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
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HOW TO
CONTACT US
- ----------
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
The Fund's voting policies and procedures are available without charge, upon
request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
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17
[LOGO] John Hancock
1-800-225-5291 1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
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Now available: electronic
delivery www.jhancock.com/funds/edelivery
- ------------------------------------------
This report is for the information of the shareholders of the John Hancock U.S.
Government Cash Reserve.
430SA 9/03
11/03
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John Hancock
Money
MARKET FUND
- ------
SEMI
ANNUAL
REPORT
- ------
9.30.03
Sign up for electronic delivery at
www.jhancock.com/funds/edelivery
[LOGO] John Hancock
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[A photo of Maureen Ford Goldfarb, Chairman and Chief Executive Officer, flush
left next to first paragraph.]
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Table of contents
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Your fund at a glance
page 1
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Managers' report
page 2
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Fund's investments
page 5
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Financial statements
page 7
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For your information
page 17
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Dear Fellow Shareholders,
The stock market has made a strong recovery in 2003. Historically low interest
rates, improving corporate earnings and government stimulus in the form of tax
cuts gave investors hope that the economy would soon begin to strengthen. The
market's move up began in April and the breadth of the rally was enormous. As a
result, the major indexes were able to wipe out their first-quarter losses and
post solid gains for the first nine months of the year. With technology leading
the way, the tech-heavy Nasdaq Composite Index rose 33.80% through September,
while the Dow Jones Industrial Average was up 13.18% and the Standard & Poor's
500 Index returned 14.71%. With falling interest rates, bonds also did well,
although they reversed course in July and August. High yield bonds led the pack,
returning 21.77% through September, as measured by the Lehman Brothers High
Yield Index.
In other news, we are pleased to inform you that on September 28, 2003, the
Boards of Directors of Canada-based Manulife Financial Corporation and
Boston-based John Hancock Financial Services, Inc., the parent company of John
Hancock Funds, unanimously voted to merge the two companies.
Please be assured that the completion of the merger - anticipated to occur in
the first half of 2004 - will have no effect on your investment in our John
Hancock mutual funds. Your fund's adviser and board of trustees will remain the
same, as will your relationship with your financial adviser.
The merger is subject to customary closing conditions, including receipt of
required regulatory approvals and approval by John Hancock stockholders. If you
only own shares in a John Hancock mutual fund, you are not affected and will not
receive a proxy.
Additional information on this transaction is available on our Web site:
www.jhfunds.com. If you have questions about the merger, you may also call
1-800-732-5543. Separately, for information about your investments in John
Hancock mutual funds, please contact your financial adviser or our Customer
Service representatives at 1-800-225-5291.
Sincerely,
/s/Maureen Ford Goldfarb
- ------------------------
Maureen Ford Goldfarb,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of September 30, 2003. They are
subject to change at any time.
- -----------
YOUR FUND
AT A GLANCE
- -----------
The Fund seeks the maximum current income that is consistent with maintaining
liquidity and preserving capital. The Fund intends to maintain a stable $1 share
price.
Over the last six months
[ ] Money market yields began to stabilize after falling, with interest rates,
to 45-year lows.
[ ] The Federal Reserve cut rates in June, but an improving economy and
corporate earnings picture sparked the belief that it would be the last cut
for a while.
[ ] The Fund was positioned to capture extra yield by investing in callable and
floating-rate money market securities.
- --------------------------------------------------------------------------------
[Bar chart with heading "John Hancock Money Market Fund". Under the heading is a
note that reads "Fund performance for the six months ended September 30, 2003."
The chart is scaled in increments of 0.25% with 0.00% at the bottom and 0.50% at
the top. The first bar represents the 0.12% total return for Class A. The second
bar represents the 0.06% total return for Class B. The third bar represents the
0.06% total return for Class C. A note below the chart reads "The total returns
for the Fund are at net asset value with all distributions reinvested. Past
performance is no guarantee of future results."]
[Bar chart with heading "7-day effective yield". Under the heading is a note
that reads "As of September 30, 2003." The chart is scaled in increments of
0.25% with 0.00% at the bottom and 0.50% at the top. The first bar represents
the 0.18% total return for Class A. The second bar represents the 0.14% total
return for Class B. The third bar represents the 0.14% total return for Class
C."]
