The latest report from your
Fund's management team
SEMIANNUAL REPORT
Cash
Reserve,
Inc.
JUNE 30, 2000
DIRECTORS
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02205-9116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President
and Chief Executive Officer, flush right next to second
paragraph.]
DEAR FELLOW SHAREHOLDERS:
After four years of spectacular returns, the stock market succumbed in
the first six months of 2000 largely to the pressures of rising interest
rates, as the Federal Reserve kept up its campaign to fight inflation.
The red-hot economy has begun to show signs of slowing, and investors
are no longer blind to the real possibility that rising rates could slow
corporate profits. The result was flat-to-negative results for the three
main stock-market indexes through June. Bonds also suffered during this
period, since their prices generally move in the opposite direction of
rates.
But there was good news, too. The Treasury market, where shrinking
supply bolstered prices thanks to the government's efforts to retire
some of its debt, performed well. And the Fed appears closer to the end
of its tightening cycle, which will be a strong positive if it can slow
the economy to a level that supports corporate earnings growth but keeps
inflation at bay. The picture on the global economy is brighter and
technology continues to dominate as the driver of ever-improving
corporate productivity.
No matter what happens next in the financial markets, these past several
months only served to reinforce some of the important lessons for
investors: Diversify, invest in line with your tolerance for risk and
maintain a long-term perspective.
Since not all parts of your portfolio will perform equally well all the
time, it is important to allocate your assets among different types of
investments and funds that target a variety of stock- and bond-market
segments. This strategy, executed under the guidance of a seasoned
investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing
conditions.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 2" photo at bottom right side of page of John Hancock Cash
Reserve, Inc. Caption below reads "Fund management team members
(l-r): Barry Evans and Dawn Baillie."]
John Hancock
Cash Reserve, Inc.
Inflation fears and a strong economy push interest rates higher
Money-market yields continued to rise over the last six months, as
the roaring U.S. economy caused the Federal Reserve to intensify its
inflation-fighting campaign with three additional interest-rate
hikes in 2000. As a result, the federal funds rate that banks charge
each other for overnight loans climbed from 5.50% in December to
6.50% by the end of June. Money-market securities, whose yields are
pegged to changes in the federal funds rate, also rose. As the stock
market -- technology stocks in particular -- cooled off and produced
lackluster results in the first six months of the year, money-market
funds began to provide very competitive returns.
The Federal Reserve remains intent on preventing inflation from
spiking, and entered 2000 with its "tightening" bias decidedly
intact. Robust fourth-quarter gross domestic product numbers
released in January 2000 signaled that economic growth remained
strong, so the Fed raised rates by one-quarter of a percentage
point. Then oil prices rose to over $30 per barrel -- a level not
seen since the 1970s -- and unemployment edged down to 3.9%,
increasing the potential for wage inflation. As a result, the Fed
raised rates by another quarter percentage point in March and a half
a percentage point in May. Finally, the economy began to show signs
of slowing, and the Fed left rates unchanged at its recent June
meeting. However, it restated its position that inflation was still
public enemy number one and that the Fed would not permit it to
emerge.
"Money-market
yields
continued to
rise over the
last six
months..."
[Bar chart at top of left hand column with heading "7-Day
Effective Yield". Under the heading is a note that reads "As of
June 30, 2000." The chart is scaled in increments of 1% with 0% at
the bottom and 6% at the top. The first bar represents the 5.86%
total return for John Hancock Cash Reserve, Inc. The second bar
represents the 5.90% total return for Average taxable money-market
fund. A note below the chart reads "The average taxable money-
market fund is tracked by Lipper, Inc. Past performance is no
guarantee of future results."]
"...there is a
real possibility
that the Fed
could raise
rates a few
more times."
7-day effective yield
On June 30, 2000, John Hancock Cash Reserve, Inc. had a 7-day
effective yield of 5.86%. By comparison, the average taxable money-
market fund had a 7-day effective yield of 5.90%, according to
Lipper, Inc.
