<PAGE> 1
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - -
SOVEREIGN
ACHIEVERS
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A Barron III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F.Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. Dicarlo
Senior Vice President
James K. Ho
Senior Vice President
James K. Schmidt
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
Barry H. Evans
Vice President
Anne M. Mcdonley
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank and Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday
through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- -----------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY JOHN SNYDER FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
SOVEREIGN ACHIEVERS FUND
MARKET SWINGS BACK TO HIGH-QUALITY GROWTH STOCKS;
GOOD NEWS FOR THE fUND
After a tumultous 1994, the U.S. stock market seems to be bulletproof so far in
1995. Orange County, California, one of the wealthiest counties in the U.S.,
loses $3 billion and declares bankruptcy. Mexico implodes politically and
economically. Kobe, Japan's major industrial port, collapses in an earthquake.
Barings, the renowned U.K. merchant bank, evaporates in one weekend thanks to a
28-year old options trader. And the U.S. dollar drops to record lows.
Despite all the gunfire, the U.S. stock market continued to hit one high
after another. From the start of the year through the end of April, the Dow
Jones Industrial Average was up about 12%; the Standard & Poor's 500-Stock
Index, nearly 13%. It's difficult to know exactly what's driving the market. But
one thing is clear: Money has been pouring into U.S. stocks. New issuance is
still low, but supply has been taken out of the market due to stock buy-backs
and merger activity. What's more, after being stung by the turmoil in world
markets in 1994, many U.S. investors have headed back home in a "flight to
quality". And finally, now that the dollar is a better value, there's the
potential for many foreign investors to come back into our stock market, after
being underweighted in U.S. stocks for some time.
[A 2 1/2" x 3 1/2" photo of the Sovereign Achievers investment team at bottom
right. Caption reads: "The Sovereign Achievers management team (l-r): Jere
Estes, John Snyder, Tom Weary and Jim Moorhead."]
[CAPTION]
"...THE U.S. STOCK MARKET SEEMS TO BE BULLETPROOF SO FAR IN 1995"
3
<PAGE> 4
John Hancock Funds -- Sovereign Achievers Fund
[Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) Abbott Laboratories 4.2% 2) Procter & Gamble
3.6% 3) PepsiCo 3.6% 4) Norwest 3.4% 5) General Electric 3.4%. A footnote
below reads: "As a percentage of net assets on April 30, 1995."]
ROTATION TO HIGH-QUALITY GROWTH STOCKS
We've witnessed a strong move away from cyclical, or economically-sensitive,
stocks into large, high-quality growth stocks. There are two primary reasons for
the rotation. First is the overwhelming uncertainty in the market. With rising
interest rates, an ailing dollar and financial crises abroad, there has been
plenty to be uncertain about. And as we've seen time and time again, investors
favor the relative safety of big, blue-chip growth stocks during periods of
uncertainty. Second is the slowing economy. With the Fed's rate hikes putting
the brakes on the economy, high-quality growth companies look much more
attractive. That's because they offer the best growth potential in a moderately
growing economy.
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers. The first listing is
Procter & Gamble followed by an up arrow and the phrase "Strong sales and
earnings." The second listing is PepsiCo followed by an up arrow and the
phrase "Robust soft drink/snack food sales." The third listing is May
Department Stores followed by a down arrow and the phrase "Consumers tighten
belts." Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."]
SOLID RETURNS
The market shift has been good news for John Hancock Sovereign Achievers Fund.
That's because the "dividend performer" companies that we follow are
high-quality growth companies that have raised their dividends consistently year
after year. For the six months ended April 30, 1995, the Fund's Class A and B
shares had total returns of 5.98% and 5.70%, respectively, at net asset value.
By comparison, the average growth fund returned 6.53%, according to Lipper
Analytical Services.(1)
Our consumer stocks were the big winners. Procter & Gamble rebounded as
investors realized that fears of brand-name competition were overblown and the
company's sales and earnings were growing nicely. PepsiCo also moved up strongly
as fears about its restaurant division dissipated and its soft drink/snack food
businesses continued to go gangbusters. On the flip side, two of our chemical
companies -- Witco and Rohm Haas -- were lackluster performers, mainly due to
concerns about rising raw material costs. Also, our retailers, including May
Department Stores, suffered as consumers tightened their belts and retail sales
slumped in the first quarter of 1995.
A FEW FAVORITES
One of our favorite stocks is Interpublic Group -- one of the world's largest
advertising agencies. More than two-thirds of the company's revenues come from
overseas, particularly Europe and the Pacific Rim. With the continuing
penetration of consumer products worldwide, Interpublic is likely to be one of
the biggest beneficiaries. The company has delivered consistent earnings --
anywhere from 13% to
[CAPTION]
"OUR CONSUMER STOCKS WERE THE BIG WINNERS."
4
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John Hancock Funds -- Sovereign Achievers Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart
is scaled in increments of 4% from bottom to top, with 8% at the top and 0% at
the bottom. Within the chart, there are three solid bars. The first
represents the 5.98% total return for John Hancock Sovereign Achievers Fund:
Class A. The second represents the 5.70% total return for John Hancock
Sovereign Achievers Fund: Class B. The third represents the 6.53% total return
for the average growth fund. Footnote below reads: "Total returns for John
Hancock Sovereign Achievers Fund are at net asset value with all distributions
reinvested. The average growth fund is tracked by Lipper Analytical Services.
(1) See following page for historical performance information."]
15% a year -- for over a decade. We expect that trend to continue.
Pep Boys -- Manny, Moe and Jack is another interesting holding. The company
not only sells autos parts but is involved in installation, repairs and
servicing. With many gas stations shutting down their service areas, it's
filling a real need. Now located primarily in the Mid-Atlantic and West, Pep
Boys is expanding rapidly into New England, the Midwest and even Puerto Rico.
It may sound unusual to find a fabulous growth company in an industry that
had been almost given up for dead -- the U.S. steel industry. But we did just
that with Nucor, which we bought recently. The industry has undergone a stunning
resurrection, and Nucor is one of the leaders. It's the premier scrap-based
steel minimill in the U.S. While Nucor's fundamentals have been impressive, its
stock has always been a bit pricey for us. Concerns about a slowing economy and
weaker steel prices, however, recently pulled the stock down from $70 to the mid
$50s. In our opinion, the worries are overdone. The industry's fundamentals are
still strong, and Nucor is in the best position to benefit from shrinking supply
and growing demand. So we viewed the recent pullback as a terrific opportunity
to get into a high-quality company.
WHAT'S AHEAD?
As the U.S. economy slows relative to most major industrialized and emerging
economies, we see significant opportunities in companies with large and growing
overseas exposure. That's because the relative contribution to sales and profits
of overseas operations of multinational companies will rise dramatically. We
will continue to look for companies most likely to benefit from this trend.
Current holdings include Procter & Gamble with 52% of its sales outside the U.S.
and General Electric with 42%.
We also believe that high-quality growth stocks will continue to lead the
market higher for the rest of 1995. Attributes of dependability and
sustainability of earnings have been out of fashion for the past couple of
years. Investors have focused on the stronger, yet more volatile, earnings of
cyclical companies. But as a slowing economy clouds earnings projections for
cyclicals, investors will continue the shift back to high-quality growth stocks
with more reliable earnings. With 15% earnings growth, Sysco, the world's
largest food service company, may not have looked attractive last year when
earnings on the S&P 500 Index were 18% to 19%. But it certainly will as the
market's earnings drop back to a more normal level of 8% to 10%.
[CAPTION]
"...WE SEE SIGNIFICANT OPPORTUNITIES IN COMPANIES WITH LARGE AND GROWING
OVERSEAS EXPOSURE."
- -------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE> 6
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds -- Sovereign Achievers Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for the 1-year period and since inception on January 3, 1992, for Class
A shares were 2.60% and 4.37%, respectively, and reflect payment of the maximum
sales charge of 5%. For the 1-year and 5-year periods and since inception on
April 22, 1987, the average annualized total return for Class B shares were
2.29%, 6.97% and 6.74%, respectively, and reflect the applicable contingent
deferred sales charge (maximum contingent deferred sales charge of 5% and
declines to 0% over 6 years). All performance data shown represent past
performance and should not be considered indicative of future performance. For
Class A shares, different sales charges were in effect prior to August 1992 and
are not reflected in the performance data. Returns and principal values of Fund
investments will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
[Sovereign Achievers Fund
Class A shares
Line chart with the heading Sovereign Achievers Fund:
Class A, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines.
The first line represents the value of the Standard &
Poor's 500 Stock Index and is equal to $13,553* as of
April 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the Sovereign
Achievers Fund on January 3, 1992, before sales charge, and
is equal to $12,157 as of April 30, 1995. The third line
represents the Sovereign Achievers Fund after sales charge
and is equal to $11,553 as of April 30, 1995.
Sovereign Achievers Fund
Class B shares
Line chart with the heading Sovereign Achievers Fund:
Class B, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines.
The first line represents the value of the Standard &
Poor's 500 Stock Index and is equal to $22,787* as of
April 30, 1995. The second line represents the value of the
hypothetical $10,000 investment made in the Sovereign
Achievers Fund on April 22, 1987, before contingent
deferred sales charge, and is equal to $16,882 as of April
30, 1995. The third line represents the Sovereign Achievers
Fund after contingent deferred sales charge and is equal to
$16,882 as of April 30, 1995.
*The Standard & Poor's 500 Stock Index is an unmanaged
index that includes 500 widely traded common stocks and is
a commonly used measure of stock market performance.]
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value -- Note C:
Common stocks (cost -- $101,549,507) ...................... $107,442,188
Joint repurchase agreement (cost -- $5,957,000) ........... 5,957,000
Corporate savings account ................................. 16
------------
113,399,204
Receivable for shares sold .................................. 82,713
Receivable for investments sold ............................. 2,520,448
Interest receivable ......................................... 976
Dividends receivable ........................................ 102,250
Other assets ................................................ 1,328
------------
Total Assets ............................. 116,106,919
------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased .............................. 58,078
Payable to John Hancock Advisers, Inc. and
affiliates -- Note B ...................................... 97,497
Accounts payable and accrued expenses ....................... 26,343
------------
Total Liabilities ........................ 181,918
------------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................. 110,131,835
Accumulated net realized loss on investments ................ ( 198,928)
Net unrealized appreciation of investments .................. 5,892,681
Undistributed net investment income ......................... 99,413
------------
Net Assets ............................... $115,925,001
============================================================
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 -- $22,923,345 / 1,892,381 .......................... $ 12.11
==============================================================================
Class B -- $93,001,656 / 7,722,007 ........................... $ 12.04
==============================================================================
MAXIMUM OFFERING PRICE *
Class -- A ($12.11 x 105.26%) ................................ $ 12.75
===============================================================================
<FN>
* On a single retail sale of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends .................................................... $1,006,238
Interest ..................................................... 269,184
------------
1,275,422
------------
Expenses:
Investment management fee -- Note B ........................ 417,444
Distribution/service fee -- Note B
Class A ................................................... 33,060
Class B ................................................... 412,487
Transfer agent fee -- Note B
Class A ................................................... 33,060
Class B ................................................... 126,458
Custodian fee .............................................. 19,636
Registration and filing fees ............................... 14,947
Trustees' fees ............................................. 11,761
Auditing fee ............................................... 10,629
Printing ................................................... 9,673
Legal ...................................................... 714
Miscellaneous .............................................. 2,190
----------
Total Expenses ............................ 1,092,059
------------------------------------------------------------
Net Investment Income ..................... 183,363
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold ........................ ( 269,690)
Change in net unrealized appreciation/depreciation
of investments ............................................. 6,422,919
----------
Net Realized and Unrealized
Gain on Investments ....................... 6,153,229
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ................. $6,336,592
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
---------------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............................................................ $ 183,363 $ 439,388
Net realized gain (loss) on investments sold..................................... ( 269,690) 5,079,274
Change in net unrealized appreciation/depreciation of investments................ 6,422,919 ( 4,547,665)
------------ ------------
Net Increase in Net Assets Resulting from Operations.......................... 6,336,592 970,997
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A -- ($0.0557 and $0.0985 per share, respectively)...................... ( 106,651) ( 192,364)
Class B -- ($0.0226 and $0.0196 per share, respectively)...................... ( 175,761) ( 155,215)
Distributions from net realized gain on investments sold
Class A -- ($0.5169 and $0.4437 per share, respectively)...................... ( 989,803) ( 865,748)
Class B -- ($0.5169 and $0.4437 per share, respectively)...................... ( 4,020,261) ( 3,478,874)
------------ ------------
Total Distributions to Shareholders............................................ ( 5,292,476) ( 4,692,201)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET*............................................. ( 2,842,483) 4,219,619
------------ ------------
NET ASSETS:
Beginning of period............................................................ 117,723,368 117,224,953
------------ ------------
End of period (including undistributed net investment income of
$99,413 and $198,462, respectively)........................................... $115,925,001 $117,723,368
<FN>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
============ ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------- -------
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 133,787 $1,563,859 2,105,977 $25,842,725
Shares issued to shareholders in reinvestment of distributions... 97,420 1,074,543 85,071 1,034,292
------- ---------- --------- ------------
231,207 2,638,402 2,191,048 26,877,017
Less shares repurchased.......................................... (277,275) (3,220,881) (2,139,424) ( 26,191,185)
------- ---------- --------- ------------
Net increase (decrease).......................................... ( 46,068) ($ 582,479) 51,624 $ 685,832
======= ========== ========= ============
CLASS B
Shares sold...................................................... 308,353 $3,592,414 1,454,076 $17,601,685
Shares issued to shareholders in reinvestment of distributions... 353,406 3,883,925 281,030 3,417,866
------- ---------- --------- ------------
661,759 7,476,339 1,735,106 21,019,551
Less shares repurchased.......................................... (841,802) ( 9,736,343) (1,456,639) ( 17,485,764)
------- ---------- --------- ------------
Net increase (decrease).......................................... (180,043) ($2,260,004) 278,467 $ 3,533,787
======= ========== ========= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
---------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period...................... $ 12.02 $ 12.39 $ 10.99 $ 12.81
------ ------ ------ ------
Net Investment Income .................................... 0.05(a) 0.10 0.08(a) 0.06(a)
Net Realized and Unrealized Gain (Loss) on Investments.... 0.62 0.07 1.34 (0.06)
------ ------ ------ ------
Total from Investment Operations.......................... 0.67 0.17 1.42 0.00
------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income...................... (0.06) (0.10) (0.02) (0.07)
Distributions from Net Realized Gain on Investments Sold.. (0.52) (0.44) -- (1.74)
Distributions from Capital Paid-In........................ -- -- -- (0.01)
------ ------ ------ ------
Total Distributions....................................... (0.58) (0.54) (0.02) (1.82)
------ ------ ------ ------
Net Asset Value, End of Period............................ $ 12.11 $ 12.02 $ 12.39 $ 10.99
====== ====== ====== ======
Total Investment Return at Net Asset Value................ 5.98% 1.35% 12.97% 0.19%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................. $22,923 $23,292 $23,372 $ 1,771
Ratio of Expenses to Average Net Assets................... 1.46%* 1.53% 1.60% 1.73%*
Ratio of Net Investment Income to Average Net Assets...... 0.81%* 0.83% 0.64% 0.62%*
Portfolio Turnover Rate................................... 17% 60% 71% 246%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period...................... $ 11.95 $ 12.31 $ 10.97 $ 11.71 $ 9.22 $ 11.52
------ ------ ------ ------ ----- ------
Net Investment Income .................................... 0.01(a) 0.03 0.02(a) 0.01(a) 0.07 0.18
Net Realized and Unrealized Gain (Loss) on Investments.... 0.62 0.07 1.33 1.05 2.67 (2.00)
------ ------ ------ ------ ----- ------
Total from Investment Operations.......................... 0.63 0.10 1.35 1.06 2.74 (1.82)
------ ------ ------ ------ ----- ------
Less Distributions:
Dividends from Net Investment Income...................... (0.02) (0.02) (0.01) (0.03) (0.20) (0.20)
Distributions from Net Realized Gain on Investments Sold.. (0.52) (0.44) -- (1.76) (0.05) (0.28)
Distributions from Capital Paid-In........................ -- -- -- (0.01) -- --
------ ------ ------ ------ ----- ------
Total Distributions...................................... (0.54) (0.46) (0.01) (1.80) (0.25) (0.48)
------ ------ ------ ------ ----- ------
Net Asset Value, End of Period............................ $ 12.04 $ 11.95 $ 12.31 $ 10.97 $ 11.71 $ 9.22
====== ====== ====== ====== ===== =======
Total Investment Return at Net Asset Value................ 5.70% 0.78% 12.34% 7.22% 30.21% (16.46%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................. $93,002 $94,431 $93,853 $23,525 $21,826 $17,714
Ratio of Expenses to Average Net Assets................... 2.06%* 2.10% 2.09% 2.27% 2.24% 2.13%
Ratio of Net Investment Income to Average Net Assets...... 0.21%* 0.25% 0.17% 0.10% 0.66% 1.64%
Portfolio Turnover Rate................................... 17% 60% 71% 246% 217% 165%
<FN>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
(a) On average month end shares outstanding.