- --------------------------------------------------------------------------------
1
BY MATTHEW R. SAWATZKY AND DAVID A. BEES FOR THE PORTFOLIO MANAGEMENT TEAM
- ---------
MANAGERS'
REPORT
- ---------
John Hancock
Money Market
Fund
During the six months ending September 30, 2003, money market yields finally
started to stabilize after having fallen, with interest rates, to 45-year lows.
As the period began in April 2003, the Federal Reserve remained concerned about
the possibility and strength of an economic recovery in the United States. The
uncertainty of such a recovery, coupled with war with Iraq, continued to
suppress market and consumer confidence. Determined to do what it could to help
bolster a recovery, the Federal Reserve lowered the fed funds rate from 1.25% to
1% at its June FOMC meeting. It was the only action the Federal Reserve took in
the six-month period. As the period progressed, investors grew encouraged by
growing signs of economic strength, a relatively quick end to major military
action in Iraq, and solid second-quarter corporate earnings. The optimism played
out in a strong stock-market rally and an upward shift in interest rates in July
and August. Money market rates stabilized as the market came to believe that the
Federal Reserve would leave the federal funds rate unchanged for the rest of
2003.
"...money market yields finally started to stabilize after having fallen, with
interest rates, to 45-year lows."
FUND YIELD AND PERFORMANCE
On September 30, 2003, John Hancock Money Market Fund's Class A, Class B and
Class C shares had 7-day effective yields of 0.18%, 0.14% and 0.14%,
respectively. By comparison, the average taxable money market fund had a 7-day
effective yield of 0.37%, according to Lipper, Inc.
For the six months ended September 30, 2003, the Fund's Class A, Class B and
Class C shares posted total returns of 0.12%, 0.06% and 0.06%, respectively, at
net asset value, compared with the 0.21% return of the average taxable money
2
- --------------------------------------------------------------------------------
[Photos of Matthew Sawatzky and David Bees]
- --------------------------------------------------------------------------------
market fund, according to Lipper, Inc.1 Keep in mind that your net asset value
return will be different from the Fund's performance if you were not invested in
the Fund for the entire period and did not reinvest all distributions.
FUND MOVES
As the economic environment began to improve and short-term rates began to
stabilize, investors were compensated more for investing further into the
future. To take advantage of this, we lengthened the Fund's weighted average
days to maturity. This shift in the Fund's maturity structure allowed the Fund
to take advantage of higher-yielding opportunities and positioned the Fund for
what we also believed would be a stable-to-rising rate environment. We also
began to buy floating rate securities, which reset their interest rates monthly
or quarterly based on prevailing benchmark interest rates at the time. These
securities provide the Fund with the opportunity to capture the benefits of a
rise in interest rates.
OUTLOOK
We believe that the economy is on a path to recovery and that conditions will
continue to improve. Inflation has, thus far, been of no concern. Economic
growth was strong in the second quarter and is expected to continue in the third
quarter as well. Corporate earnings are improving and we are starting to see
signs of increased corporate spending. After three consecutive down years, the
stock market has enjoyed double-digit returns so far in 2003. Although the
unemployment rate remains a concern, investor and consumer attitudes are
increasingly positive. As long as these trends continue, we believe the Federal
Reserve will remain accommodative and keep the fed funds rate unchanged. We will
continue to position the Fund in a way that will allow us to take advantage of
all opportunities to capture additional yield while, as always, maintaining
liquidity and striving to preserve capital.
"We believe that the economy is on a path to recovery and that conditions will
continue to improve."
3
- --------------------------------------------------------------------------------
[Table at top left-hand side of page entitled "Top five industry groups." The
first listing is Finance 22%, the second is Banks-foreign 14%, the third U.S.
government agencies 12%, the fourth Medical 10%, and the fifth Banks-U.S. 6%.]
[Pie chart in middle of page with heading "Portfolio diversification As a
percentage of net assets on 9-30-03." The chart is divided into three sections
(from top to left): Commercial paper 84%, U.S. government agencies 12% and Joint
repurchase agreements 4%. ]
- --------------------------------------------------------------------------------
This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. The team's statements reflect
their own opinions. As such, they are in no way guarantees of future events, and
are not intended to be used as investment advice or a recommendation regarding
any specific security. They are also subject to change at any time 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.
1 Figures from Lipper, Inc. include reinvested dividends and do not take into
account sales charges. Actual load-adjusted performance is lower.
