The latest report from your
Fund's management team
SEMIANNUAL REPORT
Sovereign
Investors Fund
JUNE 30, 1999
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
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
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
TRANSFER AGENT
John Hancock Signature Services, Inc.
1 John Hancock Way, Suite 1000
Boston, Massachusetts 02217-1000
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
CHAIRMAN'S MESSAGE
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting
ready to celebrate this historic transition to a new millennium. At John
Hancock Funds, we share the excitement, but we aren't popping the
champagne corks just yet. Rather, we are staying on the course that we set
more than two years ago to ensure that the transition to a new millennium
is a smooth one for our shareholders.
As many already know, the Year 2000 has created more than the prospect of
New Year's festivities of epic proportions. It has also presented the
world with a challenge: making sure that older computers, and any
equipment powered by computer chips, can properly read and process the
date "00" as 2000, not 1900. Much has been written about how the world
will weather the change. Some view it as a non-event, while others see the
potential for disruptions. How much disruption, and for how long, depends
on whom you talk to.
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an
important issue to be dealt with and we have made it a top priority. Two
years ago, John Hancock Funds put a full-time team of experts on the case
and established a company-wide program to evaluate all computer
applications and to modify or replace those that needed changing.
These modifications and replacements for all mission-critical systems are
done and successfully compliance tested. The rest of 1999 will be spent
completing the few remaining non mission-critical systems, testing with
our business partners and continuing to participate in industry testing.
We have also established additional contingency plans beyond our regular
ones to prepare for any challenges that the Year 2000 might present. In
the end, John Hancock will spend approximately $90-$95 million to ensure
we make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is
featuring articles with more detailed information on Y2K matters of
importance to our shareholders. I encourage you to read them, or contact
one of our Customer Service Representatives at 1-800-225-5291 for another
copy. For your own peace of mind, we also recommend that you save your
1999 statements, especially those you receive between October and
December, so that you are able to check them against the first one you
receive in 2000. It's a measure of prudence, not panic. Good record
keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although
we cannot make any ironclad assurances, we are confident that the steps we
have taken will provide shareholders with as smooth a transition as
possible. Once that occurs, we will happily raise our glasses to toast the
New Year, future prosperity and our hopes to serve you well into the
2000's.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JOHN F. SNYDER, III, BARRY H. EVANS, CFA,
AND PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGERS
John Hancock
Sovereign Investors Fund
Market shifts from growth to value stocks
The first half of 1999 was marked by two distinct periods of stock market
performance. During the first quarter of the year, we saw a continuation of
1998 -- where a narrow group of stocks fueled the market's performance.
The common theme among the market's bigger winners was extremely high
valuations. Technology stocks, once again, topped the list of the market's
strongest performers, driven by a few names such as Microsoft and America
Online. Value stocks with more reasonable prices and solid fundamentals, on
the other hand, lagged behind in the market's first quarter rally.
In the second quarter, however, the market began to broaden. With evidence
of stronger earnings growth and improvement in other sectors of the
economy, investors started to migrate from the high-valuation stocks into
more value-oriented stocks. As a result, stocks in other sectors -- such as
basic materials and capital goods -- began to participate in the market
rally.
"In the
second
quarter...
the market
began to
broaden."
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock
Sovereign Investors Fund. Caption below reads "Portfolio Managers John
Snyder (l) and Barry Evans (r)."]
Performance explained
While the Fund owned many strong performers during the period, what
impacted performance most was the stocks that we didn't own, namely most
technology stocks. As discussed in past reports, most technology stocks
simply don't meet our investment criteria. We focus on what we call
"dividend performers," namely companies that have increased their
dividends consistently for at least the past 10 years. Most technology
stocks don't fall into this category, and that caused us to underperform
our peers.
[Table at top left hand column entitled "Top Five Holdings." The first
listing is General Electric 3.0%, the second is Bristol-Myers Squibb 2.7%,
the third SYSCO Corp. 2.5%, the fourth Honeywell 2.4% and the fifth McGraw-
Hill 2.3%. A note below the table reads "As a percentage of net assets on
June 30, 1999."]
"...what
impacted
performance
most was the
stocks that
we didn't
own, namely
technology
stocks."
While our cautious approach may not always win out over the short term, it
has rewarded shareholders over the long term. In fact, the Fund has
generated positive returns in 19 out of the past 20 calendar years.
Sovereign Investors is a long-term investment focused on risk-averse
growth. That's why we always encourage shareholders to keep the longer-term
picture in mind when looking at short-term performance numbers.
Fund performance
For the six months ended June 30, 1999, John Hancock Sovereign Investors
Fund's Class A, Class B, Class C and Class Y shares returned 5.80%, 5.47%,
5.44% and 5.99%, respectively, at net asset value. By comparison, the
average growth and income fund returned 10.93% for the same period,
according to Lipper, Inc.1 Keep in mind that your net asset value return
will be different from the Fund's performance if you were not invested in
the Fund for the entire period and did not reinvest all distributions. See
pages six and seven for historical performance information.
[Table at bottom of left hand column entitled "Scorecard". The header for
the left column is "Investment" and the header for the right column is
"Recent Performance...and What's Behind the Numbers". The first listing is
Dayton Hudson followed by an up arrow with the phrase "Expansion of Target
chain." The second listing is Minnesota Mining & Manufacturing followed by
an up arrow with the phrase "Boosted by global recovery." The third listing
is UNUM followed by a down arrow with the phrase "Concerns about recent
merger." A note below the table reads "See 'Schedule of Investments.'
Investment holdings are subject to change."]
Capital goods, basic materials, retailers
Our sizable holdings in capital goods and basic materials stocks benefited
from the market shift in the second quarter. After being significantly
undervalued, stocks in these sectors became much more appealing to
investors looking for value. With the turnaround in the global economy,
particularly Southeast Asia, our multinational holdings -- such as
Honeywell, Minnesota Mining & Manufacturing and Emerson Electric --
rebounded strongly.
Retail stocks continued their winning streak from 1998, thanks to solid
wage growth and strong consumer spending. Once again, Dayton Hudson stood
out as a stellar performer among our retail stocks. With the aggressive
expansion of its mass-merchandise chain, Target, throughout the Northeast
and Mid-Atlantic states, the company has successfully gained market share
from competitors.
Paring back overvalued stocks
Throughout the first half of the year, we took advantage of strength in the
market to take profits in some of our higher-valuation stocks. Examples
include fast-food chain McDonald's, advertising agency Interpublic and mass
merchandise giant Wal-Mart Stores.
Although these companies' fundamentals remain extremely solid, their
valuations had just gotten too lofty. So we decided to pare back holdings
in favor of ones that offered better relative value.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the six months ended June 30,
1999." The chart is scaled in increments of 2% with 0% at the bottom and 12%
at the top. The first bar represents the 5.80% total return for John Hancock
Sovereign Investors Fund Class A. The second bar represents the 5.47% total
return for John Hancock Sovereign Investors Fund Class B. The third bar
represents the 5.44% total return for John Hancock Sovereign Investors Fund
Class C. The fourth bar represents the 5.99% total return for John Hancock
Sovereign Investors Class Y. The fifth bar represents the 10.93% total
return for Average growth and income fund. A note below the chart reads
"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, Inc.1 See the following two pages for historical
performance information."]
Beefing up financial stocks
One of the most attractive areas of opportunity has been financial stocks,
where we've increased our stake to 16%, up from 14% at the end of 1998. One
favorite new holding is Fannie Mae Corporation, the largest originator of
mortgages in the country. Fears of increased competition caused the stock
to drop sharply at the start of the year. In our view, those fears were
overblown and we took advantage of the stock's decline to add a substantial
position to the portfolio. Barriers to entry are extremely high in this
industry and Fannie Mae's top-notch services and costs would be difficult
for competitors to match.
Another new holding is SunTrust, a regional bank in the Southeast. Not only
is this premiere bank undervalued, but its growth prospects are extremely
promising. With its recent acquisition of Crestar, SunTrust will be able to
quickly expand its market share. It is also well positioned to reap the
benefits of the rapid growth in the Southeast region.
Looking ahead
We expect to see the global economy continue on the road to recovery in the
second half of the year. The worst appears to be over in Southeast Asia and
Japan -- and we're starting to see signs of life emerge in those economies.
As economic recovery takes hold around the world, multi-national companies
are likely to be the biggest beneficiaries. However, there are still
challenges facing investors. For one, we don't expect the global economy to
make a quick recovery, but rather a slow uptick. Second, consumer spending
is likely to slow due to increasing debt levels. And finally, pricing power
will likely remain limited, given the outlook for tame inflation.
"We expect
to see the
global
economy
continue on
the road to
recovery..."