Short maturity provides flexibility
Since it was clear that the Fed was going to continue to push rates
up in response to the steaming economy, we maintained a conservative
stance through much of the last six months. By keeping the Fund's
maturity slightly shorter than average, we didn't have our money
locked up for so long, and were able to reinvest in higher-
yielding securities after each rate hike. We also managed the Fund's
maturity to accommodate the increased liquidity demands we
experienced in the first quarter of 2000, as investors redeemed
shares to move assets into the then-strong technology sector.
A look ahead
While there have been some hints of an economic slowdown lately, we
believe there is a real possibility that the Fed could raise rates a
few more times. Typically, it takes at least six months for higher
interest rates to have a measurable economic impact, so it could be
at least the end of the summer before the effects of the three
latest hikes are seen. But if signs of a slowdown continue, the Fed
could be coming nearer to ending its rate-hike cycle. In an election
year, the Fed may also want to stay out of the political fray by
wrapping up before the campaign season moves into high gear.
Until it's clear that the Fed is done raising rates, we will keep
the Fund's duration shorter than average to take advantage of
further increases. As always, we will focus not only on providing
the Fund with a competitive yield, but also on preserving stability
of principal.
-----------------------------------------------------------------
This commentary reflects the views of the portfolio management
team through the end of the Fund's period discussed in this report.
Of course, the team's views are subject to change as market and
other conditions warrant.
The Fund is neither insured nor guaranteed by the U.S. government.
Although the Fund seeks to maintain a net asset value of $1.00 per share,
it is possible to lose money by investing in the Fund.
FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and shows
the value of what the Fund owns, is due and owes on June 30, 2000. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
-----------------------------------------------------------------
<S> <C>
Assets:
Investments, in money market instruments,
at value - Note C:
Commercial paper (cost - $10,457,815) $10,457,815
Corporate interest-bearing obligations
(cost - $4,409,490) 4,409,490
U.S. government obligations (cost - $3,194,079) 3,194,079
Joint repurchase agreement (cost - $3,786,000) 3,786,000
-----------
21,847,384
Cash 662
Interest receivable 148,975
Other assets 42,458
-----------
Total Assets 22,039,479
-----------------------------------------------------------------
Liabilities:
Dividend payable 2,189
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 21,383
Accounts payable and accrued expenses 17,996
-----------
Total Liabilities 41,568
-----------------------------------------------------------------
Net Assets:
Capital paid-in 21,997,911
-----------
Net Assets $21,997,911
=================================================================
Net Asset Value, Offering Price and
Redemption Price Per Share:
(Based on 21,997,911 shares of beneficial interest
outstanding - 4,000,000,000 shares authorized with
$0.01 per share par value) $1.00
=================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned
and expenses incurred in operating the Fund. It also shows net gains (losses)
for the period stated.
