HANCOCK JOHN CASH RESERVE INC, 485B24E, 1996-04-30

HANCOCK JOHN CASH RESERVE INC
485B24E, 1996-04-30

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REGISTRATION NO. 2-66461
REGISTRATION NO. 811-2995

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 18 [X]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 21 [X]

JOHN HANCOCK CASH RESERVE, INC.
(Exact Name of Registrant as Specified in Articles of Incorporation)

101 Huntington Avenue, Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices)

Registrant's Telephone Number, Including Area Code: (617) 375-1700

Thomas H. Drohan, Esq.
John Hancock Advisers, Inc.
101 Huntington Avenue, Boston, Massachusetts 02199-7603
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485

Calculation of Registration Fees Under the Securities Act of 1933
<TABLE>
<CAPTION>
Proposed Maximum Proposed Aggregate
Title of Securities Amount of Shares Offering Price Maximum Amount of
Being Registered Being Registered Per Share Offering Price Registration Fee
---------------- ---------------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest Indefinite* N/A N/A N/A
Shares of Beneficail Interest 22,828,046 $1.00 290,000 $1.00
</TABLE>

* Registrant continues its election to register an indefinite number of
shares of beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended.

** Registrant elects to calculate the maximum aggregate offering price
pursuant to Rule 24e-2. 342,524,244 shares were redeemed during the fiscal
year ended December 31, 1995. 319,986,198 shares were used for reductions
pursuant to Paragraph (c) of Rule 24f-2 during the current fiscal year.
22,828,046 shares is the amount of redeemed shares used for reduction in
this Amendment. Pursuant to Rule 457(c) under the Securities Act of 1933,
the maximum public offering price of $1.00 per share on April 19, 1996 is
the price used as the basis for calculating the registration fee. While no
fee is required for the 22,538,046 shares the Registrant has elected to
register, for $100, an additional $290,000 of shares (approximately 290,000
shares at $1.00 per share).

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has registered an indefinite number of securities under the Securities Act of
1933. The Registrant filed the notice required by Rule 24f-2 for its most recent
fiscal year on or about February 26, 1996.
<PAGE>

JOHN HANCOCK CASH RESERVE, INC.

CROSS-REFERENCE SHEET

Form N-1A
Item

Part A Caption Prospectus
- ------ ------- ----------
<S> <C> <C>
1... Cover Page Cover Page
2... Synopsis/Summary of Fund Expense Information; The Fund's Expenses;
Expenses Share Price
3... Condensed Financial The Fund's Financial Highlights
Information
4... General Description Investment Objective and Policies;
of Registrant Organization and Management of the Fund
5... Management of the Fund Organization and Management of the Fund;
The Fund's Expenses; Back Cover Page
6... Capital Stock and Organization and Management of the Fund;
Other Securities Dividends and Taxes; How to Buy Shares; How to
Redeem Shares; Additional Services and
Programs
7... Purchase of Securities How To Buy Shares; Share Price; Additional
Being Offered Services and Programs; Alternative Purchase
Arrangements; The Fund's Expenses; Back
Cover Page
8... Redemption or Repurchase How To Redeem Shares
9... Pending Legal Proceedings Not applicable

Part B Caption Statement of Additional Information
- ------ ------- -----------------------------------
10... Cover Page Cover Page
11... Table of Contents Table of Contents
12... General Information Those Responsible for Management
and History
13... Investment Objectives Investment Objective and Policies;
and Policies Investment Objectives and Policies;
Special Investment Techniques
14... Management of the Fund Those Responsible for Management

15... Control Persons and Those Responsible for Management
Principal Holders of
Securities

<PAGE>

16... Investment Advisory and The Fund and its Management
Other Services
17... Brokerage Allocation Brokerage Allocation
18... Capital Stock and Additional Information
Other Securities
19... Purchase, Redemption and Purchase of Shares; Net Asset Value
Being Offered
20... Tax Status Tax Status
21... Underwriters Distribution Contract
22... Calculation of Calculation of Performance
Performance Data
23... Financial Statements Independent Auditors; Financial Statements

</TABLE>

Part C Other Information

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.

iii

<PAGE>

JOHN HANCOCK

CASH RESERVE, INC.

PROSPECTUS

MAY 1, 1996

<TABLE>
- ---------------------------------------------------------------------------------------------
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Expense Information................................................................... 2
The Fund's Financial Highlights....................................................... 3
Investment Objective and Policies..................................................... 4
Organization and Management of the Fund............................................... 6
The Fund's Expenses................................................................... 6
Dividends and Taxes................................................................... 6
How to Buy Shares..................................................................... 8
Share Price........................................................................... 9
How to Redeem Shares.................................................................. 10
Additional Services and Programs...................................................... 12
Investments, Techniques and Risk Factors.............................................. 15
</TABLE>

This Prospectus sets forth the information about John Hancock Cash Reserve,
Inc. (the "Fund"), a diversified Fund, that you should know before investing.
Please read and retain it for future reference.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. AN INVESTMENT IN THE FUND IS 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.

Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC"). You can obtain a copy of the Fund's Statement
of Additional Information, dated May 1, 1996, and incorporated by reference into
this Prospectus, free of charge by writing or telephoning: John Hancock Investor
Services Corporation, P.O. Box 9116, Boston, Massachusetts 02205-9116,
1-800-225-5291 (1-800-554-6713 TDD).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

EXPENSE INFORMATION

<TABLE>
The purpose of the following information is to help you to understand the
various fees and expenses you will bear, directly or indirectly, when you
purchase Fund shares. The operating expenses included in the table and
hypothetical example below are based on fees and expenses for the Fund's fiscal
year ended December 31, 1995, adjusted to reflect current fees and expenses.
Actual fees and expenses may be greater or less than those shown.

<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of offering price)...................................... None
Maximum sales charge imposed on reinvested dividends............................................................... None
Maximum deferred sales charge...................................................................................... None
Redemption fee+.................................................................................................... None
Exchange fee....................................................................................................... None
ANNUAL FUND OPERATING EXPENSES (As a percentage of average net assets)
Management fee..................................................................................................... 0.35%
12b-1 fee.......................................................................................................... 0.00%
Other expenses*.................................................................................................... 0.40%
Total Fund operating expenses...................................................................................... 0.75%

* Other Expenses include transfer agent, legal, audit, custody and other
expenses.
+ Redemption by wire fee (currently $4.00) not included.
</TABLE>

<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses for the indicated period of years on a
hypothetical $1,000 investment, assuming 5% annual return........................ $8 $24 $42 $93
</TABLE>

(This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.)

The management fees referred to above are more fully explained in this
Prospectus under the caption "The Fund's Expenses" and in the Statement of
Additional Information under the caption "Investment Advisory and Other
Services."

<PAGE>

THE FUND'S FINANCIAL HIGHLIGHTS

<TABLE>
The following table of Financial Highlights has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose unqualified report is included in
the Fund's 1995 Annual Report included in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, that may be obtained free of charge
by writing or telephoning John Hancock Investor Services Corporation ("Investor
Services"), at the address or telephone number listed on the front page of this
Prospectus.

Selected data for each share outstanding throughout each period indicated is
as follows:

<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------
1995 1994(A) 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <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 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net
investment
income..... 0.05 0.04 0.03 0.03 0.06 0.08 0.09 0.07 0.06 0.06
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS
DISTRIBUTIONS
Dividends
from net
investment
income..... (0.05) (0.04) (0.03) (0.03) (0.06) (0.08) (0.09) (0.07) (0.06) (0.06)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset
value, end
of year.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total
investment
return at
net asset
value(b)... 5.38% 3.74% 2.60% 3.33% 5.79% 8.05% 9.20% 7.40% 6.43% 6.61%
RATIOS AND
SUPPLEMENTAL
DATA
Net assets,
end of
period
(000's
omitted)... $119,763 $142,301 $130,405 $266,349 $416,198 $556,860 $444,299 $429,700 $416,066 $324,612
Ratio of
expenses to
average net
assets..... 0.73% 0.62% 0.66% 0.63% 0.57% 0.46% 0.45% 0.45% 0.49% 0.54%
Ratio of net
investment
income to
average net
assets..... 5.30% 3.72% 2.58% 3.34% 5.66% 7.78% 8.85% 7.21% 6.36% 6.55%

(a) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.

(b) Total investment return assumes dividend reinvestment.

</TABLE>

YIELD INFORMATION

For the seven days ended December 31, 1995, the Fund's annualized yield and
effective yield were 5.05% and 5.18%, respectively. On December 31, 1995, the
Fund's average portfolio maturity was 37 days.

Current information on the Fund's annualized yield during a recent seven-day
period may be obtained by calling the Easi-Line at 1-800-338-8080 or a customer
service representative, 1-800-225-5291.

For information on how the Fund calculates its annualized yield see the
Statement of Additional Information.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES
The Fund invests in high quality money market instruments maturing within one
year from the date of purchase with an average portfolio maturity of 90 days or
less. The Fund seeks to maximize current income from these short-term
investments to the extent consistent with maintaining liquidity and preserving
capital. The Fund will invest in U.S. dollar denominated instruments of the
following types:

- -------------------------------------------------------------------------------
THE FUND SEEKS TO OBTAIN MAXIMUM CURRENT
INCOME CONSISTENT WITH THE PRESERVATION OF
CAPITAL AND MAINTENANCE OF LIQUIDITY.
- -------------------------------------------------------------------------------

- -- high quality, short-term corporate obligations including commercial paper,
notes and bonds.

- -- obligations of financial institutions including U.S. and Canadian banks
(including their foreign branches) and U.S. savings loan associations.

- -- obligations of U.S. and Canadian governments and their agencies or
instrumentalities.

- -- other short-term debt obligations with remaining maturities of 365 days or
less.

Securities in which the Fund invests may not earn as high a level of current
income as long-term or lower quality securities which generally have less
liquidity, greater market risk and more fluctuation in market value. The return
on an investment in the Fund will depend on the interest earned by the Fund's
investments after expenses of the Fund are deducted. The return is paid to
shareholders in the form of dividends.

The Fund seeks to maintain a net asset value of $1.00 per share at all times.
There can be no assurance that the Fund will be able to maintain a constant
$1.00 share price. However, because the Fund purchases high quality securities
with short maturities, this policy helps to minimize any price decreases or
increases that could result from changes in interest rates or an issuer's
creditworthiness.

- -------------------------------------------------------------------------------
THE FUND SEEKS TO MAINTAIN A CONSTANT
$1.00 SHARE PRICE.
- -------------------------------------------------------------------------------

The Fund will invest only in U.S. dollar denominated securities determined by
the Board of Directors to present minimal credit risk and which are rated high
quality by any major rating service or, if unrated, determined to be of
comparable quality by the Board of Directors. These include commercial paper and
similar short-term obligations of U.S. issuers which generally meet the highest
quality standards at the time of investment, in conformity with securities
regulations governing money market mutual funds. The Fund may also purchase
other marketable, non-convertible corporate debt securities of U.S. issuers.
These investments include bonds, debentures, floating rate obligations, and
issues with optional maturities which in each case must have remaining
maturities of one year or less and be rated at least AA by Standard and Poor's
Ratings Group ("S&P") or Aa by Moody's Investor Services, Inc. ("Moody's") at
the time of investment. See the "Statement of Additional Information" for a
description of S&P and Moody's ratings.

Investments will also include bank obligations such as certificates of deposit,
time or demand deposits and bankers acceptances. Bank obligations are limited to
U.S. or Canadian banks having total assets over $1 billion. Investments in
savings association obligations are limited to U.S. savings and loan
associations with total

<PAGE>

assets over $1 billion. Investments in bank obligations may include instruments
issued by foreign branches of U.S. or Canadian banks. The Fund may invest in
U.S. Government securities, U.S. dollar denominated securities issued or
guaranteed by the Government of Canada, a Province of Canada, or their
instrumentalities in an amount not to exceed 10% of its total assets at the time
of purchase of such government securities. The Fund may enter into repurchase
agreements, invest in restricted securities and is authorized to invest in
participation interests and to purchase securities on a delayed delivery basis.
In addition, the Fund is authorized, but presently does not intend, to engage in
reverse repurchase agreements and invest in variable amount master notes. See
Statement of Additional Information for discussion of these instruments.

The Fund has adopted certain investment restrictions which are detailed in the
Statement of Additional Information where, they are designated as fundamental or
nonfundamental. Fundamental investment restrictions may not be changed without
shareholder approval. The Fund's investment objective, policies and
restrictions, except as noted, are fundamental and may not be changed without
the approval of the Fund's shareholders. Notwithstanding the Fund's investment
restriction prohibiting investments in other investment companies, the Fund may,
pursuant to an order granted by the SEC, invest in other investment companies in
connection with a deferred compensation plan for the non-interested trustees of
the John Hancock of Funds. There can be no assurance that the Fund will achieve
its investment objective.

RISK FACTORS. It is important to note that unlike the government securities in
which the Fund may invest, shares of the Fund are neither insured nor
guaranteed. Because interest rates on money market instruments fluctuate in
response to economic factors, the rates on short-term investments made by the
Fund and the daily dividend paid to investors will vary rising or falling with
short-term rates generally. Many obligations in which the Fund invests are not
guaranteed by any governmental agency. For additional information about risks
associated with an investment in the Fund, see "Investments, Techniques and Risk
Factors."

When choosing brokerage firms to carry out the Fund's transactions, John Hancock
Advisers, Inc. (the "Adviser") gives primary consideration to execution at the
most favorable prices, taking into account the broker's professional ability and
quality of service. Consideration may also be given to the broker's sales of
Fund shares. Pursuant to procedures established by the Directors, the Adviser
may place securities transactions with brokers affiliated with the Adviser.
These brokers include Tucker Anthony Incorporated, Sutro & Company, Inc. and
John Hancock Distributors, Inc. They are indirectly owned by the John Hancock
Mutual Life Insurance Company (the "Life Company"), which in turn indirectly
owns the Adviser.

- -------------------------------------------------------------------------------
BROKERS ARE CHOSEN ON BEST PRICE AND
EXECUTION.
- -------------------------------------------------------------------------------

<PAGE>

ORGANIZATION AND MANAGEMENT OF THE FUND

The Fund is a diversified open-end management investment company organized as a
Maryland Corporation in 1980. The Fund reserves the right to create and issue a
number of series of shares which are separately managed and have different
investment objectives. The Fund is not required to hold annual shareholder
meetings, although special meetings may be held for such purposes as electing or
removing Directors, changing fundamental policies or approving a management
contract. The Fund, under certain circumstances, will assist in shareholder
communications with other shareholders.

