The latest report from your
Fund's management team
SEMIANNUAL REPORT
Sovereign
Investors Fund
JUNE 30, 2000
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
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, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
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
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President
and Chief Executive Officer, flush right next to second
paragraph.]
DEAR FELLOW SHAREHOLDERS:
After four years of spectacular returns, the stock market succumbed in
the first six months of 2000 largely to the pressures of rising interest
rates, as the Federal Reserve kept up its campaign to fight inflation.
The red-hot economy has begun to show signs of slowing, and investors
are no longer blind to the real possibility that rising rates could slow
corporate profits. The result was flat-to-negative results for the three
main stock-market indexes through June. Bonds also suffered during this
period, since their prices generally move in the opposite direction of
rates.
But there was good news, too. The Treasury market, where shrinking
supply bolstered prices thanks to the government's efforts to retire
some of its debt, performed well. And the Fed appears closer to the end
of its tightening cycle, which will be a strong positive if it can slow
the economy to a level that supports corporate earnings growth but keeps
inflation at bay. The picture on the global economy is brighter and
technology continues to dominate as the driver of ever-improving
corporate productivity.
No matter what happens next in the financial markets, these past several
months only served to reinforce some of the important lessons for
investors: Diversify, invest in line with your tolerance for risk and
maintain a long-term perspective.
Since not all parts of your portfolio will perform equally well all the
time, it is important to allocate your assets among different types of
investments and funds that target a variety of stock- and bond-market
segments. This strategy, executed under the guidance of a seasoned
investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing
conditions.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY JOHN F. SNYDER, III, PORTFOLIO MANAGEMENT TEAM LEADER, AND BARRY H.
EVANS, CFA, AND PETER M. SCHOFIELD, PORTFOLIO MANAGERS
[A 2" 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
A volatile market produces mixed returns
The first half of 2000 was marked by two distinct periods of
stock-market performance. In the first quarter of the year, the market
continued where it left off last year. A narrow group of "new economy"
stocks, led primarily by high-flying technology stocks, fueled an
unprecedented surge in the market.
In the second quarter, however, the tide turned. With technology
valuations stretched beyond reason, the disparity between technology and
other market sectors exceeded any rational explanation. So it wasn't
surprising when tech stocks started to tumble in the second quarter.
With the Fed's interest-rate hikes sparking concerns about a slower
economy, the market started to broaden out and investors began to
gravitate to more stable companies with more reasonable valuations.
Blue-chip and "old economy" companies -- whose businesses had been
strong, but whose stocks had languished -- suddenly came back into
favor.
"The first half
of 2000 was
marked by
two distinct
periods of
stock market
performance."
Understanding performance
Like the stock market, John Hancock Sovereign Investors Fund also
experienced two distinct periods of performance in the first half of the
year. During the first quarter's technology-driven market, the Fund
lagged its competitors due to its lack of technology holdings. With the
market shift in the second quarter, however, the Fund began to outpace
its peer group. As value-oriented stocks rebounded, so did many of the
stocks in our investment universe, including steady consumer staple
stocks like PepsiCo, and health-care names like Baxter International and
Abbott Laboratories. Consumer cyclical stocks like Lowe's, Home Depot
and Target, on the other hand, were hurt by fears that a slowing economy
would curb spending. The Fund's strong second-quarter performance wasn't
enough to make up for the first-quarter disappointment and prevented us
from keeping up with our peers.
[Table at top left hand column entitled "Top Five Common Stock
Holdings." The first listing is Johnson & Johnson 3.1%, the second
is McGraw-Hill 3.0%, the third PepsiCo 2.7%, the fourth Baxter
International 2.7% and the fifth General Electric 2.7%. A note
below the table reads "As a percentage of net assets on June 30,
2000."]
"As of July 1,
the Fund is
able to
invest up to
35% of its
stocks in
non-dividend
performers."
Performance scorecard
For the six months ended June 30, 2000, John Hancock Sovereign Investors
Fund's Class A, Class B, Class C and Class Y shares returned -4.50%,
-4.88%, -4.88% and -4.36%, respectively, at net asset value. By
comparison, the average large-cap value fund returned -1.64% for the
same period, according to Lipper, Inc.1 (Lipper has introduced new
competitive categories that more accurately reflect the average
portfolio holdings of the funds they track.) Keep in mind that your net
asset value return will be different from the Fund's performance if you
were not invested in the Fund for the entire period and did not reinvest
all distributions. See pages six and seven for historical performance
information.
[Table at bottom of left hand column entitled "Scorecard". The
header for the left column is "Investment" and the header for the
right column is "Recent Performance...and What's Behind the
Numbers". The first listing is Bestfoods followed by an up arrow
with the phrase "Acquired by Unilever." The second listing is
Baxter International followed by an up arrow with the phrase
"Benefited from market shift to health-care stocks." The third
listing is Honeywell International followed by a down arrow with
the phrase "Difficulties integrating recent merger." A note below
the table reads "See 'Schedule of Investments.' Investment
holdings are subject to change."]
Enhancing the investment flexibility
The Fund's Board of Trustees recently approved an amendment that we
believe will enhance the Fund's investment flexibility. As long-time
shareholders know, the Fund has invested 100% of its stock investments
in what we call "dividend performers"-- companies that have increased
their dividends for at least ten consecutive years. As of July 1, the
Fund is able to invest up to 35% of its stocks in non-dividend
performers.
The reason for this modification is simple. Historically, companies have
been measured largely on their ability to consistently produce and
increase dividends. Today, however, many companies have different views
on the importance of dividends as a measure of corporate health. In
fact, the number of companies that raise their dividends year after year
is shrinking. Instead of paying for dividend increases, many companies
are using cash flow to reinvest in their businesses through stock
buybacks, acquisitions or restructurings. The rising-dividend
requirement that made so much sense in 1979 and has served shareholders
so well is still valid. However, as the market has evolved, blind
adherence to it would threaten our ability to deliver returns.
[Bar chart at top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six
months ended June 30, 2000." The chart is scaled in increments of
1% with -5% at the bottom and 0% at the top. The first bar
represents the -4.50% total return for John Hancock Sovereign
Investors Fund Class A. The second bar represents the -4.88% total
return for John Hancock Sovereign Investors Fund Class B. The
third bar represents the -4.88% total return for John Hancock
Sovereign Investors Fund Class C. The fourth bar represents the
-4.36% total return for John Hancock Sovereign Investors Fund Class
Y. The fifth bar represents the -1.64% total return for Average
large-cap value 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 large-cap value
fund is tracked by Lipper, Inc.1 See the following two pages for
historical performance information"]
John Hancock Sovereign Investors Fund has a rich history of delivering
consistent returns with a relatively risk-averse investment strategy. We
want to stress that this modification will not change the Fund's
fundamental objective. However, it will give us the flexibility to keep
the stocks we like even if their rising-dividend pattern is interrupted.
Under the previous policy, not only would we have to sell a company once
it broke its rising-dividend pattern, but we couldn't even consider it
again until it had another ten consecutive years of rising dividends. In
addition, we will now have the opportunity to consider a broader
universe of attractive companies that fit our fundamental criteria --
strong management, financial soundness, stable earnings and
profitability, brand-name recognition and reasonable valuations -- even
if they do not meet our ten-year rising dividend test.
A look ahead
In our view, this update is both practical and prudent. Over the long
term, the enhanced flexibility will give us -- and our shareholders -- a
better ability to take advantage of opportunities in today's market. In
the second half of the year, we will gradually begin to look for
opportunities to add non-dividend performer stocks to the portfolio. Of
course, we will look across all sectors to find the best investments.
Given the Fund's historical underweighting in technology, however, this
is one sector we will focus on. We want to stress that even though we
will buy some non-dividend performer stocks in the technology sector,
they will still meet our stringent criteria of being established
companies with a history of stable earnings and reasonable valuations.
"...we do
believe that
the market
will continue
to broaden
out."
On the macro level, we're optimistic about the market's prospects for
the remainder of the year. One of the big questions weighing on
investors is how much more the Fed will raise interest rates and what
the effect will be on the economy. We've already started to see economic
growth taper off from its extremely high levels and inflation remains
relatively benign. Given that, we're anticipating more modest rate
increases, if any, over next several months.
While investors will continue to buy technology stocks, we do believe
that the market will continue to broaden out. As it does, stock
selectivity will become even more critical. It will be important to own
those companies with solid earnings and reasonable valuations. In our
opinion, these are the companies with the strongest upside potential.
------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. Of course, the
managers' views are subject to change as market and other conditions
warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock Sovereign Investors
Fund. Total return measures the change in value of an investment from
the beginning to the end of a period, assuming all distributions were
reinvested.
For Class A shares, total return figures include an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 1% and declining to 0%
after one year).
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.
CLASS A
For the period ended June 30, 2000
ONE FIVE TEN
YEAR YEARS YEARS
----- ----- -----
Cumulative Total Returns (9.19%) 89.28% 215.60%
Average Annual Total Returns (9.19%) 13.61% 12.18%
CLASS B
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (1/3/94)
----- ----- ---------
Cumulative Total Returns (9.68%) 89.88% 115.57%
Average Annual Total Returns (9.68%) 13.68% 12.57%
CLASS C
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (5/1/98)
----- ----------
Cumulative Total Returns (6.98%) 4.16%
Average Annual Total Returns (6.98%) 1.90%
CLASS Y
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (5/7/93)
----- ----- ---------
Cumulative Total Returns (4.08%) 102.85% 142.10%
Average Annual Total Returns (4.08%) 15.20% 13.17%
YIELDS
As of June 30, 2000
SEC 30-DAY
YIELD
----------
John Hancock
Sovereign Investors Fund: Class A 1.59%
John Hancock
Sovereign Investors Fund: Class B 0.96%
John Hancock
Sovereign Investors Fund: Class C 0.96%
John Hancock
Sovereign Investors Fund: Class Y 2.04%
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.
Line chart with the heading John Hancock Sovereign Investors Fund
Class A, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are three
lines. The first line represents the Standard & Poor's 500 Index
and is equal to $52,978 as of June 30, 2000. 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 $34,810 as of June 30, 2000.
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 $33,077 as of June 30, 2000.
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. 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. It is not possible to invest in an index. Past performance is
not indicative of future results.
