The latest report from your
Fund's management team
ANNUAL REPORT
Sovereign
Investors Fund
DECEMBER 31, 1999
TRUSTEES
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive 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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief
Executive Officer, flush right next to third paragraph.]
DEAR FELLOW SHAREHOLDERS:
As "The American Century" drew to a close this past year, the U.S.
economy ended the era on a high note. With robust growth continuing in
1999, our economy stood poised to enter the history books for producing
the longest expansion on record.
The stock market also rang out the century in style. For an
unprecedented fifth straight year, both the Dow Jones Industrial
Average and the Standard & Poor's 500 Index produced 20%-plus returns.
However, the market's advances were restricted to a very select group
of stocks, primarily in the technology sector. Many others, including
some of the household blue-chip names, languished or lost ground as the
result of investors' seemingly insatiable appetite for tech stocks.
Bonds struggled through their second-worst year in more than two
decades, as the strength of the U.S. economy and the rebound of many
others around the world provoked inflation fears. Though their outlook
from here looks brighter, in many instances, bond mutual fund investors
actually lost a little ground or made only slight advances in 1999.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds
that target a variety of market segments. This strategy, executed under
the guidance of a seasoned investment professional, could provide you
with a better chance of both realizing results and weathering the
market's changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from
your fund's portfolio management team on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JOHN F. SNYDER, III, BARRY H. EVANS, CFA,
AND PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGERS
[A 3" x 2" photo at bottom right side of page of John Hancock
Sovereign Investors Fund. Caption below reads "Portfolio Managers
(l-r): Barry Evans, Peter Schofield and John Snyder."]
John Hancock
Sovereign Investors Fund
Driven by narrow universe of stocks, market indices
end the century with big gains
The last year of the millennium was certainly full of surprises for
investors. A year ago, after an unprecedented four years of
double-digit gains, most market experts warned investors that stocks
couldn't possibly repeat their outstanding performance again in 1999.
However, with stronger-than-expected growth and continued low
inflation, the economy beat the odds and the experts were proven wrong.
With the favorable economic backdrop, the major stock market indices
posted remarkable gains, with the Standard & Poor's 500 Index rising
21.04%, the Dow Jones Industrial Average advancing 27.20% and the
Nasdaq Composite Index surging a whopping 86.12%.
"...our
conservative
investment
approach was
clearly out of
favor."
What was also surprising to investors was that the market's blockbuster
returns were driven by a very narrow universe of stocks. Investors
spent the year chasing after the same small group of high-flying
technology stocks. In hopes of landing on the next big winner in the
information-technology revolution, investors focused on momentum stocks
- -- those that are going up -- while ignoring both quality and
valuations. In the process, many non-technology stocks were left behind
- -- and many even declined for the year. In fact, what's interesting
about this market is that there was a huge discrepancy between the
winners and losers. Even though the Nasdaq Composite soared, a large
number of stocks in the Index actually posted losses for the year. And
the return on the S&P 500 -- if you remove technology stocks -- was
only 3.1%, according to the Leuthold Group, a stock market research
firm.
[Table at top left hand column entitled "Top Five Common Stock
Holdings." The first listing is General Electric 3.4%, the second
is Gannett 2.9%, the third McGraw-Hill 2.8%, the fourth SYSCO 2.7%
and the fifth Citigroup 2.7%. A note below the table reads "As a
percentage of net assets on December 31, 1999."]
"One of our
top-perform-
ing sectors
in this
narrow
market was
retail
stocks."
Understanding performance
In this technology-driven market, our conservative investment approach
was clearly out of favor. As we have discussed in past reports, most
technology companies don't meet our investment criterion of
consistently increasing dividends for the past 10 years. That's because
technology companies tend to reinvest their earnings rather than using
them to pay out dividends. What's more, we focus on companies with
stable earnings growth, solid fundamentals and reasonable valuations.
In a momentum- driven market -- as we experienced in 1999 -- investors
were interested in only one thing: rising stock prices, and they
ignored our key tenets of earnings growth, valuations and fundamentals.
So it's not surprising when you look at the performance figures below
that John Hancock Sovereign Investors Fund wasn't able to keep up with
its more aggressive peers.
[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 McGraw-Hill followed by an up arrow
with the phrase "Strong textbook sales." The second listing is
Interpublic Group followed by an up arrow with the phrase
"Expanding Internet advertising business." The third listing is
Bond holdings followed by a down arrow with the phrase "Hurt by
rising interest rates." A note below the table reads "See
'Schedule of Investments.' Investment holdings are subject to
change."]
Despite the current environment, we won't change our investment style
to adapt to the changes in the market. Investment styles go in and out
of favor, and it's impossible to time those shifts in the market.
History has shown that it's better to invest for the long term rather
than trying to chase the flavor of the day. Our Fund is designed for
conservative investors who want solid returns over the long haul
without a lot of risk. Although we, too, are frustrated by the
narrowness of the current market, we still firmly believe that our
Dividend Performers strategy has delivered -- and will continue to
deliver -- on that promise. That's why we've stayed the course. In so
doing, the Fund has posted positive returns in 20 out of the past 21
years.
Performance scorecard
For the 12 months ended December 31, 1999, John Hancock Sovereign
Investors Fund's Class A, Class B, Class C and Class Y shares returned
5.91%, 5.20%, 5.17% and 6.30%, respectively, at net asset value. By
comparison, the average growth and income fund returned 13.76% 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.
[Bar chart at top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year
ended December 31, 1999." The chart is scaled in increments of 3%
with 0% at the bottom and 15% at the top. The first bar represents
the 5.91% total return for John Hancock Sovereign Investors Fund
Class A. The second bar represents the 5.20% total return for John
Hancock Sovereign Investors Fund Class B. The third bar represents
the 5.17% total return for John Hancock Sovereign Investors Fund
Class C. The fourth bar represents the 6.30% total return for John
Hancock Sovereign Investors Fund Class Y. The fifth bar represents
the 13.76% 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"]
Profit-taking in retail stocks
One of our top-performing sectors in this narrow market was retail
stocks. Thanks to strong wage growth and a healthy stock market,
consumers have gone on a spending spree. That has benefited retailers
such as mass-merchandise giant Wal-Mart and department store Dayton
Hudson. While the fundamentals of these companies remain extremely
solid, we believe their valuations have become a bit expensive. In
addition, it's not clear that consumers will be able to continue
spending at the same rate throughout 2000. So we have taken advantage
of the market's strength to take profits in these holdings in favor of
ones that offer better relative value.
Increasing capital goods
In turn, we've added to our position in capital goods stocks, which now
make up about 17% of the Fund's net assets. We firmly believe that the
stock market will broaden out in 2000. When it does, capital goods
stocks should start to look more appealing to investors. Not only are
these stocks undervalued, but they are benefiting from a pickup in the
U.S. industrial sector as well as a turnaround in the global economy.
So we've beefed up our holdings in multinational companies such as
Avery Dennison, Dover Corporation and Minnesota Mining & Manufacturing.
"...participa-
tion in the
market's
bounty will
eventually
broaden..."
Outlook
As we enter the new millennium, we are cautiously optimistic. As
investors try to figure out where the market is headed in 2000, we are
likely to experience some volatility. A big question weighing on
investors' minds is whether the technology bull market will continue
for another year, and that's likely to add to the uncertainty.
On the positive side, however, we believe that the economy will
continue to grow, albeit at a slower rate, and we see no reason for
inflation to pick up significantly. Given that, we expect interest
rates to begin to trend down in the second half of the year. As we
mentioned above, we also believe that participation in the market's
bounty will eventually broaden, allowing a wider variety of stocks to
prosper. When that happens, we expect stocks that were out of favor in
1999 -- many of which are Dividend Performers -- to make a recovery.
- ---------------------------------------------------------------------------
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 December 31, 1999
ONE FIVE TEN
YEAR YEARS YEARS
------- ------- -------
Cumulative Total Returns 0.60% 128.10% 246.36%
Average Annual Total Returns 0.60% 17.93% 13.23%
CLASS B
For the period ended December 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/94)
------- ------- -------
Cumulative Total Returns 0.20% 129.37% 125.64%
Average Annual Total Returns 0.20% 18.06% 14.55%
CLASS C
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (5/1/98)
------- -------
Cumulative Total Returns 4.17% 10.62%
Average Annual Total Returns 4.17% 6.24%
CLASS Y
For the period ended December 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (5/7/93)
------- ------- -------
Cumulative Total Returns 6.30% 144.62% 153.14%
Average Annual Total Returns 6.30% 19.59% 14.98%
YIELDS
As of December 31, 1999
SEC 30-DAY
YIELD
-------
John Hancock Sovereign Investors Fund: Class A 1.03%
John Hancock Sovereign Investors Fund: Class B 0.39%
John Hancock Sovereign Investors Fund: Class C 0.39%
John Hancock Sovereign Investors Fund: Class Y 1.46%
WHAT HAPPENED TO A $10,000 INVESTMENT...
The chart on the right shows 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
Index -- an unmanaged index that includes 500 widely traded common
stocks and is often used as a measure of stock market performance. It
is not possible to invest in an index. Past performance does not
indicate future results.
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 and Poor's 500 Index
and is equal to $53,205 as of December 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made
in the John Hancock Sovereign Investors Fund on December 31, 1989,
before sales charge, and is equal to $36,451 as of December 31,
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 $34,636 as of December 31,
1999.
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 December 31,
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.
Chart representing the growth of $10,000 investment for the Fund's
Class B, C and Y shares in lower right hand 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: $22,663;
With Maximum Sales Charge: $22,563; Standard & Poor's 500 Index:
$35,557. The second column represents Class C shares. Top to
bottom information is as follows: Inception Date: 5/1/98; Without
Sales Charge: $11,061; With Maximum Sales Charge: N/A; Standard &
Poor's 500 Index: $13,522. The third column represents Class Y
shares. From top to bottom information is as follows: Inception
Date: 5/7/93; Without Sales Charge: $25,311; With Maximum Sales
Charge: N/A; Standard & Poor's 500 Index: $38,425.
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
Statement of Assets and Liabilities
December 31, 1999
- ------------------------------------------------------------
Assets:
Investments at value - Note C:
Common and preferred stocks
(cost - $1,578,200,149) $2,456,804,468
Corporate bonds
(cost - $120,773,047) 115,008,710
U.S. government and agencies
obligations (cost - $50,455,238) 48,833,650
Joint repurchase agreement
(cost - $67,895,000) 67,895,000
Short-term notes
(cost - $14,983,875) 14,983,875
Corporate savings account 4,005
-----------
2,703,529,708
Receivable for shares sold 555,310
Dividends receivable 2,557,731
Interest receivable 3,542,438
Other assets 256,920
-----------
Total Assets 2,710,442,107
- ------------------------------------------------------------
Liabilities:
Payable for investments purchased 8,508,214
Payable for shares repurchased 1,629,935
Payable to John Hancock Advisers,
Inc. and affiliates - Note B 4,460,230
Accounts payable and accrued expenses 153,842
-----------
Total Liabilities 14,752,221
- ------------------------------------------------------------
Net Assets:
Capital paid-in 1,782,240,555
Accumulated net realized gain on
investments 42,416,888
Net unrealized appreciation of
investments 871,218,394
Distributions in excess of net
investment income (185,951)
-----------
Net Assets $2,695,689,886
============================================================
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 - $1,787,615,081/72,922,841 $24.51
============================================================
Class B - $819,537,469/33,476,318 $24.48
============================================================
Class C - $10,591,140/432,281 $24.50
============================================================
Class Y - $77,946,196/3,178,822 $24.52
============================================================
Maximum Offering Price Per Share*
Class A - ($24.51 x 105.26%) $25.80
============================================================
* 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 December 31,
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
Year ended December 31, 1999
- ------------------------------------------------------------
Investment Income:
Dividends (net of foreign
withholding taxes of $100,357) $38,930,143
Interest 22,989,705
-----------
61,919,848
-----------
Expenses:
Investment management fee - Note B 14,700,572
Distribution and service fee - Note B
Class A 5,528,111
Class B 7,917,189
Class C 74,887
Transfer agent fee - Note B 4,474,947
Accounting and legal services fee -
Note B 482,826
Custodian fee 368,621
Trustees' fees 162,914
Miscellaneous 125,303
Registration and filing fees 108,815
Printing 97,752
Auditing fee 46,164
Legal fees 26,659
-----------
Total Expenses 34,114,760
- ------------------------------------------------------------
Net Investment Income 27,805,088
- ------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on
investments sold 116,748,448
Change in net unrealized
appreciation/depreciation
of investments 6,916,212
-----------
Net Realized and Unrealized
Gain on Investments 123,664,660
- ------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $151,469,748
============================================================
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
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1999
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $28,965,378 $27,805,088
Net realized gain on investments sold 165,892,837 116,748,448
Change in net unrealized
appreciation/depreciation of
investments 171,161,057 6,916,212
-------------- --------------
Net Increase in Net Assets
Resulting from Operations 366,019,272 151,469,748
-------------- --------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.3139 and $0.3448 per
share, respectively) (23,712,516) (25,565,939)
Class B - ($0.1358 and $0.1794 per
share, respectively) (4,062,580) (5,952,636)
Class C** - ($0.1235 and $0.1720
per share, respectively) (14,721) (56,041)
Class Y - ($0.3935 and $0.4348 per
share, respectively) (927,523) (1,316,163)
Distributions in excess of net investment income
Class A - (none and $0.0003 per
share, respectively) -- (18,738)
Class B - (none and $0.0003 per
share, respectively) -- (8,853)
Class C** - (none and $0.0003 per
share, respectively) -- (103)
Class Y - (none and $0.0003 per
share, respectively) -- (892)
Distributions from net realized gain
on investments sold
Class A - ($1.2878 and $0.7751 per
share, respectively) (95,145,395) (55,419,777)
Class B - ($1.2878 and $0.7751 per
share, respectively) (39,824,856) (25,447,168)
Class C** - ($1.2878 and $0.7751
per share, respectively) (204,020) (320,119)
Class Y - ($1.2878 and $0.7751 per
share, respectively) (3,140,420) (2,401,749)
-------------- --------------
Total Distributions to Shareholders (167,032,031) (116,508,178)
-------------- --------------
From Fund Share Transactions - Net: * 135,002,951 (80,984,529)
-------------- --------------
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
distributions in excess of net
investment income of $185,951,
respectively) $2,741,712,845 $2,695,689,886
============== ==============
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.
<CAPTION>
Statement of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1999
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 13,387,027 $315,833,546 6,324,255 $155,570,497
Shares issued to shareholders in
reinvestment of distributions 4,746,128 110,630,538 3,136,682 75,415,162
----------- ----------- ----------- -----------
18,133,155 426,464,084 9,460,937 230,985,659
Less shares repurchased (18,399,338) (432,577,451) (14,303,362) (351,723,205)
----------- ----------- ----------- -----------
Net decrease (266,183) ($6,113,367) (4,842,425) ($120,737,546)
=========== ============ =========== ============
CLASS B
Shares sold 8,792,974 $207,827,824 6,969,993 $170,815,262
Shares issued to shareholders in
reinvestment of distributions 1,764,977 41,005,639 1,220,160 29,269,718
----------- ----------- ----------- -----------
10,557,951 248,833,463 8,190,153 200,084,980
Less shares repurchased (5,198,801) (122,125,680) (7,369,818) (180,972,878)
----------- ----------- ----------- -----------
Net increase 5,359,150 $126,707,783 820,335 $19,112,102
=========== ============ =========== ============
CLASS C**
Shares sold 193,199 $4,581,484 296,415 $7,281,730
Shares issued to shareholders in
reinvestment of distributions 8,781 203,952 14,462 347,040
----------- ----------- ----------- -----------
201,980 4,785,436 310,877 7,628,770
Less shares repurchased (10,927) (253,063) (69,649) (1,703,515)
----------- ----------- ----------- -----------
Net increase 191,053 $4,532,373 241,228 $5,925,255
=========== ============ =========== ============
CLASS Y
Shares sold 601,499 $14,196,937 756,168 $18,508,744
Shares issued to shareholders in
reinvestment of distributions 174,378 4,066,776 154,590 3,718,807
----------- ----------- ----------- -----------
775,877 18,263,713 910,758 22,227,551
Less shares repurchased (356,868) (8,387,551) (304,117) (7,511,891)
----------- ----------- ----------- -----------
Net increase 419,009 $9,876,162 606,641 $14,715,660
=========== ============ =========== ============
** Class C shares commenced operations on May 1, 1998.
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,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.24 $17.87 $19.48 $22.41 $24.23
-------- -------- -------- -------- --------
Net Investment Income 0.40 0.36(2) 0.32(2) 0.31(2) 0.30(2)
Net Realized and Unrealized Gain
on Investments 3.71 2.77 5.31 3.11 1.11
-------- -------- -------- -------- --------
Total from Investment Operations 4.11 3.13 5.63 3.42 1.41
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.40) (0.36) (0.32) (0.31) (0.35)
Distributions from Net Realized Gain on
Investments Sold (0.08) (1.16) (2.38) (1.29) (0.78)
-------- -------- -------- -------- --------
Total Distributions (0.48) (1.52) (2.70) (1.60) (1.13)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $17.87 $19.48 $22.41 $24.23 $24.51
======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(1) 29.15% 17.57% 29.14% 15.62% 5.91%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,280,321 $1,429,523 $1,748,490 $1,884,460 $1,787,615
Ratio of Expenses to Average Net Assets 1.14% 1.13% 1.06% 1.03% 1.05%
Ratio of Net Investment Income to
Average Net Assets 2.45% 1.86% 1.44% 1.33% 1.21%
Portfolio Turnover Rate 46% 59% 62% 51% 64%
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.
<CAPTION>
Financial Highlights (continued)
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.24 $17.86 $19.46 $22.38 $24.20
-------- -------- -------- -------- --------
Net Investment Income(2) 0.27 0.21 0.16 0.14 0.13
Net Realized and Unrealized Gain
on Investments 3.71 2.77 5.29 3.11 1.11
-------- -------- -------- -------- --------
Total from Investment Operations 3.98 2.98 5.45 3.25 1.24
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.28) (0.22) (0.15) (0.14) (0.18)
Distributions from Net Realized Gain on
Investments Sold (0.08) (1.16) (2.38) (1.29) (0.78)
-------- -------- -------- -------- --------
Total Distributions (0.36) (1.38) (2.53) (1.43) (0.96)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $17.86 $19.46 $22.38 $24.20 $24.48
======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(1) 28.16% 16.67% 28.14% 14.79% 5.20%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $257,781 $406,523 $610,976 $790,277 $819,537
Ratio of Expenses to Average Net Assets 1.90% 1.91% 1.83% 1.79% 1.73%
Ratio of Net Investment Income to
Average Net Assets 1.65% 1.10% 0.67% 0.58% 0.54%
Portfolio Turnover Rate 46% 59% 62% 51% 64%
<CAPTION>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
PERIOD
FROM MAY 1, 1998 YEAR
(COMMENCEMENT OF ENDED
OPERATIONS) TO DECEMBER 31,
DECEMBER 31, 1998 1999
----------------- --------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $24.43 $24.22
-------- --------
Net Investment Income(2) 0.13 0.13
Net Realized and Unrealized Gain
on Investments 1.07 1.10
-------- --------
Total from Investment Operations 1.20 1.23
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.12) (0.17)
Distributions from Net Realized Gain on
Investments Sold (1.29) (0.78)
-------- --------
Total Distributions (1.41) (0.95)
-------- --------
Net Asset Value, End of Period $24.22 $24.50
======== ========
Total Investment Return at
Net Asset Value(1) 5.18%(3) 5.17%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $4,627 $10,591
Ratio of Expenses to Average Net Assets 1.67%(4) 1.75%
Ratio of Net Investment Income to
Average Net Assets 0.84%(4) 0.51%
Portfolio Turnover Rate 51% 64%
<CAPTION>
Financial Highlights (continued)
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS Y
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.24 $17.87 $19.48 $22.41 $24.24
-------- -------- -------- -------- --------
Net Investment Income 0.46 0.44(2) 0.41(2) 0.40(2) 0.39(2)
Net Realized and Unrealized Gain
on Investments 3.71 2.76 5.30 3.11 1.11
-------- -------- -------- -------- --------
Total from Investment Operations 4.17 3.20 5.71 3.51 1.50
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.46) (0.43) (0.40) (0.39) (0.44)
Distributions from Net Realized Gain on
Investments Sold (0.08) (1.16) (2.38) (1.29) (0.78)
-------- -------- -------- -------- --------
Total Distributions (0.54) (1.59) (2.78) (1.68) (1.22)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $17.87 $19.48 $22.41 $24.24 $24.52
======== ======== ======== ======== ========
Total Investment Return at
Net Asset Value(1) 29.68% 17.99% 29.60% 16.05% 6.30%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $19,946 $29,431 $48,256 $62,349 $77,946
Ratio of Expenses to Average Net Assets 0.74% 0.75% 0.71% 0.69% 0.69%
Ratio of Net Investment Income to
Average Net Assets 2.84% 2.26% 1.79% 1.67% 1.58%
Portfolio Turnover Rate 46% 59% 62% 51% 64%
(1) Assumes dividend reinvestment and does not reflect the effect of sales charges.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Not annualized.
