<PAGE> 1
JOHN HANCOCK
CASH RESERVE, INC.
ANNUAL REPORT
December 31, 1994
For The Investor
Seeking Current Income,
Capital Preservation
And Liquidity.
[LOGO]
JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
Back Cover
In upper left corner, return address: John Hancock Cash Reserve, Inc., John
Hancock Funds Shareholder Services, P.O. Box 9656, Providence, RI 02940-9656.
In upper right corner, postage information: Bulk Rate U.S. Postage Paid Permit
No. 6011, Houston, Texas. In lower left corner, 3/8" x 3/8" John Hancock Funds
logo. 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.
<PAGE> 2
Chairman's Message
Page 1
A 2" x 2 7/16" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, centered at top of page with copy wrapped around photo.
Dear Shareholders,
On behalf of our nearly 700 associates, I'm delighted to welcome you to John
Hancock Funds. As you all know, Transamerica Fund Management Company was
acquired by John Hancock Funds on December 22, 1994, following
a favorable shareholder vote. At that time, all of the Transamerica mutual
funds became part of the John Hancock family of funds.
We're excited about the opportunities this acquisition will bring to
shareholders. The combined firms form a larger, more competitive organization
with more than $13 billion in assets under management and more than 1 million
shareholders. Now with 50 open-end funds, 8 closed-end funds and a full array
of retirement and private account services, John Hancock Funds offers you a
broader selection of investment choices to meet your long-term financial needs.
What's more, the union of the John Hancock and Transamerica investment teams
gives you access to some of the top talent in the industry.
The Transamerica name is changing, but the commitment to serving you as a
valued shareholder isn't. Here at John Hancock Funds, our motto is: "We invest
in quality first." It has to do with the way we invest your money and the way
we work with you. Not only do we strive to ensure that your investments are
well managed, we also take pride in providing the highest quality customer
service. We can't guarantee investment performance; nobody can. The quality of
our service, however, depends totally on us. That is something that we can
guarantee.
In mid-May, we anticipate that all of the Transamerica funds will be
fully integrated into John Hancock's internal shareholder service organization,
John Hancock Investor Services. At that time, not only will you gain exchange
privileges into all John Hancock funds, but your account will be handled by one
of the top-rated service organizations in the industry. To show you how
seriously we take our commitment to quality, you will have access to our
service guarantee. If we make an error in processing a transaction in your
account, we will deposit $25 into it. Or, if you have a retirement account, we
will waive the annual fee.
We value your business and look forward to serving your investment needs in
the years to come.
Sincerely,
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
John Hancock Funds
1
<PAGE> 3
BY THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK CASH RESERVE, INC.
HIGHER INTEREST RATES BOOST MONEY MARKET WHILE
ECONOMY CONTINUES TO GROW
The backdrop for the 12-month period can be described as steadily growing for
the economy, volatile for stock and long-term bond markets and positive for the
money market.
Throughout the reporting period, the U.S. economy registered steady
acceleration with gross domestic product (GDP) for 1994 at a 4.0% rate.
Corporations continued to report accelerating earnings as they capitalized on
higher sales and increased productivity. Employment growth was substantial
with over 3.5 million jobs created in 1994. Consumers continued to release
pent-up demand with robust purchases of autos, houses, electronics and other
durable items.
As a result of strong economic growth, the Federal Reserve Board became
concerned about inflationary pressures. It began raising key short-term
interest rates in an effort to head off inflation and slow economic growth to a
sustainable, long-term rate. Between February 2, 1994 and December 31, 1994,
the Federal Reserve increased the federal funds rate (the rate banks charge
each other for overnight loans) from 3.00% to 5.50% and the discount rate
from 3.00% to 4.50%.
Rates in the money market reached their highest levels in two years in
response to the Federal Reserve's actions. Yields on three-month Treasury bills
rose from 3.01% to 5.53% between December 31, 1993 and December 31, 1994.
Likewise, yields on 90-day commercial paper rose from 3.31% to 6.27%.
While the money market reacted positively to higher short-term rates, both
stock and bond markets have experienced volatility. This volatility, along with
higher rates on short-term instruments, helped attract investors to money
market investments during the period.
