John Hancock Funds
Growth
and Income
Fund
ANNUAL REPORT
August 31, 1996
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles F. Fretz*
Harold R. Hiser, Jr.*
Anne C. Hodsdon
Charles L. Ladner*
Leo E. Linbeck*
Patricia P. McCarter*
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (ret.)*
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Ernst & Young L.L.P.
200 Clarendon Street
Boston, Massachusetts 02116
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief
Executive Officer, flush right, next to second paragraph.
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Since late 1994, prospectus simplification has been a major topic in
the mutual fund industry. At that time, Securities and Exchange
Commission Chairman Arthur Levitt called on fund companies to
make their prospectuses more user-friendly. He noted that
prospectuses are often overloaded with technical detail and are hard
for most investors to understand. Many industry observers agreed,
and rightly so.
So it is my pleasure to let you know that after being under
development for a year, John Hancock Funds has introduced new
simplified and consolidated prospectuses. The prospectuses feature
shorter, clearer language with a streamlined design, and they
incorporate several funds with similar investment objectives into
one document. They cover our income, growth, growth and income, tax-
free income, international/global and money market funds. We are
gratified at the favorable reviews that our new prospectuses have
received from shareholders, financial advisers, industry analysts
and the press. We believe they are a bold but sensible step forward.
And while they are easier to read, they still comply with all
federal and state guidelines.
We have taken the initiative to create a prospectus that
dramatically departs from the norm. Among its most innovative
features is a two-page spread highlighting each fund's goals and
investment strategy, the types of securities it buys, its portfolio
management and risk factors, all in plainer language. Fund expenses
and financial highlights are now found here, too, as is a new bar
chart that shows year-to-year volatility for each fund. Other
features include a better presentation of fund services, a new
glossary of investment risks and a discussion about how funds are
organized, including a diagram showing the connection of the various
players that provide services to your Hancock fund(s).
We believe we have made a significant advancement in the drive
toward better mutual fund prospectuses. We hope you will agree
because in the end, we did it for you, our shareholders.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY TIMOTHY KEEFE, CFA, PORTFOLIO MANAGER
John Hancock
Growth and Income Fund
Strong first half gives way to
market volatility in second half
In July 1996, Timothy Keefe began leading the management team of
John Hancock Growth and Income Fund. Prior to joining John Hancock
Funds as a senior vice president and portfolio manager, Mr. Keefe
was vice president and portfolio manager for Federated Investors.
The market environment changed dramatically as the Fund's fiscal
year unfolded. In the first half, low interest rates, strong
earnings and tame inflation propelled stock prices to near record
highs. From August 31, 1995 through February 29, 1996, the Standard
and Poor's 500-Stock Index -- the most common measure of the broad
stock market -- gained 15.3%. It was a different story in the second
half of the year. Signs of a stronger-than-expected economy sparked
worries about inflation and rising interest rates. Those worries
have kept stocks on a rollercoaster ride during the past six months.
The net result has been a flat market. From February 29, 1996
through August 31, 1996, the S&P 500 rose a mere 2.9%.
"The market
environment
changed
dramatically..."
A 2 1/4" x 3 1/2" photo of Fund management team at bottom right.
Caption reads: "Timothy Keefe (standing) and Fund management team
members (l-r) Anurag Pandit and Ben Hock".
Despite the market volatility, John Hancock Growth and Income Fund
posted solid, double-digit returns. For the year ended August 31,
1996, the Fund's Class A and Class B shares had total returns of
15.33% and 14.49%, respectively, at net asset value. Those returns
were in line with the average growth and income fund's return of
15.45% for the same period, according to Lipper Analytical
Services.1 Please see pages six and seven for longer-term
performance information.
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) McDonnell Douglas 4.5% 2)
Eastman Kodak 4.4% 3) Hibernia Corp. 4.1% 4) United Technologies 3.8% 5)
Eli Lilly 3.0%. A footnote below reads "As a percentage of net assets on
August 31, 1996."
"Consumer
staple stocks
were among
our biggest
winners ..."
Winners and losers
Consumer staple stocks were among our biggest winners, particularly
in the last six months. With Wall Street nervous about interest
rates and inflation, investors have shifted into these more steady
growth stocks. Warner-Lambert Co. performed particularly well,
thanks to improving fundamentals in both its drug and consumer
products businesses and speculation that the company could be a
primary takeover target in the drug industry's ongoing
consolidation.