(4) Annualized.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
December 31, 1999
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, and are unaudited.
- ----------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Sovereign Investors Fund on December 31, 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 (89.78%)
Advertising (2.57%)
1,200,000 Interpublic Group of Companies, Inc.
(The) @ 57 11/16 $69,225,000
One of the largest advertising agencies in ------------
the world
Earnings P/S $0.40, 0.44, 0.39, 0.56, 0.29, 0.51, 0.80, 0.75, 1.11, 1.30 14.0%
Dividends P/S $0.13, 0.14, 0.15, 0.17, 0.19, 0.21, 0.23, 0.25, 0.29, 0.34 11.3%
Price/Earnings Ratio 44.4
Banks (4.19%)
850,000 Bank of America Corp. @ 50 3/16 42,659,375
Holding company for Bank of America and
NationsBank
Earnings P/S $0.40, 1.20, 1.98, 2.46, 2.54, 2.98, 3.36, 3.61, 2.90, 4.69 12.8%
Dividends P/S $0.57, 0.62, 0.64, 0.69, 0.94, 1.04, 1.20, 1.37, 1.59, 1.85 14.0%
Price/Earnings Ratio 10.7
550,000 First Tennessee National Corp. @ 28 1/2 15,675,000
Tennessee-based bank holding company
Earnings P/S $0.45, 0.57, 0.72, 0.81, 1.08, 1.21, 1.34, 1.50, 1.72, 1.91 17.4%
Dividends P/S $0.28, 0.29, 0.32, 0.38, 0.44, 0.49, 0.55, 0.62, 0.69, 0.79 12.2%
Price/Earnings Ratio 14.9
500,000 SunTrust Banks, Inc. @ 68 13/16 34,406,250
Holding company for SunTrust Banks operating
through 700 offices in Florida, Georgia,
Tennessee and Alabama
Earnings P/S $1.30, 1.26, 1.46, 1.90, 2.22, 2.38, 2.59, 3.04, 3.04, 3.93 13.1%
Dividends P/S $0.46, 0.47, 0.49, 0.58, 0.66, 0.74, 0.83, 0.93, 1.00, 1.38 13.0%
Price/Earnings Ratio 17.5
500,000 Wells Fargo Co. @ 40 7/16 20,218,750
Diversified financial services company providing
banking, insurance, investments and consumer
finance
Earnings P/S $0.79, 0.36, 0.53, 0.98, 1.36, 1.62, 1.36, 1.48, 1.17, 2.24 12.3%
Dividends P/S $0.21, 0.24, 0.27, 0.32, 0.39, 0.45, 0.53, 0.62, 0.70, 0.79 15.9%
Price/Earnings Ratio 18.1
------------
112,959,375
------------
Beverages (1.70%)
1,300,000 PepsiCo, Inc. @ 35 1/4 45,825,000
Second largest soft drink company ------------
Earnings P/S $0.68, 0.68, 0.23, 0.98, 1.09, 1.00, 0.72, 1.36, 1.31, 1.21 6.6%
Dividends P/S $0.19, 0.23, 0.26, 0.31, 0.35, 0.39, 0.45, 0.49, 0.52, 0.54 12.3%
Price/Earnings Ratio 29.1
Building (1.74%)
1,850,000 Masco Corp. @ 25 3/8 46,943,750
Manufactures buildings, home improvement ------------
and consumer products
Earnings P/S $0.46, 0.15, 0.61, 0.73, 0.61, (1.39) 0.92, 1.15, 1.39, 1.59 14.8%
Dividends P/S $0.27, 0.29, 0.31, 0.33, 0.35, 0.37, 0.39, 0.41, 0.44, 0.46 6.1%
Price/Earnings Ratio 16.0
Chemicals (1.86%)
500,000 Air Products & Chemicals, Inc. @ 33 9/16 16,781,250
Producer of industrial gases
Earnings P/S $1.04, 1.12, 1.20, 0.88, 1.09, 1.65, 1.87, 1.95, 2.48, 2.06 7.9%
Dividends P/S $0.35, 0.38, 0.42, 0.45, 0.48, 0.51, 0.54, 0.58, 0.64, 0.71 8.2%
Price/Earnings Ratio 16.3
1,026,562 RPM, Inc. @ 10 3/16 10,458,100
Manufacturer of specialty chemicals and
coatings to waterproof and rustproof structures
Earnings P/S $0.40, 0.46, 0.46, 0.46, 0.56, 0.65, 0.69, 0.76, 0.84, 0.86 8.9%
Dividends P/S $0.23, 0.26, 0.28, 0.30, 0.33, 0.35, 0.38, 0.41, 0.44, 0.48 8.5%
Price/Earnings Ratio 11.8
765,000 Sigma-Aldrich Corp. @ 30 1/16 22,997,812
Manufacturer of biochemical and organic
products used for research and diagnostics
Earnings P/S $0.72, 0.80, 0.96, 0.97, 1.11, 1.30, 1.45, 1.62, 1.64, 1.73 10.2%
Dividends P/S $0.11, 0.12, 0.13, 0.15, 0.17, 0.19, 0.23, 0.26, 0.28, 0.30 11.8%
Price/Earnings Ratio 17.4
------------
50,237,162
------------
Computers (2.93%)
830,000 Automatic Data Processing, Inc. @ 53 7/8 44,716,250
Largest independent computing services firm
in the U.S.
Earnings P/S $0.36, 0.41, 0.46, 0.52, 0.59, 0.67, 0.76, 0.85, 0.98, 1.10 13.2%
Dividends P/S $0.08, 0.09, 0.11, 0.12, 0.14, 0.16, 0.20, 0.23, 0.26, 0.32 16.7%
Price/Earnings Ratio 49.0
300,000 Hewlett-Packard Co. @ 113 15/16 34,181,250
Manufactures and services electronic
measurement, analysis and computation
instruments
Earnings P/S $0.77, 0.76, 0.55, 1.17, 1.54, 2.32, 2.46, 2.95, 2.77, 3.24 17.3%
Dividends P/S $0.11, 0.12, 0.19, 0.23, 0.28, 0.35, 0.44, 0.52, 0.60, 0.64 21.6%
Price/Earnings Ratio 35.1
------------
78,897,500
------------
Containers (1.16%)
897,000 Bemis Co., Inc. @ 34 7/8 31,282,875
------------
Producer of a broad range of flexible packaging
and equipment and pressure-sensitive materials
Earnings P/S $0.99, 1.03, 1.10, 0.86, 1.40, 1.63, 1.90, 2.00, 2.09, 2.16 9.1%
Dividends P/S $0.36, 0.42, 0.46, 0.50, 0.54, 0.64, 0.72, 0.80, 0.88, 0.92 11.0%
Price/Earnings Ratio 16.1
Diversified Operations (5.43%)
300,000 DuPont (E.I.) De Nemours & Co. @ 65 7/8 19,762,500
Nation's largest chemical manufacturer
Earnings P/S $1.70, 1.04, (2.92) 0.41, 1.98, 2.77, 3.18, 2.08, 3.90, 2.42 4.0%
Dividends P/S $0.81, 0.84, 0.87, 0.88, 0.91, 1.01, 1.12, 1.23, 1.37, 1.40 6.3%
Price/Earnings Ratio 27.2
1,125,000 Honeywell International, Inc. @ 57 11/16 64,898,438
Diversified technology and manufacturing leader,
serving customers worldwide with aerospace
products and services; control technologies for
buildings, homes and industry; automotive
products; power generation systems; specialty
chemicals; fibers; plastics; and electronic and
advanced materials
Earnings P/S $1.01, 0.07, (0.56) 0.88, 1.27, 1.47, 1.73, 2.00, 2.34, 2.62 11.2%
Dividends P/S $0.23, 0.24, 0.25, 0.29, 0.34, 0.39, 0.45, 0.52, 0.60, 0.68 12.8%
Price/Earnings Ratio 22.0
397,200 Johnson Controls, Inc. @ 56 7/8 22,590,750
Manufactures automotive systems and
building controls
Earnings P/S $1.02, 1.06, 1.37, 0.08, 1.80, 2.13, 2.55, 3.12, 3.63, 4.27 17.2%
Dividends P/S $0.60, 0.62, 0.64, 0.68, 0.72, 0.78, 0.82, 0.86, 0.92, 1.03 6.2%
Price/Earnings Ratio 13.3
400,000 Minnesota Mining & Manufacturing Co.
@ 97 7/8 39,150,000
Manufactures industrial, commercial and
health-care products
Earnings P/S $2.96, 2.63, 2.81, 2.91, 3.13, 2.31, 3.62, 5.06, 2.88, 4.14 3.8%
Dividends P/S $1.46, 1.56, 1.60, 1.66, 1.76, 1.88, 1.92, 2.12, 2.20, 2.24 4.9%
Price/Earnings Ratio 23.6
------------
146,401,688
------------
Electronics (6.03%)
1,050,000 Emerson Electric Co. @ 57 3/8 60,243,750
Produces and sells electrical/electronic
products and systems
Earnings P/S $1.38, 1.42, 1.48, 1.58, 1.76, 2.03, 2.28, 2.50, 2.77, 3.06 9.3%
Dividends P/S $0.63, 0.66, 0.69, 0.72, 0.78, 0.89, 0.98, 1.08, 1.18, 1.33 8.7%
Price/Earnings Ratio 18.8
600,000 General Electric Co. @ 154 3/4 92,850,000
Dominant force in home appliances,
electrical power and financial services
Earnings P/S $1.21, 0.76, 1.38, 1.26, 1.39, 1.93, 2.16, 2.46, 2.80, 3.23 11.5%
Dividends P/S $0.48, 0.52, 0.58, 0.66, 0.75, 0.85, 0.95, 1.08, 1.25, 1.46 13.2%
Price/Earnings Ratio 47.9
200,000 Grainger (W.W.), Inc. @ 47 13/16 9,562,500
Leading distributor of electrical equipment
Earnings P/S $1.16, 1.19, 1.29, 1.43, 1.25, 1.82, 2.02, 2.27, 2.44, 2.16 7.2%
Dividends P/S $0.28, 0.31, 0.33, 0.36, 0.39, 0.45, 0.49, 0.53, 0.59, 0.63 9.4%
Price/Earnings Ratio 22.1
------------
162,656,250
------------
Finance (4.99%)
1,287,500 Citigroup, Inc. @ 55 9/16 71,536,719
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 $0.37, 0.11, 0.62, 1.13, 1.12, 1.50, 1.81, 1.83, 1.62, 2.82 25.3%
Dividends P/S $0.04, 0.05, 0.08, 0.11, 0.13, 0.18, 0.20, 0.27, 0.37, 0.54 33.5%
Price/Earnings Ratio 19.7
750,000 Fannie Mae @ 62 7/16 46,828,125
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 $1.12, 1.25, 1.48, 1.71, 1.94, 1.95, 2.48, 2.83, 3.23, 3.66 14.1%
Dividends P/S $0.18, 0.26, 0.35, 0.46, 0.60, 0.68, 0.76, 0.84, 0.96, 1.08 22.0%
Price/Earnings Ratio 17.1
430,000 Household International, Inc. @ 37 1/4 16,017,500
Provides consumer lending and credit card
services in the U.S., Canada and the U.K.
Earnings P/S $0.96, 0.52, 0.64, 0.95, 1.13, 1.24, 1.73, 1.93, 1.03, 3.05 13.7%
Dividends P/S $0.36, 0.37, 0.38, 0.39, 0.41, 0.44, 0.49, 0.54, 0.60, 0.68 7.3%
Price/Earnings Ratio 12.2
------------
134,382,344
------------
Food (1.17%)
600,000 Bestfoods, Inc. @ 52 9/16 31,537,500
Manufactures consumer food and baking ------------
products in 62 countries
Earnings P/S $0.88, 0.92, 0.40, 1.14, 0.69, 1.68, 1.93, 1.15, 2.09, 2.47 12.2%
Dividends P/S $0.50, 0.55, 0.60, 0.64, 0.69, 0.74, 0.79, 0.86, 0.94, 1.02 8.2%
Price/Earnings Ratio 21.3
Furniture (1.27%)
1,590,000 Leggett & Platt, Inc. @ 21 7/16 34,085,625
Produces intermediate products for the home ------------
furnishings industry
Earnings P/S $0.21, 0.27, 0.41, 0.52, 0.68, 0.75, 0.77, 1.08, 1.24, 1.45 24.0%
Dividends P/S $0.11, 0.22, 0.12, 0.14, 0.16, 0.19, 0.23, 0.27, 0.32, 0.36 14.1%
Price/Earnings Ratio 14.8
Insurance (4.97%)
780,000 AFLAC, Inc. @ 47 3/16 36,806,250
Global specialty insurer
Earnings P/S $0.39, 0.49, 0.60, 0.81, 0.95, 1.17, 1.37, 2.08, 1.76, 1.99 19.9%
Dividends P/S $0.09, 0.10, 0.12, 0.13, 0.15, 0.17, 0.20, 0.23, 0.25, 0.29 13.9%
Price/Earnings Ratio 23.7
350,000 American General Corp. @ 75 7/8 26,556,250
Provides retirement services, life insurance
and consumer loans to more than 12 million
customers through various operating
subsidiaries
Earnings P/S $2.30, 2.13, 2.24, 1.20, 2.46, 2.66, 2.63, 2.19, 2.96, 4.59 8.0%
Dividends P/S $0.79, 1.00, 1.04, 1.10, 1.16, 1.24, 1.30, 1.40, 1.50, 1.60 8.2%
Price/Earnings Ratio 16.5
500,000 American International Group, Inc.
@ 108 1/8 54,062,500
Broadly based property-casualty insurance
organization
Earnings P/S $1.25, 1.34, 1.38, 1.62, 1.62, 1.88, 2.18, 2.52, 2.86, 3.19 11.0%
Dividends P/S $0.06, 0.07, 0.08, 0.09, 0.10, 0.11, 0.14, 0.15, 0.17, 0.19 12.3%
Price/Earnings Ratio 33.9
424,300 ReliaStar Financial Corp. @ 39 3/16 16,627,256
Financial services company engaged in
life/health insurance and consumer finance
Earnings P/S $1.00, 0.80, 0.95, 0.95, 1.50, 1.98, 2.37, 2.55, 2.56, 2.87 12.4%
Dividends P/S $0.33, 0.35, 0.37, 0.40, 0.44, 0.49, 0.55, 0.61, 0.71, 0.80 10.3%
Price/Earnings Ratio 13.7
------------
134,052,256
------------
Leisure (0.43%)
600,000 Hasbro, Inc. @ 19 1/16 11,437,500
Designs, manufactures and markets toys, ------------
games and interactive software
Earnings P/S $0.46, 0.42, 0.89, 0.99, 0.87, 0.77, 0.98, 0.68, 1.00, 1.41 18.3%
Dividends P/S $0.06, 0.07, 0.09, 0.11, 0.13, 0.14, 0.18, 0.20, 0.21, 0.24 16.7%
Price/Earnings Ratio 13.4
Machinery (2.92%)
1,000,000 Dover Corp. @ 45 3/8 45,375,000
Manufactures a variety of specialized
industrial products
Earnings P/S $0.64, 0.54, 0.56, 0.70, 0.89, 1.22, 1.69, 1.79, 1.69, 1.88 12.7%
Dividends P/S $0.19, 0.21, 0.22, 0.23, 0.25, 0.28, 0.32, 0.36, 0.40, 0.44 9.8%
Price/Earnings Ratio 24.1
862,900 Pentair, Inc. @ 38 1/2 33,221,650
Manufactures enclosures for electrical, electronic,
woodworking and power tool equipment
Earnings P/S $0.81, 1.00, (0.18) 1.10, 1.26, 1.81, 1.73, 2.11, 2.46, 2.85 15.0%
Dividends P/S $0.30, 0.31, 0.33, 0.34, 0.36, 0.40, 0.50, 0.54, 0.60, 0.64 8.8%
Price/Earnings Ratio 13.5
------------
78,596,650
------------
Media (5.64%)
950,000 Gannett Co., Inc. @ 81 9/16 77,484,375
News and information company that publishes
newspapers, operates broadcasting stations
and cable television systems, and is engaged
in marketing, commercial printing, newswire
service, data services and news programming
Earnings P/S $1.18, 1.00, 0.70, 1.36, 1.62, 1.71, 3.35, 2.50, 3.50, 3.29 12.1%
Dividends P/S $0.61, 0.62, 0.63, 0.65, 0.67, 0.69, 0.71, 0.74, 0.78, 0.82 3.3%
Price/Earnings Ratio 24.8
1,211,200 McGraw-Hill Cos., Inc. @ 61 5/8 74,640,200
Provides informational products and services
for business and industry
Earnings P/S $0.89, 0.76, 0.15, 0.06, 1.03, 1.14, 2.48, 1.46, 1.67, 1.95 9.1%
Dividends P/S $0.54, 0.55, 0.56, 0.57, 0.58, 0.60, 0.66, 0.72, 0.78, 0.86 5.3%
Price/Earnings Ratio 31.6
------------
152,124,575
------------
Medical (10.39%)
600,000 Abbott Laboratories @ 36 5/16 21,787,500
Major pharmaceutical and health-care firm
Earnings P/S $0.56, 0.64, 0.74, 0.85, 0.94, 1.05, 1.19, 1.34, 1.51, 1.66 12.8%
Dividends P/S $0.21, 0.25, 0.30, 0.34, 0.38, 0.42, 0.48, 0.54, 0.60, 0.68 14.0%
Price/Earnings Ratio 21.9
250,000 American Home Products Corp.