STRATEGY CONTINUES TO EMPHASIZE QUALITY
Higher interest rates in the market allowed the Fund to return a higher yield
to shareholders, without sacrificing our commitment to quality. For the 12
months ended
Page 2
A bar chart centered at bottom of page with text wrapped around it with
heading "12-Month Yield." Under the heading is the note "For The Period Ended
December 31, 1994." The chart is not scaled and has two solid, vertical bars.
The first represents the 3.65% average money market fund yield. The second
represents the 3.74% yield of John Hancock Cash Reserve, Inc. The footnote
below states: "From December 31, 1993 to December 31, 1994, John Hancock Cash
Reserve, Inc., had an average yield of 3.74%. The average money market fund had
a 12-month yield of 3.65% for the same period, according to IBC/Donoghue, Inc.
The average 12-month yield represents effective yields assuming reinvestment of
all distributions for up to one year. As of December 31, 1994, the Fund had a
seven-day current yield of 5.36%."
2
<PAGE> 4
John Hancock Cash Reserve, Inc.
December 31, 1994, John Hancock Cash Reserve, Inc., had an effective yield of
3.74%.* The Fund distributed $0.037 per share in dividends. Please remember
that an investment in the Fund is neither guaranteed nor insured by the U.S.
government, and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
Your Fund's seven-day current yield as of December 31, 1994 was 5.22%, which
compares favorably to the 5.18% average money market fund yield reported by
IBC/Donoghue.
We correctly anticipated that the economy would expand and that short-term
rates would go up. As a result, we kept the average maturity reasonably short
to give us the flexibility to take advantage of rising interest rates. As of
December 31, 1994, average maturity was 28 days.
During the 12-month period, we continued to invest only in money market
instruments issued or backed by the U.S. government and its agencies, bank
obligations, repurchase agreements, commercial and certain other debt
instruments that carry the highest ratings given by established ratings
services. We did not invest in any derivatives such as SWAPS or inverse
floaters, because we believe that safety of principal is the most important
feature of a money market fund.
OUTLOOK
The economy continues its growth course, though there are signs of a slight
slowdown. Both housing and auto sales are down as a result of higher interest
rates, although businesses, such as manufacturing, continue to grow. We believe
that ultimately the Federal Reserve Board's actions will prove successful, and
we anticipate U.S. GDP to increase 2.5% to 3.0% in 1995, a more sustainable
long-term growth rate.
In the months ahead, rates on high-quality money market instruments should
continue to rise as the money market digests all of the Fed's actions, making
the outlook favorable for money market fund investors.
- ------------------------------------------------------------------------------
* Represents investment income with dividends reinvested for the period. Past
performance is no guarantee of future results. Returns will fluctuate with
market conditions.
3
<PAGE> 5
John Hancock Cash Reserve, Inc.
STATEMENT OF NET ASSETS
December 31, 1994
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ----------- -----------
<S> <C> <C>
COMMERCIAL
PAPER--83.98%
BANKING
INSTITUTIONS--16.70%
Banc One Corp.
5.700% due 01/03/95........................ $ 1,600,000 $ 1,599,493
Bankers Trust
New York Corp.
4.950% to 5.400% due
01/03/95 to 01/27/95.................... 8,900,000 8,883,415
Canadian Imperial
Holdings Inc.
6.030% due 02/28/95...................... 7,000,000 6,931,995
Toronto-Dominion
Holdings Inc.
4.960% to 5.150% due
01/23/95 to 03/01/95.................... 6,400,000 6,353,555
-----------
23,768,458
BUSINESS CREDIT
INSTITUTIONS--13.78%
Daimler Benz
North America Corp.
5.480% to 5.520% due
01/13/95 to 03/21/95.................... 6,900,000 6,856,747
General Electric Capital Corp.
5.770% to 5.880% due
02/15/95 to 03/23/95.................... 7,900,000 7,814,739
Toyota Motor Credit Corp.
5.800% due 03/21/95...................... 5,000,000 4,936,361
-----------
19,607,847
</TABLE>
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ ----------- -----------
<S> <C> <C>
CANADIAN GOVERNMENT &
AGENCY OBLIGATIONS--9.40%
Canadian Wheat Board
6.030% due 02/03/95...................... 3,750,000 3,729,272
Ontario Hydro
5.410% due 01/06/95...................... 8,000,000 7,993,989
Province of Alberta
5.570% due 01/09/95 ..................... 1,650,000 1,647,958
-----------
13,371,219
CONSUMER GOODS &
SERVICES--12.39%
Cargill Inc.