4
FINANCIAL STATEMENTS
- -----------
FUND'S
INVESTMENTS
- -----------
Securities owned
by the Fund on
September 30, 2003
(unaudited)
This schedule is divided into three types of short-term investments, which are
further broken down by industry group.
ISSUER, DESCRIPTION, INTEREST QUALITY PAR VALUE
MATURITY DATE RATE RATING* (000S OMITTED) VALUE
- -----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 84.07% $333,513,826
- -----------------------------------------------------------------------------------------------------------------
(Cost $333,513,826)
Banks - Foreign 14.48% 57,465,163
Abbey National North America Corp., 10-21-03 0.860% Tier 1 $19,000 19,000,000
Societe Generale N.A., Inc., 12-04-03 1.060 Tier 1 18,500 18,465,138
Toronto Dominion Bank, 10-10-03 1.040 Tier 1 20,000 20,000,025
Banks - United States 6.08% 24,126,324
Bank of America Corp., 03-01-04 5.750 Tier 1 3,500 3,566,487
Morgan (J.P.) & Co., Inc., 02-25-04 5.750 Tier 1 550 559,837
Wells Fargo Bank NA, 10-06-03 1.070 Tier 1 20,000 20,000,000
Beverages 3.02% 12,000,000
Coca-Cola Enterprises, Inc., 10-01-03 (R) 1.050 Tier 1 12,000 12,000,000
Chemicals 5.04% 19,980,544
DuPont (E.I.) de Nemours & Co., 11-04-03 1.030 Tier 1 20,000 19,980,544
Commodities 5.04% 19,996,033
Cargill, Inc., 10-08-03 (R) 1.020 Tier 1 20,000 19,996,033
Finance 22.03% 87,415,011
American Honda Finance Corp., 07-09-04 1.060 Tier 1 18,500 18,500,000
Associates Corporation of North America, 11-01-03 5.750 Tier 1 5,875 5,897,633
BNP Paribas, Inc., 10-17-03 1.025 Tier 1 20,000 19,990,889
CIT Group, Inc., 10-15-03 5.625 Tier 1 20,000 20,030,267
Ford Motor Credit Co., 10-02-03 1.260 Tier 2 1,400 1,399,950
Ford Motor Credit Co., 10-16-03 1.240 Tier 2 2,600 2,598,657
General Motors Acceptance Corp., 10-15-03 1.250 Tier 2 4,000 3,998,055
UBS Finance, Inc., 10-02-03 1.055 Tier 1 15,000 14,999,560
Media 5.04% 19,991,583
Gannett Co., 10-16-03 (R) 1.010 Tier 1 20,000 19,991,583
Medical 9.83% 38,979,848
Baxter International, Inc., 10-30-03 1.060 Tier 1 19,000 18,983,776
Prizer, Inc., 10-08-03 (R) 1.010 Tier 1 20,000 19,996,072
Mortgage & Real Estate Services 3.93% 15,578,627
Countrywide Home Loans, 06-15-04 6.850 Tier 1 15,000 15,578,627
See notes to
financial statements.
5
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST QUALITY PAR VALUE
MATURITY DATE RATE RATING* (000S OMITTED) VALUE
Multi Purpose 3.78% $14,989,746
Yorktown Capital, LLC, 10-24-03 (R) 1.070% Tier 1 $15,000 14,989,746
Telecommunications 1.01% 3,999,339
AT&T Corp., 10-6-03 1.190 Tier 2 4,000 3,999,339
Trade Receivables 4.79% 18,991,608
Clipper Receivables Corp., 10-16-03 (R) 1.060 Tier 1 19,000 18,991,608
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 11.88% $47,111,169
- -----------------------------------------------------------------------------------------------------------------
(Cost $47,111,169)
Government - U.S. Agencies 11.88% 47,111,169
Federal Home Loan Mortgage Corp., 04-15-04 3.750 Tier 1 8,000 8,111,169
Federal National Mortgage Assn., 10-01-03 0.970 Tier 1 7,000 7,000,000
Federal National Mortgage Assn., 08-17-04 1.200 Tier 1 12,000 12,000,000
Federal National Mortgage Assn., 08-30-04 1.300 Tier 1 10,000 10,000,000
Federal National Mortgage Assn., 09-21-04 1.500 Tier 1 10,000 10,000,000
- -----------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENT 3.92% $15,537,000
- -----------------------------------------------------------------------------------------------------------------
(Cost $15,537,000)
Investment in a joint repurchase agreement transaction
with Barclays Capital, Inc. - Dated 09-30-03
due 10-01-03 (Secured by U.S. Treasury Inflation
Indexed Bond, 3.875% due 04-15-29, U.S. Treasury
Inflation Indexed Notes, 3.000% due 07-15-12,
and 3.500% due 01-15-11) 0.970 15,537 15,537,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 99.87% $396,161,995
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET 0.13% $534,425
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS 100.00% $396,696,420
- -----------------------------------------------------------------------------------------------------------------
* 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.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $105,965,042, or 26.71% of the Fund's net assets, as
of September 30, 2003.