@ 39 7/16 9,859,375
Discovers, develops, manufactures and markets
prescription drugs and over-the-counter medications
as well as vaccines, biotechnology, agricultural
products and animal health-care items
Earnings P/S $0.98, 1.09, 1.17, 1.19, 1.25, 1.35, 1.46, 1.56, 1.85, 1.76 13.6%
Dividends P/S $0.54, 0.60, 0.67, 0.72, 0.74, 0.76, 0.79, 0.83, 0.87, 0.91 6.0%
Price/Earnings Ratio 22.3
850,000 Baxter International, Inc. @ 62 13/16 53,390,625
The company operates four divisions: renal,
biotech, cardiovascular and intravenous
systems and international distribution
Earnings P/S ($0.05) 2.03, 1.56, (0.72) 2.13, 2.31, 2.41, 1.06, 1.09, 2.8 56.8%
Dividends P/S $0.64, 0.74, 0.86, 1.00, 1.03, 1.11, 1.12, 1.13, 1.14, 1.16 6.8%
Price/Earnings Ratio 22.0
950,000 Bristol-Myers Squibb Co. @ 64 3/16 60,978,125
Produces pharmaceuticals, medical devices
and non-prescription health products
Earnings P/S $0.84, 0.99, 0.95, 0.95, 0.91, 0.89, 1.40, 1.57, 1.55, 2.05 10.4%
Dividends P/S $0.53, 0.60, 0.69, 0.72, 0.73, 0.74, 0.75, 0.76, 0.78, 0.89 5.9%
Price/Earnings Ratio 31.3
626,000 Johnson & Johnson @ 93 1/8 58,296,250
Major producer of prescription and
non-prescription drugs, toiletries, medical
instruments and supplies
Earnings P/S $0.86, 1.10, 0.78, 1.37, 1.56, 1.86, 2.17, 2.41, 2.23, 3.01 14.9%
Dividends P/S $0.33, 0.39, 0.45, 0.51, 0.56, 0.64, 0.74, 0.85, 0.97, 1.09 14.2%
Price/Earnings Ratio 31.0
400,000 Medtronic, Inc. @ 36 7/16 14,575,000
World's leading medical technology company
Earnings P/S $0.12, 0.14, 0.17, 0.21, 0.25, 0.30, 0.46, 0.50, 0.51, 0.77 22.9%
Dividends P/S $0.01, 0.02, 0.03, 0.04, 0.05, 0.06, 0.09, 0.11, 0.12, 0.15 35.1%
Price/Earnings Ratio 47.3
200,000 Merck & Co., Inc. @ 67 1/16 13,412,500
World's largest ethical drug manufacturer
Earnings P/S $0.75, 0.91, 0.86, 0.93, 1.17, 1.32, 1.56, 1.87, 2.15, 2.45 14.1%
Dividends P/S $0.34, 0.40, 0.48, 0.52, 0.57, 0.62, 0.71, 0.85, 0.95, 1.12 14.2%
Price/Earnings Ratio 27.4
550,000 Schering-Plough Corp. @ 42 3/16 23,203,125
Discovers, develops, manufactures and
markets pharmaceutical and health-care
products worldwide
Earnings P/S $0.32, 0.38, 0.45, 0.47, 0.61, 0.60, 0.82, 0.98, 1.18, 1.41 17.9%
Dividends P/S $0.14, 0.16, 0.19, 0.22, 0.25, 0.28, 0.32, 0.37, 0.43, 0.49 14.9%
Price/Earnings Ratio 30.1
300,000 Warner-Lambert Co. @ 81 15/16 24,581,250
Major producer of consumer health-care,
pharmaceutical and confectionery products
Earnings P/S $0.60, 0.04, 0.80, 0.41, 0.86, 0.90, 0.95, 1.04, 1.48, 1.95 14.0%
Dividends P/S $0.25, 0.29, 0.34, 0.38, 0.41, 0.43, 0.46, 0.51, 0.64, 0.80 13.8%
Price/Earnings Ratio 42.0
------------
280,083,750
------------
Metal Products (1.25%)
500,000 Illinois Tool Works, Inc. @ 67 9/16 33,781,250
Designs and manufacturers fasteners and ------------
components, equipment and consumable
systems and a variety of specialty products
and equipment
Earnings P/S $0.84, 0.82, 0.86, 0.92, 1.23, 1.65, 1.95, 2.33, 2.67, 2.99 15.2%
Dividends P/S $0.18, 0.20, 0.23, 0.25, 0.27, 0.31, 0.35, 0.43, 0.51, 0.66 15.5%
Price/Earnings Ratio 22.6
Office (3.72%)
581,350 Avery Dennison Corp. @ 72 7/8 42,365,881
Develops, manufactures and markets innovative
self-adhesive solutions for consumer products
and label systems
Earnings P/S $0.05, 0.51, 0.67, 0.73, 0.99, 1.32, 1.63, 1.93, 2.15, 2.51 54.5%
Dividends P/S $0.32, 0.38, 0.41, 0.45, 0.50, 0.56, 0.62, 0.72, 0.87, 0.99 13.4%
Price/Earnings Ratio 29.0
1,200,000 Pitney Bowes, Inc. @ 48 5/16 57,975,000
Manufactures office automation equipment
Earnings P/S $0.67, 0.93, 0.32, 1.11, 0.87, 1.92, 1.56, 1.80, 2.06, 2.32 14.8%
Dividends P/S $0.30, 0.34, 0.39, 0.45, 0.52, 0.60, 0.69, 0.80, 0.90, 1.02 14.6%
Price/Earnings Ratio 20.8
------------
100,340,881
------------
Oil & Gas (4.98%)
500,000 Chevron Corp. @ 86 5/8 43,312,500
One of the largest integrated, international oil
companies with interest in petrochemicals
Earnings P/S $3.05, 1.85, 2.32, 1.95, 2.60, 1.43, 3.99, 4.95, 2.04, 3.48 1.5%
Dividends P/S $1.48, 1.63, 1.65, 1.75, 1.85, 1.93, 2.08, 2.28, 2.44, 2.48 5.9%
Price/Earnings Ratio 24.9
792,090 Exxon Mobil Corp. @ 80 9/16 63,812,751
Worldwide leader in the petroleum and
petrochemicals business
Earnings P/S $1.94, 2.12, 1.59, 2.06, 1.73, 2.48, 2.91, 3.28, 2.28, 2.39 2.3%
Dividends P/S $1.19, 1.30, 1.36, 1.38, 1.41, 1.46, 1.54, 1.62, 1.64, 1.67 3.8%
Price/Earnings Ratio 33.7
450,000 Royal Dutch Petroleum Co., American
Depository Receipt (Netherlands)
@ 60 7/16 27,196,875
Owns 60% of the Royal Dutch/Shell Group
of companies. Operations include production,
transportation, refining and sales of
oil/natural gas
Earnings P/S $1.95, 1.26, 1.30, 1.24, 1.78, 1.90, 2.69, 2.20, 0.13, 1.45 NMF
Dividends P/S $1.06, 1.11, 1.22, 1.18, 1.33, 1.40, 1.45, 1.53, 1.61, 1.58 4.5%
Price/Earnings Ratio 41.8
------------
134,322,126
------------
Paper & Paper Products (1.70%)
700,000 Kimberly-Clark Corp. @ 65 1/4 45,675,000
Leading producer of consumer and personal ------------
care products
Earnings P/S $1.05, 0.79, 0.27, 0.42, 1.36, 0.06, 2.48, 1.61, 2.11, 2.95 12.2%
Dividends P/S $0.68, 0.73, 0.82, 0.85, 0.88, 0.90, 0.92, 0.95, 1.00, 1.04 4.8%
Price/Earnings Ratio 22.2
Retail (10.68%)
900,000 Dayton Hudson Corp. @ 73 7/16 66,093,750
General merchandiser selling through Target
and Marvyn stores
Earnings P/S $0.87, 0.62, 0.81, 0.80, 0.92, 0.65, 0.98, 1.59, 1.98, 2.51 12.5%
Dividends P/S $0.20, 0.23, 0.25, 0.26, 0.27, 0.28, 0.30, 0.32, 0.33, 0.40 8.0%
Price/Earnings Ratio 29.3
675,000 Home Depot, Inc. (The) @ 68 9/16 46,279,687
Operates a chain of retail building supply/home
improvement "warehouse" stores
Earnings P/S $0.11, 0.13, 0.18, 0.23, 0.30, 0.35, 0.44, 0.53, 0.71, 1.10 29.2%
Dividends P/S $0.01, 0.01, 0.02, 0.02, 0.03, 0.04, 0.05, 0.06, 0.08, 0.11 33.8%
Price/Earnings Ratio 62.5
700,000 Lowe's Cos., Inc. @ 59 3/4 41,825,000
Retail distributes building materials and
supplies through stores in the United States
Earnings P/S $0.23, 0.03, 0.29, 0.44, 0.63, 0.66, 0.86, 1.05, 1.38, 1.77 25.5%
Dividends P/S $0.07, 0.07, 0.07, 0.08, 0.09, 0.09, 0.10, 0.11, 0.12, 0.13 8.0%
Price/Earnings Ratio 33.8
800,000 McDonald's Corp. @ 40 5/16 32,250,000
Develops, operates, franchises and services
a worldwide system of restaurants
Earnings P/S $0.55, 0.59, 0.65, 0.73, 0.84, 0.98, 1.08, 1.15, 1.10, 1.41 11.0%
Dividends P/S $0.08, 0.09, 0.10, 0.11, 0.12, 0.13, 0.14, 0.16, 0.18, 0.20 10.7%
Price/Earnings Ratio 28.6
1,861,600 SYSCO Corp. @ 39 9/16 73,649,550
Largest distributor of food service products
Earnings P/S $0.37, 0.42, 0.47, 0.54, 0.59, 0.69, 0.76, 0.86, 0.86, 1.08 12.6%
Dividends P/S $0.05, 0.06, 0.09, 0.13, 0.16, 0.20, 0.24, 0.28, 0.33, 0.42 26.7%
Price/Earnings Ratio 36.6
400,000 Wal-Mart Stores, Inc. @ 69 1/8 27,650,000
Operates chain of discount department stores
Earnings P/S $0.29, 0.35, 0.44, 0.51, 0.59, 0.60, 0.67, 0.78, 0.99, 1.26 17.7%
Dividends P/S $0.03, 0.04, 0.05, 0.06, 0.07, 0.09, 0.10, 0.11, 0.14, 0.20 23.5%
Price/Earnings Ratio 54.9
------------
287,747,987
------------
Soap & Cleaning Preparations (1.67%)
450,000 Ecolab, Inc. @ 39 1/8 17,606,250
Develops and markets premium institutional
cleansing, sanitizing and maintenance
products and services
Earnings P/S $0.52, (2.05) 0.53, 0.61, 0.62, 0.73, 0.85, 1.00, 1.44, 1.31 10.8%
Dividends P/S $0.17, 0.18, 0.18, 0.20, 0.23, 0.26, 0.29, 0.34, 0.39, 0.44 11.1%
Price/Earnings Ratio 29.9
250,000 Procter & Gamble Co. @ 109 9/16 27,390,625
Produces laundry and cleaning products,
personal care items, food and beverages
and paper products
Earnings P/S $1.13, 1.23, 1.31, (0.56) 1.45, 1.74, 2.01, 2.28, 2.56, 2.59 9.7%
Dividends P/S $0.44, 0.49, 0.51, 0.55, 0.62, 0.70, 0.80, 0.90, 1.01, 1.21 11.9%
Price/Earnings Ratio 42.3
------------
44,996,875
------------
Steel Producers (1.47%)
725,000 Nucor Corp. @ 54 13/16 39,739,063
Manufactures steel products ------------
Earnings P/S $0.88, 0.75, 0.92, 1.42, 2.60, 3.14, 2.83, 3.35, 3.00, 2.57 12.7%
Dividends P/S $0.12, 0.13, 0.14, 0.16, 0.18, 0.28, 0.32, 0.40, 0.48, 0.52 17.7%
Price/Earnings Ratio 21.3
Tobacco (0.43%)
500,000 Philip Morris Cos., Inc. @ 23 3/16 11,593,750
Global tobacco, brewing and food company ------------
Earnings P/S $1.28, 1.08, 1.82, 1.17, 1.82, 2.16, 2.56, 2.58, 2.20, 3.19 10.7%
Dividends P/S $0.52, 0.64, 0.78, 0.87, 1.01, 1.22, 1.47, 1.60, 1.68, 1.84 15.1%
Price/Earnings Ratio 7.2
Utilities (4.49%)
300,000 ALLTEL Corp. @ 82 11/16 24,806,250
Provides wireline and wireless communications
and information services
Earnings P/S $0.67, 0.65, 0.75, 0.76, 0.91, 1.27, 1.26, 2.11, 1.89, 2.58 16.2%
Dividends P/S $0.44, 0.48, 0.50, 0.82, 0.90, 0.98, 1.06, 1.12, 1.18, 1.24 12.2%
Price/Earnings Ratio 32.1
550,000 CenturyTel, Inc. @ 47 3/8 26,056,250
Louisiana-based telecommunications company
Earnings P/S $0.29, 0.35, 0.41, 0.59, 0.80, 0.87, 0.95, 1.87, 1.64, 1.68 21.6%
Dividends P/S $0.12, 0.13, 0.13, 0.14, 0.14, 0.15, 0.16, 0.16, 0.17, 0.18 4.2%
Price/Earnings Ratio 28.2
1,401,200 Questar Corp. @ 15 21,018,000
Diversified holding company for Utah, Wyoming
and Colorado natural gas transmission,
distribution and storage
Earnings P/S $0.73, 0.82, 1.01, 1.02, 1.08, 1.03, 1.20, 1.27, 0.93, 1.33 6.9%
Dividends P/S $0.49, 0.51, 0.52, 0.55, 0.57, 0.58, 0.60, 0.62, 0.65, 0.67 3.5%
Price/Earnings Ratio 11.3
1,010,600 SBC Communications, Inc. @ 48 3/4 49,266,750
Provides telephone service throughout the
United States and internationally
Earnings P/S $0.92, 0.90, 1.09, (1.37) 1.54, (1.82) 1.77, 0.85, 2.03, 2.26 10.5%
Dividends P/S $0.69, 0.71, 0.73, 0.76, 0.79, 0.83, 0.86, 0.90, 0.94, 0.97 3.9%
Price/Earnings Ratio 21.6
------------
121,147,250
------------
TOTAL COMMON STOCKS
(Cost $1,541,919,169) 2,420,072,982
-------------
PREFERRED STOCKS (1.36%)
118,742 CSC Holdings, Inc., 11.125%, Ser M
@ 109 1/4 12,972,564
80,540 CSC Holdings, Inc., 11.750%, Ser H
@ 110 3/4 8,919,805
20,600 Duke Capital Financing Trust I, 7.375%,
Ser T @ 21 7/16 441,602
134,300 Duke Capital Financing Trust II, 7.375%,
Ser U @ 21 3/8 2,870,663
97,800 FPC Capital I, 7.100%, Ser A @ 20 13/16 2,035,462
146,200 Georgia Power Capital Trust IV, 7.100%,
Ser A @ 20 3/4 3,033,650
60,000 Lasmo America Ltd., 8.150% (R)
@ 107.629 6,457,740
------------
TOTAL PREFERRED STOCKS
(Cost $36,280,980) 36,731,486
-------------
TOTAL COMMON AND PREFERRED STOCKS
(Cost $1,578,200,149) 2,456,804,468
-------------
PAR VALUE
(000s OMITTED)
- --------------
CORPORATE BONDS (4.27%)
$6,000 Adelphia Communications Corp., Sr Note
9.25%, 10-01-02 @ 100.625 6,037,500
2,000 Bank of America Corp, Deb 9.125%,
10-15-01 @ 103.562 2,071,240
15,900 Beaver Valley Funding Corp II, Deb 9.00%,
06-01-17 @ 100.250 15,939,750
5,000 CMS Energy Corp., Sr Note 8.125%,
05-15-02 @ 98.986 4,949,300
8,000 Citibank Credit Card Master Trust,
Series 1997-3A 6.839%, 02-10-04
@ 99.156 7,932,480
7,100 Comcast Corp., Sr Sub Deb 10.25%,
10-15-01 @ 104.995 7,454,645
6,500 Continental Cablevision, Inc., Deb 9.50%,
08-01-13 @ 110.424 7,177,560
3,000 First Union Corp., Sub Note 8.00%,
08-15-09 @ 99.711 2,991,330
5,000 GTE North, Inc., Sr Sub Note, 9.60%,
01-01-21 @ 107.214 5,360,700
10,810 Guaranteed Trade Trust, Notes 7.39%,
06-26-06 @ 100.760 10,892,198
5,000 Hydro-Quebec, Bond 9.40%, 02-01-21
@ 116.875 5,843,750
11,000 Long Island Lighting Co., Deb 8.20%,
03-15-23 @ 99.750 10,972,500
5,000 MidAmerican Energy Holdings Co., Bond
8.480%, 09-15-28 @ 103.122 5,156,100
1,390 North Atlantic Energy Corp., 1st Mtg Bond
9.050%, 06-01-02 @ 101.350 1,408,765
5,500 Northwest Airlines, Inc., Note 8.375%,
03-15-04 @ 94.594 5,202,670
5,800 Northwest Airlines, Inc., Note 7.625%,
03-15-05 @ 88.159 5,113,222
11,000 U.S. Airways, Inc., Pass Thru Ctf
Ser 1989-A2 9.82%, 01-01-13 @ 95.500 10,505,000
------------
TOTAL CORPORATE BONDS
(Cost $120,773,047) 115,008,710
------------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (1.81%)
4,789 Federal Home Loan Mortgage Corp.,
Sr Sub 8.00%, 12-15-08 @ 99.750 4,777,134
10,000 Federal National Mortgage Assn.,
Sr Sub 8.50%, 02-01-05 @ 100.187 10,018,700
2,000 Federal National Mortgage Assn.,
Sr Sub 6.21%, 11-07-07 @ 94.594 1,891,880
1,929 Government National Mortgage Assn.,
8.00% 08-15-24 @ 101.218 1,952,900
14,897 Government National Mortgage Assn.,
6.50% 01-15-29 @ 93.843 13,979,796
4,000 United States Treasury, Bond 12.50%,
08-15-14 @ 139.687 5,587,480
9,000 United States Treasury, Bond 6.125%,
08-15-29 @ 95.328 8,579,520
2,000 United States Treasury, Note 8.00%,
05-15-01 @ 102.312 2,046,240
------------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $50,455,238) 48,833,650
-------------
INTEREST
RATE
---------
SHORT-TERM INVESTMENTS (3.07%)
Joint Repurchase Agreement (2.52%)
$67,895 Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 12-31-99
due 01-03-00 (Secured by U.S.
Treasury Bond 10.625% due
03-15-15 and U. S. Treasury Notes
5.375% thru 7.125% due
01-31-00 thru 05-15-00)
- Note A 2.49% 67,895,000
--------------
Short-Term Notes (0.55%)
15,000 Federal Home Loan Mortgage
Corp., 01-10-00 14,983,875
--------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 4,005
--------------
TOTAL SHORT-TERM INVESTMENTS (3.07%) 82,882,880
--------- --------------
TOTAL INVESTMENTS (100.29%) 2,703,529,708
--------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.29%) (7,839,822)
--------- --------------
TOTAL NET ASSETS (100.00%) $2,695,689,886
========= ==============
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 $6,457,740 or 0.24% of
the Fund's net assets as of December 31, 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
John Hancock Funds - Sovereign Investors Fund
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 three series portfolios: John Hancock Sovereign
Investors Fund (the "Fund"), John Hancock Balanced Fund and John
Hancock Large Cap Value 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 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 shares
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 a 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, which may
differ from generally accepted acounting 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.
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 year
ended December 31, 1999.
SECURITIES LENDING The Fund may lend its securities to certain
qualified brokers who pay the Fund negotiated lender fees. These fees
are included in interest income. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Fund may bear the risk of delay of the loaned securities in
recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. The Fund had no lending activity
for the year ended December 31, 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 year
ended December 31, 1999, net sales charges received with regard to
sales of Class A shares amounted to $1,547,341. Out of this amount,
$150,373 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $269,953 was paid as sales
commissions to unrelated broker-dealers and $1,127,015 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 5.00% 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 B shares. For the year ended December 31, 1999, contingent
deferred sales charges paid to JH Funds amounted to $1,785,856.
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 for
providing distribution related services to the Fund in connection with
the sale of Class C shares. For the year ended December 31, 1999,
contingent deferred sales charges paid to JH Funds amounted to $3,857.