(b) Not annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
SOVEREIGN ACHIEVERS FUND ON APRIL 30, 1995. IT'S DIVIDED INTO TWO MAIN
CATEGORIES: COMMON STOCKS AND SHORT-TERM INVESTMENTS. THE MAIN CATEGORY OF
COMMON STOCKS IS FURTHER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS,
WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
Per share earnings and dividends and their compound growth rates are shown for
the most recently reported five year periods on common stocks.
- --------------------------------------------------------------------------------------------------
<CAPTION>
COMPOUND
NUMBER GROWTH
OF SHARES COMMON STOCKS (92.68%) RATE MARKET VALUE
- --------- -------- ------------
<S> <C> <C>
ADVERTISING (2.29%)
70,000 Interpublic Group of Cos., Inc. (The).............. $ 2,660,000
One of the largest advertising agencies in ------------
the world.
Earnings P/S..........$1.17, 1.32, 1.39, 1.69, 1.89 12.7%
Dividends P/S..............$.37, .41, .45, .49, .55 10.4%
Price/Earnings Ratio...........................19.8
BANKS (6.02%)
60,000 NationsBank Corp................................... 3,000,000
Largest superregional bank in Southeast.
Earnings P/S..........$3.34, 1.39, 4.42, 5.42, 6.19 16.7%
Dividends P/S.........$1.42, 1.48, 1.51, 1.64, 1.88 7.3%
Price/Earnings Ratio............................8.2
150,000 Norwest Corp....................................... 3,975,000
Minneapolis-based superregional bank.
Earnings P/S...........$.46, 1.49, 1.53, 1.99, 2.52 53.0%
Dividends P/S..............$.42, .47, .54, .64, .77 16.4%
Price/Earnings Ratio...........................10.1
------------
6,975,000
------------
CAPITAL GOODS (4.99%)
177,500 Myers Industries, Inc.............................. 2,595,938
Manufacturer of polymer and metal products for
the transportation industries.
Earnings P/S.............$.73, .80, .87, 1.05, 1.19 13.0%
Dividends P/S..............$.10, .11, .12, .13, .15 10.7%
Price/Earnings Ratio...........................11.9
85,000 Stewart & Stevenson Services, Inc. 3,187,500
Leading manufacturer of custom diesel and gas
turbine power systems.
Earnings P/S...........$.99, 1.18, 1.35, 1.73, 2.05 20.0%
Dividends P/S..............$.10, .14, .18, .22, .26 27.0%
Price/Earnings Ratio...........................15.1
------------
5,783,438
------------
CHEMICALS -- DIVERSIFIED (9.06%)
40,000* Air Products & Chemicals, Inc. .................... 2,015,000
Produces and distributes industrial gases.
Earnings P/S..........$2.21, 2.32, 2.50, 1.26, 2.81 6.2%
Dividends P/S..............$.69, .75, .83, .89, .95 8.3%
Price/Earnings Ratio...........................18.6
150,000 Crompton & Knowles Corp............................ 2,718,750
Produces and markets specialty chemicals.
Earnings P/S.............$.64, .72, .91, 1.01, 1.02 12.4%
Dividends P/S..............$.20, .25, .31, .38, .46 23.2%
Price/Earnings Ratio...........................17.7
50,000 Rohm & Haas Co..................................... 2,906,250
Producer of plastics and related products.
Earnings P/S..........$2.91, 2.70, 2.52, 1.87, 3.97 8.1%
Dividends P/S.........$1.22, 1.24, 1.28, 1.36, 1.44 4.2%
Price/Earnings Ratio...........................14.9
100,000 Witco Corp......................................... 2,862,500
Producer of special petroleum chemicals.
Earnings P/S...........$1.53, 1.65, 1.18, .65, 1.93 6.0%
Dividends P/S.............$.86, .89, .92, .94, 1.03 4.6%
Price/Earnings Ratio...........................15.2 ------------
10,502,500
------------
COMMERCIAL SERVICES (8.45%)
50,000* Alco Standard Corporation.......................... 3,543,750
Distributes office products and paper products.
Earnings P/S...........$1.62, 2.07, 2.36, .10, 1.48 NMF
Dividends P/S.............$.85, .89, .93, .97, 1.01 4.4%
Price/Earnings Ratio...........................49.0
120,000 Ecolab Inc......................................... 2,760,000
Leading developer/marketing of cleaning products.
Earnings P/S...........$.93, 1.00, 1.05, 1.25, 1.26 7.9%
Dividends P/S..............$.33, .35, .36, .38, .44 7.5%
Price/Earnings Ratio...........................19.3
125,000 Sysco Corp......................................... 3,500,000
Largest distributor of foodservice products.
Earnings P/S............$.81, .90, 1.00, 1.16, 1.33 13.2%
Dividends P/S..............$.10, .14, .22, .28, .36 37.7%
Price/Earnings Ratio...........................21.1
------------
9,803,750
------------
CONSUMER DURABLES (9.76%)
125,000 Fleetwood Enterprises, Inc.... 2,875,000
Largest U.S. manufacturer of recreational vehicles
and manufactured housing.
Earnings P/S...............$.82, .86, 1.17, 1.30, 1.97 24.5%
Dividends P/S.................$.40, .43, .45, .49, .53 7.3%
Price/Earnings Ratio...............................9.2
140,000 Juno Lighting, Inc............ 2,905,000
Manufactures/markets full line of recessed and
track lighting fixtures.
Earnings P/S................$.74, .72, .88, 1.01, 1.27 14.5%
Dividends P/S.................$.13, .14, .19, .23, .26 18.9%
Price/Earnings Ratio..............................16.3
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH
OF SHARES COMMON STOCKS RATE MARKET VALUE
- --------- -------- ------------
<S> <C> <C>
CONSUMER DURABLES (CONTINUED)
75,000 Leggett & Platt, Inc............................... $ 2,887,500
Produces intermediate products for the home
furnishings industry.
Earnings P/S...........$.70, 1.28, 1.74, 2.24, 2.93 43.0%
Dividends P/S..............$.42, .43, .46, .54, .62 10.2%
Price/Earnings Ratio...........................14.3
100,000 Superior Industries International, Inc. 2,650,000
Manufacturer of automotive wheels.
Earnings P/S............$.37, .75, 1.10, 1.55, 1.98 52.1%
Dividends P/S..............$.08, .09, .10, .11, .15 17.0%
Price/Earnings Ratio...........................12.9
------------
11,317,500
------------
CONSUMER NON-DURABLES (14.57%)
115,000 McCormick & Co., Inc............................... 2,530,000
Manufacturer of spices, mixes, teas, and other
food related products.
Earnings P/S...........$.90, 1.00, 1.16, 1.24, 1.35 10.7%
Dividends P/S..............$.23, .28, .38, .44, .48 20.2%
Price/Earnings Ratio...........................16.4
100,000 PepsiCo Inc........................................ 4,162,500
Second largest soft drink company.
Earnings P/S..........$1.40, 1.38, 1.64, 1.99, 2.27 12.8%
Dividends P/S..............$.38, .46, .51, .61, .68 15.7%
Price/Earnings Ratio...........................17.2
60,000 Procter & Gamble Co. (The)......................... 4,192,500
Produces laundry and cleaning products,
personal care items, food, beverages, etc.
Earnings P/S...........$2.43, 2.57, 2.54, .70, 2.43 NMF
Dividends P/S..........$.93, 1.00, 1.08, 1.17, 1.32 9.2%
Price/Earnings Ratio...........................27.3
125,000 Sara Lee Corp...................................... 3,484,375
Manufactures brand name packaged foods and
consumer products
Earnings P/S...........$1.03, 1.49, 1.36, 1.47, .52 NMF
Dividends P/S..............$.42, .47, .50, .58, .64 11.1%
Price/Earnings Ratio...........................53.6
50,000* VF Corporation..................................... 2,525,000
Manufactures and markets jeanswear,
sportswear/activewear, intimate/occupational
apparel.
Earnings P/S..........$1.44, 3.00, 4.07, 3.78, 4.28 31.3%
Dividends P/S.........$1.00, 1.02, 1.11, 1.22, 1.30 6.8%
Price/Earnings Ratio...........................11.8
------------
16,894,375
------------
DIVERSIFIED OPERATIONS (8.97%)
100,000* Corning Inc........................................ 3,337,500
Worldwide technology and healthcare services
company.
Earnings P/S.........$1.55, 1.75, 1.32, (.07), 1.39 NMF
Dividends P/S..............$.45, .53, .62, .68, .69 11.3%
Price/Earnings Ratio...........................25.9
70,000 General Electric Co................................ 3,920,000
Dominant force in home appliances, electrical
power, and financial services.
Earnings P/S..........$2.48, 2.54, 2.55, 2.57, 3.56 9.5%
Dividends P/S..........$.94, 1.02, 1.12, 1.26, 1.44 11.3%
Price/Earnings Ratio...........................15.2
30,000 ITT Corp........................................... 3,135,000
Conglomerate with interest in manufacturing,
finance, and hotels.
Earnings P/S........$7.84, 5.25, (2.69), 5.75, 7.76 NMF
Dividends P/S.........$1.46, 1.57, 1.66, 1.78, 1.90 6.8%
Price/Earnings Ratio...........................13.2
------------
10,392,500
------------
HEALTHCARE (6.20%)
125,000 Abbott Laboratories................................ 4,921,875
Major pharmaceutical and healthcare firm.
Earnings P/S..........$1.15, 1.32, 1.53, 1.73, 1.94 14.0%
Dividends P/S..............$.40, .48, .58, .66, .74 16.6%
Price/Earnings Ratio...........................18.4
30,000 Schering-Plough Corp............................... 2,261,250
Major pharmaceutical corporation.
Earnings P/S..........$2.63, 3.18, 3.77, 4.41, 5.01 17.5%
Dividends P/S.........$1.07, 1.27, 1.50, 1.74, 1.98 16.6%
Price/Earnings Ratio...........................14.9
------------
7,183,125
------------
INSURANCE (1.84%)
20,000 American International Group, Inc.................. 2,135,000
Leading global insurance company. ------------
Earnings P/S..........$4.64, 4.96, 5.32, 6.14, 7.09 11.2%
Dividends P/S..............$.27, .31, .35, .39, .43 12.3%
Price/Earnings Ratio...........................14.7
METALS -- STEEL (2.07%)
50,000* Nucor Corporation............. 2,400,000
Manufacturer of steel and steel products ------------
for steel service centers, fabricators
and manufacturers.
Earnings P/S.............$.86, .78, .98, 1.57, 2.97 36.3%
Dividends P/S..............$.12, .13, .14, .16, .18 10.7%
Price/Earnings Ratio...........................18.9
POLLUTION CONTROL (2.12%)
90,000 WMX Technologies Inc.......... 2,452,500
Nation's largest provider of waste management ------------
services.
Earnings P/S...........$1.52, 1.28, 1.88, .87, 1.62 1.6%
Dividends P/S...............$.34, .40, .48, .56 .60 15.3%
Price/Earnings Ratio...........................17.0
PUBLISHING (2.07%)
40,000 A.H. Belo Corp..................................... 2,405,000
Publishes 8 newspapers and operates 6 ------------
TV stations.
Earnings P/S..........$1.31, 1.08, 1.92, 2.32, 3.50 27.9%
Dividends P/S..............$.48, .52, .54, .56, .60 5.7%
Price/Earnings Ratio...........................16.6
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH
OF SHARES COMMON STOCKS RATE MARKET VALUE
- --------- -------- ------------
<S> <C> <C>
RETAIL (7.17%)
60,000 May Department Stores Co. (The).................... $ 2,175,000
Operates 318 department stores and 3,295
shoe stores.