In this environment, corporate earnings are still likely to improve.
However, stock selectivity will be critical, especially given the market's
high valuations. Our universe of "dividend performers" is currently
undervalued. And as the market continues to broaden out in the second half
of the year, we believe that investors will likely recognize their
potential.
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.
1 Figures from Lipper, Inc. 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 measures the change in value of an investment from the beginning to
the end of a period, assuming all distributions were reinvested.
For Class A shares, total return figures include a maximum applicable
sales charge of 5%. Class B performance reflects a maximum contingent
deferred sales charge (maximum 5% and declining to 0% over six years).
Class C performance includes a contingent deferred sales charge (1%
declining to 0% after one year).
All figures represent past performance and are no guarantee of future
results. 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.
Please read your prospectus carefully before you invest or send money.
CLASS A
For the period ended June 30, 1999
ONE FIVE TEN
YEAR YEARS YEARS
--------- --------- ---------
Cumulative Total Returns 7.04% 135.30% 285.10%
Average Annual Total Returns 7.04% 18.67% 14.43%
CLASS B
For the period ended June 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/94)
--------- ---------- -----------
Cumulative Total Returns 6.90% 136.60% 126.22%
Average Annual Total Returns 6.90% 18.80% 16.04%
CLASS C
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (5/1/98)
-------- ----------
Cumulative Total Returns 10.96% 10.90%
Average Annual Total Returns 10.96% 9.29%
CLASS Y
For the period ended June 30, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (5/7/93)
-------- -------- ---------
Cumulative Total Returns 13.05 152.26% 152.42%
Average Annual Total Returns 13.05 20.33% 16.25%
YIELDS
As of June 30, 1999
SEC 30-DAY
YIELD
----------
John Hancock Sovereign Investors Fund: Class A 1.14%
John Hancock Sovereign Investors Fund: Class B 0.57%
John Hancock Sovereign Investors Fund: Class C 0.52%
John Hancock Sovereign Investors Fund: Class Y 1.56%
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, assuming all
distributions were reinvested for the period indicated. 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.
Line chart with the heading John Hancock 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 Standard & Poor's 500 Stock Index and is equal to $65,027 as of June
30, 1999. The second line represents the value of the hypothetical $10,000
investment made in the John Hancock Sovereign Investors Fund on December
31, 1988, before sales charge, and is equal to $45,067 as of June 30, 1999.
The third line represents the value of the same hypothetical investment
made in the John Hancock Sovereign Investors Fund, after sales charge, and
is equal to $42,810 as of June 30, 1999.
Chart representing the growth of $10,000 investment for the Fund's Class B,
C* and Y shares in lower right hand corner of page. Within the chart are
three columns and four rows.
Going from left to right, the first column represents information for Class
B shares. From top to bottom the information is as follows: Inception Date:
1/3/94; Without Sales Charge: $22,722; With Maximum Sales Charge $22,622;
Standard & Poor's 500 Stock Index $33,015. The second column represents
Class C* shares. Top to bottom information is as follows: Inception Date:
5/1/98; Without Sales Charge: $11,090; With Maximum Sales Charge: N/A;
Standard & Poor's 500 Stock Index: $12,555. The third column represents
Class Y shares. From top to bottom information is as follows: Inception
Date: 5/7/93; Without Sales Charge: $25,242; With Maximum Sales Charge: N/A;
Standard & Poor's 500 Stock Index: $35,678.
*No contingent deferred sales charge applicable.
Assuming all distributions were reinvested for the period indicated, the
chart below shows the value of a $10,000 investment in the Fund's Class B,
Class C and Class Y shares, respectively, as of June 30, 1999. Performance
of the classes will vary based on the difference in sales charges paid by
shareholders investing in the different classes and the fee structure of
those classes. Past performance is not indicative of future results.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- -----------------------------------------------------------------------
Assets:
Investments at value - Note C:
Common and preferred stocks
(cost - $1,520,164,883) $2,445,835,536
Corporate bonds
(cost - $141,702,594) 137,717,899
U.S. government and agencies
obligations (cost - $71,611,953) 70,527,774
Joint repurchase agreement
(cost - $191,907,000) 191,907,000
Corporate savings account 900
---------------
2,845,989,109
Receivable for investments sold 47,507,134
Receivable for shares sold 680,018
Dividends receivable 2,563,468
Interest receivable 4,203,215
Other assets 256,920
---------------
Total Assets 2,901,199,864
- -----------------------------------------------------------------------
Liabilities:
Payable for investments purchased 47,989,185
Payable for shares repurchased 1,172,568
Payable to John Hancock
Advisers, Inc. and
affiliates - Note B 4,438,476
Accounts payable and accrued expenses 31,121
---------------
Total Liabilities 53,631,350
- -----------------------------------------------------------------------
Net Assets:
Capital paid-in 1,820,300,984
Accumulated net realized
gain on investments 104,986,924
Net unrealized appreciation
of investments 920,601,779
Undistributed net investment income 1,678,827
---------------
Net Assets $2,847,568,514
=======================================================================
Net Asset Value Per Share:
(Based on net asset values and shares
of beneficial interest outstanding -
unlimited number of shares authorized
with no par value)
Class A -
$1,911,144,406/75,065,153 $25.46
=======================================================================
Class B -
$850,068,771/33,432,936 $25.43
=======================================================================
Class C - $7,730,235/303,798 $25.45
=======================================================================
Class Y -
$78,625,102/3,087,332 $25.47
=======================================================================
Maximum Offering Price Per Share*
Class A - ($25.46 x 105.26%) $26.80
=======================================================================
* 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 June 30,
1999. You'll also find the net asset value and the maximum offering
price per share as of that date.
See notes to financial statements.
Statement of Operations
Six months ended June 30, 1999 (Unaudited)
- -----------------------------------------------------------------------
Investment Income:
Dividends (net of foreign
withholding taxes of $53,296) $19,356,139
Interest 11,183,901
---------------
30,540,040
---------------
Expenses:
Investment management fee - Note B 7,316,059
Distribution and service fee - Note B
Class A 2,777,256
Class B 3,806,372
Class C 29,759
Transfer agent fee - Note B 2,161,710
Accounting and legal
services fee - Note B 196,563
Custodian fee 155,818
Trustees' fees 75,978
Registration and filing fees 51,674
Printing 46,884
Miscellaneous 37,784
Auditing fee 19,577
Legal fees 14,387
---------------
Total Expenses 16,689,821
- -----------------------------------------------------------------------
Net Investment Income 13,850,219
- -----------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on
investments sold 84,382,190
Change in net unrealized
appreciation/depreciation
of investments 56,299,597
---------------
Net Realized and Unrealized
Gain on Investments 140,681,787
- -----------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $154,532,006
=======================================================================
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>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $28,965,378 $13,850,219
Net realized gain on
investments sold 165,892,837 84,382,190
Change in net unrealized
appreciation/depreciation
of investments 171,161,057 56,299,597
----------------- ----------------
Net Increase in Net Assets
Resulting from Operations 366,019,272 154,532,006
----------------- ----------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.3139 and
$0.1692 per share,
respectively) (23,712,516) (12,810,416)
Class B - ($0.1358 and
$0.0897 per share,
respectively) (4,062,580) (2,977,588)
Class C** - ($0.1235 and
$0.0833 per share,
respectively) (14,721) (22,163)
Class Y*** - ($0.3935 and
$0.2131 per share,
respectively) (927,523) (629,142)
Distributions from net realized
gain on investments sold
Class A - ($1.2878 and none
per share, respectively) (95,145,395) --
Class B - ($1.2878 and none
per share, respectively) (39,824,856) --
Class C** - ($1.2878 and
none per share,
respectively) (204,020) --
Class Y*** - ($1.2878 and
none per share,
respectively) (3,140,420) --
----------------- ----------------
Total Distributions to
Shareholders (167,032,031) (16,439,309)
----------------- ----------------
From Fund Share Transactions - Net: * 135,002,951 (32,237,028)
----------------- ----------------
Net Assets:
Beginning of period 2,407,722,653 2,741,712,845
----------------- ----------------
End of period (including
undistributed net
investment income of
$4,267,917 and $1,678,827,
respectively) $2,741,712,845 $2,847,568,514
================= ================
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (continued)
-----------------------------------------------------------------
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 13,387,027 $315,833,546 3,424,141 $83,568,266
Shares issued to shareholders in
reinvestment of distributions 4,746,128 110,630,538 483,766 11,789,534
-------------- -------------- -------------- --------------
18,133,155 426,464,084 3,907,907 95,357,800
Less shares repurchased (18,399,338) (432,577,451) (6,608,020) (161,606,372)
-------------- -------------- -------------- --------------
Net decrease (266,183) ($6,113,367) (2,700,113) ($66,248,572)
============== ============== ============== ==============
CLASS B
Shares sold 8,792,974 $207,827,824 4,163,039 $101,575,956
Shares issued to shareholders in
reinvestment of distributions 1,764,977 41,005,639 114,438 2,781,394
-------------- -------------- -------------- --------------
10,557,951 248,833,463 4,277,477 104,357,350
Less shares repurchased (5,198,801) (122,125,680) (3,500,524) (85,646,728)
-------------- -------------- -------------- --------------
Net increase 5,359,150 $126,707,783 776,953 $18,710,622
============== ============== ============== ==============
CLASS C**
Shares sold 193,199 $4,581,484 133,873 $3,272,235
Shares issued to shareholders in
reinvestment of distributions 8,781 203,952 830 20,237
-------------- -------------- -------------- --------------
201,980 4,785,436 134,703 3,292,472
Less shares repurchased (10,927) (253,063) (21,958) (533,511)
-------------- -------------- -------------- --------------
Net increase 191,053 $4,532,373 112,745 $2,758,961
============== ============== ============== ==============
CLASS Y***
Shares sold 601,499 $14,196,937 580,515 $14,163,754
Shares issued to shareholders in
reinvestment of distributions 174,378 4,066,776 25,761 629,142
-------------- -------------- -------------- --------------
775,877 18,263,713 606,276 14,792,896
Less shares repurchased (356,868) (8,387,551) (91,125) (2,250,935)