Elsewhere, Monsanto was a strong performer. This chemical company is
shedding its low-return commodity businesses and moving into higher
growth areas. Over the past few years, the company has invested
heavily in Searle, its pharmaceutical subsidiary. And those
investments are starting to pay off as many new, promising drugs
move toward FDA approval. Monsanto is also expanding into the fast-
growing bio-agricultural business.
Table entitled "Scorecard" at bottom of left hand column. The header for
the left column is "Investment"; the header for the right column is
"Recent performance ... and what's behind the numbers. The first listing
is Warner Lambert Co. followed by an up arrow and the phrase "Improving
fundamentals and takeover speculation." The second listing is Monsanto
followed by an up arrow and the phrase "Successful transition to higher-
growth businesses." The third listing is Westinghouse followed by a down
arrow and the phrase "Worries about price paid for recent acquisition."
Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."
Of course, not all of our investments were winners. Bausch & Lomb
was a disappointment. Management hasn't responded aggressively
enough to an increasingly tough business climate, and the stock has
lost ground. Westinghouse also didn't perform as well as we
expected. Investors are worried that the company paid too much to
acquire Infinity Broadcasting. We don't agree. With the rapid
consolidation in radio broadcasting, Westinghouse stands to reap
substantial benefits from the acquisition. Once the market
recognizes that, we believe the stock will move back up.
Portfolio strategy
We plan to maintain the Fund's strong focus on cash flow as it is
one of the most important indicators of a company's potential.
However, in conjunction with cash flow, we will also apply a value-
oriented approach to picking stocks. We firmly believe that the
market is efficient over the long term, but not over the short term.
Our goal is to identify those short-term discrepancies between price
and value.
To do that, we follow a disciplined three-step process. Starting
with a universe of 1,500 stocks, we first apply a valuation model.
This model allows us to identify which stocks are inexpensive today
relative to their historical averages of the past eight years.
However, we are careful not to just buy cheap stocks. It's critical
that a company's fundamentals are also improving. Because if they're
not, the stock is likely to get cheaper. As a result, our second
step is to apply a momentum model, which identifies those companies
where revenues and earnings are growing. The third and last step is
rigorous fundamental analysis. Here, we take an entrepreneurial
approach to determine whether a company offers a business that we
would indeed want to own. We not only evaluate management's record
and strategy, but we also talk to customers, vendors and
competitors.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended August 31, 1996."
The chart is scaled in increments of 5% from bottom to top, with 20% at
the top and 0% at the bottom. Within the chart there are three solid
bars. The first represents the 15.33% total return for the John Hancock
Growth and Income Fund: Class A. The second represents the 14.49% total
return for the John Hancock Growth and Income Fund: Class B. The third
represents the 15.45% total return for the average growth and income
fund. A footnote below reads: "The total returns for John Hancock Growth
and Income Fund are at net asset value with all distributions
reinvested. The average growth and income fund is tracked by Lipper
Analytical Services. (1) See following two pages for historical
performance information."
This process helps us identify outstanding businesses that are
selling at a discount to their intrinsic value and have a catalyst
to unlock their true value. Below are two examples of recent
portfolio additions which exemplify our strategy.
Federal Home Loan Mortgage Corporation. Most commonly known as
Freddie Mac, this issuer of mortgage-backed securities is clearly
undervalued. Its price-to-earnings multiple -- a measure of how much
you're paying for earnings power -- is only 10 times 1996 earnings
versus the market's multiple of 17. Fears about rising interest
rates and potential privatization of this quasi-government agency
have driven the stock price down. We believe these fears are
overblown. Over time, Freddie Mac has successfully handled
fluctuations in interest rates. What's more, the company is growing
between 14% and 16% per year. The recent price decline has simply
provided us with an excellent opportunity to own one of the
country's truly great businesses.
Electronic Data Systems. Because of its national presence, EDS is
benefiting from the increasing trend toward outsourcing electronic
data processing. Not only does the company enjoy a high recurring
revenue stream, but it benefits from tremendous economies of scale.
EDS has the ability to solve a problem for one client and then apply
that programming expertise to other clients more efficiently. EDS'
former parent company, General Motors, recently sold a substantial
portion of the stock from its pension fund. The sale put downward
pressure on the stock price, giving us an opportunity to buy this
company at a great price.
