John Hancock Funds
Growth
and Income
Fund
ANNUAL REPORT
December 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, Jr.*
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 and Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way Ste 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
INDEPENDENT AUDITORS
Ernst & Young LLP
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:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although it
seems a long way off, the issue is serious enough that at least one
group has already studied the problem, and experts and politicians alike
have weighed in with a slew of prescriptions. Legislative action could
be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this: in
1950, there were 16 workers paying into the Social Security system for
each retiree collecting benefits. Today, there are three workers for
each retiree and by 2019 there will be two. Starting then, the Social
Security Administration estimates that the amount paid out in Social
Security benefits will start to be greater than the amount collected in
Social Security taxes. Compounding the issue is the fact that people are
retiring earlier and living longer.
The state of the system has already left many people, especially younger
and middle-aged workers, feeling insecure about Social Security. A
recent survey by the Employee Benefits Research Institute (EBRI) found
that 79% of current workers polled had little confidence in the ability
of Social Security to maintain the same level of benefits as those
received by today's retirees. Instead, they said they expect
to use their own savings or employer-sponsored pensions for their
retirement. Yet, remarkably, another EBRI survey revealed that only
slightly more than half of America's current workers are saving money
for retirement. Fewer than half own IRAs or participate in employer-
sponsored pension or savings plans.
No matter how Social Security's problems get solved, one thing is clear.
Americans need to rely on themselves for accumulating the bulk of their
retirement savings. There's no law that says you should have to reduce
your standard of living once you stop working. So we encourage you to
save all that you can now, so you can live the way you'd like to later.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY TIMOTHY KEEFE, CFA, PORTFOLIO MANAGER
John Hancock
Growth & Income Fund
Stock market advances smartly for second straight year;
large-cap stocks are leaders
Recently, the Fund's fiscal year end changed from August to December.
What follows is a discussion of the Fund's performance for the 12 months
ended December 31, 1996.
For the second straight year, the stock market advanced to new highs in
1996 and again gave shareholders returns well in excess of historical
norms. The same favorable stock picking conditions that dominated 1995
continued in 1996 -- strong earnings growth and low interest rates,
despite periodic rate increases when investors worried that a faster
growing economy would spark inflation. But actual inflation stayed
benign, emotions notwithstanding, and stock prices advanced almost all
year. The biggest winners were the mid-to large-company growth stocks.
Investors flocked to these more liquid and stable companies as mixed
economic signals throughout the year led to uncertainty about where the
economy was headed. For the year ending December 31, 1996, the Dow Jones
Industrial Average returned 28.91%, including reinvested dividends, and
the Standard & Poor's 500-Stock Index, a broader measure of the market,
advanced 22.95%.
Because of its focus on mid- and large-company growth stocks, John
Hancock Growth and Income Fund had a good year both absolutely and with
respect to its peer group. The Fund's Class A and Class B shares posted
total returns of 22.21% and 21.25% respectively, at net asset value.
That compared favorably to the 20.78% return of the average growth and
income fund, according to Lipper Analytical Services, Inc.1 Please see
pages six and seven for longer-term performance information.
A 2 1/4" by 3 3/4" photo of Fund management team at bottom right.
Caption reads: Tim Keefe (standing) and Growth and Income Fund
management team members Anurag Pandit (l) and Ben Hock (r)."
"The same
favorable
stock picking
conditions
that
dominated
1995
continued in
1996..."
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) Eastman Kodak 4.2%; 2) United
Technologies 3.6%; 3) Eli Lilly 3.3%; 4) Phillip Morris 3.0%; 5)
Hibernia Corp. 3.0%. A footnote below states " As a percentage of net
assets on December 31, 1996."
"...we
exchanged
some of our
aerospace/
defense
money
into select
technology
stocks..."
Winners and disappointments
Our largest holding, Eastman Kodak, was one of our strongest performers
during the year. Its new products and strong overseas growth have
contributed to its overall bottom line health. What's more, its share
buyback program has enhanced its strong cash flow position, which for us
is one of the most important indicators of a company's potential. We
still believe Kodak's stock price does not reflect its true earnings
potential.
Our overweighted positions in finance, healthcare and aerospace/defense
also contributed strongly to the Fund's performance. Bank stocks, such
as regional bank Hibernia, and savings and loans were boosted by strong
earnings growth and continuing consolidation. Some of the S&L's that we
own began the year with very low prices relative to their earnings
potential -- a key characteristic we look for as value-oriented
investors. Their prices then rose along with earnings and a favorable
outlook for 1997. The larger money-center banks benefited from the
relatively benign interest-rate environment, cost cutting and increasing
worldwide market share. Our investments in three government-sponsored
entities -- Federal Home Loan Mortgage Corporation, Federal National
Mortgage Association and the Student Loan Marketing Association -- also
served us well. These issuers of asset- and mortgage-backed securities
are all dominant players in their industry and have very predictable
earnings streams. At the start of the year, fears of rising interest
rates caused their stocks to sell at single-digit price-to-earnings
(p/e) multiples, compared to the market's average multiple of 17 or 18.
A p/e multiple is a measure of how much you're paying for earnings
power. But as the year went on and rate fears dissipated, the stocks
rallied as investors came to appreciate these companies' stable income
stream. In the third quarter, interest rate scares and fears of rising
consumer debt and delinquencies created the opportunity to add credit
card companies First USA and Dean Witter Discover at very attractive
prices.
Table entitled "Scorecard" at bottom 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 "Eastman Kodak" followed by an up arrow and the phrase "New products,
international growth, strong cash flow". The second listing is "H&R
Block" followed by an up arrow and the phrase "Undervalued, high return
business with good management". The third listing is "Gillette" followed
by a flat arrow and the phrase "Solid fundamentals, but stock price
fully valued". Footnote below reads: "See '"Schedule of Investments."
Investment holdings are subject to change."
The bulk of our health-care holdings were in drug companies such as Eli
Lilly, one of our largest positions and stronger performers. The
combination of predictable earnings and strong new product flows has
helped the large drug companies continue to perform regardless of the
economic environment. Aerospace and defense giants United Technologies -
- - the Fund's second largest holding at year end -- and McDonnell Douglas
are both benefiting from the revitalized airlines industry and a spate
of new orders to replace a quarter of the domestic aircraft over the
next three years. Suppliers of airplane parts, including Fund holdings
General Electric, Allied Signal and Honeywell, are also reaping the
rewards of this replacement cycle.
On the other hand, the Fund's light ownership in the energy sector
prevented us from realizing the significant gains made by many energy
stocks as oil and gas prices rose along with increased demand worldwide,
cold weather and a shortage of supplies.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote "For the year ended December 31, 1996.
" The chart is scaled in increments of 5% from top to bottom with 25% at
the top and 0% at the bottom. Within the chart, there are three solid
bars. The first represents the 22.21% total return for John Hancock
Growth and Income Fund: Class A. The second represents the 21.25% total
return for John Hancock Growth and Income Fund: Class B. The third
represents the 20.78% total return for the average growth and income
fund. Footnote below reads: "The total returns for John Hancock
Independence Equity 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.
Search for value leads to several shifts
We constantly look for companies that show strong prospects for growth
and have attractive stock prices. As the year progressed, we shifted
some of the Fund's money out of stocks or sectors of the market that we
believed had become fully valued into more attractively priced ones
whose fundamentals remain sound. Often, these opportunities arise after
a particular stock or sector has had a meaningful correction, as we saw
in the summer. At that time, we exchanged some of our aerospace/defense
money for select technology stocks, including IBM, Lucent Technologies,
an AT&T spin-off, and Solectron, a company that specializes in the
outsourcing of manufacturing services to the rapidly growing electronics
industries. These stocks took a drubbing along with most other
technology stocks during a massive summer sell-off. Another shift
occurred after we took profits in gaming and lodging stocks Bally and
Marriott at a point when they appeared fully valued. In their place, we
bought tax preparation company H&R Block. This high return business, run
by committed, shareholder-focused management, saw its stock dragged down
by its ownership of CompuServe, in which the market seems to be placing
no value. But we don't agree, and after extensive analysis believe we've
been able to buy H&R Block's strong tax preparer business for a very
attractive price.
"We're taking
a cautious
approach to
1997..."
A look ahead
We're taking a cautious approach to 1997 and believe investors would be
wise to temper their expectations as well. After back-to-back years of
spectacular growth, it's hard to imagine a third year of such returns.
If the economy continues its moderate growth course, the market can
still move up. But we'd expect to see returns at or even below the
historical 8-10% annual average, with more volatility as worries about
the economy, interest rates and inflation persist. It's also getting
harder to find stocks that aren't fully valued. But that's not to say
they don't exist. In fact, we're optimistic about the future,
particularly as value-oriented investors. We'll use any market swings to
uncover discrepancies between a stock's price and its true value. As
appropriate, we'll shift assets away from stocks or sectors that are
selling at high p/e multiples into more inexpensive ones. We believe
it's a good way to both lower the Fund's risk level and provide the best
opportunity for growth.
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 December 31, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
----------- ----------- -----------
John Hancock Growth and Income
Fund: Class A 16.08% 69.02% 213.50%
John Hancock Growth and Income
Fund: Class B 16.25% 69.14% 88.24%(1)
AVERAGE ANNUAL TOTAL RETURNS
For the period ended December 31, 1996
ONE FIVE LIFE OF
YEAR YEARS FUND
----------- ----------- -----------
John Hancock Growth and Income
Fund: Class A 16.08% 11.07% 12.10%
John Hancock Growth and Income
Fund: Class B 16.25% 11.08% 12.53%(1)
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 December 31, 1996. They
assume that you either had invested on the day each class of shares
started, or that you have been invested for the most recent 10 years. In
either case, they also assume that you 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
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 $41,396 as of December 31, 1996. The second line represents
the value of the hypothetical $10,000 investment made in the Growth and
Income Fund on December 31, 1986, before sales charge, and is equal to
$32,986 as of December 31, 1996. The third line represents the Growth
and Income Fund, after sales charge, and is equal to $31,350 as of
December 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 $21,620 as of December 31, 1996. The second line represents
the value of the hypothetical $10,000 investment made in the Growth and
Income Fund, before sales charge, on August 22, 1991, and is equal to
$18,924 as of December 31, 1996. The third line represents the value of
the Growth and Income Fund, after sales charge, and is equal to $18,824
as of December 31, 1996.
FINANCIAL STATEMENTS
John Hancock Funds - Growth and Income Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value -- Note C:
Common stocks (cost -- $211,067,771) $ 291,641,388
Convertible preferred stocks (cost -- $2,919,705) 3,087,500
Joint repurchase agreement (cost -- $14,480,000) 14,480,000
Corporate savings account 823
-------------
309,209,711
Dividends and interest receivable 658,474
Receivable for shares sold 110,286
Other assets 40,328
-------------
Total Assets 310,018,799
- --------------------------------------------------------------------------------------
Liabilities:
Payable for shares repurchased 133,359
Payable to John Hancock Advisers, Inc. and affiliates -- Note B 264,187
Accounts payable and accrued expenses 68,234
-------------
Total Liabilities 465,780
- --------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 222,178,724
Accumulated net realized gain on investments 6,634,304
Net unrealized appreciation of investments 80,742,463
Distributions in excess of net investment income (2,472)
-------------
Net Assets $ 309,553,019
======================================================================================
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 -- $163,153,747/ 10,447,719 $ 15.62
======================================================================================
Class B -- $146,399,272/ 9,346,021 $ 15.66
======================================================================================
Maximum Offering Price Per Share*
Class A -- ($15.62 x 105.26%) $ 16.44
======================================================================================
* 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.
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 December 31, 1996. You'll also find
the net asset value and the maximum offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- --------------------------------------------------------------------------------------
PERIOD FROM
SEPTEMBER 1, 1996
YEAR ENDED TO DECEMBER 31,
AUGUST 31, 1996 1996(1)
--------------- -----------------
<S> <C> <C>
Investment Income:
Dividends $ 6,085,432 $ 1,916,974
Interest 251,751 127,925
----------- -----------
6,337,183 2,044,899
----------- -----------
Expenses:
Investment management fee -- Note B 1,616,654 616,603
Distribution/service fee -- Note B
Class A 338,498 129,043
Class B 1,213,464 470,391
Transfer agent fee -- Note B 494,693 206,352
Registration and filing fees 58,759 31,054
Printing 54,299 20,187
Custodian fee 52,263 20,669
Auditing fee 36,248 26,000
Trustees' fees 29,072 3,473
Advisory board fee 21,633 --
Legal fees 9,175 4,661
Miscellaneous 4,805 5,904
Financial services fee -- Note B -- 27,211
----------- -----------
Total Expenses 3,929,563 1,561,548
- -----------------------------------------------------------------------------------
Net Investment Income 2,407,620 483,351
- -----------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 25,207,559 11,589,657
Change in net unrealized appreciation/depreciation
of investments 7,739,354 26,075,239
----------- -----------
Net Realized and Unrealized Gain on Investments 32,946,913 37,664,896
- -----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations $35,354,533 $38,148,247
===================================================================================
(1) Effective December 31, 1996, the fiscal period changed from
August 31 to December 31.
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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED AUGUST 31, SEPTEMBER 1,1996
----------------------------- TO DECEMBER 31,
1995 1996 1996(1)
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $ 3,388,316 $ 2,407,620 $ 483,351
Net realized gain on investments sold 6,147,562 25,207,559 11,589,657
Change in net unrealized appreciation/depreciation of investments 30,850,499 7,739,354 26,075,239
------------- ------------- -------------
Net Increase in Net Assets Resulting from Operations 40,386,377 35,354,533 38,148,247
------------- ------------- -------------
Distributions to Shareholders:
Dividends from net investment income:
Class A -- ($0.2026, $0.1939 and $0.0752 per share, respectively) (2,080,993) (1,792,414) (697,553)
Class B -- ($0.1178, $0.0916 and $0.0151 per share, respectively) (1,113,907) (780,162) (126,946)
Distributions from net realized gain on investments sold:
Class A -- (none, $0.1450 and $1.5747 per share, respectively) -- (1,309,129) (14,744,885)
Class B -- (none, $0.1450 and $1.5747 per share, respectively) -- (1,230,621) (13,438,564)
------------- ------------- -------------
Total Distributions to Shareholders (3,194,900) (5,112,326) (29,007,948)
------------- ------------- -------------
From Fund Share Transactions -- Net* (27,471,362) (9,818,420) 35,083,465
------------- ------------- -------------
Net Assets:
Beginning of period 235,185,353 244,905,468 265,329,255
------------- ------------- -------------
End of period (including
undistributed net investment
income of $503,632, $338,676
and distributions in excess
of net investment income
$2,472, respectively) $ 244,905,468 $ 265,329,255 $ 309,553,019
============= ============= =============
* Analysis of Fund Share Transactions:
PERIOD FROM
YEAR ENDED AUGUST 31, SEPTEMBER 1,1996
---------------------------------------------------------- TO DECEMBER 31,
1995 1996 1996(1)
--------------------------- -------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- -----------
CLASS A
Shares sold 1,688,091 $19,652,565 1,760,701 $25,784,827 2,100,056 $34,769,586
Shares issued to shareholders
in reinvestment of distributions 149,026 1,724,908 184,594 2,627,197 864,570 13,618,418
--------- ----------- --------- ----------- --------- -----------
1,837,117 21,377,473 1,945,295 28,412,024 2,964,626 48,388,004
Less shares repurchased (2,719,043) (31,913,858) (2,414,054) (34,877,792) (1,774,320) (29,444,447)
--------- ----------- --------- ----------- --------- -----------
Net increase (decrease) (881,926) ($10,536,385) (468,759) ($ 6,465,768) 1,190,306 $18,943,557
========= =========== ========= =========== ========= ===========
CLASS B
Shares sold 1,972,798 $23,053,675 2,595,953 $37,809,526 901,707 14,803,231
Shares issued to shareholders
in reinvestment of distributions 80,431 936,397 123,908 1,753,023 767,775 12,131,262
--------- ----------- --------- ----------- --------- -----------
2,053,229 23,990,072 2,719,861 39,562,549 1,669,482 26,934,493
Less shares repurchased (3,464,943) (40,925,049) (2,944,133) (42,915,201) (653,345) (10,794,585)
--------- ----------- --------- ----------- --------- -----------
Net increase (decrease) (1,411,714) ($16,934,977) (224,272) ($ 3,352,652) 1,016,137 $16,139,908
========= =========== ========= =========== ========= ===========
(1) Effective December 31, 1996, the fiscal period changed from August 31 to December 31.
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 Fund shares sold,
reinvested and redeemed during the last two periods, along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each period indicated, investment returns, key ratios
and supplemental data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM
-------------------------------------------------------------- SEPTEMBER 1, 1996
1992 1993 1994 1995(4) 1996 TO DECEMBER 31, 1996(6)
------- -------- -------- -------- -------- ----------------------
<S> <C> <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 $ 15.07
------- -------- -------- -------- -------- --------
Net Investment Income (1) 0.32 0.40 0.32 0.21 0.19 0.05
Net Realized and Unrealized Gain
(Loss) on Investments 0.89 1.12 (0.61) 1.95 1.84 2.15
------- -------- -------- -------- -------- --------
Total from Investment Operations 1.21 1.52 (0.29) 2.16 2.03 2.20
------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.25) (0.42) (0.37) (0.20) (0.19) (0.08)
Distributions from Net Realized
Gain on Investments Sold (0.30) (1.45) -- -- (0.15) (1.57)
------- -------- -------- -------- -------- --------
Total Distributions (0.55) (1.87) (0.37) (0.20) (0.34) (1.65)
------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 12.43 $ 12.08 $ 11.42 $ 13.38 $ 15.07 $ 15.62
======= ======== ======== ======== ======== ========
Total Investment Return
at Net Asset Value (2) 10.47% 13.64% (2.39%) 19.22% 15.33% 14.53%(7)
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $ 89,682 $115,780 $121,160 $130,183 $139,548 $163,154
Ratio of Expenses
to Average Net Assets 1.34% 1.29% 1.31% 1.30% 1.17% 1.22%(5)
Ratio of Net Investment Income
to Average Net Assets 2.75% 3.43% 2.82% 1.82% 1.28% 0.85%(5)
Portfolio Turnover Rate 119% 107% 195% 99% 74% 26%
Average Broker Commission Rate (3) N/A N/A N/A N/A $ 0.0665 $ 0.0692
The Financial Highlights summarizes the impact of the following factors on a single share for each 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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, PERIOD FROM
-------------------------------------------------------------- SEPTEMBER 1, 1996
1992 1993 1994 1995(4) 1996 TO DECEMBER 31, 1996(6)
------- -------- -------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 11.77 $ 12.44 $ 12.10 $ 11.44 $ 13.41 $ 15.10
------- -------- -------- -------- -------- --------
Net Investment Income (1) 0.23 0.30 0.24 0.13 0.08 0.01
Net Realized and Unrealized Gain
(Loss) on Investments 0.89 1.12 (0.61) 1.96 1.85 2.14
------- -------- -------- -------- -------- --------
Total from Investment Operations 1.12 1.42 (0.37) 2.09 1.93 2.15
------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.15) (0.31) (0.29) (0.12) (0.09) (0.02)
Distributions from Net Realized
Gain on Investments Sold (0.30) (1.45) -- -- (0.15) (1.57)
------- -------- -------- -------- -------- --------
Total Distributions (0.45) (1.76) (0.29) (0.12) (0.24) (1.59)
------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 12.44 $ 12.10 $ 11.44 $ 13.41 $ 15.10 $ 15.66
======= ======== ======== ======== ======== ========
Total Investment Return
at Net Asset Value (2) 9.67% 12.64% (3.11%) 18.41% 14.49% 14.15%(7)
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $ 29,826 $ 65,010 $114,025 $114,723 $125,781 146,399
Ratio of Expenses
to Average Net Assets 2.07% 2.19% 2.06% 2.03% 1.90% 1.98%(5)
Ratio of Net Investment Income
to Average Net Assets 2.02% 2.53% 2.07% 1.09% 0.55% 0.10%(5)
Portfolio Turnover Rate 119% 107% 195% 99% 74% 26%
Average Broker Commission Rate (3) N/A N/A N/A N/A $ 0.0665 $ 0.0692
(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 2, 1994, John Hancock Advisers, Inc. became the investment adviser of the Fund.
