<PAGE> 1
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
CASH
RESERVE,
INC.
SEMI-ANNUAL REPORT
June 30, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles L. Ladner*
Leo E. Linbeck, Jr.*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Lawrence J. Daly
Senior Vice President
James K. Ho
Senior Vice President
Barry H. Evans
Vice President
Anne M. McDonley
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
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
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Educating shareholders has always been one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern time, Monday through
Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
CASH RESERVE, INC.
MONEY MARKET YIELDS APPROACH HIGHEST LEVEL IN FOUR YEARS
After the Federal Reserve's seven interest-rate increases, money market yields
have approached their highest levels in almost four years. In fact, they've
nearly doubled since February 1994 when the Fed first began raising interest
rates to rein in the economy. With yields now close to 6%, money market
investors are earning a real rate of return -- that is, the return after
inflation -- of nearly 4%. At that level, money market funds have become more
attractive investments than they've been in recent memory, especially relative
to more risky stock and bond funds.
[A 2 1/2" x 2 1/4" photo of Dawn Baillie at bottom center. Caption reads: "Dawn
Baillie".]
On June 30, 1995, John Hancock Cash Reserve, Inc. had a 7-day average yield
of 5.52%. By comparison, the average taxable money fund had a 7-day average
yield of 5.46%, according to IBC/Donoghue's Money Fund Report.
SHIFTING GEARS
In the first six months of 1995, the market environment experienced a complete
reversal. At the end of January, when business activity seemed to be on the
verge of boiling over into an inflationary mess, the market anticipated and
welcomed the Fed's seventh interest-rate hike. Five months later, the economy
was showing signs of slowing and the market was hoping that the Fed would lower
rates.
With the change in market environment, our strategy has shifted gears, too.
In the last quarter of 1994 and early this year, we kept the Fund's average
maturity relatively short, in the 25-day range. This conservative strategy
allowed us to buy higher-yielding securities as interest rates were rising,
especially at year-end when short-term financing pressures caused yields to
spike temporarily.
[CAPTION]
"...MONEY MARKET FUNDS HAVE BECOME MORE ATTRACTIVE INVESTMENTS..."
3
<PAGE> 4
John Hancock Funds - Cash Reserve, Inc.
[Bar chart with the heading "7-Day Yield" at top of left hand column. Under the
heading is the footnote: "As of June 30, 1995." The chart is scaled in
increments of 2% from top to bottom, with 6% at the top and 0% at the bottom.
Within the chart, there are two solid bars. The first represents the 5.52% 7-day
yield for John Hancock Cash Reserve Fund. The second represents the 5.46% 7-day
yield for the average taxable money market fund. Footnote below reads: "The
average taxable money market fund is tracked by IBC/Donoghue's Money Fund
Report."]
After the last rate hike in early February of this year, however, the market
began to anticipate that the Fed would soon be done raising rates. That
phenomenon, coupled with signs of a slowing economy and positive technical
factors in the market, caused short-term rates to drop off slightly. In
response, money fund managers began to lengthen their average maturities.
At John Hancock Cash Reserve, Inc. we gradually lengthened our average
maturity along with other funds, extending out to almost 55 days by the end of
June. That was slightly longer than the Donoghue's average for all taxable money
market funds. This approach was a bit more aggressive, but prudent, as it
reflected our expectation of a slower economy and a possible interest-rate cut
by the Fed.
LOOKING AHEAD
It's evident that the economy has slowed sharply following the Fed's seven rate
hikes. In the first quarter of this year, economic growth was running at a tame
2.7% versus 4.1% in 1994. In fact, the marked slowdown prompted the Fed to
reverse its monetary policy and cut interest rates soon after the period ended.
At the start of July, the Fed lowered the federal funds rate -- a key short-term
interest rate -- by one-quarter of a percentage point, from 6.00% to 5.75%.
In the current environment, we're keeping the Fund's average maturity
slightly longer than normal -- between 52 to 60 days. We're also keeping a close
eye on the economic indicators to determine what the Fed's next move might be.