"...we'll use
this market
volatility
to our
advantage..."
Outlook
Looking ahead to the remainder of 1996, we're likely to see stocks
continue their rollercoaster ride as worries about the economy,
interest rates and inflation persist. While this environment may
make some investors nervous, we're optimistic about the future,
particularly for value-oriented stocks. When the market is going
straight up -- as it did in the first half of the Fund's fiscal year
- -- it becomes more difficult to find great values. Volatile markets
- -- such as we've recently experienced -- present much better
opportunities for us to find discrepancies between a stock's price
and its true value.
- -------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through
the end of the Fund's period discussed in this report. Of course,
the manager's views are subject to change as market and other
conditions warrant.
1Figures from Lipper Analytical Services include reinvested
dividends and do not take into account sales charges. Actual load-
adjusted performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock Growth and Income
Fund. Total return is a performance measure that equals the sum of
all income and capital gains dividends, assuming reinvestment of
these distributions, and the change in the price of the Fund's
shares, expressed as a percentage of the Fund's net asset value per
share. Performance figures include the maximum applicable sales
charge of 5% for Class A shares. The effect of the maximum contingent
deferred sales charge for Class B shares (maximum 5% and declining
to 0% over six years) is included in Class B performance. Performance
is affected by a 12b-1 plan, which commenced on January 1, 1990 and
August 22, 1991 for Class A and Class B shares, respectively. Remember
that all figures represent past performance and are no guarantee of how
the Fund will perform in the future. Also, keep in mind that the total
return and share price of the Fund's investments will fluctuate. As a
result, your Fund's shares may be worth more or less than their original
cost, depending on when you sell them.
CUMULATIVE TOTAL RETURNS
For the period ended June 30, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
----------- ----------- ------------
John Hancock Growth
and Income Fund:
Class A 18.83% 79.49% 176.02%
John Hancock Growth
and Income Fund:
Class B 19.21% 69.28%(1) N/A
AVERAGE ANNUAL TOTAL RETURNS
For the period ended June 30, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
----------- ----------- ------------
John Hancock Growth
and Income Fund:
Class A 18.83% 12.41% 10.69%
John Hancock Growth
and Income Fund:
Class B 19.21% 11.44%(1) N/A
As of August 31, 1996
YIELDS
SEC 30-DAY
YIELD
----------------
John Hancock Growth and Income Fund: Class A 1.16%
John Hancock Growth and Income Fund: Class B 0.48%
Notes to Performance
(1) Class B shares started on August 22, 1991.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John
Hancock Growth and Income Fund would be worth on August 31, 1996,
assuming either you have invested on the day each class of shares
started or have been invested for the most recent ten years and have
reinvested all distributions. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance.
Growth and Income Fund
Class A shares
Line chart with the heading Growth and Income Fund: Class A,
representing the growth of a hypothetical $10,000 investment over the
most recent ten years. Within the chart are three lines.
The first line represents the value of the Standard & Poor's 500 Stock
Index and is equal to $35,037 as of August 31, 1996. The second line
represents the value of the hypothetical $10,000 investment made in the
Growth and Income Fund on August 31, 1986, before sales charge, and is
equal to $28,507 as of August 31, 1996. The third line represents the
Growth and Income Fund after sales charge and is equal to $27,093 as of
August 31, 1996.
Growth and Income Fund
Class B shares
Line chart with the heading Growth and Income Fund: Class B,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines.
The first line represents the value of the Standard & Poor's 500 Stock
Index and is equal to $18,895 as of August 31, 1996. The second line
represents the value of the hypothetical $10,000 investment made in the
Growth and Income Fund on August 22, 1991, and is equal to $16,579 as of
August 31, 1996. The third line represents the value of the Growth and
Income Fund after sales charge and is equal to $16,379 as of August 31,
1996.
<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 August 31, 1996. You'll
also find the net asset value and the maximum offering price per share as
of that date.