Class B* Class C* Class Y
-------- -------- -------
Inception Date 1/3/94 5/1/98 5/7/93
Without Sales Charge $21,567 $10,522 $24,208
With Maximum Sales Charge N/A $10,095 N/A
Standard & Poor's
500 Index $35,405 $13,464 $38,261
*No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value -- Note C:
Common and preferred stocks
(cost -- $1,324,331,493) $1,898,039,865
Corporate bonds (cost -- $112,818,772) 107,240,591
U.S. government and agencies
obligations (cost -- $113,831,820) 113,375,644
Joint repurchase agreement
(cost -- $82,054,000) 82,054,000
Corporate savings account 540
-----------------
2,200,710,640
Receivable for shares sold 323,191
Dividends receivable 1,967,077
Interest receivable 6,111,702
Other assets 256,921
-----------------
Total Assets 2,209,369,531
--------------------------------------------------------------
Liabilities:
Payable for shares repurchased 1,173,681
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 3,714,262
Accounts payable and accrued expenses 130,701
-----------------
Total Liabilities 5,018,644
--------------------------------------------------------------
Net Assets:
Capital paid-in 1,442,699,291
Accumulated net realized gain on
investments 194,028,283
Net unrealized appreciation of
investments 567,674,015
Distributions in excess of net
investment income (50,702)
-----------------
Net Assets $2,204,350,887
==============================================================
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 -- $1,459,644,924/62,819,250 $23.24
==============================================================
Class B -- $664,783,492/28,648,685 $23.20
==============================================================
Class C -- $11,237,148/483,860 $23.22
==============================================================
Class Y -- $68,685,323/2,955,303 $23.24
==============================================================
Maximum Offering Price Per Share
Class A* -- ($23.24/0.95) $24.46
==============================================================
Class C -- ($23.22/0.99) $23.45
==============================================================
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and
shows the value of what the Fund owns, is due and owes on June 30,
2000. You'll also find the net asset value and the maximum offering
price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $58,170) $19,413,791
Interest (including income on
securities loaned of $34) 9,245,280
-----------------
28,659,071
-----------------
Expenses:
Investment management fee -- Note B 6,335,448
Distribution and service fee -- Note B
Class A 2,300,450
Class B 3,493,613
Class C 50,881
Transfer agent fee -- Note B 1,999,592
Accounting and legal services fee --
Note B 208,307
Custodian fee 190,225
Miscellaneous 60,996
Registration and filing fees 60,664
Trustees' fees 54,465
Printing 50,057
Auditing fee 25,541
Legal fees 13,053
-----------------
Total Expenses 14,843,292
--------------------------------------------------------------
Net Investment Income 13,815,779
--------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments sold 151,611,395
Change in net unrealized
appreciation/depreciation of
investments (303,544,379)
-----------------
Net Realized and Unrealized Loss on
Investments (151,932,984)
--------------------------------------------------------------
Net Decrease in Net Assets Resulting
from Operations ($138,117,205)
==============================================================
The Statement of Operations summarizes the Fund's investment income
earned and expenses incurred in operating the Fund. It also shows net
gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $27,805,088 $13,815,779
Net realized gain on investments sold 116,748,448 151,611,395
Change in net unrealized
appreciation/depreciation of
investments 6,916,212 (303,544,379)
----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 151,469,748 (138,117,205)
----------------- -----------------
Distributions to Shareholders:
Dividends from net investment income
Class A -- ($0.3448 and $0.1647 per share, respectively) (25,565,939) (10,564,128)
Class B -- ($0.1794 and $0.0843 per share, respectively) (5,952,636) (2,459,459)
Class C -- ($0.1720 and $0.0843 per share, respectively) (56,041) (38,643)
Class Y -- ($0.4348 and $0.2083 per share, respectively) (1,316,163) (618,300)
Distributions in excess of net investment income
Class A -- ($0.0003 and none per share, respectively) (18,738) --
Class B -- ($0.0003 and none per share, respectively) (8,853) --
Class C -- ($0.0003 and none per share, respectively) (103) --
Class Y -- ($0.0003 and none per share, respectively) (892) --
Distributions from net realized gain on investments sold
Class A -- ($0.7751 and none per share, respectively) (55,419,777) --
Class B -- ($0.7751 and none per share, respectively) (25,447,168) --
Class C -- ($0.7751 and none per share, respectively) (320,119) --
Class Y -- ($0.7751 and none per share, respectively) (2,401,749) --
----------------- -----------------
Total Distributions to Shareholders (116,508,178) (13,680,530)
----------------- -----------------
From Fund Share Transactions -- Net: * (80,984,529) (339,541,264)
----------------- -----------------
Net Assets:
Beginning of period 2,741,712,845 2,695,689,886
----------------- -----------------
End of period (including
distributions in excess of net
investment income of $185,951 and
$50,702, respectively) $2,695,689,886 $2,204,350,887
================= =================
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:
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 6,324,255 $155,570,497 2,465,799 $57,059,288
Shares issued to shareholders in
reinvestment of distributions 3,136,682 75,415,162 423,591 9,732,679
----------------- ----------------- ----------------- -----------------
9,460,937 230,985,659 2,889,390 66,791,967
Less shares repurchased (14,303,362) (351,723,205) (12,992,981) (294,249,095)
----------------- ----------------- ----------------- -----------------
Net decrease (4,842,425) ($120,737,546) (10,103,591) ($227,457,128)
================= ================= ================= =================
CLASS B
Shares sold 6,969,993 $170,815,262 1,901,762 $43,791,388
Shares issued to shareholders in
reinvestment of distributions 1,220,160 29,269,718 100,554 2,312,133
----------------- ----------------- ----------------- -----------------
8,190,153 200,084,980 2,002,316 46,103,521
Less shares repurchased (7,369,818) (180,972,878) (6,829,949) (154,401,106)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 820,335 $19,112,102 (4,827,633) ($108,297,585)
================= ================= ================= =================
CLASS C
Shares sold 296,415 $7,281,730 160,106 $3,723,789
Shares issued to shareholders in
reinvestment of distributions 14,462 347,040 1,584 36,530
----------------- ----------------- ----------------- -----------------
310,877 7,628,770 161,690 3,760,319
Less shares repurchased (69,649) (1,703,515) (110,111) (2,502,680)
----------------- ----------------- ----------------- -----------------
Net increase 241,228 $5,925,255 51,579 $1,257,639
================= ================= ================= =================
CLASS Y
Shares sold 756,168 $18,508,744 176,781 $4,082,803
Shares issued to shareholders in
reinvestment of distributions 154,590 3,718,807 26,914 618,300
----------------- ----------------- ----------------- -----------------
910,758 22,227,551 203,695 4,701,103
Less shares repurchased (304,117) (7,511,891) (427,214) (9,745,293)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 606,641 $14,715,660 (223,519) ($5,044,190)
================= ================= ================= =================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
-----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------------------- JUNE 30, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <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 $24.51
---------- ---------- ---------- ---------- ---------- ----------
Net Investment Income 0.40 0.36(1) 0.32(1) 0.31(1) 0.30(1) 0.16(1)
Net Realized and Unrealized
Gain (Loss) on Investments 3.71 2.77 5.31 3.11 1.11 (1.27)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations 4.11 3.13 5.63 3.42 1.41 (1.11)
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net
Investment Income (0.40) (0.36) (0.32) (0.31) (0.35) (0.16)
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) (0.16)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $17.87 $19.48 $22.41 $24.23 $24.51 $23.24
========== ========== ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(2) 29.15% 17.57% 29.14% 15.62% 5.91% (4.50%)(3)
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 $1,459,645
Ratio of Expenses to Average
Net Assets 1.14% 1.13% 1.06% 1.03% 1.05% 1.08%(4)
Ratio of Net Investment
Income to Average Net
Assets 2.45% 1.86% 1.44% 1.33% 1.21% 1.40%(4)
Portfolio Turnover Rate 46% 59% 62% 51% 64% 22%
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, SIX MONTHS ENDED
----------------------------------------------------------------- JUNE 30, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
--------- --------- --------- --------- --------- -------------
<S> <C> <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 $24.48
--------- --------- --------- --------- --------- -------------
Net Investment Income(1) 0.27 0.21 0.16 0.14 0.13 0.08
Net Realized and Unrealized
Gain (Loss) on Investments 3.71 2.77 5.29 3.11 1.11 (1.28)
--------- --------- --------- --------- --------- -------------
Total from Investment Operations 3.98 2.98 5.45 3.25 1.24 (1.20)
--------- --------- --------- --------- --------- -------------
Less Distributions:
Dividends from Net Investment
Income (0.28) (0.22) (0.15) (0.14) (0.18) (0.08)
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) (0.08)
--------- --------- --------- --------- --------- -------------
Net Asset Value, End of
Period $17.86 $19.46 $22.38 $24.20 $24.48 $23.20
========= ========= ========= ========= ========= =============
Total Investment Return at
Net Asset Value(2) 28.16% 16.67% 28.14% 14.79% 5.20% (4.88%)(3)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $257,781 $406,523 $610,976 $790,277 $819,537 $664,783
Ratio of Expenses to Average
Net Assets 1.90% 1.91% 1.83% 1.79% 1.73% 1.78%(4)
Ratio of Net Investment
Income to Average Net
Assets 1.65% 1.10% 0.67% 0.58% 0.54% 0.70%(4)
Portfolio Turnover Rate 46% 59% 62% 51% 64% 22%
<CAPTION>
Financial Highlights (continued)
--------------------------------------------------------------------------------------------------------------------
YEAR
ENDED SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30, 2000
1998(5) DECEMBER 31 1999 (UNAUDITED)
------------- ---------------- -------------
<S> <C> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $24.43 $24.22 $24.50
------------- ------------- -------------
Net Investment Income(1) 0.13 0.13 0.08
Net Realized and Unrealized
Gain (Loss) on Investments 1.07 1.10 (1.28)
------------- ------------- -------------
Total from Investment Operations 1.20 1.23 (1.20)
------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.12) (0.17) (0.08)
Distributions from
Net Realized Gain
on Investments Sold (1.29) (0.78) --
------------- ------------- -------------
Total Distributions (1.41) (0.95) (0.08)
------------- ------------- -------------
Net Asset Value, End of
Period $24.22 $24.50 $23.22
============= ============= =============
Total Investment Return at
Net Asset Value(2) 5.18%(3) 5.17% (4.88%)(3)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $4,627 $10,591 $11,237
Ratio of Expenses to Average
Net Assets 1.67%(4) 1.75% 1.78%(4)
Ratio of Net Investment
Income to Average Net
Assets 0.84%(4) 0.51% 0.73%(4)
Portfolio Turnover Rate 51% 64% 22%
<CAPTION>
Financial Highlights (continued)
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------------------------------------------------- JUNE 30, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
--------- --------- --------- --------- --------- -------------
<S> <C> <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 $24.52
--------- --------- --------- --------- --------- -------------
Net Investment Income 0.46 0.44(1) 0.41(1) 0.40(1) 0.39(1) 0.20(1)
Net Realized and Unrealized
Gain (Loss) on Investments 3.71 2.76 5.30 3.11 1.11 (1.27)
--------- --------- --------- --------- --------- -------------
Total from Investment Operations 4.17 3.20 5.71 3.51 1.50 (1.07)
--------- --------- --------- --------- --------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.46) (0.43) (0.40) (0.39) (0.44) (0.21)
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) (0.21)
--------- --------- --------- --------- --------- -------------
Net Asset Value, End of
Period $17.87 $19.48 $22.41 $24.24 $24.52 $23.24
========= ========= ========= ========= ========= =============
Total Investment Return at
Net Asset Value(2) 29.68% 17.99% 29.60% 16.05% 6.30% (4.36%)(3)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $19,946 $29,431 $48,256 $62,349 $77,946 $68,685
Ratio of Expenses to Average
Net Assets 0.74% 0.75% 0.71% 0.69% 0.69% 0.71%(4)
Ratio of Net Investment
Income to Average Net
Assets 2.84% 2.26% 1.79% 1.67% 1.58% 1.78%(4)
Portfolio Turnover Rate 46% 59% 62% 51% 64% 22%
(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) Class C shares began operations on May 1, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Sovereign Investors Fund on June 30, 2000. 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 and preferred stocks and bonds are further broken down by
industry group. Short-term investments, which represent the Fund's
"cash" position, are listed last.