Earnings P/S..........$2.00, 2.01, 2.36, 2.77, 3.06 11.2%
Dividends P/S.............$.77, .81, .83, .90, 1.01 7.0%
Price/Earnings Ratio...........................11.0
100,000* Pep Boys-Manny, Moe & Jack......................... 2,575,000
Retailer of automotive parts and accessories,
automotive maintenance, and service and
installation of parts.
Earnings P/S............$..67, .69, .90, 1.06, 1.32 18.5%
Dividends P/S..............$.12, .13, .14, .15, .17 9.1%
Price/Earnings Ratio...........................24.7
150,000 Wal-Mart Stores, Inc............................... 3,562,500
Operates a chain of discount department
stores.
Earnings P/S.............$.57, .69, .87, 1.03, 1.18 20.0%
Dividends P/S..............$.07, .09, .11, .13, .16 23.0%
Price/Earnings Ratio...........................19.4
------------
8,312,500
------------
TELECOMMUNICATIONS (1.93%)
60,000 Telephone & Data Systems, Inc...................... 2,235,000
Holding company providing telephone, cellular, ------------
and radio paging.
Earnings P/S..............$.85, .77, .70, .70, 1.28 10.8%
Dividends P/S...............$.28, .30, .32,.34, .36 6.5%
Price/Earnings Ratio...........................30.9
TOYS/GAMES/HOBBY PROD (2.19%)
80,000 Hasbro Inc......................................... 2,540,000
World's leading manufacturer and marketer of ------------
toys, games, puzzles, and infant care products.
Earnings P/S...........$1.05, .95, 2.04, 2.22, 1.98 17.2%
Dividends P/S..............$.13, .15, .19, .24, .27 20.1%
Price/Earnings Ratio...........................16.0
TRANSPORTATION (2.98%)
150,000 Atlantic Southeast Airlines, Inc................... 3,450,000
Largest regional airline in the Southeastern U.S. ------------
Earnings P/S............$.76, .99, 1.06, 1.50, 1.47 17.9%
Dividends P/S..............$.16, .20, .24, .28, .32 18.9%
Price/Earnings Ratio...........................12.6
TOTAL COMMON STOCKS
(Cost $101,549,507) 107,442,188
------------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
(000's SHORT-TERM INTEREST
OMITTED) INVESTMENTS (5.14%) RATE MARKET VALUE
- ---------- -------- -------------
<S> <C> <C>
$5,957 JOINT REPURCHASE AGREEMENT (5.14%)
Investment in a joint repurchase agreement
transaction with B.T. Securities Corp., -
Dated 04-28-95, Due 05-01-95 (secured by
U.S. Treasury Bond, 10.750%, Due 08-15-05;
and U.S. Treasury Note, 6.875%,
Due 10-31-96) Note A............................... 5.93% $ 5,957,000
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%................................. 16
------------
TOTAL SHORT-TERM INVESTMENTS 5,957,016
------------
TOTAL INVESTMENTS (97.82%) $113,399,204
====== ============
<FN>
* Securities, other than short-term investments, newly added to the
portfolio during the period ended April 30, 1995.
NMF No Meaningful Figure
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
John Hancock Funds -- Sovereign Achievers Fund
<TABLE>
HISTORICAL DATA (UNAUDITED)
The table below shows the record of the Fund from its inception in 1987.
- ------------------------------------------------------------------------
<CAPTION>
CLASS A PER SHARE
YEAR --------------------------------------
ENDED SHARES NET ASSET CAPITAL GAINS
OCT. 31 OUTSTANDING DIVIDENDS VALUE DISTRIBUTION
- ------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
1992(1) 161,120 $0.0700 $10.99 $1.7400
1993 1,886,825 0.0240 12.39 $ --
1994 1,938,449 0.0990 12.02 0.4400
1995* 1,892,381 0.0557 12.11 0.5169
</TABLE>
<TABLE>
<CAPTION>
CLASS B PER SHARE
YEAR --------------------------------------
ENDED SHARES NET ASSET CAPITAL GAINS
OCT. 31 OUTSTANDING DIVIDENDS VALUE DISTRIBUTION
- ------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
1987(2) 1,680,681 $0.0200 $ 8.34 $ --
1988 1,450,348 0.0900 10.29 0.1400
1989 2,067,791 0.1200 11.52 0.0900
1990 1,920,447 0.2000 9.22 0.2800
1991 1,863,882 0.2000 11.71 0.0500
1992 2,144,696 0.0300 10.97 1.7600
1993 7,623,583 0.0130 12.31 $ --
1994 7,902,050 0.0200 11.95 0.4400
1995* 7,722,007 0.0226 12.04 0.5169
<FN>
(1) For the period January 3, 1992 (commencement of operations) to October 31,
1992.
(2) For the period April 22, 1987 (commencement of operations) to October 31,
1987.
* For the period ended April 30, 1995.
</TABLE>
<TABLE>
DIVIDEND INCREASES (UNAUDITED)
Listed below are the most recent dividend increases for the common stocks held
in the Sovereign Achievers Fund as of April 30, 1995.
- ------------------------------------------------------------------------------
<CAPTION>
PERCENT OF
DIVIDEND INCREASE
-----------------
<S> <C>
A.H. Belo Corp................................ 6.7%
Abbott Laboratories........................... 10.5
Air Products & Chemicals, Inc................. 6.5
Alco Standard Corporation..................... 4.0
American International Group, Inc............. 15.0
Atlantic Southeast Airlines, Inc.............. 6.3
Corning, Inc.................................. 5.9
Crompton & Knowles Corp....................... 12.5
Ecolab Inc.................................... 13.6
Fleetwood Enterprises, Inc.................... 12.0
General Electric Co........................... 13.9
Hasbro Inc.................................... 14.3
Interpublic Group of Cos., Inc................ 12.0
ITT, Corp..................................... 9.2
Juno Lighting, Inc............................ 14.3
Leggett & Platt............................... 12.5
May Department Stores (The)................... 9.6
McCormick & Co., Inc.......................... 8.3
Myers Industries, Inc......................... 11.1
NationsBank Corp.............................. 8.7
Norwest Corp.................................. 13.5
Nucor Corporation............................. 57.8
Pep Boys -- Manny, Moe & Jack................. 11.8
PepsiCo Inc................................... 11.1
Procter & Gamble (The)........................ 12.9
Rohm & Haas Co................................ 5.7
Sara Lee Corp................................. 6.3
Schering-Plough Corp.......................... 15.4
Stewart & Stevenson Services, Inc............. 16.7
Superior Industries International, Inc........ 50.0
Sysco Corp.................................... 22.2
Telephone & Data Systems, Inc................. 5.6
VFCorporation................................. 6.3
Wal-Mart Stores, Inc.......................... 17.6
Witco Corp.................................... 12.0
WMX Technologies Inc.......................... 15.4
</TABLE>
The average dividend increase for this group was 13.54%
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Sovereign Achievers Fund (the "Fund"),
John Hancock Gold & Government Fund, John Hancock Regional Bank Fund, John
Hancock Sovereign U.S. Government Income Fund and John Hancock Managed
Tax-Exempt Fund. Prior to January 1, 1995, John Hancock Gold and Government Fund
was known as John Hancock Freedom Gold and Government Fund, John Hancock
Regional Bank Fund was known as John Hancock Freedom Regional Bank Fund and John
Hancock Managed Tax-Exempt Fund was known as John Hancock Freedom Managed
Tax-Exempt Fund.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B shares. The shares of each class represent an
interest in the same portfolio of investments of the Fund and have equal rights
to voting, redemption, 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/service expenses under terms of a distribution plan,
have exclusive voting rights regarding such distribution plan. Significant
accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
daily to each class of shares based on the appropriate net assets of the
respective classes. Distribution/service fees 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.
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 (a) 0.75% of the first $500,000,000 of the
Fund's average daily net asset value and (b) 0.65% of the Fund's average daily
net asset value in excess of $500,000,000. The Adviser has entered into a
service agreement with Sovereign Asset Management Corporation ("SAMCORP") an
affiliate of the Adviser, to provide certain investment research and portfolio
management services to the Fund, for which the Adviser pays SAMCORP 40% of its
management fee.
In the event normal operating expenses of the Fund, exclusive of
certain expenses prescribed by state law, are in excess of the most restrictive
state limit where the Fund is registered to sell shares of beneficial interest,
the fee payable to the Adviser will be reduced to the extent of such excess, and
the Adviser will make additional arrangements necessary to eliminate any
remaining excess expenses. The current limits are 2.5% of the first $30,000,000
of the Fund's average daily net asset value, 2.0% of the next $70,000,000, and
1.5% of the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. For the period ended April 30, 1995, net sales charges
received on the sales of Class A shares amounted to $37,200. Out of this amount,
$5,477 was retained and used for printing prospectuses, advertising, sales
literature and other purposes, $12,611 was paid as sales commissions to
unrelated broker-dealers, and $19,112 was paid as sales commissions to sales
personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony,
Incorporated ("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"). The Adviser's
indirect parent, John Hancock Mutual Life Insurance Company, is the indirect
sole shareholder of Distributors and John Hancock Freedom Securities Corporation
and its subsidiaries which include FDC, Tucker Anthony and Sutro, all of which
are broker-dealers.
Class B shares that 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 April 30, 1995
contingent deferred sales charges received by JH Funds amounted to $167,357.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted Distribution
Plans with respect to Class A and Class B shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Accordingly, the Fund will make payments to
the Co-Distributors, for distribution and service expenses which, in total, will
not exceed on an annual basis 0.30% of Class A average daily net assets and
1.00% of Class B average daily net assets to reimburse the Co-Distributors for
their distribution/service costs. Up to a maximum of 0.25% of such payments may
be service fees as defined by the amended Rules of Fair Practice of the National
Association of Securities Dealers. Under the amended Rules of Fair Practice,
curtailment of a portion of the Fund's 12b-1 payments could occur under certain
circumstances. In order to comply with this rule, the 12b-1 fee was decreased on
Class B shares to 0.85% effective October 1, 1994.
The Fund has a transfer agent agreement with John Hancock Investor
Services Corporation ("Investor Services"), a wholly-owned subsidiary of The
Berkeley Financial Group. Prior to January 1, 1995, Investor Services was known
as John Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays
transfer agent fees based on transaction volume and the number of shareholder
accounts. Prior to Janaury 1,
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds -- Sovereign Achievers Fund
1995, the Fund paid a monthly transfer agent fee equivalent, on an annual basis,
to 0.30% and 0.27% of the Fund's average daily net asset value of Class A and
Class B shares of the Fund, respectively, plus out of pocket expenses incurred
by Investor Services on behalf of the Fund for proxy mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and
its affiliates, as well as a Trustee of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid for
1995, the unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund will make investments into other John Hancock funds,
as applicable, to cover its liability with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be recorded
on the Fund's books as an other asset. The deferred compensation liability will
be marked to market on a periodic basis and income earned by the investment will
be recorded on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
investments, during the period ended April 30, 1995, aggregated $18,122,286 and
$26,604,183 respectively.
The cost of investments owned at April 30, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $107,506,507. Gross
unrealized appreciation and depreciation of investments aggregated $9,435,928
and $3,543,247, respectively, resulting in net unrealized appreciation of
$5,892,681.
16
<PAGE> 17
NOTES
John Hancock Funds -- Sovereign Achievers Fund
17
<PAGE> 18
NOTES
John Hancock Funds -- Sovereign Achievers Fund
18
<PAGE> 19
NOTES
John Hancock Funds -- Sovereign Achievers Fund
.
19
<PAGE> 20
[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."]
Bulk Rate
U.S. Postage
PAID
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 Brockton, MA
Permit No. 582
This report is for the information of shareholders of the John Hancock
Sovereign Achievers 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."]
JHF 350SA 04/95
<PAGE> 21
John Hancock Funds
- -------------------------------------------------------------------------------
REGIONAL
BANK
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 22
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
James K. Schmidt
Senior Vice President
Anne M. McDonley
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential risks as well as the potential rewards of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
sgive you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information,
feel free to call one of our Customer Service Representatives at 1-800-225-5291,
from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 23
BY JAMES K. SCHMIDT, CFA, SENIOR VICE PRESIDENT AND
PORTFOLIO MANAGER
JOHN HANCOCK
REGIONAL BANK FUND
BANK STOCKS RECAPTURE LOST GROUND; MERGERS AND
SHAREHOLDER ACTIVISM COMPLEMENT HEALTHY EARNINGS
After painfully adjusting to rising interest rates during 1994, the stock market
has broken through to new highs so far in 1995. Investors seem to believe that
rates have stabilized and the Federal Reserve may indeed have engineered a "soft
landing" -- that is, a moderately growing economy with low inflation. This
belief propelled the S&P 500 Index more than 11% over the last six months.
Bank and thrift stocks mirrored the stock market's trend but with greater
variation. After a steeper sell-off in the fourth quarter of 1994, the financial
group rebounded sharply, outperforming the overall market so far in 1995. John
Hancock Regional Bank Fund benefited from the resurgence. For the six months
ended April 30, 1995, the Fund's Class A and B shares returned 7.96% and 7.57%,
respectively, at net asset value. Those returns compared favorably to the 5.91%
return for the average financial services fund, according to Lipper Analytical
Services.(1)
Why have bank and thrift stocks rallied so strongly? As we discussed in the
annual report six months ago, we believed that the fourth quarter sell-off in
banks and thrifts was a temporary pullback, not the start of a prolonged
downturn. In fact, we saw it as a great opportunity to pick up holdings at
bargain basement prices. And sure enough, as investors' interest-rate fears
eased, the group bounced back nicely. What sparked the upward move was a
combination of stronger-than-expected fourth quarter earnings and several
headline mergers.
[A 2 1/4" x 3 1/4" photo of James Schmidt. Caption reads: "James K. Schmidt,
Portfolio Manager."]
[CAPTION]
"...THE FINANCIAL GROUP REBOUNDED SHARPLY..."