Statement of Assets and Liabilities
August 31, 1996
- -------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $204,022,640) $258,688,813
Joint repurchase agreement (cost - $8,154,000) 8,154,000
Corporate savings account 12,826
-----------
266,855,639
Dividends and interest receivable 547,378
Receivable for shares sold 139,534
Miscellaneous assets 40,105
-----------
Total Assets 267,582,656
- -------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,950,275
Payable for shares repurchased 17,933
Payable to John Hancock Advisers, Inc. and
affiliates - Note B 222,119
Accounts payable and accrued expenses 63,074
-----------
Total Liabilities 2,253,401
- -------------------------------------------------------------------------
Net Assets:
Capital paid-in 187,095,259
Accumulated net realized gain on investments 23,228,096
Net unrealized appreciation of investments 54,667,224
Undistributed net investment income 338,676
-----------
Net Assets $265,329,255
=========================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of
beneficial interest outstanding - unlimited
number of shares authorized with $0.01 per
share par value, respectively)
Class A - $139,547,919/9,257,413 $15.07
=========================================================================
Class B - $125,781,336/8,329,884 $15.10
=========================================================================
Maximum Offering Price Per Share*
Class A - ($15.07 x 105.26%) $15.86
=========================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more
and on group sales the offering price is reduced.
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 for
the period stated.
Statement of Operations
Year ended August 31, 1996
- -------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends $6,085,432
Interest 251,751
-----------
6,337,183
-----------
Expenses:
Investment management fee - Note B 1,616,654
Distribution/service fee - Note B
Class A 338,498
Class B 1,213,464
Transfer agent fee - Note B 494,693
Registration and filing fees 58,759
Printing 54,299
Custodian fee 52,263
Auditing fee 36,248
Trustees' fees 29,072
Advisory board fee 21,633
Legal fees 9,175
Miscellaneous 4,805
-----------
Total Expenses 3,929,563
- -------------------------------------------------------------------------
Net Investment Income 2,407,620
- -------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
Net realized gain on investments sold 25,207,559
Change in net unrealized appreciation/
depreciation of investments 7,739,354
-----------
Net Realized and Unrealized
Gain on Investments 32,946,913
- -------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $35,354,533
=========================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
---------------------------
1995 1996
------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $3,388,316 $2,407,620
Net realized gain on investments sold 6,147,562 25,207,559
Change in net unrealized appreciation/
depreciation of investments 30,850,499 7,739,354
------------ ------------
Net Increase in Net Assets Resulting
from Operations 40,386,377 35,354,533
------------ ------------
Distributions to Shareholders:
Dividends from net investment income:
Class A - ($0.2026 and $0.1939 per
share, respectively) (2,080,993) (1,792,414)
Class B - ($0.1178 and $0.0916 per
share, respectively) (1,113,907) (780,162)
Distributions from net realized gain on
investments sold:
Class A - (none and $0.1450 per
share, respectively) -- (1,309,129)
Class B - (none and $0.1450 per
share, respectively) -- (1,230,621)
------------ ------------
Total Distributions to Shareholders (3,194,900) (5,112,326)
------------ ------------
From Fund Share Transactions - Net* (27,471,362) (9,818,420)
------------ ------------
Net Assets:
Beginning of period 235,185,353 244,905,468
End of period (including undistributed net
investment income of $503,632 and $338,676,
respectively) $244,905,468 $265,329,255
============ ============
* Analysis of Fund Share Transactions:
YEAR ENDED AUGUST 31,
---------------------------------------------------------
1995 1996
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
CLASS A
Shares sold 1,688,091 $19,652,565 1,760,701 $25,784,827
Shares issued to shareholders in reinvestment
