HANCOCK JOHN CASH RESERVE INC, 485BPOS, 1998-04-24

HANCOCK JOHN CASH RESERVE INC
485BPOS, 1998-04-24

Previous: WITTER DEAN TAX EXEMPT SECURITIES TRUST, 497J, 1998-04-24

Next: GOFEN & GLOSSBERG LLC /IL/, SC 13G, 1998-04-24

FILE NO. 2-66461
FILE 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. 20 (X)
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 23 (X)
---------
JOHN HANCOCK CASH RESERVE, INC.
(Exact Name of Registrant as Specified in Charter)
101 Huntington Avenue
Boston, Massachusetts 02199-7603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, (617) 375-1700
---------
SUSAN S. NEWTON
Vice President and Secretary
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and Address of Agent for Service)
---------

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
(X) on May 1, 1998 pursuant to paragraph (b) of Rule 485
( ) 75 days after filing pursuant to paragraph (a) of Rule 485
( ) on (date) pursuant to paragraph (a) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

List all Funds in the Trust:
John Hancock Cash Reserve, Inc.

Item Number Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
------ ------------------ -------------------
<S> <C> <C>
1 Front Cover Page *
2 Overview; Investor Expenses; *

3 Financial Highlights *

4 Overview; Goal and Strategy; Portfolio *
Securities; Risk Factors; Business
Structure; More About Risk

5 Overview; Business Structure; *
Manager/Subadviser; Investor Expenses

6 Choosing a Share Class; Buying Shares; *
Selling Shares; Transaction Policies;
Dividends and Account Policies;
Additional Investor Services

7 Choosing a Share Class; How Sales Charges *
are Calculated; Sales Charge Deductions
and Waivers; Opening an Account; Buying
Shares; Transaction Policies; Additional
Investor Services

8 Selling Shares; Transaction Policies; *
Dividends and Account Policies

9 Not Applicable *

10 * Front Cover Page

11 * Table of Contents

12 * Organization of the Fund

13 * Investment Objectives and Policies;
Certain Investment Practices;
Investment Restrictions

14 * Those Responsible for Management

15 * Those Responsible for Management

16 * Investment Advisory; Subadvisory
and Other Services; Distribution
Contract; Transfer Agent Services;
Custody of Portfolio; Independent
Auditors

17 * Brokerage Allocation

18 * Description of Fund's Shares

19 * Net Asset Value; Additional
Services and Programs

20 * Tax Status

21 * Distribution Contract

22 * Calculation of Performance

23 * Financial Statements

</TABLE>

<PAGE>

JOHN HANCOCK
CASH RESERVE, INC.

PROSPECTUS

MAY 1, 1998

On September 10, 1996, the Directors voted to close the Fund to new
purchases, except shares purchased with reinvested Fund dividends effective
October 1, 1996.

- --------------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<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, 1998, and incorporated by reference into
this Prospectus, free of charge by writing or telephoning: John Hancock
Signature Services, Inc. 1 John Hancock Way Suite 1000, Boston, Massachusetts
02217-1000, 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

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, 1997, adjusted to reflect current fees and expenses.
Actual fees and expenses may be greater or less than those shown.

<TABLE>
<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*............................................. 0.26%
Total Fund operating expenses............................... 0.61%
</TABLE>

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE: ------ ------- ------- --------
<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................................. $6 $20 $34 $76
</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

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 1997 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 Signature Services, Inc. ("Signature
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:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1997 1996 1995 1994(a) 1993 1992 1991
---- ---- ---- ------- ---- ---- ----
<S> <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
------- ------- -------- -------- -------- -------- --------
Net investment
income............... 0.05 0.05 0.05 0.04 0.03 0.03 0.06
------- ------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income.... (0.05) (0.05) (0.05) (0.04) (0.03) (0.03) (0.06)
------- ------- -------- -------- -------- -------- --------
Net asset value, end
of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======== ======== ======== ======== ========
Total investment
return at net asset
value(b)............. 5.20% 5.00% 5.38% 3.74% 2.60% 3.33% 5.79%
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period (000's
omitted)............. $37,822 $67,003 $119,763 $142,301 $130,405 $266,349 $416,198
Ratio of expenses to
average net assets... 0.61% 0.65% 0.73% 0.62% 0.66% 0.63% 0.57%
Ratio of net
investment income to
average net assets... 5.07% 4.85% 5.30% 3.72% 2.58% 3.34% 5.66%