-------------- -------------- -------------- --------------
Net increase 419,009 $9,876,162 515,151 $12,541,961
============== ============== ============== ==============
** Class C shares commenced operations on May 1, 1998.
*** The original Class C shares were renamed Class Y shares effective May 1, 1998.
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 repurchased 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 DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------------------------ JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning
of Period $15.10 $14.24 $17.87 $19.48 $22.41 $24.23
-------- -------- -------- -------- -------- --------
Net Investment Income 0.46 0.40 0.36(3) 0.32(3) 0.31(3) 0.15(3)
Net Realized and Unrealized
Gain (Loss) on Investments (0.75) 3.71 2.77 5.31 3.11 1.25
-------- -------- -------- -------- -------- --------
Total from Investment Operations (0.29) 4.11 3.13 5.63 3.42 1.40
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net
Investment Income (0.46) (0.40) (0.36) (0.32) (0.31) (0.17)
Distributions from Net Realized
Gain on Investments Sold (0.11) (0.08) (1.16) (2.38) (1.29) --
-------- -------- -------- -------- -------- --------
Total Distributions (0.57) (0.48) (1.52) (2.70) (1.60) (0.17)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $14.24 $17.87 $19.48 $22.41 $24.23 $25.46
======== ======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(2) (1.85%) 29.15% 17.57% 29.14% 15.62% 5.80%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,090,231 $1,280,321 $1,429,523 $1,748,490 $1,884,460 $1,911,144
Ratio of Expenses to Average
Net Assets 1.16% 1.14% 1.13% 1.06% 1.03% 1.04%(5)
Ratio of Net Investment
Income to Average Net Assets 3.13% 2.45% 1.86% 1.44% 1.33% 1.20%(5)
Portfolio Turnover Rate 45% 46% 59% 62% 51% 31%
Financial Highlights (continued)
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------------------------ JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
-------- -------- -------- -------- -------- --------
CLASS B (1)
Per Share Operating Performance
Net Asset Value, Beginning
of Period $15.02 $14.24 $17.86 $19.46 $22.38 $24.20
-------- -------- -------- -------- -------- --------
Net Investment Income(3) 0.38 0.27 0.21 0.16 0.14 0.07
Net Realized and Unrealized
Gain (Loss) on Investments (0.69) 3.71 2.77 5.29 3.11 1.25
-------- -------- -------- -------- -------- --------
Total from Investment Operations (0.31) 3.98 2.98 5.45 3.25 1.32
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net
Investment Income (0.36) (0.28) (0.22) (0.15) (0.14) (0.09)
Distributions from Net Realized
Gain on Investments Sold (0.11) (0.08) (1.16) (2.38) (1.29) --
-------- -------- -------- -------- -------- --------
Total Distributions (0.47) (0.36) (1.38) (2.53) (1.43) (0.09)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $14.24 $17.86 $19.46 $22.38 $24.20 $25.43
======== ======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(2) (2.04%)(4) 28.16% 16.67% 28.14% 14.79% 5.47%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $128,069 $257,781 $406,523 $610,976 $790,277 $850,069
Ratio of Expenses to Average
Net Assets 1.86%(5) 1.90% 1.91% 1.83% 1.79% 1.69%(5)
Ratio of Net Investment
Income to Average Net Assets 2.57%(5) 1.65% 1.10% 0.67% 0.58% 0.55%(5)
Portfolio Turnover Rate 45% 46% 59% 62% 51% 31%
PERIOD
FROM MAY 1, 1998 SIX
(COMMENCEMENT OF MONTHS ENDED
OPERATIONS) TO JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
----------------- -------------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $24.43 $24.22
-------- --------
Net Investment Income(3) 0.13 0.06
Net Realized and Unrealized
Gain on Investments 1.07 1.25
-------- --------
Total from Investment Operations 1.20 1.31
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.12) (0.08)
Distributions from Net Realized
Gain on Investments Sold (1.29) --
-------- --------
Total Distributions (1.41) (0.08)
-------- --------
Net Asset Value, End of Period $24.22 $25.45
======== ========
Total Investment Return at
Net Asset Value(2) 5.18%(4) 5.44%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $4,627 $7,730
Ratio of Expenses to Average
Net Assets 1.67%(5) 1.74%(5)
Ratio of Net Investment
Income to Average Net Assets 0.84%(5) 0.51%(5)
Portfolio Turnover Rate 51% 31%
Financial Highlights (continued)
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------------------------ JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
-------- -------- -------- -------- -------- ----------------
CLASS Y
Per Share Operating Performance
Net Asset Value, Beginning
of Period $15.11 $14.24 $17.87 $19.48 $22.41 $24.24
-------- -------- -------- -------- -------- --------
Net Investment Income 0.52 0.46 0.44(3) 0.41(3) 0.40(3) 0.19(3)
Net Realized and Unrealized
Gain (Loss) on Investments (0.77) 3.71 2.76 5.30 3.11 1.25
-------- -------- -------- -------- -------- --------
Total from Investment Operations (0.25) 4.17 3.20 5.71 3.51 1.44
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net
Investment Income (0.51) (0.46) (0.43) (0.40) (0.39) (0.21)
Distributions from Net Realized
Gain on Investments Sold (0.11) (0.08) (1.16) (2.38) (1.29) --
-------- -------- -------- -------- -------- --------
Total Distributions (0.62) (0.54) (1.59) (2.78) (1.68) (0.21)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $14.24 $17.87 $19.48 $22.41 $24.24 $25.47
======== ======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(2) (1.57%) 29.68% 17.99% 29.60% 16.05% 5.99%(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $15,128 $19,946 $29,431 $48,256 $62,349 $78,625
Ratio of Expenses to Average
Net Assets 0.81% 0.74% 0.75% 0.71% 0.69% 0.68%(5)
Ratio of Net Investment
Income to Average Net Assets 3.53% 2.84% 2.26% 1.79% 1.67% 1.57%(5)
Portfolio Turnover Rate 45% 46% 59% 62% 51% 31%
(1) Class B shares commenced operations on January 3, 1994.
(2) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(3) Based on the average of the shares outstanding at the end of each month.
(4) Not annualized.
(5) Annualized.
The Financial Highlights summarizes the impact of the following factors on
a single share for each period indicated: net investment income, gains
(losses), distributions 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>
Schedule of Investments
June 30, 1999 (Unaudited)
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.