of distributions 149,026 1,724,908 184,594 2,627,197
------------ ------------ ------------ ------------
1,837,117 21,377,473 1,945,295 28,412,024
Less shares repurchased (2,719,043) (31,913,858) (2,414,054) (34,877,792)
------------ ------------ ------------ ------------
Net decrease (881,926) ($10,536,385) (468,759) ($6,465,768)
============ ============ ============ ============
CLASS B
Shares sold 1,972,798 $23,053,675 2,595,953 $37,809,526
Shares issued to shareholders in reinvestment
of distributions 80,431 936,397 123,908 1,753,023
------------ ------------ ------------ ------------
2,053,229 23,990,072 2,719,861 39,562,549
Less shares repurchased (3,464,943) (40,925,049) (2,944,133) (42,915,201)
------------ ------------ ------------ ------------
Net decrease (1,411,714) ($16,934,977) (224,272) ($3,352,652)
============ ============ ============ ============
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, any
investment gains and losses, distributions paid to shareholders, and any increase or decrease
in money shareholders invested in the Fund. The footnote illustrates the number of the Fund shares
sold, reinvested and redeemed during the last two periods, along with the corresponding dollar
values.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the period indicated:
investment returns, key ratios and supplemental data are as follows:
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
---------------------------------------------------------------------
1992 1993 1994 1995(4) 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $11.77 $12.43 $12.08 $11.42 $13.38
------- ------- ------- ------- -------
Net Investment Income 0.32(1) 0.40(1) 0.32(1) 0.21(1) 0.19(1)
Net Realized and Unrealized Gain (Loss) on Investments 0.89 1.12 (0.61) 1.95 1.84
------- ------- ------- ------- -------
Total from Investment Operations 1.21 1.52 (0.29) 2.16 2.03
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (0.25) (0.42) (0.37) (0.20) (0.19)
Distributions from Net Realized Gain on Investments Sold (0.30) (1.45) -- -- (0.15)
------- ------- ------- ------- -------
Total Distributions (0.55) (1.87) (0.37) (0.20) (0.34)
------- ------- ------- ------- -------
Net Asset Value, End of Period $12.43 $12.08 $11.42 $13.38 $15.07
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (2) 10.47% 13.64% (2.39%) 19.22% 15.33%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $89,682 $115,780 $121,160 $130,183 $139,548
Ratio of Expenses to Average Net Assets 1.34% 1.29% 1.31% 1.30% 1.17%
Ratio of Net Investment Income to Average Net Assets 2.75% 3.43% 2.82% 1.82% 1.28%
Portfolio Turnover Rate 119% 107% 195% 99% 74%
Average Broker Commission Rate (3) N/A N/A N/A N/A $0.0665
The Financial Highlights summarizes the impact of the following factors on a single share for the period indicated: net investment
income, gains (losses), dividends and total investment return of the Fund. It shows how the Fund's net asset value for a share
has changed since the end of the previous period. Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $11.77 $12.44 $12.10 $11.44 $13.41
------- ------- ------- ------- -------
Net Investment Income 0.23(1) 0.30(1) 0.24(1) 0.13(1) 0.08(1)
Net Realized and Unrealized Gain (Loss) on Investments 0.89 1.12 (0.61) 1.96 1.85
------- ------- ------- ------- -------
Total from Investment Operations 1.12 1.42 (0.37) 2.09 1.93
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (0.15) (0.31) (0.29) (0.12) (0.09)
Distributions from Net Realized Gain on Investments Sold (0.30) (1.45) -- -- (0.15)
------- ------- ------- ------- -------
Total Distributions (0.45) (1.76) (0.29) (0.12) (0.24)
------- ------- ------- ------- -------
Net Asset Value, End of Period $12.44 $12.10 11.44 $13.41 $15.10
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (2) 9.67% 12.64% (3.11%) 18.41% 14.49%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $29,826 $65,010 $114,025 $114,723 $125,781
Ratio of Expenses to Average Net Assets 2.07% 2.19% 2.06% 2.03% 1.90%
Ratio of Net Investment Income to Average Net Assets 2.02% 2.53% 2.07% 1.09% 0.55%
Portfolio Turnover Rate 119% 107% 195% 99% 74%
Average Brokerage Commission Rate (3) N/A N/A N/A N/A $0.0665
(1) Based on the average of the shares outstanding at the end of each month.