- -------------------------------------------------------------------------------
THE DIRECTORS ELECT OFFICERS AND RETAIN
THE INVESTMENT ADVISER WHO IS RESPONSIBLE
FOR THE DAY-TO-DAY OPERATIONS OF THE FUND,
SUBJECT TO THE DIRECTORS' POLICIES AND
SUPERVISION.
- -------------------------------------------------------------------------------

The Adviser was organized in 1968 and is a wholly-owned indirect subsidiary of
the Life Company, a financial services company. The Adviser provides the Fund,
and other investment companies in the John Hancock group of funds, with
investment research and portfolio management services. John Hancock Funds, Inc.
("John Hancock Funds"), an indirect subsidiary of the Life Company, distributes
shares for all of the John Hancock funds through selected broker-dealers
("Selling Brokers"). Certain Fund officers are also officers of the Adviser and
John Hancock Funds.

- -------------------------------------------------------------------------------

JOHN HANCOCK ADVISERS, INC. ADVISES
INVESTMENT COMPANIES HAVING A TOTAL ASSET
VALUE OF MORE THAN $16 BILLION.

- -------------------------------------------------------------------------------

In order to avoid conflicts with portfolio trades for the Fund, the Adviser and
the Fund have adopted extensive restrictions on personal securities trading by
personnel of the Adviser and its affiliates. Some of these restrictions are:
pre-clearance for all personal trades and a ban on the purchase of initial
public offerings, as well as contributions to specified charities of profits on
securities held for less than 91 days. These restrictions are a continuation of
the basic principle that the interests of the Fund and its shareholders come
first.

THE FUND'S EXPENSES

For managing its investment and business affairs, the Fund pays a monthly fee to
the Adviser which for the 1995 fiscal year, the advisory fee was 0.35% of the
Fund's average daily net assets.

The Fund compensates the Adviser for performing necessary tax and financial
management services. The compensation for 1996 is estimated to be at an annual
rate of 0.01875% of the average net assets of the Fund.

Information on the Fund's total expenses is in the Financial Highlights section
of the Prospectus.

DIVIDENDS AND TAXES

DIVIDENDS. The Fund generally declares daily and pays monthly dividends
representing all or substantially all net investment income.

Purchase orders which are received together with Federal funds by wire before
12:00 noon New York time will receive the dividend declared that day and other
purchase orders, including any order with payment other than by Federal funds,
will begin receiving dividends the following business day. Redemption orders
received prior to 12:00 noon New York time will not receive that day's
dividends.

<PAGE>

Dividends are reinvested in additional shares of the Fund unless you elect the
option to receive cash. If you elect the cash option and the U.S. Postal Service
cannot deliver your checks, your election will be converted to the reinvestment
option.

TAXATION. Dividends from the Fund's net investment income and net short-term
capital gains are taxable to you as ordinary income and dividends from the
Fund's net long-term capital gains are taxable as long-term capital gains. The
Fund does not anticipate that it will generally realize any long-term capital
gains. These dividends are taxable, whether received in cash or reinvested in
additional shares. Certain dividends may be paid in January of a given year but
may be taxable as if you received them the previous December. The Fund will send
you a statement by January 31 showing the tax status of the dividends you
received for the prior year.

The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a regulated investment company, the Fund will not be
subject to Federal income taxes on any net investment income and net realized
capital gains that are distributed to its shareholders within the time period
prescribed by the Code.

On the account application, you must certify that the social security or other
taxpayer identification number you provide is correct and that you are not
subject to backup withholding of Federal income tax. If you do not provide this
information or are otherwise subject to this withholding, the Fund may be
required to withhold 31% of your dividends.

In addition to Federal taxes, you may be subject to state, local or foreign
taxes with respect to your investments in and distributions from the Fund.
Non-U.S. shareholders and tax-exempt shareholders are subject to a different tax
treatment not described above. In many states, a portion of the Fund's dividends
that represent interest received by the Fund on direct U.S. Government
obligations may be exempt from tax. You should consult your tax adviser for
specific advice.

HOW TO BUY SHARES
- ---------------------------------------------------------------------------------------

The minimum initial investment is $2,500 ($250 for group investments and
retirement plans). Complete the Account Application attached to this Prospectus.

- -------------------------------------------------------------------------------
OPENING AN ACCOUNT
- -------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------
<S> <C> <C>
BY CHECK 1. Make your check payable to John Hancock Investor Services
Corporation, P.O. Box 9115, Boston, MA 02205-9115.
2. Deliver the completed application and check to your registered
representative or a Selling Broker or mail it directly to
Investor Services.
- ---------------------------------------------------------------------------------------
BY WIRE 1. Obtain an account number by contacting your registered
representative or Selling Broker, or by calling 1-800-225-5291.
2. Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Cash Reserve, Inc.
Your Account Number
Name(s) under which account is registered
3. Deliver the completed application to your registered
representative or Selling Broker or mail it directly to
Investor Services.
4. SAME DAY. To receive the dividend declared on the same day you
wire funds, you must telephone your order to Investor Services
toll free 1-800-225-5291 by 12:00 noon New York time that day.
See "Dividends and Taxation."
- ---------------------------------------------------------------------------------------
MONTHLY 1. Complete the "Automatic Investing" and "Bank Information"
AUTOMATIC sections on the Account Privileges Application designating a
ACCUMULATION bank account from which funds may be drawn.

- -------------------------------------------------------------------------------
BUYING ADDITIONAL SHARES
- -------------------------------------------------------------------------------

PROGRAM 2. The amount you elect to invest will be withdrawn automatically
(MAAP) from your bank or credit union account.
- ---------------------------------------------------------------------------------------
BY TELEPHONE 1. Complete the "Invest-By-Phone" and "Bank Information" sections
on the Account Privileges Application designating a bank
account from which your funds may be drawn. Note that in order
to invest by phone, your account must be in a bank or credit
union that is a member of the Automated Clearing House system
(ACH).
2. After your authorization form has been processed, you may
purchase additional shares by calling Investor Services
toll-free 1-800-225-5291.
3. Give the Investor Services representative the name(s) in which
your account is registered, the Fund name, your account number,
and the amount you wish to invest.
4. Your investment normally will be credited to your account the
business day following your phone request.
- ---------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>

- ---------------------------------------------------------------------------------------
<S> <C> <C>
BY CHECK 1. Either complete the detachable stub included on your account
statement or include a note with your investment listing the
name of the Fund, your account number and the name(s) in which
the account is registered.

- -------------------------------------------------------------------------------
BUYING ADDITIONAL
SHARES (CONTINUED)
- -------------------------------------------------------------------------------

2. Make your check payable to John Hancock Investor Services
Corporation.
3. Mail the account information and check to:
John Hancock Investor Services Corporation
P.O. Box 9115
Boston, MA 02205-9115
or deliver it to your registered representative or Selling
Broker.
- ---------------------------------------------------------------------------------------
BY WIRE Instruct your bank to wire funds to:
First Signature Bank & Trust
John Hancock Deposit Account No. 900000260
ABA Routing No. 211475000
For credit to: John Hancock Cash Reserve Inc.
Your Account Number
Name(s) under which account is registered
SAME DAY. To receive the dividend on the same day you wire funds,
you must telephone your order to Investor Services toll free
1-800-225-5291 by 12:00 noon New York time that day. See "Dividends
and Taxation."
- ---------------------------------------------------------------------------------------
Other Requirements: All purchases must be made in U.S. dollars. Checks written on
foreign banks will delay purchases until U.S. funds are received, and a collection
charge may be imposed. Wire purchases normally take two or more hours to complete
and, to be accepted the same day, must be received by 4:00 P.M., New York time.
Your bank may charge a fee to wire funds. Telephone transactions are recorded to
verify information. Certificates are not issued.
- ---------------------------------------------------------------------------------------
</TABLE>

You will receive a statement of your account after any transaction that affects
your share balance or registration (statements related to reinvestment of
dividends and automatic investment/withdrawal plans will be sent to you
quarterly). A tax information statement will be mailed to you by January 31 of
each year.

- -------------------------------------------------------------------------------
YOU WILL RECEIVE ACCOUNT STATEMENTS THAT
YOU SHOULD KEEP TO HELP WITH YOUR PERSONAL
RECORDKEEPING.
- -------------------------------------------------------------------------------

SHARE PRICE

The net asset value per share ("NAV") is the value of one share. The NAV is
calculated by dividing the net assets of the Fund by the number of outstanding
shares. The NAV is calculated twice daily at 12:00 noon Eastern time and as of
the close of regular trading on the New York Stock Exchange (the "Exchange")
(generally at 4:00 P.M., New York time) on each day that the Exchange is open.

- -------------------------------------------------------------------------------

THE PRICE OF YOUR SHARES IS THEIR NET
ASSET VALUE, WHICH WILL NORMALLY BE
CONSTANT AT $1.00.

- -------------------------------------------------------------------------------

The Fund uses the amortized cost method of valuing portfolio instruments. Under
amortized cost valuation, assets are valued by amortizing daily over the
remaining life of an instrument the difference between the principal amount due
at maturity and the cost of the instrument to the Fund. Amortized cost pricing
facilitates the maintenance of a $1.00 constant net asset value per share,
however, there is no assurance that the Fund can maintain the $1.00 per share
net asset value.

Shares of the Fund are sold at the NAV computed after your investment request is
received in good order by John Hancock Funds, which will normally be constant at
$1.00 per share. There is no sales charge. If you buy shares of the Fund through
a Selling Broker, the Selling Broker must receive your investment before the
close of regular trading on the Exchange and transmit it to John Hancock Funds
before its close of business to receive that day's price.

9
<PAGE>

HOW TO REDEEM SHARES

You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the next NAV calculated after your redemption request is
received in good order by Investor Services. The Fund may hold payment until
reasonably satisfied that investments recently made by check or Invest-by-Phone
have been collected (which may take up to 10 calendar days).

Once your shares are redeemed, the Fund generally sends you payment on the next
business day. Under unusual circumstances, the Fund may suspend redemptions or
postpone payment for up to three days or longer, as permitted by Federal
securities laws.

<TABLE>
- ---------------------------------------------------------------------------------------
<S> <C>
BY CHECK You may elect the checkwriting privilege which allows you
to write checks in amounts from a minimum of $100. Checks
may not be written against shares in your account which
have been purchased within the last 10 days, except for
shares purchased by wire transfer (which are immediately
available).

- -------------------------------------------------------------------------------
TO ASSURE ACCEPTANCE OF YOUR REDEMPTION
REQUEST, PLEASE FOLLOW THESE PROCEDURES.
- -------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------
BY TELEPHONE All Fund shareholders are eligible automatically for the
telephone redemption privilege. Call 1-800-225-5291, from
8:00 A.M. to 4:00 P.M. (New York time), Monday through
Friday, excluding days on which the Exchange is closed.
Investor Services employs the following procedures to
confirm that instructions received by telephone are
genuine. Your name, the account number, taxpayer
identification number applicable to the account and other
relevant information may be requested. In addition,
telephone instructions are recorded.
You may redeem up to $100,000 by telephone, but the address
on the account must not have changed for the last thirty
days. A check will be mailed to the exact name(s) and
address shown on the account.
If reasonable procedures, such as those described above,
are not followed, the Fund may be liable for any loss due
to unauthorized or fraudulent telephone instructions. In
all other cases, neither the Fund nor Investor Services
will be liable for any loss or expense for acting upon
telephone instructions made according to the telephone
transaction procedures mentioned above.
Telephone redemption is not available for IRAs or other
tax-qualified retirement plans or shares of the Fund that
are in certificated form.
During periods of extreme economic conditions or market
changes, telephone requests may be difficult to implement
due to a large volume of calls. During these times, you
should consider placing redemption requests in writing or
use EASI-Line. EASI-Line's telephone number is
1-800-338-8080.
- ---------------------------------------------------------------------------------------
BY WIRE If you have a telephone redemption form on file with the
Fund, redemption proceeds of $1,000 or more can be wired to
your designated bank account, and a fee (currently $4.00)
will be deducted.
SAME DAY. To receive redemption proceeds the same day, you
must telephone Investor Services at 1-800-225-5291 before
12:00 noon New York time. Dividends will not be received
for that day.
NEXT DAY. If same day wiring is not so requested,
redemption proceeds will be wired on the next business day.
You may also use electronic funds transfer to your assigned
bank account, and the funds are usually collectible after
two business days. Your bank may or may not charge a fee
for this service. Redemptions of less than $1,000 will be
sent by check or electronic funds transfer.
This feature may be elected by completing the "Telephone
Redemption" section on the Account Privileges Application
included with this Prospectus.
- ---------------------------------------------------------------------------------------
</TABLE>

10
<PAGE>

<TABLE>
- ---------------------------------------------------------------------------------------
<S> <C>
IN WRITING Send a stock power or "letter of instruction" specifying
the name of the Fund, the dollar amount or the number of
shares to be redeemed, your name, your account number and
the additional requirements listed below that apply to your
particular account.
- ---------------------------------------------------------------------------------

TYPE OF REGISTRATION REQUIREMENTS
-------------------- ------------
Individual, Joint Tenants, Sole A letter of instruction signed (with titles
Proprietorship, Custodial where applicable) by all persons authorized
(Uniform Gifts or Transfer to to sign for the account, exactly as it is
Minors Act), General Partners registered with the signature(s) guaran-
teed.
Corporation, Association A letter of instruction and a corporate
resolution, signed by person(s) authorized
to act on the account with the signature(s)
guaranteed.
Trusts A letter of instruction signed by the
trustee(s) with the signature(s) guaranteed.
(If the trustee's name is not registered on
your account, also provide a copy of the
trust document, certified within the last 60
days.)
If you do not fall into any of these registration categories, please call
1-800-225-5291 for further instructions.
- ---------------------------------------------------------------------------------------
A signature guarantee is a widely accepted way to protect you and the Fund by
verifying the signature on your request. It may not be provided by a notary
public. If the net asset value of the shares redeemed is $100,000 or less, John
Hancock Funds may guarantee the signature. The following institutions may
provide you with a signature guarantee, provided that the institution meets
credit standards established by Investor Services: (i) a bank; (ii) a securities
broker or dealer, including a government or municipal securities broker or
dealer, that is a member of a clearing corporation or meets certain net capital
requirements; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, a federal savings bank or association; or (v) a
national securities exchange, a registered securities exchange or a clearing
agency.