If we feel the economy is continuing to slow and warrants another interest-rate
decrease, we may extend the Fund's maturity out even further. As always, we are
committed to providing to you a money market fund that promotes safety,
liquidity and a competitive money market yield.
- --------------------------------------------------------------------------------
The Fund is neither insured nor guaranteed by the U.S. government. There can be
no assurance that the Fund will be able to maintain a net asset value of $1.00
per share.
[CAPTION]
"...IT'S EVIDENT THAT THE ECONOMY HAS SLOWED SHARPLY..."
4
<PAGE> 5
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
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 JUNE 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE PER SHARE AS OF THAT DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, in money market instruments, at value - Note C:
Commercial paper (cost $80,219,758).......................... $ 80,219,758
Negotiable bank certificates of deposit
(cost $10,018,399)......................................... 10,018,399
Corporate interest-bearing obligations
(cost - $18,504,609)....................................... 18,504,609
Corporate savings account.................................... 2,330,000
------------
111,072,766
Cash........................................................... 286,569
Interest receivable............................................ 703,580
Other assets................................................... 74,517
------------
Total Assets................................ 112,137,432
------------------------------------------------------------
LIABILITIES:
Dividend payable............................................... 21,304
Payable for fund shares repurchased............................ 4,023,540
Payable to John Hancock Advisers, Inc.
and affiliates - Note B...................................... 30,224
Accounts payable and accrued expenses.......................... 8,504
------------
Total Liabilities........................... 4,083,572
------------------------------------------------------------
NET ASSETS:
Capital paid-in................................................ 108,053,860
------------
Net Assets.................................. $108,053,860
============================================================
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
(based on 108,053,860 shares of beneficial interest
outstanding - $4,000,000,000 shares authorized
$0.01 per share par value..................................... $ 1.00
==============================================================================
</TABLE>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest....................................................... $3,560,616
----------
Expenses:
Investment management fee - Note B........................... 205,170
Transfer agent fee - Note B.................................. 77,546
Custodian fee................................................ 21,133
Registration and filing fees................................. 16,015
Printing..................................................... 15,667
Auditing fee................................................. 10,927
Miscellaneous................................................ 7,432
Trustees' fees............................................... 7,175
Advisory board fee........................................... 5,812
Legal fees................................................... 5,217
Shareholder service fee...................................... 2,425
----------
Total Expenses.............................. 374,519
------------------------------------------------------------
Net Investment Income....................... 3,186,097
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations................... $3,186,097
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 6
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment Income................................................................. $ 3,186,097 $ 6,711,161
------------- -------------
Net Increase in Net Assets Resulting from Operations................................ 3,186,097 6,711,161
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ($0.0267 and $0.0368 per share, respectively).... (3,186,097) (6,711,161)
------------- -------------
FROM FUND SHARE TRANSACTIONS-- NET*.................................................... (34,247,164) 11,895,566
------------- -------------
NET ASSETS:
Beginning of period................................................................... 142,301,024 130,405,458
------------- -------------
End of period......................................................................... $ 108,053,860 $ 142,301,024
============= =============
* ANALYSIS OF FUND SHARE TRANSACTIONS AT $1 PER SHARE:
Shares sold........................................................................... $ 111,740,744 $ 898,557,224
Shares issued to shareholders in reinvestment of distributions........................ 2,926,634 5,942,196
------------- -------------
114,667,378 904,499,420
Less shares repurchased............................................................... (148,914,542) (892,603,854)
------------- -------------
Net increase (decrease)............................................................... $ (34,247,164) $ 11,895,566
============= =============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, DISTRIBUTIONS PAID TO SHAREHOLDERS, AND ANY INCREASE OR
DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES
THE FUND SHARES SOLD, REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
periods indicated, investment returns, key ratios, and supplemental data are as
follows:
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 --------------------------------------------------------
(UNAUDITED) 1994(a) 1993 1992 1991 1990
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Net Investment Income................................. 0.03 0.04 0.03 0.03 0.06 0.08
-------- -------- -------- -------- -------- --------
Less Distributions
Dividends from Net Investment Income.................. (0.03) (0.04) (0.03) (0.03) (0.06) (0.08)
-------- -------- -------- -------- -------- --------
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............ 2.70%(b) 3.74% 2.60% 3.33% 5.79% 8.05%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)............. $108,054 $142,301 $130,405 $266,349 $416,198 $556,860
Ratio of Expenses to Average Net Assets............... 0.64%* 0.62% 0.66% 0.63% 0.57% 0.46%
Ratio of Net Investment Income to Average Net Assets.. 5.44%* 3.72% 2.58% 3.34% 5.66% 7.78%
<FN>
* On an annualized basis.