3
<PAGE> 24
John Hancock Funds-Regional Bank Fund
FUNDAMENTALS STILL HEALTHY
After record-breaking earnings in 1993, banks faced a more difficult, rising
rate environment in 1994. Yet, according to FDIC data, commercial bank operating
earnings actually increased 16.2% over 1993. That's mainly because net interest
margins -- the spread banks earn between what they charge borrowers (prime rate)
and pay depositors (deposit rates) -- remained relatively wide. For the year,
average net interest margins narrowed only four basis points, from 4.40% to
4.36%. This is notable given the steep, three percentage point increase in
short-term rates.
Several factors have kept bank margins at healthy levels. As the Fed raised
rates last year, banks hiked their prime rates but kept deposit rates relatively
steady. What's more, because the recent rate hikes have been accompanied by
healthy commercial and consumer loan growth, most banks have been able to book
higher-yielding assets to offset any increase in deposit costs. And finally, a
sharp drop in problem loans has reduced credit costs.
For 1995, we're only expecting a minor compression of about 10 to 20 basis
points in bank interest margins. In addition, with takeovers forcing banks to
cut costs, the industry's overhead ratio is the lowest since the 1950s. Given
that, our forecast calls for bank earnings to increase 8% to 10% in 1995.
Thrifts, on the other hand, are likely to report more moderate gains. Because
they're more interest-rate sensitive, thrifts saw their margins squeezed more
than banks last year. As a result, their 1994 earnings contracted slightly from
1993 levels. But with rates starting to stabilize, so, too, should thrift
margins. For 1995, we expect to see thrifts post earnings increases in the range
of 2% to 5%.
VALUE IN BANKS
Despite the recent rally, bank stocks are still surprisingly inexpensive. The
average regional bank stock in the Fund is trading at approximately 9.5 times
1995 estimated earnings versus 15.5 times for the broad market, as measured by
the S&P 500 Index. That means bank stocks are selling at a 40% discount to the
market, which is still near the inexpensive end of their historical range. We
expect this discount to narrow as bank stocks continue their upward move.
ON THE MERGER FRONT
In the last six months, nine of the Fund's holdings have announced that they're
going to be acquired. Two deals were particularly noteworthy. First, Shawmut
National agreed to be bought by Fleet Financial Group. This is the first "large
bank" takeover in more than a year. With the Riegle-Neal Interstate Banking and
Branching Efficiency Act taking effect on October 1, 1995, we expect to see more
mergers between major banks.
The other takeover of note is Michigan National's sale to National Australia
Bank. What's interesting about this deal is how it
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is Glenfed
followed by an up arrow and the phrase "Investors turn bullish on California
thrifts." The second listing is First American followed by an up arrow and the
phrase "Market wakes up to attractive fundamentals and great franchise value."
The third listing is Bancorp Hawaii followed by a down arrow and the phrase
"Weak local economy and rising rates keep stock out of rally." Footnote below
reads: "See "Schedule of Investments." Investment holdings are subject to
change."]
[CAPTION]
"...BANK STOCKS ARE STILL SURPRISINGLY INEXPENSIVE."
4
<PAGE> 25
John Hancock Funds-Regional Bank Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart is
scaled in increments of 2% from top to bottom, with 8% on the left and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
7.96% total return for John Hancock Regional Bank Fund: Class A. The second
represents the 7.57% total return for John Hancock Regional Bank Fund: Class B.
The third represents the 5.91% total return for the average financial services
fund. Footnote below reads: "Total returns for John Hancock Regional Bank Fund
are at net asset value with all distributions reinvested. The average financial
services fund is tracked by Lipper Analytical Services.(1) See page 7 for
historical performance information."]
came about. A major shareholder, Michael Price of Mutual Shares, took a large
position in Michigan National and initiated a proxy battle to replace the board.
His efforts culminated in the sale of the bank to National Australia at a
significant premium.
SHAREHOLDER ACTIVISIM
Compass Bancshares, one of our largest holdings, has grabbed the spotlight
recently as a dissident director, Harry Brock, attempted to get the Birmingham,
Alabama bank to consider a premium buyout offer from First Union. Although
management has done an excellent job running Compass, we sided with the
dissident group. That's because we didn't believe that management was looking
out for the shareholders' best interests when it dismissed First Union's bid
and subsequently showed interest in a no-premium "merger of equals" with
another Birmingham bank. Though Mr. Brock lost by a narrow margin, this case of
shareholder activism drives home the point that all managements must consider
what's best for shareholders -- and not themselves -- in the merger process.
NEWS FROM WASHINGTON
National interstate banking becomes law in less than six months. This
long-awaited legislation is important because it removes the last barrier to
nationwide banking and should lead to even more consolidation over the next
several years. In addition, other regulatory changes are adding to the appeal of
bank stocks:
- -REPEAL OF THE GLASS-STEAGALL ACT, which has separated commercial banking from
securities underwriting for sixty years, could afford banks broader brokerage
and/or insurance distribution powers. Due to the complexity and
highly-politicized nature of this legislation, any near-term resolution is
unlikely. Longer term, however, we're likely to see less regulation and,
therefore, more revenue potential.
- -FDIC deposit premiums are slated to be reduced for most institutions insured by
the Bank Insurance Fund, mainly commercial banks. By late 1995, the rate for
most banks could go from 23 cents to 4 cents per $100 in deposits. That could
boost earnings by 6%. The rub here is that entities insured by the Savings
Association Insurance Fund, mostly thrifts, get no reduction. Some compromise
needs to be reached and, therefore, banks will likely see a smaller windfall.
- -THE OFFICE OF THRIFT SUPERVISION (OTS), the primary thrift regulator, recently
approved several stock repurchases. At issue here is the excess capital many
thrifts generated in conversions from
[CHART]
"NATIONAL INTERSTATE BANKING BECOMES LAW IN LESS THAN SIX MONTHS."
5
<PAGE> 26
JOHN HANCOCK FUNDS - REGIONAL BANK FUND
[Chart with heading "Top Five Common Stock Holdings" at top of left hand column.
The chart lists five holdings: 1) First of America Bank Corp. 2.1% 2) First
Interstate Bancorp 1.9% 3) Integra Financial Corp. 1.9% 4) Shawmut National
Corp. 1.9% 5) GP Financial 1.9%. A footnote below reads: "As a percentage of net
assets on April 30, 1995."]
mutual ownership to public ownership. Unable to deploy the capital prudently in
loans, thrifts want to buy back their shares, but need special regulatory
clearance. OTS-approved repurchases add to earnings and generally support stock
prices. We have investments in many of the recently-converted thrifts.
PORTFOLIO COMPOSITION...AND OUTLOOK
Strategically, we continued our focus on undervalued regional banks and thrifts
with healthy earnings prospects and the potential to benefit from consolidation.
While the Fund is still geographically diverse, we've recently added to holdings
in states -- such as Virginia and Missouri -- that will benefit most from the
new banking legislation. We have been especially interested in two groups of
stocks that are at opposite ends of the size spectrum. One is the mid-sized
regional banks -- those with $10 to $30 billion in assets. These are just below
the "superregional" banks in size. While we think that the superregionals such
as Banc One will be survivors over the next decade of consolidation, we believe
many of the mid-sized regionals will disappear through mergers. Another category
we like is mutual thrifts that have recently converted to public ownership.
These stocks tend to sell well under tangible book value and should benefit from
share repurchases and merger activity.
At the time of our last report, the Fund was closed to new shareholders.
Large inflows of money during the first half of 1994 made it difficult to stay
fully invested in the type of small bank stocks we favor. By mid-July, our cash
position was over 25%, so we suspended sales to new shareholders until we could
put the money to work. By year-end, that task was complete and we felt that we
could re-open the Fund without being overwhelmed with new cash flows. Since
re-opening the Fund on December 27, 1994, sales have been brisk, but manageable,
and we've been able to invest the cash judiciously.
Looking ahead, we continue to see solid, long-term investment value in bank
and thrift stocks. The economic environment is ideal: Banks do best in a low
inflation, slow growth economy. The stocks are inexpensive: Despite increasing
profitability, the thrift and bank group still carries a low valuation, trading
at just 40% of the market multiple. The fundamentals are positive: Favorable
earnings and continued merger activity both augur well for stock prices. While
short-term volatility can be expected, we're confident that bank and thrift
stocks will be able to generate attractive returns over the next several years.
- -------------------------------------------------------------------------------
(1)Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is lower.
[CAPTION]
"...WE CONTINUE TO SEE SOLID, LONG-TERM INVESTMENT VALUE IN BANK
AND THRIFT STOCKS."
6
<PAGE> 27
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Regional Bank Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annual total returns
for the 1-year period and since inception on January 3, 1992 for Class A shares
were 5.68% and 22.10%, respectively, and reflect payment of the maximum sales
charge of 5%. For the 1-year and 5-year periods and since inception on October
4, 1985, the average annualized total returns for Class B shares were 5.53%,
21.57% and 19.16%, respectively, and reflect the applicable contingent deferred
sales charge (maximum contingent deferred sales charge is 5% and declines to 0%
over 6 years). All performance data shown represent past performance and should
not be considered indicative of future performance. For Class A shares,
different sales charges were in effect prior to August 1992 and are not
reflected in the performance data. Returns and principal values of Fund
investments will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost. See the prospectus for risks
associated with industry segment investing.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF FUND
[Regional Bank Fund
Class A shares
Line chart with the heading Regional Bank Fund: Class A, representing the growth
of a hypothetical $10,000 investment over the life of the fund. Within the chart
are three lines.
The first line represents the value of the hypothetical $10,000 investment made
in the Regional Bank Fund on January 3, 1992, before sales charge, and is equal
to $20,733 as of April 30, 1995. The second line represents the Regional Bank
Fund after sales charge and is equal to $19,695 as of April 30, 1995. The third
line represents the value of the Standard & Poor's 500 Stock Index and is equal
to $13,553* as of April 30, 1995.
Regional Bank Fund
Class B shares
Line chart with the heading Regional Bank 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 value of the hypothetical $10,000 investment made
in the Regional Bank Fund on October 4, 1985 and is equal to $54,333** as of
April 30, 1995. The second line represents the value of the Standard & Poor's
500 Stock Index and is equal to $38,459* as of April 30, 1995.
* The Standard & Poor's 500 Stock Index is an unmanaged index that includes 500
widely traded common stocks and is a commonly used measure of stock market
performance.