- -------------------------------------------------------------------------------
WHO MAY GUARANTEE YOUR SIGNATURE.
- -------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------
THROUGH YOUR BROKER. Your broker may be able to initiate the redemption. Contact
your broker for instructions.

- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
- -------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------
If you have certificates for your shares, you must submit them with your stock
power or a letter of instructions. You may not redeem certificated shares by
telephone.
Due to the proportionately high cost of maintaining small accounts, the Fund
reserves the right to redeem at net asset value all shares in an account which
holds less than $500 (except accounts under retirement plans) and to mail the
proceeds to the shareholder, or the transfer agent may impose an annual fee of
$10.00. No account will be involuntarily redeemed or additional fee imposed, if
the value of the account is in excess of the Fund's minimum initial investment
or if the account falls below the required minimum as a result of market action.
Shareholders will be notified before these redemptions are to be made or this
fee is imposed, and will have 30 days to purchase additional shares to bring
their account balance up to the required minimum. Unless the number of shares
acquired by additional purchases and any dividend reinvestments exceeds the
number of shares redeemed, repeated redemptions from a smaller account may
eventually trigger this policy.
- ---------------------------------------------------------------------------------------
</TABLE>

<PAGE>

ADDITIONAL SERVICES AND PROGRAMS

EXCHANGE PRIVILEGE

If your investment objective changes, or if you wish to achieve further
diversification, John Hancock offers other funds with a wide range of investment
goals. Contact your registered representative or Selling Broker and request a
prospectus for the John Hancock funds that interest you. Read the prospectus
carefully before exchanging your shares. You can exchange shares of each class
of the Fund only for Class A shares of another John Hancock fund. For this
purpose, John Hancock funds with only one class of shares will be treated as
Class A, whether or not they have been so designated.

- -------------------------------------------------------------------------------
YOU MAY EXCHANGE SHARES OF THE FUND ONLY
FOR CLASS A SHARES OF ANOTHER JOHN HANCOCK
FUND.
- -------------------------------------------------------------------------------

Exchanges between funds that carry a front end sales charge will be subject to
the sales charge described in the other fund's Prospectus (generally, 4.5% or
5.0%). Shares of the Fund acquired by exchange of shares of another fund on
which a front end sales charge was previously paid are exchanged at net asset
value.

An exchange of shares is treated as a redemption of shares of one fund and the
purchase of shares of another for Federal income tax purposes. An exchange will
not ordinarily result in a gain or loss if the Fund has maintained a constant
net asset value.

The Fund reserves the right to require you to keep previously exchanged shares
(and reinvested dividends) in the Fund for 90 days before you are permitted to
execute a new exchange. The Fund may also terminate or alter the terms of the
exchange privilege, upon 60 days' notice to shareholders.

When you make an exchange, your account registration in both the existing and
new account must be identical. The exchange privilege is available only in
states where the exchange can be made legally.

Under exchange agreements with John Hancock Funds, certain dealers, brokers and
investment advisers may exchange their clients' Fund shares, subject to the
terms of those agreements and John Hancock Funds right to reject or suspend
those exchanges at any time. Because of the restrictions and procedures under
those agreements, the exchanges may be subject to timing limitations and other
restrictions that do not apply to exchanges requested by shareholders directly,
as described above.

Because Fund performance and shareholders can be hurt by excessive trading, the
Fund reserves the right to terminate the exchange privilege for any person or
group that, in John Hancock Funds' judgment, is involved in a pattern of
exchanges that coincide with a "market timing" strategy that may disrupt the
Fund's ability to invest effectively according to its investment objective and
policies, or might otherwise affect the Fund and its shareholders adversely. The
Fund may also temporarily or permanently terminate the exchange privilege for
any person who makes seven or more exchanges out of the Fund per calendar year.
Accounts under common control or ownership will be aggregated for this purpose.
Although the Fund will attempt to give prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time.

<PAGE>

BY TELEPHONE

1. When you complete the application for your initial purchase of Fund shares,
you authorize exchanges automatically by telephone unless you check the box
indicating that you do not wish to authorize telephone exchanges.

2. Call 1-800-225-5291. Have the account number of your current fund and the
exact name in which it is registered available to give to the telephone
representative.

3. Your name, the account number, taxpayer identification number applicable to
the account and other relevant information may be requested. In addition,
telephone instructions are recorded.

IN WRITING
1. In a letter, request an exchange and list the following:

-- the name of the Fund whose shares you currently own
-- your account number
-- the name(s) in which the account is registered
-- the name of the fund in which you wish your exchange to be invested
-- the number of shares, all shares or dollar amount you wish to exchange

Sign your request exactly as the account is registered.

2. Mail the request and information to:

John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116

SYSTEMATIC WITHDRAWAL PLAN

1. You can elect the Systematic Withdrawal Plan at any time by completing the
Account Privileges Application which is attached to this Prospectus. You can
also obtain this application from your registered representative or by
calling 1-800-225-5291.

2. To be eligible, you must have at least $5,000 in your account.

3. Payments from your account can be made monthly, quarterly, semi-annually or
annually or on a selected monthly basis to yourself or any other designated
payee.

- -------------------------------------------------------------------------------
YOU CAN PAY ROUTINE BILLS FROM YOUR
ACCOUNT, OR MAKE PERIODIC DISBURSEMENTS OF
FUNDS FROM YOUR RETIREMENT ACCOUNT TO
COMPLY WITH IRS REGULATIONS.
- -------------------------------------------------------------------------------

4. There is no limit on the number of payees you may authorize, but all payments
must be made at the same time or intervals.

5. Redemptions will be discontinued if the U.S. Postal Service cannot deliver
your checks or if deposits to a bank account are returned for any reason.

<PAGE>

MONTHLY AUTOMATIC ACCUMULATION PROGRAM (MAAP)

1. You can authorize an investment to be withdrawn automatically each month from
your bank, for investment in Fund shares under the "Automatic Investing" and
"Bank Information" sections of the Account Privileges Application.

- -------------------------------------------------------------------------------
YOU CAN MAKE AUTOMATIC INVESTMENTS AND
SIMPLIFY YOUR INVESTING.
- -------------------------------------------------------------------------------

2. You can also authorize automatic investment through payroll deduction by
completing the "Direct Deposit Investing" section of the Account Privileges
Application.

3. You can terminate your Monthly Automatic Accumulation Program plan at any
time.

4. There is no charge to you for this program, and there is no cost to the Fund.

5. If you have payments withdrawn from a bank account and we are notified that
the account has been closed, your withdrawals will be discontinued.

RETIREMENT PLANS

1. You may use the Fund for various types of qualified retirement plans,
including Individual Retirement Accounts, Keogh Plans (H.R.10), pension and
profit sharing plans (including 401(k) plans), Tax Sheltered Annuity
retirement plans (403(b) or TSA plans) and Section 457 plans.

2. The initial investment minimum or aggregate minimum for any of the above
plans is $250. However, accounts being established as Group IRA, SEP, SARSEP,
TSA, 401(k) and Section 457 plans will be accepted without an initial minimum
investment.

<PAGE>

INVESTMENTS, TECHNIQUES AND RISK FACTORS
The Fund will purchase only, with regard to its investments in both rated (all
ratings are at time of investment) and unrated (excluding U.S. government
securities) obligations, a short-term obligation (including a long-term
obligation having one year or less remaining to maturity and whose issuer has
high quality rated short-term debt obligations, hereinafter referred to as a
"corporate bond"), which, in the following order or priority, is:

(a) rated in the highest category by both Standard & Poor's Ratings Group, Inc.
("S&P") and Moody's Investors Services ("Moody's"); or

(b) rated in the highest category by only one of the rating services described
in (a) and also rated in the highest category by any other nationally
recognized statistical rating organization (hereinafter together with S&P
and Moody's, collectively referred to as "rating services"); or

(c) rated by only one rating service which rating is in its highest category,
and the purchase of such obligation is approved or ratified by the Board of
Directors; or

(d) unrated and whose issuer has short-term securities rated as described in
(a), (b) and (c); or

(e) unrated, other than those described in (d), and which is determined by the
Investment Adviser to be of comparable quality to obligations rated in (a),
(b) or (c) and such determination is approved or ratified by the Directors
(hereinafter, obligations described under (a), (b), (c), (d) and (e) are
collectively referred to a "premium obligations"); and

In addition, the Fund will purchase only, with regard to its rated and unrated
investments, apart from premium obligations referenced above, any of the
following obligations (collectively "other eligible obligations") so long as the
purchase would not cause this category (i.e. the Fund's total investments in
other eligible obligations) to exceed 5% of the fund's total assets and further
provided that investment in all other obligations of a single issuer, at the
time of purchase, is limited to the greater of 1% of the fund's total net assets
or $1 million:

(a) an obligation rated in the highest category by only one rating service and
also rated in the second highest category by another rating service;

(b) a corporate bond, other than a premium obligation, rated by only one rating
service, which rating is in its second highest category and the purchase of
such obligation is approved or ratified by the Directors; and

(c) an unrated obligation, other than a premium obligation, which is determined
by the Adviser to be of comparable quality to the rating of any other
eligible obligation so long as such determination is approved or ratified by
the Board of Directors.

<PAGE>

DESCRIPTION OF PORTFOLIO SECURITIES
U.S. Government Securities: include obligations issued or guaranteed as to
principal and interest, including detached interest coupons, by the U.S.
Government or one of its agencies or instrumentalities, including certificates
or receipts evidencing ownership of interest or principal payments of the
foregoing.
Commercial Paper: is a short-term promissory note issued to finance short-term
credit needs.
Bankers' Acceptances: are negotiable obligations of a bank to pay a draft which
has been drawn on it by a customer.
Time Deposits: non-negotiable deposits maintained in a banking institution
earning a specified interest rate over a given period of time (no longer than 7
days).
Corporate Obligations (other than commercial paper): include bonds and notes
issued by corporations and other business organizations in order to finance
long-term credit needs.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its net
assets in illiquid investments, which include repurchase agreements maturing in
more than seven days, restricted securities and securities not readily
marketable.
REPURCHASE AGREEMENTS. For the purpose of realizing additional (taxable)
income, the Fund may enter into repurchase agreements. In a repurchase
agreement, the Fund buys a security subject to the right and obligation to sell
it back to the issuer at the same price plus accrued interest. The transaction
must be fully collateralized at all times. The Fund may reinvest any cash
collateral in short-term highly liquid debt securities. However, reverse
repurchase agreements may involve some credit risk to the Fund if the other
party should default on its obligation and the Fund is delayed in or prevented
from recovering the collateral.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Fund may purchase securities
on a forward or "when-issued" basis and may purchase or sell securities on a
forward commitment basis to hedge against anticipated changes in interest rates
and prices. When the Fund engages in such transactions, it relies on the seller
or the buyer, as the case may be, to consummate the transaction. Failure to
consummate the transaction may result in the Fund's losing the opportunity to
obtain an advantageous price and yield. If the Fund chooses to dispose of the
right to acquire a when-issued security prior to its acquisition or dispose of
its right to deliver or receive against a forward commitment, it can incur a
taxable gain or a loss.
SHORT-TERM TRADING AND PORTFOLIO TURNOVER. Short-term trading means the
purchase and subsequent sale of a security after it has been held for a
relatively brief period of time. Short-term trading may have the effect of
increasing portfolio turnover and may increase net short-term capital gains,
distributions from which would be taxable to shareholders as ordinary income.
The Fund does not intend to invest for the purpose of seeking short-term
profits. The Fund's portfolio securities may be changed, however, without regard
to the holding period of these securities (subject to certain tax restrictions),
when the Adviser deems that this action will help achieve the Fund's objective
given a change in an issuer's operations or changes in general market
conditions.

<PAGE>

RISK FACTORS. The Fund's ownership of obligations issued by banks may involve
special considerations. Normally, large domestic banks are members of the
Federal Reserve System and the Federal Deposit Insurance Corporation, but these
are not investment requirements. The purchase of obligations issued by foreign
branches of domestic banks and by Canadian banks or their foreign branches
involves special investment considerations, including the possible imposition of
withholding taxes on interest income, expropriation, confiscatory taxation, the
possible adoption of foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations, limitations on
the removal of funds, or other adverse political or economic developments. In
addition, it may be more difficult to obtain and enforce a judgment against a
Canadian bank or foreign branch of a domestic or Canadian bank. The Fund will
not invest more than 25% of its assets in Canadian banks, including their
foreign branches. Some investments in foreign branches of domestic banks may be
considered to have the same investment risk as investing in instruments of the
domestic bank when the parent is unconditionally liable for the obligations of
its foreign branch; in all other cases the Fund will not invest more than 25% of
its assets in the instruments of foreign branches of domestic banks.

<PAGE>

(NOTES)

<PAGE>

(NOTES)

<PAGE>

JOHN HANCOCK JOHN HANCOCK
CASH RESERVE, INC. CASH RESERVE,
INC.
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PROSPECTUS
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc. MAY 1, 1996
101 Huntington Avenue
Boston, Massachusetts 02199-7603

A MUTUAL FUND SEEKING TO OBTAIN
CUSTODIAN MAXIMUM CURRENT INCOME CONSIS-
TENT WITH PRESERVATION OF CAPITAL
State Street Bank and Trust Company AND MAINTENANCE OF LIQUIDITY.

225 Franklin Street

Boston, Massachusetts 02110

TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116

INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116

HOW TO OBTAIN INFORMATION
ABOUT THE FUND

For Service Information
For Telephone Exchange call 1-800-225-5291
For Investment-by-Phone
For Telephone Redemption

For TDD call 1-800-554-6713 101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291

4200P 5/96(LOGO) Printed on Recycled Paper

<PAGE>

JOHN HANCOCK CASH RESERVE, INC.
Statement of Additional Information
May 1, 1996

This Statement of Additional Information provides information about John
Hancock Cash Reserve Fund, Inc. (the "Fund") in addition to the information that
is contained in the Prospectus (the "Prospectus"), dated May 1, 1996.