The Schedule of Investments is a complete list of all securities owned by
the Sovereign Investors Fund on June 30, 1999. 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 (85.30%)
Advertising (1.83%)
600,000 Interpublic Group of Companies, Inc. (The) @ 86 5/8 $51,975,000
One of the largest advertising agencies -------------
in the world
Earnings P/S $.70, .79, .82, .95, .99, 1.19, 1.36, 1.34, 1.81, 2.18 13.5%
Dividends P/S $.21, .25, .27, .30, .33, .36, .40, .44, .50, .58 11.9%
Price/Earnings Ratio 33.5
Banks (5.91%)
600,000 Bank of America Corp. @ 73 5/16 43,987,500
Holding company for Bank of America and
NationsBank
Earnings P/S $1.45, 2.31, 1.67, .38, 2.26, 2.47, 3.03, 3.53, 4.07, 4.16 12.4%
Dividends P/S $.55, .71, .74, .76, .82, .94, 1.04, 1.20, 1.37, 1.59 12.5%
Price/Earnings Ratio 15.7
497,500 Banc One Corp. @ 59 9/16 29,632,344
Ohio-based bank holding company
Earnings P/S $.98, 1.10, 1.50, 1.88, 2.21, 2.49, 2.07, 2.60, 2.03, 3.13 4.9%
Dividends P/S $.52, .57, .63, .73, .89, 1.02, 1.12, 1.24, 1.38, 1.52 13.0%
Price/Earnings Ratio 15.5
500,000 First Tennessee National Corp. @ 38 5/16 19,156,250
Tennessee-based bank holding company
Earnings P/S $.57, .61, .63, .88, .76, 1.01, 1.12, 1.27, 1.49, 1.70 12.9%
Dividends P/S $.24, .27, .29, .32, .38, .43, .49, .55, .62, .69 12.5%
Price/Earnings Ratio 19.9
324,300 First Union Corp. @ 47 15,242,100
North Carolina-based bank holding company
Earnings P/S $1.20, 1.26, 1.16, 1.45, 1.81, 2.34, 2.44, 2.41, 3.03, 2.68 9.3%
Dividends P/S $.50, .54, .56, .64, .75, .86, .98, 1.10, 1.22, 1.58 13.6%
Price/Earnings Ratio 13.6
500,000 SunTrust Banks, Inc. @ 69 7/16 34,718,750
Holding company for SunTrust Banks operating
through 700 offices in Florida, Georgia,
Tennessee and Alabama
Earnings P/S $1.31, 1.38, 1.45, 1.64, 1.89, 2.19, 2.47, 2.77, 3.13, 3.50 11.5%
Dividends P/S $.39, .43, .47, .52, .58, .66, .74, .83, .93, 1.00 11.0%
Price/Earnings Ratio 17.9
600,000 Wells Fargo Co. @ 42 3/4 25,650,000
Diversified financial services company
providing banking, insurance, investments
and consumer finance
Earnings P/S $.57, .63, .68, .73, .86, 1.05, 1.21, 1.37, 1.55, 1.75 13.3%
Dividends P/S $.19, .21, .24, .27, .32, .38, .45, .53, .62, .70 15.6%
Price/Earnings Ratio 19.8
-------------
168,386,944
-------------
Beverages (1.77%)
1,300,000 PepsiCo, Inc. @ 38 11/16 50,293,750
Second largest soft drink company -------------
Earnings P/S $.57, .68, .68, .82, .87, 1.07, 1.21, .74, .81, 1.40 10.5%
Dividends P/S $.16, .19, .23, .26, .31, .35, .39, .45, .49, .52 14.0%
Price/Earnings Ratio 31.4
Building (1.88%)
1,850,000 Masco Corp. @ 28 7/8 53,418,750
Manufactures building, home improvement -------------
and consumer products
Earnings P/S $.71, .46, .14, .37, .68, .79, .55, .70, 1.14, 1.39 7.8%
Dividends P/S $.25, .27, .29, .31, .33, .35, .37, .39, .41, .43 6.2%
Price/Earnings Ratio 18.8
Chemicals (1.92%)
254,000 Air Products & Chemicals, Inc. @ 40 1/4 10,223,500
Producer of industrial gases
Earnings P/S $.99, 1.04, 1.11, 1.23, .88, 1.03, 1.65, 1.87, 1.95, 2.54 11.0%
Dividends P/S $.32, .35, .38, .42, .45, .48, .51, .54, .59, .66 8.4%
Price/Earnings Ratio 19.1
1,026,562 RPM, Inc. @ 14 3/16 14,564,348
Manufacturer of specialty chemicals and
coatings to waterproof and rustproof structures
Earnings P/S $.31, .34, .36, .43, .46, .64, .69, .65, .84, .91 12.7%
Dividends P/S $.22, .24, .27, .29, .31, .34, .36, .39, .42, .45 8.3%
Price/Earnings Ratio 15.9
865,000 Sigma-Aldrich Corp. @ 34 7/16 29,788,437
Manufacturer of biochemical and organic
products used for research and diagnostics
Earnings P/S $.65, .72, .62, .93, 1.04, 1.11, 1.26, 1.44, 1.61, 1.68 11.1%
Dividends P/S $.09, .10, .11, .13, .15, .17, .19, .23, .26, .28 13.4%
Price/Earnings Ratio 19.3
-------------
54,576,285
-------------
Computers (2.34%)
830,000 Automatic Data Processing, Inc. @ 44 36,520,000
Largest independent computing services
firm in the U.S.
Earnings P/S $.31, .36, .41, .46, .52, .59, .68, .77, .93, .99 12.1%
Dividends P/S $.07, .08, .10, .11, .13, .15, .18, .21, .24, .28 14.2%
Price/Earnings Ratio 39.5
300,000 Hewlett-Packard Co. @ 100 1/2 30,150,000
Manufactures and services electronic
measurement, analysis and computation
instruments
Earnings P/S $.88, .77, .76, .87, 1.16, 1.54, 2.32, 2.46, 3.00, 2.84 13.9%
Dividends P/S $.10, .11, .13, .20, .24, .29, .38, .46, .54, .62 22.5%
Price/Earnings Ratio 28.4
-------------
66,670,000
-------------
Containers (1.41%)
897,000 Bemis Co., Inc. @ 39 3/4 35,655,750
Producer of a broad range of flexible
packaging and equipment and pressure
sensitive materials
Earnings P/S $.90, .99, .98, 1.14, .84, 1.33, 1.55, 1.84, 1.95, 2.15 10.2%
Dividends P/S $.30, .36, .42, .46, .50, .54, .64, .72, .80, .88 12.7%
Price/Earnings Ratio 18.3
150,080 Sonoco Products Co. @ 29 15/16 4,493,020
Leading manufacturer of containers, paper
products and packaging
Earnings P/S $.53, .48, .97, 1.03, .90, 1.13, 1.50, 1.64, 1.67, .35 NMF
Dividends P/S $.35, .39, .40, .43, .46, .48, .54, .59, .64, .70 8.0%
Price/Earnings Ratio 15.9
-------------
40,148,770
-------------
Diversified Operations (2.91%)
350,000 DuPont (E.I.) De Nemours & Co. @ 68 5/16 23,909,375
Nation's largest chemical manufacturer
Earnings P/S $1.77, 1.70, 1.57, .66, .12, 1.70, 2.72, 3.05, 2.43, 1.38 NMF
Dividends P/S $.73, .81, .84, .87, .88, .91, 1.02, 1.12, 1.23, 1.37 7.2%
Price/Earnings Ratio 27.2
347,200 Johnson Controls, Inc. @ 69 5/16 24,065,300
Manufactures automotive systems and
building controls
Earnings P/S $1.21, 1.07, 1.10, 1.43, 1.58, 1.90, 2.27, 2.55, 2.52, 3.89 13.9%
Dividends P/S $.59, .61, .63, .65, .69, .74, .79, .83, .88, .94 5.3%
Price/Earnings Ratio 16.9
400,000 Minnesota Mining & Manufacturing Co. @ 86 15/16 34,775,000
Manufactures industrial, commercial and
health care products
Earnings P/S $2.83, 2.94, 2.71, 2.76, 2.91, 2.81, 3.18, 3.36, 5.15, 3.28 1.7%
Dividends P/S $1.30, 1.46, 1.56, 1.60, 1.66, 1.76, 1.88, 1.92, 2.12, 2.20 6.0%
Price/Earnings Ratio 22.3
-------------
82,749,675
-------------
Electronics (7.81%)
700,000 Emerson Electric Co. @ 62 7/8 44,012,500
Produces and sells electrical/electronic
products and systems
Earnings P/S $1.32, 1.38, 1.42, 1.48, 1.58, 2.02, 1.95, 2.28, 2.52, 2.80 8.7%
Dividends P/S $.58, .64, .67, .70, .74, .80, .92, 1.01, 1.11, 1.21 8.5%
Price/Earnings Ratio 22.3
750,000 General Electric Co. @ 113 84,750,000
Dominant force in home appliances, electrical
power and financial services
Earnings P/S $1.09, 1.22, 1.27, 1.27, 1.16, 1.66, 1.89, 2.14, 2.42, 2.75 10.8%
Dividends P/S $.43, .48, .52, .58, .65, .75, .85, .95, 1.08, 1.25 12.6%
Price/Earnings Ratio 35.2
450,000 Grainger (W.W.), Inc. @ 53 13/16 24,215,625
Leading distributor of electrical equipment
Earnings P/S $1.10, 1.16, 1.18, 1.28, 1.38, 1.64, 1.34, 1.99, 2.21, 2.42 9.2%
Dividends P/S $.25, .28, .31, .33, .35, .39, .45, .49, .53, .59 10.0%
Price/Earnings Ratio 21.1
600,000 Honeywell, Inc. @ 115 7/8 69,525,000
Makes automation and control systems
Earnings P/S $3.55, 2.52, 2.37, 3.41, 1.78, 2.19, 2.44, 2.96, 3.51, 4.32 2.2%
Dividends P/S $.57, .70, .77, .84, .91, .97, 1.01, 1.06, 1.09, 1.13 7.9%
Price/Earnings Ratio 23.1
-------------
222,503,125
-------------
Finance (4.71%)
1,287,500 Citigroup, Inc. @ 47 1/2 61,156,250
Diversified global financial services company
offering commercial/consumer banking,
investment banking, brokerage services and
insurance to consumer and corporate
customers around the world
Earnings P/S $.32, .36, .48, .59, .86, .86, 1.09, 1.70, 2.12, 1.77 20.9%
Dividends P/S $.03, .04, .05, .08, .11, .14, .18, .20, .27, .37 32.1%
Price/Earnings Ratio 18.5
650,000 Fannie Mae @ 68 3/8 44,443,750
Largest U.S. investor in home mortgage loans
providing funds to the mortgage market
by purchasing mortgage loans from various
nationwide lenders
Earnings P/S $.78, 1.12, 1.25, 1.48, 1.71, 1.94, 2.16, 2.50, 2.83, 3.25 17.1%
Dividends P/S $.11, .18, .26, .35, .46, .60, .68, .76, .84, .96 21.2%
Price/Earnings Ratio 18.7
600,000 Household International, Inc. @ 47 3/8 28,425,000
Provides consumer lending and credit card
services in the U.S., Canada and the U.K.