** No applicable contingent deferred sales charge.]
7
<PAGE> 28
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks and warrants
(cost - $668,559,846)............................... $759,512,437
Preferred stocks (cost - $21,719,681)................. 22,103,239
Bonds (cost - $2,689,561)............................. 2,925,500
Joint repurchase agreement (cost - $79,503,000)....... 79,503,000
Corporate savings account............................. 31,600
------------
864,075,776
Receivable for investments sold......................... 552,295
Receivable for shares sold.............................. 7,157,386
Dividends receivable.................................... 1,477,472
Interest receivable..................................... 67,357
Prepaid assets.......................................... 139,506
Other assets............................................ 3,662
------------
Total Assets......................... 873,473,454
----------------------------------------------------
LIABILITIES:
Payable for investments purchased....................... 7,484,550
Payable for shares repurchased.......................... 913,870
Payable to John Hancock Advisers, Inc. and
affiliates - Note B................................... 675,793
Accounts payable and accrued expenses................... 32,709
------------
Total Liabilities.................... 9,106,922
----------------------------------------------------
NET ASSETS:
Capital paid-in......................................... 770,192,121
Accumulated net realized gain on investments............ 1,917,056
Net unrealized appreciation of investments.............. 91,572,088
Undistributed net investment income..................... 685,267
------------
Net Assets........................... $864,366,532
====================================================
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, respectively)
Class A - $245,307,952/10,870,943....................... $ 22.57
=======================================================================
Class B - $619,058,580/27,544,400....................... $ 22.47
=======================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($22.57 x 105.26%)............................ $ 23.76
=======================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends............................................... $12,301,683
Interest................................................ 1,868,029
-----------
14,169,712
-----------
Expenses:
Investment management fee - Note B.................... 2,862,258
Distribution/service fee - Note B
Class A.............................................. 316,943
Class B.............................................. 2,596,398
Transfer agent fee - Note B
Class A.............................................. 245,726
Class B.............................................. 574,991
Trustees' fees........................................ 89,223
Custodian fee......................................... 76,597
Registration and filing fees.......................... 25,763
Printing.............................................. 19,316
Legal fees............................................ 14,349
Miscellaneous......................................... 12,923
Auditing fee.......................................... 12,429
-----------
Total Expenses....................... 6,846,916
---------------------------------------------------
Net Investment Income................ 7,322,796
---------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold................... 1,917,070
Change in net unrealized appreciation/depreciation
of investments........................................ 48,860,653
-----------
Net Realized and Unrealized
Gain on Investments.................. 50,777,723
---------------------------------------------------
Net Increase in Net Assets
Resulting from Operations............ $58,100,519
===================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 29
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
---------------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income......................................................................... $ 7,322,796 $ 6,043,134
Net realized gain on investments sold......................................................... 1,917,070 11,428,717
Change in net unrealized appreciation/depreciation of investments............................. 48,860,653 ( 7,116,756)
------------ -----------
Net Increase in Net Assets Resulting from Operations........................................ 58,100,519 10,355,095
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.2477 and $0.3356 per share, respectively)..................................... ( 2,489,022) ( 2,449,060)
Class B - ($0.1729 and $0.2112 per share, respectively)..................................... ( 4,373,219) ( 3,373,113)
Distributions from net realized gain on investments sold
Class A - ($0.3413 and $1.0644 per share, respectively)..................................... ( 3,288,461) ( 4,773,906)
Class B - ($0.3413 and $1.0644 per share, respectively)..................................... ( 8,137,395) ( 8,743,106)
------------ ------------
Total Distributions to Shareholders........................................................ ( 18,288,097) ( 19,339,185)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET*............................................................ 85,369,116 482,203,467
------------ ------------
NET ASSETS:
Beginning of period........................................................................... 739,184,994 265,965,617
------------ ------------
End of period (including undistributed net investment income of $685,267 and $224,712,
respectively)................................................................................ $864,366,532 $739,184,994
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1994
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 2,724,382 $ 58,374,485 7,852,429 $170,793,204
Shares issued to shareholders in reinvestment of distributions... 254,773 5,129,630 323,27 6,649,805
--------- ------------ ---------- ------------
2,979,155 63,504,115 8,175,703 177,443,009
Less shares repurchased.......................................... (2,192,304) ( 46,716,161) ( 2,446,139) ( 52,952,434)
--------- ------------ ---------- ------------
Net increase..................................................... 786,851 $ 16,787,954 5,729,564 $124,490,575
========= ============ ========== ============
CLASS B
Shares sold...................................................... 4,634,508 $ 99,505,621 17,745,423 $386,853,695
Shares issued to shareholders in reinvestment of distributions... 458,252 9,156,483 519,637 10,621,844
--------- ------------ ---------- ------------
5,092,760 108,662,104 18,265,060 397,475,539
Less shares repurchased.......................................... (1,918,249) ( 40,080,942) ( 1,862,961) ( 39,762,647)
--------- ------------ ---------- ------------
Net increase..................................................... 3,174,511 $ 68,581,162 16,402,099 $357,712,892
========= ============ ========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 30
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 ------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
---------------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............. $ 21.52 $ 21.62 $ 17.47 $ 13.47
-------- -------- -------- --------
Net Investment Income............................ 0.26 0.39*** 0.26*** 0.21
Net Realized and Unrealized Gain on
Investments..................................... 1.38 0.91 5.84 3.98
-------- -------- -------- --------
Total from Investment Operations............... 1.64 1.30 6.10 4.19
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income............. ( 0.25) ( 0.34) ( 0.26) ( 0.19)
Distributions from Net Realized Gain on
Investments Sold................................. ( 0.34) ( 1.06) ( 1.69) --
-------- -------- -------- --------
Total Distributions............................ ( 0.59) ( 1.40) ( 1.95) ( 0.19)
-------- -------- -------- --------
Net Asset Value, End of Period................... $ 22.57 $ 21.52 $ 21.62 $ 17.47
======== ======== ======== ========
Total Investment Return at Net Asset Value....... 7.96% 6.44% 37.45% 31.26%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........ $245,308 $216,978 $ 94,158 $ 31,306
Ratio of Expenses to Average Net Assets.......... 1.38%* 1.34% 1.35% 1.41%*
Ratio of Net Investment Income to Average
Net Assets...................................... 2.50%* 1.78% 1.29% 1.64%*
Portfolio Turnover Rate.......................... 7% 13% 35% 53%
CLASS B
PER SHARE OPERATING PERFOMANCE
Net Asset Value, Beginning of Period............. $ 21.43 $ 21.56 $ 17.44 $ 13.76 $ 8.13 $ 13.00
-------- -------- -------- -------- -------- -------
Net Investment Income............................ 0.18 0.23*** 0.15*** 0.18 0.29 0.30
Net Realized and Unrealized Gain (Loss) on
Investments..................................... 1.37 0.91 5.83 4.56 5.68 ( 4.19)
-------- -------- -------- -------- -------- -------
Total from Investment Operations............... 1.55 1.14 5.98 4.74 5.97 ( 3.89)
-------- -------- -------- -------- -------- -------
Less Distributions:
Dividends from Net Investment Income............. ( 0.17) ( 0.21) ( 0.17) ( 0.28) ( 0.34) ( 0.19)
Distributions from Net Realized Gain on
Investments Sold................................ ( 0.34) ( 1.06) ( 1.69) ( 0.78) -- ( 0.76)
Distributions from Capital Paid-In............... -- -- -- -- -- ( 0.03)
-------- -------- -------- -------- -------- -------
Total Distributions............................ ( 0.51) ( 1.27) ( 1.86) ( 1.06) ( 0.34) ( 0.98)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of Period................... $ 22.47 $ 21.43 $ 21.56 $ 17.44 $ 13.76 $ 8.13
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset Value....... 7.57% 5.69% 36.71% 37.20% 75.35% ( 32.29%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........ $619,059 $522,207 $171,808 $ 56,016 $ 52,098 $ 38,992
Ratio of Expenses to Average Net Assets.......... 2.07%* 2.06% 1.88% 1.96% 2.04% 1.99%
Ratio of Net Investment Income to Average Net
Assets.......................................... 1.80%* 1.07% 0.76% 1.21% 2.65% 2.51%
Portfolio Turnover Rate.......................... 7% 13% 35% 53% 75% 56%
</TABLE>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
*** On average month end shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 31
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
REGIONAL BANK FUND ON APRIL 30, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
COMMON STOCKS AND WARRANTS, PREFERRED STOCKS, BONDS, AND SHORT-TERM INVESTMENTS.
COMMON STOCKS ARE FURTHER BROKEN DOWN BY REGION. SHORT-TERM INVESTMENTS, WHICH
REPRESENT THE FUND'S "CASH" POSITION, ARE LAST.
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS
MONEY CENTER BANKS (2.58%)
Chase Manhattan Corp. (NY)............. 235,000 $10,281,250
Chemical Banking Corp. (NY)............ 81,000 3,381,750
Morgan (J.P.) & Co., Inc. (NY)......... 131,000 8,596,875
-----------
22,259,875
-----------
SUPER REGIONALS (11.45%)
Banc One Corp. (OH).................... 305,250 9,004,875
BankAmerica Corp. (CA)................. 130,987 6,483,857
Bank of Boston Corp. (MA).............. 411,250 13,776,875
Bank of New York, Inc. (NY)............ 162,000 5,325,750
Barnett Banks, Inc. (FL)............... 295,000 13,791,250
First Bank Systems, Inc. (MN).......... 190,730 7,724,565
First Fidelity Bancorp. (NJ)........... 38,000 1,833,500
First Interstate Bancorp. (CA)......... 218,500 16,797,188
First Union Corp. (NC)................. 51,500 2,330,375
Fleet Financial Group, Inc. (RI)....... 195,000 6,386,250
KeyCorp. (OH).......................... 174,905 4,678,709
Mellon Bank Corp. (PA)................. 28,201 1,106,889
NationsBank Corp. (NC)................. 72,000 3,600,000
NBD Bancorp., Inc. (MI)................ 27,008 827,120
Norwest Corp. (MN)..................... 60,500 1,603,250
PNC Bank Corp. (PA).................... 50,000 1,256,250
Wachovia Corp. (NC).................... 70,000 2,458,750
-----------
98,985,453
-----------
REGIONALS (54.74%)
ABC Bancorp. (GA)...................... 60,000 825,000
ANB Corp. (IN)......................... 48,500 1,297,375
American Bancorp. (WV)................. 74,000 1,128,500
AmSouth Bancorp. (AL).................. 237,293 7,415,406
Bancfirst Corp. (OK)................... 43,600 664,900
Bancorp. Hawaii, Inc. (HI)............. 550,000 15,468,750
Bank of New Hampshire Corp. (NH)....... 86,800 2,278,500
Banknorth Group, Inc. (VT)............. 240,000 5,940,000
B M J Financial Corp. (NJ)............. 132,632 1,724,216
BNH Bancshares, Inc. **(CT)............ 645,000 846,562
Boatmens' Bancshares, Inc. (MO)........ 374,734 12,459,905
Brenton Banks, Inc. (IA)............... 154,600 2,821,450
Bryn Mawr Bank Corp. (PA).............. 27,600 986,700
BT Financial Corp. (PA)................ 19,950 586,031
California Commercial Bankshares **(CA) 52,747 303,295
Capital Bancorp., Inc. (MO)............ 97,000 2,582,625
Carnegie Bancorp. (NJ)................. 47,250 608,344
CB Bancorp., Inc. **(IN)............... 57,870 737,842
CB Bancshares, Inc. (HI)............... 30,000 915,000
CCB Financial Corp. (NC)............... 30,000 1,256,250
Central Mtg Bancshares, Inc. (MO)...... 151,000 3,246,500
Centura Banks, Inc. (NC)............... 237,700 6,150,487
Citizens Banking Corp. ( MI ).......... 38,400* 1,036,800
CM Bank Holding Co. (LA)............... 8,000 480,000
Colonial BancGroup, Inc. (AL).......... 196,500 4,765,125
Comerica, Inc. (MI).................... 342,798 9,855,442
Commerce Bancshares, Inc. (MO)......... 52,763 1,609,256
Commercial Bankshares, Inc. (FL)....... 125,000 1,820,312
Community Bank System, Inc. (NY)....... 105,800 2,684,675
Compass Bancshares, Inc. (AL).......... 451,500 11,795,437
Continental Pacific Bank **(CA)........ 30,020 405,270
CoreStates Financial Corp. (PA)........ 181,708 5,928,223
Crestar Financial Corp. (VA)........... 139,700 6,286,500
CU Bancorp. (CA)....................... 46,211 346,582
Cupertino National Bancorp. (CA)....... 27,277 245,492
Dauphin Deposit Corp. (PA)............. 53,000 1,275,312
Deposit Guaranty Corp. (MS)............ 108,100 3,742,962
Evergreen Bancorp., Inc. (NY).......... 95,350 1,620,950
F & M National Corp. (VA).............. 79,950 1,299,188
First American Corp. (TN).............. 362,500 12,506,250
First of America Bank Corp. (MI)....... 519,705 17,994,786
First Citizens Bancshares, Inc.
(Class A) (NC)........................ 5,000 235,000
First Colonial Group, Inc. (PA)........ 21,000 312,375
First Commerce Corp. (LA).............. 377,887 10,391,893
First Commercial Corp.(AR)............. 106,654 2,679,675
First Merchants Corp. (IN)............. 15,000 485,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 32
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----
<S> <C> <C>
REGIONALS (CONTINUED)
First National Bancorp. (GA)........... 119,000 $ 2,543,625
First Patriot Bankshares (VA).......... 81,100 608,250
First Security Corp. (UT).............. 105,000 2,506,875
First Source Corp. (IN)................ 48,096 1,352,708
First State Bancorp. (NM).............. 37,000 545,750
First Tennesse National Corp.(TN)...... 294,750 12,526,875
Firstar Corp. (WI)..................... 254,276 7,342,220
FirstBanc Corp. (MI)................... 45,203 994,455
Firstmerit Corp. (OH).................. 50,000* 1,156,250
Firstbank of Illinois Co. (IL)......... 52,275 1,398,356
FirsTier Financial, Inc. (NE).......... 33,000 1,105,500
FNB Corp. (PA)......................... 33,626 563,240
FNB Rochester Corp. **(NY)............. 153,737 941,639
Fourth Financial Corp.
(Dep Shares) (KS)..................... 65,000 1,836,250
Fourth Financial Corp. (KS)............ 12,500 390,625
Franklin Bank, NA (MI)................. 55,125 461,672
Fulton Financial Corp. (PA)............ 162,831 3,338,036
Hancock Holdings Co. (MS).............. 233,000 6,931,750
Hawkeye Bancorp. (IA).................. 56,000 1,270,500
Hibernia Corp. (Class A) **(LA)........ 150,000* 1,200,000
Hubco, Inc. (NJ)....................... 112,500 1,982,813
Huntington Bancshares, Inc. (OH)....... 45,000 846,563
Independent Bank Corp. (MA)............ 100,000 687,500
Integra Financial Corp. (PA)........... 381,980 16,711,625
Interchange Financial Services
Corp. (NJ)............................ 90,000 1,721,250
Intercontinental Bank (FL)............. 60,000 1,350,000
Lafayette American Bancorp., Inc.**(CT) 306,513 2,452,104
Liberty Bancorp., Inc. (OK)............ 15,000 453,750
LSB Bancshares, Inc. (NC).............. 10,727 203,813
Magna Group, Inc. (MO)................. 67,000 1,407,000
Marshall and Ilsley Corp. (WI)......... 194,480 3,913,910
Mercantile Bancorp., Inc. (MO)......... 380,313 13,881,425
Mercantile Bankshares Corp. (MD)....... 340,000 7,182,500
Merchants Bancorp., Inc. (IL).......... 28,800 727,200
Meridian Bancorp., Inc. (PA)........... 295,493 9,381,903
MetroBanCorp **(IN).................... 75,000 421,875
Michigan Financial Corp. (MI).......... 61,552 1,207,958
Michigan National Corp. (MI)........... 54,051 5,668,599
Midlantic Corp., Inc. (NJ)............. 157,000 5,730,500
Mississippi Valley Bancshares (MO)..... 75,500 1,396,750
Mountain Parks Financial...............
Corp. **(CO).......................... 35,000 564,375
North Fork Bancorp., Inc. (NY)......... 86,609 1,515,658
North Valley Bank (CA)................. 51,067 1,187,308
Old Kent Financial Corp. (MI).......... 167,500 5,192,500
One Valley Bancorp. of West Virginia,
Inc. (WV)............................. 24,000 729,000
Pacific Bank N.A. **(CA)............... 66,923 1,162,787
Peoples Bank Corp. of Indianapolis (IN) 22,500 427,500
Piedmont BankGroup, Inc. (VA).......... 51,850 1,153,663
Premier Bancorp., Inc. **(LA).......... 375,800 6,388,600
Premier Bankshares Corp. (VA).......... 85,000 1,434,375
Premier Financial Services, Inc. (IL).. 160,500 1,243,875
Princeton National Bancorp., Inc. (IL). 64,500 838,500
Provident Bancorp., Inc. (OH).......... 97,500 3,290,625
Regions Financial Corp. (AL)........... 65,000 2,258,750
Republic Bancorp., Inc. (MI)........... 44,910 516,474
Republic New York Corp. (NY)........... 229,000 10,963,375
Riggs National Corp. **(DC)............ 195,000 1,950,000
SC Bancorp. **(CA)..................... 219,051 1,013,111
Seacoast Banking Corp. of Florida
(Class A) (FL)........................ 98,500 1,846,875
Shawmut National Corp. (MA)............ 616,641 16,340,987
Signet Banking Corp. (VA).............. 276,000 5,865,000
Simmons First National Corp. (AR)...... 67,000 1,708,500
Southern National Corp. (NC)........... 441,628 9,053,374
SouthTrust Corp. (AL).................. 530,500 11,405,750
Southwest Bancorp., Inc. (OK).......... 122,000 1,677,500
State Financial Services Corp..........
(Class A) (WI)........................ 48,000 708,000
Sterling Bancshares (TX)............... 107,150 1,285,800
Summit Bancorp., Inc. (NJ)............. 121,000 2,329,250
Susquehanna Bancshares, Inc. (PA)...... 172,175 3,960,025
Texas Regional Bancshares, Inc.