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/service costs. A maximum of
0.25% of such payments may be service fees as defined by the Conduct
Rules of the National Association of Securities Dealers. Under the
Conduct Rules, 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
year was at an annual rate of less than 0.02% of the average net assets
of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford, 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 year ended December 31, 1999, aggregated $901,690,534 and
$1,025,334,675, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies, during the year
ended December 31, 1999, aggregated $756,453,013 and $752,806,641,
respectively. The cost of investments owned at December 31, 1999
(excluding the corporate savings account), for federal income tax
purposes was $1,836,641,862. Gross unrealized appreciation and
depreciation of investments aggregated $920,670,478 and $53,786,637,
respectively, resulting in net unrealized appreciation of $866,883,841.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended December 31, 1999, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized gain on
investments of $11,347,481, a decrease in distributions in excess of
net investment income of $660,409 and an increase in capital paid-in
of $10,687,072. This represents the amount necessary to report these
balances on a tax basis, excluding certain temporary differences, as of
December 31, 1999. Additional adjustments may be needed in subsequent
reporting years. These reclassifications, which have no impact on the
net asset value of the Fund, are primarily attributable to the
computation of distributable income and capital gains under federal tax
rules versus generally accepted accounting principles, and the Fund's
use of the tax accounting practice known as equalization. The
calculation of net investment income per share in the financial
highlights excludes these adjustments.
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 the John Hancock Investment Trust, including
the schedule of investments as of December 31, 1999, and the related
statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31,
1999, by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not
received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the John Hancock Sovereign Investors Fund
portfolio of John Hancock Investment Trust at December 31, 1999, the
results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in
the United States.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 10, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the taxable distributions of the Fund during its fiscal
year ended December 31, 1999.
The Fund has designated distributions to shareholders of $92,930,844 as
a long-term capital gain dividend. This amount was reported on the 1999
U.S. Treasury Department Form 1099-DIV.
With respect to the ordinary dividends paid by the Fund for the fiscal
year ended December 31, 1999, 62.91% of the dividends qualify for the
corporate dividends received deduction.
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 72,922,841 .35 24.51 .78
- ----------------------------------------------------------------------
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 33,476,318 .18 24.48 .78
- ----------------------------------------------------------------------
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 432,281 .17 24.50 .78
- ----------------------------------------------------------------------
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 3,178,822 .44 24.52 .78
(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 on May 7, 1993.
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, 1999.
- ------------------------------------------------------------
PERCENT OF
DIVIDEND INCREASE
-----------------
Abbott Laboratories 13.3%
AFLAC, Inc. 14.6
Air Products & Chemicals, Inc. 10.9
ALLTEL Corp. 5.1
American General Corp. 6.7
American Home Products Corp. 4.6
American International Group, Inc. 13.1
Automatic Data Processing, Inc. 24.5
Avery Dennison Corp. 13.8
Bank of America Corp. 16.4
Baxter International, Inc. 1.8
Bemis Co., Inc. 4.5
Bestfoods, Inc. 8.5
Bristol-Myers Squibb Co. 14.1
CenturyTel, Inc. 4.0
Chevron Corp. 1.6
Citigroup, Inc. 44.8
Dayton Hudson Corp. 21.2
Dover Corp. 10.0
DuPont (E.I.) De Nemours & Co. 2.2
Ecolab, Inc. 12.8
Emerson Electric Co. 12.7
Exxon Mobil Corp. 1.8
Fannie Mae 12.5
First Tennessee National Corp. 15.3
Gannett Co., Inc. 5.1
General Electric Co. 16.8
Grainger (W.W.), Inc. 6.8
Hasbro, Inc. 14.3
Hewlett-Packard Co. 6.7
Home Depot, Inc. 37.5
Honeywell International, Inc. 13.3
Household International, Inc. 13.3
Illinois Tool Works, Inc. 29.4
Interpublic Group of Companies, Inc. (The) 17.2
Johnson & Johnson 12.4
Johnson Controls, Inc. 12.0
Kimberly-Clark Corp. 4.0
Leggett & Platt, Inc. 12.5
Lowe's Cos., Inc. 8.3
Masco Corp. 4.5
McDonald's Corp. 11.1
McGraw-Hill Cos., Inc. 10.3
Medtronic, Inc. 25.0
Merck & Co., Inc. 17.9
Minnesota Mining & Manufacturing Co. 1.8
Nucor Corp. 8.3
Pentair, Inc. 6.7
PepsiCo, Inc. 4.9
Philip Morris Cos., Inc. 9.5
Pitney Bowes, Inc. 13.3
Procter & Gamble Co. 19.8
Questar Corp. 3.1
ReliaStar Financial Corp. 12.7
RPM, Inc. 9.1
SBC Communications, Inc. 3.2
Schering-Plough Corp. 14.0
Sigma-Aldrich Corp. 7.1
SunTrust Banks, Inc. 38.0
SYSCO Corp. 27.3
Wal-Mart Stores, Inc. 42.9
Warner-Lambert Co. 25.0
Wells Fargo Co. 12.9
-----------------
The average dividend
increase for this group was 13.2%
=================
[THIS PAGE INTENTIONALLY LEFT BLANK]
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
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
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U.S. Postage
PAID
Randolph, MA
Permit No. 75
This report is for the information of shareholders of the John Hancock
Sovereign Investors 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."
2900A 12/99
2/00
The latest report from your
Fund's management team
ANNUAL REPORT
Balanced
Fund
DECEMBER 31, 1999
TRUSTEES
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive 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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to third paragraph.]
DEAR FELLOW SHAREHOLDERS:
As "The American Century" drew to a close this past year, the U.S.
economy ended the era on a high note. With robust growth continuing in
1999, our economy stood poised to enter the history books for producing
the longest expansion on record.
The stock market also rang out the century in style. For an
unprecedented fifth straight year, both the Dow Jones Industrial
Average and the Standard & Poor's 500 Index produced 20%-plus returns.
However, the market's advances were restricted to a very select group
of stocks, primarily in the technology sector. Many others, including
some of the household blue-chip names, languished or lost ground as the
result of investors' seemingly insatiable appetite for tech stocks.
Bonds struggled through their second-worst year in more than two
decades, as the strength of the U.S. economy and the rebound of many
others around the world provoked inflation fears. Though their outlook
from here looks brighter, in many instances, bond mutual fund investors
actually lost a little ground or made only slight advances in 1999.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds
that target a variety of market segments. This strategy, executed under
the guidance of a seasoned investment professional, could provide you
with a better chance of both realizing results and weathering the
market's changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from
your fund's portfolio management team on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JOHN F. SNYDER, III, BARRY H. EVANS, CFA,
AND PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGERS
[A 3" x 2" photo at bottom right side of page of John Hancock Balanced
Fund. Caption below reads "Portfolio Managers (l-r): Barry Evans,
Peter Schofield and John Snyder."]
John Hancock
Balanced Fund
Driven by a narrow universe of stocks, market
indices end the century with big gain
The last year of the millennium was certainly full of surprises for
investors. A year ago, after an unprecedented four years of
double-digit gains, most market experts warned investors that stocks
couldn't possibly repeat their outstanding performance again in 1999.
However, with stronger-than-expected growth and continued low
inflation, the economy beat the odds and the experts were proven wrong.
With the favorable economic backdrop, the major stock market indices
posted remarkable gains, with the Standard & Poor's 500 Index rising
21.04%, the Dow Jones Industrial Average advancing 27.20% and the
Nasdaq Composite Index surging a whopping 86.12%.
"...most non-
technology
stocks were
left behind
and many
even declined
for the
year."
What was also surprising to investors was that the market's blockbuster
returns were driven by a very narrow universe of stocks. Investors
spent the year chasing after the same small group of high-flying
technology stocks. In hopes of landing on the next big winner in the
information-technology revolution, investors focused on momentum stocks
- -- those that were going up -- while ignoring both quality and
valuations. In the process, most non-technology stocks were left behind
and many even declined for the year. In fact, what's interesting about
this market is that there was a huge discrepancy between the winners
and losers. Even though the Nasdaq Composite soared, a large number of
stocks in the Index actually posted losses for the year. And the return
on the S&P 500, if you exclude technology stocks, was only 3.1%,
according to the Leuthold Group, a stock-market research firm.
[Pie chart at top left hand column with heading "Portfolio
Diversification." The chart is divided into five sections (from top to
left): Short-Term Investments & Other 4%, Preferred Stocks 7%, U.S.
Government & Agencies 9%, Corporate Bonds 12% and Common Stocks 68%. A
note below the chart reads "As a percentage of net assets on December
31, 1999."]
"One of
our top-
performing
sectors in
this narrow
market was
retail
stocks."
Understanding performance
In this technology-driven market, our more conservative investment
approach was clearly out of favor. As we have discussed in past
reports, most technology companies don't meet our investment criterion
of increasing dividends consistently for the past 10 years. That's
because technology companies tend to reinvest their earnings rather
than use them to pay out dividends. What's more, we focus on companies
with stable earnings growth, solid fundamentals and reasonable
valuations. In a momentum-driven market -- as we experienced in 1999 --
investors were interested in only one thing -- that is, rising stock
prices -- and they ignored our key tenets of earnings growth,
valuations and fundamentals. So it's not surprising when you look at
the performance figures below that the Fund wasn't able to keep up with
its more aggressive peers.
[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 McGraw-Hill followed by an up arrow with the phrase "Strong
textbook sales." The second listing is Interpublic Group followed by an
up arrow with the phrase "Expanding Internet advertising business." The
third listing is Bond holdings followed by a down arrow with the phrase
"Hurt by rising interest rates." A note below the table reads "See
'Schedule of Investments.' Investment holdings are subject to change."]
While investment styles go in and out of favor -- and it's impossible
to time those shifts in the market -- history has shown that it's
better to invest for the long term rather than try to chase the flavor
of the day. The Fund is designed for conservative investors who want
solid returns over the long haul without a lot of risk. Although we,
too, are frustrated by the narrowness of the current market, we still
firmly believe that our Dividend Performers strategy has delivered --
and will continue to deliver -- on that promise. So, we encourage you
to keep the long-term picture in mind when you look at short-term
performance numbers.
Performance scorecard
For the 12 months ended December 31, 1999, John Hancock Balanced Fund's
Class A and Class B shares returned 3.89% and 3.16%, respectively, at
net asset value. By comparison, the average balanced fund returned
8.72% for the same period, according to Lipper, Inc.1 The Fund's Class
C shares, which were launched on May 1, 1999, returned -1.15% from
inception through December 31, 1999. 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.
Profit-taking in retail stocks
One of our top-performing sectors in this narrow market was retail
stocks. Thanks to strong wage growth and a healthy stock market,
consumers have gone on a spending spree. That has benefited retailers
such as mass-merchandise giant Wal-Mart Stores and department store
Dayton Hudson. While the fundamentals of these companies remain
extremely solid, we believe their valuations have become a bit
expensive. In addition, it's not clear that consumers will be able to
continue spending at the same rate throughout 2000. So we have taken
advantage of the market's strength to take profits in these holdings in
favor of ones that offer 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 year ended December 31,
1999." The chart is scaled in increments of 2% with -2% at the bottom
and 10% at the top. The first bar represents the 3.89% total return for
John Hancock Balanced Fund Class A. The second bar represents the 3.16%
total return for John Hancock Balanced Fund Class B. The third bar
represents the -1.15%* total return for John Hancock Balanced Fund Class
C. The fourth bar represents the 8.72% total return for Average
balanced fund. A note below the chart reads "Total returns for John
Hancock Balanced Fund are at net asset value with all distributions
reinvested. The average balanced fund is tracked by Lipper, Inc.1 See
the following two pages for historical performance information. *From
inception May 1, 1999 through December 31, 1999."]
Increasing capital goods
In turn, we've added to our position in capital goods stocks, because
we firmly believe that the stock market will broaden out in 2000. When
it does, capital goods stocks could start to look more appealing to
investors. Not only are these stocks undervalued, but they are also
benefiting from a pickup in the U.S. industrial sector as well as a
turnaround in the global economy. So we've beefed up our holdings in
multinational capital goods companies such as Avery Dennison, Dover
Corporation and Minnesota Mining & Manufacturing.
Low profile for bonds
As we have discussed in the past few shareholder reports, we believe
that stocks have offered more upside potential than bonds in the
current market environment. Given that, we remained underweighted in
bonds throughout the year, ending with a 22% stake, down from 31% a
year ago. That strategy paid off as bonds experienced a rough ride in
1999. Our main focus continues to be on corporate bonds, given their
attractive yields and the improving economy. Looking ahead, we will
continue to monitor the bond market closely and, as always, evaluate
the relative attractiveness of bonds versus stocks.
"...participa-
tion in the
market's
bounty will
eventually
broaden..."
Outlook
As we enter the new millennium, we are cautiously optimistic. As
investors try to figure out where the market is headed in 2000, we are
likely to experience some volatility. A big question weighing on
investors' minds is whether the technology bull market will continue
for another year, and that's likely to add to the uncertainty.
On the positive side, however, the economy should continue to grow,
albeit at a slower rate, and we see no reason for inflation to pick up
significantly. Given that, we expect interest rates to begin to trend
down in the second half of the year. As we mentioned above, we also
believe that participation in the market's bounty will eventually
broaden, allowing a wider variety of stocks to prosper. When that
happens, we expect stocks that were out of favor in 1999 -- many of
which are Dividend Performers -- to make a recovery.
- ---------------------------------------------------------------------------
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 Balanced 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 December 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/5/92)
------- ------- -------
Cumulative Total Returns (1.30%) 89.30% 108.25%
Average Annual Total Returns (1.30%) 13.61% 10.67%
CLASS B
For the period ended December 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/5/92)
------- ------- -------
Cumulative Total Returns (1.83%) 90.57% 108.71%
Average Annual Total Returns (1.83%) 13.77% 10.70%
CLASS C
For the period ended December 31, 1999
SINCE
INCEPTION
(5/1/99)
-------
Cumulative Total Return (2.12%)
Average Annual Total Return (2.12%)(1)
YIELDS
As of December 31, 1999
SEC 30-DAY
YIELD
-------
John Hancock Balanced Fund: Class A 2.04%
John Hancock Balanced Fund: Class B 1.45%
John Hancock Balanced Fund: Class C 1.45%
Note to Performance
(1) Not annualized.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Balanced 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 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index. Past performance is not indicative of
future results.
Line chart with the heading John Hancock 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 Standard & Poor's 500 Stock Index and is equal to $41,099
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Balanced Fund
on October 5, 1992, before sales charge, and is equal to $21,926 as of
December 31, 1999. The third line represents the value of the same
hypothetical investment made in the John Hancock Balanced Fund, after
sales charge, and is equal to $20,829 as of December 31, 1999.
Line chart with the heading John Hancock Balanced Fund Class B*,
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 Standard & Poor's 500 Stock Index and is equal to $41,099
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Balanced Fund
on October 5, 1992, before sales charge, and is equal to $20,869 as of
December 31, 1999.
Line chart with the heading John Hancock Balanced Fund Class C,
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 $11,099
as of December 31, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock Balanced Fund
on May 1, 1999, before sales charge, and is equal to $9,884 as of
December 31, 1999. The third line represents the value of the same
hypothetical investment made in the John Hancock Balanced Fund, after
sales charge, and is equal to $9,785 as of December 31, 1999.
* No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - 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,
1999. 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, 1999
- ------------------------------------------------------------
Assets:
Investments at value - Note C:
Common and preferred stocks
(cost - $129,024,745) $182,906,509
Corporate bonds
(cost - $32,387,817) 30,288,648
U.S. government and agencies
obligations (cost - $23,257,837) 22,734,515
Joint repurchase agreement
(cost - $6,960,000) 6,960,000
Corporate savings account 763
-----------
242,890,435
Receivable for shares sold 25,090
Dividends receivable 148,033
Interest receivable 1,083,030
Other assets 30,017
-----------
Total Assets 244,176,605
- ------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,258,975
Payable for shares repurchased 65,923
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 207,034
Accounts payable and accrued expenses 61,481
-----------
Total Liabilities 1,593,413
- ------------------------------------------------------------
Net Assets:
Capital paid-in 193,304,836
Accumulated net realized loss on
investments (1,963,483)
Net unrealized appreciation of
investments 51,259,273
Distributions in excess of net
investment income (17,434)
-----------
Net Assets $242,583,192
============================================================
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 - $130,689,603/9,300,873 $14.05
============================================================
Class B - $111,563,508/7,941,568 $14.05
============================================================
Class C* - $330,081/23,497 $14.05
============================================================
Maximum Offering Price Per Share**
Class A - ($14.05 x 105.26%) $14.79
============================================================
* Class C commenced operations on May 1, 1999.
** 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 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, 1999
- ------------------------------------------------------------
Investment Income:
Interest (including income on
securities loaned of $529) $5,431,487
Dividends (net of foreign
withholding taxes of $11,937) 3,185,816
-----------
8,617,303
-----------
Expenses:
Investment management fee - Note B 1,403,318
Distribution and service fee - Note B
Class A 354,485
Class B 1,146,092
Class C 1,877
Transfer agent fee - Note B 527,827
Registration and filing fees 53,492
Custodian fee 51,017
Accounting and legal services fee - Note B 41,436
Auditing fee 38,164
Printing 18,070
Trustees' fees 13,006
Miscellaneous 11,219
Legal fees 3,560
-----------
Total Expenses 3,663,563
- ------------------------------------------------------------
Net Investment Income 4,953,740
- ------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized loss on investments sold (1,803,424)
Change in net unrealized
appreciation/depreciation
of investments 5,223,352
-----------
Net Realized and Unrealized Gain
on Investments 3,419,928
- ------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $8,373,668
============================================================
See notes to financial statements.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1999
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $4,388,420 $4,953,740
Net realized gain (loss) on
investments sold 13,089,843 (1,803,424)
Change in net unrealized
appreciation/depreciation of
investments 8,135,130 5,223,352
-------------- --------------
Net Increase in Net Assets
Resulting from Operations 25,613,393 8,373,668
-------------- --------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.3551 and $0.3556 per
share, respectively) (2,267,801) (3,011,864)
Class B - ($0.2593 and $0.2571 per
share, respectively) (1,980,839) (2,103,521)
Class C** - (none and $0.1880 per
share, respectively) -- (4,139)
Distributions in excess of net
investment income
Class A - (none and $0.0023 per
share, respectively) -- (19,143)
Class B - (none and $0.0023 per
share, respectively) -- (18,719)
Class C** - (none and $0.0019 per
share, respectively) -- (31)
Distributions from net realized gain on
investments sold
Class A - ($0.7372 and $0.1848 per
share, respectively) (4,791,752) (1,637,012)
Class B - ($0.7372 and $0.1848 per
share, respectively) (5,780,678) (1,464,673)
Class C** - (none and $0.1848 per
share, respectively) -- (3,892)
-------------- --------------
Total Distributions to Shareholders (14,821,070) (8,262,994)
-------------- --------------
From Fund Share Transactions - Net: * 16,449,308 29,717,945
-------------- --------------
Net Assets:
Beginning of period 185,512,942 212,754,573
-------------- --------------
End of period (including
undistributed net investment
income of $149,965 and
distributions in excess of net
investment income of $17,434,
respectively) $212,754,573 $242,583,192
============== ==============
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.