(5) Annualized.
(6) Effective December 31, 1996, the fiscal period changed from August 31 to December 31.
(7) Not annualized.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
December 31, 1996
- ----------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Fund
on December 31, 1996. It's divided into three main categories: common stocks,
convertible preferred stocks and short-term investments. The common stocks and
convertible preferred stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's cash position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
<S> <C> <C> <C>
COMMON STOCKS
Aerospace (10.79%)
General Dynamics Corp. 100,000 $ 7,050,000
McDonnell Douglas Corp. 133,000 8,512,000
Northrop Grumman Corp. 80,000 6,620,000
United Technologies Corp. 170,000 11,220,000
------------
33,402,000
------------
Banks -- United States (8.38%)
AmSouth Bancorp. 100,000 4,837,500
Bankers Trust New York Corp. 50,000 4,312,500
Hibernia Corp. (Class A) 700,000 9,275,000
J.P. Morgan & Co., Inc. 70,000 6,833,750
National City Corp. 15,000 673,125
------------
25,931,875
------------
Beverages (1.70%)
PepsiCo, Inc. 180,000 5,265,000
------------
Business Services -- Misc (1.87%)
Block, H & R, Inc. 200,000 5,800,000
------------
Chemicals (2.70%)
Monsanto Co. 215,000 8,358,125
------------
Computers (4.38%)
Computer Associates
International, Inc. 27,000 1,343,250
Electronic Data Systems Corp. 63,000 2,724,750
Informix Corp.* 115,000 2,343,125
International Business
Machines Corp. 30,000 4,530,000
Oracle Corp.* 63,000 2,630,250
------------
13,571,375
------------
Cosmetics & Personal Care (2.52%)
Gillette Co. 60,000 4,665,000
International Flavors
& Fragrances, Inc. 70,000 3,150,000
------------
7,815,000
------------
Diversified Operations (3.06%)
Allied Signal, Inc. 95,700 6,411,900
Cognizant Corp. 70,000 2,310,000
Viad Corp. 45,000 742,500
------------
9,464,400
------------
Electronics (6.69%)
Amphenol Corp. (Class A)* 80,000 1,780,000
General Electric Co. 78,000 7,712,250
Honeywell, Inc. 55,000 3,616,250
Intel Corp. 4,000 523,750
Novellus Systems, Inc.* 40,000 2,167,500
Solectron Corp. 92,000 4,910,500
------------
20,710,250
------------
Finance (8.58%)
Dean Witter Discover & Co. 95,000 6,293,750
Financial Security Assurance
Holdings Ltd. 59,600 1,959,350
First USA, Inc. 200,000 6,925,000
Great Western Financial Corp. 200,000 5,800,000
Student Loan Marketing Assn. 60,000 5,587,500
------------
26,565,600
------------
Food (1.92%)
CPC International, Inc. 76,500 5,928,750
------------
Instruments -- Scientific (1.00%)
Millipore Corp. 75,000 3,103,125
------------
Insurance (3.35%)
Progressive Corp. 100,000 6,737,500
Travelers Group, Inc. 80,000 3,630,000
------------
10,367,500
------------
Leisure (4.15%)
Eastman Kodak Co. 160,000 12,840,000
------------
Medical (13.89%)
Baxter International, Inc. 120,000 4,920,000
Columbia/HCA Healthcare Corp. 45,600 1,858,200
Eli Lilly & Co. 140,000 10,220,000
Pfizer, Inc. 100,000 8,287,500
Pharmacia & Upjohn, Inc. 75,000 2,971,875
Schering-Plough Corp. 120,000 7,770,000
Warner-Lambert Co. 70,000 5,250,000
Wellpoint Health Networks, Inc. 50,000 1,718,750
------------
42,996,325
------------
Mortgage Banking (2.98%)
Federal Home Loan Mortgage Corp. 28,000 3,083,500
Federal National Mortgage Assn. 165,000 6,146,250
------------
9,229,750
------------
Oil & Gas (4.63%)
Exxon Corp. 30,000 2,940,000
Mobil Corp. 44,000 5,379,000
Phillips Petroleum Co. 100,000 4,425,000
Tosco Corp. 20,000 1,582,500
------------
14,326,500
------------
Paper & Paper Products (1.54%)
Kimberly-Clark Corp. 50,000 4,762,500
------------
Pollution Control (0.56%)
US Filter Corp.* 55,000 1,746,250
------------
Retail (2.14%)
Sears, Roebuck and Co. 55,000 2,536,875
Sysco Corp. 125,000 4,078,125
------------
6,615,000
------------
Telecommunications (4.23%)
A T & T Corp. 100,000 4,350,000
Comsat Corp. 110,000 2,708,750
Lucent Technologies, Inc. 130,200 6,021,750
------------
13,080,500
------------
Tobacco (3.00%)
Philip Morris Cos., Inc. 82,500 9,291,563
------------
Transport (0.15%)
Swift Transportation Co. 20,000 470,000
------------
TOTAL COMMON STOCKS
(Cost $211,067,771) (94.21%) 291,641,388
----- ------------
CONVERTIBLE PREFERRED STOCK
Broker Services (1.00%)
Salomon Inc., 7.625% 100,000 3,087,500
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(Cost $2,919,705) (1.00%) 3,087,500
----- ------------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000'S OMITTED) VALUE
- ------------------- -------- --------------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
(4.68%) Investment in a
joint repurchase agreement
transaction with Lehman
Brothers, Inc. Dated
12-31-96, Due 01-02-97
(secured by U.S. Treasury
Bonds, 7.25% thru 12.50%
due 08-15-14 thru
08-15-22) -- Note A 6.70% 14,480 $ 14,480,000
-------------
Corporate Savings Account
(0.00%) Investors Bank &
Trust Company Daily Interest
Savings Account Current
Rate 4.75% 823
-------------
TOTAL SHORT-TERM INVESTMENTS (4.68%) 14,480,823
----- -------------
TOTAL INVESTMENTS (99.89%) $ 309,209,711
===== =============
* Non-income producing security.
The percentage shown for each investment category is the total of that
category as a percentage of net assets of the fund.
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Growth and Income Fund
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. The Trust consists of three series portfolios: John Hancock
Growth and Income Fund (the "Fund"), John Hancock Sovereign Balanced
Fund and John Hancock Sovereign Investors. On June 25, 1996, the
Trustees voted to change the fiscal period end from August 31 to
December 31. This change was effective December 31, 1996. The other two
series of the Trust are reported in separate financial statements. 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 two classes of shares of
the Fund, designated as Class A and Class B. 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 and the Internal Revenue Service. Shareholders of a class,
which bears distribution and service expenses under the terms of a
distribution plan, have exclusive voting rights regarding such
distribution plan.
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.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative sizes of the funds.
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 appropriate 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.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
December 31, 1996, net sales charges received with regard to sales of
Class A shares amounted to $82,503. Out of this amount, $13,029 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $46,506 was paid as sales commissions to
unrelated broker-dealers and $22,968 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 ("JHMLICo"), is the
indirect sole shareholder of Distributors and was the indirect sole
shareholder until November 29, 1996 of 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 December 31, 1996, contingent
deferred sales charges amounted to $52,948.
In addition, to reimburse 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 and 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 Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of
JHMLICo. The Fund pays transfer agent fees based on transaction the
number of shareholder accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Funds. The compensation for 1996
is to be paid at an annual rate of 0.01875% of the average net assets of
the Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are trustees 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
December 31, 1996, the Fund's investments to cover the deferred
compensation liability had unrealized appreciation of $1,051.
The Fund had an independent advisory board established under an
agreement which expired in December, 1996, composed of certain retired
Directors who provided advice to the current Board of Directors. The
Fund paid the advisory board and its counsel a fee under this agreement.
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 December 31, 1996, aggregated $75,299,964 and
$76,924,784, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended December 31, 1996.
The cost of investments owned at December 31, 1996 (excluding the
corporate savings account) for federal income tax purposes was
$228,510,592. Gross unrealized appreciation and depreciation of
investments aggregated $83,733,735 and $3,035,439, respectively,
resulting in net unrealized appreciation of $80,698,296.
REPORT OF ERNST & YOUNG LLP, 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 of
the John Hancock Growth and Income Fund (the "Fund"), one of the
portfolios constituting John Hancock Investment Trust, including the
schedule of investments, as of December 31, 1996, and the related
statement of operations for the period from September 1, 1996 to
December 31, 1996 and for the year ended August 31, 1996, and the
statement of changes in net assets and the financial highlights for each
of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of December 31,
1996, by correspondence with the custodian and brokers, and other
appropriate auditing procedures when 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 portfolio
of John Hancock Investment Trust at December 31, 1996, the results of
its operations for the period from September 1, 1996 to December 31,
1996 and for the year ended August 31, 1996, and the changes in its net
assets and the financial highlights for each of the indicated periods,
in conformity with generally accepted accounting principles.
/S/ Ernst & Young LLP
Boston, Massachusetts
February 7, 1997
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, 1996 and
paid on December 28, 1996 a long-term capital gain dividend of
$23,296,993. Shareholders will receive a 1996 U.S. Treasury Department
Form 1099-DIV in January 1997 representing their proportionate share.
For the fiscal year ending December 31, 1996, 84% of the ordinary income
distributions qualify for the dividends received deduction.
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Growth and Income Fund. 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
Recycled Paper." 5000A 12/96
2/97
John Hancock Funds
Sovereign
Balanced
Fund
Annual Report
December 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, Jr.*
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, Inc.
1 John Hancock Way Ste 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
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
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:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although it
seems a long way off, the issue is serious enough that at least one
group has already studied the problem, and experts and politicians alike
have weighed in with a slew of prescriptions. Legislative action could
be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this: in
1950, there were 16 workers paying into the Social Security system for
each retiree collecting benefits. Today, there are three workers for
each retiree and by 2019 there will be two. Starting then, the Social
Security Administration estimates that the amount paid out in Social
Security benefits will start to be greater than the amount collected in
Social Security taxes. Compounding the issue is the fact that people are
retiring earlier and living longer.
The state of the system has already left many people, especially younger
and middle-aged workers, feeling insecure about Social Security. A
recent survey by the Employee Benefits Research Institute (EBRI) found
that 79% of current workers polled had little confidence in the ability
of Social Security to maintain the same level of benefits as those
received by today's retirees. Instead, they said they expect
to use their own savings or employer-sponsored pensions for their
retirement. Yet, remarkably, another EBRI survey revealed that only
slightly more than half of America's current workers are saving money
for retirement. Fewer than half own IRAs or participate in employer-
sponsored pension or savings plans.
No matter how Social Security's problems get solved, one thing is clear.
Americans need to rely on themselves for accumulating the bulk of their
retirement savings. There's no law that says you should have to reduce
your standard of living once you stop working. So we encourage you to
save all that you can now, so you can live the way you'd like to later.
Sincerely,
/S/EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By John Snyder and Barry Evans, CFA, Co-Portfolio Managers
John Hancock
Sovereign Balanced Fund
Stocks post strong gains, while bonds turn in
more modest returns; 1997 calls for cautious optimism
Once again, stock investors had much to cheer about in 1996. The Dow
Jones Industrial Average soared 28.91%, with reinvested dividends, while
the Standard & Poor's 500-Stock Index climbed 22.95%. Added to 1995's
gains of more than 30%, stock investors have enjoyed impressive two-year
gains of more than 50%. While those returns are certainly cause for
celebration, the mood wasn't always festive. Sentiment swung sharply as
investors tried to figure out where the economy was headed. Stock prices
dropped as weaker economic reports sparked fears of a slowing economy --
and then rallied as stronger-than-expected news reassured investors that
the economy was on track.
Bonds, on the other hand, didn't have as much to celebrate. After
stellar double-digit returns in 1995, bonds turned in only mediocre
performance in 1996. Early in the year, investors expected the Federal
Reserve to revive the slow-growth economy with a series of interest-rate
cuts. But soon after the Fed's quarter-point reduction on January 31, it
became apparent that the economy was stronger than expected. As
inflation fears heated up, bond prices fell throughout the first half of
the year. In the late summer, however, economic reports showed that
growth was moderating and bonds rebounded.
"...stock
investors
have enjoyed
impressive
two-year
gains..."
A 2 1/4" x 3 3/4" photo of John F. Snyder III centered at bottom of
page. Caption reads: Sovereign Balanced Fund management team members:
(l-r) Anne McDermott, John Snyder, Barry Evans, Jere Estes."
In this environment, John Hancock Sovereign Balanced Fund delivered
solid results, although it slightly lagged its peers. For the year ended
December 31, 1996, the Fund's Class A and Class B shares posted total
returns of 12.13% and 11.46%, respectively, at net asset value. By
comparison, the average balanced fund had a total return of 13.76%,
according to Lipper Analytical Services.1 Please see pages six and seven
for longer-term performance information.
Pie chart entitled "Portfolio Diversification" at top left hand column.
The chart is divided into three sections: Going from top left to right;
Stocks 60%; Bonds 32%; Short-Term Investments & Others 8%. A footnote
below reads: "As a percentage of net assets on December 31, 1996."
"Throughout
the year, we
continued
to reduce
our bond
exposure..."
Stocks: Tracking performance
John Hancock Sovereign Balanced Fund turned in an especially strong
performance in the first three quarters of the year, thanks to the
market's "flight to quality." During periods of uncertainty, as we
experienced this year, investors tend to flock to large, high-quality
stocks with reliable earnings -- the type of stocks that the Fund
invests in. General Electric is a perfect example. Investors have been
attracted to the company's consistently improving revenues and profits.
The stock was up nearly 38% for the year. Procter & Gamble was another
winner. By gaining market share both domestically and globally, this
consumer products powerhouse has been able maintain its solid earnings
growth.
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 General Electric followed by an up arrow and the phrase "Improving
sales/earnings". The second listing is Procter & Gamble followed by an
up arrow and the phrase "Market share gains." The third listing is Sysco
followed by a down arrow and the phrase "Margin squeeze impact
earnings." A footnote below reads: "See "Schedule of Investments."
Investment holdings are subject to change."
Conditions in the fourth quarter, however, took some shine off the
Fund's strong overall performance. Technology stocks -- which make up
14% of the S&P 500 -- led the market during the last quarter of the
year. While many of our competitors have sizable holdings in the sector,
we own virtually no technology stocks. Technology stocks just don't meet
our fundamental investment criterion of having increased dividends
consistently. Given that, we didn't participate fully in the stock
market's year-end rally.
Trimming large stock holdings,
diversifying the portfolio
In the past several months, we have pared back some of the Fund's
largest stock holdings, such as PepsiCo and NationsBank, in favor of new
investments. Not only did we want to take profits, but we also wanted to
diversify the portfolio. In selecting new stocks, we've targeted
companies that are -- and can remain -- leaders in their industry. With
pricing power diminishing, companies must find other ways to grow
earnings such as increasing market share, restructuring businesses or
going global.
Bonds: Reducing exposure, adjusting duration
Throughout the year, we continued to reduce our bond exposure to
increase our investment in stocks. We believed that stocks offered much
more upside potential, and that was certainly the case this year. By the
end of 1996, our stake in bonds had fallen to 32% from 38% at the start
of the year.
As market conditions changed throughout the year, so did our investment
strategy. To protect against rising rates in the first half of the year,
we shortened the Fund's duration to 4.2 years from 4.8 years. Duration
is a measure of how sensitive a bond's price, and therefore the Fund's
share price, is to interest-rate changes. The shorter the duration, the
less the bond's price falls when interest rates rise (and rises when
rates fall.)
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended December 31,
1996." The chart is scaled in increments of 5% from bottom to top, with
15% at the top and 0% at the bottom. Within the chart, there are three
solid bars. The first represents the 12.13% total return for John
Hancock Sovereign Balanced Fund: Class A. The second represents the
11.46% total return for John Hancock Sovereign Balanced Fund: Class B.
The third represents the 13.76% return for the average balanced fund.
The footnote below states: "Total returns for John Hancock Sovereign
Balanced Fund are at net asset value with all distributions reinvested.
The average balanced fund is tracked by Lipper Analytical Services. See
following two pages for historical performance information."
With evidence of slower growth in the second half, we then extended our
duration out to five years by buying longer-term Treasuries. With a
longer duration, the Fund was well-positioned to take advantage of the
bond market's fall rally. In early December, however, increasing market
jitters signaled to us that the bond market's rally would not last
through year-end. Given that, we shortened to a more neutral duration of
4.8 years, which paid off as bonds retreated in late December.
Outlook
Looking to 1997, we do not believe that inflation presents a real
threat. Many of the factors that drove consumer spending in 1996 -- such
as refinancing activity and tax refunds -- are no longer in place.
Consumers are strapped with mounds of debt. Therefore, spending is
likely to remain at modest levels as evidenced by the slow Christmas
season. Since consumer spending accounts for nearly two-thirds of the
gross domestic product (GDP), lackluster spending is likely to keep a
lid on economic growth and inflation.
On the bond side, we're cautiously optimistic. With the dividend yield
on the S&P 500 dipping below 2%, bonds offer more attractive yields than
stocks. In addition, yields in many overseas bond markets have fallen to
extremely low levels. As a result, foreign investors, particularly
governments, are likely to continue purchasing large amounts of
Treasuries. In the near term, however, inflation worries could keep the
bond market jittery. So for now, we'll maintain our current bond
position.