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.
6
FINANCIAL STATEMENTS
- -----------
ASSETS AND
LIABILITIES
- -----------
September 30, 2003
(unaudited)
This Statement of Assets and Liabilities is the Fund's balance sheet. It shows
the value of what the Fund owns, is due and owes. You'll also find the net asset
value and the maximum offering price per share.
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments at value (cost $396,161,995) $396,161,995
Cash 753
Receivable for shares sold 151
Interest receivable 1,306,228
Other assets 95,545
Total assets 397,564,672
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Dividends payable 3,541
Payable for shares repurchased 299,309
Payable to affiliates
Management fee 147,449
Distribution and service fee 10,568
Other 231,329
Other payables and accrued expenses 176,056
Total liabilities 868,252
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Capital paid-in 396,694,053
Accumulated net realized loss on investments (1,458)
Accumulated net investment income 3,825
Net assets $396,696,420
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Based on net asset values and shares outstanding
Class A ($252,802,585 / 252,882,669 shares) $1.00
Class B ($129,992,052 / 130,011,053 shares) $1.00
Class C ($13,901,783 / 13,901,849 shares) $1.00
- --------------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE
- --------------------------------------------------------------------------------
Class C ($1.00 / 99%) $1.01
See notes to
financial statements.
7
FINANCIAL STATEMENTS
- ----------
OPERATIONS
- ----------
For the period ended
September 30, 2003
(unaudited)1
This Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund.
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $2,446,716
Total investment income 2,446,716
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Investment management fee 1,035,537
Class A distribution and service fee 318,236
Class B distribution and service fee 716,515
Class C distribution and service fee 80,480
Transfer agent fee 603,871
Accounting and legal services fee 62,098
Custodian fee 45,152
Registration and filing fee 43,552
Auditing fee 17,215
Trustees' fee 13,300
Printing 10,389
Miscellaneous 9,838
Legal fee 4,452
Total expenses 2,960,635
Less expense reductions (912,817)
Net investment income 398,898
- --------------------------------------------------------------------------------
REALIZED LOSS
- --------------------------------------------------------------------------------
Net realized loss on investments (1,458)
Increase in net assets from operations $397,440
1 Semiannual period from 4-1-03 through 9-30-03.
See notes to
financial statements.
8
FINANCIAL STATEMENTS
- ----------
CHANGES IN
NET ASSETS
- ----------
These Statements of Changes in Net Assets show how the value of the Fund's net
assets has changed during the last two periods. The difference reflects earnings
less expenses, distributions, if any, paid to shareholders and any increase or
decrease in money shareholders invested in the Fund.
YEAR PERIOD
ENDED ENDED
3-31-03 9-30-03 1
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- --------------------------------------------------------------------------------
From operations
Net investment income $2,216,154 $398,898
Net realized loss - (1,458)
Increase in net assets resulting
from operations 2,216,154 397,440
Distributions to shareholders
From net investment income
Class A (2,038,032) (304,553)
Class B (156,964) (84,858)
Class C (21,158) (9,487)
(2,216,154) (398,898)
From Fund share transactions 33,902,188 (58,157,544)
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Beginning of period 420,953,234 454,855,422
End of period 2 $454,855,422 $396,696,420
1 Semiannual period from 4-1-03 through 9-30-03. Unaudited.
2 Includes accumulated net investment income of $3,825 and $3,825, respectively.
See notes to
financial statements.
9
FINANCIAL HIGHLIGHTS
CLASS A SHARES
The Financial Highlights show how the Fund's net asset value for a share has
changed since the end of the previous period.