(2) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(3) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
(4) On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
August 31, 1996
- --------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Growth and
Income Fund on August 31, 1996. It's divided into two main categories: common stocks and
short-term investments. Common stocks are further broken down by industry group. Short-
term investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ----------------------------------------------------- ------------ ------------
<S> <C> <C>
COMMON STOCK
Aerospace (14.30%)
General Dynamics Corp. 100,000 $6,412,500
McDonnell Douglas Corp. 240,000 12,030,000
Northrop Grumman Corp. 80,000 5,740,000
Raytheon Co. 70,000 3,605,000
United Technologies Corp. 90,000 10,147,500
------------
37,935,000
------------
Banks - United States (11.12%)
AmSouth Bancorp. 100,000 3,937,500
Bankers Trust New York Corp. 50,000 3,887,500
Hibernia Corp. (Class A) 1,000,000 11,000,000
Morgan (J.P.) & Co., Inc. 70,000 6,133,750
National City Corp. 15,000 564,375
Signet Banking Corp. 165,000 3,980,625
------------
29,503,750
------------
Chemicals (2.60%)
Monsanto Co. 215,000 6,906,875
------------
Computers (3.28%)
Electronic Data Systems Corp. 65,000 3,542,500
International Business Machines Corp. 45,000 5,146,875
------------
8,689,375
------------
Cosmetics & Personal Care (3.39%)
Gillette Co. 60,000 3,825,000
Int'l Flavors & Fragrances, Inc. 120,000 5,160,000
------------
8,985,000
------------
Diversified Operations (5.55%)
Allied-Signal, Inc. 100,000 6,175,000
Dial Corp. 45,000 517,500
Gencorp, Inc. 200,000 2,775,000
TRW Inc. 50,000 4,625,000
Viad Corp. 45,000 641,250
------------
14,733,750
------------
Electronics (7.84%)
Amphenol Corp. (Class A)* 80,000 1,570,000
General Electric Co. 85,000 7,065,625
Honeywell, Inc. 125,000 7,265,625
Westinghouse Electric Corp. 300,000 4,912,500
------------
20,813,750
------------
Finance (4.66%)
Dean Witter Discover & Co. 50,000 2,500,000
Great Western Financial Corp. 220,000 5,445,000
Student Loan Marketing Assn. 60,000 4,417,500
------------
12,362,500
------------
Food (2.75%)
CPC International, Inc. 70,000 4,821,250
Dole Food Co. 60,000 2,482,500
------------
7,303,750
------------
Instruments - Scientific (1.08%)
Millipore Corp. 75,000 2,868,750
------------
Insurance (0.98%)
Travelers Group, Inc. 60,000 2,602,500
------------
Leisure (6.17%)
Eastman Kodak Co. 160,000 11,600,000
Promus Hotel Corp.* 100,000 3,012,500
Station Casinos, Inc.* 150,000 1,743,750
------------
16,356,250
------------
Machinery (0.66%)
U.S. Filter Corp.* 67,500 1,763,438
------------
Medical (13.62%)
Bausch & Lomb, Inc. 50,000 1,656,250
Baxter International, Inc. 120,000 5,355,000
Eli Lilly & Co. 140,000 8,015,000
Pfizer, Inc. 100,000 7,100,000
Pharmacia & Upjohn, Inc. 75,000 3,150,000
Schering-Plough Corp. 120,000 6,705,000
Warner-Lambert Co. 70,000 4,165,000
------------
36,146,250
------------
Mortgage Banking (2.59%)
Federal Home Loan Mortgage Corp. 20,000 1,767,500
Federal National Mortgage Assn. 165,000 5,115,000
------------
6,882,500
------------
Oil & Gas (4.32%)
Exxon Corp. 30,000 2,441,250
Mobil Corp. 44,000 4,961,000
Phillips Petroleum Co. 100,000 4,050,000
------------
11,452,250
------------
Paper & Paper Products (1.48%)
Kimberly-Clark Corp. 50,000 3,918,750
------------
Retail (5.22%)
Apple South, Inc. 145,000 3,045,000
Federated Department Stores, Inc.* 140,000 4,847,500
Landry's Seafood Restaurants, Inc.* 70,000 1,933,750
Sysco Corp. 125,000 4,015,625
------------
13,841,875
------------
Soap & Cleaning Preparations (1.84%)
Colgate-Palmolive Co. 60,000 4,875,000
------------
Telecommunications (0.78%)
Comsat Corp. 35,000 791,875
Lucent Technologies, Inc. 35,000 1,290,625
------------
2,082,500
------------
Textile (0.56%)
Warnaco Group, Inc. (Class A) 60,000 1,485,000
------------
Tobacco (2.71%)
Philip Morris Cos., Inc. 80,000 7,180,000
------------
TOTAL COMMON STOCK
(Cost $204,022,640) (97.50%) 258,688,813
------- ------------
<CAPTION>
SHORT-TERM INVESTMENTS
<S> <C> <C> <C>
Joint Repurchase Agreement (3.07%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets, Inc. --
Dated 08-30-96, due
09-03-96 (secured by U.S.
Treasury Bonds, 7.25% thru
12.00% due 08-15-13 thru
08-15-22) and by U.S.