5.800% due 02/01/95 ..................... 4,800,000 4,776,027
Procter & Gamble Co.
5.600% to 5.720% due
01/05/95 to 02/06/95.................... 7,900,000 7,870,615
Sara Lee Corp.
5.950% due 01/12/95...................... 5,000,000 4,990,910
-----------
17,637,552
FINANCE & INSURANCE
INSTITUTIONS--17.14%
Associates Corp. of
North America
5.700% to 5.820% due
01/18/95 to 01/30/95.................... 7,900,000 7,874,144
Corporate Asset
Funding Co., Inc.
5.500% to 5.700% due
01/17/95 to 01/23/95.................... 6,700,000 6,681,619
Prudential Funding Corp.
5.760% due 02/15/95 ..................... 7,900,000 7,843,120
U.S.A.A. Capital Corp.
5.730% due 01/12/95 ..................... 2,000,000 1,996,498
-----------
24,395,381
</TABLE>
4
<PAGE> 6
John Hancock Cash Reserve, Inc.
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
FACE
ISSUER AMOUNT VALUE
- ------ --------- ------------
<S> <C> <C>
INDUSTRIAL--3.51%
E.I. duPont deNemours & Co.
5.700% due 01/05/95 . . . . . . . . . . . . 5,000,000 4,996,833
TELEPHONE & TELEGRAPH--11.06%
American Telephone & Telegraph Co.
5.750% to 6.000% due
02/02/95 to 02/07/95 . . . . . . . . . 8,100,000 8,053,918
Bellsouth
Telecommunications Inc.
5.680% due 01/18/95 . . . . . . . . . . . 7,700,000 7,679,347
------------
15,733,265
------------
TOTAL COMMERCIAL PAPER
(Cost $119,510,555) . . . . . . . . . . . . . 119,510,555
REPURCHASE AGREEMENTS--7.66%
Goldman Sachs 5.800% due 01/03/95
(dated 12/30/94). Collateralized by
$7,041,444 value, Federal National
Mortgage Association 6.500% due
04/01/09. (Repurchase proceeds
$6,904,447) . . . . . . . . . . . . . . . . 6,900,000 6,902,224
Merrill Lynch 5.500% due 01/03/95
(dated 12/30/94). Collateralized by
$4,081,820 value, Federal National
Mortgage Association 6.500% due
03/01/09. (Repurchase proceeds
$4,002,444) . . . . . . . . . . . . . . . . 4,000,000 4,001,222
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $10,903,446) . . . . . . . . . . . . . 10,903,446
TIME DEPOSIT--5.73%
National Bank of Detroit, Nassau Branch(1)
5.500% due 01/03/95 . . . . . . . . . . . . 8,149,635 8,152,126
MEDIUM-TERM NOTE--2.48%
Wachovia Bank of North Carolina, N.A.
5.650% due 01/17/95 . . . . . . . . . . . . 3,500,000 3,525,739
------------
TOTAL INVESTMENTS--99.85%
(Cost $142,091,866) . . . . . . . . . . . . . 142,091,866
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.15% . . . . . . . . . . . 209,158
------------
NET ASSETS, at value, equivalent to
$1.00 per share for 142,301,024
shares ($.01 par value) of capital
stock outstanding--100.00% . . . . . . . . $142,301,024
============
</TABLE>
(1) Full branch of a U.S. bank.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 7
John Hancock Cash Reserve, Inc.