<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1990 1989 1988
---- ---- ----
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of
period............... $1.00 $1.00 $1.00
-------- -------- --------
Net investment
income............... 0.08 0.09 0.07
-------- -------- --------
Less Distributions:
Dividends from net
investment income.... (0.08) (0.09) (0.07)
-------- -------- --------
Net asset value, end
of period............ $1.00 $1.00 $1.00
======== ======== ========
Total investment
return at net asset
value(b)............. 8.05% 9.20% 7.40%
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period (000's
omitted)............. $556,860 $444,299 $429,700
Ratio of expenses to
average net assets... 0.46% 0.45% 0.45%
Ratio of net
investment income to
average net assets... 7.78% 8.85% 7.21%
</TABLE>

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

(b) Total investment return assumes dividend reinvestment.

YIELD INFORMATION

For the seven days ended December 31, 1997, the Fund's annualized yield and
effective yield were 5.14% and 5.27%, respectively. On December 31, 1997, the
Fund's average portfolio maturity was 73 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. In addition, the Fund may invest in 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."

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

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. John
Hancock Distributors, Inc. is affiliated with the Adviser because it is
indirectly owned by the John Hancock Mutual Life Insurance Company (the "Life
Company"), which in turn indirectly owns the Adviser.

<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 $30 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.

YEAR 2000 COMPLIANCE

The Adviser has addressed the Year 2000 issue by taking steps that it believes
are reasonably designed to address the potential failure of computer programs
used by the Adviser and the Funds' service providers. There can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Funds.

THE FUND'S EXPENSES

For managing its investment and business affairs, the Fund pays a monthly fee to
the Adviser which for the 1997 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. Annual compensation is not expected to exceed 0.02% 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.

<PAGE>

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.

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.

<PAGE>

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

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

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

<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
BY CHECK 1. Make your check payable to Signature Services, Inc. 1 John
Hancock Way, Suite 1000 Boston, MA 02217-1000.
2. Deliver the completed application and check to your registered
representative or a Selling Broker or mail it directly to
Signature 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
Signature Services.
4. SAME DAY. To receive the dividend declared on the same day you
wire funds, you must telephone your order to Signature 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.
Program 2. The amount you elect to invest will be withdrawn automatically
(MAAP) from your bank or credit union account.
</TABLE>

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

<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
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 Signature Services toll-free 1-800-225-5291.
3. Give the Signature Services representative the name(s) in which your account
is registered, the Fund name, your account number, and the amount you wish to
invest.
</TABLE>

<TABLE>
<S> <C> <C> <C>
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 Signature Services, Inc.
3. Mail the account information and check to:
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, MA 02217-1000
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 Signature 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.

<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 Signature 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> <C> <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.
Signature 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 Signature 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 Signature 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>

<PAGE>

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

<TABLE>
<S> <C> <C> <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.
- ----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
-------------------- ------------
<S> <C> <C> <C>
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) guaranteed.
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 12
months.)
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. The signature guarantee must be from a member of the Signature
Guarantee Medallion Program (generally a broker or securities dealer). We may
refuse any other source.

- -------------------------------------------------------------------------------
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 that previously exchanged shares (and
reinvested dividends) be in the Fund for 90 days before a shareholder is
permitted a new exchange.

The Fund may refuse any exchange order. The Fund may change or cancel its
exchange policies at any time, upon 60 days notice to its 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

<PAGE>

the Fund will attempt to give prior notice whenever it is reasonably able to do
so, it may impose these restrictions at any time.

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 Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000

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) 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
CASH RESERVE, INC.

INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603

CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000

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

4200P 5/98 (Recycle LOGO) Printed on Recycled Paper

JOHN HANCOCK
CASH RESERVE,
INC.

PROSPECTUS

MAY 1, 1998

A MUTUAL FUND SEEKING TO OBTAIN MAXIMUM CURRENT INCOME
CONSISTENT WITH PRESERVATION OF CAPITAL AND MAINTENANCE OF
LIQUIDITY.
101 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02199-7603
TELEPHONE 1-800-225-5291

<PAGE>

JOHN HANCOCK CASH RESERVE, INC.