Treasury Note, 5.25%,
due 12-31-97) Note A 5.26% $8,154 $8,154,000
------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 12,826
------------
TOTAL SHORT-TERM INVESTMENTS (3.08%) $8,166,826
------- ------------
TOTAL INVESTMENTS (100.58%) $266,855,639
======= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of that category as a
percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
Notes to financial statments
NOTE A --
ACCOUNTING POLICIES
John Hancock Investment Trust, (the "Trust") is a diversified, open-
end management investment company, registered under the Investment
Company Act of 1940. John Hancock Growth and Income Fund (the
"Fund") is the only series of the Trust presently issuing shares.
The Trustees may authorize the creation of additional Funds from
time to time to satisfy various investment objectives. The
investment objective of the Fund is to obtain the highest total
return, a combination of capital appreciation and current income,
consistent with reasonable safety of capital.
The Trustees have authorized the issuance of multiple classes of
shares of the Fund, designated as Class A and Class B shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting,
redemptions, dividends, and liquidation, except that certain
expenses subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current
regulations of the Securities and Exchange Commission. Shareholders
of a class which bears distribution/service expenses under terms of
a distribution plan have exclusive voting rights regarding such
distribution plan.
On June 25, 1996, the Trustees voted to change the fiscal period
end from August 31 to December 31. This change is effective
December 31, 1996.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are
valued on the basis of market quotations, valuations provided by
independent pricing services or, at fair value as determined in good
faith in accordance with procedures approved by the Trustees. Short-
term debt investments maturing within 60 days are valued at
amortized cost which approximates market value.
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, may participate in a
joint repurchase agreement transaction. Aggregate cash balances are
invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its
agencies. The Fund's custodian bank receives delivery of the
underlying securities for the joint account on the Fund's behalf.
The Adviser is responsible for ensuring that the agreement is fully
collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of
the date of purchase, sale or maturity. Net realized gains and
losses on sales of investments are determined on the identified cost
basis.
FEDERAL INCOME TAX The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investments, to its
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on
investment securities is recorded on the accrual basis.
The Fund records all distributions to shareholders from net
investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax
regulations which may differ from generally accepted accounting
principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and
will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
CLASS ALLOCATIONS Income, common expenses and realized and
unrealized gains (losses) are determined at the Fund level and
allocated daily to each class of shares based on the appropriate net
assets of the respective classes. Distribution/service fees if any,
are calculated daily at the class level based on the appropriated
net assets of each class and the specific expense rate(s) applicable
to each class.
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, to 0.625% of the Fund's average daily net asset
value.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most
restrictive state limit where the Fund is registered to sell shares
of beneficial interest, the fee payable to the Adviser will be
reduced to the extent of such excess and the Adviser will make
additional arrangements necessary to eliminate any remaining excess
expenses. The current limits are 2.5% of the first $30,000,000 of
the Fund's average daily net asset value, 2.0% of the next
$70,000,000 and 1.5% of the remaining average daily net asset value.
The Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the
period ended August 31, 1996, net sales charges received with regard
to sales of Class A shares amounted to $322,955. Out of this amount,
$40,602 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $233,513 was paid
as sales commissions to unrelated broker-dealers and $48,840 was
paid as sales commissions to sales personnel of John Hancock
Distributors, Inc. ("Distributors"), Tucker Anthony, Incorporated
("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"), all of which are
broker dealers. The Adviser's indirect parent, John Hancock Mutual
Life Insurance Company, is the indirect sole shareholder of
Distributors and John Hancock Freedom Securities Corporation and its
subsidiaries, which include Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will
be subject to a contingent deferred sales charge ("CDSC") at
declining rates beginning at 5.0% of the lesser of the current
market value at the time of redemption or the original purchase cost
of the shares being redeemed. Proceeds from the CDSC are paid to JH
Funds and are used in whole or in part to defray its expenses
related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended
August 31, 1996, contingent deferred sales charges amounted to
$290,697.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a
Distribution Plan with respect to Class A and Class B pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Accordingly,
the Fund will make payments to JH Funds for distribution and service
expenses at an annual rate not to exceed 0.25% of Class A average
daily net assets and 1.00% of Class B average daily net assets to
reimburse JH Funds for its distribution/service costs. Up to a
maximum of 0.25% of such payments may be service fees as defined by
the amended Rules of Fair Practice of the National Association of
Securities Dealers. Under the amended Rules of Fair Practice,
curtailment of a portion of the Fund's 12b-1 payments could occur
under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor
Services Corporation ("Investor Services"), a wholly owned
subsidiary of The Berkeley Financial Group. The Fund pays transfer
agent fees based on transaction the number of shareholder accounts
and certain out-of-pocket expenses.