(a) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(b) Not annualized.
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF NET INVESTMENT INCOME AND
DIVIDENDS ON A SINGLE SHARE FOR THE PERIOD INDICATED. ADDITIONALLY, IMPORTANT
RELATIONSHIPS BETWEEN SOME ITEMS PRESENTED IN THE FINANCIAL STATEMENTS ARE
EXPRESSED IN RATIO FORM.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY CASH
RESERVE, INC. ON JUNE 30, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
COMMERCIAL PAPER, NEGOTIABLE BANK CERTIFICATES OF DEPOSIT, CORPORATE INTEREST
BEARING OBLIGATIONS AND SHORT-TERM INVESTMENTS. THE INVESTMENTS ARE FURTHER
BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE
FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
INTEREST QUALITY (000's MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Automotive (4.60%)
Ford Motor Credit Co.,
07-17-95.......................................... 6.000% Tier 1 $ 2,000 $ 1,994,666
Ford Motor Credit Co.,
08-21-95.......................................... 5.920 Tier 1 3,000 2,974,839
-----------
4,969,505
-----------
BANKING (1.85%)
U.S. Bancorp.,
07-13-95.......................................... 5.900 Tier 1 1,000 998,033
U.S. Bancorp.,
07-21-95.......................................... 5.980 Tier 1 1,000 996,678
-----------
1,994,711
-----------
BEVERAGE (3.60%)
Coca Cola Enterprises, Inc.,
07-10-95.......................................... 6.000 Tier 1 3,900 3,894,150
-----------
BROKER SERVICES (12.39%)
Bear Stearns Cos., Inc.,
07-21-95.......................................... 5.950 Tier 1 5,000 4,983,472
Goldman Sachs Group., L.P.
07-20-95.......................................... 5.950 Tier 1 1,500 1,495,290
Goldman Sachs Group., L.P.
08-21-95.......................................... 5.900 Tier 1 1,500 1,487,462
Merrill Lynch & Co., Inc.,
07-03-95.......................................... 5.900 Tier 1 3,000 2,999,017
Merrill Lynch & Co., Inc.,
07-25-95.......................................... 5.970 Tier 1 2,433 2,423,317
-----------
13,388,558
-----------
CHEMICAL (4.61%)
Monsanto Co., Inc.,
07-18-95.......................................... 5.900 Tier 1 5,000 4,986,069
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000's MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
FINANCE (5.74%)
American Honda Finance Corp.,
07-11-95.......................................... 5.980% Tier 1 $1,400 $ 1,397,674
American Honda Finance Corp.,
07-14-95.......................................... 5.980 Tier 1 300 299,352
American Honda Finance Corp.,
08-16-95.......................................... 5.950 Tier 1 2,300 2,282,515
American Honda Finance Corp.,
08-21-95.......................................... 5.950 Tier 1 1,250 1,239,464
General Electric Capital Corp.,
10-25-95.......................................... 6.200 Tier 1 1,000 980,022
-----------
6,199,027
-----------
MORTGAGE BANKING (5.00%)
Countrywide Funding Corp.,
07-06-95.......................................... 5.980 Tier 1 2,400 2,398,007
Countrywide Funding Corp.,
07-07-95.......................................... 6.010 Tier 1 1,905 1,903,092
Countrywide Funding Corp.,
07-17-95.......................................... 6.000 Tier 1 1,100 1,097,067
-----------
5,398,166
-----------
RETAIL STORES (13.02%)
Dayton Hudson Corp.,
07-20-95.......................................... 5.980 Tier 1 5,200 5,183,588
Sears Roebuck Acceptance Corp.,
07-11-95.......................................... 5.970 Tier 1 3,500 3,494,196
Wal-Mart Stores, Inc.,
07-06-95.......................................... 5.970 Tier 1 5,400 5,395,522
-----------
14,073,306
-----------
UTILITIES (23.43%)
Bell Atlantic Financial Services,
07-06-95.......................................... 5.980 Tier 1 1,800 1,798,505
Bell Atlantic Financial Services,
07-19-95.......................................... 6.000 Tier 1 3,600 3,589,200