On the stock side, slower growth is likely to result in more earnings
disappointments in 1997. Large-cap companies that can grow earnings in
the double digits will be the exception, not the rule. As corporate
earnings begin to decline, high-quality growth stocks with steady
earnings will become even more attractive to investors.
"...we do
not believe
that inflation
presents a
real threat."
- ----------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. Of course, the
managers' 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 Sovereign Balanced
Fund. Total return is a performance measure that equals the sum of all
income and capital gain distributions, assuming reinvestment of these
distributions and the change in the price 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. 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 December 31, 1996
ONE LIFE OF
YEAR FUND
------ --------
John Hancock Sovereign
Balanced Fund: Class A 6.51% 45.55%(1)
John Hancock Sovereign
Balanced Fund: Class B 6.46% 46.94%(1)
AVERAGE ANNUAL TOTAL RETURNS
For the period ended December 31, 1996
ONE LIFE OF
YEAR FUND
------ --------
John Hancock Sovereign
Balanced Fund: Class A 6.51% 9.26%(1)
John Hancock Sovereign
Balanced Fund: Class B 6.46% 9.50%(1)
YIELDS
As of December 31, 1996
SEC 30-DAY
YIELD
-------
John Hancock Sovereign
Balanced Fund: Class A 2.56%
John Hancock Sovereign
Balanced Fund: Class B 1.97%
Notes to Performance
Notes to Performance
(1) Class A and B shares started on October 5, 1992.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Sovereign Balanced Fund would be worth on December 31, 1996.
They assume that you either had invested on the day each class of shares
started, or that you have been invested for the most recent 10 years. In
either case, they also assume that you 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 used often as a measure
of stock market performance.
Sovereign Balanced Fund
Class A shares
Line chart with the heading Sovereign Balanced Fund: Class A,
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 $19,801 as of December 31, 1996. The second line represents
the value of the hypothetical $10,000 investment made in the Sovereign
Balanced Fund on October 5, 1992, before sales charge, and is equal to
$15,326 as of December 31, 1996. The third line represents the value of
the hypothetical $10,000 investment made in the Sovereign Balanced Fund
on October 5, 1992, after sales charge, and is equal to $14,555 as of
December 31, 1996.
Sovereign Balanced Fund
Class B shares
Line chart with the heading Sovereign Balanced 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 $19,801 as of December 31, 1996. The second line represents
the value of the hypothetical $10,000 investment made in the Sovereign
Balanced Fund, before sales charge, on October 5, 1992, and is equal to
$14,894 as of December 31, 1996. The third line represents the value
of the hypothetical $10,000 investment made in the Sovereign Balanced
Fund on October 5, 1992, after sales charge, and is equal to $14,694 as
of December 31, 1996.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Balanced Fund
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 December 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
December 31, 1996
- ------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common and preferred stocks
(cost - $73,049,119) $ 97,676,675
Corporate bonds (cost - $30,428,867) 30,126,051
United States government and
agencies obligations (cost - $22,311,123) 22,281,327
Joint repurchase agreement (cost - $11,719,000) 11,719,000
Corporate savings account 460
-------------
161,803,513
Receivable for shares sold 10,718
Interest receivable 1,233,168
Dividends receivable 174,055
Foreign tax receivable 1,679
Other assets 9,418
Deferred organization expenses - Note A 18,208
-------------
Total Assets 163,250,759
- ------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 918,707
Payable for shares repurchased 36,995
Dividend payable 1,034
Payable to John Hancock Advisers, Inc. and
and affiliates - Note B 138,417
Accounts payable and accrued expenses 57,893
-------------
Total Liabilities 1,153,046
- ------------------------------------------------------------------------
Net Assets:
Capital paid-in $ 135,173,496
Accumulated net realized gain on investments 2,636,267
Net unrealized appreciation of investments 24,295,779
Distributions in excess of net investment income (7,829)
-------------
Net Assets $ 162,097,713
========================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - 30,000,000 shares authorized
per class with $0.01 par value per share)
Class A - $71,242,415 / 5,805,051 $ 12.27
========================================================================
Class B - $90,855,298 / 7,404,823 $ 12.27
========================================================================
Maximum Offering Price *
Class - A ($12.27 x 105.26%) $ 12.92
========================================================================
* On a single retail sale 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 (losses) for the period stated.
Statement of Operations
Year ended December 31, 1996
- ------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest $ 5,005,723
Dividends (net of foreign withholding
taxes of $5,037) 2,371,420
-----------
7,377,143
-----------
Expenses:
Investment management fee - Note B 956,674
Distribution/service fee - Note B
Class A 211,127
Class B 890,698
Transfer agent fee - Note B 372,293
Registration and filing fees 53,871
Custodian fee 44,742
Printing 33,250
Auditing fee 31,000
Financial services fee - Note B 29,896
Organization expense - Note A 23,962
Miscellaneous 15,198
Trustees' fees 14,749
Legal fees 9,453
-----------
Total Expenses 2,686,913
- ------------------------------------------------------------------------
Net Investment Income 4,690,230
- ------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 8,918,977
Change in net unrealized appreciation/depreciation
of investments 4,175,398
-----------
Net Realized and Unrealized
Gain on Investments 13,094,375
- ------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $17,784,605
========================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1996
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $ 5,360,939 $ 4,690,230
Net realized gain on investments sold 1,018,778 8,918,977
Change in net unrealized appreciation/
depreciation of investments 25,174,426 4,175,398
------------ ------------
Net Increase in Net Assets Resulting
from Operations 31,554,143 17,784,605
------------ ------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.4373 and $0.4113
per share, respectively) (2,613,933) (2,342,425)
Class B - ($0.3632 and $0.3257
per share, respectively) (2,759,067) (2,357,069)
Dividends from net realized
gain on investments sold
Class A - (none and $0.4733
per share, respectively) -- (2,627,891)
Class B - (none and $0.4733
per share, respectively) -- (3,369,351)
------------ ------------
Total Distributions to Shareholders (5,373,000) (10,696,736)
------------ ------------
From Fund Share Transactions - Net* (9,671,500) (2,627,744)
------------ ------------
Net Assets:
Beginning of period 141,127,945 157,637,588
------------ ------------
End of period (including undistributed
net investment income of $ 1,435 and
and distributions in excess of net
investment income of $7,829, respectively) $157,637,588 $162,097,713
============ ============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1995 1996
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 731,880 $ 8,003,387 816,219 $ 9,909,760
Shares issued to shareholders
in reinvestment of distributions 225,314 2,478,514 391,011 4,778,423
--------- ------------ --------- -------------
957,194 10,481,901 1,207,230 14,688,183
Less shares repurchased (1,309,813) (14,133,563) (1,345,458) (16,427,737)
--------- ------------ --------- -------------
Net decrease (352,619) ($ 3,651,662) (138,228) ($ 1,739,554)
========= ============ ========= =============
CLASS B
Shares sold 752,142 $ 8,157,490 839,251 $ 10,238,843
Shares issued to shareholders
in reinvestment of distributions 222,136 2,441,524 425,371 5,201,478
--------- ------------ --------- -------------
974,278 10,599,014 1,264,622 15,440,321
Less shares repurchased (1,542,113) (16,618,852) (1,338,200) (16,328,511)
--------- ------------ --------- -------------
Net decrease (567,835) ($ 6,019,838) ( 73,578) ($ 888,190)
========= ============ ========= =============
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 Fund shares sold, reinvested and redeemed
during the last two periods, along with the corresponding dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each period indicated,
investment returns, key ratios and supplemental data are as follows:
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1992(1) 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 10.00 $ 10.19 $ 10.74 $ 9.84 $ 11.75
------- ------- ------- ------- -------
Net Investment Income 0.04(2) 0.46 0.50 0.44(2) 0.41(2)
Net Realized and Unrealized Gain
(Loss) on Investments 0.20 0.68 (0.88) 1.91 0.99
------- ------- ------- ------- -------
Total from Investment Operations 0.24 1.14 (0.38) 2.35 1.40
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (0.05) (0.45) (0.50) (0.44) (0.41)
Distributions from Net Realized Gain
on Investments Sold -- (0.14) (0.02) -- (0.47)
------- ------- ------- ------- -------
Total Distributions (0.05) (0.59) (0.52) (0.44) (0.88)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 10.19 $ 10.74 $ 9.84 $ 11.75 $ 12.27
======= ======= ======= ======= =======
Total Investment Return
at Net Asset Value (3) 2.37%(4) 11.38% (3.51%) 24.23% 12.13%
Total Adjusted Investment Return
at Net Asset Value (3,5) 2.34%(4) -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $ 5,796 $62,218 $61,952 $69,811 $71,242
Ratio of Expenses to Average Net Assets 2.79%(6) 1.45% 1.23% 1.27% 1.29%
Ratio of Adjusted Expenses
to Average Net Assets (7) 2.94%(6) -- -- -- --
Ratio of Net Investment Income
to Average Net Assets 3.93%(6) 4.44% 4.89% 3.99% 3.33%
Ratio of Adjusted Net Investment
Income to Average Net Assets (7) 3.78%(6) -- -- -- --
Portfolio Turnover Rate 0% 85% 78% 45% 80%
Fee Reduction Per Share $0.0016 N/A N/A N/A N/A
Average Brokerage Commission Rate (8) N/A N/A N/A N/A $0.0700
The Financial Highlights summarizes the impact of the following factors on a single share for each 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.
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1992(1) 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 10.00 $ 10.20 $ 10.75 $ 9.84 $ 11.74
------- ------- ------- ------- -------
Net Investment Income 0.03(2) 0.37 0.43 0.36(2) 0.32(2)
Net Realized and Unrealized Gain
(Loss) on Investments 0.20 0.70 (0.89) 1.90 1.01
------- ------- ------- ------- -------
Total from Investment Operations 0.23 1.07 ( 0.46) 2.26 1.33
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (0.03) (0.38) (0.43) (0.36) (0.33)
Distributions from Net Realized Gain
on Investments Sold -- (0.14) (0.02) -- (0.47)
------- ------- ------- ------- -------
Total Distributions (0.03) (0.52) (0.45) (0.36) (0.80)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 10.20 $ 10.75 $ 9.84 $ 11.74 $ 12.27
======= ======= ======= ======= =======
Total Investment Return
at Net Asset Value (3) 2.29%(4) 10.63% ( 4.22%) 23.30% 11.46%
Total Adjusted Investment Return
at Net Asset Value (3,5) 2.26%(4) -- -- -- --
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $14,311 $78,775 $79,176 $87,827 $90,855
Ratio of Expenses to Average Net Assets 3.51%(6) 2.10% 1.87% 1.96% 1.99%
Ratio of Adjusted Expenses
to Average Net Assets(7) 3.66%(6) -- -- -- --
Ratio of Net Investment Income
to Average Net Assets 3.21%(6) 4.01% 4.25% 3.31% 2.63%
Ratio of Adjusted Net Investment Income
to Average Net Assets(7) 3.06%(6) -- -- -- --
Portfolio Turnover Rate 0% 85% 78% 45% 80%
Fee Reduction Per Share $0.0012 N/A N/A N/A N/A
Average Brokerage Commission Rate(8) N/A N/A N/A N/A $0.0700
(1) Class A and Class B shares commenced operations on October 5, 1992. This period is covered by the report of
other independent auditors (not included herein).
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) Not annualized.
(5) An estimated total return calculated that does not take into consideration fee reductions by adviser
during the periods shown.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
December 31, 1996
Per share earnings and dividends and their compound growth rates are shown for the most
recently reported ten year periods on common stocks, as well as price/earnings ratios,
but are unaudited.
- ---------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Sovereign
Balanced Fund on December 31, 1996. It's divided into five main categories: common
stocks, preferred stocks, corporate bonds, U.S. government and agencies obligations
and short-term investments. The common stocks are further broken down by industry
group. Short-term investments, which represent the Fund's "cash" position, are
listed last.
COMPOUND
NUMBER GROWTH MARKET
OF SHARES RATE VALUE
- --------- ------- ------
<S> <C> <C> <C> <C>
COMMON STOCKS (59.48%)
Advertising (1.46%)
50,000 Interpublic Group of Cos., Inc.
(The) @ 47 1/2 $2,375,000
------------
One of the largest advertising agencies
in the world
Earnings P/S $ .75, .91, 1.05, 1.12, 1.23, 1.43, 1.49, 1. 11.30%
Dividends P/S $ .22, .26, .32, .37, .41, .45, .49, .55, .6 13.20%
Price/Earnings Ratio 24.6
Banks (4.89%)
44,000 Banc One Corp. @ 43 1,892,000
Ohio-based bank holding company
Earnings P/S $ 1.19, 1.56, 1.66, 1.83, 1.65, 2.07, 2.44, 11.40%
Dividends P/S $ .45, .50, .57, .63, .70, .81, .98, 1.13, 1 13.10%
Price/Earnings Ratio 14
70,000 First Tennessee National
Corp. @ 37 1/2 2,625,000
Tennessee-based bank holding company
Earnings P/S $ .78, 1.10, .65, .98, 1.26, 1.76, 1.52, 2.0 14.10%
Dividends P/S $ .40, .43, .49, .54, .57, .63, .75, .87, .9 11.90%
Price/Earnings Ratio 14.8
20,000 NationsBank Corp. @ 97 3/4 1,955,000
Largest superregional bank in the Southeast
Earnings P/S $ 2.01, 2.87, 4.44, 2.61, .76, 2.60, 4.55, 6 16.10%
Dividends P/S $ .86, .94, 1.10, 1.42, 1.48, 1.51, 1.64, 1. 12.10%
Price/Earnings Ratio 13.2
40,000 Southern National Corp. @ 36 1/4 1,450,000
Multi-bank holding company
Earnings P/S $ .95, 1.13, 1.14, 1.12, 1.19, 1.61, 2.06, . 11.50%
Dividends P/S $ .34, .36, .39, .42, .46, .50, .64, .74, .8 12.70%
Price/Earnings Ratio 13.9
------------
7,922,000
------------
Capital Goods (4.35%)
30,000 Dover Corp. @ 50 1/4 1,507,500
Manufactures a variety of specialized
industrial products
Earnings P/S $ .83, 1.11, 1.14, 1.28, 1.12, 1.08, 1.32, 1 16.70%
Dividends P/S $ .26, .31, .35, .38, .41, .43, .45, .49, .5 10.50%
Price/Earnings Ratio 14.8
70,000 Pall Corp. @ 25 1/2 1,785,000
Manufactures filtration and
separation devices
Earnings P/S $ .50, .50, .50, .58, .68, .81, .69, .88, 1. 10.50%
Dividends P/S $ .11, .13, .16, .19, .22, .27, .32, .37, .4 18.10%
Price/Earnings Ratio 20.8
116,500 Pentair, Inc. @ 32 1/4 $3,757,125
Manufactures enclosures for electrical
equipment, electronic, woodworking and
power tool equipment
Earnings P/S $ .65, 1.12, .95, .80, 1.01, 1.06, 1.19, 1.2 11.40%
Dividends P/S $ .21, .22, .27, .29, .31, .33, .34, .36, .4 10.10%
Price/Earnings Ratio 17.1
------------
7,049,625
------------
Chemicals (3.08%)
20,000 Air Products And Chemicals @ 69 1/8 1,382,500
Producer of industrial and speciality
chemicals and gases
Earnings P/S $ .04, 1.95, 2.02, 2.08, 2.23, 2.45, 1.76, 2 14.00%
Dividends P/S $ .45, .55, .63, .69, .75, .83, .89, .95, 1. 10.10%
Price/Earnings Ratio 18.6
25,000 E.I. du Pont de Nemours and
Co. @ 94 3/8 2,359,375
Nations largest chemical manufacturer
Earnings P/S $ 2.46, 3.03, 3.53, 3.40, 3.13, 1.32, .23, 3 10.60%
Dividends P/S $ 1.10, 1.23, 1.45, 1.62, 1.68, 1.74, 1.76, 8.20%
Price/Earnings Rat 16.7
20,000 Sigma-Aldrich Corp. @ 62 7/16 1,248,750
Manufacturer of biochemical and organic
products used for research and diagnostics
Earnings P/S $ .425, .575, .65, .72, .62, .93, 1.04, 1.11 14.50%
Dividends P/S $ .075, .085, .095, .10, .115, .13, .15, .17 13.10%
Price/Earnings Ratio 20.6
------------
4,990,625
------------
Commercial Services (1.21%)
60,000 Sysco Corp. @ 32 5/8 1,957,500
------------
Largest distributor of food service products.
Earnings P/S $ .45, .60, .73, .76, .86, .95, 1.10, 1.24, 14.90%
Dividends P/S $ .07, .08, .09, .10, .14, .22, .28, .36, .4 25.00%
Price/Earnings Ratio 20.6
Computer and Office Equipment (2.75%)
60,000 Alco Standard Corp. @ 51 5/8 3,097,500
Distributor of office and paper products
Earnings P/S $ .84, 1.15, 1.96, .91, .98, 1.11, (.025), . 3.40%
Dividends P/S $ .26, .28, .31, .34, .36, .37, .39, .41, .4 6.30%
Price/Earnings Ratio 36.1
25,000 Pitney Bowes, Inc. @ 54 1/2 1,362,500
Manufactures office automation equipment
Earnings P/S $ 1.27, 1.54, 1.19, 1.34, 1.77, 1.87, 1.89, 10.10%
Dividends P/S $ .38, .46, .52, .60, .68, .78, .90, 1.04, 1 15.40%
Price/Earnings Ratio 18.4
------------
4,460,000
------------
Consumer Durables (1.12%)
100,000 Worthington Industries, Inc. @ 18 1/8 1,812,500
------------
Manufactures metals and plastic products
Earnings P/S $ .61, .70, .61, .64, .52, .68, .86, 1.10, 1 4.80%
Dividends P/S $ .17, .19, .23, .26, .28, .32, .34, .39, .4 20.80%
Price/Earnings Ratio 20.7
Consumer Non-Durables (7.26%)
30,000 Archer-Daniel Midland Co. @ 22 660,000
Processes and merchandises
agricultural products
Earnings P/S $ .62, .75, .85, .75, .78, .79, .80, 1.00, 1 5.20%
Dividends P/S $ .028, .029, .034, .048, .05, .053, .056, . 23.90%
Price/Earnings Ratio 22.8
15,000 ConAgra, Inc. @ 49 3/4 746,250
Leader in frozen and processed foods and
distributes agricultural supplies
Earnings P/S $ .85, 1.08, 1.25, 1.33, 1.45, 1.55, 1.62, 1 1.20%
Dividends P/S $ .27, .31, .36, .42, .48, .56, .65, .75, .8 15.50%
Price/Earnings Ratio 52.2
35,000 CPC International, Inc. @ 77 1/2 2,712,500
Major international food processor
Earnings P/S $ 2.17, 1.84, 2.11, 2.42, 2.56, 2.73, 2.90, 6.00%
Dividends P/S $ .65, .76, .88, 1.00, 1.10, 1.20, 1.28, 1.3 10.40%
Price/Earnings Ratio 21.3
25,000 Kimberly-Clark Corp. @ 95 1/4 2,381,250
Leading producer of consumer and
personal care products
Earnings P/S $ 1.87, 2.36, 2.63, 2.70, 3.01, 3.37, 1.95, NMF
Dividends P/S $ .70, .78, 1.26, 1.32, 1.48, 1.59, 1.67, 1. 11.30%
Price/Earnings Rat 17.2
70,000 PepsiCo, Inc. @ 29 1/4 2,047,500
Second largest soft drink company
Earnings P/S $ .38, .49, .57, .68, .68, .82, .87, 1.07, 1 8.60%
Dividends P/S $ .11, .14, .16, .19, .23, .26, .31, .35, .3 16.90%
Price/Earnings Ratio 36.1
30,000 Procter & Gamble Co.