This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus, a copy of which can be obtained free of
charge by writing or telephoning:

John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-5291
1-800-225-5291

TABLE OF CONTENTS

Organization of the Fund............................................. 2
Investment Objective and Policies.................................... 2
Investment Restrictions.............................................. 4
Those Responsible for Management..................................... 7
Investment Advisory and Other Services............................... 16
Distribution Contract................................................ 19
Amortized Cost Method of Portfolio Valuation......................... 19
Tax Status........................................................... 20
Brokerage Allocation................................................. 22
Transfer Agent Services.............................................. 24
Custodian............................................................ 24
Independent Auditors................................................. 25
Description of the Fund's Shares..................................... 25
Calculation of Yield................................................. 26
Appendix............................................................. A-1
Financial Statements................................................. F-1

<PAGE>

ORGANIZATION OF THE FUND

The Fund is a diversified open-end management investment company organized
as a corporation under the laws of the state of Maryland on January 17, 1980.
Prior to the approval of John Hancock Advisers, Inc. (the "Adviser") an indirect
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company (the "Life
Company"), a Massachusetts life insurance company chartered in 1862, with
national headquarters at John Hancock Place, Boston, Massachusetts as the Fund's
Adviser, effective December 22, 1994, the Fund was known as Transamerica Cash
Reserve, Inc.

INVESTMENT OBJECTIVE AND POLICIES

Investment Objective. As discussed under "Investment Objective and
Policies" in the Prospectus, the investment objective of the Fund is to obtain
maximum current income consistent with the preservation of capital and
maintenance of liquidity. The Fund seeks to achieve its objective by investing
in high quality money market instruments maturing within one year from the date
of purchase with an average portfolio maturity of 90 days or less. Securities in
which the Fund may invest may not earn as high a level of current income as
long-term or lower quality securities which generally have less liquidity,
greater market risk and more fluctuation in market value.

U.S. Government Securities. U.S. Government obligations are issued or
guaranteed as to principal and interest by the U.S. Government or one of its
agencies or instrumentalities. Treasury bills, bonds and notes and certain
obligations of Government agencies and instrumentalities, such as Government
National Mortgage Association pass through certificates are supported by the
full faith and credit of the Treasury. Other obligations such as securities of
the Federal Home Loan Bank are supported by the right of the issuer to borrow
from the Treasury; while others such as bonds issued by the Federal National
Mortgage Association, which is a private corporation, are supported only by the
credit of the issuing instrumentality. Obligations not backed by the full faith
and credit of the United States may be secured, in whole or part, by a line of
credit with the U.S. Treasury or collateral consisting of cash or other
securities which are backed by the full faith and credit of the United States.
In the case of other obligations, the agency issuing or guaranteeing the
obligation must be looked to for ultimate repayment.

Corporate Obligations. For a description of the ratings of securities which
are eligible for investment by the Fund, see Appendix A.

Short-term corporate obligations may also include variable amount master
demand notes. Variable amount master notes are obligations that permit the
investment of fluctuating amounts by the Fund at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the borrower.
These notes permit daily changes in the amounts borrowed. The Fund has the

-2-
<PAGE>

right to increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount, and the borrower may
repay up to the full amount of the note without penalty. The borrower is
typically a large industrial or finance company which also issues commercial
paper. Typically these notes provide that the interest rate is set daily by the
borrower; the rate is usually the same as or similar to the interest rate on
commercial paper being issued by the borrower. Because variable amount master
notes are direct lending arrangements between the lender and borrower, it is not
generally contemplated that such instruments will be traded, and there is no
secondary market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at the face value, plus accrued interest,
at any time. Accordingly, the Fund's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand. In connection with
master demand note arrangements, the Fund considers earning power, cash flow,
and other liquidity ratios of the issuer. The Fund will only invest in master
demand notes of U.S. issuers. While master demand notes, as such, are not
typically rated by credit rating agencies, if not so rated the Fund may invest
in them only if at the time of an investment the issuer meets the criteria set
forth in the Prospectus for all other commercial paper issuers. The Fund will
not invest more than 25% of its assets in master demand notes. Although the Fund
has previously invested in one master demand note and might again own this type
of note, it has no current intention of doing so in the foreseeable future.

Other Investment Practices. The Fund may invest in participations issued by
an intermediary, usually a bank, which evidence ownership of a fractional
interest in a large, underlying money market instrument of a type in which the
Fund is otherwise permitted to invest. The Fund's ability to exercise its rights
as a lender and to trade these participations and any fractional notes from the
underlying issuer in the secondary market is normally less than if the Fund
owned the entire investment directly.

The Fund may enter into reverse repurchase agreements which involve the
sale of any of the money market securities held by the Fund and an agreement to
repurchase those securities at an agreed upon price, date, and interest payment.
The Fund would then use the proceeds of reverse repurchase agreements to make
other investments which either mature or are under an agreement to resell at a
date simultaneous with or prior to the expiration of the reverse repurchase
agreement. The Fund may utilize reverse repurchase agreements only if the
interest income to be earned from the investment of proceeds of the transaction
is greater than the interest expense of the reverse repurchase transaction. In
the view of the staff of the Securities and Exchange Commission ("SEC") (a)
reverse repurchase arrangements are borrowings under the Investment Company Act
of 1940 and (b) if entered into with other than banks, the Fund must maintain,
in a segregated account, marketable short-term securities equal to the aggregate
amount of its reverse repurchase obligations. If the Fund enters into reverse
repurchase arrangements with other than banks, it will maintain such a
segregated account. In addition, the Fund would not enter into reverse
repurchase agreements exceeding in the aggregate (provided that overall
borrowings do not exceed 1/3 of the Fund's total assets) more than 20% of the
value of its total net assets. To avoid the potential leveraging effects of the
Fund's borrowings, additional investments will not be

-3-
<PAGE>

made while borrowings (including reverse repurchase agreements) are in excess of
5% of the Fund's total assets. In addition, the Fund would enter into reverse
repurchase agreements only with financial institutions which are approved in
advance as being creditworthy by the Board of Directors. Under procedures
established by the Board of Directors, the Investment Adviser will monitor the
creditworthiness of the firms involved. The Fund has not invested in reverse
repurchase agreements in the past and has no current intention of doing so.

Although it is not typically the practice with respect to money market
securities, some new issues of the securities in which the Fund may invest could
be offered on a delayed delivery (including a when-issued) basis, that is,
delivery and payment for the securities would be scheduled to take place after a
typical settlement date with the price, interest rate, and settlement date being
fixed at the time of commitment. The Fund will not effect delayed delivery
transactions with scheduled delivery dates of more than one year after the date
of its commitment. The Fund would only make such commitments to purchase
securities with the intention of actually acquiring them, and no new commitment
will be made if, as a result, more than 20% of the Fund's net assets would be so
committed. The Fund will at all times maintain in a segregated account cash or
liquid, high-grade money market instruments in an amount equal to these
commitments. However, the Fund could meet its obligations to pay for delayed
delivery securities from sale of the delayed delivery securities themselves,
which may have a value greater or less than the Fund's payment obligation and
thus produce a realized gain or loss.

The Fund's investment restrictions permit it to invest more than 25% of its
assets in all finance companies as a group and all domestic banks as a group
when, in the opinion of the Investment Adviser, yield differentials and money
market conditions suggest and when cash is available for such investment and
instruments are available for purchase which fulfill the Fund's objectives in
terms of quality and marketability.

INVESTMENT RESTRICTIONS

The following investment restrictions cannot be changed without approval of
the holders of a majority (as defined in the Investment Company Act of 1940) of
the outstanding shares of the Fund ("1940 Act Majority"). The Fund may not:

1. Borrow money except from banks for temporary or emergency purposes
(including meeting redemptions without immediately selling securities, but
not to purchase investment securities) in an amount not to exceed 1/3 of
the value (including the proceeds of the loan) of the Fund's total assets;

2. Mortgage, pledge, or hypothecate assets, except to an extent not greater
than 10% of total assets to secure borrowings made in accordance with
restriction 1 above;

-4-
<PAGE>

3. Invest more than 5% of its total assets in the securities of any one
issuer, except for: securities issued or guaranteed by the United States
government or by one of its agencies or instrumentalities; and, with
respect to 25% of its total assets, obligations of domestic commercial
banks (although under current regulations, an investment in the obligations
of any one commercial bank may not exceed 5% of the Fund's total assets,
subject to an exception permitting investment in certain obligation of any
one such bank at any one time for a period of up to three business days);

4. Invest more than 25% of the Fund's total assets in the securities of
issuers (other than domestic banks and the U.S. Government, its agencies,
and instrumentalities) in the same industry. Electric, natural gas
distribution, natural gas pipeline, combined electric and natural gas, and
telephone utilities are considered separate industries for purposes of this
restriction, and finance companies as a group shall not be considered a
single industry;

5. Make loans to others, except through the purchase of various kinds of
publicly distributed debt obligations, investments in variable amount
master demand notes, participations, and repurchase agreement transactions;

6. Purchase or sell real estate; however, the Fund may purchase marketable
securities issued by companies which invest in real estate or interest
therein;

7. Purchase securities on margin or sell short;

8. Purchase or sell commodities or commodity futures contracts, or oil, gas,
or mineral exploration or development programs;

9. Underwrite securities of other issuers;

10. Acquire more than 10% of any class of securities of an issuer. For this
purpose, all outstanding bonds and other evidences of indebtedness shall be
deemed within a single class regardless of maturities, priorities, coupon
rates, series, designations, conversion rights, security, or other
differences;

11. Purchase securities (other than under repurchase agreements of not more
than one week's duration considering only the remaining days to maturity of
each existing repurchase agreement) for which there exists no readily
available market, or for which there are legal or contractual restrictions
on resale (excepting from this restriction securities which are subject to
such resale restrictions but which, in the judgment of the Fund's
investment adviser, are readily redeemable on demand), if as a result of
any such purchase, more than 10% of the Fund's net assets would be invested
in such securities;

-5-
<PAGE>

12. Purchase warrants, or write, purchase or sell puts, calls, straddles,
spreads, or combinations thereof; and

13. Enter into reverse repurchase agreements, if as a result, the Fund's
obligations with respect to all reverse repurchase agreements would be
greater than 20% of net assets.

The following non-fundamental investment restrictions may be changed by the
Fund's Board of Directors without shareholder approval.

The Fund may not:

1. Purchase a security if, as a result, (i) more than 10% of the Fund's total
assets would be invested in the securities of other investment companies,
(ii) the Fund would hold more than 3% of the total outstanding voting
securities of any one investment company, or (iii) more than 5% of the
Fund's total assets would be invested in the securities of any one
investment company. These limitations do not apply to (a) the investment of
cash collateral, received by the Fund in connection with lending the Fund's
portfolio securities, in the securities of open-end investment companies or
(b) the purchase of shares of any investment company in connection with
merger, consolidation, reorganization or purchase of substantially all of
the assets of another investment company. Subject to the above percentage
limitations, the Fund may, in connection with the John Hancock Group of
Funds Deferred Compensation Plan for Independent Trustees/Directors,
purchase securities of other investment companies within the John Hancock
Group of Funds. The Fund may not purchase the shares of any closed-end
investment company except in the open market where no commission or profit
to a sponsor or dealer results from the purchase, other than customary
brokerage fees.

2. Purchase securities of any issuer for the purpose of exercising control or
management;

3. Invest more than 5% of total assets in securities of any issuer which,
together with predecessors, has been in continuous operation less than
three years; and

4. Purchase or retain the securities of an issuer if those officers or
directors of the Fund or the Investment Adviser, who are also officers or
directors of the issuer and who each own beneficially more than 1/2 of 1%
of the securities of that issuer, together own more than 5% of the
securities of such issuer.

With respect to investment restriction nos. 1 and 2, to avoid the potential
leveraging effects of the Fund's borrowings, additional investments will not be
made while borrowings (including reverse repurchase agreements) are in excess of
5% of the Fund's total assets.

-6-
<PAGE>

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of net assets will not be considered a violation
of any of the foregoing restrictions or those appearing in the Prospectus.

A 1940 Act majority means: (i) more than 50% of the outstanding shares
entitled to vote or (ii) 67% or more of the shares represented at the meeting
and entitled to vote on the matter, where more than 50% of the outstanding
shares are represented, whichever is less.

THOSE RESPONSIBLE FOR MANAGEMENT

The business of the Fund is managed by its Directors who elect officers who
are responsible for the day-to-day operations of the Fund and who execute
policies formulated by the Directors. Several of the officers and Directors of
the Fund are also officers and directors of the Adviser or officers and
Directors of the Fund's principal distributor, John Hancock Funds, Inc. ("John
Hancock Funds").

Set forth below is information with respect to each of the Fund's officers
and Directors. The officers and Directors may be contacted at 101 Huntington
Avenue, Boston, MA 02199-7603. Their affiliations represent their principal
occupations during the past five years.

-7-
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr.* Chairman and Chief Chairman and Chief Executive
101 Huntington Avenue Executive Officer (1,2) Officer, the Adviser and The
Boston, MA 02199 Berkeley Financial Group ("Berkeley
Group"); Chairman, NM Capital
Management, Inc. ("NM Capital");
John Hancock Advisers International
Limited ("Advisers International");
John Hancock Funds, Inc., ("John
Hancock Funds"), John Hancock
Investor Services Corporation
("Investor Services") and Sovereign
Asset Management Corporation
("SAMCorp") (herein after the
Adviser, The Berkeley Group, NM
Capital, Advisers International,
John Hancock Funds, Investor
Services and SAMCorp collectively
referred to as the "Affiliated
Companies"); Chairman, First
Signature Bank & Trust; Director,
John Hancock Freedom Securities
Corp., John Hancock Capital Corp.,
New England/Canada Business
Council; Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; President, the Adviser
(until July 1992); Chairman, John
Hancock Distributors, Inc. (until
April 1994).

</TABLE>

- -------------------
* An "interested person" of the Company as such term is defined in the
Investment Company Act of 1940, as amended ("The Investment Company Act").
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.

-8-
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
James F. Carlin Director(3) Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
Arbella Mutual Insurance Company
(insurance), Consolidated Group
Trust (insurance administration),
Carlin Insurance Agency, Inc., West
Insurance Agency, Inc. (until May,
1995) and Uno Restaurant Corp.;
Chairman, Massachusetts Board of
Higher Education; Receiver, the
City of Chelsea (until August
1992).

William H. Cunningham Director(3) Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Regents Chair for Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company); LBJ Foundation
Board (education foundation); and
Advisory Director, Texas Commerce
Bank - Austin.

Charles F. Fretz Director (3) Retired; Former Vice President and
RD #5, Box 300B Director, Towers, Perrin, Foster &
Clothier Springs Road Crosby, Inc. (international
Malvern, PA 19355 management consultants)
(1952-1985).

</TABLE>

-9-
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Harold R. Hiser, Jr. Director (3) Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hills, NJ 07078 (pharmaceuticals) (until 1996);
Director, ReCapital Corporation
(reinsurance)(until 1995).