Statement of Additional Information
May 1, 1998

On September 10, 1996, the Directors voted to close the Fund to new purchases,
except shares purchased with reinvested Fund dividends effective October 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, 1998.

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 Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
1-800-225-5291

TABLE OF CONTENTS

Organization of the Fund.......................................................2
Investment Objective and Policies..............................................2
Investment Restrictions........................................................4
Those Responsible for Management...............................................6
Investment Advisory and Other Services........................................15
Distribution Contract.........................................................17
Net Asset Value...............................................................17
Description of the Fund's shares..............................................18
Tax Status....................................................................19
Calculation of Yield..........................................................21
Brokerage Allocation..........................................................22
Transfer Agent Services.......................................................24
Custody of Portfolio..........................................................24
Independent Auditors..........................................................24
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 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

2
<PAGE>

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 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.

3
<PAGE>

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;

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

4
<PAGE>

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;

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:

(a) 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

5
<PAGE>

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.

(b) Purchase securities of any issuer for the purpose of exercising control or
management;

With respect to investment restrictions (a) and (b), 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.

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").

6
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Edward J. Boudreau, Jr. * Trustee, Chairman and Chief Chairman, Director and Chief
101 Huntington Avenue Executive Officer (1, 2) Executive Officer, the Adviser;
Boston, MA 02199 Chairman, Director and Chief
October 1944 Executive Officer, The Berkeley
Financial Group, Inc. ("The
Berkeley Group"); Chairman and
Director, NM Capital Management,
Inc. ("NM Capital"), John Hancock
Advisers International Limited
("Advisers International") and
Sovereign Asset Management
Corporation ("SAMCorp"); Chairman,
Chief Executive Officer and
President, John Hancock Funds, Inc.
("John Hancock Funds"); Chairman,
First Signature Bank and Trust
Company; Director, John Hancock
Insurance Agency, Inc. ("Insurance
Agency, Inc."), John Hancock
Advisers International (Ireland)
Limited ("International Ireland"),
John Hancock Capital Corporation
and New England/Canada Business
Council; Member, Investment Company
Institute Board of Governors;
Director, Asia Strategic Growth
Fund, Inc.; Trustee, Museum of
Science; Director, John Hancock
Freedom Securities Corporation
(until September 1996); Director,
John Hancock Signature Services,
Inc. ("Signature Services") (until
January 1997).

- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
</TABLE>

7
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
James F. Carlin Trustee Chairman and CEO, Carlin
233 West Central Street Consolidated, Inc.
Natick, MA 01760 (management/investments); Director,
April 1940 Arbella Mutual Insurance Company
(insurance), Health Plan Services,
Inc., Massachusetts Health and
Education Tax Exempt Trust, Flagship
Healthcare, Inc., Carlin Insurance
Agency, Inc., West Insurance Agency,
Inc. (until May 1995), Uno
Restaurant Corp.; Chairman,
Massachusetts Board of Higher
Education (since 1995).

William H. Cunningham Trustee Chancellor, University of Texas
601 Colorado Street System and former President of the
O'Henry Hall University of Texas, Austin, Texas;
Austin, TX 78701 Lee Hage and Joseph D. Jamail
January 1944 Regents Chair of Free Enterprise;
Director, LaQuinta Motor Inns, Inc.
(hotel management company);
Director, Jefferson-Pilot
Corporation (diversified life
insurance company) and LBJ
Foundation Board (education
foundation); Advisory Director,
Texas Commerce Bank - Austin.
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
</TABLE>

8
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Charles F. Fretz Trustee Retired; self employed; Former Vice
RD #5, Box 300B President and Director, Towers,
Clothier Springs Road Perrin, Foster & Crosby, Inc.
Malvern, PA 19355 (international management
June 1928 consultants) (1952-1985).

Harold R. Hiser, Jr. Trustee Executive Vice President,
123 Highland Avenue Schering-Plough Corporation
Short Hill, NJ 07078 (pharmaceuticals) (retired 1996);
October 1931 Director, ReCapital Corporation
(reinsurance) (until 1995).