Earnings P/S $.98, 1.00, .53, .66, .97, 1.20, 1.40, 1.80, 1.90, 2.30 9.9%
Dividends P/S $.357, .359, .37, .38, .39, .41, .44, .49, .54, .60 5.9%
Price/Earnings Ratio 16.2
-------------
134,025,000
-------------
Food (0.85%)
280,000 Archer-Daniels-Midland Co. @ 15 7/16 4,322,500
Processes and merchandises agricultural
products
Earnings P/S $.73, .68, .70, .72, .73, .91, 1.29, .89, .84, .66 NMF
Dividends P/S $.03, .04, .045, .047, .05, .06, .10, .17, .18, .19 22.8%
Price/Earnings Ratio 38.5
400,000 Bestfoods, Inc. @ 49 1/2 19,800,000
Manufactures consumer food and baking
products in 62 countries
Earnings P/S $1.06, 1.20, 1.30, 1.39, 1.48, 1.58, 1.84, 1.85, 2.12, 2.22 8.6%
Dividends P/S $.44, .49, .54, .60, .64, .69, .74, .79, .86, .94 8.8%
Price/Earnings Ratio 20.5
-------------
24,122,500
-------------
Furniture (1.55%)
1,590,000 Leggett & Platt, Inc. @ 27 13/16 44,221,875
Produces intermediate products for the home -------------
furnishings industry
Earnings P/S $.33, .33, .16, .38, .49, .65, .78, .81, 1.05, 1.23 15.7%
Dividends P/S $.09, .105, .108, .12, .14, .16, .19, .23, .27, .32 15.1%
Price/Earnings Ratio 18.8
Insurance (5.98%)
650,000 AFLAC Corp. @ 47 7/8 31,118,750
Global specialty insurer
Earnings P/S $.27, .38, .46, .57, .72, .90, 1.14, 1.21, 2.28, 1.74 23.0%
Dividends P/S $.08, .09, .10, .11, .13, .15, .17, .19, .22, .25 13.5%
Price/Earnings Ratio 24.1
400,000 American International Group, Inc. @ 117 1/16 46,825,000
Broadly based property-casualty insurance
organization
Earnings P/S $1.31, 1.36, 1.42, 1.46, 1.74, 1.97, 2.27, 2.64, 3.04, 3.48 11.5%
Dividends P/S $.07, .08, .09, .10, .11, 13, .14, .16, .19, .21 13.0%
Price/Earnings Ratio 30.5
814,300 ReliaStar Financial Corp. @ 43 3/4 35,625,625
Financial services company engaged in
life/health insurance and consumer finance
Earnings P/S $.68, .79, .86, .96, 1.26, 1.53, 2.08, 2.46, 2.61, 2.89 17.4%
Dividends P/S $.30, .32, .35, .37, .39, .44, .49, .55, .61, .71 10.0%
Price/Earnings Ratio 13.8
1,035,000 UNUM Corp. @ 54 3/4 56,666,250
Holding company for Unum Life Insurance
Company of America
Earnings P/S $.97, 1.35, 1.51, 1.78, 1.89, 1.20, 1.88, 1.72, 2.43, 2.69 12.0%
Dividends P/S $.14, .19, .25, .31, .38, .46, .52, .55, .57, .59 17.3%
Price/Earnings Ratio 16.9
-------------
170,235,625
-------------
Leisure (1.03%)
1,050,000 Hasbro, Inc. @ 27 15/16 29,334,375
Designs, manufactures and markets toys, -------------
games and interactive software
Earnings P/S $.46, .46, .42, .89, .96, .84, .86, .98, 1.13, 1.07 9.8%
Dividends P/S $.04, .05, .07, .08, .10, .12, .13, .17, .20, .21 20.2%
Price/Earnings Ratio 19.2
Machinery (2.12%)
600,000 Dover Corp. @ 35 21,000,000
Manufactures a variety of specialized
industrial products
Earnings P/S $.57, .64, .56, .54, .66, .83, 1.17, 1.67, 1.72, 1.72 13.1%
Dividends P/S $.18, .19, .21, .22, .23, .25, .28, .32, .36, .40 9.3%
Price/Earnings Ratio 23.0
862,900 Pentair, Inc. @ 45 3/4 39,477,675
Manufactures enclosures for electrical,
electronic, woodworking and power tool
equipment
Earnings P/S $.93, .96, 1.01, 1.06, 1.19, 1.20, 1.40, 1.73, 2.11, 2.57 12.0%
Dividends P/S $.27, .29, .31, .33, .34, .36, .40, .50, .54, .60 9.3%
Price/Earnings Ratio 15.6
-------------
60,477,675
-------------
Media (4.55%)
900,000 Gannett Co., Inc. @ 71 3/8 64,237,500
Publishes 81 daily/50 nondaily newspapers,
operates 10 TV, 8 FM and 7 AM stations
Earnings P/S $1.23, 1.17, 1.04, 1.13, 1.32, 1.53, 1.67, 1.69, 2.73, 3.42 12.0%
Dividends P/S $.56, .61, .62, .63, .65, .67, .69, .71, .74, .78 3.8%
Price/Earnings Ratio 23.2
1,211,200 McGraw-Hill Cos., Inc. @ 53 15/16 65,329,100
Provides informational products and services
for business and industry
Earnings P/S $.21, .88, .76, .78, .06, 1.03, 1.14, 1.25, 1.46, 1.68 25.9%
Dividends P/S $.50, .54, .55, .56, .57, .58, .60, .66, .72, .78 5.1%
Price/Earnings Ratio 28.0
-------------
129,566,600
-------------
Medical (10.81%)
1,000,000 Abbott Laboratories @ 45 1/2 45,500,000
Major pharmaceutical and health care firm
Earnings P/S $.49, .56, .61, .71, .82, .91, 1.03, 1.17, 1.32, 1.49 13.2%
Dividends P/S $.17, .20, .24, .29, .33, .37, .41, .53, .59 14.8%
Price/Earnings Ratio 27.2
800,000 Baxter International, Inc. @ 60 5/8 48,500,000
The company operates four divisions: renal,
biotech, cardiovascular and intravenous
systems and international distribution
Earnings P/S $1.49, (.05), 2.10, 1.80, 1.69, (.62), 1.41, 2.07, .99, 1.03 NMF
Dividends P/S $.56, .64, .74, .86, 1.00, 1.03, 1.11, 1.17, 1.14, 1.16 8.4%
Price/Earnings Ratio 20.7
400,000 Becton, Dickinson & Co. @ 30 12,000,000
Manufactures broad line of medical supplies
Earnings P/S $.68, .58, .61, .65, .68, .76, .90, 1.06, 1.20, .95 3.8%
Dividends P/S $.13, .14, .15, .154, .17, .19, .21, .24, .27, .30 9.7%
Price/Earnings Ratio 19.6
1,100,000 Bristol-Myers Squibb Co. @ 70 7/16 77,481,250
Produces pharmaceuticals, medical devices,
non-prescription health products
Earnings P/S $.72, 1.67, 1.89, 2.00, 1.61, 1.97, 2.02, 1.98, 3.13, 3.55 19.4%
Dividends P/S $1.02, 1.10, 1.25, 1.40, 1.45, 1.47, 1.49, 1.51, 1.53, 1.60 5.1%
Price/Earnings Ratio 35.0
626,000 Johnson & Johnson @ 98 61,348,000
Major producer of prescription and
non-prescription drugs, toiletries, medical
instruments and supplies
Earnings P/S $.80, .85, 1.07, 1.20, 1.35, 1.53, 1.80, 2.11, 2.42, 2.68 14.4%
Dividends P/S $.28, .33, .39, .45, .51, .57, .64, .74, .85, .97 14.8%
Price/Earnings Ratio 32.6
200,000 Merck & Co., Inc. @ 74 14,800,000
World's largest ethical drug manufacturer
Earnings P/S $.63, .76, .92, 1.1, .94, 1.2, 1.4, 1.6, 1.9, 2.2 14.9%
Dividends P/S $.29, .34, .40, .48, .53, .58, .64, .71, .86, .95 14.2%
Price/Earnings Ratio 30.7
650,000 Schering-Plough Corp. @ 53 34,450,000
Discovers, develops, manufactures and
markets pharmaceutical and health care
products worldwide
Earnings P/S $.27, .32, .36, .43, .51, .59, .69, .80, .94, 1.15 17.5%