PERIOD ENDED 3-31-99 1 3-31-00 1 3-31-01 1 3-31-02 1 3-31-03 9-30-03 2
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income3 0.04 0.04 0.05 0.02 0.01 __ 4
Less distributions
From net investment income (0.04) (0.04) (0.05) (0.02) (0.01) __ 4
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return5,6 (%) 4.54 4.45 5.51 2.41 0.75 0.12 7
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in millions) $374 $362 $295 $264 $271 $253
Ratio of expenses
to average net assets (%) 0.91 0.91 0.95 0.90 0.94 0.94 8
Ratio of adjusted expenses
to average net assets9 (%) 1.11 1.11 1.15 1.10 1.14 1.14 8
Ratio of net investment
income to average
net assets (%) 4.44 4.40 5.43 2.40 0.75 0.24 8
See notes to
financial statements.
10
FINANCIAL HIGHLIGHTS
CLASS B SHARES
PERIOD ENDED 3-31-99 1 3-31-00 1 3-31-01 1 3-31-02 1 3-31-03 9-30-03 2
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income3 0.04 0.04 0.05 0.02 __ 4 __ 4
Less distributions
From net investment income (0.04) (0.04) (0.05) (0.02) __ 4 __ 4
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return5,6 (%) 3.66 3.59 4.63 1.55 0.10 0.06 7
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in millions) $182 $158 $162 $142 $166 $130
Ratio of expenses
to average net assets (%) 1.76 1.74 1.79 1.75 1.59 1.07 8
Ratio of adjusted expenses
to average net assets9 (%) 1.86 1.84 1.89 1.85 1.89 1.90 8
Ratio of net investment
income to average
net assets (%) 3.54 3.56 4.54 1.52 0.10 0.12 8
See notes to
financial statements.
11
FINANCIAL HIGHLIGHTS
CLASS C SHARES
PERIOD ENDED 3-31-99 1 3-31-00 1 3-31-01 1 3-31-02 1 3-31-03 9-30-03 2
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income3 0.03 0.04 0.05 0.02 __ 4 __ 4
Less distributions
From net investment income (0.03) (0.04) (0.05) (0.02) __ 4 __ 4
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return5,6 (%) 3.29 7 3.58 4.63 1.55 0.11 0.06 7
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in millions) $1 $6 $13 $16 $18 $14
Ratio of expenses
to average net assets (%) 1.75 8 1.76 1.79 1.75 1.61 1.07 8
Ratio of adjusted expenses
to average net assets9 (%) 1.85 8 1.86 1.89 1.85 1.88 1.89 8
Ratio of net investment
income to average net assets (%) 3.46 8 3.67 4.59 1.46 0.10 0.12 8
1 Audited by previous auditor.
2 Semiannual period from 4-1-03 through 9-30-03. Unaudited.
3 Based on the average of the shares outstanding.
4 Less than $0.01 per share.
5 Assumes dividend reinvestment and does not reflect the effect of sales charges.
6 Total returns would have been lower had certain expenses not been reduced during the periods shown.
7 Not annualized.
8 Annualized.
9 Does not take into consideration expense reductions during the periods shown.
10 Class C shares began operations on 5-1-98.
See notes to
financial statements.
12
- ----------
NOTES TO
STATAMENTS
- ----------
Unaudited
NOTE A
Accounting policies
John Hancock Money Market Fund (the "Fund") is a diversified series of John
Hancock Current Interest, an open-end management investment company registered
under the Investment Company Act of 1940. The investment objective of the Fund
is to seek the maximum current income that is consistent with maintaining
liquidity and preserving capital.
The 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 as to voting, redemptions, dividends and liquidation, except
that certain expenses, subject to the approval of the 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 that bears distribution and service expenses under the
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
Securities in the Fund's portfolio 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, LLC (the "Adviser"), a wholly owned
subsidiary of The Berkeley Financial Group, LLC, may participate in a joint
repurchase agreement transaction. Aggregate cash balances are invested in one or
more large 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
13
investments are determined on the identified cost basis.
Class allocations
Income, common expenses and realized and unrealized gains (losses) are
determined at the fund level and allocated daily to each class of shares based
on the appropriate net asset value of the respective classes. Distribution and
service fees, if any, are calculated daily at the class level based on the
appropriate net asset value of each class and the specific expense rate(s)
applicable to each class.
Expenses
The majority of expenses are directly identifiable to an individual fund.