NUMBER MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
------------------- --------- ------------
<S> <C> <C>
COMMON STOCKS
Advertising (2.20%)
Interpublic Group of Cos., Inc. (The) 1,127,000 $48,461,000
------------
Banks -- United States (3.17%)
Bank of America Corp. 850,000 36,550,000
Firstar Corp. 300,000 6,318,750
Wells Fargo Co. 700,000 27,125,000
------------
69,993,750
------------
Beverages (4.26%)
Anheuser-Busch Cos., Inc. 300,000 22,406,250
Coca-Cola Co. (The) 200,000 11,487,500
PepsiCo, Inc. 1,350,000 59,990,625
------------
93,884,375
------------
Chemicals (1.15%)
Air Products & Chemicals, Inc. 600,000 18,487,500
Rohm & Haas Co. 200,000 6,900,000
------------
25,387,500
------------
Computers (2.14%)
Automatic Data Processing, Inc. 530,000 28,388,125
Hewlett-Packard Co. 150,000 18,731,250
------------
47,119,375
------------
Containers (1.44%)
Bemis Co., Inc. 947,000 31,842,875
------------
Diversified Operations (4.20%)
Du Pont (E.I.) De Nemours & Co. 250,000 10,937,500
Honeywell International, Inc. 775,000 26,107,813
Johnson Controls, Inc. 197,200 10,118,825
Minnesota Mining & Manufacturing Co. 550,000 45,375,000
------------
92,539,138
------------
Electronics (5.31%)
Emerson Electric Co. 950,000 57,356,250
General Electric Co. 1,125,000 59,625,000
------------
116,981,250
------------
Finance (3.51%)
Citigroup, Inc. 987,500 59,496,875
Household International, Inc. 430,000 17,871,875
------------
77,368,750
------------
Food (1.88%)
Bestfoods 600,000 41,550,000
------------
Furniture (0.82%)
Leggett & Platt, Inc. 1,090,000 17,985,000
------------
Insurance (5.41%)
AFLAC, Inc. 780,000 35,831,250
American General Corp. 550,000 33,550,000
American International Group, Inc. 425,000 49,937,500
------------
119,318,750
------------
Machinery (3.14%)
Dover Corp. 950,000 38,534,375
Pentair, Inc. 862,900 30,632,950
------------
69,167,325
------------
Media (4.46%)
Gannett Co., Inc. 550,000 32,896,875
McGraw-Hill Cos., Inc. (The) 1,211,200 65,404,800
------------
98,301,675
------------
Medical (12.25%)
Abbott Laboratories 550,000 24,509,375
American Home Products Corp. 400,000 23,500,000
Baxter International, Inc. 850,000 59,765,625
Bristol-Myers Squibb Co. 325,000 18,931,250
Johnson & Johnson 676,000 68,867,500
Medtronic, Inc. 400,000 19,925,000
Merck & Co., Inc. 200,000 15,325,000
Pfizer, Inc. 343,750 16,500,000
Schering-Plough Corp. 450,000 22,725,000
------------
270,048,750
------------
Metal (1.29%)
Illinois Tool Works, Inc. 500,000 28,500,000
------------
Mortgage Banking (2.42%)
Fannie Mae 750,000 39,140,625
Freddie Mac 350,000 14,175,000
------------
53,315,625
------------
Office (3.77%)
Avery Dennison Corp. 581,350 39,023,119
Pitney Bowes, Inc. 1,100,000 44,000,000
------------
83,023,119
------------
Oil & Gas (5.99%)
Chevron Corp. 600,000 50,887,500
Exxon Mobil Corp. 642,090 50,404,065
Royal Dutch Petroleum Co., American Depositary
Receipts (ADR) (Netherlands) 500,000 30,781,250
------------
132,072,815
------------
Paper & Paper Products (1.82%)
Kimberly-Clark Corp. 700,000 40,162,500
------------
Retail (6.17%)
Albertson's, Inc. 300,000 9,975,000
Home Depot, Inc. (The) 325,000 16,229,686
Lowe's Cos., Inc. 550,000 22,584,375
McDonald's Corp. 475,000 15,645,313
SYSCO Corp. 841,600 35,452,400
Target Corp. 525,000 30,450,000
Wal-Mart Stores, Inc. 100,000 5,762,500
------------
136,099,274
------------
Soap & Cleaning Preparations (1.06%)
Ecolab, Inc. 450,000 17,578,125
Procter & Gamble Co. (The) 100,000 5,725,000
------------
23,303,125
------------
Telecommunications (0.46%)
CenturyTel, Inc. 350,000 10,062,500
------------
Tobacco (0.60%)
Philip Morris Cos., Inc. 500,000 13,281,250
------------
Utilities (4.86%)
ALLTEL Corp. 550,000 34,065,625
Questar Corp. 1,401,200 27,148,250
SBC Communications, Inc. 1,060,600 45,870,950
------------
107,084,825
------------
TOTAL COMMON STOCKS
(Cost $1,271,930,606) (83.78%) 1,846,854,546
-------- -------------
PREFERRED STOCKS
Finance (0.38%)
Duke Capital Financing Trust I, 7.375%, Ser T 49,300 1,087,657
Duke Capital Financing Trust II, 7.375%, Ser U 177,000 3,894,000
Georgia Power Capital Trust IV, 6.85% 166,100 3,342,762
------------
8,324,419
------------
Media (1.47%)
Adelphia Communications Corp., 13.00%, Ser B 50,300 5,055,150
CSC Holdings, Inc., 11.125% Ser M 171,920 18,094,580
CSC Holdings, Inc., 11.750%, Ser H 85,340 9,216,720
------------
32,366,450
------------
Oil & Gas (0.27%)
Lasmo America Ltd., 8.15% (R) 60,000 6,000,000
------------
Utilities (0.20%)
FPC Capital I, 7.10%, Ser A 216,600 4,494,450
------------
TOTAL PREFERRED STOCKS
(Cost $52,400,887) (2.32%) 51,185,319
-------- -------------
TOTAL COMMON AND PREFERRED STOCKS
(Cost $1,324,331,493) (86.10%) 1,898,039,865
-------- -------------
<CAPTION>
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
------------------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C>
CORPORATE BONDS
Banks -- United States (0.09%)
Bank of America Corp.,
Sub Note 10-15-01 9.125% A $2,000 $2,044,260
-------------
Energy (0.23%)
Teton Acquisition Corp.,
Sr Bond 09-15-28 8.480 BBB- 5,000 5,040,800
-------------
Finance (0.82%)
Citibank Credit Card Master Trust I,
Class A Cr Card Part Cert, Ser 1997-3 02-10-04 6.839 AAA 8,000 7,960,000
Guaranteed Trade Trust,
Note 06-26-06 7.390 AAA 9,979 10,113,210
-------------
18,073,210
-------------
Manufacturing (0.24%)
GTE North, Inc.,
Deb 01-01-21 9.600 A+ 5,000 5,302,000
-------------
Media (0.59%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 6,200 6,076,000
Continental Cablevision, Inc.,
Sr Deb 08-01-13 9.500 AA- 6,500 6,823,245
-------------
12,899,245
-------------
Transportation (0.75%)
Northwest Airlines, Inc.,
Gtd Note 04-07-04 8.520 BB 2,000 1,906,780
Gtd Note 03-15-05 7.625 BB 5,800 5,286,178
USAirways, Inc.,
Pass Thru Ctf Ser 1989-A2 01-01-13 9.820 BB- 11,000 9,418,750
-------------
16,611,708
-------------
Utilities (2.15%)
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-07 8.625 BB- 1,863 1,866,950
Sec Lease Oblig Bond 06-01-17 9.000 BB- 17,900 18,101,375
Cleco Corp.,
Sr Note 06-01-05 8.750 BBB 5,000 5,087,500
CMS Energy Corp.,
Sr Note 05-15-02 8.125 BB 6,000 5,927,640
Hydro-Quebec,
Gtd Deb Ser IF (Canada) 02-01-13 (Y) 8.000 A+ 5,000 5,206,250
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 6,000 5,700,000
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 10.330 BBB- 1,648 1,681,542
Deb Ser C-94 07-23-02 10.330 BBB- 3,625 3,698,111
-------------
47,269,368
-------------
TOTAL CORPORATE BONDS
(Cost $112,818,772) (4.87%) 107,240,591
-------- -------------
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
Government -- U.S. (4.49%)
United States Treasury,
Bond 02-15-01 11.750 AAA 50,000 51,547,000
Bond 05-15-01 13.125 AAA 11,292 11,918,367
Bond 08-15-01 13.375 AAA 10,000 10,725,000
Bond 11-15-01 15.750 AAA 7,000 7,830,130
Bond 11-15-04 11.625 AAA 4,000 4,800,000
Bond 08-15-14 12.500 AAA 4,000 5,669,360
Bond 02-15-16 9.250 AAA 5,000 6,488,300
-------------
98,978,157
-------------
Government -- U.S. Agencies (0.65%)
Federal Home Loan Mortgage Corp.,
Remic Series 1254 Class M 12-15-08 8.000 AAA 3,442 3,431,492
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 08-15-24 8.000 AAA 1,787 1,809,680
30 Yr SF Pass Thru Ctf 01-15-29 6.500 AAA 9,648 9,156,315
-------------
14,397,487
-------------
TOTAL U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
(Cost $113,831,820) (5.14%) 113,375,644
-------- -------------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
------------------- -------- ------------ --------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.72%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. -- Dated 06-30-00, due
07-03-00 (Secured by U.S. Treasury
Bonds 6.250% thru 7.500%, due 08-15-22
thru 08-15-27) -- Note A 6.550% $82,054 $82,054,000
--------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 5.20% 540
--------------
TOTAL SHORT-TERM INVESTMENTS (3.72%) 82,054,540
--------- --------------
TOTAL INVESTMENTS (99.83%) 2,200,710,640
--------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.17%) 3,640,247
--------- --------------
TOTAL NET ASSETS (100.00%) $2,204,350,887
========= ==============
* Credit ratings are rated by 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 security may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $6,000,000 or 0.27% of
net assets as of June 30, 2000.
(Y) 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 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
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Sovereign Investors Fund (the "Fund") is a diversified
series of John Hancock Investment Trust (the "Trust"), an open-end
investment management company, registered under the Investment Company
Act of 1940. The investment objective of the Fund is to seek long-term
growth of capital and income without assuming undue market risks.
The Trustees have authorized the issuance of multiple classes of the
Fund, designated as Class A, Class B, Class C and Class Y shares. The
shares of each class represent an interest in the same portfolio of
investments of the Fund and have equal rights to voting, redemptions,
dividends and liquidation, except that certain expenses, subject to the
approval of the Trustees, may be applied differently to each class of
shares in accordance with current regulations of the Securities and
Exchange Commission and Internal Revenue Service. Shareholders of a
class which bears distribution and service expenses under terms of a
distribution plan have exclusive voting rights regarding such
distribution plan.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in a joint repurchase
agreement. Aggregate cash balances are invested in one or more
repurchase agreements, whose underlying securities are obligations of
the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account, on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal
income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on
investment securities is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, 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.
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. The Fund has a syndicated line of credit agreement with
various banks. 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 is charged to each fund based on the average daily unused portion of
the line of credit and is allocated among the participating funds. The
Fund had no borrowing activity for the period ended June 30, 2000.
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 June 30, 2000, there were no outstanding securities
loaned.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
quarterly management fee to the Adviser for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.60% of the
first $750,000,000 of the Fund's average daily net asset value, (b)
0.55% of the next $750,000,000, (c) 0.50% of the next $1,000,000,000 and
(d) 0.45% of the Fund's average daily net asset value in excess of
$2,500,000,000.
The Fund has a distribution agreement with John Hancock Funds, Inc. ("JH
Funds"), a wholly owned subsidiary of the Adviser. For the period ended
June 30, 2000, net sales charges received with regard to sales of Class
A shares amounted to $612,348. Out of this amount, $87,898 was retained
and used for printing prospectuses, advertising, sales literature and
other purposes, $216,152 was paid as sales commissions to unrelated
broker-dealers and $308,298 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 Life
Insurance Company ("JHLICo"), 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 period ended June 30, 2000, CDSCs paid to JH
Funds amounted to $1,260,892.
Effective May 1, 2000, all Class C retail purchases are assessed a 1.00%
up-front sales charge. For the period ended June 30, 2000, the up-front
sales charges received with respect to sales of Class C shares amounted
to $25,656. Out of this amount $20,589 was paid as sales commissions to
unrelated broker-dealers and $5,067 was paid as sales commissions to
sales personnel of Signator Investors. Class C shares which are redeemed
within one year of purchase will be subject to a CDSC at a rate of 1.00%
of the lesser of the current market value at the time of redemption or
the original purchase cost of the shares being redeemed. Proceeds from
the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the
Fund in connection with the sale of Class C shares. For the period ended
June 30, 2000, CDSCs paid to JH Funds amounted to $1,431.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution
Plans with respect to Class A, Class B and Class C pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund
will make payments to JH Funds for distribution and service expenses, at
an annual rate not to exceed 0.30% of Class A average daily net assets
and 1.00% of Class B and Class C average daily net assets, to reimburse
JH Funds for its distribution and service costs. Up to a maximum of
0.25% of such payments may be service fees as defined by the 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 JHLICo.
Class A, Class B and Class C shares pay transfer agent fees based on the
number of shareholder accounts and certain out-of-pocket expenses. Class
Y shares pay a monthly transfer agent fee equivalent, on an annual
basis, to 0.10% of the average daily net asset value of Class Y shares
of the Fund.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford and Mr. Richard S.
Scipione are directors and/or officers of the Adviser and/or its
affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees
may elect to defer for tax purposes their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The
Fund makes investments into other John Hancock funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover
the Fund's deferred compensation liability are recorded on the Fund's
books as an other asset. The deferred compensation liability and the
related other asset are always equal and are marked to market on an
annual basis to reflect any income earned by the investment as well as
any unrealized gains or losses. The investment had no impact on the
operations of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the period ended June 30, 2000, aggregated $248,372,273 and
$664,216,690, respectively. Purchases and proceeds from sales of
obli-gations of the U.S. government and its agencies, during the period
ended June 30, 2000, aggregated $257,184,255 and $191,450,425,
respectively. The cost of investments owned at June 30, 2000 (excluding
corporate savings account), for federal income tax purposes, was
$1,635,924,608. Gross unrealized appreciation and depreciation of
investments aggregated $628,526,737 and $63,741,245, respectively,
resulting in net unrealized appreciation of $564,785,492.