Anne C. Hodsdon * Trustee and President (1,2) President, Chief Operating Officer
101 Huntington Avenue and Director, the Adviser, The
Boston, MA 02199 Berkeley Group; Director, John
April 1953 Hancock Funds, Advisers
International, Insurance Agency,
Inc. and International Ireland;
President and Director, SAMCorp. and
NM Capital; Executive Vice
President, the Adviser (until
December 1994); Director, Signature
Services (until January 1997).

Charles L. Ladner Trustee Director, Energy North, Inc. (public
UGI Corporation utility holding company) (until
P.O. Box 858 1992); Senior Vice President of UGI
Valley Forge, PA 19482 Corp. Holding Company Public
February 1938 Utilities, LPGAS, Vice President of
Amerigas Partners L.P.

9
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Leo E. Linbeck, Jr. Trustee Chairman, President, Chief Executive
3810 W. Alabama Officer and Director, Linbeck
Houston, TX 77027 Corporation (a holding company
August 1934 engaged in various phases of the
construction industry and
warehousing interests); Former
Chairman, Federal Reserve Bank of
Dallas (1992, 1993); Chairman of
the Board, Linbeck Construction
Corporation; Director, PanEnergy
Corporation (a diversified energy
company), Daniel Industries, Inc.
(manufacturer of gas measuring
products and energy related
equipment), GeoQuest International
Holdings, Inc. (a geophysical
consulting firm); Director, Greater
Houston Partnership.

Patricia P. McCarter Trustee Director and Secretary, The McCarter
1230 Brentford Road Corp. (machine manufacturer).
Malvern, PA 19355
May 1928

10
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
Steven R. Pruchansky Trustee (1) Director and President, Mast
4327 Enterprise Avenue Holdings, Inc. (since 1991);
Naples, FL 33942 Director, First Signature Bank &
August 1944 Trust Company (until August 1991);
Director, Mast Realty Trust (until
1994); President, Maxwell Building
Corp. (until 1991).

Richard S. Scipione * Trustee (1) General Counsel, John Hancock Life
John Hancock Place Company; Director, the Adviser,
P.O. Box 111 Advisers International, John Hancock
Boston, MA 02117 Funds, John Hancock Distributors,
August 1937 Inc., Insurance Agency, Inc., John
Hancock Subsidiaries, Inc., SAMCorp.
and NM Capital; Director, The
Berkeley Group; Director, JH
Networking Insurance Agency, Inc.;
Director, Signature Services (until
January 1997).

Norman H. Smith Trustee Lieutenant General, United States
243 Mt. Oriole Lane Marine Corps; Deputy Chief of Staff
Linden, VA 22642 for Manpower and Reserve Affairs,
March 1933 Headquarters Marine Corps;
Commanding General III Marine
Expeditionary Force/3rd Marine
Division (retired 1991).

11
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
John P. Toolan Trustee Director, The Smith Barney Muni Bond
13 Chadwell Place Funds, The Smith Barney Tax-Free
Morristown, NJ 07960 Money Funds, Inc., Vantage Money
September 1930 Market Funds (mutual funds), The
Inefficient-Market Fund, Inc.
(closed-end investment company) and
Smith Barney Trust Company of
Florida; Chairman, Smith Barney
Trust Company (retired December,
1991); Director, Smith Barney,
Inc., Mutual Management Company and
Smith Barney Advisers, Inc.
(investment advisers) (retired
1991); Senior Executive Vice
President, Director and member of
the Executive Committee, Smith
Barney, Harris Upham & Co.,
Incorporated (investment bankers)
(until 1991).

Robert G. Freedman Vice Chairman and Chief Investment Vice Chairman and Chief Investment
101 Huntington Avenue Officer (2) Officer, the Adviser; Director, the
Boston, MA 02199 Adviser, Advisers International,
July 1938 John Hancock Funds, SAMCorp.,
Insurance Agency, Inc.,
Southeastern Thrift & Bank Fund and
NM Capital; Director and Senior
Vice President, The Berkeley Group;
President, the Adviser (until
December 1994); Director, Signature
Services (until January 1997).

12
<PAGE>

Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
<S> <C> <C>
James B. Little Senior Vice President and Chief Senior Vice President, the Adviser,
101 Huntington Avenue Financial Officer The Berkeley Group, John Hancock
Boston, MA 02199 Funds.
February 1935

John A. Morin Vice President Vice President and Secretary, the
101 Huntington Avenue Adviser, The Berkeley Group,
Boston, MA 02199 Signature Services and John Hancock
July 1950 Funds; Secretary, NM Capital and
SAMCorp.; Clerk, Insurance Agency,
Inc.; Counsel, John Hancock Mutual
Life Insurance Company (until
February 1996), and Vice President
of John Hancock Distributors, Inc.
(until April 1994).