(Class A) (TX)........................ 150,000 1,987,500
Today's Bancorp., Inc. (IL) (formerly
Northwest Illinois Bancorp., Inc.).... 102,200 1,814,050
Trico Bancshares (CA).................. 59,000 951,375
Trustmark Corp. (MS)................... 72,000 1,188,000
UJB Financial Corp. (NJ)............... 422,800 11,574,150
Union Bank (CA)........................ 48,000 1,860,000
Union Planters Corp. (TN).............. 661,119 15,866,856
US Bancorp. (OR)....................... 412,805 11,403,738
USBANCORP, Inc. (PA)................... 48,000 1,014,000
Vectra Banking Corp. **(CO)............ 35,000 350,000
Vermont Financial Services (VT)........ 144,900 3,205,913
Westamerica Bancorp. (CA).............. 67,800 2,288,250
West Coast Bancorp., Inc. (FL)......... 30,000 412,500
West One Bancorp., Inc. (ID)........... 292,600* 8,083,075
Whitney Holding Corp. (LA)............. 307,500 7,956,563
Zions Bancorp. (UT).................... 207,000 8,823,375
------------
473,181,264
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 33
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----
<S> <C> <C>
THRIFTS (17.95%)
ALBANK Financial Corp. (NY)............ 20,000 $ 517,500
Allied Bank Capital, Inc. (NC)......... 91,000 1,615,250
American Federal Bank FSB (SC)......... 185,000 2,566,875
American National Savings Bank (MD).... 45,000 517,500
AMFED Financial, Inc. (NV)............. 202,500 4,556,250
Astoria Financial Corp. **(NY)......... 315,000 10,710,000
Avondale Financial Corp. **(IL)........ 100,000* 1,200,000
BankUnited Financial Corp.
(Class A) (FL)........................ 20,000 110,000
Bedford Bancshares, Inc. (VA).......... 30,000 390,000
Brooklyn Bancorp., Inc. **(NY)......... 466,200 14,801,850
California Federal Bank **(CA)......... 108,334 1,327,092
California Financial Holding Co. (CA).. 126,000 1,874,250
Calumet Bancorp., Inc. **(IL).......... 110,000 2,928,750
Cameron Financial Corp. **(MO)......... 45,000* 528,750
Cenfed Financial Corp. (CA)............ 30,000 585,000
Center Banks, Inc. (NY)................ 23,000 310,500
CFX Corp. (NH)......................... 26,886 497,397
Coast Savings Financial, Inc. **(CA)... 90,000 1,867,500
Coastal Bancorp., Inc. (TX)............ 45,000* 652,500
Conestoga Bancorp., Inc. **(NY)........ 30,000 453,750
DeerBank Corp. (IL).................... 12,000 526,500
Dime Bancorp Inc.**(NY) (formerly
Dime Savings Bank of New York)........ 327,500 3,152,188
Eagle Bancshares (GA).................. 52,000 1,365,000
Elmira Savings Bank (NY)............... 34,950 567,937
Farmers & Mechanics Bank **(CT)........ 41,300 640,150
FFW Corp. (IN)......................... 20,000 357,500
Fidelity Federal Bank . **(CA)......... 562,500* 1,968,750
First Bankshares, Inc. (MO)............ 40,000 590,000
Firstfed Michigan Corp. (MI)........... 22,500 545,625
First Federal Bancorp. **(MN).......... 40,000* 440,000
First Federal Capital Corp. (WI)....... 19,945 309,147
First Financial Corp. (WI)............. 115,151 1,799,228
First Financial Corp. of Western
Maryland (MD)......................... 65,500 1,293,625
First Independence Corp. (KS).......... 35,500 559,125
First Indiana Corp. (IN)............... 41,166 720,405
First Keystone Financial Inc. **(PA)... 43,000* 559,000
First Republic Bancorp., Inc. **(CA)... 229,162 2,778,589
First Southern Bancorp., Inc. (NC)..... 45,000 1,248,750
FMS Financial Corp. (NJ)............... 12,000 294,000
Fort Bend Holdings Corp. (TX).......... 44,000 720,500
Glendale Federal Bank **(CA)........... 271,000 3,319,750
Golden West Financial (CA)............. 30,000 1,372,500
GP Financial Corp. (NY)................ 672,000 16,086,000
Great Southern Bancorp., Inc. (MO)..... 74,000 1,239,500
Harbor Federal Bancorp., Inc. (MD)..... 80,000 1,010,000
Haven Bancorp. **(NY).................. 137,500 2,423,437
HF Financial Corp. (SD)................ 75,000 2,006,250
HMN Financial, Inc. **(MN)............. 165,000 2,165,625
Home Federal Bancorp. (IN)............. 7,500 159,375
Lakeview Financial Corp. (NJ).......... 33,000 513,562
Landmark Bancshares, Inc. (KS)......... 110,000 1,347,500
Long Island Bancorp., Inc. (NY)........ 50,000 925,000
MAF Bancorp., Inc. (IL)................ 133,500 3,170,625
Marble Financial Corp. (VT)............ 15,000 180,000
Marion Capital Holdings, Inc. (IN)..... 72,500 1,359,375
Marshalltown Financial Corp. **(IA).... 20,000 250,000
MassBank Corp. (MA).................... 35,000 848,750
MFB Corp. **(IN)....................... 90,000 1,170,000
MLF Bancorp., Inc. (PA)................ 55,000 955,625
Morgan Financial Corp. (CO)............ 21,000 375,375
Monterey Bay Bancorp., Inc. **(CA)..... 50,000* 481,250
MSB Bankcorp., Inc. (NY)............... 20,000 445,000
Northeast Federal Corp. **(CT)......... 120,000 1,305,000
Palfed, Inc. **(SC).................... 98,000 980,000
Pennfirst Bancorp., Inc. (PA).......... 81,290 1,046,614
Permanent Bancorp., Inc. **(IN)........ 98,500 1,600,625
Plains Spirit Financial Corp. (IA)..... 50,000 1,481,250
PVF Capital Corp. (OH)................. 16,500* 218,625
Redfed Bancorp., Inc. **(CA)........... 65,000 568,750
River Bank America, Inc. **(NY)........ 150,000 1,087,500
Roosevelt Financial Group, Inc. (MO)... 659,123 10,545,968
Southern Financial Federal Savings
Bank (VA)............................. 62,065 729,264
Southern Missouri Bancorp., Inc.(MO)... 70,000 1,050,000
Sovereign Bancorp. (PA)................ 26,772 227,562
Springfield Institution For
Savings **(MA)........................ 75,000* 890,625
Sterling Financial Corp. **(WA)........ 63,525 857,588
TCF Financial Corp. (MN)............... 63,413 2,718,832
TeleBanc Financial Corp. **(VA)........ 100,000 500,000
TR Financial Corp. (NY)................ 90,000 1,485,000
UF Bancorp, Inc. (IN).................. 42,700 1,569,225
United Financial Bancorp., Inc. (IN)... 20,000 800,000
Virginia First Financial Corp.(VA)..... 130,000 2,307,500
Washington Mutual Savings Bank (WA).... 450,000 9,281,250
WesterFed Financial Corp. (MT)......... 230,000 2,990,000
WSFS Financial Corp. **(DE)............ 129,400 647,000
------------
155,139,410
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 34
FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
<TABLE>
<CAPTION>
MARKET
ISSUER, STATE, DESCRIPTION NUMBER OF SHARES VALUE
- -------------------------- ---------------- -----
<S> <C> <C>
OTHER - FINANCIAL (1.01%)
Capital One Financial Corp.................. 262,000* $ 5,272,750
Financial Security Assurance Holdings Ltd... 10,000 226,250
First Washington Realty Trust............... 79,470 1,311,255
KBK Capital Corp. **........................ 19,000 111,625
Lomas Financial Corp. **.................... 180,000 292,500
PMC Capital, Inc............................ 25,000 296,875
Prime Residential, Inc...................... 70,000 1,023,750
Prime Retail, Inc........................... 15,000 185,625
-----------
8,720,630
-----------
WARRANTS (0.14%)
Carnegie Bancorp. **(NJ).................... 29,000 39,875
Glendale Federal Bank **(CA)................ 300,000 1,185,930
-----------
1,225,805
-----------
TOTAL COMMON STOCKS AND WARRANTS
(Cost $668,559,846) (87.87%) 759,512,437
------- -----------
PREFERRED STOCKS
California Federal Bank,
Ser B, 10.625% (CA)........................ 13,333 1,386,632
Chevy Chase Savings 13.00% (MD)............. 50,000 1,412,500
Community Bank, Ser B, 13.00% (CA).......... 40,000 840,000
FirstFederal Financial Corp.,
Ser A, 7.00% (OH).......................... 10,000 400,000
First Nationwide Bank 11.50% (CA)........... 30,000 3,127,500
First Washington Realty Trust 9.75% (MD).... 113,498 2,440,207
Glendale Federal Bank, Ser E,
8.75% (CA)................................. 100,000 3,400,000
Greater NY Savings Bank, Ser B,
12.00% (NY)................................ 100,000 2,700,000
National City Corp. 8.00% (OH).............. 7,000 465,500
Prime Retail Inc., Ser B, 8.50% (MD)........ 50,000 850,000
Riggs National Corp., Ser B,
10.75% (DC)................................ 64,300 1,639,650
River Bank America Inc., Ser A,
15.00% (NY)................................ 10,000 220,000
Roosevelt Financial Group,Inc.,
Ser F, 6.50% (MO).......................... 16,000 952,000
Southern National Corp., Ser A,
6.75% (NC)................................. 50,000 1,531,250
Suncoast Savings and Loan Assn.,
Ser A, 8.00% (FL).......................... 28,000 371,000
Washington Mutual Savings Bank,
Ser D, $6.00 (WA).......................... 4,000 367,000
-----------
TOTAL PREFERRED STOCKS
(Cost $21,719,681) (2.56%) 22,103,239
------ -----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, STATE, DESCRIPTION RATE (000'S OMITTED) VALUE
- -------------------------- ---- --------------- -----
<S> <C> <C> <C>
BONDS
Bank of New York, Inc.
Conv Note 08-15-01..... 7.50% 200 $ 338,000
Susquehanna Bancshares, Inc.
Sub Deb 02-01-05....... 9.00 2,000 2,097,500
Sierra Tahoe Bancorp.
Conv Sub Deb 02-01-04.. 8.50 500 490,000
------------
TOTAL BONDS
(Cost $2,689,561) ( 0.34%) 2,925,500
----- ------------
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (9.20%)
Investment in a joint repurchase
agreement transaction
with B.T. Securities
Corp. - Dated 4-28-95,
Due 05-01-95 (secured by
U.S.Treasury Bond, 10.75%,
due 08-15-05 and U.S.Treasury
Note, 6.875% due 10 -31-96)
Note A................. 5.93 79,503 79,503,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%..... 31,600
------------
TOTAL SHORT-TERM INVESTMENTS ( 9.20%) 79,534,600
------ ------------
TOTAL INVESTMENTS (99.97%) $864,075,776
====== ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the six months ended April 30, 1995.
**Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Regional Bank Fund (the "Fund"), John
Hancock Gold & Government Fund, John Hancock Sovereign U.S. Government Income
Fund, John Hancock Sovereign Achievers Fund, and John Hancock Managed Tax-Exempt
Fund. Prior to January 1, 1995, John Hancock Regional Bank Fund was known as
John Hancock Freedom Regional Bank Fund and John Hancock Gold & Government Fund
was known as John Hancock Freedom Gold & Government Fund.
The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemption, 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/ service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. The Fund was re-opened to new shareholders on December 27,
1994. Significant 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 instruments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the
15
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
respective classes. Distribution/service fees, if any, are calculated daily at
the class level based on the appropriate net assets of each class and the
specific expense rate(s) applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
purchased from either the date of issue or the date of purchase over the life of
the security, as required by the Internal Revenue Code.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser, for a continuous investment program equivalent,
on an annual basis, to the sum of (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value and (b) 0.75% of the Fund's average daily
net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended April 30, 1995, JH Funds
received net sales charges of $1,096,522 with regard to sales of Class A shares.
Out of this amount, $189,149 was retained and used for printing prospectuses,
advertising, sales literature and other purposes, $767,861 was paid as sales
commissions to unrelated broker-dealers, and $139,512 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries, which include FDC,
Tucker Anthony and Sutro, all of which are broker-dealers.
Class B shares which are redeemed within six years of purchase are 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 April 30, 1995 the contingent
deferred sales charges received by JH Funds amounted to $900,284.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors, for distribution and service expenses at an annual rate not to
exceed 0.30% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse the Co-Distributors for their distribution/service costs.
Up to a maximum of 0.25% of these payments may be service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995,
16
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Regional Bank Fund
Investor Services was known as John Hancock Fund Services, Inc. Effective
January 1, 1995, the Fund pays transfer agent fees based on transaction volume
and the number of shareholder accounts. Prior to January 1, 1995, the Fund paid
Investor Services a monthly transfer agent fee equivalent, on an annual basis,
to 0.15% and 0.18% of the average daily net asset value of Class A and Class B
shares of the Fund, respectively, plus out of pocket expenses incurred by Fund
Services on behalf of the Fund for proxy mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
obligations, during the period ended April 30, 1995, aggregated $97,812,927 and
$40,556,614, respectively.
The cost of investments owned at April 30, 1995 (including the short term
investment) for federal income tax purposes was $772,472,088. Gross unrealized
appreciation and depreciation of investments aggregated $104,990,050 and
$13,417,962, respectively, resulting in net unrealized appreciation of
$91,572,088.
17
<PAGE> 38
NOTES
John Hancock Funds - Regional Bank Fund
18
<PAGE> 39
NOTES
John Hancock Funds - Regional Bank Fund
19
<PAGE> 40
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
[A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of this 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."]
- -------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Regional Bank 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."]
JHF 010SA 4/95
<PAGE> 41
John Hancock Funds
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
GOLD &
GOVERNMENT
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 42
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
James K. Schmidt
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
Lawrence J. Daly
Senior Vice President
Anthony A. Goodchild
Senior Vice President
Anne M. McDonley
Vice President
Barry H. Evans
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank &Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale andDorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential risks as well as the potential rewards of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information,
feel free to call one of our Customer Service Representatives at 1-800-225-5291,
from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
2
<PAGE> 43
BY ANNE MCDONLEY, VICE PRESIDENT AND
PORTFOLIO MANAGER
JOHN HANCOCK
GOLD & GOVERNMENT FUND
GOLD MARKET HEADS SOUTH BEFORE MAKING A LONG-AWAITED
RECOVERY; LONG-TERM GOVERNMENT BONDS REBOUND
The gold market, which was volatile for most of 1994, headed downhill quickly in
the last quarter of the year. Although the fundamentals -- increasing demand and
limited supply -- remained positive, proprietary traders for investment firms
and technical traders started to bail out once gold neared $400 an ounce in late
September. Prices plummeted as investors headed for the exits. By early
December, gold prices had fallen about 25%. Surprisingly, bond prices -- which
typically rise when gold is falling -- remained basically flat.