GTE Northwest, Inc.,
07-11-95.......................................... 5.970 Tier 1 3,000 2,995,025
GTE Northwest, Inc.,
07-20-95.......................................... 5.980 Tier 1 1,000 996,844
Pacific Gas and Electric Co.,
07-31-95.......................................... 5.970 Tier 1 4,000 3,980,100
Pennsylvania Power & Light Co.,
07-05-95.......................................... 5.930 Tier 1 1,000 999,341
Pennsylvania Power & Light Co.,
07-05-95.......................................... 5.950 Tier 1 1,000 999,339
Pennsylvania Power & Light Co.,
07-11-95.......................................... 6.000 Tier 1 1,000 998,333
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000's MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
UTILITIES (CONTINUED)
Pennsylvania Power & Light Co.,
07-12-95.......................................... 6.030% Tier 1 $1,000 $ 998,157
Pennsylvania Power & Light Co.,
07-27-95.......................................... 6.050 Tier 1 1,400 1,393,883
Public Service Electric and Gas Co.,
07-10-95.......................................... 6.000 Tier 1 3,500 3,494,750
Public Service Electric and Gas Co.,
07-12-95.......................................... 6.050 Tier 1 1,900 1,896,488
U.S.West Communications, Inc.,
07-20-95.......................................... 5.940 Tier 1 1,180 1,176,301
-----------
25,316,266
-----------
TOTAL COMMERCIAL PAPER
(Cost $80,219,758) (74.24%) 80,219,758
------ -----------
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
U.S BRANCHES OF FOREIGN BANKS (9.27%)
Canadian Imperial Bank of Commerce,
08-15-95.......................................... 6.070 Tier 1 1,000 1,000,059
Canadian Imperial Bank of Commerce,
09-12-95.......................................... 7.000 Tier 1 4,000 4,006,467
Royal Bank of Canada,
12-13-95.......................................... 7.420 Tier 1 5,000 5,011,873
-----------
10,018,399
-----------
TOTAL NEGOTIABLE BANK
CERTIFICATES OF DEPOSIT
(Cost $10,018,399) (9.27%) 10,018,399
----- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST QUALITY (000's MARKET
ISSUER, DESCRIPTION RATE RATINGS* OMITTED) VALUE
- ------------------- ---- -------- -------- -----
<S> <C> <C> <C> <C>
CORPORATE INTEREST BEARING OBLIGATIONS
AUTOMOTIVE (4.62%)
General Motors Acceptance Corp.,
03-13-96.......................................... 8.900% Tier 1 $ 1,900 $ 1,934,031
General Motors Acceptance Corp.,
05-02-96.......................................... 8.650 Tier 1 3,000 3,056,337
------------
4,990,368
------------
BANKING (2.31%)
Bank of New York,
08-15-95.......................................... 6.520 Tier 1 2,500 2,500,735
------------
CHEMICAL (2.81%)
duPont (E.I.) de Nemours and Co.,
12-15-95.......................................... 8.480 Tier 1 3,000 3,031,275
------------
FINANCE (5.53%)
American Express Credit Corp.,
03-05-96.......................................... 6.900 Tier 1 1,500 1,506,820
CIT Group Holdings, Inc.,
11-15-95.......................................... 5.650 Tier 1 3,000 2,989,439
CIT Group Holdings, Inc.,
03-15-96.......................................... 4.750 Tier 1 1,500 1,481,037
------------
5,977,296
------------
INSURANCE (1.86%)
American General Finance Corp.,
08-15-95.......................................... 8.100 Tier 1 2,000 2,004,935
------------
TOTAL CORPORATE INTEREST
BEARING OBLIGATIONS
(Cost $18,504,609) (17.13%) 18,504,609
------- ------------
SHORT-TERM INVESTMENTS
CORPORATE SAVINGS ACCOUNT (2.15%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%................................ 2,330,000
------------
TOTAL SHORT-TERM INVESTMENTS (2.15%) 2,330,000
------- ------------
TOTAL INVESTMENTS (102.79%) $111,072,766
======= ============
<FN>
*Quality ratings indicate the categories of eligible securities, as defined by
Rule 2a-7 of the U.S. Securities and Exchange Commission, owned by the Fund.