Susan S. Newton Vice President and Secretary Vice President, the Adviser; John
101 Huntington Avenue Hancock Funds, Signature Services
Boston, MA 02199 and The Berkeley Group; Vice
March 1950 President, John Hancock
Distributors, Inc. (until April
1994).

James J. Stokowski Vice President and Treasurer Vice President, the Adviser.
101 Huntington Avenue
Boston, MA 02199
November 1946

<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 31, 1998, the officers and Directors of the Fund as a group
beneficially owned less than 1% of the outstanding shares of the Fund.

Compensation of the Board of Directors. 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. 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. The compensation to the Director from the Fund
shown below is for the fiscal year ended December 31, 1997.

Total
Compensation from
all Funds in John
Aggregate Hancock Fund
Compensations Complex to
Directors from the Fund+ Directors**
--------- -------------- -----------

James F. Carlin $ 482 $ 74,000
William H. Cunningham* 482 74,000
Charles F. Fretz 482 74,250
Harold R. Hiser, Jr.* 482 74,000
Charles L. Ladner 482 74,250
Leo E. Linbeck, Jr. 482 74,250
Patricia P. McCarter* 482 74,250
Steven R. Pruchansky* 498 77,250
Norman H. Smith* 498 77,250
John P. Toolan* 483 74,250
------- --------
$ 4,853 $747,750

* As of December 31, 1997the value of the aggregate accrued deferred
compensation from all Funds in the John Hancock Fund Complex for Mr.
Cunningham was $220,106, Mr. Hiser was $103,868, for Ms. McCarter was
$159,075, for Mr. Pruchansky was $68,102, for Mr. Smith was $70,607 and
for Mr. Toolan was $281,133 under the John Hancock Deferred
Compensation Plan for Independent Trustees (the "Plan").

** Total compensation paid by the John Hancock Fund Complex to the
Independent Trustees is for the calendar year ended December 31, 1997.
As of this date, there were sixty-seven funds in the John Hancock Fund
Complex of which each of these independent trustees served on
thirty-two funds.

14
<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has over $30 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 1,400,000 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 $100
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 (the "Advisory
Agreement") with the Adviser. Pursuant to the Advisory Agreement, the Adviser
agreed to act as investment adviser and manager to the Fund. As manager and
investment adviser, the Adviser will:(a) furnish continuously an investment
program for the Fund and determine, subject to the overall supervision and
review of the Directors, which investments should be purchased, held, sold or
exchanged, and (b) provide supervision over all aspects of the Fund's operations
except those which are delegated to a custodian, transfer agent or other agent.

The Fund bears all costs of its organization and operation, including expenses
of preparing, printing and mailing all shareholders' reports, notices,
prospectuses, proxy statements and reports to regulatory agencies; expenses
relating to the issuance, registration and qualification of shares; government
fees; interest charges; expenses of furnishing to shareholders their account
statements; taxes; expenses of redeeming shares; brokerage and other expenses
connected with the execution of portfolio securities transactions; expenses
pursuant to the Fund's plan of distribution; fees and expenses of custodians
including those for keeping books and accounts and calculating the net asset
value of shares; fees and expenses of transfer agents and dividend disbursing
agents; legal, accounting, financial, management, tax and auditing fees and
expenses of the Fund (including an allocable portion of the cost of the
Adviser's employees rendering such services to the Fund; the compensation and
expenses of Trustees who are not otherwise affiliated with the Trust, the
Adviser or any of their affiliates; expenses of Trustees' and shareholders'
meetings; trade association memberships; insurance premiums; and any
extraordinary expenses.

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 portion 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.

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 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,

15
<PAGE>

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.

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.

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.

The investment management contract will continue in effect from year to year
provided that its continuance is 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.

For the fiscal year ended December 31, 1997, 1996 and 1995, the advisory fee
paid to the Adviser amounted to $170,018, $363,452 and $405,945.

Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services. For the fiscal year ended December 31, 1997 and 1996, the
Fund paid the Adviser $8,877 and $19,471 for services under this agreement.

16
<PAGE>

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.

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 from year to year provided that its continuance is 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.

NET ASSET VALUE

For purposes of calculating the net asset value ("NAV") of the Fund's shares,
the following procedures are utilized wherever applicable.

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.

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

17
<PAGE>

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 NAV for the fund and class is determined twice each business day at 12 noon
and at the close of regular trading on the New York Stock Exchange (typically 4
p.m. Eastern Time), by dividing a class's net assets by the number of its shares
outstanding. To help the Fund maintain its $1 constant share price, portfolio
investments are valued at cost, and any discount or premium created by market
movements is amortized to maturity.

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

18
<PAGE>

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.

The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept credit card checks. All checks returned by the
post office as undeliverable will be reinvested at net asset value in the fund
or funds from which a redemption was made or dividend paid. Use of information
provided on the account application may be used by the Fund to verify the
accuracy of the information or for background or financial history purposes. A
joint account will be administered as a joint tenancy with right of survivorship
unless the joint owners notify Signature Services of a different intent. A
shareholder's account is governed by the laws of The Commonwealth of
Massachusetts.

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.

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

19
<PAGE>

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.

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.

20
<PAGE>

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.

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

21
<PAGE>

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.

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.

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 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

22
<PAGE>

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,
1997, 1996 and 1995, 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, 1997, 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 Distributors, Inc. a broker-dealer ("Distributors"
or "Affiliated Broker).

Pursuant to procedures determined by the Trustees 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, 1997, 1996 and 1995, the Fund did not execute any portfolio transactions
with Affiliated Brokers.

During the years ended December 31, 1997, 1996 and 1995 the Fund did not execute
any portfolio transactions with Affiliated Brokers.

Distributors 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 Trustees pursuant to the 1940 Act. Commissions paid to an
Affiliated Broker must be at least as favorable as those which the Trustees
believe to be contemporaneously charged by other brokers in connection with

23
<PAGE>

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
Trustees 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.

Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Fund. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other clients managed by it in order to obtain best execution.

TRANSFER AGENT SERVICES

John Hancock Signature Services, Inc. ("Signature Services"), 1 John Hancock
Way, Suite 1000, Boston MA 02217-1000, a wholly owned indirect subsidiary of the
Life Company, is the transfer and dividend paying agent for the Fund. The Fund
pays Signature Services monthly a transfer agent fee equal to $20.00 per
shareholder account, on an annual basis, plus certain out-of-pocket expenses.

CUSTODY OF PORTFOLIO

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.

INDEPENDENT AUDITORS

Ernst & Young, LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has been
selected as the independent auditor of the Trust. The financial statements of
the Funds for the fiscal year ended December 31, 1997 included in the Prospectus
and this Statement of Additional Information have been audited by Ernst & Young,
LLP for the periods indicated in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon authority of
such firm as experts in accounting and auditing.

<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>

FINANCIAL STATEMENTS

The financial statements listed below are included in and incorporated in the
Fund's 1997 Annual Report to Shareholders for the year ended December 31, 1997
(filed electronically on March 3, 1998, accession number 0001010521-98-000207)
and are included in and incorporated by reference into Part B of this
registration statement of John Hancock Cash Reserve, Inc. (file nos. 811-2995
and 2-66461).

John Hancock Cash Reserve, Inc.

Statement of Assets and Liabilities as of December 31, 1997. Statement
of Operations for the year ended December 31, 1997. Statement of
Changes in Net Assets for each of the periods indicated therein.
Financial Highlights for each of the10 years indicated therein.
Schedule of Investments as of December 31, 1997.
Notes to Financial Statements.
Report of Independent Auditors.

F-1

<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 1997 Annual
Report to Shareholders for the year ended December 31, 1997 (filed
electronically on March 3, 1998; file nos. 811-2995 and 2-66461; accession
number 0001010521-98-000207):

John Hancock Cash Reserve, Inc.

Statement of Assets and Liabilities as of December 31, 1997.
Statement of Operations for the year ended December 31, 1997.
Statement of Changes in Net Assets for each of the two years ended
December 31.
Notes to Financial Statements.
Financial Highlights for each of the five years ended December 31.
Schedule of Investments as of December 31, 1997.