On September 10, 1996, the Board of Trustees approved retroactively
to July 1, 1996, an agreement with the Adviser to perform necessary
tax and financial management services for the Funds. The
compensation for 1996 is estimated to be at an annual rate of
0.01875% of the average net assets of each Fund.
Mr. Edward J. Boudreau, Jr., Mr. Richard S. Scipione and Ms. Anne C.
Hodsdon are directors and/or officers of the Adviser and/or its
affiliates, as well as a Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees
paid for 1995, the unaffiliated Trustees may elect to defer 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. At August 31,
1996, the Fund's investments to cover the deferred compensation
liability had unrealized appreciation of $1,051.
The Fund has an independent advisory board composed of certain
retired Directors who provide advice to the current Board of
Directors in order to facilitate a smooth management transition. The
Fund pays the advisory board and its counsel a fee.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than
obligations of the U.S. government and its agencies and short-term
securities, during the period ended August 31, 1996, aggregated
$185,804,626 and $201,666,167, respectively. There were no purchases
or sales of obligations of the U.S. government and its agencies
during the period ended August 31, 1996.
The cost of investments owned at August 31, 1996 (excluding the
corporate savings account) for federal income tax purposes was
$212,254,187. Gross unrealized appreciation and depreciation of
investments aggregated $59,356,321 and $4,767,695, respectively,
resulting in net unrealized appreciation of $54,588,626.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Investment Trust --
John Hancock Growth and Income Fund
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of the John
Hancock Growth and Income Fund (the "Fund"), a series of John
Hancock Investment Trust (the "Trust"), as of August 31, 1996, and
the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of
August 31, 1996, by correspondence with the custodian and brokers,
or other appropriate auditing procedures where replies from brokers
were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the John Hancock Growth and Income Fund of
John Hancock Investment Trust at August 31, 1996, the results of its
operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/S/Ernst & Young LLP
Boston, Massachusetts
October 9, 1996
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is
furnished with respect to the distributions of the Fund during its
fiscal year ended August 31, 1996.
The Fund distributed to shareholders of record December 22, 1995 and
paid on December 28, 1995, a capital gain dividend of $763,166.
Shareholders were mailed a 1995 U.S. Treasury Department Form 1099-
DIV in January 1996 representing their proportionate share. It is
anticipated that there will be a distribution from sales of
securities to shareholders of record on December 22, 1996 and
payable December 28, 1996. Shareholders will receive a 1996 U.S.
Treasury Department Form 1099-DIV in January 1997 representing their
proportionate share.
For the fiscal year ending August 31, 1996, 83% of the ordinary
income distributions qualify for the dividends received deduction.
SHAREHOLDER MEETING
On June 26, 1996, a special meeting of John Hancock Growth and
Income Fund (the "Fund") was held.
Shareholders approved an Amended and Restated Declaration of Trust
for the Fund. The shareholder votes were 8,779,876 FOR, 322,611
AGAINST and 607,266 ABSTAINING.
Next, the shareholders approved an amendment to redesignate as
nonfundamental the Fund's fundamental investment restriction on
investing in other investment companies. The shareholder votes were
8,692,840 FOR, 340,815 AGAINST and 679,692 ABSTAINING.
The shareholders elected the following trustees, with the votes as
indicated:
NAME OF TRUSTEE FOR WITHHELD
- --------------- ---------- -------------
Edward J. Boudreau, Jr. 10,601,382 205,311
James F. Carlin 10,599,416 207,277
William H. Cunningham 10,592,085 214,608
Charles F. Fretz 10,592,768 213,925
Harold R. Hiser, Jr. 10,588,090 218,603
Anne C. Hodsdon 10,601,535 205,158
Charles L. Ladner 10,598,758 207,935
Leo E. Linbeck, Jr. 10,595,095 211,598
Patricia P. McCarter 10,602,987 203,706
Steven R. Pruchansky 10,598,189 208,504
Richard S. Scipione 10,591,244 215,449
Norman H. Smith 10,599,249 207,444
John P. Toolan 10,595,347 211,346
NOTES
John Hancock Funds - Growth and Income Fund
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