<CAPTION>
Statement of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1999
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 1,706,479 $23,630,812 6,511,964 $91,237,100
Shares issued to shareholders in
reinvestment of distributions 494,608 6,784,234 319,253 4,425,505
----------- ----------- ----------- -----------
2,201,087 30,415,046 6,831,217 95,662,605
Less shares repurchased (1,621,817) (22,566,492) (4,432,247) (62,259,801)
----------- ----------- ----------- -----------
Net increase 579,270 $7,848,554 2,398,970 $33,402,804
=========== =========== =========== ===========
CLASS B
Shares sold 1,624,484 $22,535,756 1,573,367 $22,069,946
Shares issued to shareholders in
reinvestment of distributions 516,445 7,079,353 234,065 3,246,824
----------- ----------- ----------- -----------
2,140,929 29,615,109 1,807,432 25,316,770
Less shares repurchased (1,513,934) (21,014,355) (2,091,169) (29,352,484)
----------- ----------- ----------- -----------
Net increase (decrease) 626,995 $8,600,754 (283,737) ($4,035,714)
=========== =========== =========== ===========
CLASS C**
Shares sold -- -- 48,586 $689,657
Shares issued to shareholders in
reinvestment of distributions -- -- 481 6,646
----------- ----------- ----------- -----------
-- -- 49,067 696,303
Less shares repurchased -- -- (25,570) (345,448)
----------- ----------- ----------- -----------
Net increase -- -- 23,497 $350,855
=========== =========== =========== ===========
** Class C commenced operations on May 1, 1999.
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,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $9.84 $11.75 $12.27 $13.33 $14.06
-------- -------- -------- -------- --------
Net Investment Income(1) 0.44 0.41 0.37 0.36 0.35
Net Realized and Unrealized Gain
on Investments 1.91 0.99 2.14 1.47 0.18
-------- -------- -------- -------- --------
Total from Investment Operations 2.35 1.40 2.51 1.83 0.53
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.44) (0.41) (0.37) (0.36) (0.36)
Distributions in Excess of
Net Investment Income -- -- -- -- (0.00)(5)
Distributions from Net Realized Gain on
Investments Sold -- (0.47) (1.08) (0.74) (0.18)
-------- -------- -------- -------- --------
Total Distributions (0.44) (0.88) (1.45) (1.10) (0.54)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $11.75 $12.27 $13.33 $14.06 $14.05
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(2) 24.23% 12.13% 20.79% 14.01% 3.89%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $69,811 $71,242 $84,264 $97,072 $130,690
Ratio of Expenses to Average Net Assets 1.27% 1.29% 1.22% 1.21% 1.22%
Ratio of Net Investment Income to Average
Net Assets 3.99% 3.33% 2.77% 2.61% 2.47%
Portfolio Turnover Rate 45% 80% 115% 83% 94%
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.
<CAPTION>
Financial Highlights (continued)
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $9.84 $11.74 $12.27 $13.33 $14.06
-------- -------- -------- -------- --------
Net Investment Income(1) 0.36 0.32 0.28 0.27 0.26
Net Realized and Unrealized Gain
on Investments 1.90 1.01 2.14 1.46 0.17
-------- -------- -------- -------- --------
Total from Investment Operations 2.26 1.33 2.42 1.73 0.43
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.36) (0.33) (0.28) (0.26) (0.26)
Distributions in Excess of Net Investment Income -- -- -- -- (0.00)(5)
Distributions from Net Realized Gain on
Investments Sold -- (0.47) (1.08) (0.74) (0.18)
-------- -------- -------- -------- --------
Total Distributions (0.36) (0.80) (1.36) (1.00) (0.44)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $11.74 $12.27 $13.33 $14.06 $14.05
======== ======== ======== ======== ========
Total Investment Return at Net Asset Value(2) 23.30% 11.46% 19.96% 13.23% 3.16%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $87,827 $90,855 $101,249 $115,682 $111,564
Ratio of Expenses to Average Net Assets 1.96% 1.99% 1.91% 1.88% 1.92%
Ratio of Net Investment Income to Average
Net Assets 3.31% 2.63% 2.08% 1.93% 1.76%
Portfolio Turnover Rate 45% 80% 115% 83% 94%
See notes to financial statements.
<CAPTION>
Financial Highlights (continued)
- ----------------------------------------------------------------
FOR THE PERIOD
FROM MAY 1, 1999
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1999
-----------------
<S> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.60
--------
Net Investment Income(1) 0.19
Net Realized and Unrealized Loss
on Investments (0.37)
--------
Total From Investment Operations (0.18)
--------
Less Distributions:
Dividends from Net Investment Income (0.19)
Distributions in Excess of Net Investment Income (0.00)(5)
Distributions from Net Realized Gain on
Investments Sold (0.18)
--------
Total from Investment Operations (0.37)
--------
Net Asset Value, End of Period $14.05
========
Total Investment Return at Net Asset Value(2) (1.15%)(3)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $330
Ratio of Expenses to Average Net Assets 1.84%(4)
Ratio of Net Investment Income to Average
Net Assets 1.88%(4)
Portfolio Turnover Rate 94%
(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) Not annualized.
(4) Annualized.
(5) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
December 31, 1999
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, and are unaudited.
- ----------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Balanced Fund on December 31, 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 (68.08%)
Advertising (1.43%)
60,000 Interpublic Group of Companies, Inc.
(The) @ 57 11/16 $3,461,250
One of the largest advertising agencies ------------
in the world
Earnings P/S $0.40, 0.44, 0.39, 0.56, 0.29, 0.51, 0.80, 0.75, 1.11, 1.30 14.0%
Dividends P/S $0.13, 0.14, 0.15, 0.17, 0.19, 0.21, 0.23, 0.25, 0.29, 0.34 11.3%
Price/Earnings Ratio 44.4
Banks (4.74%)
40,000 Bank of America Corp. @ 50 3/16 2,007,500
Holding company for Bank of America and
NationsBank
Earnings P/S $0.40, 1.20, 1.98, 2.46, 2.54, 2.98, 3.36, 3.61, 2.90, 4.69 12.8%
Dividends P/S $0.57, 0.62, 0.64, 0.69, 0.94, 1.04, 1.20, 1.37, 1.59, 1.85 14.0%
Price/Earnings Ratio 10.7
25,000 Banc One Corp. @ 32 801,563
Ohio-based bank holding company
Earnings P/S $1.01, 1.24, 1.32, 2.16, 1.96, 2.12, 2.57, 2.43, 2.61, 3.46 14.7%
Dividends P/S $0.57, 0.63, 0.73, 0.78, 1.03, 1.13, 1.24, 1.38, 1.52, 1.68 12.8%
Price/Earnings Ratio 9.2
60,000 First Tennessee National Corp. @ 28 1/2 1,710,000
Tennessee-based bank holding company
Earnings P/S $0.45, 0.57, 0.72, 0.81, 1.08, 1.21, 1.34, 1.50, 1.72, 1.91 17.4%
Dividends P/S $0.28, 0.29, 0.32, 0.38, 0.44, 0.49, 0.55, 0.62, 0.69, 0.79 12.5%
Price/Earnings Ratio 14.9
70,000 SunTrust Banks, Inc. @ 68 13/16 4,816,875
Holding company for SunTrust Banks operating
through 700 offices in Florida, Georgia,
Tennessee and Alabama.
Earnings P/S $1.30, 1.26, 1.46, 1.90, 2.22, 2.38, 2.59, 3.04, 3.04, 3.93 13.1%
Dividends P/S $0.46, 0.47, 0.49, 0.58, 0.66, 0.74, 0.83, 0.93, 1.00, 1.38 13.0%
Price/Earnings Ratio 17.5
54,000 Wells Fargo Co. @ 40 7/16 2,183,625
Diversified financial services company providing
banking, insurance, investments and
consumer finance.
Earnings P/S $0.79, 0.36, 0.53, 0.98, 1.36, 1.62, 1.36, 1.48, 1.17, 2.24 12.3%
Dividends P/S $0.21, 0.24, 0.27, 0.32, 0.39, 0.45, 0.53, 0.62, 0.70, 0.79 15.9%
Price/Earnings Ratio 18.1
------------
11,519,563
------------
Beverages (1.31%)
90,000 PepsiCo, Inc. @ 35 1/4 3,172,500
Second largest soft drink company ------------
Earnings P/S $0.68, 0.68, 0.23, 0.98, 1.09, 1.00, 0.72, 1.36, 1.31, 1.21 6.6%
Dividends P/S $0.19, 0.23, 0.26, 0.31, 0.35, 0.39, 0.45, 0.49, 0.52, 0.54 12.3%
Price/Earnings Ratio 29.1
Building (1.15%)
110,000 Masco Corp. @ 25 3/8 2,791,250
Manufactures buildings, home improvement ------------
and consumer products
Earnings P/S $0.46, 0.15, 0.61, 0.73, 0.61, (1.39) 0.92, 1.15, 1.39, 1.59 14.8%
Dividends P/S $0.27, 0.29, 0.31, 0.33, 0.35, 0.37, 0.39, 0.41, 0.44, 0.46 6.1%
Price/Earnings Ratio 16.0
Chemicals (0.65%)
80,000 RPM, Inc. @ 10 3/16 815,000
Manufacturer of specialty chemicals and
coatings to waterproof and rustproof structures
Earnings P/S $0.40, 0.46, 0.46, 0.46, 0.56, 0.65, 0.69, 0.76, 0.84, 0.86 8.9%
Dividends P/S $0.23, 0.26, 0.28, 0.30, 0.33, 0.35, 0.38, 0.41, 0.44, 0.48 8.5%
Price/Earnings Ratio 11.8
25,000 Sigma - Aldrich Corp. @ 30 1/16 751,563
Manufacturer of biochemical and organic
products used for research and diagnostics
Earnings P/S $0.72, 0.80, 0.96, 0.97, 1.11, 1.30, 1.45, 1.62, 1.64, 1.73 10.2%
Dividends P/S $0.11, 0.12, 0.13, 0.15, 0.17, 0.19, 0.23, 0.26, 0.28, 0.30 11.8%
Price/Earnings Ratio 17.4
------------
1,566,563
------------
Computers (1.11%)
50,000 Automatic Data Processing, Inc. @ 5 7/8 2,693,750
Largest independent computing services ------------
firm in the U.S.
Earnings P/S $0.36, 0.41, 0.46, 0.52, 0.59, 0.67, 0.76, 0.85, 0.98, 1.10 13.2%
Dividends P/S $0.08, 0.09, 0.11, 0.12, 0.14, 0.16, 0.20, 0.23, 0.26, 0.32 10.7%
Price/Earnings Ratio 49.0
Containers (0.57%)
40,000 Bemis Co., Inc. @ 34 7/8 1,395,000
Producer of a broad range of flexible ------------
packaging and equipment and pressure-
sensitive materials
Earnings P/S $0.99, 1.03, 1.10, 0.86, 1.40, 1.63, 1.90, 2.00, 2.09, 2.16 9.1%
Dividends P/S $0.36, 0.42, 0.46, 0.50, 0.54, 0.64, 0.72, 0.80, 0.88, 0.92 11.0%
Price/Earnings Ratio 16.1
Diversified Operations (3.73%)
30,000 DuPont (E.I.) De Nemours & Co. @ 65 7/8 1,976,250
Nation's largest chemical manufacturer
Earnings P/S $1.70, 1.04, (2.92) 0.41, 1.98, 2.77, 3.18, 2.08, 3.90, 2.42 4.0%
Dividends P/S $0.81, 0.84, 0.87, 0.88, 0.91, 1.01, 1.12, 1.23, 1.37, 1.40 6.3%
Price/Earnings Ratio 27.2
61,875 Honeywell, Inc. @ 57 11/16 3,569,414
Makes automation and control systems
Earnings P/S $1.01, 0.07, (0.56) 0.88, 1.27, 1.47, 1.73, 2.00, 2.34, 2.62 11.2%
Dividends P/S $0.23, 0.24, 0.25, 0.29, 0.34, 0.39, 0.45, 0.52, 0.60, 0.68 12.8%
Price/Earnings Ratio 22.0
10,000 Johnson Controls, Inc. @ 56 7/8 568,750
Manufactures automotive systems and
building controls
Earnings P/S $1.02, 1.06, 1.37, 0.08, 1.80, 2.13, 2.55, 3.12, 3.63, 4.27 17.2%
Dividends P/S $0.60, 0.62, 0.64, 0.68, 0.72, 0.78, 0.82, 0.86, 0.92, 1.03 6.2%
Price/Earnings Ratio 13.3
30,000 Minnesota Mining & Manufacturing Co.
@ 97 7/8 2,936,250
Manufactures industrial, commercial and
health-care products
Earnings P/S $2.96, 2.63, 2.81, 2.91, 3.13, 2.31, 3.62, 5.06, 2.88, 4.14 3.8%
Dividends P/S $1.46, 1.56, 1.60, 1.66, 1.76, 1.88, 1.92, 2.12, 2.20, 2.24 4.9%
Price/Earnings Ratio 23.6
------------
9,050,664
------------
Electronics (5.41%)
70,000 Emerson Electric Co. @ 57 3/8 4,016,250
Produces and sells electrical/electronic
products and systems
Earnings P/S $1.38, 1.42, 1.48, 1.58, 1.76, 2.03, 2.28, 2.50, 2.77, 3.06 9.3%
Dividends P/S $0.63, 0.66, 0.69, 0.72, 0.78, 0.89, 0.98, 1.08, 1.18, 1.33 8.7%
Price/Earnings Ratio 18.8
45,000 General Electric Co. @ 154 3/4 6,963,750
Dominant force in home appliances, electrical
power and financial services
Earnings P/S $1.21, 0.76, 1.38, 1.26, 1.39, 1.93, 2.16, 2.46, 2.80, 3.23 11.5%
Dividends P/S $0.48, 0.52, 0.58, 0.66, 0.75, 0.85, 0.95, 1.08, 1.25, 1.46 13.2%
Price/Earnings Ratio 47.9
45,000 Grainger (W.W.), Inc. @ 47 13/16 2,151,563
Leading distributor of electrical equipment
Earnings P/S $1.16, 1.19, 1.29, 1.43, 1.25, 1.82, 2.02, 2.27, 2.44, 2.16 7.2%
Dividends P/S $0.28, 0.31, 0.33, 0.36, 0.39, 0.45, 0.49, 0.53, 0.59, 0.63 9.4%
Price/Earnings Ratio 22.1
------------
13,131,563
------------
Finance (3.96%)
100,000 Citigroup, Inc. @ 55 9/16 5,556,250
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 $0.37, 0.11, 0.62, 1.13, 1.12, 1.50, 1.81, 1.83, 1.62, 2.82 25.3%
Dividends P/S $0.04, 0.05, 0.08, 0.11, 0.13, 0.18, 0.20, 0.27, 0.37, 0.54 33.5%
Price/Earnings Ratio 19.7
65,000 Fannie Mae @ 62 7/16 4,058,438
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 $1.12, 1.25, 1.48, 1.71, 1.94, 1.95, 2.48, 2.83, 3.23, 3.66 14.1%
Dividends P/S $0.18, 0.26, 0.35, 0.46, 0.60, 0.68, 0.76, 0.84, 0.96, 1.08 22.0%
Price/Earnings Ratio 17.1
------------
9,614,688
------------
Furniture (1.37%)
155,000 Leggett & Platt, Inc. @ 21 7/16 3,322,813
Produces intermediate products for the home ------------
furnishings industry
Earnings P/S $0.21, 0.27, 0.41, 0.52, 0.68, 0.75, 0.77, 1.08, 1.24, 1.45 24.0%
Dividends P/S $0.11, 0.22, 0.12, 0.14, 0.16, 0.19, 0.23, 0.27, 0.32, 0.36 14.1%
Price/Earnings Ratio 14.8
Insurance (3.25%)
40,000 AFLAC Corp. @ 47 3/16 1,887,500
Global specialty insurer
Earnings P/S $0.39, 0.49, 0.60, 0.81, 0.95, 1.17, 1.37, 2.08, 1.76, 1.99 19.9%
Dividends P/S $0.09, 0.10, 0.12, 0.13, 0.15, 0.17, 0.20, 0.23, 0.25, 0.29 13.9%
Price/Earnings Ratio 23.7
30,000 American International Group, Inc.