Anne C. Hodsdon* Director and President President and Chief Operating
101 Huntington Avenue (1,2) Officer, the Adviser; Executive
Boston, MA 02199 Vice President, the Adviser (until
December 1994); Senior Vice
President; the Adviser (until
December 1993); Vice President, the
Adviser, 1991.

Charles L. Ladner Director (3) Director, Energy North, Inc.
UGI Corporation (public utility holding company)
P.O. Box 858 (until 1992); Senior Vice President
Valley Forge, PA 19482 and Chief Financial Officer of UGI
Corp. (Holding Company: Public
Utilities, LPGAS).

</TABLE>

-10-
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Leo E. Linbeck, Jr. Director(3) Chairman, President, Chief
3810 W. Alabama Executive Officer and Director,
Houston, TX 77027 Linbeck Corporation (a holding
company engaged in various phases
of the construction industry and
warehousing interests); Director
and Chairman, Federal Reserve Bank
of Dallas; Chairman of the Board
and Chief Executive Officer,
Linbeck Construction Corporation;
Director, Panhandle Eastern
Corporation (a diversified energy
company); Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment); GeoQuest International,
Inc. (a geophysical consulting
firm); and Director, Greater
Houston Partnership.

Patricia P. McCarter Director (3) Director and Secretary of The
1230 Brentford Road McCarter Corp. (manufacturing).
Malvern, PA 19355

Steven R. Pruchansky Director (1,3) Director and President, Mast
6920 Daniel Road Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
Trust Company (until August 1991);
Director, Mast Realty Trust
(1982-1994); President, Maxwell
Building Corp. (until 1991).

Richard S. Scipione* Director(1) General Counsel, the Life Company;
John Hancock Place Director, the Adviser, the
P.O. Box 111 Affiliated Companies, John Hancock
Boston, Massachusetts Distributors, Inc., JH Networking
Insurance Agency, Inc., John
Hancock Subsidiaries, Inc.,
SAMCorp, NM Capital and John
Hancock Property and Casualty
Insurance and its affiliates (until
November, 1993); Trustee, The
Berkeley Group.
</TABLE>

- -------------------
* An "interested person" of the Company as such term is defined in the 1940
Act.
(1) Member of the Executive Committee. Under the Company's charter, the
Executive Committee may generally exercise most of the powers of the Board
of Directors.
(2) A member of the Investment Committee of the Adviser.
(3) Member of the Audit Committee and the Administration Committee.

-11-
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Norman H. Smith Director (3) Retired. Lieutenant General, United
243 Mt. Oriole Lane States Marine Corps; Deputy Chief
Linden, VA 22642 of Staff for Manpower and Reserve
Affairs, Headquarters Marine Corps;
Commanding General, III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).

John P. Toolan Director (3) Director, The Muni Bond Funds,
13 Chadwell Place National Liquid Reserves, Inc., The
Morristown, NJ 07960 Tax Free Money Fund, Inc. and
Vantage Money Market Funds (mutual
funds), and The Inefficient-Market
Fund, Inc. (closed-end investment
company; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (until
December, 1991).

Robert G. Freedman* Vice Chairman and Chief Vice Chairman and Chief Investment
101 Huntington Avenue Investment Officer (2) Officer, the Adviser; President,
Boston, MA 02199 the Adviser (until December 1994).

Thomas H. Drohan* Senior Vice President and Senior Vice President and Secretary
101 Huntington Avenue Secretary of the Adviser.
Boston, MA 02199

James B. Little* Senior Vice President and Senior Vice President, the Adviser.
101 Huntington Avenue Chief Financial Officer
Boston, MA 02199

Susan S. Newton* Vice President, Assistant Vice President and Assistant
101 Huntington Avenue Secretary and Compliance Secretary, the Adviser.
Boston, MA 02199 Officer

</TABLE>

-12-

<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
John A. Morin* Vice President Vice President, the Adviser;
101 Huntington Avenue Counsel, the Life Company (until
Boston, MA 02199 1995).

James J. Stokowski* Vice President and Vice President, the Adviser.
101 Huntington Avenue Treasurer
Boston, MA 02199

</TABLE>

-13-
<PAGE>

All of the officers listed are officers or employees of the Adviser or the
Affiliated Companies. Some of the Directors and officers may also be officers
and/or directors and/or trustees of one or more of the other funds for which the
Adviser serves as investment adviser.

As of March 13, 1996, the officers and Directors of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund.

As of December 22, 1994, the Directors have established an Advisory Board
which acts to facilitate a smooth transition of management over a two-year
period (between Transamerica Fund Management Company ("TFMC"), the prior
investment adviser, and the Adviser). The members of the Advisory Board are
distinct from the Board of Directors, do not serve the Fund in any other
capacity and are persons who have no power to determine what securities are
purchased or sold on behalf of the Fund. Each member of the Advisory Board may
be contacted at 101 Huntington Avenue, Boston, Massachusetts 02199.

Members of the Advisory Board and their respective principal occupations
during the past five years are as follows:

R. Trent Campbell, President, FMS, Inc. (financial and management services);
former Chairman of the Board, Mosher Steel Company.

Mrs. Lloyd Bentsen, Formerly National Democratic Committeewoman from Texas;
co-founder, Houston Parents' League; former board member of various civic
and cultural organizations in Houston, including the Houston Symphony,
Museum of Fine Arts and YWCA. Mrs. Bentsen is presently active in various
civic and cultural activities in the Washington, D.C. area, including
membership on the Area Board for The March of Dimes and is a National
Trustee for the Botanic Gardens of Washington, D.C.

Thomas R. Powers, Formerly Chairman of the Board, President and Chief Executive
Officer, TFMC; Director, West Central Advisory Board, Texas Commerce Bank;
Trustee, Memorial Hospital System; Chairman of the Board of Regents of
Baylor University; Member, Board of Governors, National Association of
Securities Dealers, Inc.; Formerly, Chairman, Investment Company Institute;
formerly, President, Houston Chapter of Financial Executive Institute.

Thomas B. McDade, Chairman and Director, TransTexas Gas Company; Director,
Houston Industries and Houston Lighting and Power Company; Director,
TransAmerican Companies (natural gas producer and transportation); Member,
Board of Managers, Harris County Hospital District; Advisory Director,
Commercial State Bank, El Campo; Advisory Director, First National Bank of
Bryan; Advisory Director, Sterling Bancshares; Former Director and Vice
Chairman, Texas Commerce Bancshares; and Vice Chairman, Texas Commerce
Bank.

-14-
<PAGE>

Compensation of the Board of Directors and Advisory Board. The following
table provides information regarding the compensation paid by the Fund and the
other investment companies in the John Hancock Fund Complex to the Independent
Directors and the Advisory Board members for their services. The three
non-Independent Directors, Messrs. Boudreau, Scipione and Ms. Hodsdon, and each
of the officers of the Fund are interested persons of the Adviser, are
compensated by the Adviser and/or its affiliates and receive no compensation
from the Fund for their services.

Pension or Retirement Total Compensation from
Benefits Accrued as all Funds in John
Aggregate Compensation Part of the Fund's Hancock Fund Complex to
Directors from the Fund* Expenses* Directors(1)
- --------- -------------- --------- ------------
<S> <C> <C> <C>
James F. Carlin $ 1,198 $ $ 60,700
William H. Cunningham 424 2,269 69,700
Charles F. Fretz 141 - 56,200
Harold R. Hiser, Jr. - 70 60,200
Charles L. Ladner 1,430 60,700
Leo E. Linbeck, Jr. 2,693 73,200
Patricia P. McCarter 1,430 60,700
Steven R. Pruchansky 1,481 62,700
Norman H. Smith 1,481 62,700
John P. Toolan 1,430 60,700
------- ------ --------
$10,278 $3,769 $627,500
</TABLE>

* Compensation for the fiscal year ended December 31, 1995.

(1) The total compensation paid by the John Hancock Fund Complex to the
Independent Directors was $627,500 as of the calendar year ended December
31, 1995. All Trustees/Directors, except Messrs. Cunningham and Linbeck,
are Trustees/Directors of 33 funds in the John Hancock Fund Complex.
Messrs. Cunningham and Linbeck are Trustees/Directors of 31 funds.

Total Compensation from
Pension or Retirement all Funds in John Hancock
Aggregate Compensation Benefits Accrued as Part Fund Complex to
Advisory Board** from the Fund** of the Fund's Expenses** Advisory Board**
- ---------------- --------------- ------------------------ ----------------
<S> <C> <C> <C>
R. Trent Campbell $ 2,657 $ - $ 70,000
Mrs. Lloyd Bentsen 2,722 - 63,000
Thomas R. Powers 2,657 - 63,000
Thomas B. McDade 2,657 -------- 63,000
------- --------

TOTAL $10,693 $ - $259,000
</TABLE>
** For the fiscal year ended December 31, 1995.

-15-

<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

As described in the Prospectus, the Fund receives its investment advice
from the Adviser. Investors should refer to the Prospectus for a description of
certain information concerning the investment management contract. Each of the
Directors and principal officers affiliated with the Fund who is also an
affiliated person of the Adviser is named above, together with the capacity in
which such person is affiliated with the Fund, the Adviser or TFMC (the Fund's
prior investment adviser).

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts
02199-7603, was organized in 1968 and has over $16 billion in assets under
management in its capacity as investment adviser to the Fund and the other
mutual funds and publicly traded investment companies in the John Hancock group
of funds having a combined total of over 1,080,000 shareholders. The Adviser is
an affiliate of the Life Company, one of the most recognized and respected
financial institutions in the nation. With total assets under management of over
$80 billion, the Life Company is one of the ten largest life insurance companies
in the United States, and carries high ratings from Standard & Poor's and A.M.
Best. Founded in 1862, the Life Company has been serving clients for over 130
years.

The Fund has entered into an investment management contract with the
Adviser. Under the investment management contract, the Adviser provides the Fund
with (i) a continuous investment program, consistent with the Fund's stated
investment objective and policies, (ii) supervision of all aspects of the Fund's
operations except those that are delegated to a custodian, transfer agent or
other agent and (iii) such executive, administrative and clerical personnel,
officers and equipment as are necessary for the conduct of its business. See
"Organization and Management of the Fund" and "The Fund's Expenses" in the
Prospectus for a description of certain information concerning the Fund's
investment management contract.

No person other than the Adviser and its directors and employees regularly
furnishes advice to the Fund with respect to the desirability of the Fund
investing in, purchasing or selling securities. The Adviser may from time to
time receive statistical or other similar factual information, and information
regarding general economic factors and trends, from the Life Company and its
affiliates.

Under the terms of the investment management contract with the Fund, the
Adviser provides the Fund with office space, equipment and supplies and other
facilities and personnel required for the business of the Fund. The Adviser pays
the compensation of all officers and employees of the Fund and Directors of the
Fund affiliated with the Adviser, the office expenses of the Fund, including
those of the Fund's Treasurer and Secretary, and other expenses incurred by the
Adviser in connection with the performance of its duties. All expenses which are
not

-16-
<PAGE>

specifically paid by the Adviser and which are incurred in the operation of the
Fund including, but not limited to, (i) the fees of the Directors of the Fund
who are not "interested persons," as such term is defined in the 1940 Act (the
"Independent Directors"), (ii) the fees of the members of the Fund's Advisory
Board (described above) and (iii) the continuous public offering of the shares
of the Fund are borne by the Fund.

For the services rendered by the Adviser, the investment management
contract requires the Fund to pay monthly fees to the Adviser computed at the
annual percentage rate of 0.35% of the Fund's average daily net assets. Fees are
calculated and accrued daily and, at the end of each month, the Adviser is
entitled to a portions of the annual fee, based on the average daily net assets
of the Fund through the last day of the month for which payment is made, less
any previous payments made to the Adviser for the fiscal year.

In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of any 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 required by law. At this time, the most
restrictive limit on expenses imposed by a state requires that expenses charged
to the Fund in any fiscal year not exceed 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2% of the next $70,000,000 and 1.5% of the
remaining average daily net asset value. When calculating the limit above, the
Fund may exclude interest, brokerage commissions and extraordinary expenses.

Pursuant to the investment management contract, the Adviser is not liable
to the Fund or its shareholders for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which the
contract relates, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Adviser in the performance of its duties or
from its reckless disregard of the obligations and duties under the applicable
contract.

The investment management contract initially expires on December 22, 1996
and will continue in effect from year to year thereafter if approved annually by
a vote of a majority of the Directors of the Fund who are not interested persons
of one of the parties to the contract, cast in person at a meeting called for
the purpose of voting on such approval, and by either a majority of the
Directors or the holders of a majority of the Fund's outstanding voting
securities. The management contract may, on 60 days' written notice, be
terminated at any time without the payment of any penalty to the Fund by vote of
a majority of the outstanding voting securities of the Fund, by the Directors or
by the Adviser. The management contract terminates automatically in the event of
its assignment.

Securities held by the Fund may also be held by other funds or investment
advisory clients for which the Adviser or its affiliates provide investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities

-17-
<PAGE>

by the Adviser or for other funds or clients for which the Adviser renders
investment advice arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds or clients in a manner deemed equitable to all of them. To the
extent that transactions on behalf of more than one client of the Adviser or its
respective affiliates may increase the demand for securities being purchased or
the supply of securities being sold, there may be an adverse effect on price.

Under the investment management contract, the Fund may use the name "John
Hancock" or any name derived from or similar to it only for so long as the
investment management contract or any extension, renewal or amendment thereof
remains in effect. If the Fund's investment management contract is no longer in
effect, the Fund (to the extent that it lawfully can) will cease to use such
name or any other name indicating that it is advised by or otherwise connected
with the Adviser. In addition, the Adviser or the Life Company may grant the
non-exclusive right to use the name "John Hancock" or any similar name to any
other corporation or entity, including but not limited to any investment company
of which the Life Company or any subsidiary or affiliate thereof or any
successor to the business of any subsidiary or affiliate thereof shall be the
investment adviser.

For the fiscal years ended December 31, 1993 and 1994, the advisory fee
payable by the Fund to TFMC, the Fund's former investment adviser, amounted to
$585,243 and $630,730, respectively. For the fiscal year ended December 31,
1995, the adivsory fee paid to the Adviser amounted to $405,945.