Dividends P/S $.11, .13, .16, .19, .22, .25, .28, .32, .37, .43 16.4%
Price/Earnings Ratio 38.9
200,000 Warner-Lambert Co. @ 69 3/8 13,875,000
Major producer of consumer health care,
pharmaceutical and confectionery products
Earnings P/S $.51, .60, .69, .80, .80, .86, .81, .90, 1.05, 1.48 12.5%
Dividends P/S $.21, .25, .29, .34, .38, .41, .43, .46, .51, .64 13.1%
Price/Earnings Ratio 35.7
-------------
307,954,250
-------------
Office (2.03%)
900,000 Pitney Bowes, Inc. @ 64 1/4 57,825,000
Manufactures office automation equipment -------------
Earnings P/S $.60, .67, .88, .94, .95, 1.12, 1.28, 1.51, 1.73, 2.01 14.4%
Dividends P/S $.26, .30, .34, .39, .45, .52, .60, .69, .80, .90 14.8%
Price/Earnings Ratio 28.8
Oil & Gas (4.21%)
350,000 Chevron Corp. @ 95 3/16 33,315,625
One of the largest integrated, international oil
companies with interest in petrochemicals
Earnings P/S $.37, 3.05, 2.69, 1.69, 3.14, 2.09, 3.03, 2.64, 4.35, 3.68 29.1%
Dividends P/S $1.40, 1.48, 1.63, 1.65, 1.75, 1.85, 1.93, 2.08, 2.28, 2.44 6.4%
Price/Earnings Ratio 31.7
600,000 Mobil Corp. @ 99 59,400,000
One of the largest integrated, international oil
companies with interest in petrochemicals
Earnings P/S $2.20, 2.05, 2.63, 1.43, 2.74, 1.92, 2.61, 3.83, 4.05, 3.21 4.3%
Dividends P/S $1.28, 1.41, 1.56, 1.60, 1.63, 1.70, 1.81, 1.96, 2.12, 2.28 6.6%
Price/Earnings Ratio 33.2
450,000 Royal Dutch Petroleum Co., American
Depository Receipt (Netherlands) @ 60 1/4 27,112,500
Owns 60% of the Royal Dutch/Shell Group of
companies. Operations include production,
transportation, refining and sales of
oil/natural gas
Earnings P/S $2.06, 2.07, 1.34, 1.53, 1.63, 1.67, 2.2, 2.48, 2.40, 1.44 NMF
Dividends P/S $.841, 1.063, 1.043, 1.217, 1.183, 1.211, 1.367, 1.449,
1.456, 1.587 7.3%
Price/Earnings Ratio 33.0
-------------
119,828,125
-------------
Paper & Paper Products (0.40%)
200,000 Kimberly-Clark Corp. @ 57 11,400,000
Leading producer of consumer and personal -------------
care products
Earnings P/S $1.32, 1.35, 1.50, 1.69, .98, 1.78, 1.90, .37, 2.47, 1.43 0.9%
Dividends P/S $.65, .68, .76, .82, .86, .88, .90, .92, .96, 1.00 4.9%
Price/Earnings Ratio 19.8
Retail (10.08%)
700,000 Albertson's, Inc. @ 51 9/16 36,093,750
One of the largest retail food-drug chains in
the United States
Earnings P/S $.74, .83, .94, .95, 1.24, 1.58, 1.80, 1.96, 1.99, 2.24 13.1%
Dividends P/S $.19, .23, .27, .31, .35, .42, .50, .58, .63, .67 15.0%
Price/Earnings Ratio 19.8
950,000 Dayton Hudson Corp. @ 65 61,750,000
General merchandiser selling through Target
and Marvyn stores
Earnings P/S $.89, .92, .75, .71, .76, .96, .80, 1.07, 1.48, 1.94 9.0%
Dividends P/S $.19, .22, .24, .25, .27, .28, .29, .31, .33, .36 7.4%
Price/Earnings Ratio 29.6
500,000 Home Depot, Inc. (The) @ 64 7/16 32,218,750
Operates a chain of retail building suppy/home
improvement "warehouse" stores
Earnings P/S $.11, .14, .19, .25, .33, .42, .49, .61, .77, 1.03 28.2%
Dividends P/S $.008, .012, .02, .03, .04, .05, .06, .08, .10, .12 35.1%
Price/Earnings Ratio 46.4
350,000 Lowe's Cos., Inc. @ 56 11/16 19,840,625
Retail distributes building materials and
supplies through stores in the United States
Earnings P/S $.25, .24, .18, .29, .45, .70, .68, .86, 1.03, 1.37 20.8%
Dividends P/S $.06, .065, .068, .07, .08, .09, .093, .10, .11, .12 8.0%
Price/Earnings Ratio 32.7
800,000 McDonald's Corp. @ 41 5/16 33,050,000
Develops, operates, franchises and services
a worldwide system of restaurants
Earnings P/S $.48, .54, .57, .63, .71, .82, .97, 1.08, 1.15, 1.26 11.3%
Dividends P/S $.07, .08, .09, .10, .11, .12, .13, .15, .16, .18 11.1%
Price/Earnings Ratio 29.1
2,361,600 SYSCO Corp. @ 29 13/16 70,405,200
Largest distributor of food service products
Earnings P/S $.37, .38, .43, .47, .55, .62, .71, .68, .87, .98 11.4%
Dividends P/S $.046, .05, .07, .11, .14, .18, .22, .26, .30, .36 25.7%
Price/Earnings Ratio 29.0
700,000 Wal-Mart Stores, Inc. @ 48 1/4 33,775,000
Operates chain of discount department stores
Earnings P/S $.19, .24, .29, .35, .44, .51, .59, .60, .67, .78 16.9%
Dividends P/S $.03, .04, .05, .06, .07, .09, .10, .11, .13, .15 19.5%
Price/Earnings Ratio 41.3
-------------
287,133,325
-------------
Soap & Cleaning Preparations (1.75%)
75,000 Clorox Co. @ 106 13/16 8,010,938
Produces cleaning products, laundry additives,
specialty nonfoods, and dressings/sauces
for homes and institutions
Earnings P/S $1.40, 1.22, 1.33, 1.54, 1.68, 1.89, 2.14, 2.41, 2.84, 3.25 9.8%
Dividends P/S $.60, .70, .77, .83, .89, .93, 1.01, 1.11, 1.22, 1.36 9.5%
Price/Earnings Ratio 31.7
450,000 Ecolab, Inc. @ 43 5/8 19,631,250
Develops and markets premium institutional
cleansing, sanitizing and maintenance
products and services
Earnings P/S $.03, .49, .47, .48, .59, .68, .67, .84, .99, 1.16 50.1%
Dividends P/S $.165, .168, .175, .179, .20, .23, .26, .29, .34, .49 12.9%
Price/Earnings Ratio 33.3
250,000 Procter & Gamble Co. @ 89 1/4 22,312,500
Produces laundry and cleaning products,
personal care items, food and beverages,
and paper products
Earnings P/S $1.03, 1.23, 1.31, 1.41, 1.55, 1.89, 2.01, 2.28, 2.56, 2.83 11.8%
Dividends P/S $.40, .46, .50, .54, .59, .66, .75, .85, .96, 1.08 11.6%
Price/Earnings Ratio 30.0
-------------
49,954,688
-------------
Tobacco (1.20%)
850,000 Philip Morris Cos., Inc. @ 40 3/16 34,159,375
Global tobacco, brewing and food company -------------
Earnings P/S $1.05, 1.27, 1.45, 1.65, 1.67, 1.52, 2.08, 2.47, 2.68, 2.64 10.8%
Dividends P/S $.42, .52, .64, .78, .87, 1.01, 1.22, 1.47, 1.60, 1.68 16.7%
Price/Earnings Ratio 12.3
Utilities (6.24%)
300,000 ALLTEL Corp. @ 71 1/2 21,450,000
Provides wireline and wireless communications
and information services
Earnings P/S $1.13, 1.20, 1.18, 1.18, 1.35, 1.56, 1.61, 1.50, 2.53, 2.24 7.9%
Dividends P/S $.59, .66, .71, .76, .82, .90, .98, 1.06, 1.12, 1.18 8.0%
Price/Earnings Ratio 27.1
350,000 Ameritech Corp. @ 73 1/2 25,725,000
One of the world's largest communications