@ 108 1/8 3,243,750
Broadly based property-casualty insurance
organization
Earnings P/S $0.39, 0.49, 0.60, 0.81, 0.95, 1.17, 1.37, 2.08, 1.76, 1.99 11.0%
Dividends P/S $0.09, 0.10, 0.12, 0.13, 0.15, 0.17, 0.20, 0.23, 0.25, 0.29 12.3%
Price/Earnings Ratio 33.9
70,000 ReliaStar Financial Corp. @ 39 3/16 2,743,125
Financial services company engaged in
life/health insurance and consumer finance
Earnings P/S $1.00, 0.80, 0.95, 0.95, 1.50, 1.98, 2.37, 2.55, 2.56, 2.87 12.4%
Dividends P/S $0.33, 0.35, 0.37, 0.40, 0.44, 0.49, 0.55, 0.61, 0.71, 0.80 10.3%
Price/Earnings Ratio 13.7
------------
7,874,375
------------
Leisure (0.57%)
72,500 Hasbro, Inc. @ 19 1/16 1,382,031
Designs, manufactures and markets toys, ------------
games and interactive software
Earnings P/S $0.46, 0.42, 0.89, 0.99, 0.87, 0.77, 0.98, 0.68, 1.00, 1.41 18.3%
Dividends P/S $0.06, 0.07, 0.09, 0.11, 0.13, 0.14, 0.18, 0.20, 0.21, 0.24 16.7%
Price/Earnings Ratio 13.4
Machinery (2.13%)
50,000 Dover Corp. @ 45 3/8 2,268,750
Manufactures a variety of specialized
industrial products
Earnings P/S $0.64, 0.54, 0.56, 0.70, 0.89, 1.22, 1.69, 1.79, 1.69, 1.88 12.7%
Dividends P/S $0.19, 0.21, 0.22, 0.23, 0.25, 0.28, 0.32, 0.36, 0.40, 0.44 9.8%
Price/Earnings Ratio 24.1
75,000 Pentair, Inc. @ 38 1/2 2,887,500
Manufactures enclosures for electrical,
electronic, woodworking and power tool
equipment
Earnings P/S $0.81, 1.00, (0.18) 1.10, 1.26, 1.81, 1.73, 2.11, 2.46, 2.85 15.0%
Dividends P/S $0.30, 0.31, 0.33, 0.34, 0.36, 0.40, 0.50, 0.54, 0.60, 0.64 8.8%
Price/Earnings Ratio 13.5
------------
5,156,250
------------
Media (4.22%)
65,000 Gannett Co., Inc. @ 81 9/16 5,301,563
Publishes 81 daily/50 nondaily newspapers,
operates 10 TV, 8 FM and 7 AM stations
Earnings P/S $1.18, 1.00, 0.70, 1.36, 1.62, 1.71, 3.35, 2.50, 3.50, 3.29 12.1%
Dividends P/S $0.61, 0.62, 0.63, 0.65, 0.67, 0.69, 0.71, 0.74, 0.78, 0.82 3.3%
Price/Earnings Ratio 24.8
80,000 McGraw-Hill Cos., Inc. @ 61 5/8 4,930,000
Provides informational products and services
for business and industry
Earnings P/S $0.89, 0.76, 0.15, 0.06, 1.03, 1.14, 2.48, 1.46, 1.67, 1.95 9.1%
Dividends P/S $0.54, 0.55, 0.56, 0.57, 0.58, 0.60, 0.66, 0.72, 0.78, 0.86 5.3%
Price/Earnings Ratio 31.6
------------
10,231,563
------------
Medical (7.39%)
60,000 Abbott Laboratories @ 36 5/16 2,178,750
Major pharmaceutical and health-care firm
Earnings P/S $0.56, 0.64, 0.74, 0.85, 0.94, 1.05, 1.19, 1.34, 1.51, 1.66 12.8%
Dividends P/S $0.21, 0.25, 0.30, 0.34, 0.38, 0.42, 0.48, 0.54, 0.60, 0.68 14.0%
Price/Earnings Ratio 21.9
40,000 American Home Products Corp.,
@ 39 7/16 1,577,500
Discovers, develops, manufactures and markets
prescription drugs and over-the-counter
medications as well as vaccines, biotechnology,
agricultural products and animal health-care
items
Earnings P/S $0.98, 1.09, 1.17, 1.19, 1.25, 1.35, 1.46, 1.56, 1.85, 1.76
Dividends P/S $0.54, 0.60, 0.67, 0.72, 0.74, 0.76, 0.79, 0.83, 0.87, 0.91
Price/Earnings Ratio 22.3
70,000 Baxter International, Inc. @ 62 13/16 4,396,875
The company operates four divisions: renal,
biotech, cardiovascular and intravenous
systems and international distribution
Earnings P/S ($0.05) 2.03, 1.56, (0.72) 2.13, 2.31, 2.41, 1.06, 1.09, 2.86 56.8%
Dividends P/S $0.64, 0.74, 0.86, 1.00, 1.03, 1.11, 1.12, 1.13, 1.14, 1.16 6.8%
Price/Earnings Ratio 22.0
70,000 Bristol-Myers Squibb Co. @ 64 3/16 4,493,125
Produces pharmaceuticals, medical devices,
non-prescription health products
Earnings P/S $0.84, 0.99, 0.95, 0.95, 0.91, 0.89, 1.40, 1.57, 1.55, 2.05 10.4%
Dividends P/S $0.53, 0.60, 0.69, 0.72, 0.73, 0.74, 0.75, 0.76, 0.78, 0.89 5.9%
Price/Earnings Ratio 31.3
26,000 Johnson & Johnson @ 93 1/8 2,421,250
Major producer of prescription and
non-prescription drugs, toiletries, medical
instruments and supplies
Earnings P/S $0.86, 1.10, 0.78, 1.37, 1.56, 1.86, 2.17, 2.41, 2.23, 3.01 14.9%
Dividends P/S $0.33, 0.39, 0.45, 0.51, 0.56, 0.64, 0.74, 0.85, 0.97, 1.09 14.2%
Price/Earnings Ratio 31.0
35,000 Warner-Lambert Co. @ 81 15/16 2,867,813
Produces pharmaceuticals, consumer health-
care and confectionery products
Earnings P/S $0.60, 0.04, 0.80, 0.41, 0.86, 0.90, 0.95, 1.04, 1.48, 1.95 14.0%
Dividends P/S $0.25, 0.29, 0.34, 0.38, 0.41, 0.43, 0.46, 0.51, 0.64, 0.80 13.8%
Price/Earnings Ratio 42.0
------------
17,935,313
------------
Metal Products (0.84%)
30,000 Illinois Tool Works, Inc. @ 67 9/16 2,026,875
Designs and manufacturers fasteners and ------------
components, equipment and consumable
systems and a variety of specialty products
and equipment
Earnings P/S $0.84, 0.82, 0.86, 0.92, 1.23, 1.65, 1.95, 2.33, 2.67, 2.99 15.2%
Dividends P/S $0.18, 0.20, 0.23, 0.25, 0.27, 0.31, 0.35, 0.43, 0.51, 0.66 15.5%
Price/Earnings Ratio 22.6
Office (1.90%)
30,000 Avery Dennison Corp. @ 72 7/8 2,186,250
Manufactures and markets self-adhesive
solutions for consumer porducts and
label systems
Earnings P/S $0.05, 0.51, 0.67, 0.73, 0.99, 1.32, 1.63, 1.93, 2.15, 2.51 54.5%
Dividends P/S $0.32, 0.38, 0.41, 0.45, 0.50, 0.56, 0.62, 0.72, 0.87, 0.99 13.4%
Price/Earnings Ratio 29.0
50,000 Pitney Bowes, Inc. @ 48 5/16 2,415,625
Manufactures office automation equipment
Earnings P/S $0.67, 0.93, 0.32, 1.11, 0.87, 1.92, 1.56, 1.80, 2.06, 2.32 14.8%
Dividends P/S $0.30, 0.34, 0.39, 0.45, 0.52, 0.60, 0.69, 0.80, 0.90, 1.02 14.6%
Price/Earnings Ratio 20.8
------------
4,601,875
------------
Oil & Gas (4.64%)
45,000 Chevron Corp. @ 86 5/8 3,898,124
One of the largest integrated, international oil
companies with interest in petrochemicals
Earnings P/S $3.05, 1.85, 2.32, 1.95, 2.60, 1.43, 3.99, 4.95, 2.04, 3.48 1.5%
Dividends P/S $1.48, 1.63, 1.65, 1.75, 1.85, 1.93, 2.08, 2.28, 2.44, 2.48 5.9%
Price/Earnings Ratio 24.9
54,604 Exxon Mobil Corp. @ 80 9/16 4,399,034
One of the largest integrated, international oil
companies with interest in petrochemicals
Earnings P/S $1.94, 2.12, 1.59, 2.06, 1.73, 2.48, 2.91, 3.28, 2.28, 2.39 2.3%
Dividends P/S $1.19, 1.30, 1.36, 1.38, 1.41, 1.46, 1.54, 1.62, 1.64, 1.67 3.8%
Price/Earnings Ratio 33.7
60,000 Shell Transport & Trading Co., PLC
American Depositary Receipts
(Great Britain) @ 49 1/4 2,955,000
Involved in all phases of the petroleum industry
Earnings P/S $1.68, 1.08, 1.12, 1.07, 1.53, 1.64, 2.32, 1.75, 5.00, 0.72 -9.0%
Dividends P/S $0.90, 1.11, 0.97, 0.86, 0.97, 1.13, 1.36, 1.31, 1.35, 1.49 10.4%
Price/Earnings Ratio 68.1
------------
11,252,158
------------
Paper & Paper Products (1.88%)
70,000 Kimberly-Clark Corp. @ 65 1/4 4,567,500
Manufactures tissue, personal care and ------------
health-care products
Earnings P/S $1.05, 0.79, 0.27, 0.42, 1.36, 0.06, 2.48, 1.61, 2.11, 2.95 12.2%
Dividends P/S $0.68, 0.73, 0.82, 0.85, 0.88, 0.90, 0.92, 0.95, 1.00, 1.04 4.8%
Price/Earnings Ratio 22.2
Retail (9.09%)
70,000 Dayton Hudson Corp. @ 73 7/16 5,140,624
General merchandiser selling through Target
and Marvyn stores
Earnings P/S $0.87, 0.62, 0.81, 0.80, 0.92, 0.65, 0.98, 1.59, 1.98, 2.51 12.5%
Dividends P/S $0.20, 0.23, 0.25, 0.26, 0.27, 0.28, 0.30, 0.32, 0.33, 0.40 8.0%
Price/Earnings Ratio 29.3
82,500 Home Depot, Inc. (The) @ 68 9/16 5,656,405
Operates a chain of retail building supply/
home improvement "warehouse" stores
Earnings P/S $0.11, 0.13, 0.18, 0.23, 0.30, 0.35, 0.44, 0.53, 0.71, 1.10 29.2%
Dividends P/S $0.01, 0.01, 0.02, 0.02, 0.03, 0.04, 0.05, 0.06, 0.08, 0.11 33.8%
Price/Earnings Ratio 62.5
30,000 Lowe's Companies, Inc. @ 59 3/4 1,792,500
Distributes building materials and supplies
through stores in the United States
Earnings P/S $0.23, 0.03, 0.29, 0.44, 0.63, 0.66, 0.86, 1.05, 1.38, 1.77 25.5%
Dividends P/S $0.07, 0.07, 0.07, 0.08, 0.09, 0.09, 0.10, 0.11, 0.12, 0.13 8.0%
Price/Earnings Ratio 62.5
46,000 McDonald's Corp. @ 40 5/16 1,854,374
Develops, operates, franchises and services
a worldwide system of restaurants
Earnings P/S $0.55, 0.59, 0.65, 0.73, 0.84, 0.98, 1.08, 1.15, 1.10, 1.41 11.0%
Dividends P/S $0.08, 0.09, 0.10, 0.11, 0.12, 0.13, 0.14, 0.16, 0.18, 0.20 10.7%
Price/Earnings Ratio 28.6
140,000 SYSCO Corp. @ 39 9/16 5,538,750
Largest distributor of food service products
Earnings P/S $0.37, 0.42, 0.47, 0.54, 0.59, 0.69, 0.76, 0.86, 0.86, 1.08 12.6%
Dividends P/S $0.05, 0.06, 0.09, 0.13, 0.16, 0.20, 0.24, 0.28, 0.33, 0.42 26.7%
Price/Earnings Ratio 36.6
30,000 Wal-Mart Stores, Inc. @ 69 1/8 2,073,750
Operates chain of discount department stores
Earnings P/S $0.29, 0.35, 0.44, 0.51, 0.59, 0.60, 0.67, 0.78, 0.99, 1.26 17.7%
Dividends P/S $0.03, 0.04, 0.05, 0.06, 0.07, 0.09, 0.10, 0.11, 0.14, 0.20 23.5%
Price/Earnings Ratio 54.9
------------
22,056,403
------------
Steel Producers (1.69%)
75,000 Nucor Corp. @ 54 13/16 4,110,938
Manufactures steel products ------------
Earnings P/S $0.88, 0.75, 0.92, 1.42, 2.60, 3.14, 2.83, 3.35, 3.00, 2.57 12.7%
Dividends P/S $0.12, 0.13, 0.14, 0.16, 0.18, 0.28, 0.32, 0.40, 0.48, 0.52 17.7%
Price/Earnings Ratio 21.3
Utilities (5.05%)
25,000 ALLTEL Corp. @ 82 11/16 2,067,188
Provides wireline and wireless communications
and information services
Earnings P/S $0.67, 0.65, 0.75, 0.76, 0.91, 1.27, 1.26, 2.11, 1.89, 2.58 16.2%
Dividends P/S $0.44, 0.48, 0.50, 0.82, 0.90, 0.98, 1.06, 1.12, 1.18, 1.24 12.2%
Price/Earnings Ratio 32.1
67,500 CenturyTel, Inc. @ 47 3/8 3,197,813
Louisiana-based telecommunications company
Earnings P/S $0.29, 0.35, 0.41, 0.59, 0.80, 0.87, 0.95, 1.87, 1.64, 1.68 21.6%
Dividends P/S $0.12, 0.13, 0.13, 0.14, 0.14, 0.15, 0.16, 0.16, 0.17, 0.18 4.2%
Price/Earnings Ratio 28.2
110,000 Questar Corp. @ 15 1,650,000
Diversified holding company for Utah, Wyoming
and Colorado natural gas transmission,
distribution and storage
Earnings P/S $0.73, 0.82, 1.01, 1.02, 1.08, 1.03, 1.20, 1.27, 0.93, 1.33 6.9%
Dividends P/S $0.49, 0.51, 0.52, 0.55, 0.57, 0.58, 0.60, 0.62, 0.65, 0.67 3.5%
Price/Earnings Ratio 11.3
109,220 SBC Communications, Inc. @ 48 3/4 5,324,475
Provides telephone service throughout the
United States and internationally
Earnings P/S $0.92, 0.90, 1.09, (1.37) 1.54, (1.82) 1.77, 0.85, 2.03, 2.26 10.5%
Dividends P/S $0.69, 0.71, 0.73, 0.76, 0.79, 0.83, 0.86, 0.90, 0.94, 0.97 3.9%
Price/Earnings Ratio 21.6
------------
12,239,476
------------
TOTAL COMMON STOCKS
(Cost $111,446,295) 165,154,361
------------
PREFERRED STOCKS (7.32%)
35,528 CSC Holdings, Inc., 11.125%, Ser M
@ 109 1/4 3,881,434
39,232 CSC Holdings, Inc., 11.750%, Ser H
@ 110 3/4 4,344,944
50,800 Duke Capital Financing, 7.375%, Ser T
@ 21 7/16 1,089,000
49,200 Duke Capital Financing, 7.375%, Ser U
@ 21 3/8 1,051,650
100,000 FPC Capital I, 7.100%, Ser A
@ 20 13/16 2,081,250
100,000 Georgia Power Capital Trust IV, 6.850%,
@ 20 3/4 2,075,000
30,000 Lasmo America Ltd., 8.150%, (R)
@ 107.629 3,228,870
------------
TOTAL PREFERRED STOCKS
(Cost $17,578,450) 17,752,148
------------
TOTAL COMMON AND PREFERRED STOCKS
(Cost $129,024,745) 182,906,509
------------
PAR VALUE
(000s OMITTED)
- --------------
CORPORATE BONDS (12.49%)
$1,000 Adelphia Communications Corp. Sr Note
9.25%, 10-01-02 @ 100.625 1,006,250
1,000 Barclay's North American Capital Corp.,
Gtd Cap Note (United Kingdom) 9.750%
05-15-21 @ 107.074 1,070,740
2,000 Beaver Valley Funding Corp. II Deb 9.00%
06-01-17 @100.250 2,005,000
1,500 Continental Cablevision, Inc. Deb 9.50%
08-01-13 @ 110.424 1,656,360
1,300 GTE Corp. Deb 10.25% 11-01-20
@ 107.014 1,391,182
3,000 Hydro Quebec, Bond (Canada) 9.375%
04-15-30 @ 116.875 3,506,250
1,800 Landeskreditbank Baden Wuerttemberg,
Sub Note (Germany) 7.625% 02-01-23
@ 97.155 1,748,772
2,500 Long Island Lighting Co. Deb 8.20%
03-15-23 @ 99.750 2,493,750
600 Massachusetts Mutual Life Insurance Co.,
Surplus Note 7.625% 11-15-23 (R)
@ 97.77 586,620
2,000 MidAmerican Energy Holdings Co., 8.48%
09-15-28 @ 103.122 2,062,440
1,497 Midland Cogeneration Venture L.P.
Sec Deb Ser C-91 10.33% 07-23-02
@ 102.880 1,540,118
750 New York Life Insurance Co.,
Surplus Note 7.50% 12-15-23 (R)
@ 91.500 686,250
1,146 North Atlantic Energy Corp.1st Mtg Bond
9.050% 06-01-02 @ 101.350 1,161,471
1,000 Northwest Airlines, Inc., Note 8.375%,
03-15-04 @ 94.495 924,950
2,500 Northwest Airlines, Inc., Note 7.625%,
03-15-05 @ 88.159 2,203,975
1,000 Rogers Cablesystems Ltd. Note 9.625%
01-01-02 @ 102.500 1,025,000
1,100 Security Pacific Corp., Sub Note 11.50%
11-15-00 @ 103.922 1,143,142
1,000 Standard Credit Card Master Trust I,
Class A Credit Card Part Ctf Ser 1994-2,
7.250% 04-07-08, @ 98.906 989,060
750 Standard Credit Card Master Trust,
Ser 1995-1 8.25% 01-08-07
@ 103.625 777,188
2,159 Westinghouse Credit Corp. Deb 8.875%
06-14-14 @ 107.000 2,310,130
-----------
TOTAL CORPORATE BONDS
(Cost $32,387,817) 30,288,648
-----------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (9.37%)
600 Federal National Mort. Assn., Sr Sub
5.25% 01-15-09 @ 88.203 529,218
2,000 Federal National Mort. Assn., Sr Sub
6.25% 05-15-29 @ 89.000 1,780,000
1,356 Federal National Mort. Assn., Sr Sub
7.00% 07-01-11 @ 98.821 1,340,008
829 Federal National Mort. Assn., Sr Sub
7.50% 08-01-08 @ 100.644 834,336
1,790 Financing Corp., Bond 9.65%
11-02-18 @ 124.094 2,221,283
2,000 Freddie Mac Deb 5.000%
01-15-04 @ 93.870 1,877,400
4,951 Government National Mort. Assn.,
6.50% 04-15-29 @ 93.840 4,646,000
1,273 Government National Mort. Assn.,
7.00% 06-15-23 @ 97.234 1,237,788
49 Government National Mort. Assn.,
9.00% 04-15-21 @ 105.057 51,478
1,000 United States Treasury, Bond 6.125%,
08-15-29 @ 95.328 953,280
5,200 United States Treasury, Bond 12.50%,
08-15-14 @ 139.687 7,263,724
-----------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $23,257,837) 22,734,515
-----------
INTEREST
RATE
----------
SHORT-TERM INVESTMENTS (2.87%)
6,960 Joint Repurchase Agreement (2.87%)
Investment in a joint repurchase
agreement transaction with
Barclay's, Inc. - Dated 12-31-99
due 01-03-00 (Secured by U.S.
Treasury Bond 10.625% due
3-15-15 and U.S. Treasury Notes
5.375% thru 7.125% due
01-31-00 thru 05-15-00)
- Note A 2.49% 6,960,000
--------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 763
--------------
TOTAL SHORT-TERM INVESTMENTS (2.87%) 6,960,763
--------- --------------
TOTAL INVESTMENTS (100.13%) 242,890,435
--------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.13%) (307,243)
--------- --------------
TOTAL NET ASSETS (100.00%) $242,583,192
========= ==============
(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 $4,501,740 or 1.86% of
the Fund's net assets as of December 31, 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
John Hancock Funds - Balanced 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
Balanced Fund (the "Fund"), John Hancock Large Cap Value Fund and John
Hancock Sovereign Investors Fund. Prior to May 1, 1999, the 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 two series of the Trust are reported in separate financial
statements. The investment objectives of the Fund are to provide
current income, long-term growth of capital and income, and
preservation of capital.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, Class B and Class C shares. The
Trustees authorized the issuance of Class C shares effective May 1,
1999. 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, 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. For federal income tax purposes, the
Fund has $1,808,991 of a capital loss carryforward available, to the
extent provided by regulations, to offset future net realized capital
gains. To the extent such a carryforward is used by the Fund, no
capital gain distribution will be made. The Fund's carryforward expires
on December 31, 2007.
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.
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.
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 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 sizes 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 year
ended December 31, 1999.
SECURITIES LENDING The Fund may lend its securities to certain
qualified brokers who pay the Fund negotiated lender fees. These fees
are included in interest income. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Fund may bear the risk of delay of the loaned securities in
recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. The Fund had no lending activity
for the year ended December 31, 1999.
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 Fund has a distribution agreement with John Hancock Funds, Inc.
("JH Funds"), a wholly owned subsidiary of the Adviser. For the year
ended December 31, 1999, JH Funds received net sales of $582,294 with
regard to sales of Class A shares. Out of this amount, $19,333 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $453,954 was paid as sales commissions
to unrelated broker-dealers, and $109,007 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 year ended December 31, 1999, contingent
deferred sales charges paid to JH Funds amounted to $174,792.
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. There was no contingent deferred sales
charges received by JH Funds for the year ended December 31,1999.
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. A maximum of
0.25% of such payments may be service fees as defined by the Conduct
Rules of the National Association of Securities Dealers. Under the
Conduct Rules, 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,
accounting and legal services for the Funds. The compensation for the
year was at an annual rate of less than 0.02% of the average net assets
of each Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford, 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 a
periodic basis to reflect any income earned by the investment as well
as any unrealized gains or losses. The investment had no impact on the
operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the year ended December 31, 1999, aggregated $84,873,218 and
$60,098,689, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies, during the year
ended December 31, 1999, aggregated $146,057,488 and $147,165,424,
respectively.
The cost of investments owned at December 31, 1999 (excluding the
corporate savings account), for federal income tax purposes was
$191,784,891. Gross unrealized appreciation and depreciation of
investments aggregated $56,824,665 and $5,719,884, respectively,
resulting in net unrealized appreciation of $51,104,781.
NOTE D -
RECLASSIFICATION OF ACCOUNTS
During the year ended December 31, 1999, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized loss on
investments of $763, a decrease in distributions in excess of net
investment income of $36,278 and a decrease in capital paid-in of
$37,041. This represents the amount necessary to report these balances
on a tax basis, excluding certain temporary differences, as of December
31, 1999. Additional adjustments may be needed in subsequent reporting
years. These reclassifications, which have no impact on the net asset
value of the Fund, are primarily attributable to certain differences in
the computation of distributable income and capital gains under
federal income tax rules versus generally accepted accounting
principles. The calculation of net investment income per share in the
financial highlights excludes these adjustments.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Investment Trust --
John Hancock Balanced Fund
We have audited the accompanying statement of assets and liabilities of
the John Hancock Balanced Fund (formerly, John Hancock Sovereign
Balanced Fund) (the "Fund"), one of the portfolios constituting the
John Hancock Investment Trust, including the schedule of investments,
as of December 31, 1999, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31,
1999, by correspondence with the custodian and brokers, or other
appropriate auditing procedures where replies from brokers were not
received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the John Hancock Balanced Fund portfolio of John
Hancock Investment Trust at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United
States.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 10, 2000
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished
with respect to the taxable distributions of the Fund during its fiscal
year ended December 31, 1999.