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
Bulk Rate
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."
290SA 6/00
8/00
The latest report from your
Fund's management team
SEMIANNUAL REPORT
Balanced Fund
JUNE 30, 2000
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
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, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
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
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President
and Chief Executive Officer, flush right next to second
paragraph.]
DEAR FELLOW SHAREHOLDERS:
After four years of spectacular returns, the stock market succumbed in
the first six months of 2000 largely to the pressures of rising interest
rates, as the Federal Reserve kept up its campaign to fight inflation.
The red-hot economy has begun to show signs of slowing, and investors
are no longer blind to the real possibility that rising rates could slow
corporate profits. The result was flat-to-negative results for the three
main stock-market indexes through June. Bonds also suffered during this
period, since their prices generally move in the opposite direction of
rates.
But there was good news, too. The Treasury market, where shrinking
supply bolstered prices thanks to the government's efforts to retire
some of its debt, performed well. And the Fed appears closer to the end
of its tightening cycle, which will be a strong positive if it can slow
the economy to a level that supports corporate earnings growth but keeps
inflation at bay. The picture on the global economy is brighter and
technology continues to dominate as the driver of ever-improving
corporate productivity.
No matter what happens next in the financial markets, these past several
months only served to reinforce some of the important lessons for
investors: Diversify, invest in line with your tolerance for risk and
maintain a long-term perspective.
Since not all parts of your portfolio will perform equally well all the
time, it is important to allocate your assets among different types of
investments and funds that target a variety of stock- and bond-market
segments. This strategy, executed under the guidance of a seasoned
investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing
conditions.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY 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
A volatile market produces mixed results
The first half of 2000 was marked by two distinct periods of stock
market performance. In the first quarter of the year, a narrow group of
"new economy" stocks -- led primarily by high-flying technology stocks
-- fueled an unprecedented surge in the market.
In the second quarter, however, the tide turned. With technology
valuations stretched beyond reason, the disparity between technology and
other market sectors exceeded any rational explanation. So it wasn't
surprising when tech stocks started to tumble in the second quarter.
With the Fed's interest-rate hikes sparking concerns about a slower
economy, the market started to broaden out and investors began to
gravitate to more stable companies with more reasonable valuations.
Blue-chip and "old economy" companies -- whose businesses had been
strong, but whose stocks had languished -- suddenly came back into
favor.
"The first half
of 2000 was
marked by
two distinct
periods of
stock market
performance."
Understanding performance
Like the stock market, John Hancock Balanced Fund also experienced two
distinct periods of performance in the first half of the year. During
the first quarter's technology-driven market, the Fund lagged its
competitors due to its lack of technology holdings. With the market
shift in the second quarter, however, the Fund began to outpace its peer
group. As value-oriented stocks rebounded, so did many of the stocks in
the Fund, including steady consumer staples stocks like PepsiCo and
health-care names like Baxter International and Abbott Laboratories.
Consumer cyclical stocks like Home Depot, Lowe's and Target, on the
other hand, were hurt by fears that a slowing economy would slow
consumer spending. The Fund's strong second-quarter performance wasn't
enough to make up for the first- quarter disappointment, however, and
that prevented us from keeping up with our peers.
[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 3%, U.S. Government &
Agencies 8%, Corporate Bonds 13%, Preferred Stocks 8% and Common
Stocks 68%. A note below the chart reads "As a percentage of net
assets on June 30, 2000."]
"As of May 1,
the Fund was
able to
invest up to
25% of its
stocks in
non-dividend
performers."
Performance scorecard
For the six months ended June 30, 2000, John Hancock Balanced Fund's
Class A, Class B and Class C shares returned -3.41%, -3.74% and
-3.74%, respectively, at net asset value. By comparison, the average
balanced fund returned 1.34% for the same period, according to Lipper,
Inc.1 Keep in mind that your net asset value return will be different
from the Fund's performance if you were not invested in the Fund for the
entire period and did not reinvest all distributions. See pages six and
seven for historical performance information.
[Table at bottom of left hand column entitled "Scorecard". The
header for the left column is "Investment" and the header for the
right column is "Recent Performance...and What's Behind the
Numbers". The first listing is PepsiCo followed by an up arrow
with the phrase "Steady consumer staple company." The second
listing is Baxter International followed by an up arrow with the
phrase "Benefited from market shift to health-care stocks." The
third listing is Honeywell followed by a down arrow with the
phrase "Difficulties integrating recent merger." A note below the
table reads "See 'Schedule of Investments.' Investment holdings
are subject to change."]
Enhancing the investment flexibility
The Fund's Board of Trustees recently approved an amendment that we
believe will enhance the Fund's investment flexibility. As long-time
shareholders know, the Fund has invested 100% of its stock investments
in what we call "dividend performers" -- those companies that have
increased their dividends for at least ten consecutive years. As of May
1, the Fund was able to invest up to 25% of its stock investments in
non-dividend performers.
The reason for this modification is simple. Historically, companies have
been measured largely on their ability to consistently produce and
increase dividends. Today, however, many companies have different views
on the importance of dividends as a measure of corporate health. In
fact, the number of companies that raise their dividends year after year
is shrinking. Instead of paying for dividend increases, many companies
are using cash flow to reinvest in their businesses through stock
buybacks, acquisitions or restructurings. The rising-dividend
requirement that made so much sense in 1992 and has served shareholders
so well is still valid. However, as the market has evolved, blind
adherence to it would threaten our ability to deliver returns.
We want to stress that this modification will not change the Fund's
fundamental objective. However, it will give us the flexibility to keep
the stocks we like even if their rising-dividend pattern is interrupted.
In addition, we will now have the opportunity to consider a broader
universe of attractive companies that fit our fundamental criteria --
strong management, financial soundness, stable earnings and
profitability, brand-name recognition and reasonable valuations -- even
if they do not meet our ten-year rising dividend test.
[Bar chart at top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six
months ended June 30, 2000." The chart is scaled in increments of
5% with -5% at the bottom and 15% at the top. The first bar
represents the -3.41% total return for John Hancock Balanced Fund
Class A. The second bar represents the -3.74% total return for
John Hancock Balanced Fund Class B. The third bar represents the
-3.74% total return for John Hancock Balanced Fund Class C. The
fourth bar represents the 1.34% 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."]
Continued 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 have remained underweighted in bonds
throughout the period, ending with a 21% weighting. This strategy has
paid off, especially with interest rates rising over the past year.
Looking ahead, however, we will continue to monitor the bond market
closely and, as always, evaluate the relative attractiveness of bonds
versus stocks.
A look ahead
In the past few months, we've gradually begun to look for opportunities
to add non-dividend performer stocks to the portfolio. Of course, we are
looking across all sectors to find the best investments. So far,
however, the biggest area of opportunity has been in technology stocks,
where the Fund has been traditionally underweighted. We want to stress
that even though we are buying non-dividend performer stocks in the
technology sector, they will still meet our stringent criteria of being
established companies with a stable earnings history and reasonable
valuations. Our newest additions include Sun Microsystems, Lucent
Technologies and Intel.
"...we do
believe that
the market
will continue
to broaden
out."
On the macro level, we're optimistic about the market's prospects for
the remainder of the year. One of the big questions weighing on
investors is how much more the Fed will raise interest rates and what
the effect will be on the economy. We've already started to see economic
growth taper off from its extremely high levels and inflation remains
relatively benign. Given that, we're anticipating more modest rate
increases, if any, over the next several months.
While investors will continue to buy technology stocks, we do believe
that the market will continue to broaden out. As it does, stock
selectivity will become even more critical. It will be important to own
those companies with solid earnings and reasonable valuations. In our
opinion, these are the companies with the strongest upside potential.
------------------------------------------------------------------------
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. Of course, the
managers' views are subject to change as market and other conditions
warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock 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 an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 1% and declining to 0%
after one year).
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.
CLASS A
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/5/92)
----- ----- -------
Cumulative Total Returns (7.89%) 61.86% 101.16%
Average Annual Total Returns (7.89%) 10.11% 9.46%
CLASS B
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (10/5/92)
----- ----- -------
Cumulative Total Returns (8.36%) 62.53% 100.90%
Average Annual Total Returns (8.36%) 10.20% 9.44%
CLASS C
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (5/1/99)
----- ----------
Cumulative Total Returns (5.62%) (5.82%)
Average Annual Total Returns (5.62%) (5.04%)
YIELDS
As of June 30, 2000
SEC 30-DAY
YIELD
----------
John Hancock Balanced Fund: Class A 3.14%
John Hancock Balanced Fund: Class B 2.61%
John Hancock Balanced Fund: Class C 2.61%
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 Index and is equal to
$40,923 as of June 30, 2000. 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 $21,179 as of June 30, 2000. 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 $20,120
as of June 30, 2000.
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 Index and is equal to
$40,923 as of June 30, 2000. 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 $20,088 as of June 30, 2000.
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 Index and is equal to
$11,052 as of June 30, 2000. 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
$9,515 as of June 30, 2000. 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 $9,420 as of June 30,
2000.
* No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - Balanced Fund
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
--------------------------------------------------------------
<S> <C>
Assets:
Investments at value -- Note C:
Common and preferred stocks
(cost -- $137,414,909) $161,131,846
Corporate bonds (cost -- $28,643,802) 26,979,527
U.S. government and agencies securities
(cost -- $16,898,427) 16,959,962
Joint repurchase agreement
(cost -- $6,056,000) 6,056,000
Corporate savings account 687
-----------------
211,128,022
Receivable for shares sold 28,327
Dividends receivable 180,468
Interest receivable 916,384
Other assets 30,009
-----------------
Total Assets 212,283,210
--------------------------------------------------------------
Liabilities:
Payable for shares repurchased 5,572
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 160,835
Accounts payable and accrued expenses 32,816
-----------------
Total Liabilities 199,223
--------------------------------------------------------------
Net Assets:
Capital paid-in 174,624,771
Accumulated net realized gain on
investments 15,232,968
Net unrealized appreciation of
investments 22,114,197
Undistributed net investment income 112,051
-----------------
Net Assets $212,083,987
==============================================================
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 -- $121,557,107/9,062,851 $13.41
==============================================================
Class B -- $89,875,259/6,701,067 $13.41
==============================================================
Class C -- $651,621/48,602 $13.41
==============================================================
Maximum Offering Price Per Share
Class A * -- ($13.41/0.95) $14.12
==============================================================
Class C -- ($13.41/0.99) $13.55
==============================================================
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet and
shows the value of what the Fund owns, is due and owes on June 30,
2000. You'll also find the net asset value and the maximum offering
price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------
<S> <C>
Investment Income:
Interest (including stock lending
income of $18) $2,165,233
Dividends (net of foreign withholding
taxes of $5,156) 1,904,671
-----------------
4,069,904
-----------------
Expenses:
Investment management fee -- Note B 651,017
Distribution and service fee -- Note B
Class A 181,522
Class B 462,207
Class C 2,128
Transfer agent fee -- Note B 290,164
Registration and filing fees 48,026
Custodian fee 28,517
Accounting and legal services fee --
Note B 19,552
Auditing fee 15,809
Printing 12,909
Miscellaneous 5,087
Trustees' fees 4,352
Legal fees 1,038
-----------------
Total Expenses 1,722,328
--------------------------------------------------------------
Net Investment Income 2,347,576
--------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments sold 17,196,451
Change in net unrealized
appreciation/depreciation of
investments (29,145,076)
-----------------
Net Realized and Unrealized Loss on
Investments (11,948,625)
--------------------------------------------------------------
Net Decrease in Net Assets Resulting
from Operations ($9,601,049)
==============================================================
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>
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.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Operations:
Net investment income $4,953,740 $2,347,576
Net realized gain (loss) on
investments sold (1,803,424) 17,196,451
Change in net unrealized
appreciation/depreciation of
investments 5,223,352 (29,145,076)
----------------- -----------------
Net Increase (Decrease) in Net
Assets Resulting from Operations 8,373,668 (9,601,049)
----------------- -----------------
Distributions to Shareholders:
Dividends from net investment income
Class A -- ($0.3556 and $0.1600 per share, respectively) (3,011,864) (1,430,250)
Class B -- ($0.2571 and $0.1134 per share, respectively) (2,103,521) (783,586)
Class C -- ($0.1880 and $0.1134 per share, respectively) (4,139) (4,255)
Distributions in excess of net investment income
Class A -- ($0.0023 and none per share, respectively) (19,143) --
Class B -- ($0.0023 and none per share, respectively) (18,719) --
Class C -- ($0.0019 and none per share, respectively) (31) --
Distributions from net realized gain on investments sold
Class A -- ($0.1848 and none per share, respectively) (1,637,012) --
Class B -- ($0.1848 and none per share, respectively) (1,464,673) --
Class C -- ($0.1848 and none per share, respectively) (3,892) --
----------------- -----------------
Total Distributions to
Shareholders (8,262,994) (2,218,091)
----------------- -----------------
From Fund Share Transactions -- Net: * 29,717,945 (18,680,065)
----------------- -----------------
Net Assets:
Beginning of period 212,754,573 242,583,192
----------------- -----------------
End of period (including
distributions in excess of net
investment income of $17,434 and
undistributed net investment
income of $112,051, respectively) $242,583,192 $212,083,987
================= =================
See notes to financial statements.