Expenses that are not readily identifiable to a specific fund will be 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.
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 that is distributed to shareholders.
Therefore, no federal income tax provision is required.
Distributions
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. Distributions paid by the Fund with respect to each class of shares are
calculated in the same manner, at the same time and are in the same amount,
except for the effect of expenses that may be applied differently to each class.
Such distributions, on a tax basis, are determined in conformity with income tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. Distributions in excess of tax basis earnings and
profits, if any, are reported in the Fund's financial statements as a return of
capital.
Use of estimates
The preparation of these financial statements, in accordance with accounting
principles generally accepted in the United States of America, incorporates
estimates made by management in determining the reported amount 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
The Fund has an investment management contract with the Adviser. Under the
investment management contract, the Fund pays a monthly management fee to the
Adviser 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 Fund's average daily net asset value in
excess of $2,500,000,000.
The Adviser has agreed to limit the management fee to 0.40% of the Fund's first
$750,000,000 average daily net asset value, at least until July 31, 2004. The
management fee cannot be reinstated to the original contracted amounts without
the Trustees' consent. Accordingly, the expense reductions related to the
management fee limitation amounted to $207,561for the period ended September 30,
2003.
The Fund has Distribution Plans with John Hancock Funds, LLC ("JH Funds"), a
wholly owned subsidiary of the Adviser. 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 to reimburse JH Funds for the services it
provides as distributor of shares of the Fund. Accordingly, the Fund
14
makes monthly payments to JH Funds at an annual rate not to exceed 0.25% of
Class A average daily net asset value and 1.00% of Class B and Class C average
daily net asset value. JH Funds has agreed to limit the distribution and service
("12b-1") fee for Class A to 0.15% of the Class A average daily net asset value
at least until July 31, 2004. JH Funds has also agreed to limit the 12b-1 fees
for Class B and Class C as follows: to 0.35% of the Class B and Class C average
daily net assets, effective from January 25, 2003 to June 26, 2003; and to 0.20%
of the Class B and Class C average daily net assets, effective June 26, 2003.
The 12b-1 fee limitations for Class B and C may be discontinued at any time.
Accordingly, the expense reductions related to the 12b-1 fees amounted to
$127,294 for Class A, $519,784 for Class B and $58,178 for Class C, for the
period ended September 30, 2003. 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.
Class C shares are assessed up-front sales charges. During the period ended
September 30, 2003, JH Funds received net up-front sales charges of $9,047 with
regard to sales of Class C shares. Of this amount, $5,509 was paid as sales
commissions to unrelated broker-dealers and $3,538 was paid as sales commissions
to sales personnel of Signator Investors, Inc. ("Signator Investors"), a related
broker-dealer. The Adviser's indirect parent, John Hancock Life Insurance
Company ("JHLICo"), is the indirect sole shareholder of Signator Investors.
Class B shares that are redeemed within six years of purchase are 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. Class C shares that are
redeemed within one year of purchase are 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 CDSCs 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
and Class C shares. During the period ended September 30, 2003, CDSCs received
by JH Funds amounted to $394,641 for Class B shares and $10,499 for Class C
shares.
The Fund has a transfer agent agreement with John Hancock Signature Services,
Inc., an indirect subsidiary of JHLICo. The Fund pays a monthly transfer agent
fee at an annual rate of 0.015% of the average daily net asset value, plus a fee
based on the number of shareholder accounts and reimbursement for certain
out-of-pocket expenses, aggregated and allocated to each class on the basis of
its relative net asset value.
The Fund has an agreement with the Adviser to perform necessary tax, accounting
and legal services for the Fund. The compensation for the period was at an
annual rate of approximately 0.03% of the average net asset value of the Fund.
Ms. Maureen Ford Goldfarb and Mr. John M. DeCiccio 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
15
the related other asset are always equal and are marked to market on a periodic
basis to reflect any income earned by the investments as well as any unrealized
gains or losses. The Deferred Compensation Plan investments had no impact on the
operations of the Fund.
NOTE C
Fund share transactions
This listing illustrates the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the corresponding dollar
value. Analysis of Fund share transactions is reported at $1 per share. The Fund
has an unlimited number of shares authorized with no par value.