Administrative Services Agreement. The Fund was a party to an
administrative services agreement with TFMC (the "Services Agreement"), pursuant
to which TFMC performed bookkeeping and accounting services and functions,
including preparing and maintaining various accounting books, records and other
documents and keeping such general ledgers and portfolio accounts as are
reasonably necessary for the operation of the Fund. Other administrative
services included communications in response to shareholder inquiries and
certain printing expenses of various financial reports. In addition, such staff
and office space, facilities and equipment was provided as necessary to provide
administrative services to the Fund. The Services Agreement was amended in
connection with the appointment of the Adviser as adviser to the Fund to permit
services under the Agreement to be provided to the Fund by the Adviser and its
affiliates. The Services Agreement was terminated during the current fiscal
year.

For the fiscal years ended December 31, 1993 and 1994, the Fund paid to
TFMC (pursuant to the Services Agreement) $76,114 and $80,795, respectively of
which $60,553, and $65,979, respectively was paid to TFMC and $15,561 and
$14,816, respectively were paid for certain data processing and pricing
information services. No fees relating to the Service Agreement was paid or
incurred during the fiscal year 1995.

-18-
<PAGE>

DISTRIBUTION CONTRACT

The Fund has a distribution contract with John Hancock Funds (the
"Distribution Contract"). Under the Distribution Contract, John Hancock Funds is
obligated to use its best efforts to sell shares on behalf of the Fund. Shares
of the Fund are also sold by selected broker-dealers (the "Selling Brokers")
which have entered into selling agency agreements with John Hancock Funds. John
Hancock Funds accepts orders for the purchase of the shares of the Fund which
are continually offered at net asset value (normally $1.00 per share). The Fund
is a no-load Fund and John Hancock Funds and Selling Brokers' representatives do
not receive any sales commissions in connection with the sales of shares of the
Fund.

The Distribution Contract was initially adopted by the affirmative vote of
the Fund's Board of Directors including the vote of a majority of Directors who
are not parties to the agreement or interested persons of any such party, cast
in person at a meeting called for such purpose. The Distribution Contract shall
continue in effect until December 22, 1996 and from year to year if approved by
either the vote of the Fund's shareholders or the Board of Directors including
the vote of a majority of Directors who are not parties to the agreement or
interested persons of any such party, cast in person at a meeting called for
such purpose. The Distribution Contract may be terminated at any time, without
penalty, by either party upon sixty (60) days' written notice or by a vote of a
majority of the outstanding voting securities of the Fund and terminates
automatically in the case of an assignment by the John Hancock Funds.

AMORTIZED COST METHOD OF PORTFOLIO VALUATION

The Fund utilizes the amortized cost valuation method of valuing
portfolio instruments in the absence of extraordinary or unusual circumstances.
Under the amortized cost method, assets are valued by constantly amortizing over
the remaining life of an instrument the difference between the principal amount
due at maturity and the cost of the instrument to the Fund. The Directors will
from time to time review the extent of any deviation of the net asset value, as
determined on the basis of the amortized cost method, from net asset value as it
would be determined on the basis of available market quotations. If any
deviation occurs which may result in unfairness either to new investors or
existing shareholders, the Directors will take such actions as they deem
appropriate to eliminate or reduce such unfairness to the extent reasonably
practicable. These actions may include selling portfolio instruments prior to
maturity to realize gains or losses or to shorten the Fund's average portfolio
maturity, withholding dividends, splitting, combining or otherwise
recapitalizing outstanding shares or utilizing available market quotations to
determine net asset value per share.

-19-
<PAGE>

Since a dividend is declared to shareholders each time net asset value is
determined, the net asset value per share of the Fund will normally remain
constant at $1.00 per share. There is no assurance that the Fund can maintain
the $1.00 per share value. Monthly, any increase in the value of a shareholder's
investment from dividends is reflected as an increase in the number of shares in
the shareholder's account or is distributed as cash if a shareholder has so
elected.

It is expected that the Fund's net income will be positive each time it is
determined. However, if because of a sudden rise in interest rates or for any
other reason the net income of the Fund determined at any time is a negative
amount, the Fund will offset the negative amount against income accrued during
the month for each shareholder account. If at the time of payment of a
distribution such negative amount exceeds a shareholder's portion of accrued
income, the Fund may reduce the number of its outstanding shares by treating the
shareholder as having contributed to the capital of the Fund that number of full
or fractional shares which represent the amount of excess. By investing in the
Fund, shareholders are deemed to have agreed to make such a contribution. This
procedure permits the Fund to maintain its net asset value at $1.00 per share.

If in the view of the Directors it is inadvisable to continue the practice
of maintaining net asset value at $1.00 per share, the Directors reserve the
right to alter the procedures for determining net asset value. The Fund will
notify shareholders of any such alteration.

The Fund is permitted to redeem shares in kind. Nevertheless, the Fund has
filed with the Securities and Exchange Commission a notification of election
committing itself to pay in cash on redemption by a shareholder of record,
limited during any 90-day period to the lesser of $250,000 or 1% of the net
asset value of the Fund at the beginning of such period.

The Fund will not price its securities on the following national holidays:
New Year's Day; President's Day; Good Friday; Memorial Day; Independence Day;
Labor Day; Thanksgiving Day and Christmas Day.

TAX STATUS

The Fund has qualified and has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and intends to continue to so qualify for each taxable
year. As such and by complying with the applicable provisions of the Code
regarding the sources of its income, the timing of its distributions, and the
diversification of its assets, the Fund will not be subject to Federal income
tax on taxable income (including net realized capital gains, if any) which is
distributed to shareholders at least annually in accordance with the timing
requirements of the Code.

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<PAGE>

The Fund will be subject to a four percent nondeductible Federal excise tax
on certain amounts not distributed (and not treated as having been distributed)
on a timely basis in accordance with annual minimum distribution requirements.
The Fund intends under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.

Distributions of net investment income (which include original issue
discount and accrued, recognized market discount) and any net realized
short-term capital gains, as computed for Federal income tax purposes, will be
taxable as described in the Prospectus whether taken in shares or in cash.
Although the Fund does not expect to realize any net long-term capital gains,
distributions from such gains, if any, would be taxable as long-term capital
gains. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the amount of cash they would have received had they elected
the distribution in cash, divided by the number of shares received.

Upon a redemption of shares (including by exercise of the exchange
privilege) a shareholder ordinarily will not realize a taxable gain or loss if,
as anticipated, the Fund maintains a constant net asset value per share. If the
Fund is not successful in maintaining a constant net asset value per share, a
redemption may produce a taxable gain or loss.

Distributions from the Fund will not qualify for the dividends-received
deduction for corporate shareholders.

For Federal income tax purposes, the Fund is permitted to carry forward a
net capital loss in any year to offset net capital gains, if any, during the
eight years following the year of the loss. To the extent subsequent capital
gains are offset by such losses, they would not result in Federal income tax
liability to the Fund and would not be distributed as such to shareholders.

Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.

The Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments, if any, in foreign securities. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes.

If more than 50% of the value of the total assets of the Fund at the close
of any taxable year consists of securities of foreign corporations, the Fund may
file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends actually received) their pro rata
shares of foreign income taxes paid by the Fund even though not actually
received, and (ii) treat such respective pro rata portions as foreign income
taxes paid by them.

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<PAGE>

If the election is made, shareholders of the Fund may then deduct such pro
rata portions of foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. federal income taxes. Shareholders who do not
itemize deductions for Federal income tax purposes will not, however, be able to
deduct their pro rata portion of foreign taxes paid by the Fund, although such
shareholders will be required to include their shares of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Fund as a separate
category of income for purposes of computing the limitations on the foreign tax
credit. Tax-exempt shareholders will ordinarily not benefit from this election.
Each year that the Fund files the election described above, its shareholders
will be notified of the amount of (i) each shareholder's pro rata share of
foreign income taxes paid by the Fund and (ii) the portion of Fund dividends
which represents income from each foreign country.

Provided that the Fund qualifies as a regulated investment company under
the Code, the Fund will not be required to pay any Massachusetts income,
corporate excise or franchise taxes.

The foregoing discussion relates solely to U.S. Federal income tax laws
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions (if any), and ownership of
or gains realized (if any) on the exchange or redemption of shares of the Fund
may also be subject to state and local taxes. Shareholders should consult their
own tax advisers as to the Federal, state or local tax consequences of ownership
of shares of, and receipt of distribution from, the Fund in their particular
circumstances.

Non-U.S. investors not engaged in U.S. trade or business with which their
Fund investment is effectively connected will be subject to U.S. Federal income
tax treatment that is different from that described above. These investors may
be subject to non-resident alien withholding tax at the rate of 30% (or a lower
rate under an applicable tax treaty) on amounts treated as ordinary dividends
from the Fund. Non-U.S. investors should consult their tax advisers regarding
such treatment and the application of foreign taxes to an investment in the
Fund.

BROKERAGE ALLOCATION

Decisions concerning the purchase and sale of portfolio securities are made
by the Adviser pursuant to recommendations made by an investment committee of
the Adviser, which consists of officers and directors of the Adviser and
affiliates and officers and Directors who are interested persons of the Fund.
Orders for purchases and sales of securities are placed in a manner which, in
the opinion of the officers of the Fund, will offer the best price and market
for the execution of each such transaction. Purchases from underwriters of
portfolio securities may include a

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<PAGE>

commission or commissions paid by the issuer and transactions with dealers
serving as market makers reflect a "spread." Investments in debt securities are
generally traded on a net basis through dealers acting for their own account as
principals and not as brokers; no brokerage commissions are payable on such
transactions.

The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with the foregoing primary
policy, the Rules of Fair Practice of the NASD and other policies that the
Directors may determine, the Adviser may consider sales of shares of the Fund as
a factor in the selection of broker-dealers to execute the Fund's portfolio
transactions.

To the extent consistent with the foregoing, the Fund will be governed in
the selection of brokers and dealers, and the negotiation of brokerage
commission rates and dealer spreads, by the reliability and quality of the
services, including primarily the availability and value of research information
and to a lesser extent statistical assistance furnished to the Adviser of the
Fund, and their value and expected contribution to the performance of the Fund.
It is not possible to place a dollar value on information and services to be
received from brokers and dealers, since it is only supplementary to the
research efforts of the Adviser. The receipt of research information is not
expected to reduce significantly the expenses of the Adviser. The research
information and statistical assistance furnished by brokers and dealers may
benefit the Life Company or other advisory clients of the Adviser, and
conversely, brokerage commissions and spreads paid by other advisory clients of
the Adviser may result in research information and statistical assistance
beneficial to the Fund. The Fund will make no commitments to allocate portfolio
transactions upon any prescribed basis. While the Adviser will be primarily
responsible for the allocation of the Fund's brokerage business, their policies
and practices in this regard must be consistent with the foregoing and will at
all times be subject to review by the Directors. For the fiscal years ended
December 31, 1995, 1994 and 1993, no negotiated brokerage commissions were paid
on portfolio transactions.

As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Fund may pay to a broker which provides brokerage and research services to the
Fund an amount of disclosed commission in excess of the commission which another
broker would have charged for effecting that transaction. This practice is
subject to a good faith determination by the Directors that the price is
reasonable in light of the services provided and to policies that the Directors
may adopt from time to time. During the fiscal year ended December 31, 1995, the
Fund did not pay commissions as compensation to any brokers for research
services such as industry, economic and company reviews and evaluations of
securities.

The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of John Hancock Freedom Securities Corporation and its subsidiaries,
three of which, Tucker Anthony Incorporated ("Tucker Anthony"), John Hancock
Distributors, Inc. ("John Hancock

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<PAGE>

Distributors"), and Sutro & Company, Inc. ("Sutro"), are broker-dealers
("Affiliated Brokers"). Pursuant to procedures established by the Directors and
consistent with the above policy of obtaining best net results, the Fund may
execute portfolio transactions with or through Affiliated Brokers. During the
years ended December 31, 1995, 1994 and 1993, the Fund did not execute any
portfolio transactions with Affiliated Brokers.

Any of the Affiliated Brokers may act as broker for the Fund on exchange
transactions, subject, however, to the general policy of the Fund set forth
above and the procedures adopted by the Directors pursuant to the 1940 Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Directors believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if the Fund would have to pay a commission rate less favorable than the
Affiliated Broker's contemporaneous charges for comparable transactions for its
other most favored, but unaffiliated, customers, except for accounts for which
the Affiliated Broker acts as a clearing broker for another brokerage firm, and
any customers of the Affiliated Broker not comparable to the Fund as determined
by a majority of the Directors who are not interested persons (as defined in the
1940 Act) of the Fund, the Adviser or the Affiliated Brokers. Because the
Adviser, which is affiliated with the Affiliated Brokers, has, as an investment
adviser to the Fund, the obligation to provide investment management services,
which includes elements of research and related investment skills, such research
and related skills will not be used by the Affiliated Brokers as a basis for
negotiating commissions at a rate higher than that determined in accordance with
the above criteria. The Fund will not effect principal transactions with
Affiliated Brokers.

TRANSFER AGENT SERVICES

John Hancock Investor Services Corporation ("Investor Services"), P.O. Box
9116, Boston, MA 02205-9116, a wholly owned indirect subsidiary of the Life
Company, is the transfer and dividend paying agent for the Fund. The Fund pays
Investor Services monthly a transfer agent fee equal to $25.00 per shareholder
account, on an annual basis, plus certain out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company ("SSB"), 225 Franklin Street, Boston,
Massachusetts, serves as custodian of the cash and investment securities of the
Fund. SSB is also responsible for, among other things, receipt and delivery of
the Fund's investment securities in accordance with procedures and conditions
specified in the custody agreement.

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<PAGE>

INDEPENDENT AUDITORS

The independent auditors of the Fund are Ernst & Young LLP, 200 Clarendon
Street, Boston, Massachusetts 02116. Ernst & Young LLP audits and renders and
opinion on the Fund's annual financial statements and prepares the Fund's
Federal income tax return..

DESCRIPTION OF THE FUND'S SHARES

Capitalization and Voting Rights. The Fund's total authorized capital stock
is 4,000,000,000 common shares of the par value of one cent ($.01) per share.
The Board of Directors has the authority to designate additional series of
Common Stock without seeking the approval of shareholders.

All shares have equal rights as to voting, dividends and liquidation. The
voting rights of shares of the Fund are noncumulative. Consequently, holders of
more than 50% of the shares voting for the election of directors can elect all
of the directors of the Fund if they choose to do so, and in such event, the
holders of the remaining less than 50% of the shares voting will not be able to
elect any person or persons to the Board of Directors. In addition, shareholders
may request in writing that the Fund call a special meeting of shareholders for
various purposes, including removal of a director provided that such request
represents at least 10% of all the votes entitled to be cast at the meeting. The
Fund will assist shareholders with any communications, including shareholder
proposals, in accordance with provisions of Section 16 of the Investment Company
Act of 1940. All shares of the Fund issued and outstanding are, and all shares
offered by the Prospectus, when issued, will be fully paid and nonassessable.
Shares have no conversion, preemptive or other subscription rights and are
freely transferable on the books of the Fund.