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended December 31, 1994
Investment Income
Interest............................................ $7,822,316
Expenses
Management fees..................................... $630,730
Transfer agent fees................................. 192,365
Administrative service fees......................... 80,795
Custodian fees...................................... 63,184
Registration fees................................... 37,987
Directors' fees and expenses........................ 34,390
Audit and legal fees................................ 27,842
Insurance expense................................... 19,437
Shareholder reports................................. 14,522
Miscellaneous....................................... 9,903 1,111,155
-------- ----------
Net Investment Income............................. $6,711,161
==========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993
------------ -------------
<S> <C> <C>
Operations
Net investment income........................... $ 6,711,161 $ 4,327,530
Distributions to Shareholders From
Net investment income........................... (6,711,161) (4,327,530)
Capital Share Transactions
Increase (decrease) in capital
shares outstanding............................ 11,895,566 (135,943,904)
------------ -------------
Increase (decrease) in net assets............... 11,895,566 (135,943,904)
Net Assets
Beginning of year............................... 130,405,458 266,349,362
------------ -------------
End of year..................................... $142,301,024 $ 130,405,458
============ =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 8
FINANCIAL HIGHLIGHTS
John Hancock Cash Reserve, Inc.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994(1) 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share income and capital changes for
a share outstanding during each year:
Net asset value, beginning of year . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income . . . . . . . . . . . . 0.037 0.026 0.033 0.056 0.078
LESS DISTRIBUTIONS
Dividends from net investment income . . . . . (0.037) (0.026) (0.033) (0.056) (0.078)
-------- -------- -------- -------- --------
Net asset value, end of year . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
TOTAL RETURN . . . . . . . . . . . . . . . . . 3.74% 2.60% 3.33% 5.79% 8.05%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average net assets . . . 0.62% 0.66% 0.63% 0.57% 0.46%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . . 3.72% 2.58% 3.34% 5.66% 7.78%
Net Assets, end of year (in thousands) . . . . $142,301 $130,405 $266,349 $416,198 $556,860
(1) On December 22, 1994, John Hancock Advisers, Inc. became the Investment
Adviser. Prior to this date, Transamerica Fund Management Company was the
Investment Adviser.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
John Hancock Cash Reserve, Inc.
NOTE A --
SIGNIFICANT ACCOUNTING POLICIES
John Hancock Cash Reserve, Inc. (the ``Fund''), formerly Transamerica
Cash Reserve, Inc., is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. On December
16, 1994, the shareholders of each of the mutual funds managed by Transamerica
Fund Management Company (TFMC) voted to approve new Investment Advisory
contracts with John Hancock Advisers, Inc. Each such approval was subject to
the acquisition of TFMC by The Berkeley Financial Group (known beginning
January 1, 1995 as John Hancock Funds), the parent company of John Hancock
Advisers, Inc. The acquisition became effective December 22, 1994. The Fund's
name change was also effective on this date.
The following is a summary of significant accounting policies
consistently followed by the Fund.
(1) The Fund values its investment securities at amortized cost
(original cost plus amortized discount or accrued interest).
(2) The Fund may invest in repurchase agreements which are
collateralized by underlying debt securities. The Fund will make payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of the custodian bank. The seller is required to maintain the
value of the underlying security at not less than the repurchase proceeds due
the Fund.
(3) Security transactions are accounted for on the trade date. Interest
income is accrued daily. The identified cost of securities at December 31, 1994
is the same for both financial reporting and federal income tax purposes.
(4) Distributions of the Fund are declared daily and reinvested in Fund
shares or paid to shareholders monthly. Income distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Distributions payable to shareholders at December 31,
1994 were $60,137.
(5) No provision for federal income taxes has been made since it is the
Fund's intention to distribute all of its taxable income and profits to its
shareholders and to comply with the requirements applicable to regulated
investment companies and the minimum distribution requirements of the Internal
Revenue Code.
(6) The Fund reports custodian fees net of credits and charges
resulting from cash positions in the custodial accounts greater than or less
than the amounts required to settle fund transactions. For the year ended
December 31, 1994, these amounts were $28,089 and $28,148, respectively.
NOTE B --
MANAGEMENT FEE AND OTHER
TRANSACTIONS WITH AFFILIATES
From January 1, 1994 through December 21, 1994, TFMC acted as the
Investment Adviser to the Fund. On December 22, 1994, John Hancock Advisers,
Inc., a wholly-owned subsidiary of John Hancock Funds, became Investment
Adviser following the approval of the Fund's shareholders. Throughout these
financial statement notes, TFMC and John Hancock Advisers, Inc. are referred to
collectively as the ``Investment Adviser'', as each acted in this capacity
during the time periods noted above. The Investment Adviser has a sub-advisory
agreement with, and pays a fee to, Transamerica Investment Services, Inc. (the
``Sub-Adviser''). TFMC was, prior to December 22, 1994, and the Sub-Adviser is
presently a subsidiary of Transamerica Corporation.