YEAR ENDED PERIOD ENDED
3-31-03 9-30-03 1
- --------------------------------------------------------------------------------
CLASS A SHARES
- --------------------------------------------------------------------------------
Sold $309,350,628 $147,142,859
Distributions reinvested 1,957,626 291,656
Repurchased (304,129,513) (165,407,014)
Net increase (decrease) $7,178,741 ($17,972,499)
- --------------------------------------------------------------------------------
CLASS B SHARES
- --------------------------------------------------------------------------------
Sold $187,011,944 $44,185,665
Distributions reinvested 141,507 76,320
Repurchased (162,960,444) (80,028,749)
Net increase (decrease) $24,193,007 ($35,766,764)
- --------------------------------------------------------------------------------
CLASS C SHARES
- --------------------------------------------------------------------------------
Sold $34,073,192 $24,407,423
Distributions reinvested 19,983 8,759
Repurchased (31,562,735) (28,834,463)
Net increase (decrease) $2,530,440 ($4,418,281)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) $33,902,188 ($58,157,544)
- --------------------------------------------------------------------------------
1 Semiannual period from 4-1-03 through 9-30-03. Unaudited.
NOTE D
Investment
transactions
Purchases and proceeds from sales or maturities of securities, including
discount earned on investment securities, other than obligations of the U.S.
government, during the period ended September 30, 2003, aggregated $393,305,052
and $453,394,868, respectively. The cost of investments owned on September 30,
2003, including short-term investments, for federal income tax purposes was
$396,161,995.
16
- -----------
FOR YOUR
INFORMATION
- -----------
TRUSTEES
James F. Carlin
William H. Cunningham
John M. DeCiccio
Ronald R. Dion
Maureen Ford Goldfarb
Charles L. Ladner*
Steven R. Pruchansky
Lt. Gen. Norman H. Smith,
USMC (Ret.)
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Maureen Ford Goldfarb
Chairman, President
and Chief Executive Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President
and Secretary
William H. King
Vice President and Treasurer
Thomas H. Connors
Vice President and
Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
- --------------------------------------------------------------------------------
HOW TO
CONTACT US
- ----------
On the Internet www.jhfunds.com
By regular mail John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
By express mail John Hancock Signature Services, Inc.
Attn: Mutual Fund Image Operations
529 Main Street
Charlestown, MA 02129
Customer service representatives 1-800-225-5291
24-hour automated information 1-800-338-8080
TDD line 1-800-554-6713
The Fund's voting policies and procedures are available without charge, upon
request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
- --------------------------------------------------------------------------------
17
[LOGO] John Hancock
1-800-225-5291 1-800-554-6713 (TDD)
1-800-338-8080 EASI-Line
www.jhfunds.com
- ------------------------------------------
Now available: electronic
delivery www.jhancock.com/funds/edelivery
- ------------------------------------------
This report is for the information of the shareholders of the John Hancock
Money Market Fund.
440SA 9/03
11/03
ITEM 2. CODE OF ETHICS.
As of the end of the period, September 30, 2003, the registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief
Executive Officer, Chief Financial Officer and Treasurer (respectively, the
principal executive officer, the principal financial officer and the principal
accounting officer, the "Senior Financial Officers"). A copy of the code of
ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Charles L. Ladner is the audit committee financial expert and is "independent",
pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's principal executive officer and principal financial officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule
30a-2(b) under the Investment Company Act of 1940, are attached. The
certifications furnished pursuant to this paragraph are not deemed to be "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise
subject to the liability of that section. Such certifications are not deemed to
be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent that the Registrant
specifically incorporates them by reference.
(c)(1) Contact person at the registrant
November 19, 2003
EDGAR
United States Securities and
Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:Form N-CSR
John Hancock Current Interest
John Hancock Money Market Fund
John Hancock U.S. Government Cash Reserve
File Nos. 2-50931; 811-2485
Gentlemen:
Enclosed herewith for filing pursuant to the Investment Company Act of 1940 is
Form N-CSR ("certified shareholder report").
If you have any questions or comments regarding this filing, please contact the
undersigned at (617) 375-1513.
Sincerely,
/s/Alfred Ouellette
Alfred Ouellette
Senior Attorney and Assistant Secretary
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By:
- ------------------------------
Maureen Ford Goldfarb
Chairman, President and Chief Executive Officer
Date: November 19, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:
- -------------------------------
Maureen Ford Goldfarb
Chairman, President and Chief Executive Officer
Date: November 19, 2003
By:
- -----------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: November 19, 2003