<CAPTION>
Statement of Changes in Net Assets (continued)
---------------------------------------------------------------------------------------------------------------------------
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
--------------------------------------- ---------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 6,511,964 $91,237,100 3,114,531 $42,079,663
Shares issued to shareholders in
reinvestment of distributions 319,253 4,425,505 103,859 1,383,936
----------------- ----------------- ----------------- -----------------
6,831,217 95,662,605 3,218,390 43,463,599
Less shares repurchased (4,432,247) (62,259,801) (3,456,412) (46,132,545)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,398,970 $33,402,804 (238,022) ($2,668,946)
================= ================= ================= =================
CLASS B
Shares sold 1,573,367 $22,069,946 430,122 $5,711,752
Shares issued to shareholders in
reinvestment of distributions 234,065 3,246,824 53,607 713,916
----------------- ----------------- ----------------- -----------------
1,807,432 25,316,770 483,729 6,425,668
Less shares repurchased (2,091,169) (29,352,484) (1,724,230) (22,771,928)
----------------- ----------------- ----------------- -----------------
Net decrease (283,737) ($4,035,714) (1,240,501) ($16,346,260)
================= ================= ================= =================
CLASS C
Shares sold 48,586 $689,657 33,297 $445,057
Shares issued to shareholders in
reinvestment of distributions 481 6,646 305 4,074
----------------- ----------------- ----------------- -----------------
49,067 696,303 33,602 449,131
Less shares repurchased (25,570) (345,448) (8,497) (113,990)
----------------- ----------------- ----------------- -----------------
Net increase 23,497 $350,855 25,105 $335,141
================= ================= ================= =================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------------------------------------------------- JUNE 30, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <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 $14.05
---------- ---------- ---------- ---------- ---------- ----------
Net Investment Income 0.44 0.41 0.37 0.36 0.35 0.16
Net Realized and Unrealized
Gain (Loss) on Investments 1.91 0.99 2.14 1.47 0.18 (0.64)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations 2.35 1.40 2.51 1.83 0.53 (0.48)
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net
Investment Income (0.44) (0.41) (0.37) (0.36) (0.36) (0.16)
Distributions in Excess of
Net Investment Income -- -- -- -- --(2) --
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) (0.16)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $11.75 $12.27 $13.33 $14.06 $14.05 $13.41
========== ========== ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 24.23% 12.13% 20.79% 14.01% 3.89% (3.41%)(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $69,811 $71,242 $84,264 $97,072 $130,690 $121,557
Ratio of Expenses to Average
Net Assets 1.27% 1.29% 1.22% 1.21% 1.22% 1.29%(5)
Ratio of Net Investment
Income to Average Net
Assets 3.99% 3.33% 2.77% 2.61% 2.47% 2.47%(5)
Portfolio Turnover Rate 45% 80% 115% 83% 94% 62%
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, SIX MONTHS ENDED
---------------------------------------------------------------------- JUNE 30, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <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 $14.05
---------- ---------- ---------- ---------- ---------- ----------
Net Investment Income(1) 0.36 0.32 0.28 0.27 0.26 0.12
Net Realized and Unrealized
Gain (Loss) on Investments 1.90 1.01 2.14 1.46 0.17 (0.65)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations 2.26 1.33 2.42 1.73 0.43 (0.53)
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net
Investment Income (0.36) (0.33) (0.28) (0.26) (0.26) (0.11)
Distributions in Excess of
Net Investment Income -- -- -- -- --(2) --
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) (0.11)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of
Period $11.74 $12.27 $13.33 $14.06 $14.05 $13.41
========== ========== ========== ========== ========== ==========
Total Investment Return at
Net Asset Value(3) 23.30% 11.46% 19.96% 13.23% 3.16% (3.74%)(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $87,827 $90,855 $101,249 $115,682 $111,564 $89,875
Ratio of Expenses to Average
Net Assets 1.96% 1.99% 1.91% 1.88% 1.92% 1.96%(5)
Ratio of Net Investment
Income to Average Net
Assets 3.31% 2.63% 2.08% 1.93% 1.76% 1.78%(5)
Portfolio Turnover Rate 45% 80% 115% 83% 94% 62%
<CAPTION>
Financial Highlights (continued)
----------------------------------------------------------------------
PERIOD ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 2000
1999(6) (UNAUDITED)
------------- -------------
<S> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning
of Period $14.60 $14.05
------------- -------------
Net Investment Income(1) 0.19 0.12
Net Realized and Unrealized
Loss on Investments (0.37) (0.65)
------------- -------------
Total From Investment Operations (0.18) (0.53)
------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.19) (0.11)
Distributions in Excess of
Net Investment Income --(2) --
Distributions from Net
Realized Gain on
Investments Sold (0.18) --
------------- -------------
Total from Investment Operations (0.37) (0.11)
------------- -------------
Net Asset Value, End of
Period $14.05 $13.41
============= =============
Total Investment Return at
Net Asset Value(3) (1.15%)(4) (3.74%)(4)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $330 $652
Ratio of Expenses to Average
Net Assets 1.84%(5) 1.98%(5)
Ratio of Net Investment
Income to Average Net
Assets 1.88%(5) 1.84%(5)
Portfolio Turnover Rate 94% 62%
(1) Based on the average of the shares outstanding at the end of each month.
(2) Less than $0.01 per share.
(3) Assumes dividend reinvestment and does not reflect the effect of
sales charges.
(4) Not annualized.
(5) Annualized.
(6) Class C shares began operations on May 1, 1999.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 2000 (Unaudited)
----------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the Balanced Fund on June 30, 2000. It's divided into five main
categories: common stocks, preferred stocks, corporate bonds, U.S.
government and agencies securities and short-term investments. The
common and preferred stocks and corporate bonds are further broken down
by industry group. Short-term investments, which represent the Fund's
"cash" position, are listed last.
NUMBER MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
------------------- --------- ------------
<S> <C> <C>
COMMON STOCKS
Advertising (1.22%)
Interpublic Group of Cos., Inc. (The) 60,000 $2,580,000
------------
Banks - United States (4.09%)
Bank of America Corp. 60,000 2,580,000
State Street Corp. 30,000 3,181,875
Wells Fargo Co. 75,000 2,906,250
------------
8,668,125
------------
Beverages (1.89%)
PepsiCo, Inc. 90,000 3,999,375
------------
Chemicals (1.45%)
Air Products & Chemicals, Inc. 100,000 3,081,250
------------
Computers (5.81%)
America Online, Inc.* 25,000 1,318,750
Apple Computer, Inc.* 30,000 1,571,250
Compaq Computer Corp. 50,000 1,278,125
Computer Sciences Corp.* 18,000 1,344,375
EMC Corp.* 20,000 1,538,750
First Data Corp. 30,000 1,488,750
International Business Machines Corp. 14,000 1,533,875
Sun Microsystems, Inc.* 15,000 1,364,063
Unisys Corp.* 60,000 873,750
------------
12,311,688
------------
Containers (1.75%)
Bemis Co., Inc. 110,000 3,698,750
------------
Diversified Operations (1.75%)
Minnesota Mining & Manufacturing Co. 45,000 3,712,500
------------
Electronics (5.64%)
Applied Materials, Inc.* 15,000 1,359,374
Emerson Electric Co. 65,000 3,924,374
General Electric Co. 45,000 2,385,000
Intel Corp. 12,000 1,604,250
Motorola, Inc. 45,000 1,307,812
Texas Instruments, Inc. 20,000 1,373,750
------------
11,954,560
------------
Finance (1.56%)
Citigroup, Inc. 55,000 3,313,750
------------
Insurance (2.96%)
AFLAC, Inc. 60,000 2,756,250
American International Group, Inc. 30,000 3,525,000
------------
6,281,250
------------
Machinery (1.34%)
Dover Corp. 70,000 2,839,375
------------
Medical (9.84%)
Abbott Laboratories 60,000 2,673,750
American Home Products Corp. 50,000 2,937,500
Bard (C.R.), Inc. 80,000 3,850,000
Baxter International, Inc. 76,000 5,343,750
Johnson & Johnson 40,000 4,075,000
Medtronic, Inc. 40,000 1,992,500
------------
20,872,500
------------
Mortgage Banking (1.23%)
Fannie Mae 50,000 2,609,375
------------
Office (0.94%)
Pitney Bowes, Inc. 50,000 2,000,000
------------
Oil & Gas (3.80%)
Chevron Corp. 45,000 3,816,563
Shell Transport & Trading Co., Plc, American
Depositary Receipts (ADR) (United Kingdom) 85,000 4,244,688
------------
8,061,251
------------
Paper & Paper Products (2.03%)
Kimberly-Clark Corp. 75,000 4,303,125
------------
Retail (7.59%)
Albertson's, Inc. 135,000 4,488,750
Family Dollar Stores, Inc. 175,000 3,423,438
Home Depot, Inc. (The) 45,000 2,247,188
Lowe's Cos., Inc. 60,000 2,463,750
Target Corp. 60,000 3,480,000
------------
16,103,126
------------
Soap & Cleaning Preparations (2.11%)
Clorox Co. (The) 100,000 4,481,250
------------
Telecommunications (6.64%)
ADC Telecommunications, Inc.* 25,000 2,096,875
CenturyTel, Inc. 102,500 2,946,875
Lucent Technologies, Inc. 23,000 1,362,750
Nortel Networks Corp. 24,000 1,638,000
Tellabs, Inc.* 28,000 1,916,250
WorldCom, Inc.* 90,000 4,128,750
------------
14,089,500
------------
Utilities (3.98%)
ALLTEL Corp. 60,000 3,716,250
SBC Communications, Inc. 109,220 4,723,765
------------
8,440,015
------------
TOTAL COMMON STOCKS
(Cost $119,401,706) (67.62%) 143,400,765
--------- ------------
PREFERRED STOCKS
Finance (1.99%)
Duke Capital Financing Trust I, 7.375%, Ser T 50,800 1,120,750
Duke Capital Financing Trust II, 7.375%, Ser U 49,200 1,082,400
Georgia Power Capital Trust IV, 6.85% 100,000 2,012,500
------------
4,215,650
------------
Media (3.98%)
CSC Holdings Inc. 11.125% Ser M 37,539 3,950,980
CSC Holdings, Inc., 11.750%, Ser H 41,569 4,489,451
------------
8,440,431
------------
Oil & Gas (1.41%)
Lasmo America Ltd., 8.15% (R) 30,000 3,000,000
------------
Utilities (0.98%)
FPC Capital I, 7.10%, Ser A 100,000 2,075,000
------------
TOTAL PREFERRED STOCKS
(Cost $18,013,203) (8.36%) 17,731,081
--------- ------------
TOTAL COMMON AND PREFERRED STOCKS
(Cost $137,414,909) (75.98%) 161,131,846
--------- ------------
<CAPTION>
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING** (000s OMITTED) VALUE
------------------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C>
CORPORATE BONDS
Banks - Foreign (0.84%)
Landesbank Baden-Wuerttemberg,
Sub Note (Germany) 02-01-23 (Y) 7.625% AAA $1,800 $1,779,750
-------------
Banks - United States (1.02%)
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 1,000 1,054,090
Security Pacific Corp.,
Sub Note 11-15-00 11.500 A 1,100 1,117,193
-------------
2,171,283
-------------
Energy (0.95%)
Teton Acquisition Corp.,
Sr Bond 09-15-28 8.480 BBB- 2,000 2,016,320
-------------
Finance (0.84%)
Standard Credit Card Master Trust I,
Class A Credit Card Part Ctf Ser 1994-2 04-07-08 7.250 AAA 1,000 995,000
Standard Credit Master Trust,
Series 1995-1 01-08-07 8.250 AAA 750 775,313
-------------
1,770,313
-------------
Media (2.60%)
Adelphia Communications Corp.,
Sr Note Ser B 07-15-04 (R) 10.500 B+ 1,000 1,000,000
Continental Cablevision, Inc.,
Deb 08-01-13 9.500 AA- 1,500 1,574,595
Lenfest Communications, Inc.,
Sr Sub Note 06-15-06 10.500 BBB- 1,750 1,933,750
Rogers Cablesystems Ltd.,
Sr Sec 2nd Priority Note (Canada) 08-01-02 (Y) 9.625 BB+ 1,000 1,002,500
-------------
5,510,845
-------------
Transportation (1.07%)
Northwest Airlines, Inc.,
Note 03-15-05 7.625 BB 2,500 2,278,525
-------------
Utilities (5.40%)
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 9.000 BB- 2,500 2,528,125
GTE Corp.,
Deb 11-01-20 10.250 A+ 1,300 1,371,630
Hydro-Quebec,
Gtd Deb Ser IF (Canada) 02-01-13 (Y) 8.000 A+ 3,000 3,123,750
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 2,500 2,375,000
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 10.330 BBB- 1,269 1,294,467
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB+ 754 759,519
-------------
11,452,491
-------------
TOTAL CORPORATE BONDS
(Cost $28,643,802) (12.72%) 26,979,527
--------- -------------
U.S. GOVERNMENT AND AGENCIES SECURITIES
Government - U.S. (3.34%)
United States Treasury,