companies
Earnings P/S $1.15, 1.18, 1.19, 1.13, 1.33, 1.04, 1.83, 1.78, 2.06, 3.14 11.8%
Dividends P/S $.75, .81, .86, .89, .93, .97, 1.02, 1.08, 1.15, 1.22 5.6%
Price/Earnings Ratio 26.5
550,000 Bell Atlantic Corp. @ 65 3/8 35,956,250
Telecommunications company providing voice
and data services in the Mid-Atlantic region
Earnings P/S $1.36, 1.69, 1.09, 1.69, 1.63, 1.63, 2.04, 2.00, 1.45, 1.83 3.4%
Dividends P/S $1.10, 1.18, 1.26, 1.30, 1.34, 1.38, 1.40, 1.44, 1.51, 1.54 3.8%
Price/Earnings Ratio 20.7
400,000 CenturyTel, Inc. @ 39 3/4 15,900,000
Louisiana-based telecommunications company
Earnings P/S $.40, .42, .48, .72, .93, 1.06, 1.41, 1.43, 2.08, 3.02 25.2%
Dividends P/S $.18, .19, .191, .196, .21, .213, .22, .24, .25, .26 4.2%
Price/Earnings Ratio 24.1
200,000 Duke Energy Corp. @ 54 3/8 10,875,000
Generates, transmits, distributes and sells
electric energy in the Piedmont sections
of North and South Carolina
Earnings P/S $2.57, 2.40, 2.51, 2.08, 2.83, 3.00, 3.26, 2.73, 2.66, 3.60 3.8%
Dividends P/S $1.52, 1.60, 1.68, 1.76, 1.84, 1.92, 2.00, 2.08, 2.16, 2.20 4.2%
Price/Earnings Ratio 15.3
1,401,200 Questar Corp. @ 19 1/8 26,797,950
Diversified holding company for Utah, Wyoming
and Colorado natural gas transmission,
distribution and storage
Earnings P/S $.82, .78, .85, .80, 1.12, .99, .60, 1.15, 1.27, 1.21 4.4%
Dividends P/S $.47, .49, .51, .52, .55, .57, .58, .60, .62, .65 3.7%
Price/Earnings Ratio 14.9
550,000 SBC Communications, Inc. @ 58 31,900,000
Provides telephone service throughout the
United States and internationally
Earnings P/S $.91, .92, .90, 1.09, (1.37), 1.53, (1.66), 1.74, .88, 2.01 9.2%
Dividends P/S $.64, .68, .71, .73, .75, .78, .82, .85, .89, .93 4.2%
Price/Earnings Ratio 23.6
400,000 Teco Energy, Inc. @ 22 3/4 9,100,000
Holding company for Tampa Electric, which
provides regulated electric utility services
in Florida
Earnings P/S $1.18, 1.21, 1.24, 1.28, 1.30, 1.43, 1.46, 1.64, 1.67, 1.54 3.0%
Dividends P/S $.75, .80, .85, .90, .95, 1.00, 1.05, 1.10, 1.17, 1.23 5.7%
Price/Earnings Ratio 13.1
-------------
177,704,200
-------------
TOTAL COMMON STOCKS
(Cost $1,502,997,749) 2,428,664,912
-------------
PREFERRED STOCKS (0.60%)
25,228 CSC Holdings Inc., 11.125%,
Ser M @ 109 2,749,852
73,841 CSC Holdings Inc., 11.750%,
Ser H @ 111 1/2 8,233,272
60,000 Lasmo America Ltd., 8.150%
(R) @ 103 1/8 6,187,500
-------------
TOTAL PREFERRED STOCKS
(Cost $17,167,134) 17,170,624
-------------
TOTAL COMMON AND PREFERRED STOCKS
(Cost $1,520,164,883) 2,445,835,536
-------------
PAR VALUE
(000s OMITTED)
- ---------------
CORPORATE BONDS (4.84%)
$6,000 Adelphia Communications Corp., Sr Note
9.25%, 10-01-02 @ 101.250 6,075,000
2,000 Bank of America Corp, Deb
9.125%, 10-15-01 @ 106.096 2,121,920
10,000 Beaver Valley Funding Corp. II, Deb
9.00%, 06-01-17 @ 107.000 10,700,000
5,000 Cablevison Systems Corp., Sr Deb Ser B
8.125%, 08-15-09 @ 100.531 5,026,550
4,000 CBS Corp., Deb 8.875%, 06-14-14
@ 111.250 4,450,000
8,000 Citibank Credit Card Master Trust,
Series 1997-3A 6.839%, 02-10-04
@ 100.719 8,057,500
5,000 CMS Energy Corp., Sr Note 8.125%,
05-15-02 @ 101.842 5,092,100
7,100 Comcast Corp., Sr Sub Deb 10.25%,
10-15-01 @ 105.575 7,495,825
1,500 Continental Cablevision, Inc., Deb 9.50%,
08-01-13 @ 111.939 1,679,085
7,000 CSC Holdings, Inc., Sr Note 7.875%,
12-15-07 @ 99.25 6,947,500
5,000 Delta Air Lines, Inc., Deb 9.00%,
05-15-16 @ 110.409 5,520,450
3,000 First Union Corp., Sub Note 8.00%,
08-15-09 @ 103.530 3,105,900
7,775 General Electric Capital Corp., Deb 8.50%,
07-24-08 @ 112.642 8,757,915
5,000 GTE North Inc., Sr Sub Note, 9.60%,
01-01-21 @ 109.350 5,467,500
11,642 Guaranteed Trade Trust, Notes 7.39%,
06-26-06 @ 102.740 11,960,563
4,000 Hydro-Quebec, Bond 9.40%, 02-01-21
@ 122.602 4,904,080
16,000 Long Island Lighting Co., Deb 8.20%,
03-15-23 @ 104.250 16,680,000
1,390 North Atlantic Energy Corp., 1st Mtg
Bond 9.050%, 06-01-02 @ 102.812 1,429,087
5,500 Northwest Airlines, Inc., Note 8.375%,
03-15-04 @ 96.246 5,293,530
5,800 Northwest Airlines, Inc., Note 7.625%,
03-15-05 @ 91.493 5,306,594
11,000 U.S. Airways, Inc., Pass Thru Ctf
Ser 1989-A2 9.82%, 01-01-13
@ 105.880 11,646,800
-------------
TOTAL CORPORATE BONDS
(Cost $141,702,594) 137,717,899
-------------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (2.48%)
5,000 Federal Home Loan Mortgage Corp.,
Sr Sub 8.00%, 12-15-08 @ 101.875 5,093,750
10,000 Federal National Mortgage Assn.,
Sr Sub 8.50%, 02-01-05 @ 101.609 10,160,900
2,000 Federal National Mortgage Assn.,
Sr Sub 6.21%, 11-07-07 @ 97.859 1,957,180
12,459 Federal National Mortgage Assn.,
Sr Sub 6.00%, 11-01-13 @ 96.611 12,036,457
2,173 Government National Mortgage Assn.,
8.00% 08-15-24 @ 102.937 2,237,332
9,968 Government National Mortgage Assn.,
6.00% 02-15-29 @ 93.437 9,313,452
3,050 United States Treasury, Bond 12.00%,
08-15-13 @ 140.406 4,282,383
26,000 United States Treasury, Bond 5.25%,
02-15-29 @ 89.844 23,359,440
2,000 United States Treasury, Note 8.80%,
05-15-01 @ 104.344 2,086,880
-------------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $71,611,953) 70,527,774
-------------
INTEREST
RATE
---------
SHORT-TERM INVESTMENTS (6.74%)
191,907 Joint Repurchase Agreement (6.74%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury
Bonds 9.875% and 11.250%
due 02-15-15 and 11-15-15)
- Note A 4.80% 191,907,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 900
------------
TOTAL SHORT-TERM INVESTMENTS (6.74%) 191,907,900
--------- ------------
TOTAL INVESTMENTS (99.94%) 2,845,989,109
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.06%) 1,579,405
--------- ------------
TOTAL NET ASSETS (100.00%) $2,847,568,514
========= ==============
NOTES TO SCHEDULE OF INVESTMENTS
NMF = No Meaningful Figure
(R) This security is 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 $6,187,500 or 0.22% of the Fund's
net assets as of June 30, 1999.