The Fund has designated distributions to shareholders of $3,105,577 as
long-term capital gain dividends. These amounts were reported on the
1999 U.S. Treasury Department Form 1099-DIV.
With respect to the dividends paid by the Fund for the fiscal year
ended December 31, 1999, 62.40% qualify for the corporate dividends
received deduction.
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
1997 6,322,633 0.3717 13.33 1.0829
1998 6,901,903 0.3551 14.06 0.7372
1999 9,300,873 0.3579 14.05 0.1848
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
1997 7,598,310 0.2770 13.33 1.0829
1998 8,225,305 0.2593 14.06 0.7372
1999 7,941,568 0.2594 14.05 0.1848
CLASS C PER SHARE
YEAR -------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31, OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- -------- ----------- ----------- --------- -------------
1999(2) 23,497 $0.1899 $14.05 $0.1848
(1) For the period October 5, 1992 (commencement of operations) to
December 31, 1992.
(2) For the period May 1, 1999 (commencement of operations) to
December 31, 1999.
Dividend Increases (Unaudited)
Listed below are the most recent dividend increases for the common
stocks held in the Balanced Fund as of December 31, 1999.
- ------------------------------------------------------------------
PERCENT OF
DIVIDEND INCREASE
-----------------
Abbott Laboratories 13.3%
AFLAC, Inc. 14.6
ALLTEL Corp. 5.1
American Home Products Corp. 4.6
American International Group, Inc. 13.1
Automatic Data Processing, Inc. 24.5
Avery Dennison Corp. 13.8
Bank of America Corp. 16.4
Banc One Corp. 10.5
Baxter International, Inc. 1.8
Bemis Co., Inc. 4.5
Bristol-Myers Squibb Co. 14.1
CenturyTel, Inc. 4.0
Chevron Corp. 1.6
Citigroup, Inc. 44.8
Dayton Hudson Corp. 21.2
Dover Corp. 10.0
DuPont (E.I.) De Nemours & Co. 2.2
Emerson Electric Co. 12.7
Exxon Mobil Corp. 1.8
Fannie Mae 12.5
First Tennessee National Corp. 15.3
Gannett Co., Inc. 5.1
General Electric Co. 16.8
Grainger (W.W.), Inc. 6.8
Hasbro, Inc. 14.3
Home Depot, Inc. 37.5
Honeywell International, Inc. 13.3
Illinois Tool Works, Inc. 29.4
Interpublic Group of Companies, Inc. (The) 17.2
Johnson & Johnson 12.4
Johnson Controls, Inc. 12.0
Kimberly-Clark Corp. 4.0
Leggett & Platt, Inc. 12.5
Lowe's Cos., Inc. 8.3
Masco Corp. 4.5
McDonald's Corp. 11.1
McGraw-Hill Cos., Inc. 10.3
Minnesota Mining & Manufacturing Co. 1.8
Nucor Corp. 8.3
Pentair, Inc. 6.7
PepsiCo, Inc. 4.9
Pitney Bowes, Inc. 13.3
Questar Corp. 3.1
ReliaStar Financial Corp. 12.7
RPM, Inc. 9.1
SBC Communications, Inc. 3.2
Sigma-Aldrich Corp. 7.1
SunTrust Banks, Inc. 38.0
SYSCO Corp. 27.3
Wal-Mart Stores, Inc. 42.9
Warner-Lambert Co. 25.0
Wells Fargo Co. 12.9
----
The average dividend increase for this group was 13.1%
====
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
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
1-800-225-5291 1-800-554-6713 (TDD)
Internet: www.jhfunds.com
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U.S. Postage
PAID
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Permit No. 75
This report is for the information of shareholders of the John Hancock
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 12/99
2/00
The latest report from your
Fund's management team
ANNUAL REPORT
Large Cap
Value Fund
DECEMBER 31, 1999
TRUSTEES
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Executive 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 and 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
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief
Executive Officer, flush right next to third paragraph.]
DEAR FELLOW SHAREHOLDERS:
As "The American Century" drew to a close this past year, the U.S.
economy ended the era on a high note. With robust growth continuing in
1999, our economy stood poised to enter the history books for producing
the longest expansion on record.
The stock market also rang out the century in style. For an
unprecedented fifth straight year, both the Dow Jones Industrial
Average and the Standard & Poor's 500 Index produced 20%-plus returns.
However, the market's advances were restricted to a very select group
of stocks, primarily in the technology sector. Many others, including
some of the household blue-chip names, languished or lost ground as the
result of investors' seemingly insatiable appetite for tech stocks.
Bonds struggled through their second-worst year in more than two
decades, as the strength of the U.S. economy and the rebound of many
others around the world provoked inflation fears. Though their outlook
from here looks brighter, in many instances, bond mutual fund investors
actually lost a little ground or made only slight advances in 1999.
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for
investment diversification. Since not all parts of your portfolio will
perform equally well all the time, we believe it is important to
allocate your assets among different types of investments and funds
that target a variety of market segments. This strategy, executed under
the guidance of a seasoned investment professional, could provide you
with a better chance of both realizing results and weathering the
market's changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from
your fund's portfolio management team on the following pages. It's all
too easy to get caught up in the headlines and miss what lies
underneath.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY TIMOTHY E. KEEFE, CFA, PORTFOLIO MANAGEMENT TEAM LEADER
[A 3" x 2" photo at bottom right side of page of John Hancock
Large Cap Value Fund. Caption below reads "Fund management team
members (l-r): Sylvester Marquardt, Timothy Keefe and David
Eisenberg."]
John Hancock
Large Cap Value Fund
Fueled by technology stocks, stock market reaches new heights
The U.S. stock market turned in another banner year, with investor
interest expanding to stocks of all sizes but focusing on just a few
sectors. John Hancock Large Cap Value Fund more than fully participated
in the market's gains, with its Class A, Class B and Class C shares
returning 37.89%, 36.95% and 36.94%, respectively, at net asset value
for the year ended December 31, 1999. Our strategy of finding great
businesses at relatively low prices compared to the companies' true
values again worked well, with the Fund dramatically outperforming the
Standard & Poor's 500 Index, which returned 21.04% for 1999. The Fund
also far surpassed the average growth and income fund, which returned
13.76% during the same period, according to Lipper, Inc.1 Keep in mind
that your net asset value will differ from these results if you were
not invested in the Fund for the entire period and did not reinvest all
distributions. For historical performance information, please see pages
six and seven.
"...technology
and telecom-
munications
stocks
continued to
hit on all
cylinders..."
Market review
Tremendous volatility rocked the stock market throughout 1999. Cyclical
stocks -- those that tend to move in tandem with the economy -- rallied
smartly in the spring, as investors regained confidence in U.S.
economic growth and overseas economies showed signs of turning around.
But the comeback was short-lived, as rising interest rates put pressure
on many sectors, including finance. Cyclical stocks ended up losing
their edge to higher-growth companies -- those with above-average
earnings growth prospects -- during the second half of the year. Even
as interest rates climbed, technology and telecommunications stocks
continued to hit on all cylinders, propelling the market to new heights
by year end.
[Table at top left hand column entitled "Top Five Common Stock
Holdings." The first listing is Oak Industries 8.8%, the second is
ANTEC Corp. 5.7%, the third QUALCOMM 4.8%, the fourth Parametric
Technology Corp. 4.4% and the fifth AT&T -- Liberty Media Group
3.9%. A note below the table reads "As a percentage of net assets
on December 31, 1999."]
"Most finance
stocks
disappointed
in 1999, but
not all."
Technology winners
Despite a lighter stake in technology than the S&P 500, the Fund had
some big winners in this sector. QUALCOMM, a semiconductor company that
develops and makes advanced communications systems based on digital
wireless technology, is a perfect example of our relative value
strategy, which we apply to companies wherever we find them -- even in
technology, which is not traditionally a value sector. We bought the
stock early in the year when it seemed cheap compared to its potential
to grow revenues based on its patented wireless technology. Conexant
Systems, a leading provider of broadband and wireless semiconductors,
was a similar story. Each stock returned over 500% in 1999 and together
produced approximately 15% of the Fund's return.
[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 Oak Industries followed by an up
arrow with the phrase "Buyout by Corning." The second listing is
SCI Systems followed by an up arrow with the phrase "Investors
recognize company's strength." The third listing is Ace, Ltd.
followed by a down arrow with the phrase "Weak industry pricing,
rising interest rates." A note below the table reads "See
'Schedule of Investments.' Investment holdings are subject to
change."]
Some of our software stocks also did well as we approached year end.
Both Wind River Systems, the leading provider of non-PC-based operating
systems, and Computer Associates International, the second largest
software developer worldwide, benefited as investors began anticipating
a ramp up in corporate technology spending. We also had a small stake
in i2 Technologies, a developer of inventory management software that
took off in the second half of the year. SCI Systems, which makes
equipment for technology companies that outsource their manufacturing,
also enjoyed a good run. In the media and telecommunications sectors,
AT&T -- Liberty Media Group, a company with ownership interests in major
entertainment networks and video distribution businesses, and MediaOne
Group, one of the country's fastest-growing cable companies, also did
well.
Finance stocks: pain and gain
Most finance stocks disappointed in 1999, but not all. A significant
part of our finance stake was the preferred stock of Fuji Bank, which
appreciated nicely in Japan's newly restructured financial system and
we took profits. Citigroup, a company with a valuable worldwide
franchise, also did well as Asian economies improved and cost-cutting
initiatives began to pay off. We made money in American Express,
regional banks and brokerage stocks early in the year, but pared back
as we found better opportunities elsewhere. Unfortunately, weak pricing
and rising interest rates hurt almost all our insurance stocks. Our
largest investment here was Ace, Ltd., a property and casualty insurer
with consistent earnings growth that recently merged with CIGNA. As the
stock's price fell, we added to our stake, believing in the company's
prospects. But we gave up on some of our auto insurance stocks,
including Progressive, expecting pricing pressures to continue.
[Bar chart at top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the year
ended December 31, 1999." The chart is scaled in increments of 10%
with 0% at the bottom and 40% at the top. The first bar represents
the 37.89% total return for John Hancock Large Cap Value Fund
Class A. The second bar represents the 36.95% total return for
John Hancock Large Cap Value Fund Class B. The third bar
represents the 36.94% total return for John Hancock Large Cap
Value Fund Class C. The fourth bar represents the 13.76% total
return for Average growth and income fund. A note below the chart
reads "Total returns for the John Hancock Large Cap Value 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"]
Electronics purchases
During the summer, we bought Oak Industries, which makes components for
the cable TV, wireless and fiber-optics markets. The stock was cheap,
business prospects were excellent and we expected Oak to spin out or
sell off its Lasertron optics division. Instead, Corning, a
manufacturer of the fiber used in building fiber-optic networks,
announced it was acquiring Oak. Oak's stock soared and provided the
Fund with approximately 10% of its return. We also bought ANTEC,
another manufacturer of equipment for the cable TV and broadband
communications industries. Although near-term concerns hurt the stock,
we held on because long-term prospects remained strong. Another
acquisition was Sony, whose stock price seemed cheap given the
company's assets, new video game offerings, and restructuring efforts.
Between July when we bought it and year end, the stock price doubled.
Buys and sells
In the telecommunications sector, we trimmed our stake in regional Bell
operating companies and bought competitive local exchange carriers
(CLECs) -- like Level 3 Communications -- which had tumbled during the
summer. We expect the CLECs to do well as they siphon customers away
from the regional Bells onto their networks. We also sold our stake in
Anheuser-Busch, which had appreciated nicely, and redeployed the assets
into Fort James Corp., a paper company that stands to benefit from
tight industry capacity. As prospects clouded for drug stocks like
Monsanto and Schering-Plough, we sold or cut back. We also took some
profits in QUALCOMM to focus on software names like Parametric
Technology and J.D. Edwards. Another recent purchase was Seagate
Technology, a disk drive maker with strong prospects.
"Volatility,
however,
offers
bargain-
hunters like
us great
opportunities
to buy..."
Optimism ahead
Going forward, we're optimistic that we'll continue to find more buying
opportunities like these. We believe the stock market will remain
volatile in the coming year, especially as investors wait to see what
will happen with interest rates and inflation. Volatility, however,
offers bargain-hunters like us great opportunities to buy leading
businesses at prices that make a lot of sense.
- -----------------------------------------------------------------------------
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.
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 Large Cap Value Fund.
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming that 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 December 31, 1999
ONE FIVE TEN
YEAR YEARS YEARS
------- ------- -------
Cumulative Total Returns 30.99% 247.02% 386.70%
Average Annual Total Returns(1) 30.99% 28.25% 17.15%
CLASS B
For the period ended December 31, 1999
SINCE
ONE FIVE INCEPTION
YEAR YEARS (8/22/91)
------- ------- -------
Cumulative Total Returns 31.95% 250.26% 304.88%
Average Annual Total Returns(1) 31.95% 28.49% 18.21%
CLASS C
For the period ended December 31, 1999
SINCE
ONE INCEPTION
YEAR (5/1/98)
------- -------
Cumulative Total Returns 35.94% 38.07%
Average Annual Total Returns(1) 35.94% 21.33%
Note to Performance
(1) The Adviser agreed to a one-time fee reduction of $150,000 for the
fiscal year ended 1998 only. Without the limitation of expenses the
effect on the average annual total returns would have been less than
0.01%.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Large Cap Value 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 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index. Past performance does not indicate future
results.
Line chart with the heading John Hancock Large Cap Value 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 Index
and is equal to $53,205 as of December 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made
in the John Hancock Large Cap Value Fund on December 31, 1989,
before sales charge, and is equal to $51,209 as of December 31,
1999. The third line represents the value of the same hypothetical
investment made in the John Hancock Large Cap Value Fund, after
sales charge, and is equal to $48,649 as of December 31, 1999.
Line chart with the heading John Hancock Large Cap Value Fund
Class B*, 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 Standard & Poor's 500 Index
and is equal to $45,933 as of December 31, 1999. The second line
represents the value of the hypothetical $10,000 investment made
in the John Hancock Large Cap Value Fund on August 22, 1991,
before sales charge, and is equal to $40,488 as of December 31,
1999.
Line chart with the heading John Hancock Large Cap Value Fund
Class C*, 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 hypothetical
$10,000 investment made in the John Hancock Large Cap Value Fund
on May 1, 1998, before sales charge, and is equal to $13,522 as of
December 31, 1999. The second line represents the Standard & Poor's
500 Index and is equal to $13,807 as of December 31, 1999.
*No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds -- Large Cap Value Fund
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and
shows the value of what the Fund owns, is due and owes on December 31,
1999. 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, 1999
- --------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $1,024,185,096) $1,380,041,605
Bonds (cost - $4,393,614) 4,270,000
--------------
1,384,311,605
Receivable for investments sold 30,719,334
Receivable for shares sold 836,715
Dividends receivable 995,981
Interest receivable 59,315
Other assets 81,452
--------------
Total Assets 1,417,004,402
--------------
Liabilities:
Due to custodian 4,793,004
Payable for investments purchased 25,250,139
Payable for forward foreign
currency contracts bought - Note A 24,011
Payable for forward foreign
currency contracts sold - Note A 31,360
Payable for shares repurchased 504,621
Payable to John Hancock Advisers,
Inc. and affiliates - Note B 1,008,844
Accounts payable and accrued
expenses 182,564
--------------
Total Liabilities 31,794,543
--------------
Net Assets:
Capital paid-in 899,158,145
Accumulated net realized gain on
investments and foreign currency
transactions 130,656,173
Net unrealized appreciation of
investments and foreign currency
transactions 355,677,935
Distributions in excess of net
investment income (282,394)
--------------
Net Assets $1,385,209,859
==============
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 - $604,214,452/22,358,903 $27.02
====================================================================
Class B - $768,321,607/28,677,105 $26.79
====================================================================
Class C - $12,673,800/473,052 $26.79
====================================================================
Maximum Offering Price Per Share*
Class A - ($27.02 x 105.26%) $28.44
====================================================================
* 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.
</TABLE>
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.
<TABLE>
<CAPTION>
Statement of Operations
Year ended December 31, 1999
- --------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign
withholding taxes of $38,744) $10,898,142
Interest (including income on
securities loaned of $51,303) 5,955,678
--------------
16,853,820
--------------
Expenses:
Investment management fee - Note B 6,705,736
Distribution and service fee - Note B
Class A 1,156,558
Class B 5,778,346
Class C 78,888
Transfer agent fee - Note B 2,339,610
Custodian fee 272,281
Accounting and legal services fee - Note B 191,215
Registration and filing fees 140,740
Trustees' fees 58,897
Auditing fee 52,000
Printing 50,765
Miscellaneous 50,365
Legal fees 10,977
--------------
Total Expenses 16,886,378
--------------
Net Investment Loss (32,558)
--------------
Realized and Unrealized Gain (Loss) on Investments
and Foreign Currency Transactions:
Net realized gain on investments sold 231,294,446
Net realized loss on foreign
currency transactions (337,774)
Change in net unrealized appreciation/depreciation
of investments 138,773,317
Change in net unrealized appreciation/depreciation
of foreign currency transactions 14,688
--------------
Net Realized and Unrealized Gain
on Investments and Foreign
Currency Transactions 369,744,677
--------------
Net Increase in Net Assets
Resulting from Operations $369,712,119
==============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1999
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $3,221,938 ($32,558)
Net realized gain on investments
sold, financial futures contracts
and foreign currency transactions 44,851,665 230,956,672
Change in net unrealized
appreciation/depreciation of investments 64,038,473 138,788,005
-------------- --------------
Net Increase in Net Assets
Resulting from Operations 112,112,076 369,712,119
-------------- --------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.1410 and $0.0002 per
share, respectively) (2,610,127) (3,419)
Class B - ($0.0250 and $0.0002 per
share, respectively) (602,073) (4,452)
Class C** - ($0.0224 and $0.0002
per share, respectively) (4,251) (58)
Distributions from net realized gain
on investments sold
Class A - ($0.9336 and $2.1269 per
share, respectively) (17,816,814) (43,294,412)
Class B - ($0.9336 and $2.0887 per
share, respectively) (23,024,612) (55,110,560)
Class C** - ($0.9336 and $2.0871
per share, respectively) (192,691) (873,654)
-------------- --------------
Total Distributions to Shareholders (44,250,568) (99,286,555)
-------------- --------------
From Fund Share Transactions - Net:* 262,365,255 140,910,422
-------------- --------------
Net Assets:
Beginning of period 643,647,110 973,873,873
-------------- --------------
End of period (including
undistributed net investment
income of $6,483 and distributions
in excess of net investment income
of $282,394, respectively) $973,873,873 $1,385,209,859
============== ==============
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 and foreign
currency 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.