(The) @ 107 1/2 3,225,000
Leading producer of household
consumer products
Earnings P/S $ .46, 1.48, 1.74, 2.25, 2.23, 2.43, 2.43, . 28.60%
Dividends P/S $ .68, .70, .83, .93, 1.00, 1.08, 1.17, 1.32 10.70%
Price/Earnings Ratio 24.6
------------
11,772,500
------------
Diversified Operations (0.80%)
50,000 Federal Signal Corp. @ 25 7/8 1,293,750
------------
Manufactures fire trucks and street sweepers,
as well as public safety, signaling
and communications equipment
Earnings P/S $ .32, .41, .50, .66, .65, .73, .74, .97, 1. 16.00%
Dividends P/S $ .15, .16, .19, .22, .27, .32, .36, .42, .5 16.20%
Price/Earnings Ratio 20.7
Electrical Equipment (8.24%)
40,000 AMP, Inc. @ 38 3/8 1,535,000
World's largest manufacturer of electrical/
electronic connectors
Earnings P/S $ 1.16, 1.48, 1.32, 1.35, 1.24, 1.26, 1.41, 6.30%
Dividends P/S $ .43, .50, .60, .68, .72, .76, .80, .84, .9 9.80%
Price/Earnings Ratio 19.9
34,000 Emerson Electric Co. @ 96 3/4 3,289,500
Produces and sells electrical/electronic
products and systems
Earnings P/S $ 2.00, 2.31, 2.63, 2.75, 2.83, 2.96, 3.15, 9.60%
Dividends P/S $ .98, 1.03, 1.16, 1.28, 1.34, 1.40, 1.47, 1 8.30%
Price/Earnings Ratio 22.1
36,000 General Electric Co. @ 98 7/8 3,559,500
Dominant force in home appliances,
electrical power and financial services
Earnings P/S $ 1.60, 1.88, 2.18, 2.43, 2.54, 2.54, 2.33, 11.50%
Dividends P/S $ .65, .70, .82, .94, 1.02, 1.12, 1.26, 1.44 12.30%
Price/Earnings Ratio 23.4
50,000 Hubbell Inc. Class B @ 43 1/4 2,162,500
Manufacturer of electrical and
electronic products
Earnings P/S $ .85, .97, 1.13, 1.26, 1.27, 1.39, 1.44, 1. 10.20%
Dividends P/S $ .375, .425, .535, .625, .70, .755, .775, . 11.80%
Price/Earnings Ratio 20.8
35,000 W.W. Grainger, Inc. @ 80 1/4 2,808,750
Leading distributor of electrical equipment
Earnings P/S $ 1.48, 1.57, 1.96, 2.19, 2.36, 2.55, 2.76, 11.50%
Dividends P/S $ .39, .43, .50, .57, .61, .65, .71, .78, .8 10.80%
Price/Earnings Ratio 20.4
------------
13,355,250
------------
Energy (3.75%)
15,000 Exxon Corp. @ 98 1,470,000
Major factor in the crude oil, natural gas
and chemical industry
Earnings P/S $ 3.43, 4.01, 3.43, 3.10, 4.79, 3.59, 4.13, 5.10%
Dividends P/S $ 1.90, 2.15, 2.30, 2.47, 2.68, 2.83, 2.88, 5.70%
Price/Earnings Ratio 18.5
70,000 Questar Corp. @ 36 3/4 2,572,500
Diversified holding company for Utah,
Wyoming and Colorado natural
gas transmission, distribution and storage
Earnings P/S $ .67, .64, 1.27, 1.46, 1.69, 1.59, 2.24, 1. 14.60%
Dividends P/S $ .91, .94, .95, .97, 1.01, 1.04, 1.09, 1.13 3.00%
Price/Earnings Ratio 16.7
20,000 Shell Transport & Trading Co. PLC,
American Depositary Receipts
@ 102 3/8 2,047,500
Explores, processes and delivers petroleum
Earnings P/S* $ 3.34, 2.99, 3.57, 3.48, 3.45, 3.18, 2.68, 3.60%
Dividends P/S** $ 16.0, 17.0, 18.4, 20.1, 20.9, 21.9, 24.0, 9.00%
Price/Earnings Ratio 15.7
* Earnings per share per ADR in $
** Dividends in pence per ordinary share
------------
6,090,000
------------
Finance (0.69%)
30,000 Federal National Mortgage
Association @ 37 1/4 1,117,500
------------
Issues and sells guaranteed
mortgage-backed securities
Earnings P/S $ 1.55, 2.11, 3.10, 4.49, 1.30, 1.45, 1.76, 4.10%
Dividends P/S $ .03, .06, .11, .18, .26, .35, .46, .60, .6 43.20%
Price/Earnings Ratio 16.8
Healthcare (6.45%)
50,000 Abbott Laboratories @ 50 3/4 2,537,500
Major pharmaceutical and healthcare firm
Earnings P/S $ .70, .84, .97, 1.11, 1.23, 1.42, 1.63, 1.8 14.40%
Dividends P/S $ .24, .29, .34, .40, .48, .58, .66, .74, .8 16.20%
Price/Earnings Rat 22.1
72,000 Johnson & Johnson @ 49 3 /4 3,582,000
Major producer of prescription and
non-prescription drugs, toiletries, and medical
instruments and supplies
Earnings P/S $ .59, .71, .80, .86, 1.07, 1.20, 1.35, 1.53 15.30%
Dividends P/S $ .20, .24, .28, .33, .39, .45, .51, .57, .6 15.70%
Price/Earnings Ratio 24.2
15,000 Medtronic, Inc. @ 68 1,020,000
Leading manufacturer of medical devices
and instruments
Earnings P/S $ .79, .92, 1.01, .51, .63, .81, .92, 1.13, 11.40%
Dividends P/S $ .06, .07, .09, .10, .12, .14, .17, .21, .2 20.40%
Price/Earnings Ratio 33.5
40,000 Pfizer, Inc. @ 82 7/8 3,315,000
Leading ethical pharmaceutical producer
Earnings P/S $ 1.02, 1.18, 1.01, 1.19, 1.30, 1.21, .99, 2 12.10%
Dividends P/S $ .45, .50, .55, .60, .66, .74, .84, .94, 1. 11.50%
Price/Earnings Ratio 29
------------
10,454,500
------------
Information Processing (1.59%)
60,000 Automatic Data Processing,
Inc. @ 42 7/8 2,572,500
------------
Largest independent computing services
firm in the U.S.
Earnings P/S $ .54, .62, .72, .74, .83, .94, 1.07, 1.22, 12.90%
Dividends P/S $ .11, .13, .15, .17, .20, .23, .26, .29, .3 16.10%
Price/Earnings Ratio 27.1
Information Services (1.37%)
30,000 Electronic Data Systems
Corp. @ 43 1/4 1,297,500
Provides information technology services to
companies worldwide
Earnings P/S $.66, .79, .91, 1.04, 1.10, 1.29, 1.46, 1.64 3.40%
Dividends P/S $ .13, .17, .24, .28, .32, .36, .40, .48, .5 18.50%
Price/Earnings Ratio 53
20,000 McGraw-Hill Companies,
Inc. @ 46 1/8 922,500
Provides informational products and services
for business and industry
Earnings P/S $ 1.64, 1.92, .91, 1.77, 1.58, 1.58, .12, 2. 4.50%
Dividends P/S $ .84, .92, 1.00, 1.08, 1.10, 1.12, 1.14, 1. 5.20%
Price/Earnings Ratio 19.2
------------
2,220,000
------------
Insurance (3.13%)
35,000 AFLAC Corp. @ 42 3/4 1,496,250
Global Specialty insurer
Earnings P/S $ .62, .72, .53, .77, .92, 1.15, 1.44, 1.81, 16.10%
Dividends P/S $ .12, .13, .15, .18, .20, .23, .26, .30, .3 14.00%
Price/Earnings Ratio 18.2
10,000 General Re Corp. @ 157 3/4 1,577,500
Broadly based reinsurance organization
Earnings P/S $ 5.04, 5.04, 6.52, 6.89, 7.12, 7.20, 7.88, 8.80%
Dividends P/S $ 1.00, 1.20, 1.36, 1.52, 1.68, 1.80,1.88, 1 8.20%
Price/Earnings Ratio 14.3
34,700 Reliastar Financial Corp. @ 57 3/4 2,003,925
Financial services company engaged in
life/health insurance and consumer finance
Earnings P/S $ 1.86, 1.58, 2.07, 1.99, 1.71, 1.92, 2.44, 11.30%
Dividends P/S $ .47, .57, .59, .65, .69, .73, .79, .88, .9 9.80%
Price/Earnings Ratio 11.5
------------
5,077,675
------------
Packaging (2.14%)
45,000 Bemis Co. @ 36 7/8 1,659,375
Producer of a broad range of flexible
packaging and equipment and pressure
sensitive materials
Earnings P/S $ .59, .74, .90, .99, .98, 1.14, .84, 1.33, 13.50%
Dividends P/S $ .18, .22, .30, .36, .42, .46, .50, .54, .6 16.70%
Price/Earnings Ratio 20
70,000 Sonoco Products Co. @ 25 7/8 1,811,250
Leading manufacturer of containers,
paper products and packaging
Earnings P/S $ .77, 1.10, 1.18, .52, 1.07, 1.13, .99, 1.2 10.00%
Dividends P/S $ .21, .30, .39, .43, .44, .48, .50, .53, .5 13.40%
Price/Earnings Ratio 14.7
------------
3,470,625
------------
Retail (2.26%)
82,000 Pep Boys-Manny, Moe & Jack
(The) @ 30 3/4 2,521,500
Retailer of automotive parts and accessories
Earnings P/S $ .62, .76, .63, .70, .64, .87, 1.01, 1.27, 10.90%
Dividends P/S $ .08, .09, .11, .12, .13, .14, .15, .17, .1 11.30%
Price/Earnings Ratio 18.3
50,000 Wal-Mart Stores, Inc. @ 22 7/8 1,143,750
Operates chain of discount department stores
Earnings P/S $ .28, .37, .48, .55, .64, .80, .97, 1.11, 1 18.30%
Dividends P/S $ .03, .04, .06, .07, .09, .11, .13, .17, .2 24.10%
Price/Earnings Ratio 18.8
------------
3,665,250
------------
Telecommunications (1.45%)
32,000 Century Telephone Enterprises,
Inc. @ 30 7/8 988,000
Louisiana based telecommunications
company
Earnings P/S $ .60, .58, .51, .67, .63, .72, 1.09, 1.39, 15.20%
Dividends P/S $ .253, .264, .272, .280, .287, .293, .310, 9.00%
Price/Earnings Ratio 14.2
60,000 Frontier Corp. @ 22 5/8 1,357,500
Fifth largest long distance telephone company
Earnings P/S $ .93, 1.06, .99, .96, 1.14, 1.01, 1.15, 1.4 8.10%
Dividends P/S $ .66, .68, .71, .73, .75, .77, .79, .81, .8 2.90%
Price/Earnings Ratio 12.1
------------
2,345,500
------------
Utilities (1.49%)
30,000 Central & South West Corp. @ 25 5/8 768,750
Dallas-based utility holding company
Earnings P/S $ 1.96, 1.72, 1.63, 1.90, 1.92, 1.90, 2.07, NMF
Dividends P/S $ 1.14, 1.22, 1.30, 1.38, 1.46, 1.54, 1.62, 4.80%
Price/Earnings Ratio 17.2
40,000 National Fuel Gas Co. @ 41 1/4 1,650,000
Integrated gas holding company serving
N.Y., PA and Ohio
Earnings P/S $ 1.49, 1.65, 1.93, 1.83, 1.68, 1.94, 2.21, 7.20%
Dividends P/S $ 1.19, 1.25, 1.32, 1.40, 1.45, 1.49, 1.53, 3.80%
Price/Earnings Ratio 15.1
2,418,750
------------
TOTAL COMMON STOCKS
(Cost $71,883,494) 96,421,050
------------
PREFERRED STOCKS (0.77%)
25,000 Salomon Inc. 7.625%, Ser FSA, Conv.
Pfd. @ 30 5/8 765,625
10,000 Wang Laboratories Inc. 6.50%, Ser B
Conv. Pfd. @ 49 490,000
------------
TOTAL PREFERRED STOCKS
(Cost $1,165,625) 1,255,625
------------
<CAPTION>
PAR VALUE
(000'S MARKET
OMITTED) VALUE
- --------- ------
<S> <C> <C> <C>
CORPORATE BONDS (18.59%)
1,000 Banc One Credit Card Corp.,
Sr Sub Note 7.55%, 12-15-99
@ 101.437 1,014,370
1,000 Bank of Scotland, Sub Note 8.85%,
11-01-06 @ 112.442 1,124,420
1,000 Barclays North American Capital,
Deb. 9.75%, 05-15-21 @ 114.125 1,141,250
1,100 CTC Mansfield Funding Corp., Secured
Lease Obligation Bonds 11.125%,
09-30-16 @ 105.5 1,160,500
1,000 Cablevision Systems Corp., Sr Sub
Debs 10.75%, 04-01-04 @ 104 1,040,000
1,500 Century Communications, Sen
Note 9.75%, 02-15-02 @103 1,545,000
1,300 GTE Corp., Deb 10.25%,
11-01-20 @ 114.208 1,484,704
1,500 Georgia-Pacific Corp., Deb 9.75%,
01-15-18 @ 104.325 1,564,875
1,500 Hydro-Quebec Corp. Deb Ser HS
9.40%, 02-01-21 @ 120.592 1,808,880
1,800 Landeskreditbank Baden-Wurttemberg,
Sub Note 7.625%, 02-01-23
@ 106.148 1,910,664
1,822 Long Island Lighting Co., Deb 8.9%,
07-15-19 @ 102.025 1,858,896
600 Mass Mutual Life, Sub Note 7.625%,
11-15-23 @ 100.076(R) 600,456
1,000 Midland American Capital Corp.,
Gtd Note 12.75%, 11-15-03
@ 110.977 1,109,770
2,398 Midland Cogeneration Venture
Deb Ser C-91 10.33%, 07-23-02 @ 106.25 2,547,676
670 National Westminster Bancorp,
Deb 12.125%, 11-15-02 @ 104.815 702,261
750 New York Life 7.50%, 12-15-23
@ 96.892(R) 726,690
400 RJR Nabisco Capital Corp., Sr Sub
Deb 8.75%, 04-15-04 @ 100.926 403,704
500 Scandinavian Airlines System,
Deb 9.125%, 07-20-99 @ 106.125 530,625
1,100 Security Pacific Corp., Sub Note 11.50%,
11-15-00 @ 116.454 1,280,994
750 Standard Credit Card Master Trust,
Credit Card Participation Certificates,
8.25%, 01-07-07 @ 108.593 814,448
1,000 Standard Credit Card Master Trust,
Credit Card Participation Certificates,
7.25%, 04-07-08 @ 102.25 1,022,500
650 Thrifty Payless, Inc., Sr. Sub Note,
12.25%, 04-15-04 @ 117.75 765,375
1,900 TKR Cable 1, Inc. Deb 10.50%,
10-30-07 @ 105.107 1,997,033
1,500 Viacom, Inc., Sub Deb. 7.75%,
06-01-05 @ 98.467 1,477,005
500 360 Communications Co.,
Sr. Notes 7.125%, 03-01-03
@ 98.791 493,955
------------
TOTAL CORPORATE BONDS
(Cost $30,428,867) 30,126,051
------------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (13.75%)
2,906 Federal National Mort. Assn.
7.00%, 07-01-11 @ 99.875 2,902,857
2,038 Federal National Mort. Assn.
7.50%, 08-01-08 @ 101.668 2,071,803
8 Federal National Mort. Assn.
REMIC 9.80%, 05-25-19 @ 99.625 8,249
1,790 Financing Corp., Bond 9.65%,
11-02-18 @ 128.859 2,306,576
153 Government National Mort. Assn.
9.00%, 04-15-21 @ 106.593 162,729
1,874 Government National Mort. Assn.
7.00%, 06-15-23 @ 98.25 1,840,896
3,750 United States Treasury, Bond 12%,
08-15-13 @ 143.047 5,364,263
5,250 United States Treasury, Bond 10.75%,
08-15-05 @ 128.297 6,735,593
768 United States Treasury, Bond 8.125%,
08-15-19 @ 115.672 888,361
------------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $22,311,123) 22,281,327
------------
<CAPTION>
PAR VALUE
(000'S INTEREST MARKET
OMITTED) RATE VALUE
- ---------- -------- ------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (7.23%)
11,719 Joint Repurchase Agreement
Investment in a joint repurchase
agreement transaction with
Lehman Brothers, Inc. -
Dated 12-31-96,
Due 01-02-97
(secured by U.S. Treasury
Bonds, 7.25% thru 12.50%
due 08-15-14 thru
08-15-22), - Note A 6.70% $11,719,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 460
------------
TOTAL SHORT-TERM INVESTMENTS 11,719,460
------------
TOTAL INVESTMENTS (99.82%) $161,803,513
====== ============
(R) These securities are exempt from registration under Rule 144A of the securities Act of 1933. Such securities may be
resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities
amounted to $1,327,146 as of December 31, 1996
The percentage shown for each investment category is the total value of that category as a percentage of the net assets
of the Fund.
NMF No Meaningful Figure
See notes to financial statements.
</TABLE>
NOTE A --
ACCOUNTING POLICIES
John Hancock Investment Trust. (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of 1940.
The Trust consists of three series portfolios: John Hancock Sovereign
Balanced Fund (the "Fund") John Hancock Growth and Income Fund and John
Hancock Sovereign Investors Fund. The other two series of the Trust are
reported in separate financial statements. The investment objective of
the Fund is to provide current income and preservation 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 and the Internal Revenue Service. Shareholders of a class
which bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights regarding such
distribution plan.