Bond 11-15-10 12.750 AAA 2,000 2,558,440
Bond 08-15-14 12.500 AAA 3,200 4,535,488
-------------
7,093,928
-------------
Government - U.S. Agencies (4.65%)
Federal National Mortgage Assn.,
12 Yr Pass Thru Ctf 07-01-11 7.000 AAA 1,176 1,159,181
15 Yr Pass Thru Ctf 08-01-08 7.500 AAA 741 741,639
Financing Corp.,
Bond 11-02-18 9.650 N/A 1,790 2,240,579
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 04-15-21 9.000 AAA 47 49,311
30 Yr SF Pass Thru Ctf 06-15-23 7.000 AAA 1,196 1,166,564
30 Yr SF Pass Thru Ctf 04-15-29 6.500 AAA 4,751 4,508,760
-------------
9,866,034
-------------
TOTAL U.S. GOVERNMENT AND AGENCIES SECURITIES
(Cost $16,898,427) (7.99%) 16,959,962
-------- -------------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
------------------- -------- ------------ --------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.86%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 06-30-00, due
07-03-00 (Secured by U.S. Treasury
Bonds 6.250% thru 7.500%, due 08-15-22
thru 08-15-27) - Note A 6.550 6,056 6,056,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current
Rate 5.20% 687
------------
TOTAL SHORT-TERM INVESTMENTS (2.86%) 6,056,687
--------- ------------
TOTAL INVESTMENTS (99.55%) 211,128,022
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.45%) 955,965
--------- ------------
TOTAL NET ASSETS (100.00%) $212,083,987
========= ============
NOTES TO THE SCHEDULE OF INVESTMENTS
* Non-income producing security.
** Credit ratings are rated by Moody's Investors Service or John
Hancock Advisers, Inc., where Standard & Poor's ratings are not
available.
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $4,000,000 or 1.89% of
net assets as of June 30, 2000.
(Y) 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 value of
that category as a percentage of the net assets of the Fund.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Balanced Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Balanced Fund (the "Fund") is a diversified series of John
Hancock Investment Trust (the "Trust"), an open-end management
investment company, registered under the Investment Company Act of 1940.
The investment objective of the Fund is to seek 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
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 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. The Fund has entered into a syndicated line of credit
agreement with various banks. 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 is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The Fund had no borrowing activity for
the period ended June 30, 2000.
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 June 30, 2000, there were no outstanding securities
loaned.
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 period ended
June 30, 2000, JH Funds received net sales charges of $204,959 with
regard to sales of Class A shares. Out of this amount, $19,877 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $160,443 was paid as sales commissions to
unrelated broker-dealers and $24,639 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 Life
Insurance Company ("JHLICo"), 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 period ended June 30, 2000, CDSCs paid to JH
Funds amounted to $111,831.
Effective May 1, 2000, all Class C retail purchases are assessed a 1.00%
up-front sales charge. For the period ended June 30, 2000, up-front
sales charges received with regard to sales of Class C shares amounted
to $7,033. Out of this amount $6,856 was paid as sales commissions to
unrelated broker-dealers and $177 was paid as sales commissions to sales
personnel of Signator Investors. Class C shares which are redeemed
within one year of purchase will be subject to a CDSC at a rate of 1.00%
of the lesser of the current market value at the time of redemption or
the original purchase cost of the shares being redeemed. Proceeds from
the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the
Fund in connection with the sale of Class C shares. For the period ended
June 30, 2000, CDSCs paid to JH Funds amounted to $475.
In addition, to reimburse JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted Distribution
Plans with respect to Class A, Class B and Class C pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund
will make payments to JH Funds for distribution and service expenses, at
an annual rate not to exceed 0.30% of Class A average daily net assets
and 1.00% of Class B and Class C average daily net assets, to reimburse
JH Funds for its distribution and service costs. Up to a maximum of
0.25% of such payments may be service fees as defined by the 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 JHLICo.
The Fund pays transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford and Mr. Richard S. Scipione
are directors 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 period ended June 30, 2000, aggregated $91,154,917 and
$105,410,861, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies, during the period
ended June 30, 2000, aggregated $40,887,926 and $45,561,796,
respectively.
The cost of investments owned at June 30, 2000 (excluding the corporate
savings account), for federal income tax purposes was $189,013,138.
Gross unrealized appreciation and depreciation of investments aggregated
$29,832,042 and $7,717,845, respectively, resulting in net unrealized
appreciation of $22,114,197.
[THIS PAGE INTENTIONALLY LEFT BLANK]
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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
Bulk Rate
U.S. Postage
PAID
Randolph, MA
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."
360SA 6/00
8/00
The latest report from your
Fund's management team
SEMIANNUAL REPORT
Large Cap
Value Fund
JUNE 30, 2000
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
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, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
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
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President
and Chief Executive Officer, flush right next to second
paragraph.]
DEAR FELLOW SHAREHOLDERS:
After four years of spectacular returns, the stock market succumbed in
the first six months of 2000 largely to the pressures of rising interest
rates, as the Federal Reserve kept up its campaign to fight inflation.
The red-hot economy has begun to show signs of slowing, and investors
are no longer blind to the real possibility that rising rates could slow
corporate profits. The result was flat-to-negative results for the three
main stock-market indexes through June. Bonds also suffered during this
period, since their prices generally move in the opposite direction of
rates.
But there was good news, too. The Treasury market, where shrinking
supply bolstered prices thanks to the government's efforts to retire
some of its debt, performed well. And the Fed appears closer to the end
of its tightening cycle, which will be a strong positive if it can slow
the economy to a level that supports corporate earnings growth but keeps
inflation at bay. The picture on the global economy is brighter and
technology continues to dominate as the driver of ever-improving
corporate productivity.
No matter what happens next in the financial markets, these past several
months only served to reinforce some of the important lessons for
investors: Diversify, invest in line with your tolerance for risk and
maintain a long-term perspective.
Since not all parts of your portfolio will perform equally well all the
time, it is important to allocate your assets among different types of
investments and funds that target a variety of stock- and bond-market
segments. This strategy, executed under the guidance of a seasoned
investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing
conditions.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
AND R. SCOTT MAYO, CFA, PORTFOLIO MANAGER
[A 2" x 2" photo at bottom middle of page of John Hancock Large
Cap Value Fund. Caption below reads "Tim Quinlisk."]
John Hancock
Large Cap Value Fund
Volatility rocks stock market as investors flee expensive
large-cap names
U.S. stocks made little progress in the first half of 2000. Despite a
strong start, the market grew jittery early in the year as interest-rate
concerns mounted. Investors abandoned economically sensitive and
interest-rate sensitive stocks -- the traditional value sectors -- and
focused on growth stocks. But in mid-March, they also gave up on
technology stocks, particularly large-company names whose prices had
reached extremely high levels. The market went into a nosedive that
lasted through May, erasing all earlier gains. In June, indications of
slower economic growth, the prospect that the Federal Reserve might slow
the economy down to just the right level and the possibility that
interest-rate hikes might be over buoyed investor confidence. Although
many stocks began to rebound, the Standard & Poor's 500 Index closed the
six months ended June 30, 2000 with an uninspiring -0.43% return.
"U.S. stocks
made little
progress in
the first half
of 2000."
Fund performance
We continued to look for great businesses selling at relatively cheap
prices where there was a catalyst -- a restructuring, spin-off or
management change, for example -- that could unlock the company's true
value. This strategy helped John Hancock Large Cap Value Fund's Class A,
Class B and Class C shares return 3.66%, 3.28% and 3.28%, respectively,
at net asset value, during the six-month period. By comparison, the
average multi-cap core fund returned 2.53%, according to Lipper, Inc.1
(Lipper has introduced new competitive categories that reflect more
accurately the average portfolio holdings of the funds they track.) 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.
[Table at top left hand column entitled "Top Five Common Stock
Holdings." The first listing is Ace, Ltd. 6.1%, the second is
Corning 4.6%, the third Tyco International 4.5%, the fourth ANTEC
Corp. 4.4% and the fifth Lucent Technologies 3.5%. A note below
the table reads "As a percentage of net assets on June 30, 2000."]
"We took
advantage of
market weak-
ness this
spring to add
to some of
our existing
investments."
Communications infrastructure stocks soar
Some of the Fund's best gains came from companies involved with
upgrading the communications infrastructure to enable high-speed voice
and data transmissions. One of our biggest investments was Corning, the
leading provider of fiber for fiber-optic networks. Its stock took off
as investors recognized the company's strength in the growing optical
market known as photonics. Another top performer was Amphenol, an
electronics company that designs and makes connectors for the aerospace,
cable and wireless industries. The stock did exceptionally well as end-
market demand accelerated, both internationally and domestically. ANTEC
was another positive contributor. Like Amphenol, it also supplies
components but with a focus toward telephony -- the ability to deliver
telephone services over the existing cable infrastructure.
[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 Corning followed by an up arrow
with the phrase "Strength in growing photonics optical market."
The second listing is Ace followed by an up arrow with the phrase
"Improved pricing, strong global platform." The third listing is
Computer Associates followed by a down arrow with the phrase
"Investor concerns over acquisitions, mainframe business." A note
below the table reads "See 'Schedule of Investments.' Investment
holdings are subject to change."]
Test and measurement names take off
The Fund received an added boost from companies that supply test and
measurement products. Tektronix, which targets the electronics industry,
benefited greatly from a recent restructuring, a new management team
focused on renewing the company's growth orientation and growing demand.
We also built a sizable stake in PerkinElmer, a similar type of company
that sells mainly to the health-care industry. Its stock also did well,
thanks to strong demand, a new management team and a repositioned
product portfolio. Finally, the Fund owned Millipore, a company that
provides filtration products for the pharmaceutical, biotechnology and
semiconductor markets. The stock posted an outstanding gain as the
semiconductor market began to turn around, and we decided to take
profits.