<CAPTION>
Statement of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1999
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 10,256,114 $212,230,572 6,529,174 $151,727,840
Shares issued to shareholders in
reinvestment of distributions 912,189 18,363,770 1,584,158 39,668,188
-------------- -------------- -------------- --------------
11,168,303 230,594,342 8,113,332 191,396,028
Less shares repurchased (7,052,875) (144,843,808) (5,567,614) (127,261,700)
-------------- -------------- -------------- --------------
Net increase 4,115,428 $85,750,534 2,545,718 $64,134,328
============== ============== ============== ==============
CLASS B
Shares sold 13,511,072 $280,419,339 9,104,419 $209,079,703
Shares issued to shareholders in
reinvestment of distributions 1,027,830 20,598,337 1,854,608 46,293,850
-------------- -------------- -------------- --------------
14,538,902 301,017,676 10,959,027 255,373,553
Less shares repurchased (6,320,416) (129,060,866) (8,125,995) (184,413,918)
-------------- -------------- -------------- --------------
Net increase 8,218,486 $171,956,810 2,833,032 $70,959,635
============== ============== ============== ==============
CLASS C**
Shares sold 234,157 $4,901,912 325,611 $7,485,200
Shares issued to shareholders in
reinvestment of distributions 8,695 174,231 30,352 757,525
-------------- -------------- -------------- --------------
242,852 5,076,143 355,963 8,242,725
Less shares repurchased (20,674) (418,232) (105,089) (2,426,266)
-------------- -------------- -------------- --------------
Net increase 222,178 $4,657,911 250,874 $5,816,459
============== ============== ============== ==============
** Class C shares commenced operations on May 1, 1998.
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:
- ---------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED SEPTEMBER 1,
AUGUST 31, 1996 TO YEAR ENDED DECEMBER 31,
-------------------- DECEMBER 31, ----------------------------------------
1995(3) 1996 1996(6) 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Per Share Operating Performance
Net Asset Value, Beginning of Period $11.42 $13.38 $15.07 $15.62 $19.32 $21.26
-------- -------- -------- -------- -------- --------
Net Investment Income(1) 0.21 0.19 0.05 0.12 0.16 0.09(10)
Net Realized and Unrealized Gain on
Investments, Financial Futures Contracts
and Foreign Currency Transactions 1.95 1.84 2.15 5.57 2.85 7.80
-------- -------- -------- -------- -------- --------
Total from Investment Operations 2.16 2.03 2.20 5.69 3.01 7.89
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.20) (0.19) (0.08) (0.07) (0.14) --
Distributions from Net Realized Gain on
Investments Sold -- (0.15) (1.57) (1.92) (0.93) (2.13)
-------- -------- -------- -------- -------- --------
Total Distributions (0.20) (0.34) (1.65) (1.99) (1.07) (2.13)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $13.38 $15.07 $15.62 $19.32 $21.26 $27.02
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset
Value(2) 19.22% 15.33% 14.53%(4) 36.71% 15.94% 37.89%
Total Adjusted Investment Return at Net
Asset Value(2,9) -- -- -- -- 15.92% --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $130,183 $139,548 $163,154 $303,313 $421,218 $604,214
Ratio of Expenses to Average Net Assets 1.30% 1.17% 1.22%(5) 1.12% 1.16%(8) 1.17%
Ratio of Net Investment Income to Average
Net Assets 1.82% 1.28% 0.85%(5) 0.65% 0.79%(8) 0.40%
Portfolio Turnover Rate 99% 74% 26% 102%(7) 64% 113%
<CAPTION>
Financial Highlights (continued)
- ---------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED SEPTEMBER 1,
AUGUST 31, 1996 TO YEAR ENDED DECEMBER 31,
-------------------- DECEMBER 31, ----------------------------------------
1995(3) 1996 1996(6) 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning of Period $11.44 $13.41 $15.10 $15.66 $19.31 $21.20
-------- -------- -------- -------- -------- --------
Net Investment Income (Loss)(1) 0.13 0.08 0.01 (0.02) 0.01 (0.07)
Net Realized and Unrealized Gain on
Investments, Financial Futures Contracts
and Foreign Currency Transactions 1.96 1.85 2.14 5.60 2.84 7.75
-------- -------- -------- -------- -------- --------
Total from Investment Operations 2.09 1.93 2.15 5.58 2.85 7.68
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.12) (0.09) (0.02) (0.01) (0.03) --
Distributions from Net Realized Gain on
Investments Sold -- (0.15) (1.57) (1.92) (0.93) (2.09)
-------- -------- -------- -------- -------- --------
Total Distributions (0.12) (0.24) (1.59) (1.93) (0.96) (2.09)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $13.41 $15.10 $15.66 $19.31 $21.20 $26.79
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset
Value(2) 18.41% 14.49% 14.15%(4) 35.80% 15.05% 36.95%
Total Adjusted Investment Return at Net
Asset Value(2,9) -- -- -- -- 15.03% --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $114,723 $125,781 $146,399 $340,334 $547,945 $768,322
Ratio of Expenses to Average Net Assets 2.03% 1.90% 1.98%(5) 1.87% 1.91%(8) 1.88%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.09% 0.55% 0.10%(5) (0.10%) 0.05%(8) (0.31%)
Portfolio Turnover Rate 99% 74% 26% 102%(7) 64% 113%
<CAPTION>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
PERIOD
FROM MAY 1, 1998 YEAR
(COMMENCEMENT OF ENDED
OPERATIONS) TO DECEMBER 31,
DECEMBER 31, 1998 1999
----------------- --------
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $22.03 $21.20
-------- --------
Net Investment Income (Loss)(1) 0.03 (0.09)
Net Realized and Unrealized Gain on
Investments, Financial Futures Contracts
and Foreign Currency Transactions 0.09 7.77
-------- --------
Total from Investment Operations 0.12 7.68
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.02) --
Distributions from Net Realized Gain on
Investments Sold (0.93) (2.09)
-------- --------
Total Distributions (0.95) (2.09)
-------- --------
Net Asset Value, End of Period $21.20 $26.79
======== ========
Total Investment Return at Net Asset Value(2) 0.83%(4) 36.94%
Total Adjusted Investment Return at Net
Asset Value(2, 9) 0.82%(4) --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $4,711 $12,674
Ratio of Expenses to Average Net Assets 1.92%(5,8) 1.92%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.28%(5,8) (0.40%)
Portfolio Turnover Rate 64% 113%
(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) On December 22, 1994, John Hancock Advisers, Inc. became the investment adviser of the Fund.
(4) Not annualized.
(5) Annualized.
(6) Effective December 31, 1996, the fiscal period end changed from August 31 to December 31.
(7) Portfolio turnover rate excludes merger activity.
(8) Reflects voluntary management fee reduction in effect during the
year ended December 31, 1998. As a result of such fee reductions, expenses
of Class A, Class B and Class C shares of the Fund reflect reductions of
less than $0.01 per share. Absent such reductions, the ratio of expenses
to average net assets would have been 1.18%, 1.93% and 1.94% for Class A,
Class B and Class C shares, respectively, and the ratio of net investment
income to average net assets would have been 0.77%, 0.03% and 0.26% for
Class A, Class B and Class C shares, respectively.
(9) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(10) Class A has net investment income, because of its relatively lower
class expenses as compared to other share classes.
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
December 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Large Cap Value Fund on December 31, 1999. It's divided into two
main categories: common stocks and bonds. The common stocks and bonds
are further broken down by industry groups.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- --------------
<S> <C> <C>
COMMON STOCKS
Automobile/Trucks (0.08%)
Tenneco Automotive, Inc. 120,000 $1,117,500
--------------
Banks - United States (2.21%)
Bank One Corp. 179,548 5,756,758
HomeFed Corp.* 39,615 34,663
TCF Financial Corp. 1,000,000 24,875,000
--------------
30,666,421
--------------
Business Services - Misc. (1.20%)
Cendant Corp.* 300,000 7,968,750
Sensormatic Electronics Corp.* 500,000 8,718,750
--------------
16,687,500
--------------
Computers (20.48%)
Cadence Design Systems, Inc.* 200,000 4,800,000
Comdisco, Inc. 200,000 7,450,000
Computer Associates International, Inc. 700,000 48,956,250
Edwards (J.D.) & Co.* 1,400,000 41,825,000
i2 Technologies, Inc.* 150,000 29,250,000
Integrated Systems, Inc.* 150,000 5,034,375
Parametric Technology Corp.* 2,260,000 61,161,250
Pathways Group, Inc. (The)* 36,000 85,500
Seagate Technology, Inc.* 300,000 13,968,750
Sterling Software, Inc. 600,000 18,900,000
SunGard Data Systems, Inc.* 437,200 10,383,500
Wind River Systems, Inc.* 1,143,400 41,877,025
--------------
283,691,650
--------------
Containers (0.61%)
Pactiv Corp.* 800,000 8,500,000
--------------
Electronics (21.35%)
Amphenol Corp. (Class A)* 407,950 27,154,172
Conexant Systems, Inc.* 586,000 38,895,750
Micro Linear Corp.* 20,000 171,250
Oak Industries, Inc. 1,150,000 122,043,750
Electronics (continued)
SCI Systems, Inc.* 400,000 32,875,000
Sony Corp. (Japan) 100,000 29,602,840
Tektronix, Inc. 450,000 17,493,750
Vicor Corp.* 677,550 27,440,775
--------------
295,677,287
--------------
Energy (0.48%)
Calpine Corp.* 102,900 6,585,600
--------------
Finance (3.05%)
Citigroup, Inc. 761,250 42,296,953
--------------
Food (0.15%)
Nabisco Group Holdings Corp. 200,000 2,125,000
--------------
Instruments - Scientific (2.34%)
Millipore Corp. 300,000 11,587,500
PerkinElmer, Inc. 500,000 20,843,750
--------------
32,431,250
--------------
Insurance (9.46%)
Ace, Ltd. (Bermuda) 2,935,600 48,987,825
Ambac Financial Group, Inc. 426,100 22,237,094
Financial Security Assurance Holdings, Ltd. 460,250 23,990,531
Mitsui Marine & Fire Insurance Co., Ltd. (Japan) 75,000 444,045
Radian Group, Inc. 40,000 1,910,000
XL Capital Ltd. (Class A) 644,368 33,426,590
--------------
130,996,085
--------------
Leisure (1.36%)
Ascent Entertainment Group, Inc.* 300,000 3,806,250
Galileo International, Inc. 500,000 14,968,750
--------------
18,775,000
--------------
Media (8.35%)
AT&T Corp. - Liberty Media Group (Class A)* 958,828 54,413,489
Central Newspapers, Inc. (Class A) 350,000 13,781,250
Harcourt General, Inc. 224,000 9,016,000
News Corp., Ltd., American Depositary
Receipt (ADR) (Australia) 370,000 14,152,500
Scripps (E.W.) Co. (The) (Class A) 542,200 24,297,338
--------------
115,660,577
--------------
Medical (1.55%)
DENTSPLY International, Inc. 163,000 3,850,875
Lilly (Eli) & Co. 100,000 6,650,000
Pharmacia & Upjohn, Inc. 185,000 8,325,000
Total Renal Care Holdings, Inc.* 400,000 2,675,000
--------------
21,500,875
--------------
Mortgage Banking (3.77%)
Fannie Mae 350,000 21,853,125
Freddie Mac 646,200 30,411,787
--------------
52,264,912
--------------
Oil & Gas (2.73%)
Alberta Energy Co. Ltd. (Canada) 130,108 4,074,007
Alberta Energy Co. Ltd. (Canada) # 461,711 14,315,904
Coastal Corp. (The) 34,000 1,204,875
Columbia Energy Group 16,500 1,043,625
EOG Resources, Inc. 975,000 17,123,438
--------------
37,761,849
--------------
Paper & Paper Products (1.37%)
Fort James Corp. 694,000 18,998,250
--------------
Protection - Safety Equip. & Svc. (0.14%)
Pittston Brink's Group 85,000 1,870,000
--------------
Retail (0.52%)
Neiman Marcus Group, Inc. (The) (Class B)* 267,491 7,205,539
--------------
Telecommunications (14.99%)
Alaska Communications Systems
Holdings, Inc.* 200,000 2,475,000
ANTEC Corp.* 2,146,670 78,353,455
Broadwing, Inc.* 85,000 3,134,375
Commonwealth Telephone Enterprises, Inc. 77,420 4,093,582
Level 3 Communications, Inc.* 120,500 9,865,937
MediaOne Group, Inc.* 400,000 30,725,000
QUALCOMM, Inc.* 380,000 66,927,500
Time Warner Telecom, Inc. (Class A)* 46,950 2,344,566
Viatel, Inc.* 180,000 9,652,500
--------------
207,571,915
--------------
Tobacco (0.48%)
Philip Morris Cos., Inc. 264,800 6,140,050
R.J. Reynolds Tobacco Holdings, Inc.* 32,500 572,812
--------------
6,712,862
--------------
Transport (1.82%)
CNF Transportation, Inc. 342,200 11,805,900
Northwest Airlines Corp.* 600,000 13,350,000
--------------
25,155,900
--------------
Utilities (1.14%)
ALLTEL Corp. 153,328 12,678,309
KeySpan Corp. 134,140 3,110,371
--------------
15,788,680
--------------
TOTAL COMMON STOCKS
(Cost $1,024,185,096) (99.63%) 1,380,041,605
-------------- --------------
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING** (000s OMITTED) VALUE
- ------------------- -------- ------- -------------- --------------
BONDS
Medical (0.31%)
Total Renal Care
Holdings, Inc.,
Conv Sub Note
05-15-09 (R) 7.00% B $7,000 4,270,000
--------------
TOTAL BONDS
(Cost $4,393,614) (0.31%) 4,270,000
-------------- --------------
TOTAL INVESTMENTS (99.94%) 1,384,311,605
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.06%) 898,254
-------------- --------------
TOTAL NET ASSETS (100.00%) $1,385,209,859
============== ==============
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service or John Hancock Advisers, Inc.
where Standard & Poor's ratings are not available.
(R) This security is exempt from registration under rule 144A of the
Securities Act of 1933. Such a security may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $4,270,000 or 0.31% of
net assets as of December 31, 1999.
# Shares outstanding of common stock is expressed in local currency, as
shown parenthetically in security description.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security
is U.S. dollar denominated.
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 - Large Cap Value 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 Large Cap
Value Fund (the "Fund"), John Hancock Balanced Fund and John Hancock
Sovereign Investors Fund. The other two series of the Trust are
reported in separate financial statements. Prior to May 1, 1999, the
Fund was known as John Hancock Growth and Income Fund and John Hancock
Balanced Fund was known as John Hancock Sovereign Balanced Fund. The
investment objective of the Fund is to obtain the highest total return,
a combination of capital appreciation and current income, consistent
with reasonable safety of capital.
The Trustees have authorized the issuance of multiple classes of shares
of the Fund, designated as Class A, 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 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 a
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 TAX 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. Additionally, net currency losses of
$300,785 attributable to security transactions incurred after October
31, 1999 are treated as arising on the first day (January 1, 2000) of
the Fund's next taxable year.
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.
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 sizes 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 year
ended December 31, 1999.
SECURITIES LENDING The Fund may lend its securities to certain
qualified brokers who pay the Fund negotiated lender fees. These fees
are included in interest income. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Fund may bear the risk of delay of the loaned securities in
recovery or even loss of rights in the collateral should the borrower
of the securities fail financially. At December 31, 1999, the Fund
loaned securities having a market value of $6,109,900 collateralized
by securities in the amount of $6,255,789.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial
futures contracts to hedge against the effects of fluctuations in
interest rates and other market conditions. Buying futures tends to
increase the Fund's exposure to the underlying instrument. Selling
futures tends to decrease the Fund's exposure to the underlying
instrument or hedge other Fund instruments. At the time the Fund enters
into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or U.S. government securities,
known as "initial margin," equal to a certain percentage of the value
of the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange on which it trades. Subsequent
payments, known as "variation margin," to and from the broker are made
on a daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this
"mark to market," are recorded by the Fund as unrealized gains or
losses.
When the contracts are closed, the Fund recognizes a gain or loss.
Risks of entering into futures contracts include the possibility that
there may be an illiquid market and/or that a change in the value of
the contract may not correlate with changes in the value of the
underlying securities. In addition, the Fund could be prevented from
opening or realizing the benefits of closing out futures positions
because of position limits or limits on daily price fluctuations
imposed by an exchange.
For federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures
contracts.
At December 31, 1999, there were no open positions in financial futures
contracts.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00 p.m.,
London time, on the date of any determination of the net asset value of
the Fund. Transactions affecting statement of operations accounts and
net realized gain/(loss) on investments are translated at the rates
prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the
trade and settlement dates on securities transactions and the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into
forward foreign currency exchange contracts as a hedge against the
effect of fluctuations in currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date at a set price. The aggregate
principal amounts of the contracts are marked to market daily at the
applicable foreign currency exchange rates. Any resulting unrealized
gains and losses are included in the determination of the Fund's daily
net assets. The Fund records realized gains and losses at the time the
forward foreign currency contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from potential
inability of counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets and
Liabilities. The Fund may also purchase and sell forward contracts to
facilitate the settlement of foreign currency denominated portfolio
transactions, under which it intends to take delivery of the foreign
currency. Such contracts normally involve no market risk if they are
offset by the currency amount of the underlying transaction.
Open foreign currency forward contracts sold at December 31, 1999, were
as follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT MONTH DEPRECIATION
- -------- ------------------- ---------- ------------
BUYS
Japanese Yen 198,771,709 MAR 00 ($24,011)
=======
SELLS
Japanese Yen 27,128,874 JAN 00 ($119)
Japanese Yen 258,827,182 MAR 00 (31,241)
-------
($31,360)
=======
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis to 0.625% 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 year
ended December 31, 1999, net sales charges received with regard to
sales of Class A shares amounted to $1,227,968. Out of this amount,
$122,914 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $735,041 was paid as sales
commissions to unrelated broker-dealers and $370,013 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 year ended December 31, 1999, contingent
deferred sales charges amounted to $1,515,980.
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 year ended December 31, 1999,
contingent deferred sales charges amounted to $9,602.
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 shares 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 and Class C average daily net assets to
reimburse JH Funds for its distribution and service costs. A maximum of
0.25% of such payments may be service fees as defined by the Conduct
Rules of the National Association of Securities Dealers. Under the
Conduct Rules, 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,
accounting and legal services for the Fund. The compensation for the
year was at an annual rate of less than 0.02% of the average net assets
of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford, 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 a periodic basis to reflect any income earned by the investment as
well as any unrealized gains or losses. The investment had no impact on
the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the year ended December 31, 1999, aggregated $1,261,303,428 and
$1,207,440,872, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the year
ended December 31, 1999.
The cost of investments owned at December 31, 1999 (excluding the
corporate savings account) for federal income tax purposes was
$1,031,961,779. Gross unrealized appreciation and depreciation of
investments aggregated $435,162,186 and $82,812,360, respectively,
resulting in net unrealized appreciation of $352,349,826.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended December 31, 1999, the Fund has reclassified
amounts to reflect a decrease in accumulated net realized gain on
investments and foreign currency transactions of $12,391,992, a
decrease in distributions in excess of net investment income of
$860,353, and an increase in capital paid-in of $11,531,639. This
represents the cumulative amount necessary to report these balances on
a tax basis, excluding certain temporary differences, as of December
31, 1999. Additional adjustments may be needed in subsequent reporting
periods. These reclassifications, which have no impact on the net asset
value of the Fund, are primarily attributable to the net realized loss
on foreign currency transactions in the computation of distributable
income and capital gains under federal tax rules versus generally
accepted accounting principles and the Fund's use of the tax accounting
practice known as equalization. The calculation of net investment
income per share in the financial highlights excludes these
adjustments.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Investment Trust --
John Hancock Large Cap Value Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the John Hancock Large Cap
Value Fund (the "Fund") (formerly John Hancock Growth and Income Fund),
one of the portfolios constituting the John Hancock Investment Trust,
including the schedule of investments as of December 31, 1999, 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 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 auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31,
1999, by correspondence with the custodian. 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 Large Cap Value Fund portfolio
of John Hancock Investment Trust at December 31, 1999, 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 the period then ended, in conformity with accounting
principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 10, 2000
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 December 31, 1999.
The Fund designated distributions of $55,197,532 as a long-term capital
gain dividend. This amount was reported on the 1999 U.S. Treasury
Department Form 1099-DIV.
With respect to the ordinary dividends paid by the Fund for the fiscal
year ended December 31, 1999, 9.01% of the dividends qualify for the
corporate dividends received deduction.
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This report is for the information of shareholders of the John Hancock
Large Cap Value Fund. It may be used as sales literature when preceded or
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objectives and operating policies.
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5000A 12/99
2/00