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. 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'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 investment, 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 principals. 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.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are calculated 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 appropriate net assets of each
class and the specific expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities from either the date of issue or date of purchase over the
life of the security, as required by the Internal Revenue Code.
ORGANIZATION EXPENSE Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to
the Fund's operations ratably over a five-year period that began with
the commencement of investment operations of the Fund.
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 the sum of 0.60% of the
Fund's average daily net asset value. The Adviser has entered into a
subadvisory agreement with Sovereign Asset Management Corporation
("SAMCORP") an affiliate of the Adviser, to provide certain investment
research and portfolio management services to the Fund, for which the
Adviser pays SAMCORP 40% of its management fee.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
December 31, 1996, net sales charges received with regard to sales of
Class A shares amounted to $186,339. Out of this amount, $26,816 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $54,683 was paid as sales commissions to
unrelated broker-dealers and $104,840 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 ("JHMLICo"), is the
indirect sole shareholder of Distributors and was the indirect sole
shareholder until November 29, 1996, of 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 December 31, 1996, contingent
deferred sales charges paid to JH Funds amounted to $188,965.
In addition, to reimburse 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 0.30% of Class A average daily net assets and 1.00%
of Class B average daily net assets to reimburse JH Funds for its
distribution and 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 Signature
Services, Inc.("Signature Services"), an indirect subsidiary of
JHMLICo. 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 and
financial management services for the Funds. The compensation for 1996
was paid at an annual rate of 0.01875% of the average net assets of each
Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are Trustees and/or officers of the Adviser and/or its
affiliates, as well as 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
December 31, 1996, the Fund's investments to cover the deferred
compensation liability had unrealized appreciation of $835.
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 December 31, 1996, aggregated $45,231,095 and
$61,820,453, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies aggregated
$73,511,775 and $74,090,013, respectively.
The cost of investments owned at December 31, 1996 (excluding the
corporate savings account), for federal income tax purposes was
$137,533,655. Gross unrealized appreciation and depreciation of
investments aggregated $26,241,360 and $1,971,962, respectively,
resulting in net unrealized appreciation of $24,269,398.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Investment Trust --
John Hancock Sovereign Balanced Fund
We have audited the accompanying statement of assets and liabilities of
the John Hancock Sovereign Balanced Fund (the "Fund"), one of the
portfolios constituting John Hancock Investment Trust, including the
schedule of investments, as of December 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 four 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. The financial highlights of John Hancock
Sovereign Balanced Fund for the year ended December 31, 1992 were
audited by other auditors whose report dated February 3, 1993 expressed
an unqualified opinion on those financial highlights.
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 and financial highlights. Our
procedures included confirmation of securities owned as of December 31,
1996, by correspondence with the custodian and brokers, and other
auditing procedures when 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 Sovereign Balanced Fund portfolio
of John Hancock Investment Trust at December 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 four years in the period then ended, in
conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 7, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished
with respect to the taxable distributions of the Fund for its fiscal
year ended December 31, 1996.
The Fund designated a distribution to shareholders of $5,983,035 as
long-term capital gain dividends. Shareholders were mailed a 1996 U.S.
Treasury Department Form 1099-DIV in January 1997 representing their
proportionate share.
U.S. Government Obligations: Income from these investment may be exempt
from certain state and local taxes. The percentage of assets invested in
U.S. Treasury bonds, bills and notes was 7.96% at year end. The
percentage of income derived from U.S. Treasury bonds, bills and notes
was 14.01%. The percentage of assets invested in obligations of other
U.S. government agencies (excluding securities issued by Federal
National Mortgage Association and Government National Mortgage
Association) was 1.41% at year end. The Fund did not derive any income
from these investments. For specific information on exemption provisions
in your state, consult your local state tax office or adviser.
With respect to the Fund's ordinary taxable income for the fiscal year
ended December 31, 1996, 38% qualifies for the dividends received
deduction available to corporations.
SHAREHOLDER MEETING (UNAUDITED)
On June 28, 1996, a special meeting of John Hancock Sovereign Balanced
Fund was held.
The shareholders approved an Agreement and Plan of Reorganization for
the Fund. The shareholder votes were 6,963,639 FOR, 110,596 AGAINST and
671,018 ABSTAINING.
The shareholders elected the following Trustees with the votes as
indicated:
NAME OF TRUSTEE FOR WITHHELD
- --------------------- --------- -------
Edward J. Boudreau, Jr. 8,426,916 298,303
Thomas W.L. Cameron 8,427,064 298,155
James F. Carlin 8,426,916 298,303
William H. Cunningham 8,426,916 298,303
Charles F. Fretz 8,426,916 298,303
Harold R. Hiser, Jr. 8,422,277 302,942
Anne C. Hodsdon 8,427,064 298,155
Charles L. Ladner 8,426,916 298,303
Leo E. Linbeck, Jr. 8,426,916 298,303
Patricia P. McCarter 8,427,064 298,155
Steven R. Pruchansky 8,425,033 300,185
Richard S. Scipione 8,426,232 298,987
Norman H. Smith 8,425,789 299,430
John P. Toolan 8,426,916 298,303
Historical Data (Unaudited)
The table below shows the record of the Fund since inception in 1992.
- ---------------------------------------------------------------------
CLASS A PER SHARE
YEAR ------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- -------- ----------- ----------- --------- ------------
1992(1) 568,842 $0.0473 $10.19 --
1993 5,792,163 0.4539 10.74 $0.1390
1994 6,295,898 0.4951 9.84 0.0231
1995 5,943,279 0.4373 11.75 --
1996 5,805,051 0.4113 12.27 0.4733
CLASS B PER SHARE
YEAR ------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- -------- ----------- ----------- --------- ------------
1992(1) 1,403,452 $0.0292 $10.20 --
1993 7,327,059 0.3816 10.75 $0.1390
1994 8,046,236 0.4296 9.84 0.0231
1995 7,478,401 0.3632 11.74 --
1996 7,404,823 0.3257 12.27 0.4733
(1) For the period October 5, 1992 (commencement of operations) to
December 31, 1992.
Dividend Increases (Unaudited)
Listed below are the most recent dividend increases for the common
stocks held in the John Hancock Sovereign Balanced Fund as of December 31,
1996.
- --------------------------------------------------------------------------
PERCENT OF
COMPANY DIVIDEND INCREASE
- ------- -----------------
Abbott Laboratories 14.29%
AFLAC Corp. 15.3%
Air Products and Chemicals 5.8%
Alco Standard Corp. 7.7%
AMP, Inc. 8.7%
Archer-Daniel Midland Co. 5.0%
Automatic Data Processing, Inc. 15.0%
Banc One Corp. 10.0%
Bemis Co. 12.5%
Central and SouthWest Corp. 1.2%
Century Telephone Enterprises, Inc. 9.1%
ConAgra, Inc. 14.7%
CPC International, Inc. 7.9%
Dover Corp. 13.3%
E I DuPont De Nemours & Co. 9.6%
Electronic Data Systems Corp. 15.4%
Emerson Electric Co. 10.2%
Exxon Corp. 5.3%
Federal National Mortgage Association 11.8%
Federal Signal Corp. 15.5%
First Tennessee National Corp. 13.2%
Frontier Corp. 2.4%
General Electric Co. 13.0%
General Re Corp. 4.1%
Hubbell, Inc., Cl B 10.6%
Interpublic Group of Cos., Inc. (The) 9.7%
Johnson & Johnson 15.2%
Kimberly-Clark Corp. 2.2%
McGraw-Hill Companies, Inc. 10.0%
Medtronic, Inc. 46.2%
National Fuel Gas Co. 3.7%
NationsBank Corp. 13.8%
Pall Corp. 16.7%
Pentair, Inc. 8.0%
Pep Boys - Manny, Moe & Jack (The) 10.5%
PepsiCo, Inc. 15.0%
Pfizer, Inc. 15.4%
Pitney Bowes, Inc. 15.0%
Procter & Gamble Co. (The) 12.5%
Questar Corp. 3.4%
Reliastar Financial Corp. 12.0%
Shell Transport & Trading Co.,
PLC (ADR) 20.8%
Sigma Aldrich Corp. 13.6%
Sonoco Products Co. 10.0%
Southern National Corp. 17.4%
Sysco Corp. 15.4%
W. W. Grainger, Inc. 8.7%
Wal-Mart Stores, Inc. 5.0%
Worthington Industries, Inc. 9.1%
------------
The average dividend increase
for this group was 11.45%
============
A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads: "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Sovereign Balanced Fund. 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
Recycled Paper." 3600A 12/96
2/97
John Hancock Funds
Sovereign
Investors
Fund
ANNUAL REPORT
December 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, Jr.*
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 Signature Services, Inc.
1 John Hancock Way Ste 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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
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:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although it
seems a long way off, the issue is serious enough that at least one
group has already studied the problem, and experts and politicians alike
have weighed in with a slew of prescriptions. Legislative action could
be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this: in
1950, there were 16 workers paying into the Social Security system for
each retiree collecting benefits. Today, there are three workers for
each retiree and by 2019 there will be two. Starting then, the Social
Security Administration estimates that the amount paid out in Social
Security benefits will start to be greater than the amount collected in
Social Security taxes. Compounding the issue is the fact that people are
retiring earlier and living longer.
The state of the system has already left many people, especially younger
and middle-aged workers, feeling insecure about Social Security. A
recent survey by the Employee Benefits Research Institute (EBRI) found
that 79% of current workers polled had little confidence in the ability
of Social Security to maintain the same level of benefits as those
received by today's retirees. Instead, they said they expect to use
their own savings or employer-sponsored pensions for their retirement.
Yet, remarkably, another EBRI survey revealed that only slightly more
than half of America's current workers are saving money for retirement.
Fewer than half own IRAs or participate in employer-sponsored pension or
savings plans.
No matter how Social Security's problems get solved, one thing is clear.
Americans need to rely on themselves for accumulating the bulk of their
retirement savings. There's no law that says you should have to reduce
your standard of living once you stop working. So we encourage you to
save all that you can now, so you can live the way you'd like to later.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JOHN F. SNYDER III AND BARRY EVANS, CFA, CO-PORTFOLIO MANAGERS
John Hancock
Sovereign Investors Fund
Despite volatility, stocks continued to climb in 1996;
more modest returns likely in 1997
Once again, stock investors had much to cheer about in 1996. The Dow
Jones Industrial Average soared 28.91%, with reinvested dividends, while
the Standard & Poor's 500-Stock Index climbed 22.95%. Added to 1995's
gains of more than 30% for the major market indices, stock investors
have enjoyed impressive two-year gains of more than 50%.
While those returns are certainly cause for celebration, the mood wasn't
always so festive throughout the year. Sentiment swung sharply as
investors tried to figure out where the economy was headed. The result
was a volatile stock market that often fell victim to the latest
economic news. Throughout the year, stock prices dropped as weaker
economic reports sparked fears of a slowing economy -- and then rallied
back as stronger-than-expected news reassured investors that the economy
was still on track.
In the fourth quarter of the year, the market volatility subsided
somewhat as we shifted toward what we call a "Goldilocks Economy." That
is, an economy that is not too hot and not too cold, but just right. The
Federal Reserve Bank -- the supreme arbiter of economic growth -- has
stuck by its neutral interest-rate policy, indicating that it believes
the economy is moving along at just the right pace.
A 2 1/4" x 3 1/2" photo of the portfolio management team at bottom
right. Caption reads: "Sovereign Investors Fund management team members:
(l-r) Anne McDermott, John Snyder, Barry Evans, Jere Estes."
"Once again,
stock
investors had
much to
cheer about
in 1996."
Tracking performance
John Hancock Sovereign Investors Fund turned in an especially strong
performance in the first three quarters of the year, thanks to the
market's "flight to quality."
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) General Electric 4.8 %; 2)
Emerson Electric 2.7%; 3) Johnson & Johnson 2.4 % 4) Alco Standard 2.2 %
5) E.I. du Pont de Nemours 2.2%. A footnote below reads: "As a
percentage of net assets on December 31, 1996."
"...we
continue to
invest in
high-quality
growth
companies..."
During periods of uncertainty like this, investors tend to flock to
large, high-quality stocks with reliable earnings -- the type of stocks
in which Sovereign Investors Fund invests. Our largest holding, General
Electric, is a perfect example. Investors have been attracted to the
company's consistently improving revenues and profits. The stock was up
nearly 38% for the year. Procter & Gamble was another winner. By
continuing to gain market share both domestically and globally, this
consumer products powerhouse has been able to maintain its solid
earnings growth. Finally, DuPont has improved profitability by shedding
some of its low-margin, slow-growth business.
Conditions in the fourth quarter took some shine off the Fund's overall
performance. Technology stocks -- which make up 14% of the S&P 500 --
led the market during the last quarter of the year. While many of our
competitors have sizable holdings in the sector, we own virtually no
technology stocks. Technology stocks just don't meet our fundamental
investment criterion of having increased dividends consistently for at
least the past 10 years. As a result, we didn't participate fully in the
market's year-end rally.
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 General Electric followed by an up arrow and the phrase "Improving
sales/earnings." The second listing is DuPont followed by an up arrow
and the phrase "Restructuring improves business prospects." The third
listing is Electronic Data Systems followed by a down arrow and the
phrase "Slowing orders." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."
All told, however, the Fund turned in solid results in 1996. For the 12
months ended December 31, 1996, the Fund's Class A, Class B, and Class C
shares had total returns of 17.57%, 16.67% and 17.99%, respectively, at
net asset value. By comparison, the average growth and income fund
returned 20.78%, according to Lipper Analytical Services.1 Please see
pages six and seven for longer-term Fund performance information.
Investment focus
Our fundamental investment strategy remains firmly in place. We continue
to invest in high-quality growth companies that have consistently
increased their dividends for at least the past 10 years. Although high-
quality growth stocks are attractive long-term investments, they
particularly make sense in this environment, where there is so much
uncertainty about the economy and earnings.
In the past several months, we have pared back some of the Fund's
largest holdings such as PepsiCo and NationsBank in favor of new
investments. Not only did we want to take profits, but we also wanted to
diversify the portfolio. In selecting new stocks, we've targeted
companies that are -- and can remain -- leaders in their industry. With
pricing power diminishing, companies must find other ways to grow
earnings such as increasing market share, restructuring businesses or
going global.
Rockwell International is one of our favorite restructuring stories. The
company sold its aerospace and defense business to Boeing. Now the
company can fully concentrate on its core business: factory automation.
Not only does Rockwell boast a superb balance sheet, but the company is
planning to buy back nearly $1 billion in stock over the next year. With
its new structure, we expect the company to grow earnings 15% annually
for at least the next five years.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended December 31,
1996." The chart is scaled in increments of 5% from bottom to top, with
25% at the top and 0% at the bottom. Within the chart, there are four
solid bars. The first represents the 17.57% total return for John
Hancock Sovereign Investors Fund: Class A. The second represents the
16.67% total return for John Hancock Sovereign Investors Fund: Class B.
The third represents the 17.99% return for John Hancock Sovereign
Investors Fund: Class C. The fourth represents 20.78% return for the
average growth and income fund. The footnote below states: "Total
returns for John Hancock Sovereign Investors Fund are at net asset value
with all distributions reinvested. The average growth and income fund is
tracked by Lipper Analytical Services. See following two pages for
historical performance information."
Pall, which manufacturers filters and equipment used in fluid
processing, aerospace and medical applications, is another new favorite.
One of the most exciting opportunities for Pall is blood filtering. Pall
filters greatly reduce the spread of infection. With all the publicity
surrounding blood borne infections, it seems likely that filtering will
become a standard procedure.
Looking forward
We're cautiously optimistic about stocks in the year ahead. As far as
the economy is concerned, we expect to see more of the same modest
growth in 1997. Consumers are strapped with mounds of debt. Therefore,
spending is likely to remain at modest levels as evidenced by the slow
Christmas season. Since consumer spending accounts for nearly two-thirds
of the gross domestic product (GDP), lackluster spending is likely to
keep a lid on economic growth.
With the economy likely to grow in the 2.5% to 3% range next year,
corporate profits are likely to drop back to more normal levels of 8% to
10% from their unusually high level of 20% in 1995 and 1996. Other
factors will also dampen growth prospects for corporate America.
Declining labor costs have produced strong tailwinds for U.S. companies
in the last few years. With labor costs now moving in the other
direction, companies are likely to see their margins squeezed. In
addition, rising energy costs are likely to put pressure on earnings.
With more sluggish growth in profits, we're likely to see more
disappointments as large-cap companies report earnings in 1997.
Companies that can grow earnings in the double digits will be the
exception, not the rule. As corporate earnings begin to trend down,
high-quality growth stocks with steady earnings will become even more
attractive to investors.
"We're
cautiously
optimistic
about stocks
in the year
ahead."
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. Of course, the
managers' 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 Sovereign Investors
Fund. Total return is a performance measure that equals the sum of all
income and capital gain distributions, assuming reinvestment of these
distributions and the change in the price 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 July 1, 1993 and January 3,
1994 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 December 31, 1996
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
---------- ---------- ----------
John Hancock Sovereign Investors
Fund: Class A 11.69% 60.52% 202.05%
John Hancock Sovereign Investors
Fund: Class B 11.67% 46.46%(1) N/A
John Hancock Sovereign Investors
Fund: Class C 17.99% 58.34%(2) N/A
AVERAGE ANNUAL TOTAL RETURNS
For the period ended December 31, 1996
ONE FIVE MOST RECENT
YEAR YEARS TEN YEARS
---------- ---------- ----------
John Hancock Sovereign Investors
Fund: Class A 11.69% 9.93% 11.69%
John Hancock Sovereign Investors
Fund: Class B 11.67% 12.83%(1) N/A
John Hancock Sovereign Investors
Fund: Class C 17.99% 13.42%(2) N/A
YIELDS
As of December 31, 1996
SEC 30-DAY
YIELD
-----------
John Hancock Sovereign Investors Fund: Class A 1.58%
John Hancock Sovereign Investors Fund: Class B 0.84%
John Hancock Sovereign Investors Fund: Class C 2.09%
Notes to Performance
(1) Class B shares started on January 3, 1994.
(2) Class C shares started on May 7, 1993.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Sovereign Investors Fund would be worth on December 31, 1996.
They assume that you either had invested on the day each class of shares
started, or that you have been invested for the most recent 10 years. In
either case, they also assume that you 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 used often as a measure
of stock market performance.
Sovereign Investors Fund
Class A shares
Line chart with the heading Sovereign Investors Fund: Class A,
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 $41,396 as of December 31, 1996. The second line represents
the value of the hypothetical $10,000 investment made in the Sovereign
Investors Fund on December 31, 1986, before sales charge, and is equal
to $31,804 as of December 31, 1996. The third line represents the
Sovereign Investors Fund, after sales charge, and is equal to $30,205 as
of December 31, 1996.