Reports to Shareholders. Shareholders of the Fund will receive annual and
semiannual reports showing diversification of investments, securities owned and
other information regarding the Fund's activities. The financial statements of
the Fund are audited at least once a year by the Fund's independent auditors.

Registration Statement. This Statement of Additional Information and the
Prospectus do not contain all of the information set forth in the Fund's
Registration Statement filed with the SEC. The complete Registration Statement
may be obtained from the SEC upon payment of the fee prescribed by the rules and
regulations of the SEC.

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<PAGE>

CALCULATION OF YIELD

For the purposes of calculating yield, daily income per share consists of
interest and discount earned on the Fund's investments less provision for
amortization of premiums and applicable expenses, divided by the number of
shares outstanding, but does not include realized or unrealized appreciation or
depreciation.

In any case in which the Fund reports its annualized yield, it will also
furnish information as to the average portfolio maturities of the Fund. It will
also report any material effect of realized gains or losses or unrealized
appreciation on dividends which have been excluded from the computation of
yield.

Yield calculations are based on the value of a hypothetical preexisting
account with exactly one share at the beginning of the seven day period. Yield
is computed by determining the net change in the value of the account during the
base period and dividing the net change by the value of the account at the
beginning of the base period to obtain the base period return. Base period is
multiplied by 365/7 and the resulting figure is carried to the nearest 100th of
a percent. Net change in account value during the base period includes dividends
declared on the original share, dividends declared on any shares purchased with
dividends of that share and any account or sales charges that would affect an
account of average size, but excludes any capital changes.

Effective yield is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical preexisting account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1

The yield of the Fund is not fixed or guaranteed. Yield quotations should
not be considered to be representations of yield of the Fund for any period in
the future. The yield of the Fund is a function of available interest rates on
money market instruments, which can be expected to fluctuate, as well as of the
quality, maturity and types of portfolio instruments held by the Fund and of
changes in operating expenses. The Fund's yield may be affected if, through net
sales of its shares, there is a net investment of new money in the Fund which
the Fund invests at interest rates different from that being earned on current
portfolio instruments. Yield could also vary if the Fund experiences net
redemptions, which may require the disposition of some of the Fund's current
portfolio instruments.

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<PAGE>

From time to time, in reports and promotional literature, the Fund's yield
and total return will be ranked or compared to indices of mutual funds and bank
deposit vehicles such as Lipper Analytical Services, Inc. "Lipper-Fixed Income
Fund Performance Analysis," a monthly publication which tracks net assets, total
return, and yield on fixed income mutual funds in the United States or
"IBC/Donahue's Money Fund Report," a similar publication. Comparisons may also
be made to bank Certificates of Deposit, which differ from mutual funds like the
Fund, in several ways. The interest rate established by the sponsoring bank is
fixed for the term of a CD, there are penalties for early withdrawal from CD's
and the principal on a CD is insured. Unlike CD's, which are insured as to
principal, an investment in the Fund is not insured or guaranteed.

Performance rankings and ratings, reported periodically in national
financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK, THE WALL
STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRONS, will also be
utilized.

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<PAGE>

APPENDIX A

CORPORATE AND TAX-EXEMPT BOND RATINGS

Moody's Investors Service, Inc. ("Moody's")

Aaa, Aa, A and Baa - Tax-exempt bonds rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to bonds that are of "high quality by all
standards," but long-term risks appear somewhat larger than Aaa rated bonds. The
Aaa and Aa rated bonds are generally known as "high grade bonds." The foregoing
ratings for tax-exempt bonds are sometimes presented in parentheses preceded
with a "con" indicating that the bonds are rated conditionally. Bonds for which
the security depends upon the completion of some act or upon the fulfillment of
some condition are rated conditionally. These are bonds secured by (a) earnings
of projects under construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals that begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. Such parenthetical
ratings denotes the probable credit stature upon completion of construction or
elimination of the basis of the condition. Bonds rated A are considered as upper
medium grade obligations. Principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Bonds rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected or poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact, have speculative characteristics as well.

Standard & Poor's Corporation ("S&P")

AAA, AA, A and BBB - Bonds rated AAA bear the highest rating assigned to debt
obligations and indicates an extremely strong capacity to pay principal and
interest. Bonds rated AA are considered "high grade," are only slightly less
marked than those of AAA ratings and have the second strongest capacity for
payment of debt service. Bonds rated A have a strong capacity to pay principal
and interest, although they are somewhat susceptible to the adverse effects or
changes in circumstances and economic conditions. The foregoing ratings are
sometimes followed by a "p" indicating that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the bonds being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. Although a provisional rating addresses credit quality subsequent of
completion of the project, it makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. Bonds rated BBB are regarded as
having an adequate capacity to repay principal and pay interest. Whereas they
normally exhibit protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to repay principal
and pay interest for bonds in this category than for bonds in the A category.

A-1
<PAGE>

Fitch Investors Service ("Fitch")

AAA, AA, A, BBB - Bonds rated AAA are considered to be investment grade and of
the highest quality. The obligor has an extraordinary ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal, while very
strong, is somewhat less than for AAA rated securities or more subject to
possible change over the term of the issue. Bonds rated A are considered to be
investment grade and of good quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher
ratings. Bonds rated BBB are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds with
higher ratings.

TAX-EXEMPT NOTE RATINGS

Moody's - MIG-1 and MIG-2. Notes rated MIG-1 are judged to be of the best
quality, enjoying strong protection from established cash flow of funds for
their services or from established and broad-based access to the market for
refinancing or both. Notes rated MIG-2 are judged to be of high quality with
ample margins of protection, through not as large as MIG-1.

S&P - SP-1 and SP-2. SP-1 denotes a very strong or strong capacity to pay
principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+). SP-2 denotes a
satisfactory capacity to pay principal interest.

Fitch - FIN-1 and FIN-2. Notes assigned FIN-1 are regarded as having the
strongest degree of assurance for timely payment. A plus symbol may be used to
indicate relative standing. Notes assigned FIN-2 reflect a degree of assurance
for timely payment only slightly less in degree than the highest category.

CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS

Moody's-Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Prime-1, indicates highest quality repayment capacity of rated
issue and Prime-2 indicates higher quality.

S&P-Commercial Paper ratings are a current assessment of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
Issues rated A have the greatest capacity for a timely payment and the
designation 1, 2 and 3 indicates the relative degree of safety. Issues rated
"A-1+" are those with an "overwhelming degree of credit protection."

A-2
<PAGE>

Fitch-Commercial Paper ratings reflect current appraisal of the degree of
assurance of timely payment. F-1 issues are regarded as having the strongest
degree of assurance for timely payment. (+) is used to designate the relative
position of an issuer within the rating category. F-2 issues reflect an
assurance of timely payment only slightly less in degree than the strongest
issues. The symbol (LOC) may follow either category and indicates that a letter
of credit issued by a commercial bank is attached to the commercial paper note.

Other Considerations-The ratings of S&P, Moody's, and Fitch represent their
respective opinions of the quality of the municipal securities they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal securities with the same
maturity, coupon and rating may have different yields and municipal securities
of the same maturity and coupon with different ratings may have the same yield.

A-3
<PAGE>

JOHN HANCOCK CASH RESERVE, INC.

PART C.

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) The financial statements listed below are included in and incorporated
by reference into Part B of the Registration Statement from the 1995 Annual
Report to Shareholders for the year ended December 31, 1995 (filed
electronically on February 26, 1996; file nos. 811-2995 and 2-66461; accession
number 0000950135-96-001140):

John Hancock Cash Reserve, Inc.

Statement of Assets and Liabilities as of December 31, 1995.
Statement of Operations for the year ended December 31, 1995.
Statement of Changes in Net Assets for the years ended December 31.
Notes to Financial Statements.
Financial Highlights.
Schedule of Investments as of December 31, 1995.

(b) Exhibits:

The exhibits to this Registration Statement are listed in the Exhibit Index
hereto and are incorporated herein by reference.

Item 25. Persons Controlled by or under Common Control with Registrant

No person is directly or indirectly controlled by or under common control
with Registrant.

Item 26. Number of Holders of Securities

As of March 29, 1996, the number of record holders of shares of Registrant
was as follows:

Title of Class Number of Record Holders

John Hancock Cash Reserve, Inc. 4,549

C-1
<PAGE>

Item 27. Indemnification

(a) Indemnification provisions relating to the Registrant's Directors,
officers, employees and agents is set forth in Article V of the Registrant's By
Laws included as Exhibit 2 herein.

(b) Under Section 12 of the Distribution Agreement, John Hancock Funds,
Inc. ("John Hancock Funds" ) has agreed to indemnify the Registrant and its
Directors, officers and controlling persons against claims arising out of
certain acts and statements of John Hancock Funds.

Section 9(a) of the By-Laws of the John Hancock Mutual Life Insurance
Company (" the "Insurance Company") provides, in effect, that the Insurance
Company will, subject to limitations of law, indemnify each present and former
director, officer and employee of the of the Insurance Company who serves as a
Directors or officer of the Registrant at the direction or request of the
Insurance Company against litigation expenses and liabilities incurred while
acting as such, except that such indemnification does not cover any expense or
liability incurred or imposed in connection with any matter as to which such
person shall be finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interests of the Insurance
Company. In addition, no such person will be indemnified by the Insurance
Company in respect of any liability or expense incurred in connection with any
matter settled without final adjudication unless such settlement shall have been
approved as in the best interests of the Insurance Company either by vote of the
Board of Directors at a meeting composed of directors who have no interest in
the outcome of such vote, or by vote of the policyholders. The Insurance Company
may pay expenses incurred in defending an action or claim in advance of its
final disposition, but only upon receipt of an undertaking by the person
indemnified to repay such payment if he should be determined to be entitled to
indemnification.

Article IX of the respective By-Laws of John Hancock Funds and John Hancock
Advisers, Inc. (the "Adviser") provide as follows:

"Section 9.01. Indemnity: Any person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the Corporation a director, officer, employee or agent of the
Corporation, or is or was at any time since the inception of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified by the Corporation against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and the liability was not incurred by reason of gross
negligence or reckless disregard of the duties involved in the conduct of his
office, and expenses in connection therewith may be advanced by the Corporation,
all to the full extent authorized by the law."

"Section 9.02. Not Exclusive; Survival of Rights: The indemnification provided
by Section 9.01 shall not be deemed exclusive of any other right to which those
indemnified may be entitled, and

C-2

<PAGE>

shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person."

Insofar as indemnification for liabilities under the Securities Act of 1933 (the
"Act") may be permitted to Directors, officers and controlling persons of the
Registrant pursuant to the Registrant's Amended and Restated Articles of
Incorporation and By-Laws, the Distribution Agreement, the By-Laws of John
Hancock Funds, the Adviser, or the Insurance Company or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Directors, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.

Item 28. Business and Other Connections of Investment Advisers

For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and Directors of the Adviser,
reference is made to Form ADV (801-8124) filed under the Investment Advisers Act
of 1940, which is incorporated herein by reference.

Item 29. Principal Underwriters

(a) John Hancock Funds acts as principal underwriter for the Registrant and
also serves as principal underwriter or distributor of shares for John Hancock
Cash Reserve, Inc., John Hancock Bond Fund, John Hancock Current Interest, John
Hancock Series, Inc., John Hancock Tax-Free Bond Fund, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Limited-Term
Government Fund, John Hancock Tax-Exempt Income Fund, John Hancock Sovereign
Investors Fund, Inc., John Hancock Special Equities Fund, John Hancock Sovereign
Bond Fund, John Hancock Tax-Exempt Series, John Hancock Strategic Series, John
Hancock Technology Series, Inc., John Hancock World Fund, John Hancock
Investment Trust, John Hancock Institutional Series Trust, Freedom Investment
Trust, Freedom Investment Trust II and Freedom Investment Trust III.

(b) The following table lists, for each director and officer of John
Hancock Funds, the information indicated.

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<PAGE>

Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Edward J. Boudreau, Jr. Chairman, President and Chief Director, Chairman and Chief
101 Huntington Avenue Executive Officer Executive Officer
Boston, Massachusetts

Robert H. Watts Director, Executive Vice None
John Hancock Place President and Chief Compliance
P.O. Box 111 Officer
Boston, Massachusetts

Robert G. Freedman Director Vice Chairman, Chief
101 Huntington Avenue Investment Officer
Boston, Massachusetts

Stephen M. Blair Executive Vice President None
101 Huntington Avenue
Boston, Massachusetts

Thomas H. Drohan Senior Vice President Senior Vice President and
101 Huntington Avenue Secretary
Boston, Massachusetts

James W. McLaughlin Senior Vice President None
101 Huntington Avenue and
Boston, Massachusetts Chief Financial Officer

David A. King Director None
101 Huntington Avenue
Boston, Massachusetts

James B. Little Senior Vice President Senior Vice President and
101 Huntington Avenue Chief Financial Officer
Boston, Massachusetts

C-4
<PAGE>

Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------

William S. Nichols Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts

John A. Morin Vice President and Secretary Vice President
101 Huntington Avenue
Boston, Massachusetts

Susan S. Newton Vice President Vice President
101 Huntington Avenue and Compliance Officer
Boston, Massachusetts

Christopher M. Meyer Second Vice President and None
101 Huntington Avenue Treasurer
Boston, Massachusetts

Stephen L. Brown Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

Thomas E. Moloney Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

Jeanne M. Livermore Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

Richard S. Scipione Director Director
John Hancock Place
P.O. Box 111
Boston, Massachusetts

John Goldsmith Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

C-5

<PAGE>

Richard O. Hansen Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

John M. DeCiccio Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

David F. D'Alessandro Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

Foster Aborn Director None
John Hancock Place
P.O. Box 111
Boston, Massachusetts

William C. Fletcher Director None
53 State Street
Boston, Massachusetts

James V. Bowhers Executive Vice President None
101 Huntington avenue
Boston, Massachusetts

Charles H. Womack Senior Vice President None
6501 Americas Parkway
Suite 950
Albuquerque, New Mexico

Michael T. Carpenter Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts

Anthony P. Petrucci Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts

Keith Harstein Vice President None
101 Huntington Avenue
Boston, Massachusetts

C-6

<PAGE>

Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts

</TABLE>

Item 30. Location of Accounts and Records

The Registrant maintains the records required to be maintained by it
under Rules 31a-1 (a), 31a-1(b), and 31a-2(a) under the Investment
Company Act of 1940 at its principal executive offices at 101
Huntington Avenue, Boston Massachusetts 02199-7603. Certain records,
including records relating to Registrant's shareholders and the
physical possession of its securities, may be maintained pursuant to
Rule 31a-3 at the main offices of Registrant's Transfer Agent and
Custodian.