In January and February, gold consistently traded between $372 and $383 an
ounce. When bonds rallied in late January, gold prices again broke the mold, by
staying within this range and not falling off a cliff. As the dollar fell to
historic lows against the Japanese yen, gold prices finally moved up again in
March and April. And once it looked like the dollar was not going to strengthen
and government intervention might be necessary, gold prices rose to a high of
$395 an ounce.
The prices of other precious metals have also been strong so far in 1995.
Silver, which was hard hit in 1994, came back early in the second quarter.
Behind the run-up was both limited supply and speculation that silver might be
the next leader in the metals markets. Copper posted big gains in 1994 and the
first quarter of 1995 but then declined in April. Although supply remained
inadequate for demand, prices fell as investors feared that copper had hit a
ceiling. Finally, after staying stable throughout 1994, platinum prices hit new
highs this year as rumors of new uses for the metal filtered through the market.
[A 2 1/4" x 2 1/4" photo of Anne McDonley. Caption reads: "Anne McDonley,
Portfolio Manager."]
[CAPTION]
"...gold prices finally moved up again in March and April."
3
<PAGE> 44
John Hancock Funds - Gold & Government Fund
[Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into three sections. Going from left to right:
Gold/Precious Metal Stocks 42%; Short-Term Investments & Other 25%; and U.S.
Government Bonds 33%. A footnote below states "As a percentage of net assets on
April 30, 1995."]
Meanwhile, government bonds, especially those with longer maturities, posted
strong gains during the first four months of 1995. We don't believe there was
sufficient evidence of an economic slowdown to warrant the kind of rally we saw
in the first quarter. But in January at the first signs of slowing, brokerage
houses began pushing their large bond inventories, which helped the market. The
bond market continued to rally through the end of April.
PERFORMANCE OVERVIEW
Throughout the period, we focused on finding the right mix of gold/precious
metal stocks and fixed-income investments. At the end of October, there were
many reasons to believe gold stocks would outperform government bonds. So we put
60% of the Fund's assets in gold/precious metal stocks; the balance was in
short-term U.S. Treasuries and cash. This hurt performance when gold stocks
tumbled far faster than expected in the last quarter of 1994.
To curb the Fund's volatility, we sold off some of our gold stocks late in
the year and put more money into short-term Treasuries and cash. We stayed with
two-year securities because they offered the most stability and protection if
bond prices continued to decline. But bonds rebounded faster than we had
expected, causing us to miss the gains that came mostly in longer-term
securities. The Fund regained some ground, though, in March and April as gold
prices turned around. We ended the period with 42% in gold/precious metal
stocks, 33% in U.S. Treasuries, and 25% in short-term investments.
For the six months ended April 30, 1995, the Fund's Class A and B shares
returned -3.51% and -3.88%, respectively, at net asset value. These returns were
ahead of the average gold-oriented fund, which had a -8.74% return, according to
Lipper Analytical Services.(1) The Fund's returns, however, lagged the Lehman
Government Bond Index, which was up 6.53%.
CONSOLIDATING GOLD STOCKS
When we sold gold and precious metal stocks in late 1994, we looked hard at
holdings that were down 20% or more. During the period, we cut back from 21 to
14 names, eliminating stocks that lacked liquidity or comeback potential. We
held onto what we believe are the stronger companies with better growth
prospects. Our top performer was Kinross Gold Corporation, a Canadian company
with strong management, good acquistions and competitive costs. The stock was up
72% from last summer
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
Performance ... and what's behind the numbers." The first listing is U.S.
Treasuries followed by an up arrow and the phrase "Evidence of slow economy."
The second listing is Kinross Gold followed by an up arrow and the phrase
"Undervalued growth company." the third listing is Magma Copper followed by a
down arrow and the phrase "Weak copper prices." Footnote below reads: "See
"Schedule of Investments." Investment holdings are subject to change."]
[CAPTION]
"The bond market continued to rally through the end of April."
4
<PAGE> 45
John Hancock Funds - Gold & Government Fund
[Bar chart with heading "Fund Performance" at the top of left hand column. Under
the heading is the footnote: "For the six months ended April 30, 1995." The
chart is scaled in increments of 10% from left to right,k with -10% on the left
and 10% at the right. Within the chart, there are four solid bars. The first
represents the -3.51% total return for John Hancock Gold & Government Fund:
Class A. The second represents the -3.88% total return for John Hancock Gold &
Government Fund: Class B. The third represents the -8.74% total return for the
average gold-oriented fund. The fourth represents the 6.53% return for the
Lehman Brothers Government Bond Index. Footnote below reads: "Total returns for
John Hancock Gold & Government Fund are at net asset value with all
distributions reinvested. The average gold-oriented fund is tracked by Lipper
Analytical Services.(1) The Lehman Government Bond Index is an unmanaged index,
which measures the performance of U.S. government securities. See following
page for historical performance information."]
(when we bought it) through April. Stillwater Mining -- a Montana-based company
that mines primarily platinum and is the only significant supplier outside South
Africa -- also did well. Between its initial offering last summer and the end of
April, the stock jumped 42%.
GOLD PROSPECTS GLITTER
For the rest of 1995, we plan to keep the Fund's stake in gold/precious metals
between 40% and 50% with the balance in fixed-income investments. After a
10-year drought, gold prices seem ready to break new ground. As demand continues
to outpace supply, gold prices could break through the $400 an ounce barrier and
head for $425. A word of caution, though. It's likely to be a bumpy ride up for
gold.
We have several strategies in place to minimize the Fund's volatility. First,
we plan to further consolidate our gold/precious metal holdings, owning only the
strongest companies. Second, we will continue to modify our metals
diversification. Currently, our biggest exposure is gold, followed by silver,
then copper, and platinum. Finally, we may swap some of our common stocks for
convertible stocks. Although convertibles would limit our upside, they'd add
downside protection and income to the Fund.
In the bond market, caution may be the watchword. It's possible we're near a
bond market top. Investors will continue to believe the economy is slowing until
proven otherwise, but any signs that the economy is reheating could quickly pull
the market down. We believe it's prudent to be somewhat defensive right now.
- -------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
[CAPTION]
"...gold prices seem ready to break new ground."
5
<PAGE> 46
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Gold & Government Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception on January
3, 1992 were (14.00%) and (0.43%), respectively, and reflect payment of the
maximum sales charge of 5%. The average annualized total returns for Class B
shares for the 1-year, 5-year and 10-year periods were (14.56%), 2.84% and
6.47%, respectively, and reflect applicable contingent deferred sales charge
(maximum contingent deferred sales charge is 5% and declines to 0% over 6
years). The standard SECyields for the 30-day period ended April 30, 1995 for
Class A and Class B shares were 2.02% and 1.45%, respectively. For Class A
shares, different sales charges were in effect prior to August 1992 and are not
reflected in the performance data. All performance data shown represent past
performance and should not be considered indicative of future performance.
Returns and principal values of Fund investments will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF THE FUND (OR MOST RECENT TEN YEARS)
Gold & Government Fund: Class A
Line chart with the heading Gold & Government Fund: Class A, representing the
growth of a hypothetical $10,000 investment over the life of the fund. Within
the chart are three lines.
The first line represents the value of the Lipper Gold Fund Index and is equal
to $13,464* The second line represents the value of the Lehman Government Bond
Index and is equal to $12,162** as of April 30,1995. The third line represents
the value of the hypothetical $10,000 investment made in the Gold & Government
Fund on January 3, 1992, before sales charge, and is equal to $10,508 as of
April 30,1995. The fourth line represents the Gold & Government Fund after sales
charge and is equal to $9,980 as of April 30,1995.
Gold & Government Fund: Class B
Line chart with the heading Gold & Government 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 value of the Lehman Government Bond Index and is
equal to $25,400** as of April 30,1995. The second line represents the value of
the hypothetical $10,000 investment made in the Gold & Government Fund on April
30, 1985 and is equal to $18,637*** as of April 30,1995. The third line
represents the Lipper Gold Fund Index and is equal to $16,825* as of April
30,1995.
* The Lipper Gold Fund Index is an unmanaged index of the ten largest funds
within the gold fund category.
** The Lehman Government Bond Index is an unmanaged index, which measures the
performance of U.S. Treasury bonds and U.S. Government Agency bonds.
*** No applicable contingent deferred sales charge.
6
<PAGE> 47
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies obligations
(cost - $14,758,020) .................................................. $ 14,709,177
Common stocks (cost - $14,294,248) ...................................... 16,205,670
Preferred stocks (cost - $2,521,200) .................................... 2,505,000
Short-term notes (cost - $10,430,634) ................................... 10,430,634
Corporate savings account ............................................... 124
-------------
43,850,605
Receivable for shares sold ................................................ 956
Interest receivable ....................................................... 483,982
Dividends receivable ...................................................... 22,896
Other assets .............................................................. 7,563
-------------
Total Assets ........................................... 44,366,002
-----------------------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ............................................ 442
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ..................................................... 37,401
Accounts payable and accrued expenses ..................................... 46,870
-------------
Total Liabilities ...................................... 84,713
-----------------------------------------------------------------------------
NET ASSETS:
Capital paid-in ........................................................... 54,307,718
Accumulated net realized loss on investments,
financial futures contracts and foreign
currency transactions ................................................... (11,952,438)
Net unrealized appreciation of investments ................................ 1,846,379
Undistributed net investment income ....................................... 79,630
-------------
Net Assets ............................................. $ 44,281,289
=============================================================================
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, respectively)
Class A - $13,922,250 / 1,017,278 ......................................... $ 13.69
================================================================================================
Class B - $30,359,039 / 2,221,317 ......................................... $ 13.67
================================================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($13.69 x 105.26)% .............................................. $ 14.41
================================================================================================
</TABLE>
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
INVESTMENT INCOME:
Interest .................................................................. $ 796,385
Dividends (net of foreign withholding taxes of $6,311)..................... 107,973
------------
904,358
------------
Expenses:
Investment management fee - Note B ...................................... 183,955
Distribution/service fee - Note B
Class A ................................................................ 21,040
Class B ................................................................ 159,807
Transfer agent fee - Note B
Class A ................................................................ 17,929
Class B ................................................................ 40,969
Custodian fee ........................................................... 24,064
Auditing fee ............................................................ 19,970
Registration and filing fees ............................................ 7,882
Printing ................................................................ 7,790
Trustees' fees .......................................................... 4,104
Miscellaneous ........................................................... 1,007
Legal fees .............................................................. 393
------------
Total Expenses ......................................... 488,910
-----------------------------------------------------------------------------
Net Investment Income .................................. 415,448
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FINANCIAL FUTURES CONTRACTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments sold ..................................... (3,299,009)
Net realized loss on financial futures contracts .......................... (123,469)
Net realized loss on foreign currency transactions ........................ (1,599)
Change in net unrealized appreciation/depreciation
of investments .......................................................... 537,918
------------
Net Realized and Unrealized
Loss on Investments and
Financial Futures Contracts ............................ (2,886,159)
-----------------------------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations .............................. $(2,470,711)
=============================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 48
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
---------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............................................................................ $ 415,448 $ 2,406,590
Net realized loss on investments sold and financial futures contracts ............................ (3,424,077) (7,084,743)
Change in net unrealized appreciation/depreciation of investments and financial futures contracts. 537,918 (3,014,455)
------------ ------------
Net Decrease in Net Assets Resulting from Operations ........................................... (2,470,711) (7,692,608)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.1525 and $0.6674 per share, respectively) ........................................ (161,775) (803,396)
Class B - ($0.1038 and $0.5659 per share, respectively) ........................................ (247,162) (1,761,166)
Distributions in excess of net realized gain on investments sold and financial futures contracts
Class A - (none and $0.2390 per share, respectively) ........................................... -- (291,352)
Class B - (none and $0.2390 per share, respectively) ........................................... -- (753,474)
------------ ------------
Total Distributions to Shareholders ........................................................... (408,937) (3,609,388)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET* .............................................................. (8,299,727) (5,494,834)
------------ ------------
NET ASSETS:
Beginning of period .............................................................................. 55,460,664 72,257,494
------------ ------------
End of period (including undistributed net investment income of $79,630 and $73,119,
respectively)................................................................................... $44,281,289 $55,460,664
============ ============
* ANALYSIS OF FUND SHARE TRANSACTIONS:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold........................................................... 133,286 $ 1,749,535 310,979 $ 4,916,203
Shares issued to shareholders in reinvestment of distributions........ 10,065 135,143 57,814 900,802
----------- ------------ ----------- ------------
143,351 1,884,678 368,793 5,817,005
Less shares repurchased............................................... (273,639) (3,591,317) (426,433) (6,603,119)
----------- ------------ ----------- ------------
Net decrease.......................................................... (130,288) $(1,706,639) (57,640) $(786,114)
=========== ============ =========== ============
CLASS B
Shares sold........................................................... 540,309 $ 7,056,578 557,733 $ 8,893,162
Shares issued to shareholders in reinvestment of distributions........ 13,286 178,283 117,910 1,843,490
----------- ----------- ----------- ------------
553,595 7,234,861 675,643 10,736,652
Less shares repurchased............................................... (1,053,220) (13,827,949) (1,026,605) (15,445,372)
----------- ------------ ----------- ------------
Net decrease.......................................................... (499,625) $(6,593,088) (350,962) $(4,708,720)
=========== ============ =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 49
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 --------------------------------
(UNAUDITED) 1994 1993 1992(a)
---------------- ------ ------ ---------
CLASS A
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................................... $ 14.35 $ 16.91 $ 15.19 $ 15.31
------- ------- ------- -------
Net Investment Income ................................................... 0.15 0.63 0.76** 0.72
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts and Written Options ................................. (0.66) (2.28) 1.76 (0.21)
------- ------- ------- -------
Total from Investment Operations ..................................... (0.51) (1.65) 2.52 0.51
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income .................................... (0.15) (0.67) (0.80) (0.63)
Distributions in excess of Net Realized Gains on Investments Sold,
Written Options and
Financial Futures Contracts ........................................... -- (0.24) -- --
------- ------- ------- -------
Total Distributions .................................................. (0.15) (0.91) (0.80) (0.63)
------- ------- ------- -------
Net Asset Value, End of Period .......................................... $ 13.69 $ 14.35 $ 16.91 $ 15.19
======= ======= ======= ========
Total Investment Return at Net Asset Value .............................. (3.51)% (10.10)% 17.10% 3.44%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............................... $13,922 $16,469 $20,385 $17,593
Ratio of Expenses to Average Net Assets ................................. 1.64%* 1.53% 1.59% 1.68%*
Ratio of Net Investment Income to Average Net Assets .................... 2.30%* 4.02% 4.84% 5.49%*
Portfolio Turnover Rate ................................................. 4% 147% 118% 209%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DIVIDENDS AND TOTAL INVESTMENT RETURNS 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.