Sovereign Investors Fund
Class B shares
Line chart with the heading Sovereign Investors 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 $17,131 as of December 31, 1996. The second line represents
the value of the hypothetical $10,000 investment made in the Sovereign
Investors Fund, before sales charge, on January 3, 1994, and is equal to
$14,646 as of December 31, 1996. The third line represents the value
of the Sovereign Investors Fund, after sales charge, and is equal to
$14,346 as of December 31, 1996.
Sovereign Investors Fund
Class C Shares
Line chart with the heading Sovereign Investors Fund: Class C,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the value of the Standard & Poor's 500 Stock Index, and is
equal to $18,513 as of December 31, 1996. The second line represents
the value of the hypothetical $10,000 investment made in the Sovereign
Investors Fund, before sales charge, on May 6, 1993, and is equal to
$15,834 as of December 31, 1996.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
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 December 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
December 31, 1996
- ----------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common and preferred stocks
(cost - $1,152,028,405) $1,568,478,600
Corporate bonds (cost - $57,807,224) 58,919,775
United States government and
agencies obligations (cost - $111,992,237) 112,600,353
Joint repurchase agreement (cost - $68,123,000) 68,123,000
Short term investments (cost - $59,819,345) 59,819,345
Corporate savings account 1,024,655
--------------
1,868,965,728
Receivable for shares sold 848,826
Receivable for investments sold 2,000,000
Interest receivable 3,001,478
Dividends receivable 3,433,542
Other assets 87,768
--------------
Total Assets 1,878,337,342
- ----------------------------------------------------------------------------
Liabilities:
Payable for shares repurchased 1,145,397
Payable for investments purchased 8,264,130
Payable to John Hancock Advisers, Inc. and
and affiliates - Note B 3,231,333
Accounts payable and accrued expenses 218,977
--------------
Total Liabilities 12,859,837
- ----------------------------------------------------------------------------
Net Assets:
Capital paid-in $1,407,791,565
Accumulated net realized gain on investments 39,507,785
Net unrealized appreciation of investments 418,178,155
--------------
Net Assets $1,865,477,505
============================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding with $0.01 per share par value)
Class A - $1,429,523,356 / 73,390,083 $19.48
============================================================================
Class B - $406,522,767 / 20,888,201 $19.46
============================================================================
Class C - $29,431,382 / 1,510,614 $19.48
============================================================================
Maximum Offering Price *
Class - A ($19.48 x 105.26%) $20.51
============================================================================
* On a single retail sale of less than $50,000. On sales of $50,000 or more and on
group sales the offering price is reduced.
</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
Year ended December 31, 1996
- ----------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends $32,606,341
Interest 18,764,586
--------------
51,370,927
--------------
Expenses:
Investment management fee - Note B 9,708,887
Distribution/service fee - Note B
Class A 4,073,097
Class B 3,350,040
Transfer agent fee - Note B 3,454,204
Financial services fee - Note B 321,896
Custodian fee 257,949
Printing 256,486
Registration and filing fees 160,390
Trustees' fees 148,896
Legal fees 95,635
Auditing fee 50,907
Miscellaneous 38,644
--------------
Total Expenses 21,917,031
- ----------------------------------------------------------------------------
Net Investment Income 29,453,896
- ----------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 132,393,369
Change in net unrealized appreciation/depreciation
of investments 112,475,113
--------------
Net Realized and Unrealized
Gain on Investments 244,868,482
- ----------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $274,322,378
============================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996
--------------- ---------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $32,531,034 $29,453,896
Net realized gain on investments sold 20,230,031 132,393,369
Change in net unrealized appreciation/
depreciation of investments 299,815,354 112,475,113
--------------- ---------------
Net Increase in Net Assets
Resulting from Operations 352,576,419 274,322,378
--------------- ---------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.3959 and $0.3585
per share, respectively) (28,762,733) (25,069,146)
Class B - ($0.2764 and $0.2155
per share, respectively) (3,339,275) (3,858,864)
Class C - ($0.4637 and $0.4290
per share, respectively) (477,188) (549,349)
Distributions from net realized gain
on investments sold
Class A - ($0.0837 and $1.1552
per share, respectively) (5,956,805) (80,116,607)
Class B - ($0.0837 and $1.1552
per share, respectively) (1,191,400) (22,820,809)
Class C - ($0.0837 and $1.1552
per share, respectively) (92,650) (1,639,314)
--------------- ---------------
Total Distributions to
Shareholders (39,820,051) (134,054,089)
--------------- ---------------
From Fund Share Transactions - Net* 11,863,118 167,161,216
--------------- ---------------
Net Assets:
Beginning of period 1,233,428,514 1,558,048,000
--------------- ---------------
End of period (including
undistributed net investment
income of $23,463 and none,
respectively) $1,558,048,000 $1,865,477,505
=============== ===============
* Analysis of Fund Share Transactions:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1995 1996
----------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
CLASS A
Shares sold 13,351,175 $214,650,741 18,780,738 $361,408,507
Shares issued to shareholders
in reinvestment of distributions 1,912,922 31,795,613 5,004,684 97,643,950
--------------- --------------- --------------- ---------------
15,264,097 246,446,354 23,785,422 459,052,457
Less shares repurchased (20,197,037) (323,191,321) (22,048,259) (423,528,648)
--------------- --------------- --------------- ---------------
Net increase (decrease) (4,932,940) ($76,744,967) 1,737,163 $35,523,809
=============== =============== =============== ===============
CLASS B
Shares sold 6,957,758 $112,134,961 9,159,545 $176,783,839
Shares issued to shareholders
in reinvestment of distributions 251,051 4,209,585 1,269,661 24,792,933
--------------- --------------- --------------- ---------------
7,208,809 116,344,546 10,429,206 201,576,772
Less shares repurchased (1,772,868) (28,714,271) (3,973,684) (77,636,976)
--------------- --------------- --------------- ---------------
Net increase 5,435,941 $87,630,275 6,455,522 $123,939,796
=============== =============== =============== ===============
CLASS C
Shares sold 325,074 $5,184,377 369,676 $7,183,772
Shares issued to shareholders
in reinvestment of distributions 34,194 569,771 112,176 2,188,658
--------------- --------------- --------------- ---------------
359,268 5,754,148 481,852 9,372,430
Less shares repurchased (305,670) (4,776,338) (87,535) (1,674,819)
--------------- --------------- --------------- ---------------
Net increase 53,598 $977,810 394,317 $7,697,611
=============== =============== =============== ===============
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 Fund shares sold, reinvested and
redeemed during the last two periods, along with the corresponding dollar value.
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 listed as follows:
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992(1) 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $14.31 $14.78 $15.10 $14.24 $17.87
--------- --------- --------- --------- ---------
Net Investment Income 0.47 0.44 0.46 0.40 0.36(4)
Net Realized and Unrealized
Gain (Loss) on Investments 0.54 0.39 (0.75) 3.71 2.77
--------- --------- --------- --------- ---------
Total from Investment
Operations 1.01 0.83 (0.29) 4.11 3.13
--------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net
Investment Income (0.45) (0.42) (0.46) (0.40) (0.36)
Distributions from Net
Realized Gain on
Investments Sold (0.09) (0.09) (0.11) (0.08) (1.16)
--------- --------- --------- --------- ---------
Total Distributions (0.54) (0.51) (0.57) (0.48) (1.52)
--------- --------- --------- --------- ---------
Net Asset Value,
End of Period $14.78 $15.10 $14.24 $17.87 $19.48
======== ======== ======== ======== ========
Total Investment Return
at Net Asset Value (3) 7.23% 5.71% (1.85%) 29.15% 17.57%
Ratios and Supplemental
Data
Net Assets, End of Period
(000's omitted) $872,932 $1,258,575 $1,090,231 $1,280,321 $1,429,523
Ratio of Expenses to Average
Net Assets 1.13% 1.10% 1.16% 1.14% 1.13%
Ratio of Net Investment
Income to Average Net
Assets 3.32% 2.94% 3.13% 2.45% 1.86%
Portfolio Turnover Rate 30% 46% 45% 46% 59%
Average Brokerage
Commission Rate (7) N/A N/A N/A N/A $0.0696
CLASS B (2)
Per Share Operating
Performance
Net Asset Value, Beginning
of Period $15.02 $14.24 $17.86
--------- --------- ---------
Net Investment Income (4) 0.38 0.27 0.21
Net Realized and Unrealized
Gain (Loss) on Investments (0.69) 3.71 2.77
--------- --------- ---------
Total from Investment
Operations (0.31) 3.98 2.98
--------- --------- ---------
Less Distributions:
Dividends from Net
Investment Income (0.36) (0.28) (0.22)
Distributions from Net
Realized Gain on Investments
Sold (0.11) (0.08) (1.16)
--------- --------- ---------
Total Distributions (0.47) (0.36) (1.38)
--------- --------- ---------
Net Asset Value, End of
Period $14.24 $17.86 $19.46
======== ======== ========
Total Investment Return
at Net Asset Value (3) (2.04%)(5) 28.16% 16.67%
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $128,069 $257,781 $406,523
Ratio of Expenses to Average
Net Assets 1.86%(6) 1.90% 1.91%
Ratio of Net Investment Income
to Average Net Assets 2.57%(6) 1.65% 1.10%
Portfolio Turnover Rate 45% 46% 59%
Average Brokerage Commission
Rate (7) N/A N/A $0.0696
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CLASS C (2)
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.79 $15.11 $14.24 $17.87
--------- --------- --------- ---------
Net Investment Income 0.27 0.52 0.46 0.44(4)
Net Realized and Unrealized (Loss)
on Investments 0.48 (0.77) 3.71 2.76
--------- --------- --------- ---------
Total from Investment Operations 0.75 (0.25) 4.17 3.20
--------- --------- --------- ---------
Less Distributions:
Dividends from Net
Investment Income (0.34) (0.51) (0.46) (0.43)
Distributions from Net
Realized Gain on Investments Sold (0.09) (0.11) (0.08) (1.16)
--------- --------- --------- ---------
Total Distributions (0.43) (0.62) (0.54) (1.59)
--------- --------- --------- ---------
Net Asset Value, End of Period $15.11 $14.24 $17.87 $19.48
======== ======== ======== ========
Total Investment Return at
Net Asset Value (3) 5.13%(5) (1.57%) 29.68% 17.99%
Ratios and Supplemental
Data Net Assets, End of
Period (000's omitted) $10,189 $15,128 $19,946 $29,431
Ratio of Expenses to Average
Net Assets 0.88%(6) 0.81% 0.74% 0.75%
Ratio of Net Investment
Income to Average Net Assets 3.17%(6) 3.53% 2.84% 2.26%
Portfolio Turnover Rate 46% 45% 46% 59%
Average Brokerage
Commission Rate (7) N/A N/A N/A $0.0696
(1) This period is covered by the report of other independent auditors (not included herein).
(2) Class B and Class C shares commenced operations on January 3, 1994, and May 7, 1993 respectively.
(3) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(4) Based on the average of the shares outstanding at the end of each month.
(5) Not annualized.
(6) Annualized.
(7) Per portfolio share traded. Required for fiscal years that began September 1, 1995 or later.
The Financial Highlights summarizes the impact of the following factors on a single share
for each 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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Schedule of Investments is a complete list of all securities owned by the Sovereign
Investors Fund on December 31, 1996. It's divided into five main categories: common
stocks, preferred stocks, corporate bonds, U.S. government and agencies and short-term
investments. The common stocks are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed last.
Schedule of Investments
December 31, 1996
Per share earnings and dividends and their compound growth rates are shown for the most
recently reported ten year periods on common stocks, as well as price/earnings ratios,
but are unaudited.
- --------------------------------------------------------------------------------------------------------------------------
COMPOUND
NUMBER GROWTH MARKET
OF SHARES RATE VALUE
---------- --------
<S> <C> <C> <C> <C>
COMMON STOCKS (83.50%)
Advertising (1.78%)
700,000 Interpublic Group, Inc. @ 47 1/2 $33,250,000
One of the largest advertising agencies -----------
in the world
Earnings P/S $ .75, .91, 1.05, 1.12, 1.23, 1.43, 1.49, 1.79, 2.04, 1.97 11.3%
Dividends P/S $ .22, .26, .32, .37, .41, .45, .49, .55, .61, .67 13.2%
Price/Earnings Ratio 24.6
Aerospace (1.31%)
400,000 Rockwell International Corp. @ 60 7/8 24,350,000
-----------
Leading producer of aerospace, automotive
and electronics products
Earnings P/S $1.98, 2.23, 3.01, 2.84, 2.47, 2.20, 2.47, 2.80, 3.15, 3.79 7.5%
Dividends P/S $.66, .72, .77, .82, .88, .92, .96, 1.04, 1.10, 1.16 6.5%
Price/Earnings Ratio 14.7
Banks (5.50%)
375,000 Banc One Corp. @ 43 16,125,000
Ohio-based bank holding company
Earnings P/S $ 1.19, 1.56, 1.66, 1.83, 1.65, 2.07, 2.44, 2.73, 2.27, 3.15 11.4%
Dividends P/S $ .45, .50, .57, .63, .70, .81, .98, 1.13, 1.24, 1.36 13.1%
Price/Earnings Ratio 14.0
250,000 Corestates Financial Corp. @ 51 7/8 12,968,750
Operates 334 full service offices located
in PA, NJ and DE
Earnings P/S $ 1.96, 2.25, 1.02, .78, .83, 2.20, 2.43, 1.62, 2.86, 3.05 5.0%
Dividends P/S $ .70, .77, .87, .96, .97, 1.02, 1.14, 1.24, 1.44, 1.73 10.6%
Price/Earnings Ratio 16.7
600,000 First Tennessee National Corp. @ 37 1/2 22,500,000
Tennessee-based bank holding company
Earnings P/S $ .78, 1.10, .65, .98, 1.26, 1.76, 1.52, 2.02, 2.24, 2.55 14.1%
Dividends P/S $ .40, .43, .49, .54, .57, .63, .75, .87, .97, 1.10 11.9%
Price/Earnings Ratio 14.8
300,000 KeyCorp. @ 50 1/2 15,150,000
Multi-regional bank holding company
Earnings P/S $ 1.88, 2.10, 2.32, 2.32, 2.45, 2.52, 2.98, 3.15, 3.23, 3.56 7.4%
Dividends P/S $.60, .68, .80, .88, .92, .98, 1.12, 1.28, 1.44,1.52 10.9%
Price/Earnings Ratio 14.3
300,000 NationsBank Corp. @ 97 3/4 29,325,000
Largest superregional bank in the Southeast
Earnings P/S $ 2.01, 2.87, 4.44, 2.61, .76, 2.60, 4.55, 6.02, 6.72, 7.69 16.1%
Dividends P/S $ .86, .94, 1.10, 1.42, 1.48, 1.51, 1.64, 1.88, 2.08, 2.40 12.1%
Price/Earnings Ratio 13.2
147,000 U.S. Bancorp @ 44 15/16 6,605,812
Multi-regional bank holding company
Earnings P/S $ 1.23, 1.39, 1.66, 1.99, 1.97, 1.91, 2.46, 1.65, 2.55, 2.43 7.9%
Dividends P/S $ .37, .46, .51, .61, .71, .76, .85, .94, 1.06, 1.18 13.8%
Price/Earnings Ratio 18.3
--------------
102,674,562
--------------
Capital Goods (3.05%)
550,000 Dover Corp. @ 50 1/4 27,637,500
Manufactures a variety of specialized
industrial products
Earnings P/S $ .83, 1.11, 1.14, 1.28, 1.12, 1.08, 1.32, 1.66, 2.34, 3.33 16.7%
Dividends P/S $ .26, .31, .35, .38, .41, .43, .45, .49, .56, .64 10.5%
Price/Earnings Ratio 14.8
550,000 Pall Corp. @ 25 1/2 14,025,000
Manufactures filtration and separation
devices
Earnings P/S $ .50, .50, .50, .58, .68, .81, .69, .88, 1.08, 1.23 10.5%
Dividends P/S $ .11, .13, .16, .19, .22, .27, .32, .37, .42, .49 18.1%
Price/Earnings Ratio 20.8
470,000 Pentair, Inc. @ 32 1/4 15,157,500
Manufactures enclosures for electrical,
electronic, woodworking and power
tool equipment
Earnings P/S $ .65, 1.12, .95, .80, 1.01, 1.06, 1.19, 1.20, 1.40, 1.72 11.4%
Dividends P/S $ .21, .22, .27, .29, .31, .33, .34, .36, .40, .50 10.1%
Price/Earnings Ratio 17.1
--------------
56,820,000
--------------
Chemicals (5.64%)
190,300 Air Products & Chemicals, Inc. @ 69 1/8 13,154,487
Producer of industrial and specialty
chemicals and gases
Earnings P/S $ .04, 1.95, 2.02, 2.08, 2.23, 2.45, 1.76, 2.05, 3.29, 3.73 14.0%
Dividends P/S $ .45, .55, .63, .69, .75, .83, .89, .95, 1.01, 1.07 10.1%
Price/Earnings Ratio 18.6
425,000 E.I. du Pont de Nemours and Co. @ 94 3/8 40,109,375
Nation's largest chemical manufacturer
Earnings P/S $ 2.46, 3.03, 3.53, 3.40, 3.13, 1.32, .23, 3.40, 5.43, 6.08 10.6%
Dividends P/S $ 1.10, 1.23, 1.45, 1.62, 1.68, 1.74, 1.76, 1.82, 2.03, 2.23 8.2%
Price/Earnings Ratio 16.7
175,000 PPG Inds., Inc. @ 56 1/8 9,821,875
Manufacturer of specialty chemicals,
coatings and resins
Earnings P/S $ 1.60, 2.13, 2.09, 2.22, 1.29, 1.33, 1.46, 1.97, 3.69, 3.96 10.6%
Dividends P/S $ .56, .64, .74, .82, .86, .94, 1.04, 1.12, 1.18, 1.26 9.4%
Price/Earnings Ratio 13.5
621,250 RPM, Inc. @ 17 10,561,250
Manufacturer of specialty chemicals and
coatings to waterproof and rustproof structures
Earnings P/S $ .38, .45, .42, .43, .45, .54, .58, .80, .86, .96 10.9%