The Fund's management fee is payable monthly and is calculated based on
the monthly average daily net assets of the Fund at an annual rate of 0.35%. At
December 31, 1994, the management fee payable to the Investment Adviser was
$44,174.
The Investment Adviser also provided administrative services to the
Fund pursuant to an administrative service agreement. During the year ended
December 31, 1994, the Fund paid or accrued $65,979 to the Investment Adviser
for these services, of which $8,090 was payable at December 31, 1994.
The Fund paid no compensation directly to any officer. Certain officers
of the Fund are affiliated with the Investment Adviser.
During the year ended December 31, 1994, the Fund paid legal fees of
$6,000 to Baker & Botts. A partner with Baker & Botts was an officer of the
Fund until December 22, 1994.
At December 31, 1994, John Hancock Advisers, Inc. and the Sub-Adviser
owned a total of 13.70% of the outstanding shares of the Fund.
8
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
NOTE C -- CAPITAL AND RELATED TRANSACTIONS
A summary of capital stock transactions follows:
<TABLE>
<Captions>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1994 1993
-------------------------------- -------------------------------
Shares Dollars Shares Dollars
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold .......................................... 898,557,224 $ 898,557,224 533,208,016 $ 533,208,016
Shares issued in reinvestment of distributions ....... 5,942,196 5,942,196 3,687,847 3,687,847
Shares redeemed ...................................... (892,603,854) (892,603,854) (672,839,767) (672,839,767)
------------ ------------- ------------ -------------
Net increase (decrease) in capital shares outstanding 11,895,566 $ 11,895,566 (135,943,904) $(135,943,904)
============ ============= ============ =============
</TABLE>
At December 31, 1994, net assets were comprised of $142,301,024 in
capital paid-in, representing 142,301,024 shares of Common Stock outstanding
(4,000,000,000 shares authorized).
9
<PAGE> 11
John Hancock Cash Reserve, Inc.
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
John Hancock Cash Reserve, Inc.
We have audited the accompanying statement of net assets of John Hancock
Cash Reserve, Inc., formerly Transamerica Cash Reserve, Inc., as of
December 31, 1994, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of John Hancock Cash Reserve, Inc. at December 31, 1994, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated periods, in conformity with generally accepted
accounting principles.
Houston, Texas
February 3, 1995
10
<PAGE> 12
FUND INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
OFFICERS
Edward J. Boudreau, Jr., Chairman and
Chief Executive Officer
Robert G. Freedman, Vice Chairman and
Chief Investment Officer
Thomas M. Simmons, President
Anne C. Hodsdon, Executive Vice President
James B. Little, Senior Vice President and
Chief Financial Officer
Thomas H. Drohan, Senior Vice President and Secretary
James K. Ho, Senior Vice President
Larry Daly, Senior Vice President
Barry H. Evans, Vice President
Anne M. McDonley, Vice President
James J. Stokowski, Vice President and Treasurer
Susan S. Newton, Vice President and Compliance Officer
John A. Morin, Vice President
Thomas J. Press, Vice President and Assistant Secretary
TRUSTEES
James F. Carlin
William H. Cunningham
Charles L. Ladner
Leo E. Linbeck
Patricia P. McCarter
Steven R. Pruchansky
Norman H. Smith
John P. Toolan
DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
TRANSFER AGENT
The Shareholder Services Group, Inc.
P.O. Box 9656
Providence, RI 02940-9656
1-800-343-6840
This material is not authorized for distribution unless preceded or
accompanied by a current prospectus.
The performance information referred to in this report is historical and
does not represent a guarantee of similar future results.
Investments in the Fund are neither insured nor guaranteed by the U.S.
government.
There is no assurance that the Fund will be able to maintain a stable net
asset value of $1.00 per share.
IMPORTANT TAX INFORMATION
The dividends and distributions paid by John Hancock Cash Reserve, Inc.
during the fiscal year ended December 31, 1994, were from net investment income
of $.04.
The federal tax status of all 1994 dividends and distributions paid by the
Fund were reported on Form 1099 in early 1995.
11