The percentage shown for each investment category is the total value of that
category expressed as a percentage of total net assets of the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Cash Reserve, Inc.(the "Fund") is a diversified, open-end
management investment company, registered under the Investment Company Act of
1940. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS The Trustees have determined appropriate methods for
valuing portfolio securities. Accordingly, portfolio securities are valued at
amortized cost, in accordance with Rule 2a-7 of the Investment Company Act of
1940, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the security to the Fund. Interest income on
certain portfolio securities such as negotiable bank certificates of deposit and
interest bearing notes is accrued daily and included in interest receivable.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc., a wholly-owned subsidiary of The Berkeley Financial Group, may participate
in a joint repurchase agreement transaction. 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 for both financial
reporting and federal income tax purposes.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies. It
will not be subject to Federal income tax on taxable earnings which are
distributed to shareholders.
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.
NOTE B --
MANAGEMENT FEE, ADMINISTRATIVE SERVICES 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 0.35% of the Fund's average daily net assets. This fee
structure is consistent with the former agreement with TFMC.
The Adviser provided administrative services to the Fund pursuant to an
administrative service agreement through January 16, 1995 on which day the
agreement was terminated.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
The Board of Trustees approved a shareholder servicing agreement between the
Fund and John Hancock Investor Services Corporation ("Investor Services"), a
wholly owned subsidiary of The Berkeley Financial Group, for the period between
December 22, 1994 and May 12, 1995, inclusive under which Investor Services
processed telephone transactions on behalf of the Fund. As of May 15, 1995,
the Fund entered into a full service transfer agent agreement with Investor
Services. Prior to this date The Shareholder Services Group was the transfer
agent. The Fund pays Investor Services a
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
fee based on the number of shareholder accounts and certain out-of-pocket
expenses.
Mr. Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates as well as Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The Fund will
make investments into other John Hancock Funds, as applicable, to cover its
liability with regard to the deferred compensation. Investments to cover the
Fund's deferred compensation liability will be recorded on the Fund's books as
other assets. The deferred compensation liability will be marked to market on a
periodic basis and income earned by the investment will be recorded on the
Fund's books.
The Fund has an independent advisory board composed of certain members of the
former Transamerica Board of Trustees who provide advice to the current Trustees
in order to facilitate a smooth management transition for which the Fund pays
the advisory board and its counsel a fee.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities, including discount earned on
investment securities, during the period ended June 30, 1995 aggregated
$1,327,169,848 and $1,359,615,594, respectively. The cost of investments owned
at June 30, 1995 (excluding the corporate savings account) for Federal income
tax purposes was $108,742,766.
13
<PAGE> 14
NOTES
John Hancock Funds - Cash Reserve, Inc.
14
<PAGE> 15
NOTES
John Hancock Funds - Cash Reserve, Inc.
15
<PAGE> 16
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below reads
"A Global Investment Management Firm."]
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 582
This report replaces the one entitled "U.S. Government Cash Reserve" that was
recently sent to you in error.
We apologize for any confusion this may have caused.
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock Cash
Reserve Inc. It may be used as sales literature when preceded or accompanied by
the current prospectus, which details charges, investment objectives and
operating policies.
[A recycled logo in lower left hand corner with caption "Printed on Recycled
Paper."]
JHD 420SA 6/95