Item 31. Management Services

Not applicable.

Item 32. Undertakings

(a) Not applicable

(b) Not applicable

(c) Registrant hereby undertakes to furnish each person to whom a
prospectus with respect to a series of the Registrant is delivered with a copy
of the latest annual report to shareholders with respect to that series upon
request and without charge.

(d) Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940, as amended which relates to the assistance to be rendered
to shareholders by the Trustees of the Registrant in calling a meeting of
shareholders for the purpose of voting upon the question of the removal of a
trustee.

C-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts on the
26th day of April, 1996.

JOHN HANCOCK CASH RESERVE, INC.

By: *
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman and Chief Executive
Edward J. Boudreau, Jr. Officer (Principal Executive
Officer)

/s/ James B. Little
James B. Little Senior Vice President and Chief April 26, 1996
Financial Officer (Principal
Financial and Accounting Officer)

* Director
James F. Carlin

* Director
William H. Cunningham

* Director
Charles F. Fretz

C-8
<PAGE>

Signature Title Date
--------- ----- ----
* Director
Harold R. Hiser, Jr.

Director
Anne C. Hodsdon

* Director
Charles L. Ladner

* Director
Leo E. Linbeck

* Director
Patricia P. McCarter

* Director
Steven R. Pruchansky

* Director
Norman H. Smith

* Director
John P. Toolan

*By: /s/ Thomas H. Drohan April 26, 1996
Thomas H. Drohan,
Attorney-in-Fact
</TABLE>

C-9
<PAGE>

John Hancock Cash Reserve, Inc.

EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------

99.B1 Articles of Incorporation.*

99.B2 Amended By-Laws of Registrant.**

99.B3 Not Applicable

99.B4 Specimen stock certificate filed by Post-Effective amendment.**
.
99.B5 Investment Advisory Agreement between John Hancock Advisers, Inc.
and the Registrant.**

99.B5.1 Administrative Services Agreement between John Hancock Advisers,
Inc. and the Registrant.**

99.B5.2 Sub-Advisory Agreement.**

99.B6 Distribution Agreement between Registrant and John Hancock Funds,
Inc. and the Registrant.**

99.B6.1 Soliciting Dealer Agreement between John Hancock Funds, Inc. and
the John Hancock funds.**

99.B6.2 Financial Institution Sales and Service Agreement between John
Hancock Fund's, Inc. and the John Hancock funds.**

99.B7 Not Applicable

99.B8 Master Custodian Agreement between the John Hancock funds and
State Street Bank.**

99.B9 Transfer Agency Agreement.*

99.B9.1 Accounting and Legal Services Agreement between John Hancock
Advisers, Inc. and the Registrant as of January 1, 1996.+

99.B10 Rule 24(e) Opinion.+

99.B11 Consent of Independent Auditors.+

C-1

<PAGE>

99.B12 Not Applicable

99.B13 Not Applicable

99.B14 Not Applicable

99.B15 Not Applicable

99.B16 Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22.*

* Previously filed with Pre-Effective Amendment #1 and incorporated herein by
reference.

** Previoiusly filed electronically with post-effective number 17 (file nos.
811-2995 and 2-66461) on April 24, 1995, accession number
0000950135-95-000990.

+ Filed herewith.

As of January 1, 1996

ACCOUNTING & LEGAL SERVICES AGREEMENT

John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199

Dear Sir:

The John Hancock Funds listed on Schedule A (the "Funds") have selected John
Hancock Advisers, Inc. (the "Administrator") to provide certain accounting and
legal services for the Funds, as more fully set forth below, and you are willing
to provide such services under the terms and conditions hereinafter set forth.
Accordingly, the Funds agree with you as follows:

1. Services. Subject to the general supervision of the Board of
Trustees/Directors of the Funds, you will provide certain tax, accounting
and legal services (the "Services") to the Funds. You will, to the extent
such services are not required to be performed by you pursuant to an
investment advisory agreement, provide:

(A) such tax, accounting, recordkeeping and financial management services
and functions as are reasonably necessary for the operation of each
Fund. Such services shall include, but shall not be limited to,
supervision, review and/or preparation and maintenance of the
following books, records and other documents: (1) journals containing
daily itemized records of all purchases and sales, and receipts and
deliveries of securities and all receipts and disbursements of cash
and all other debits and credits, in the form required by Rule
31a-1(b) (1) under the Act; (2) general and auxiliary ledgers
reflecting all asset, liability, reserve, capital, income and expense
accounts, in the form required by Rules 31a-1(b) (2) (i)-(iii) under
the Act; (3) a securities record or ledger reflecting separately for
each portfolio security as of trade date all "long" and "short"
positions carried by each Fund for the account of the Funds, if any,
and showing the location of all securities long and the off-setting
position to all securities short, in the form required by Rule
31a-1(b) (3) under the Act; (4) a record of all portfolio purchases or
sales, in the form required by Rule 31a-1(b) (6) under the Act; (5) a
record of all puts, calls, spreads, straddles and all other options,
if any, in which any Fund has any direct or indirect interest or which
the Funds have granted or guaranteed, in the form required by Rule
31a-1(b) (7) under the Act; (6) a record of the proof of money
balances in all ledger accounts maintained pursuant to this Agreement,
in the form required by Rule 31a-1(b) (8) under the Act; (7) price
make-up sheets and such records as are necessary to reflect the
determination of each Funds' net asset value; and (8) arrange for, or
participate in (a) the preparation for the Fund of all required tax
returns, (b) the preparation and submission of reports to existing
shareholders and (c) the preparation of financial data or reports
required by the Securities and Exchange Commission and other
regulatory authorities;

<PAGE>

(B) certain legal services as are reasonably necessary for the operation
of each Funds. Such services shall include, but shall not be limited
to; (1) maintenance of each Fund's registration statement and federal
and state registrations; (2) preparation of certain notices and proxy
materials furnished to shareholders of the Funds; (3) preparation of
periodic reports of each Fund to regulatory authorities, including
Form N-SAR and Rule 24f-2 legal opinions; (4) preparation of materials
in connection with meetings of the Board of Trustees/Directors of the
Funds; (5) preparation of written contracts, distribution plans,
compliance procedures, corporate and trust documents and other legal
documents; (6) research advice and consultation about certain legal,
regulatory and compliance issues, (7) supervision, coordination and
evaluation of certain services provided by outside counsel.

(C) provide the Funds with staff and personnel to perform such accounting,
bookkeeping and legal services as are reasonably necessary to
effectively service the Fund. Without limiting the generality of the
foregoing, such staff and personnel shall be deemed to include
officers of the Administrator, and persons employed or otherwise
retained by the Administrator to provide or assist in providing of the
services to the Fund.

(D) maintain all books and records relating to the foregoing services; and

(E) provide the Funds with all office facilities to perform tax,
accounting and legal services under this Agreement.

2. Compensation of the Administrator The Funds shall reimburse the
Administrator for: (1) a portion of the compensation, including all
benefits, of officers and employees of the Administrator based upon the
amount of time that such persons actually spend in providing or assisting
in providing the Services to the Funds (including necessary supervision and
review); and (2) such other direct and indirect expenses, including, but
not limited to, those listed in paragraph (1) above, incurred on behalf of
the Fund that are associated with the providing of the Services and (3) 10%
of the reimbursement amount. In no event, however, shall such reimbursement
exceed levels that are fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and
quality. Compensation under this Agreement shall be calculated and paid
monthly in a arrears.

3. No Partnership or Joint Venture. The Funds and you are not partners of or
joint ventures with each other and nothing herein shall be construed so as
to make you such partners or joint venturers or impose any liability as
such on any of you.

4. Limitation of Liability of the Administrator. You shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on your part in the performance of your duties or from reckless
disregard by you of your obligations and duties under this Agreement. Any
person, even though also employed by you, who may be or become an employee
of and paid by the Funds shall be deemed, when acting within the scope of
his or her employment by the Funds, to be acting in such employment solely
for the Funds and not as your employee or agent.

<PAGE>

5. Duration and Termination of this Agreement. This Agreement shall remain in
force until the second anniversary of the date upon which this Agreement
was executed by the parties hereto, and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually
by a majority of the Trustees/Directors. This Agreement may, on 60 days'
written notice, be terminated at any time without the payment of any
penalty by the Funds by vote of a majority of the Trustees/Directors, or by
you. This Agreement shall automatically terminate in the event of its
assignment.

6. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver
or termination is sought.

7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without
regard to the choice of law provisions thereof.

8. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement may
be executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument. A copy of the Declaration of Trust of each Fund
organized as Massachusetts business trusts is on file with the Secretary of
State of the Commonwealth of Massachusetts. The obligations of each such
Fund are not personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the Fund's property shall be bound.

Yours very truly,

JOHN HANCOCK FUNDS (See Schedule A)

By: /s/ James B. Little
James B. Little
Senior Vice President

The foregoing contract is
hereby agreed to as of the
date hereof.

JOHN HANCOCK ADVISERS, INC.

By: /s/ Anne C. Hodsdon
Anne C. Hodsdon
President

<PAGE>
January 1, 1996
SCHEDULE A
John Hancock Capital Series
- John Hancock Growth Fund
- John Hancock Special Value Fund
John Hancock Limited Term Government Fund
John Hancock Sovereign Bond Fund John
Hancock Sovereign Investors Fund, Inc.
- John Hancock Sovereign Investors Fund
- John Hancock Sovereign Balanced Fund
John Hancock Special Equities Fund
John Hancock Strategic Series
- John Hancock Independence Diversified Core Equity Fund
- John Hancock Strategic Income Fund
- John Hancock Utilities Fund
John Hancock Tax-Exempt Income Fund
John Hancock World Fund
- John Hancock Pacific Basin Equities Fund
- John Hancock Global Rx Fund
- John Hancock Global Marketplace Fund
John Hancock Cash Reserve, Inc.
John Hancock Series, Inc.
- John Hancock Emerging Growth Fund
- John Hancock Global Resources Fund
- John Hancock Government Income Fund
- John Hancock High Yield Bond Fund
- John Hancock High Yield Tax-Free Fund
- John Hancock Money Market Fund
John Hancock Institutional Series Trust
- John Hancock Active Bond Fund
- John Hancock Dividend Performers Fund
- John Hancock Fundamental Value Fund
- John Hancock Global Bond Fund
- John Hancock International Equity Fund
- John Hancock Multi-Sector Growth Fund
- John Hancock Small Capitalization Equity Fund
- John Hancock Independence Diversified Core Equity Fund II
- John Hancock Independence Value Fund
- John Hancock Independence Balanced Fund
- John Hancock Independence Medium Capitalization Fund
- John Hancock Independence Growth Fund
John Hancock Declartion Trust
- John Hancock V.A. 500 Index Fund
- John Hancock V.A. Discovery Fund
- John Hancock V.A. Diversified Core Equity Fund
- John Hancock V.A. Emerging Equities Fund
- John Hancock V.A. Global Income Fund
- John Hancock V.A. International Fund
- John Hancock V.A. Money Market Fund
- John Hancock V.A. Sovereign Bond Fund
- John Hancock V.A. Strategic Income Fund
- John Hancokc V.A. Sovereign Investors Fund

April 26, 1996

John Hancock Cash Reserve Inc.
101 Huntington Avenue
Boston, MA 02199

RE: John Hancock Cash Reserve Inc.
File Nos. 2-66461; 811-2995 (0000314721)

Ladies and Gentlemen:

In connection with the filing of Amendment No. 21 pursuant to Rule 24e-2 under
the Investment Company Act of 1940, as amended, registering by Post-Effective
Amendment No. 18 under the Securities Act of 1933, as amended, 290,000 shares of
the John Hancock Cash Reserve Inc. (the "Fund") sold in reliance upon Rule 24e-2
during the fiscal year ending December 31, 1995, it is the opinion of the
undersigned that such shares will be legally issued, fully paid and
nonassessable.

Sincerely,

Alfred P.Ouellette
Assistant Secretary
Member of Massachusetts Bar

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "The Fund's Financial
Highlights" in the Prospectus and "Independent Auditors" in the Shares Statement
of Additional Information and to the use of our report dated February 15, 1996,
on the financial statements and financial highlights of the John Hancock Cash
Reserves Inc. in this Post-Effective Amendment Number 18 to Registration
Statement (Form N-1A No. 2-66461) dated May 1, 1996.

/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP

Boston, Massachusetts
April 25, 1996

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 372,158,562
<INVESTMENTS-AT-VALUE> 392,867,753
<RECEIVABLES> 10,836,902
<ASSETS-OTHER> 345,374
<OTHER-ITEMS-ASSETS> 20,709,191
<TOTAL-ASSETS> 404,050,029
<PAYABLE-FOR-SECURITIES> 6,407,636
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,665,227
<TOTAL-LIABILITIES> 10,072,863
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 380,188,359
<SHARES-COMMON-STOCK> 28,947,194
<SHARES-COMMON-PRIOR> 26,034,286
<ACCUMULATED-NII-CURRENT> 147,647
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,439,031)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,080,191
<NET-ASSETS> 393,977,166
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,466,593
<OTHER-INCOME> 0
<EXPENSES-NET> 3,212,999
<NET-INVESTMENT-INCOME> 19,253,594
<REALIZED-GAINS-CURRENT> (2,245,541)
<APPREC-INCREASE-CURRENT> 51,125,949
<NET-CHANGE-FROM-OPS> 68,134,002
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,185,497
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,504,203
<NUMBER-OF-SHARES-REDEEMED> 4,285,570
<SHARES-REINVESTED> 694,275
<NET-CHANGE-IN-ASSETS> 75,029,013
<ACCUMULATED-NII-PRIOR> 127,227
<ACCUMULATED-GAINS-PRIOR> (4,123,929)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,940,320
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,730,633
<AVERAGE-NET-ASSETS> 348,664,317
<PER-SHARE-NAV-BEGIN> 9.28
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 1.41
<PER-SHARE-DIVIDEND> 0.57
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.69
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>