Statement of Operations
Six months ended June 30, 2000 (Unaudited)
----------------------------------------------------------------
<S> <C>
Investment Income:
Interest $686,827
----------
Expenses:
Investment management fee - Note B 39,888
Transfer agent fee - Note B 17,369
Custodian fee 14,544
Auditing fee 8,539
Printing 3,029
Accounting and legal services fee - Note B 2,054
Miscellaneous 922
Registration and filing fees 807
Directors' fees 386
Legal fees 130
----------
Total Expenses 87,668
----------------------------------------------------------------
Net Investment Income 599,159
----------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $599,159
================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
----------------------------------------------------------------------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 2000
1999 (UNAUDITED)
------------ ----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $1,167,547 $599,159
------------ ----------
Distributions to Shareholders:
Dividends from net investment income
($0.0438 and $0.0262 per share, respectively) (1,167,547) (599,159)
------------ ----------
From Fund Share Transactions - Net: * (5,388,618) (2,321,939)
------------ ----------
Net Assets:
Beginning of period 29,708,468 24,319,850
------------ ----------
End of period $24,319,850 $21,997,911
============ ==========
* Analysis of Fund Share Transactions at $1 Per Share:
Shares issued to shareholders in reinvestment of distributions $1,110,480 $567,258
------------ ----------
Less shares repurchased (6,499,098) (2,889,197)
------------ ----------
Net decrease ($5,388,618) ($2,321,939)
============ ==========
The Statement of Changes in Net Assets shows how the value of the Fund's net assets has
changed since the end of the previous period. The difference reflects earnings less expenses,
distributions paid to shareholders, and any increase or decrease in money shareholders invested
in the Fund. The footnote illustrates the Fund shares reinvested and repurchased during the last
two periods.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for each share of beneficial interest outstanding throughout each period indicated,
investment returns, key ratios and supplemental data are listed as follows:
--------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------------------------------------- JUNE 30, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- --------
Net Investment Income 0.05 0.05 0.05 0.05 0.04 0.03
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.05) (0.05) (0.05) (0.05) (0.04) (0.03)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(1) 5.38% 5.00% 5.20% 4.91% 4.47% 2.68%(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $119,763 $67,003 $37,822 $29,708 $24,320 $21,998
Ratio of Expenses to Average Net Assets 0.73% 0.65% 0.61% 0.75% 0.78% 0.77%(3)
Ratio of Net Investment Income to Average Net Assets 5.30% 4.85% 5.07% 4.81% 4.38% 5.26%(3)
(1) Total investment return assumes dividend reinvestment.
(2) Not annualized.
(3) Annualized.
The Financial Highlights summarizes the impact of net investment income and dividends on a single share for each period
indicated. Additionally, important relationships between some items presented in the financial statements are expressed
in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Cash Reserve, Inc. on June 30, 2000. It's divided into
four types of short-term investments. Most categories of short-term investments are further broken down by industry group.
PAR VALUE
INTEREST QUALITY (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
------------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER
Automobile/Trucks (9.90%)
Ford Motor Credit Co.,
9/29/00 6.530% Tier 1 $1,100 $1,082,042
General Motors Acceptance Corp.,
7/25/00 6.120 Tier 1 1,100 1,095,512
------------
2,177,554
------------
Beverages (4.53%)
Coca-Cola Co.,
7/20/00 6.500 Tier 1 1,000 996,569
------------
Broker Services (7.21%)
Goldman Sachs Group, L.P.,
8/18/00 6.580 Tier 1 700 693,859
Merrill Lynch & Co., Inc.,
8/16/00 6.540 Tier 1 900 892,479
------------
1,586,338
------------
Chemicals (4.98%)
DuPont (E.I.) de Nemours & Co.,
7/20/00 6.500 Tier 1 1,100 1,096,226
------------
Finance (7.71%)
American Express Credit Corp.,
7/10/00 6.500 Tier 1 1,000 998,375
General Electric Capital Corp.,
7/20/00 6.530 Tier 1 700 697,588
------------
1,695,963
------------
Medical (2.71%)
Becton Dickinson & Co.,
8/9/00 6.600 Tier 1 600 595,710
------------
Utilities (10.50%)
Bell Atlantic Financial Services,
7/24/00 6.540 Tier 1 771 767,779
Bell Atlantic Network Funding,
7/24/00 6.700 Tier 1 650 647,218
Duke Energy Corp.,
8/4/00 6.520 Tier 1 900 894,458
------------
2,309,455
------------
TOTAL COMMERCIAL PAPER
(Cost $10,457,815) (47.548) 10,457,815
------------ ------------
CORPORATE INTEREST-BEARING OBLIGATIONS
Broker Services (4.09%)
Bear Stearns Cos., Inc.,
7/5/00 6.500 Tier 1 900 899,954
------------
Finance (9.09%)
International Business Machines Credit Corp.,
9/1/00 5.860 Tier 1 1,000 998,943
Norwest Financial, Inc.,