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
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Investment Trust (the "Trust") is an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust consists of four series portfolios: John Hancock Sovereign Investors
Fund (the "Fund"), John Hancock Balanced Fund, John Hancock Large Cap Value
Fund and John Hancock Real Estate Fund. Prior to May 1, 1999, John Hancock
Balanced Fund was known as John Hancock Sovereign Balanced Fund and John
Hancock Large Cap Value Fund was known as John Hancock Growth and Income
Fund. The other three 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, Class C and Class Y 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
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, Inc., may participate in a joint repurchase agreement.
Aggregate cash balances are invested in one or more repurchase agreements,
whose underlying securities are obligations of the U.S. government and/or
its agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint account, on the Fund's behalf. The Adviser is
responsible for ensuring that the agreement is fully collateralized at all
times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date
of purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company"
by complying with the applicable provisions of the Internal Revenue Code
and will not be subject to federal income tax on taxable income which is
distributed to shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, 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. 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.
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.
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 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.
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.
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.
BANK BORROWINGS The Fund is permitted to have bank borrowings for temporary
or emergency purposes, including the meeting of redemption requests that
otherwise might require the untimely disposition of securities. Effective
March 12, 1999, the Fund entered into a syndicated line of credit agreement
with various banks, and the agreements previously in effect were
terminated. This agreement enables the Fund to participate with other funds
managed by the Adviser in an unsecured line of credit with banks which
permit borrowings up to $500 million, collectively. Interest is charged to
each fund, based on its borrowing. In addition, a commitment fee based on
the average daily unused portion of the line of credit is allocated among
the participating funds. The Fund had no borrowing activity for the period
ended June 30, 1999.
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 Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
June 30, 1999, net sales charges received with regard to sales of Class A
shares amounted to $1,546,055. Out of this amount, $243,375 was retained
and used for printing prospectuses, advertising, sales literature and other
purposes, $653,183 was paid as sales commissions to unrelated
broker-dealers and $649,497 was paid as sales commissions to sales
personnel of Signator Investors, Inc. ("Signator Investors"), a related
broker-dealer. The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company ("JHMLICo"), is the indirect sole shareholder of Signator
Investors.
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 June 30, 1999, contingent deferred sales charges paid to JH
Funds amounted to $751,218.
Class C shares which are redeemed within one year of purchase will be
subject to a CDSC at a rate of 1.00% 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 C shares.
For the period ended June 30, 1999, contingent deferred sales charges paid
to JH Funds amounted to $1,783.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution Plans
with respect to Class A, Class B and Class C 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 and Class C 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, Class B and Class C shares pay transfer agent fees based on the
number of shareholder accounts and certain out-of-pocket expenses. Class Y
shares pay a monthly transfer agent fee equivalent, on an annual basis, to
0.10% of the average daily net asset value of Class Y shares of the Fund.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the period
was at an annual rate of less than 0.02% of the average net assets of the
Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, 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. 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 an annual basis to
reflect any income earned by the investment as well as any unrealized gains
or losses. The investment had no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of
the U.S. government and its agencies and short-term securities, during the
period ended June 30, 1999, aggregated $362,589,551 and $516,008,923,
respectively. Purchases and proceeds from sales of obligations of the U.S.
government and its agencies, during the period ended June 30, 1999,
aggregated $448,450,913 and $398,551,074, respectively.
The cost of investments owned at June 30, 1999 (excluding the corporate
savings account), for federal income tax purposes was $1,927,604,982. Gross
unrealized appreciation and depreciation of investments aggregated
$937,569,704 and $19,186,477, respectively, resulting in net unrealized
appreciation of $918,383,227.
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
1997 78,031,449 .32 22.41 2.38
1998 77,765,266 .31 24.23 1.29
1999(4) 75,065,153 .17 25.46 --
- ----------------------------------------------------------------------
CLASS B PER SHARE
YEAR -------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31, OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- -------- ----------- ----------- --------- -------------
1994(1) 8,996,738 $.36 $14.24 $.11
1995 14,432,679 .28 17.86 .08
1996 20,888,201 .22 19.46 1.16
1997 27,296,833 .15 22.38 2.38
1998 32,655,983 .14 24.20 1.29
1999(4) 33,432,936 .09 25.43 --
- ----------------------------------------------------------------------
CLASS C PER SHARE
YEAR -------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31, OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- -------- ----------- ----------- --------- -------------
1998(2) 191,053 $.12 $24.22 $1.29
1999(4) 303,798 .08 25.45 --
- ----------------------------------------------------------------------
CLASS Y PER SHARE
YEAR -------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31, OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- -------- ----------- ----------- --------- -------------
1993(3) 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
1997 2,153,172 .40 22.41 2.38
1998 2,572,181 .39 24.24 1.29
1999(4) 3,087,332 .21 25.47 --
(1) Class B shares commenced operations on January 3, 1994.
(2) Class C shares commenced operations on May 1, 1998.
(3) Class Y shares commenced operations May 7, 1993.
(4) For the period ended June 30, 1999.
Dividend Increases (Unaudited)
Listed below are the most recent dividend increases for the common stocks
held in the Sovereign Investors Fund as of June 30, 1999.
- ------------------------------------------------------------
PERCENT OF
DIVIDEND INCREASE
-----------------
Abbott Laboratories 11.1%
AFLAC Corp. 13.0
Air Products & Chemicals, Inc. 13.3
Albertson's, Inc. 6.3
ALLTEL Corp. 5.2
American International
Group, Inc. 12.0
Ameritech Corp. 5.8
Archer-Daniels-Midland Co. 5.0
Automatic Data Processing, Inc. 5.1
Bank of America Corp. 18.4
Banc One Corp. 10.0
Baxter International, Inc. 3.0
Becton, Dickinson & Co. 17.2
Bell Atlantic Corp. 4.1
Bemis Co., Inc. 10.0
Bestfoods, Inc. 9.1
Bristol-Myers Squibb Co. 10.3
CenturyTel, Inc. 5.4
Chevron Corp. 5.2
Citigroup, Inc. 44.0
Clorox Co. 8.9
Dayton Hudson Corp. 12.5
Dover Corp. 10.5
Duke Energy Corp. 3.8
DuPont (E.I.) De Nemours & Co. 11.1
Ecolab, Inc. 10.5
Emerson Electric Co. 10.2
Fannie Mae 8.7
First Tennessee National Corp. 15.2
First Union Corp. 11.9
Gannett Co., Inc. 5.3
General Electric Co. 16.7
Grainger (W.W.), Inc. 11.1
Hasbro, Inc. 20.0
Hewlett-Packard Co. 14.3
Home Depot, Inc. (The) 20.0
Honeywell, Inc. 3.6
Household International, Inc. 9.0
Interpublic Group of
Companies, Inc. (The) 15.4
Johnson & Johnson 13.6
Johnson Controls, Inc. 8.7
Kimberly-Clark Corp. 4.2
Leggett & Platt, Inc. 6.7
Lowe's Cos., Inc. 9.1
Masco Corp. 4.8
McDonald's Corp. 9.1
McGraw-Hill Cos., Inc. 8.3
Merck & Co., Inc. 20.0
Minnesota Mining &
Manufacturing Co. 3.8
Mobil Corp. 7.5
Pentair, Inc. 6.7
PepsiCo, Inc. 4.0
Philip Morris Cos., Inc. 10.0
Pitney Bowes, Inc. 12.5
Procter & Gamble Co. 8.8
Questar Corp. 4.8
ReliaStar Financial Corp. 19.4
Royal Dutch Petroleum Co. 9.2
RPM, Inc. 4.9
SBC Communications, Inc. 4.5
Schering-Plough Corp. 15.8
Sigma-Aldrich Corp. 3.6
Sonoco Products Co. 10.0
SunTrust Banks, Inc. 9.3
SYSCO Corp. 11.1
Teco Energy, Inc. 5.1
UNUM Corp. 3.5
Wal-Mart Stores, Inc. 14.8
Warner-Lambert Co. 7.9
Wells Fargo Co. 12.1
-----------------
The average dividend
increase for this group was 10.2%
=================
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