Finance and energy also deliver
Our investment in Ace, Ltd. paid off handsomely as we began seeing early
signs of improved pricing in the property and casualty insurance
business. Recent acquisitions had strengthened Ace's position globally,
giving the company added upside earnings potential. Another winner was
Financial Security Assurance (FSA), a U.S.-based company that provides
asset-based and municipal bond insurance. It was bought out at a nice
premium by a foreign insurer that recognized FSA's unique underwriting
capabilities and strong international growth potential. We also acquired
a stake in EOG Resources, an independent exploration and production
company that focuses on the North American gas market. The stock had an
excellent run, thanks to strong demand and limited supply in the gas
market.
[Bar chart at top of left hand column with heading "Fund
Performance." Under the heading is a note that reads "For the six
months ended June 30, 2000." The chart is scaled in increments of
1% with 0% at the bottom and 4% at the top. The first bar
represents the 3.66% total return for John Hancock Large Cap Value
Fund Class A. The second bar represents the 3.28% total return for
John Hancock Large Cap Value Fund Class B. The third bar
represents the 3.28% total return for John Hancock Large Cap Value
Fund Class C. The fourth bar represents the 2.53% total return for
Average multi-cap core fund. A note below the chart reads "Total
returns for John Hancock Large Cap Value Fund are at net asset
value with all distributions reinvested. The average multi-cap
core fund is tracked by Lipper, Inc.1 See the following two pages
for historical performance information."]
Software disappoints
Many software stocks suffered as corporations kept the lid on new
technology spending even after the new year. The Fund owned Computer
Associates International, a company that specializes in software for
mainframes, but has recently been developing products that are more
oriented toward the client-server model. Unfortunately, the stock
tumbled as investors worried about the company's recent acquisitions,
along with a slow recovery in the mainframe market post-Y2K. Parametric
Technology was another disappointment as sales of its new Windchill
product -- software that helps businesses use the Internet in the supply
chain process -- were slower than expected. Finally, our investment in
J.D. Edwards hurt performance. J.D. Edwards makes enterprise resource
planning software that helps companies better manage their businesses.
We expected demand to strengthen following the new year, but so far it
hasn't. We kept all these names because we continued to believe in their
prospects.
Volatility yields opportunity
We took advantage of market weakness this spring to add to some of our
existing investments. We also added new names, including Tyco
International, a multi-industrial company whose stock price was
depressed in part because of accounting problems that seem to be
resolved. We like Tyco's superior management team, diversified business
mix and improving prospects. We also added Lucent Technologies, a leader
in the communications infrastructure space. Lucent has been hurt
recently by the perception that it has fallen behind a major competitor
in the optical space. We believe the stock has been overpenalized, given
that Lucent is still a strong competitor in this area, is launching an
array of new products and is selling off its slower growth businesses.
"We are
somewhat
cautious
about the
market's
outlook."
Stock picking will be key
We are somewhat cautious about the market's outlook. Slower economic
growth could weaken corporate earnings growth and possibly cause
companies to miss their earnings forecasts. In addition, technology
stocks often weaken in the summer months. Concerns like these suggest
that there will most likely be continued volatility in the market.
Selectivity -- avoiding stocks where there are any hints of deteriorating
business trends -- will be key. We remain optimistic, however, about our
ability to take advantage of the market's volatility by buying great
companies when their stocks go on sale.
------------------------------------------------------------------------
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 Large Cap Value 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 an up-front 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 an up-front sales charge of 1%
and a contingent deferred sales charge (maximum 1% and declining to 0%
after one year).
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them. Please read your prospectus carefully before you invest or
send money.
CLASS A
For the period ended June 30, 2000
ONE FIVE TEN
YEAR YEARS YEARS
----- ----- -------
Cumulative Total Returns 19.29% 198.83% 375.72%
Average Annual Total Returns(1) 19.29% 24.48% 16.88%
CLASS B
For the period ended June 30, 2000
SINCE
ONE FIVE INCEPTION
YEAR YEARS (8/22/91)
----- ----- -------
Cumulative Total Returns 19.69% 201.27% 318.18%
Average Annual Total Returns(1) 19.69% 24.68% 17.53%
CLASS C
For the period ended June 30, 2000
SINCE
ONE INCEPTION
YEAR (5/1/98)
----- -------
Cumulative Total Returns 22.47% 41.20%
Average Annual Total Returns(1) 22.47% 17.28%
Note to Performance
(1) The Adviser agreed to a one-time fee reduction of $150,000 for the
fiscal year ended December 31, 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 is not indicative of 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 $52,978 as of June 30, 2000. 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 $50,068 as of June 30, 2000.
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 $47,565 as of June 30, 2000.
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 $45,737 as of June 30, 2000. 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 $41,818 as of June 30, 2000.
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 $14,261 as of
December 31, 1999. The second 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 $14,118 as of June
30, 2000. The third line represents the Standard & Poor's 500
Index and is equal to $13,464 as of June 30, 2000.
*No contingent deferred sales charge applicable.
FINANCIAL STATEMENTS
John Hancock Funds - Large Cap Value Fund
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $1,378,190,956) $1,606,040,022
Bonds (cost - $4,531,204) 4,655,000
--------------
1,610,695,022
Receivable for investments sold 7,719,319
Receivable for shares sold 3,369,822
Dividends receivable 1,158,891
Interest receivable 62,613
Other assets 81,450
--------------
Total Assets 1,623,087,117
------------------------------------------------------------------
Liabilities:
Due to custodian 1,049,776
Payable for investments purchased 7,721,985
Payable for shares repurchased 672,821
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 1,126,062
Accounts payable and accrued expenses 21,317
--------------
Total Liabilities 10,591,961
------------------------------------------------------------------
Net Assets:
Capital paid-in 1,077,456,338
Accumulated net realized gain on
investments and foreign currency transactions 312,731,074
Net unrealized appreciation of investments 227,972,862
Accumulated net investment loss (5,665,118)
--------------
Net Assets $1,612,495,156
==================================================================
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 - $723,184,542/25,814,306 $28.01
==================================================================
Class B - $850,742,331/30,744,665 $27.67
==================================================================
Class C - $38,568,283/1,393,776 $27.67
==================================================================
Maximum Offering Price Per Share
Class A* - ($28.01/0.95) $29.48
==================================================================
Class C - ($27.67/0.99) $27.95
==================================================================
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
The Statement of Assets and Liabilities is the Fund's balance sheet
and shows the value of what the Fund owns, is due and owes on
June 30, 2000. You'll also find the net asset value and the maximum
offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six months ended June 30, 2000 (Unaudited)
------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends
(net of foreign withholding taxes of $16,636) $5,021,576
Interest 821,463
Securities lending income - Note A 275,773
------------
6,118,812
------------
Expenses:
Investment management fee - Note B 4,662,887
Distribution and service fee - Note B
Class A 821,258
Class B 4,056,348
Class C 119,242
Transfer agent fee - Note B 1,353,740
Custodian fee 212,335
Accounting and legal services fee - Note B 134,440
Registration and filing fees 38,961
Miscellaneous 28,320
Printing 25,404
Trustees' fees 23,576
Auditing fee 18,425
Legal fees 6,600
------------
Total Expenses 11,501,536
------------------------------------------------------------------
Net Investment Loss (5,382,724)
------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments and
Foreign Currency Transactions:
Net realized gain
on investments sold 182,122,857
Net realized loss on
foreign currency transactions (47,956)
Change in net unrealized
appreciation/depreciation
of investments (127,760,033)
Change in net unrealized
appreciation/depreciation
of foreign currency transactions 54,960
------------
Net Realized and Unrealized
Gain on Investments
and Foreign Currency Transactions 54,369,828
------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $48,987,104
==================================================================
The Statement of Operations summarizes the Fund's investment income
earned and expenses incurred in operating the Fund. It also shows
net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in Net Assets:
From Operations:
Net investment loss ($32,558) ($5,382,724)
Net realized gain on investments sold and
foreign currency transactions 230,956,672 182,074,901
Change in net unrealized appreciation/depreciation of
investments and foreign currency transactions 138,788,005 (127,705,073)
------------------- ----------------
Net Increase in Net Assets Resulting from Operations 369,712,119 48,987,104
------------------- ----------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.0002 and none per share, respectively) (3,419) --
Class B - ($0.0002 and none per share, respectively) (4,452) --
Class C - ($0.0002 and none per share, respectively) (58) --
Distributions from net realized gain on investments sold
Class A - ($2.1269 and none per share, respectively) (43,294,412) --
Class B - ($2.0887 and none per share, respectively) (55,110,560) --
Class C - ($2.0871 and none per share, respectively) (873,654) --
------------------- ----------------
Total Distributions to Shareholders (99,286,555) --
------------------- ----------------
From Fund Share Transactions - Net:* 140,910,422 178,298,193
------------------- ----------------
Net Assets:
Beginning of period 973,873,873 1,385,209,859
------------------- ----------------
End of period (including distributions in excess of
net investment income of $282,394 and accumulated
net investment loss of $5,665,118, respectively) $1,385,209,859 $1,612,495,156
=================== ================
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 redeemed 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:
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1999 (UNAUDITED)
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 6,529,174 $151,727,840 7,392,552 $202,282,672
Shares issued to shareholders in
reinvestment of distributions 1,584,158 39,668,188 528 16,443
------------ ---------------- ------------ ----------------
8,113,332 191,396,028 7,393,080 202,299,115
Less shares repurchased (5,567,614) (127,261,700) (3,937,677) (107,161,322)
------------ ---------------- ------------ ----------------
Net increase 2,545,718 $64,134,328 3,455,403 $95,137,793
============ ================ ============ ================
CLASS B
Shares sold 9,104,419 $209,079,703 6,273,568 $171,689,778
Shares issued to shareholders in
reinvestment of distributions 1,854,608 46,293,850 2,321 62,504
------------ ---------------- ------------ ----------------
10,959,027 255,373,553 6,275,889 171,752,282
Less shares repurchased (8,125,995) (184,413,918) (4,208,329) (113,796,575)
------------ ---------------- ------------ ----------------
Net increase 2,833,032 $70,959,635 2,067,560 $57,955,707
============ ================ ============ ================
CLASS C
Shares sold 325,611 $7,485,200 1,113,816 $30,424,376
Shares issued to shareholders in
reinvestment of distributions 30,352 757,525 54 1,776
------------ ---------------- ------------ ----------------
355,963 8,242,725 1,113,870 30,426,152
Less shares repurchased (105,089) (2,426,266) (193,146) (5,221,459)
------------ ---------------- ------------ ----------------
Net increase 250,874 $5,816,459 920,724 $25,204,693
============ ================ ============ ================
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 AUGUST 31, SEPTEMBER 1, 1996 YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------- TO DECEMBER 31, ------------------------------------ JUNE 30, 2000
1995(1) 1996 1996(2) 1997 1998 1999 (UNAUDITED)
--------- -------- --------- --------- --------- --------- -----------
<S> <C> <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 $27.02
--------- -------- --------- --------- --------- --------- -----------
Net Investment Income (Loss)(4) 0.21 0.19 0.05 0.12 0.16 0.09(3) (0.04)
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 1.03
--------- -------- --------- --------- --------- --------- -----------
Total from Investment Operations 2.16 2.03 2.20 5.69 3.01 7.89 0.99
--------- -------- --------- --------- --------- --------- -----------
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 $28.01
========= ======== ========= ========= ========= ========= ===========
Total Investment Return
at Net Asset Value(5) 19.22% 15.33% 14.53%(7) 36.71% 15.94% 37.89% 3.66%(7)
Total Adjusted Investment
Return at Net Asset
Value(5,6) -- -- -- -- 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 $723,185
Ratio of Expenses to
Average Net Assets 1.30% 1.17% 1.22%(8) 1.12% 1.16%(9) 1.17% 1.12%(8)
Ratio of Net Investment
Income (Loss)
to Average Net Assets 1.82% 1.28% 0.85%(8) 0.65% 0.79%(9) 0.40% (0.30%)(8)
Portfolio Turnover Rate 99% 74% 26% 102%(10) 64% 113% 46%
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)
--------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED AUGUST 31, SEPTEMBER 1, 1996 YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------- TO DECEMBER 31, ------------------------------------ JUNE 30, 2000
1995(1) 1996 1996(2) 1997 1998 1999 (UNAUDITED)
--------- -------- --------- --------- --------- --------- -----------
<S> <C> <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 $26.79
--------- -------- --------- --------- --------- --------- -----------
Net Investment Income (Loss)(4) 0.13 0.08 0.01 (0.02) 0.01 (0.07) (0.14)
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 1.02
--------- -------- --------- --------- --------- --------- -----------
Total from Investment Operations 2.09 1.93 2.15 5.58 2.85 7.68 0.88
--------- -------- --------- --------- --------- --------- -----------
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 $27.67
========= ======== ========= ========= ========= ========= ===========
Total Investment Return
at Net Asset Value(5) 18.41% 14.49% 14.15%(7) 35.80% 15.05% 36.95% 3.28%(7)
Total Adjusted Investment
Return at Net Asset Value(5,6) -- -- -- -- 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 $850,742
Ratio of Expenses to
Average Net Assets 2.03% 1.90% 1.98%(8) 1.87% 1.91%(9) 1.88% 1.87%(8)
Ratio of Net Investment
Income (Loss)
to Average Net Assets 1.09% 0.55% 0.10%(8) (0.10%) 0.05%(9) (0.31% (1.05%)(8)
Portfolio Turnover Rate 99% 74% 26% 102%(10) 64% 113% 46%
<CAPTION>
Financial Highlights (continued)
------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
PERIOD ENDED YEAR ENDED JUNE 30, 2000
DECEMBER 31, 1998(11) DECEMBER 31, 1999 (UNAUDITED)
------------------- ----------------- ----------------
<S> <C> <C> <C>
CLASS C
Per Share Operating Performance
Net Asset Value, Beginning of Period $22.03 $21.20 $26.79
-------- -------- --------
Net Investment Income (Loss)(4) 0.03 (0.09) (0.13)
Net Realized and Unrealized Gain
on Investments, Financial Futures Contracts
and Foreign Currency Transactions 0.09 7.77 1.01
-------- -------- --------
Total from Investment Operations 0.12 7.68 0.88
-------- -------- --------
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 $27.67
======== ======== ========
Total Investment Return
at Net Asset Value(5) 0.83%(7) 36.94% 3.28%(7)
Total Adjusted Investment Return
at Net Asset Value(5,6) 0.82%(7) -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $4,711 $12,674 $38,568
Ratio of Expenses to Average Net Assets 1.92%(8,9) 1.92% 1.87%(8)
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.28%(8,9) (0.40%) (1.01%)(8)
Portfolio Turnover Rate 64% 113% 46%
(1) On December 22, 1994, John Hancock Advisers, Inc. became the investment
adviser of the Fund.