10/1/00 6.100 Tier 1 1,000 999,854
------------
1,998,797
------------
Insurance (1.82%)
American General Corp.,
7/15/00 9.625 Tier 1 400 400,527
------------
Telecommunications (5.05%)
GTE Corp.,
12/1/00 9.375 Tier 1 1,100 1,110,212
------------
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS
(Cost $4,409,490) (20.05%) 4,409,490
------------ ------------
U.S. GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (14.52%)
Federal Farm Credit Corp.,
10/2/00 5.800 Tier 1 1,000 997,552
Federal Home Loan Bank,
7/14/00 5.500 Tier 1 1,200 1,199,480
Federal National Mortgage Association,
9/25/00 5.100 Tier 1 1,000 997,047
------------
3,194,079
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $3,194,079) (14.52%) 3,194,079
------------ ------------
<CAPTION>
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
------------------- ------------- ------------- ------------
<S> <C> <C> <C>
JOINT REPURCHASE AGREEMENT (17.21%)
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. -
Dated 06-30-00, due 07-03-00
(Secured by U.S. Treasury Bonds,
9.125% due 05-15-18 and 8.125%
due 05-15-21) - Note A 6.550% $3,786 $3,786,000
------------ ------------
TOTAL JOINT REPURCHASE AGREEMENT
(Cost $3,786,000) (17.21%) 3,786,000
------------ ------------
TOTAL INVESTMENTS (99.32%) 21,847,384
------------ ------------
OTHER ASSETS AND LIABILITIES, NET (0.68%) 150,527
------------ ------------
TOTAL NET ASSETS (100.00%) $21,997,911
============ ============
* Quality ratings indicate the categories of eligible securities, as defined by Rule 2a-7 of the Investment Company Act of 1940,
owned by the Fund.
The percentage shown for each investment category is the total value of that category expressed as a percentage of the net
assets of the Fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Cash Reserve, Inc.
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Cash Reserve, Inc. (the "Fund") is a diversified, open-end
management investment company, registered under the Investment Company
Act of 1940. The investment objective of the Fund is to provide maximum
current income, consistent with capital preservation and liquidity. 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.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS The Board of Directors has determined
appropriate methods for valuing portfolio securities. Accordingly,
portfolio securities are valued at amortized cost, which approximates
market value, in accordance with Rule 2a-7 of the Investment Company Act
of 1940. The amortized cost method involves valuing a security at its
cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount
due at maturity and the cost of the security to the Fund. Interest
income on certain portfolio securities such as negotiable bank
certificates of deposit and interest-bearing notes is accrued daily and
included in interest receivable.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in a joint repurchase
agreement. Aggregate cash balances are invested in one or more
repurchase agreements, whose underlying securities are obligations of
the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal
income tax provision is required.
DIVIDENDS The Fund's net investment income is declared daily as
dividends to shareholders of record as of the close of business on the
preceding day and distributed monthly.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Fund. Actual results
could differ from these estimates.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to 0.35% of the Fund's average
daily net assets.
The Fund has a transfer agent agreement with John Hancock Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of John
Hancock Life Insurance Company. The Fund pays transfer agent fees based
on the number of shareholder accounts and certain out-of-pocket
expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Directors of
the Fund. The compensation of unaffiliated Directors is borne by the
Fund. The unaffiliated Directors may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
investment had no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment
securities, other than obligations of the U.S. government and its
agencies, during the period ended June 30, 2000, aggregated $810,955,910
and $809,440,807, respectively. Purchases and proceeds from maturities
of obligations of the U.S. government and its agencies aggregated
$11,172,327 and $15,181,100, respectively, during the period ended June
30, 2000.
The cost of investments owned at June 30, 2000 for federal income tax
purposes was $21,847,384.
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circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
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This report is for the information of shareholders of the John Hancock
Cash Reserve, Inc. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges,
investment objectives and operating policies.
A recycled logo in lower left hand corner with the caption "Printed on
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420SA 6/00
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