Dividends P/S $.21, .25, .27, .30, .34, .37, .39, .42, .46, .49 9.9%
Price/Earnings Ratio 18.2
505,000 Sigma-Aldrich Corp. @ 62 7/16 31,530,938
Manufacturer of biochemical and organic
products used for research and diagnostics
Earnings P/S $ .425, .575, .65, .72, .62, .93, 1.04, 1.11, 1.26, 1.44 14.5%
Dividends P/S $ .075, .085, .095, .10, .115, .13, .15, .17, .19, .2275 13.1%
Price/Earnings Ratio 20.6
--------------
105,177,925
--------------
Commercial Services (1.58%)
905,800 Sysco Corp. @ 32 5/8 29,551,725
--------------
Largest distributor of food service products
Earnings P/S $ .45, .60, .73, .76, .86, .95, 1.10, 1.24, 1.42, 1.57 14.9%
Dividends P/S $ .07, .08, .09, .10, .14, .22, .28, .36, .44, .52 25.0%
Price/Earnings Ratio 20.6
Computer & Office Equipment (4.15%)
790,000 Alco Standard Corp. @ 51 5/8 40,783,750
Distributor of office and paper products
Earnings P/S $ .84, 1.15, 1.96, .91, .98, 1.11, (.025), .56, 1.82, 1.13 3.4%
Dividends P/S $ .26, .28, .31, .34, .36, .37, .39, .41, .43, .45 6.3%
Price/Earnings Ratio 36.1
350,000 Hewlett-Packard Co. @ 50 1/4 17,587,500
Manufactures and services electronic
measurement, analysis and computation
instruments
Earnings P/S $ 1.25, 1.68, 1.76, .77, .76, .87, 1.16, 1.54, 2.32, 2.46 7.8%
Dividends P/S $ .06, .07, .10, .11, .13, .20, .24, .29, .38, .46 25.4%
Price/Earnings Ratio 21.6
350,000 Pitney Bowes, Inc. @ 54 1/2 19,075,000
Manufactures office automation equipment
Earnings P/S $ 1.27, 1.54, 1.19, 1.34, 1.77, 1.87, 1.89, 2.23, 2.55, 3.01 10.1%
Dividends P/S $ .38, .46, .52, .60, .68, .78, .90, 1.04, 1.20, 1.38 15.4%
Price/Earnings Ratio 18.4
--------------
77,446,250
--------------
Consumer Durables (5.14%)
200,000 Illinois Tool Works, Inc. @ 79 7/8 15,975,000
Manufactures construction fasteners and
packaging systems
Earnings P/S $ 1.03, 1.33, 1.53, 1.68, 1.63, 1.68, 1.78, 2.22, 3.17, 3.75 15.4%
Dividends P/S $ .20, .22, .27, .33, .40, .45, .49, .54, .62, .70 14.9%
Price/Earnings Ratio 21.3
745,000 Leggett & Platt, Inc. @ 34 5/8 25,795,625
Produces intermediate products for the
home furnishings industry
Earnings P/S $ .278, .273, .323, .66, .33, .76, .97, 1.30, 1.56, 1.60 21.5%
Dividends P/S $ .14, .16, .185, .21, .215, .23, .27, .31, .38, .46 14.1%
Price/Earnings Ratio 20.4
600,000 Masco Corp. @ 36 21,600,000
Manufactures buildings, home improvement
and consumer products
Earnings P/S $ 1.65, 2.10, 1.42, .91, .27, .73, 1.36, 1.57, 1.09, 1.38 NMF
Dividends P/S $ .38, .44, .50, .54, .57, .61, .65, .69, .73, .77 8.2%
Price/Earnings Ratio 25.4
400,000 Nucor Corp. @ 51 20,400,000
Manufactures steel and steel products
Earnings P/S $ .60, .84, .68, .88, .74, .88, 1.29, 2.13, 3.18, 2.74 18.4%
Dividends P/S $ .09, .10, .11, .12, .13, .14, .16, .18, 28, .32 15.1%
Price/Earnings Ratio 19.8
670,000 Worthington Industries, Inc. @ 18 1/8 12,143,750
Manufactures metal and plastic products
Earnings P/S $ .61, .70, .61, .64, .52, .68, .86, 1.10, 1.23, .93 4.8%
Dividends P/S $ .17, .19, .23, .26, .28, .32, .34, .39, .43, .47 20.8%
Price/Earnings Ratio 20.7
--------------
95,914,375
--------------
Consumer Non-Durables (9.25%)
800,000 Archer-Daniel Midland Co. @ 22 17,600,000
Processes and merchandises
agricultural products
Earnings P/S $ .62, .75, .85, .75, .78, .79, .80, 1.00, 1.43, .98 5.2%
Dividends P/S $ .028, .029, .034, .048, .05, .053, .056, .066, .116, .193 23.9%
Price/Earnings Ratio 22.8
300,000 ConAgra, Inc. @ 49 3/4 14,925,000
Leader in frozen & processed foods, and
distributes agricultural supplies
Earnings P/S $ .85, 1.08, 1.25, 1.33, 1.45, 1.55, 1.62, 1.92, 2.20, .95 1.2%
Dividends P/S $ .27, .31, .36, .42, .48, .56, .65, .75, .86, .99 15.5%
Price/Earnings Ratio 52.2
430,000 CPC International, Inc. @ 77 1/2 33,325,000
Major international food processor
Earnings P/S $ 2.17, 1.84, 2.11, 2.42, 2.56, 2.73, 2.90, 2.17, 3.54, 3.65 6.0%
Dividends P/S $ .65, .76, .88, 1.00, 1.10, 1.20, 1.28, 1.38, 1.48, 1.58 10.4%
Price/Earnings Ratio 21.3
300,000 Kimberly-Clark Corp. @ 95 1/4 28,575,000
Leading producer of consumer and
personal care products
Earnings P/S $ 1.87, 2.36, 2.63, 2.70, 3.01, 3.37, 1.95, 3.55, 3.79, .74 NMF
Dividends P/S $ .70, .78, 1.26, 1.32, 1.48, 1.59, 1.67, 1.71, 1.76, 1.84 11.3%
Price/Earnings Ratio 17.2
750,000 PepsiCo, Inc. @ 29 1/4 21,937,500
Second largest soft drink company
Earnings P/S $ .38, .49, .57, .68, .68, .82, .87, 1.07, 1.21, .80 8.6%
Dividends P/S $ .11, .14, .16, .19, .23, .26, .31, .35, .39, .45 16.9%
Price/Earnings Ratio 36.1
350,000 Procter & Gamble Co. (The) @ 107 1/2 37,625,000
Leading producer of household
consumer products
Earnings P/S $ .46, 1.48, 1.74, 2.25, 2.23, 2.43, 2.43, .63, 2.07, 3.86, 4.41 28.6%
Dividends P/S $ .68, .70, .83, .93, 1.00, 1.08, 1.17, 1.32, 1.50, 1.70 10.7%
Price/Earnings Ratio 24.6
500,000 Sara Lee Corp. @ 37 1/4 18,625,000
Manufacturer of brand name packaged food
and consumer products
Earnings P/S $ .71, .88, .95, .98, 1.41, 1.28, 1.43, .46, 1.66, 1.87 11.4%
Dividends P/S $ .25, .30, .36, .42, .47, .50, .58, .64, .68, .76 13.2%
Price/Earnings Ratio 20.1
--------------
172,612,500
--------------
Diversified Operations (0.93%)
670,000 Federal Signal Corp. @ 25 7/8 17,336,250
--------------
Manufactures fire trucks and street sweepers,
as well as public safety, signaling
and communications equipment
Earnings P/S $ .32, .41, .50, .66, .65, .73, .74, .97, 1.18, 1.22 16.0%
Dividends P/S $ .15, .16, .19, .22, .27, .32, .36, .42, .50, .58 16.2%
Price/Earnings Ratio 20.7
Electrical Equipment (10.35%)
500,000 AMP, Inc. @ 38 3/8 19,187,500
World's largest manufacturer of electrical/
electronic connectors
Earnings P/S $ 1.16, 1.48, 1.32, 1.35, 1.24, 1.26, 1.41, 1.59, 1.91, 2.01 6.3%
Dividends P/S $ .43, .50, .60, .68, .72, .76, .80, .84, .92, 1.00 9.8%
Price/Earnings Ratio 19.9
525,000 Emerson Electric Co. @ 96 3/4 50,793,750
Produces and sells electrical/electronic
products and systems
Earnings P/S $ 2.00, 2.31, 2.63, 2.75, 2.83, 2.96, 3.15, 4.04, 4.16, 4.55 9.6%
Dividends P/S $ .98, 1.03, 1.16, 1.28, 1.34, 1.40, 1.47, 1.60, 1.84, 2.01 8.3%
Price/Earnings Ratio 22.1
900,000 General Electric Co. @ 98 7/8 88,987,500
Dominant force in home appliances, electrical
power, and financial services
Earnings P/S $ 1.60, 1.88, 2.18, 2.43, 2.54, 2.54, 2.33, 3.31, 3.78, 4.26 11.5%
Dividends P/S $ .65, .70, .82, .94, 1.02, 1.12, 1.26, 1.44, 1.64, 1.84 12.3%
Price/Earnings Ratio 23.4
425,000 W.W. Grainger, Inc. @ 80 1/4 34,106,250
Leading distributor of electrical equipment
Earnings P/S $ 1.48, 1.57, 1.96, 2.19, 2.36, 2.55, 2.76, 3.28, 2.67, 3.95 11.5%
Dividends P/S $ .39, .43, .50, .57, .61, .65, .71, .78, .89, .98 10.8%
Price/Earnings Ratio 20.4
--------------
193,075,000
--------------
Energy (2.35%)
250,000 Exxon Corp. @ 98 24,500,000
Major factor in the crude oil, natural gas
and chemical industry
Earnings P/S $ 3.43, 4.01, 3.43, 3.10, 4.79, 3.59, 4.13, 3.74, 5.36, 5.37 5.1%
Dividends P/S $ 1.90, 2.15, 2.30, 2.47, 2.68, 2.83, 2.88, 2.91, 3.00, 3.12 5.7%
Price/Earnings Ratio 18.5
525,600 Questar Corp. @ 36 3/4 19,315,800
Diversified holding company for Utah, Wyoming
and Colorado natural gas transmission,
distribution and storage
Earnings P/S $ .67, .64, 1.27, 1.46, 1.69, 1.59, 2.24, 1.97, 1.19, 2.29 14.6%
Dividends P/S $ .91, .94, .95, .97, 1.01, 1.04, 1.09, 1.13, 1.16, 1.19 3.0%
Price/Earnings Ratio 16.7
--------------
43,815,800
--------------
Healthcare (9.46%)
500,000 Abbott Laboratories @ 50 3/4 25,375,000
Major pharmaceutical and healthcare firm
Earnings P/S $ .70, .84, .97, 1.11, 1.23, 1.42, 1.63, 1.82, 2.06, 2.34 14.4%
Dividends P/S $ .24, .29, .34, .40, .48, .58, .66, .74, .82, .93 16.2%
Price/Earnings Ratio 22.1
250,000 American Home Products Corp. @ 58 5/8 14,656,250
Leading manufacturer of ethical
pharmaceuticals
Earnings P/S $ (1.32), 1.61, 1.77, 3.03, 2.05, 1.85, 2.33, 2.45, 3.25, 2.30 NMF
Dividends P/S $ .84, .90, .98, 1.08, 1.19, 1.33, 1.43, 1.47, 1.51, 1.57 7.2%
Price/Earnings Ratio 26.1
350,000 Eli Lilly & Co. @ 73 25,550,000
Major producer of prescription and
non-prescription drugs, health products
Earnings P/S $ 1.11, 1.34, 1.60, 1.95, 2.18, 1.41, 2.26, .70, 2.19, 2.67 10.2%
Dividends P/S $ .50, .57, .67, .82, 1.00, 1.10, 1.21, 1.25, 1.31, 1.37 11.9%
Price/Earnings Ratio 28.0
826,000 Johnson & Johnson @ 49 3/4 41,093,500
Major producer of prescription and
non-prescription drugs, toiletries, medical
instruments and supplies
Earnings P/S $ .59, .71, .80, .86, 1.07, 1.20, 1.35, 1.53, 1.80, 2.12 15.3%
Dividends P/S $ .20, .24, .28, .33, .39, .45, .51, .57, .64, .74 15.7%
Price/Earnings Ratio 24.2
250,000 Medtronic, Inc. @ 68 17,000,000
Leading manufacturer of medical devices
and instruments
Earnings P/S $ .79, .92, 1.01, .51, .63, .81, .92, 1.13, 1.55, 2.08 11.4%
Dividends P/S $ .06, .07, .09, .10, .12, .14, .17, .21, .26, .32 20.4%
Price/Earnings Ratio 33.5
300,000 Merck & Co., Inc. @ 79 1/4 23,775,000
World's largest ethical drug manufacturer
Earnings P/S $ .74, 1.02, 1.26, 1.52, 1.75, 2.05, 1.84, 2.33, 2.61, 3.03 17.0%
Dividends P/S $ .27, .43, .55, .64, .77, .92, 1.03, 1.14, 1.24, 1.42 20.3%
Price/Earnings Ratio 27.1
350,000 Pfizer, Inc. @ 82 7/8 29,006,250
Leading ethical pharmaceutical producer
Earnings P/S $ 1.02, 1.18, 1.01, 1.19, 1.30, 1.21, .99, 2.00, 2.35, 2.86 12.1%
Dividends P/S $ .45, .50, .55, .60, .66, .74, .84, .94, 1.04, 1.20 11.5%
Price/Earnings Ratio 29.0
--------------
176,456,000
--------------
Information Processing (1.61%)
700,000 Automatic Data Processing, Inc. @ 42 7/8 30,012,500
--------------
Largest independent computing services
firm in the U.S.
Earnings P/S $ .54, .62, .72, .74, .83, .94, 1.07, 1.22, 1.43, 1.61 12.9%
Dividends P/S $ .11, .13, .15, .17, .20, .23, .26, .29, .35, .42 16.1%
Price/Earnings Ratio 27.1
Insurance (5.20%)
525,000 AFLAC Corp. @ 42 3/4 22,443,750
Global specialty insurer
Earnings P/S $ .62, .72, .53, .77, .92, 1.15, 1.44, 1.81, 2.28, 2.37 16.1%
Dividends P/S $ .12, .13, .15, .18, .20, .23, .26, .30, .34, .39 14.0%
Price/Earnings Ratio 18.2
250,000 American International Group @ 108 1/4 27,062,500
Broadly based property-casualty
insurance organization
Earnings P/S $ 3.92, 4.42, 4.61, 4.86, 3.20, 3.28, 3.92, 4.43, 5.10, 5.94 4.7%
Dividends P/S $ .09, .13, .16, .18, .21, .24, .26, .29, .32, .37 17.0%
Price/Earnings Ratio 18.5
175,000 General RE Corp. @ 157 3/4 27,606,250
Broadly based reinsurance organization
Earnings P/S $ 5.04, 5.04, 6.52, 6.89, 7.12, 7.20, 7.88, 7.56, 9.58, 10.73 8.8%
Dividends P/S $ 1.00, 1.20, 1.36, 1.52, 1.68, 1.80, 1.88, 1.92, 1.96, 2.04 8.2%
Price/Earnings Ratio 14.3
344,800 Reliastar Financial Corp. @ 57 3/4 19,912,200
Financial services company engaged in life/
health insurance and consumer finance
Earnings P/S $ 1.86, 1.58, 2.07, 1.99, 1.71, 1.92, 2.44, 3.05, 4.15, 4.86 11.3%
Dividends P/S $ .47, .57, .59, .65, .69, .73, .79, .88, .98, 1.09 9.8%
Price/Earnings Ratio 11.5
--------------
97,024,700
--------------
Media and Information Services (4.43%)
600,000 Electronic Data Systems Corp. @ 43 1/4 25,950,000
Provides information technology services to
companies worldwide
Earnings P/S $ .66, .79, .91, 1.04, 1.10, 1.29, 1.46, 1.64, 1.89, .89 3.4%
Dividends P/S $ .13, .17, .24, .28, .32, .36, .40, .48, .52, .60 18.5%
Price/Earnings Ratio 53.0
450,000 Gannett Co., Inc. @ 74 7/8 33,693,750
Publishes 81 daily/50 nondaily newspapers,
operates 10 TV, 8 FM and 7 AM stations
Earnings P/S $ 1.98, 2.26, 2.47, 2.36, 2.08, 2.26, 2.64, 3.06, 3.34, 3.64 7.0%
Dividends P/S $ .94, 1.02, 1.11, 1.21, 1.24, 1.26, 1.30, 1.34, 1.38, 1.42 4.7%
Price/Earnings Ratio 19.7
500,000 McGraw-Hill Companies, Inc. @ 46 1/8 23,062,500
Provides informational products and services
for business and industry
Earnings P/S $ 1.64, 1.92, .91, 1.77, 1.58, 1.58, .12, 2.00, 2.24, 2.43 4.5%
Dividends P/S $ .84, .92, 1.00, 1.08, 1.10, 1.12, 1.14, 1.16, 1.20, 1.32 5.2%
Price/Earnings Ratio 19.2
--------------
82,706,250
--------------
Packaging (2.36%)
650,000 Bemis Company, Inc. @ 36 7/8 23,968,750
Producer of a broad range of flexible
packaging and equipment and pressure
sensitive materials
Earnings P/S $ .59, .74, .90, .99, .98, 1.14, .84, 1.33, 1.55, 1.84 13.5%
Dividends P/S $.18, .22, .30, .36, .42, .46, .50, .54, .64, .72 16.7%
Price/Earnings Ratio 20
775,000 Sonoco Products Corp. @ 25 7/8 20,053,125
Leading manufacturer of containers,
paper products and packaging
Earnings P/S $ .77, 1.10, 1.18, .52, 1.07, 1.13, .99, 1.24, 1.65, 1.81 10.0%
Dividends P/S $.21, .30, .39, .43, .44, .48, .50, .53, .59, .65 13.4%
Price/Earnings Ratio 14.7
--------------
44,021,875
--------------
Retail (2.88%)
125,000 May Dept. Stores Co. (The) @ 46 3/4 5,843,750
Operates 318 department stores
and 3,295 shoe stores
Earnings P/S $ 1.45, 1.82, 1.76, 1.80, 2.01, 2.15, 2.60, 2.91, 2.73, 2.73 7.3%
Dividends P/S $ .50, .56, .63, .70, .73, .75, .81, .91, 1.01, 1.13 9.5%
Price/Earnings Ratio 16.4
811,400 Pep Boys - Manny, Moe & Jack (The) @ 30 3/4 24,950,550
Retailer of automotive parts and accessories
Earnings P/S $ .62, .76, .63, .70, .64, .87, 1.01, 1.27, 1.33, 1.57 10.9%
Dividends P/S $ .08, .09, .11, .12, .13, .14, .15, .17, .19, .21 11.3%
Price/Earnings Ratio 18.3
1,000,000 Wal-Mart Stores, Inc. @ 22 7/8 22,875,000
Operates chain of discount department stores
Earnings P/S $ .28, .37, .48, .55, .64, .80, .97, 1.11, 1.24, 1.27 18.3%
Dividends P/S $ .03, .04, .06, .07, .09, .11, .13, .17, .20, .21 24.1%
Price/Earnings Ratio 18.8
--------------
53,669,300
--------------
Telecommunications (2.73%)
400,000 Century Telephone Enterprise, Inc. @ 30 7/8 12,350,000
Louisiana based telecommunications company
Earnings P/S $ .60, .58, .51, .67, .63, .72, 1.09, 1.39, 1.59, 2.12, 2.15 15.2%
Dividends P/S $ .253, .264, .272, .280, .287, .293, .310, .320, .330, .360 9.0%
Price/Earnings Ratio 14.2
792,700 Frontier Corp. @ 22 5/8 17,934,838
Fifth largest long distance
telephone company
Earnings P/S $ .93, 1.06, .99, .96, 1.14, 1.01, 1.15, 1.44, .89, 1.87 8.1%
Dividends P/S $ .66, .68, .71, .73, .75, .77, .79, .81, .83, .85 2.9%
Price/Earnings Ratio 12.1
400,000 SBC Communications, Inc. @ 51 3/4 20,700,000
Provides telephone service throughout the
United States and internationally
Earnings P/S $ 1.74, 1.76, 1.82, 1.84, 1.85, 2.11, 2.34, 2.67, 2.96, 3.40 7.7%
Dividends P/S $ 1.14, 1.22, 1.29, 1.36, 1.41, 1.45, 1.50, 1.56, 1.63, 1.70 4.5%
Price/Earnings Ratio 14.7
--------------
50,984,838
--------------
Tobacco (1.81%)
300,000 Philip Morris Cos., Inc. @ 112 5/8 33,787,500
--------------
Global tobacco, brewing and food company
Earnings P/S $ 1.94, 2.22, 3.18, 3.83, 4.36, 4.95, 5.01, 4.56, 6.25, 7.40 16.0%
Dividends P/S $ .79, 1.01, 1.25, 1.55, 1.91, 2.35, 2.60, 3.03, 3.65, 4.40 21.0%
Price/Earnings Ratio 15.3
Transportation (0.57%)
250,000 CSX Corp. @ 42 1/4 10,562,500
--------------
International transportation company with
interests in rail and ocean container shipping
Earnings P/S $ 2.78, (.30), 4.11, 3.62, 2.05, (2.38), 1.74, 2.70, 2.77, 4.15 4.6%
Dividends P/S $ .59, .62, .64, .70, .72, .76, .79, .88, .92, 1.04 6.5%
Price/Earnings Ratio 10.1
Utilities (1.42%)
400,000 National Fuel Gas Co. @ 41 1/4 16,500,000
Integrated natural gas system serving N.Y.,
PA. and Ohio
Earnings P/S $ 1.49, 1.65, 1.93, 1.83, 1.68, 1.94, 2.21, 2.23, 2.03, 2.79 7.2%
Dividends P/S $ 1.19, 1.25, 1.32, 1.40, 1.45, 1.49, 1.53, 1.57, 1.61, 1.67 3.8%
Price/Earnings Ratio 15.1
260,000 Union Electric Co. @ 38 1/2 10,010,000
Largest electric utility in Missouri
Earnings P/S $ 2.91, 2.56, 2.91, 2.74, 3.03, 2.61, 3.09, 2.87, 2.86, 2.97 0.2%
Dividends P/S $ 1.92, 1.94, 2.02, 2.10, 2.18, 2.26, 2.34, 2.40, 2.46, 2.51 3.0%
Price/Earnings Ratio 13.1
--------------
26,510,000
--------------
TOTAL COMMON STOCKS
(Cost $1,142,653,405) 1,557,759,850
--------------
PREFERRED STOCKS (0.58%)
125,000 Enron Corp. ACES,
Conv Pfd 6.25% @ 24 3,000,000
250,000 Salomon, Inc., Ser FSA,
Conv Pfd 7.625% @ 30 7/8 7,718,750
--------------
TOTAL PREFERRED STOCKS
(Cost $9,375,000) 10,718,750
--------------
PAR VALUE
(000's
OMITTED)
- ------------
<S>
CORPORATE BONDS (3.16%)
$3,500 Arkla Power, Inc., Deb 10.00%,
11-15-19 @ 111.396 3,898,860
4,000 BankAmerica Corp., Sub Note
8.125%, 02-01-02 @ 105.808 4,232,320
1,000 BankAmerica Corp., Sub Note
8.95%, 11-15-04 @ 106.091 1,060,910
5,000 Cablevision Systems Corp., Sr Sub
Deb 10.75%, 04-01-04 @ 104.00 5,200,000
7,385 Century Communications, Inc.,
Deb. 11.875%, 10-15-03 @ 106.00 7,828,100
5,000 Comcast Corp., Sr Sub Deb 10.25%,
10-15-01 @ 107.50 5,375,000
3,000 First Union Corp., Sub Note 8.00%,
08-15-09 @ 103.302 3,099,060
5,000 Georgia-Pacific Corp., Deb 9.50%,
02-15-18 @ 104.608 5,230,400
5,000 GTE North Inc., Telephone Facility
Lease Bonds, 9.60%, 01-01-21
@ 112.170 5,608,500
3,000 Long Island Lighting Co., Gen Ref Mort,
9.625%, 07-01-24 @ 106.351 3,190,530
2,250 Long Island Lighting Co., Gen Ref Mort,
9.75%, 05-01-21 @ 106.788 2,402,730
2,000 NCNB Corp, Deb 9.125%, 10-15-01
@ 109.884 2,197,680
4,000 Owen-Illinois, Inc., Sr Sub Note 10.00%,
08-01-02 @ 104.50 4,180,000
5,500 Viacom, Inc., Sr Sub Note 7.75%,
06-01-05 @ 98.467 5,415,685
--------------
TOTAL CORPORATE BONDS
(Cost $57,807,224) 58,919,775
--------------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (6.04%)
$9,768 Federal Home Loan Mort.