(2) Effective December 31, 1996, the fiscal period end changed from August 31
to December 31.
(3) Class A has net investment income, because of its relatively lower class
expenses as compared with other share classes.
(4) Based on the average of the shares outstanding at the end of each month.
(5) Assumes dividend reinvestment and does not reflect the effect of sales
charges.
(6) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(7) Not annualized.
(8) Annualized.
(9) 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.
(10) Portfolio turnover rate excludes merger activity.
(11) Class C shares began operations on May 1, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 2000 (Unaudited)
----------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Large Cap Value Fund on
June 30, 2000. It's divided into two main categories: common stocks and bonds. The common stocks and
bonds are further broken down by industry groups.
NUMBER MARKET
ISSUER, DESCRIPTION OF SHARES VALUE
------------------- --------- -----------
<S> <C> <C>
COMMON STOCKS
Agricultural Operations (0.71%)
Pharmacia Corp. 220,150 $11,379,003
-----------
Banks - United States (0.88%)
TCF Financial Corp. 550,000 14,128,125
-----------
Business Services - Misc (2.20%)
Convergys Corp.* 246,350 12,779,406
Dun & Bradstreet Corp. 519,000 14,856,375
Sensormatic Electronics Corp.* 500,000 7,906,250
-----------
35,542,031
-----------
Chemicals (1.28%)
Rohm and Haas Co. 597,150 20,601,675
-----------
Computers (13.61%)
Computer Associates International, Inc. 1,061,040 54,311,985
Edwards (J.D.) & Co.* 2,444,750 36,824,047
MicroStrategy, Inc.* 153,400 4,602,000
NorthPoint Communications Group, Inc.* 1,100,000 12,306,250
Parametric Technology Corp.* 3,560,000 39,160,000
PSINet, Inc.* 200,000 5,025,000
Seagate Technology, Inc.* 300,000 16,500,000
SunGard Data Systems, Inc.* 437,200 13,553,200
Wind River Systems, Inc.* 981,400 37,170,525
-----------
219,453,007
-----------
Containers (0.84%)
Crown Cork & Seal Co., Inc. 483,300 7,249,500
Pactiv Corp.* 800,000 6,300,000
-----------
13,549,500
-----------
Diversified Operations (7.33%)
Honeywell International, Inc. 837,300 28,206,544
TRW, Inc. 397,000 17,219,875
Diversified Operations (continued)
Tyco International Ltd. 1,537,500 72,839,063
-----------
118,265,482
-----------
Electronics (16.87%)
Amphenol Corp. (Class A)* 756,650 50,080,772
Conexant Systems, Inc.* 831,800 40,446,275
PerkinElmer, Inc. 500,000 33,062,500
SCG Holding Corp.* 701,100 15,336,563
SCI Systems, Inc.* 895,000 35,072,812
Semtech Corp.* 100,000 7,648,440
Sony Corp. (Japan) 200,000 18,714,280
Tektronix, Inc.* 550,000 40,700,000
Vicor Corp.* 889,550 30,967,459
-----------
272,029,101
-----------
Finance (3.95%)
Associates First Capital Corp. (Class A) 800,000 17,850,000
Citigroup, Inc. 761,250 45,865,313
-----------
63,715,312
-----------
Food (0.76%)
Nabisco Group Holdings Corp. 475,000 12,320,312
-----------
Insurance (10.74%)
Ace, Ltd. (Bermuda) 3,495,600 97,876,800
Ambac Financial Group, Inc. 801,500 43,932,219
XL Capital Ltd. (Class A) 579,368 31,358,293
-----------
173,167,312
-----------
Media (5.89%)
AT&T Corp. - Liberty Media Group
(Class A)* 1,917,656 46,503,158
News Corp., Ltd., American Depositary
Receipt (ADR) (Australia) 370,000 20,165,000
Scripps (E.W.) Co. (The) (Class A) 573,700 28,254,725
-----------
94,922,883
-----------
Medical (0.62%)
Lilly (Eli) & Co. 100,000 9,987,500
-----------
Metal (0.43%)
Freeport-McMoRan Copper & Gold, Inc.
(Class B)* 750,000 6,937,500
-----------
Mortgage Banking (1.58%)
Fannie Mae 200,201 10,447,990
Freddie Mac 370,000 14,985,000
-----------
25,432,990
-----------
Office (0.80%)
Xerox Corp. 622,400 12,914,800
-----------
Oil & Gas (1.91%)
Alberta Energy Co., Ltd. (Canada) # 361,711 14,598,620
EOG Resources, Inc. 483,000 16,180,500
-----------
30,779,120
-----------
Paper & Paper Products (1.56%)
Fort James Corp. 1,085,000 25,090,625
-----------
Pollution Control (2.24%)
Waste Management, Inc. 1,900,000 36,100,000
-----------
Retail (1.55%)
Kroger Co.* 800,000 17,650,000
Neiman Marcus Group, Inc. (The)
(Class B)* 267,491 7,422,875
-----------
25,072,875
-----------
Telecommunications (22.07%)
ANTEC Corp.* 1,721,670 71,556,909
CenturyTel, Inc. 1,400,000 40,250,000
Commonwealth Telephone Enterprises, Inc. 77,420 3,643,579
Corning, Inc. 276,750 74,687,906
General Motors Corp. (Class H) 593,300 52,062,075
Intermedia Communications, Inc.* 575,000 17,106,250
Level 3 Communications, Inc.* 155,500 13,684,000
Lucent Technologies, Inc. 952,100 56,411,925
MediaOne Group, Inc. * 125,000 8,164,880
QUALCOMM, Inc.* 24,000 1,440,000
Time Warner Telecom, Inc. (Class A)* 183,300 11,799,938
Viatel, Inc.* 180,000 5,141,250
-----------
355,948,712
-----------
Transport (1.19%)
CNF Transportation, Inc. 242,200 5,510,050
Northwest Airlines Corp.* 449,950 13,695,353
-----------
19,205,403
-----------
Utilities (0.59%)
ALLTEL Corp. 153,328 9,496,753
-----------
TOTAL COMMON STOCKS
(Cost $1,378,190,956) (99.60%) 1,606,040,022
--------- --------------
<CAPTION>
INTEREST CREDIT PAR VALUE
RATE RATING** (000s OMITTED)
-------- -------- ------------
<S> <C> <C> <C>
BONDS
Medical (0.29%)
Total Renal Care
Holdings, Inc.,
Conv Sub Note
05-15-09 (R) 7.00% B- $7,000 $4,655,000
--------------
TOTAL BONDS
(Cost $4,531,204) (0.29%) 4,655,000
--------- --------------
TOTAL INVESTMENTS (99.89%) 1,610,695,022
--------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.11%) 1,800,134
--------- --------------
TOTAL NET ASSETS (100.00%) $1,612,495,156
========= ==============
* 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 securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $4,655,000 or 0.29% of net assets as of
June 30, 2000.
# 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, the security is U.S. dollar
denominated.
The percentage shown for each investment category is the total 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 - Large Cap Value Fund
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock Large Cap Value Fund (the "Fund") is a diversified series
of John Hancock Investment Trust (the "Trust"), an open-end management
investment company, registered under the Investment Company Act of 1940.
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
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.
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. The Fund has entered into a syndicated line of credit
agreement with various banks. 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 is charged to each fund based on the
average daily unused portion of the line of credit and is allocated
among the participating funds. The maximum loan balance outstanding
during the year amounted to $2,399,000. The annualized interest rate
charged was 6.25%.
SECURITIES LENDING The Fund may lend its securities to certain
qualified brokers who pay the Fund negotiated lender fees. The loans are
collateralized at all times with cash or securities with a market value
at least equal to the market value of the securitites 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 June 30,
2000, the Fund had loaned securities having a market value of $4,861,500
collateralized by securities in the amount of $4,958,730.
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.
At June 30, 2000, there were no open forward foreign currency exchange
contracts.
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 period ended
June 30, 2000, net sales charges received with regard to sales of Class
A shares amounted to $1,196,466. Out of this amount, $317,758 was
retained and used for printing prospectuses, advertising, sales
literature and other purposes, $634,404 was paid as sales commissions to
unrelated broker-dealers and $244,304 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 Life
Insurance Company ("JHLICo"), is the indirect sole shareholder of
Signator Investors.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.0% of the lesser of the current market value at the
time of redemption or the original purchase cost of the shares being
redeemed. Proceeds from the CDSC are paid to JH Funds and are used in
whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale of
Class B shares. For the period ended June 30, 2000, CDSCs amounted to
$731,595.
Effective May 1, 2000, all Class C retail purchases are assessed a 1.00%
up-front sales charge. For the period ended June 30, 2000, up-front
sales charges received with regard to sales of Class C shares amounted
to $223,350. Out of this amount, $204,914 was paid as sales commissions
to unrelated broker-dealers and $18,436 was paid as sales commissions to
sales personnel of Signator Investors. Class C shares which are redeemed
within one year of purchase will be subject to a CDSC at a rate of 1.00%
of the lesser of the current market value at the time of redemption or
the original purchase cost of the shares being redeemed. Proceeds from
the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the
Fund in connection with the sale of Class C shares. For the period ended
June 30, 2000, CDSCs amounted to $4,767.
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 0.25% 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 JHLICo.
The Fund pays transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period was at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Stephen L. Brown, Ms. Maureen R. Ford and Mr. Richard S.
Scipione are directors 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 period ended June 30, 2000, aggregated $867,170,920 and
$695,287,916, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended June 30, 2000.
The cost of investments owned at June 30, 2000 (excluding the corporate
savings account) for federal income tax purposes was $1,385,080,177.
Gross unrealized appreciation and depreciation of investments aggregated
$375,703,930 and $150,089,085, respectively, resulting in net unrealized
appreciation of $225,614,845.
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101 Huntington Avenue, Boston, MA 02199-7603
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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
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
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