(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 April , 1998, the number of record holders of shares of Registrant
was as follows:

Title of Class Number of Record Holders

John Hancock Cash Reserve, Inc.

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 Trust, John Hancock Current Interest, John
Hancock Series Trust, John Hancock Tax-Free Bond Trust, John Hancock California
Tax-Free Income Fund, John Hancock Capital Series, John Hancock Limited-Term
Government Fund, John Hancock Special Equities Fund, John Hancock Sovereign Bond
Fund, John Hancock Tax-Exempt Series, John Hancock Strategic Series, John
Hancock Series Trust and John Hancock World Fund, John Hancock Investment Trust,
John Hancock Institutional Series Trust, John Hancock Investment Trust II, John
Hancock Investment Trust III and John Hancock Investment Trust IV.

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

C-3
<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

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

Osbert M. Hood 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

Richard O. Hansen Senior Vice President None
101 Huntington Avenue
Boston, Massachusetts

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

C-4
<PAGE>

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

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

Christopher M. Meyer 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

Anne C. Hodsdon Director and President
101 Huntington Avenue Executive Vice President
Boston, Massachusetts

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

C-5

<PAGE>

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

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

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

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

Keith F. Harstein Vice President None
101 Huntington Avenue
Boston, Massachusetts

Griselda Lyman Vice President None
101 Huntington Avenue
Boston, Massachusetts

Karen F. Walsh Vice President None
101 Huntington Avenue
Boston, Massachusetts

J. William Benintende Vice President None
101 Huntington Avenue
Boston, Massachusetts

Gary Cronin Vice President None
101 Huntington Avenue
Boston, Massacusetts

Kristine Pancare Vice President None
101 Huntington Avenue
Boston, Massachusetts
</TABLE>

C-6

<PAGE>

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
24th day of April, 1998.

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
- -------------------------- Officer (Principal Executive
Edward J. Boudreau, Jr. Officer)

/s/ James B. Little Senior Vice President and Chief April 24, 1998
- -------------------------- Financial Officer (Principal
James B. Little 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/ Susan S. Newton April 24, 1998
-----------------------
Susan S. Newton,
Attorney-in-Fact under
Power of Attorney dated
June 25, 1996, filed herewith.
</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 Not Applicable

99.B11 Consent of Independent Auditors.+

C-10
<PAGE>

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

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.*

99.27 Financial Data Schedule

* 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.

*** Previously filed electronically with post-effective amendment number 18
(file nos. 811-2995 and 2-66461) on April 30, 1996, accession number
0001010521-96-000050.

+ Filed herewith.

C-11

CONSENT OF ERNST& YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "The Fund's
Financial Highlights" in the John Hancock Cash Reserve, Inc. Prospectus and
"Independent Auditors" in the John Hancock Cash Reserve, Inc. Statement of
Additional Information in Post-Effective Amendment Number. 20 to the
Registration Statement (Form N-1A, No. 2-66461) dated May 1, 1998.

We also consent to the incorporation by reference therein of our report dated
February 6, 1998, with respect to the financial statements and financial
highlights of the John Hancock Cash Reserve, Inc. in the Form N-1A.

/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP

Boston, Massachusetts
April 24, 1998

<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> JOHN HANCOCK CASH RESERVE, INC.

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 36,971,624
<INVESTMENTS-AT-VALUE> 36,971,624
<RECEIVABLES> 903,724
<ASSETS-OTHER> 9,002
<OTHER-ITEMS-ASSETS> 55
<TOTAL-ASSETS> 37,884,405
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62,803
<TOTAL-LIABILITIES> 62,803
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37,821,602
<SHARES-COMMON-STOCK> 37,821,602
<SHARES-COMMON-PRIOR> 67,002,899
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 37,821,602
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,759,690
<OTHER-INCOME> 0
<EXPENSES-NET> 296,394
<NET-INVESTMENT-INCOME> 2,463,296
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,463,296
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,463,296
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,066
<NUMBER-OF-SHARES-REDEEMED> 31,529,500
<SHARES-REINVESTED> 2,336,137
<NET-CHANGE-IN-ASSETS> (29,181,297)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 170,018
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 296,394
<AVERAGE-NET-ASSETS> 48,576,532
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>