Corp. Sr Sub 7.50%, 07-01-26
@ 101.375 9,902,323
5,000 Federal Home Loan Mort. Corp.
Sr Sub 8.00%, 12-15-08 @ 102.593 5,129,650
10,000 Federal National Mort. Assn.
Sr Sub 6.18%, 12-10-01 @ 98.547 9,854,700
9,633 Federal National Mort. Assn.
Sr Sub 6.50%, 04-01-11 @ 98.156 9,455,225
6,782 Federal National Mort. Assn.
Sr Sub 7.00%, 07-01-11 @ 99.875 6,773,334
4,991 Government National Mort. Assn.,
8.00% 08-15-24 @ 102.187 5,100,430
4,931 Government National Mort. Assn.,
7.5% 07-15-26 @ 100.031 4,932,860
4,947 Government National Mort. Assn.,
7.5% 11-15-26 @100.031 4,948,185
20,000 United States Treasury, Note 7.75%,
12-31-99 @ 104.594 20,918,800
22,800 United States Treasury, Bond 10.75%,
08-15-05 @ 128.297 29,251,716
4,000 United States Treasury, Note 6.50%,
10-15-06 @ 100.547 4,021,880
2,000 United States Treasury, Bond 8.125%,
08-15-19 @ 115.5625 2,311,250
--------------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $111,992,237) 112,600,353
--------------
SHORT-TERM INVESTMENTS (6.91%)
$68,123 Joint Repurchase Agreement (3.65%)
Investment in a joint repurchase
agreement transaction with
Lehman Brothers, Inc. -
Dated 12-31-96,
Due 01-02-97 (secured by
U.S. Treasury Bonds,
7.25% thru 12.50%
due 08-15-14 thru
08-15-22) - Note A 6.70% $68,123,000
--------------
Short-Term Notes (3.21%)
20,000 Federal Home Loan Mort. Corp. Disc.
Note 5.50%, 01-14-97 19,960,278
39,957 Federal Home Loan Mort.
Corp. Disc. Note 5.525%, 01-17-97 39,859,067
--------------
TOTAL SHORT-TERM NOTES 59,819,345
--------------
Corporate Savings Account (0.05%)
Investors Bank & Trust
Company Daily Interest
Savings Account Current
Rate 4.75% 1,024,655
--------------
TOTAL SHORT-TERM INVESTMENTS (6.91%) 128,967,000
-------- --------------
TOTAL INVESTMENTS (100.19%) $1,868,965,728
======== ==============
NMF No Meaningful Figure
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 STATEMENTS
John Hancock Funds - Sovereign Investors Fund
NOTE A --
ACCOUNTING POLICIES
John Hancock Investment Trust, (the "Trust"), is an open-end management
investment company registered under the Investment Company Act of 1940.
The Trust consists of three series portfolios: John Hancock Sovereign
Investors Fund (the "Fund"), John Hancock Growth and Income Fund and
John Hancock Sovereign Balanced Fund. The other two series of the Trust
are reported in separate financial statements. The investment objective
of the Fund is to provide long term growth of capital and of income
without assuming undue market risks.
The Trustees have authorized the issuance of multiple classes of the
Fund, designated as Class A, Class B and Class C 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 and service
expenses under terms of a distribution plan have exclusive voting rights
regarding such distribution plan. 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. 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's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all 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.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative size of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are calculated at the Fund level and allocated daily to
each class of shares based on the appropriate net assets of the
respective classes. Transfer agent, and distribution and service fees, if any,
are calculated daily at the class level based on the appropriate 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.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
investment securities from either the date of issue or date of purchase
over the life of the security, as required by the Internal Revenue Code.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
quarterly management fee to the Adviser for a continuous investment
program equivalent on an annual basis, to the sum of (a) 0.60% of the
first $750,000,000 of the Fund's average daily net asset value, (b)
0.55% of the next $750,000,000, (c) 0.50% of the next $1,000,000,000 and
(d) 0.45% of the Fund's average daily net asset value in excess of
$2,500,000,000. The Adviser has entered into a sub advisory agreement
with Sovereign Asset Management Corporation ("SAMCORP") an affiliate of
the Adviser, to provide certain investment research and portfolio
management services to the Fund, for which the Adviser pays SAMCORP 40%
of its management fee.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly-owned subsidiary of the Adviser. For the period ended
December 31, 1996, net sales charges received with regard to sales of
Class A shares amounted to $3,840,458. Out of this amount, $604,382 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $1,509,424 was paid as sales commissions
to unrelated broker-dealers and $1,726,652 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 ("JHMLICo"), is the indirect
sole shareholder of Distributors and until November 29, 1996, was the sole
indirect shareholder of 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 December 31, 1996 contingent
deferred sales charges paid to JH Funds amounted to $692,899.
In addition, to reimburse 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 0.30% of Class A average daily net assets and 1.00%
of Class B average daily net assets to reimburse JH Funds for its
distribution and 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 Signature
Services, Inc. ("Signature Services"), an indirect subsidiary of
JHMLICo. Class A and Class B shares pay transfer agent fees based on the
number of shareholder accounts and certain out-of-pocket expenses. Class
C shares pay a monthly transfer agent fee equivalent, on an annual
basis, to 0.10% of the average daily net asset value of Class C shares
of the Fund.
The Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Fund. The compensation for 1996
was paid at an annual rate of 0.01875% of the average net assets of the
Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are Trustees and officers of the Adviser and its affiliates, as
well as 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
December 31, 1996, the Fund's investment to cover the deferred
compensation had unrealized appreciation of $7,293.
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 December 31, 1996, aggregated $612,489,945 and
$643,516,067, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies aggregated
$ 338,371,359 and $268,080,191, respectively. The cost of investments
owned at December 31, 1996 (excluding the corporate savings account),
for Federal income tax purposes was $1,450,409,355. Gross unrealized
appreciation and depreciation of investments aggregated $428,761,146 and
$11,229,428, respectively, resulting in net unrealized appreciation of
$417,531,718.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Investment Trust --
John Hancock Sovereign Investors Fund
We have audited the accompanying statement of assets and liabilities of
the John Hancock Sovereign Investors Fund (the "Fund"), one of the
portfolios constituting John Hancock Investment Trust, including the
schedule of investments, as of December 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 four 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. The financial highlights of John Hancock
Sovereign Investors Fund for the year ended December 31, 1992 were
audited by other auditors whose report dated February 3, 1993 expressed
an unqualified opinion on those financial highlights.
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 and financial highlights. Our
procedures included confirmation of securities owned as of December 31,
1996, by correspondence with the custodian and brokers, and other
auditing procedures when 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 Sovereign Investors Fund
portfolio of John Hancock Investment Trust at December 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 four years in the period then
ended, in conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 7, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax Purposes, the following information is furnished
with respect to the taxable distributions of the Fund for its fiscal
year ended December 31, 1996.
The Fund designated a distribution to shareholders of $87,931,210 as
long-term capital gain dividends. Shareholders were mailed a 1996 U.S.
Treasury Department form 1099-DIV in January 1997 representing their
proportionate share.
U.S. Government Obligations: Income from these investments may be exempt
from certain state and local taxes. The percentage of assets invested in
U.S. Treasury bonds, bills and notes was 3.01% at year end. The
percentage of income derived from U.S. Treasury bonds, bills and notes
was 7.89%. The percentage of assets invested in obligations of other
U.S. government agencies (excluding securities issued by Federal
National Mortgage Association and Government National Mortgage
Association) was 6.11% at year end. The percentage of income derived
from these types of investments was 2.02%. For specific information on
exemption provisions in your state, consult your local tax office or
your tax adviser.
With respect to the Fund's ordinary taxable income for the fiscal year
ended December 31, 1996, 59.86% qualify for the dividends received
deduction.
For specific information on exemption provisions in your state, consult
your local state tax office or your tax adviser.
SHAREHOLDER MEETING (UNAUDITED)
On July 2, 1996, a special meeting of John Hancock Sovereign Investors
Fund was held.
The shareholders approved an Agreement and Plan of Reorganization for
the Fund. The shareholder votes were 44,708,064 FOR, 944,047 AGAINST
and 3,731,703 ABSTAINING.
The shareholders elected the following Trustees with the votes as
indicated:
NAME OF TRUSTEE FOR WITHHELD
- ---------------- ---------- ----------
Edward J. Boudreau, Jr. 60,422,606 1,239,940
Thomas W.L. Cameron 60,431,912 1,230,635
James F. Carlin 60,452,947 1,209,600
William H. Cunningham 60,391,144 1,271,403
Charles F. Fretz 60,451,947 1,210,600
Harold R. Hiser, Jr. 60,384,081 1,278,466
Anne C. Hodsdon 60,447,511 1,215,036
Charles L. Ladner 60,450,752 1,211,795
Leo E. Linbeck, Jr. 60,370,571 1,291,976
Patricia P. McCarter 60,439,937 1,222,609
Steven R. Pruchansky 60,453,752 1,208,795
Richard S. Scipione 60,444,183 1,218,364
Norman H. Smith 60,454,628 1,207,919
John P. Toolan 60,384,745 1,277,802
Historical Data (Unaudited)
The table below shows the record of the Fund during the past periods.
- ---------------------------------------------------------------------
CLASS A PER SHARE
YEAR -------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- ------- ------------ ------------ --------- -------------
1985 2,105,220 $.53 $11.31 $.44
1986 2,807,182 .55 12.36 .87
1987 3,701,248 .58 10.96 .90
1988 4,099,131 .60 11.19 .38
1989 5,274,426 .61 12.60 .58
1990 6,991,411 .59 11.94 .60
1991 13,560,178 .53 14.31 .67
1992 59,053,529 .45 14.78 .09
1993 83,332,510 .42 15.10 .09
1994 76,585,860 .46 14.24 .11
1995 71,652,920 .40 17.87 .08
1996 73,390,083 .36 19.48 1.16
CLASS B PER SHARE
YEAR -------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- ------- ------------ ------------ --------- -------------
1994 8,996,738 $.36 $14.24 $.11
1995 14,432,679 .28 17.86 .08
1996 20,888,201 .22 19.46 1.16
CLASS C PER SHARE
YEAR -------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- ------- ------------ ------------ --------- -------------
1993 674,320 $.34 $15.11 $.09
1994 1,062,699 .51 14.24 .11
1995 1,116,297 .46 17.87 .08
1996 1,510,614 .43 19.48 1.16
Dividend Increases (Unaudited)
Listed below are the most recent dividend increases for the common
stocks held in the Sovereign Investors Fund as of December 31, 1996
- -------------------------------------------------------------------
PERCENT OF
COMPANY DIVIDEND INCREASE
- -------- -------------------
Abbott Laboratories 14.3%
AFLAC Corp. 15.3
Air Products & Chemicals, Inc. 5.8
Alco Standard Corp. 7.7
American Home Products Corp. 6.5
American International Group 17.6
AMP, Inc. 8.7
Archer-Daniel Midland Co. 5.0
Automatic Data Processing, Inc. 15.0
BankOne Corp. 10.0
Bemis Company, Inc. 12.5
Century Telephone Enterprise, Inc. 9.1
ConAgra, Inc. 14.7
CoreStates Financial Corp. 11.9
CPC International, Inc. 7.9
CSX Corp. 18.2
Dover Corp. 13.3
E I DuPont De Nemours & Co. 9.6
Electronic Data Systems Corp. 15.4
Emerson Electric Co. 10.2
Exxon Corp. 5.3
Federal Signal Corp. 15.5
First Tennessee National Corp. 13.2
Frontier Corp. 2.4
Gannett Co., Inc. 2.9
General Electric Co. 13.0
General RE Corp. 4.1
Hewlett Packard Co. 20.0
Illinois Tool Works, Inc. 11.8
Interpublic Group, Inc. 9.7
Johnson & Johnson 15.2
KeyCorp. 5.6
Kimberly-Clark Corp. 2.2
Leggett & Platt, Inc. 9.1
PERCENT OF
COMPANY DIVIDEND INCREASE
- ------- -----------------
Eli Lilly Co. 5.1%
Masco Corp. 5.3
May Department Stores Co. 12.5
McGraw-Hill Companies, Inc. 10.0
Medtronic, Inc. 46.2
Merck & Co., Inc. 17.6
National Fuel Gas Co. 3.7
NationsBank Corp. 13.8
Nucor Corp. 14.3
Pall Corp. 16.7
Pentair, Inc. 8.0
Pep Boys - Manny, Moe, & Jack (The) 10.5
PepsiCo, Inc. 15.0
Pfizer, Inc. 15.4
Philip Morris Cos., Inc. 20.0
Pitney Bowes, Inc. 15.0
PPG Industries, Inc. 6.7
Procter & Gamble Co. 12.5
Questar Corp. 3.4
Reliastar Financial Corp. 12.0
Rockwell International Corp. 7.4
RPM, Inc. 8.3
Sara Lee Corp. 10.5
Sigma-Aldrich Corp. 13.6
Sonoco Products Corp. 10.0
SBC Communications, Inc. 4.2
Sysco Corp. 15.4
Union Electric Co. 1.6
U.S. Bancorp 10.7
W.W. Grainger, Inc. 8.7
Wal-Mart Stores, Inc. 5.0
Worthington Industries, Inc. 9.1
------
The average dividend increase for this group was 11.0%
======
John Hancock Funds - Sovereign Investors Fund
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