9
<PAGE> 50
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 --------------------------------------------------
(UNAUDITED) 1994 1993 1992(a) 1991 1990
---------------- ------- ------ --------- ------ ------
CLASS B
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................... $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51 $ 15.45
------- ------- ------- ------- ------- -------
Net Investment Income ................................... 0.12 0.53 0.69** 0.83 0.87+ 0.91+
Net Realized and Unrealized Gain (Loss) on Investments,
Financial
Futures Contracts and Written Options ................. (0.68) (2.28) 1.76 0.11 0.76 (0.81)
------- ------- ------- ------- ------- -------
Total from Investment Operations ..................... (0.56) (1.75) 2.45 0.94 1.63 0.10
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income .................... (0.10) (0.57) (0.73) (0.90) (1.01) (1.04)
Distributions in excess of Net Realized Gain on
Investments Sold, Written
Options and Financial Futures Contracts ............... -- (0.24) -- -- -- --
------- ------- ------- ------- ------- -------
Total Distributions .................................. (0.10) (0.81) (0.73) (0.90) (1.01) (1.04)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .......................... $ 13.67 $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51
======= ======= ======= ======= ======= =======
Total Investment Return at Net Asset Value .............. (3.88)% (10.70)% 16.56% 6.42% 11.78%+ 0.55%+
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............... $30,359 $38,992 $51,872 $36,103 $56,928 $65,498
Ratio of Expenses to Average Net Assets ................. 2.34%* 2.18% 2.11% 1.63% 1.82%+ 1.90%+
Ratio of Net Investment Income to Average Net Assets .... 1.59%* 3.41% 4.29% 5.56% 5.96%+ 6.03%+
Portfolio Turnover Rate ................................. 4% 147% 118% 209% 134% 171%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
+ Reflects expense limitations in effect during the years indicated (see
Note B). As a result of such limitations, expenses of Class B shares for the
years ended, October 31, 1991 and 1990, reflect reductions of $0.01 and less
than $0.01, per share, respectively. Absent of such reductions, for the
years ended October 31, 1991 and 1990, the ratio of expenses to average net
assets would have been 1.91% and 1.93%, respectively, and the ratio of net
investment income to average net assets would have been 5.87% and 6.00%,
respectively. Without the reimbursement, total investment return would be
lower.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 51
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY GOLD
& GOVERNMENT FUND ON APRIL 30, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES:
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS, COMMON STOCKS, PREFERRED STOCKS AND
SHORT-TERM INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S
"CASH" POSITION, ARE LISTED LAST.
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
GOVERNMENTAL - U.S. ( 33.22)%
United States Treasury, Note ....................................... 7.250% 11-15-96 $14,550 $14,709,177
-----------
TOTAL U.S. GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $14,758,020) (33.22)% 14,709,177
-------- -----------
</TABLE>
<TABLE>
NUMBER OF SHARES
----------------
<S> <C> <C>
COMMON STOCKS
GOLD AND MINING PRODUCTS (36.60)%
Asarco, Inc. ............................................................................. 80,000 2,180,000
Battle Mountain Gold Co. ................................................................. 55,000 605,000
Driefontein Consolidated Ltd. American Depository Receipts (South Africa) (Y) ............ 40,000 575,000
Hecla Mining Co.** ....................................................................... 200,000 2,125,000
Hemlo Gold Mines, Inc. (Canada) (Y) ...................................................... 50,000 556,250
Kinross Gold Corp. (Canada) (Y)** ........................................................ 500,000 3,000,000
Magma Copper Co.** ....................................................................... 75,000 1,256,250
Pan American Silver Corp. (Canada)** ..................................................... 100,000* 395,010
Placer Dome, Inc. (Canada) (Y) ........................................................... 32,000 760,000
Prime Resources Group Inc. (Canada)** .................................................... 300,000 2,066,910
Stillwater Mining Co.** .................................................................. 100,000* 1,925,000
TVX Gold, Inc. (Canada) (Y)** ............................................................ 105,000 761,250
TOTAL COMMON STOCKS
(Cost $14,294,248) (36.60)% 16,205,670
-------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 52
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
PREFERRED STOCKS
GOLD AND MINING PRODUCTS (5.65)%
Freeport-McMoRan Copper & Gold, Inc., Ser SILV ** ........................................ 120,000 $2,505,000
----------
TOTAL PREFERRED STOCKS
(Cost $2,521,200) (5.65)% 2,505,000
------- ----------
</TABLE>
<TABLE>
PAR VALUE
INTEREST MATURITY (000'S
RATE DATE OMITTED)
---- ---- --------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
SHORT-TERM NOTES (14.65)%
Federal Home Loan Bank .................................................... 5.860% 05-09-95 $2,000 1,995,442
Federal Home Loan Bank .................................................... 5.860 05-12-95 1,500 1,496,582
Federal National Mortgage Association ..................................... 5.880 05-08-95 3,000 2,994,610
JOINT REPURCHASE AGREEMENT (8.91)%
Investment in a joint repurchase agreement
transaction with BT Securities Corp. -
Dated 04-28-95, Due 05-01-95 (secured by
U.S. Treasury Bond, 10.75% Due 08-15-05
and U.S. Treasury Note, 6.875% Due 10-31-96)
Note A .................................................................. 5.93 05-01-95 3,944 3,944,000
CORPORATE SAVINGS ACCOUNT (0.00)%
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00% ...................................................... 124
-----------
TOTAL SHORT-TERM INVESTMENTS (23.56)% 10,430,758
------- -----------
TOTAL INVESTMENTS (99.03)% $43,850,605
======= ===========
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** Non-income producing security.
(Y) Parenthetical disclosure of a foreign country in the security description
represents country of 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.
12
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end investment management
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Gold & Government Fund (the "Fund"),
John Hancock Regional Bank Fund, John Hancock Sovereign U.S. Government Income
Fund, John Hancock Sovereign Achievers Fund and John Hancock Managed Tax-Exempt
Fund. Prior to January 2, 1995, John Hancock Gold & Government Fund was known as
John Hancock Freedom Gold & Government Fund and John Hancock Regional Bank Fund
was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemption, 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/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $8,066,420 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforward expires October 31,
2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously.
13
<PAGE> 54
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
EXPENSES The majority of the expenses of the Trust are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such a manner as deemed equitable, taking into
consideration, among other things the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates. At the
time the Fund enters into a financial futures contract, it is required to
deposit with its custodian a specified amount of cash or U.S. government
securities, known as "initial margin," equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of trade or
U.S. commodities exchange. Subsequent payments, known as "variation margin," to
and from the broker are made on a daily basis as the market price of the
financial futures contract fluctuates. Daily variation margin adjustments,
arising from this "mark to market," are recorded by the Fund as unrealized gains
or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities. For federal
income tax purposes, the amount, character and timing of the Fund's gains and/or
losses can be affected as a result of futures contracts.
At April 30, 1995, there were no open positions in financial futures
contracts.
OPTIONS Listed options will be valued at the last quoted sales price on the
exchange on which they are primarily traded. Purchased put or call
over-the-counter options will be valued at the average of the "bid" prices
obtained from two independent brokers. Written put or call over-the-counter
options will be valued at the average of the "asked" prices obtained from two
independent brokers. Upon the writing of a call or put option, an amount equal
to the premium received by the Fund will be included in the Statement of Assets
and Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked-to-market to reflect the current market
value of the written option.
The Fund may use option contracts to manage its exposure to the stock market.
Writing puts and buying calls will tend to increase the Fund's exposure to the
underlying instrument and buying puts and writing calls will tend to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments.
The maximum exposure to loss for any purchased options will be limited to the
premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value will reflect the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms, or if the Fund is unable to offset a contract with a counterparty on a
timely basis ("liquidity risk"). Exchange-traded options have minimal credit
risk as the exchanges act as counterparties to each transaction, and only
present liquidity risk in highly unusual market conditions. To minimize credit
and liquidity risks in over-the-counter option contracts, the Fund will
continuously monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
14
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
There were no written option transactions for the period ended April 30,
1995.
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 (a) 0.80% of the first $500,000,000 of the
Fund's average daily net asset value and (b) 0.75% of the Fund's average daily
net asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000 and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended April 30, 1995, net
sales charges received with regard to sales of Class A shares amounted to
$2,421. Out of this amount, $273 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $1,344 was paid
as sales commissions to unrelated broker-dealers and $804 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries, which include FDC,
Tucker Anthony and Sutro, all of which are broker-dealers.
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 April 30, 1995
the contingent deferred sales charges paid to JH Funds amounted to $57,438.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors, for distribution and service expenses at an annual rate not to
exceed 0.30% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares, to reimburse the Co-Distributor for their distribution/service costs. Up
to a maximum of 0.25% of these payments may be service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid a monthly transfer agent fee equivalent,
on an annual basis, to 0.23% and 0.25% of the average daily
15
<PAGE> 56
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
net asset value of Class A and Class B shares of the Fund, respectively, plus
out of pocket expenses incurred by Investor Services on behalf of the Fund for
proxy mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1995, aggregated $1,677,978 and
$13,704,629, respectively.
The cost of investments owned at April 30, 1995 (including the short-term
investments) for federal income tax purposes was $42,466,043. Gross unrealized
appreciation and depreciation of investments aggregated $1,881,771 and $497,333,
respectively, resulting in net unrealized appreciation of $1,384,438.
16
<PAGE> 57
NOTES
John Hancock Funds - Gold & Government Fund
17
<PAGE> 58
NOTES
John Hancock Funds - Gold & Government Fund
18
<PAGE> 59
NOTES
John Hancock Funds - Gold & Government Fund
19
<PAGE> 60
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 Huntington Avenue Boston, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
[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."]
- -------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock Gold &
Government 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."]
JHF 040SA 4/95
<PAGE> 61
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
SOVEREIGN
U.S.
GOVERNMENT
INCOME
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 62
CHAIRMAN'S MESSAGE
TRUSTEES
Edward J. Boudreau, Jr
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
James K. Schmidt
Vice President
Andrew F. St. Pierre
Senior Vice President
Lawrence J. Daly
Senior Vice President
Anthony A. Goodchild
Senior Vice President
Anne M. McDonley
Vice President
Barry H. Evans
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential risks as well as the potential rewards of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our Customer Service Representatives at 1-800-225-5291, from
8:00 a.m. to 8:00 p.m. eastern standard time, Monday through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 63
BY BARRY H. EVANS,
VICE PRESIDENT AND PORTFOLIO MANAGER
JOHN HANCOCK SOVEREIGN
U.S.GOVERNMENT
INCOME FUND
Bond prices turn around as economy slows and inflation
remains tame; outlook is bright for 1995
In January 1995, Barry H. Evans began managing John Hancock Sovereign U.S.
Government Income Fund. Mr. Evans, who joined John Hancock Funds in 1986, is
vice president and head of the company's government fixed-income department. He
also manages John Hancock Government Income Fund, John Hancock Limited-Term
Government Fund, and the fixed-income portion of John Hancock Sovereign Balanced
Fund.
After heading down for most of 1994, the U.S. bond market began to rally late in
November with signs that the economy was slowing. The Federal Reserve continued
to raise interest rates, demonstrating its resolve to put the brakes on economic
growth. With inflation appearing to be in check, investors returned to bonds,
pushing up prices through the first quarter of 1995. The rally stalled in April,
however, as investors waited for further evidence that the economic slowdown
would continue.
Happily, John Hancock Sovereign U.S. Government Income Fund shared in the
market's gains. For the six months ended April 30, 1995, the Fund's Class A and
B shares returned 7.21% and 6.93%, respectively, at net asset value. These
returns were slightly ahead of the average general U.S. government fund, which
was up 6.34% for the period, according to Lipper Analytical Services.(1)
[A 2 1/4" x 2 1/2" photo of Barry H. Evans. Caption reads: "Barry H. Evans,
Portfolio Manager."]
[CAPTION]
"...THE U.S. BOND MARKET BEGAN TO RALLY LATE IN NOVEMBER..."
3
<PAGE> 64
John Hancock Funds - Sovereign U.S. Government Income Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart
is scaled in increments of 4% from top to bottom, with 8% on the top and 0% at
the bottom. Within the chart, there are three solid bars. The first represents
the 7.21% total return for John Hancock Sovereign U.S. Government Income Fund:
Class A. The second represents the 6.93% total return for John Hancock
Sovereign U.S. Government Income Fund: Class B. The third represents the 6.34%
total return for the average general U.S. government income fund. Footnote
below reads: "Total returns for John Hancock Sovereign U.S. Government Income
Fund are at net asset value with all distributions reinvested. The average
general U.S. government income fund is tracked by Lipper Analytical
Services.(1) See following page for historical performance information."]
U.S. TREASURIES DOMINATE; MORTGAGES INCREASING
Throughout the period, we kept the bulk of the Fund's assets in U.S. Treasuries.
At the end of April, our weighting was close to 70%. That paid off, especially
from late January through March when interest rates fell dramatically. Because
they're so interest-rate sensitive, Treasuries tend to outperform when rates
fall quickly. For the six months ended April 30, 1995, the benchmark 30-year
Treasury returned 11.5%. By comparison, 10-year Treasuries returned 8.9% and
short-term Treasuries averaged returns around 4%.
To improve the Fund's yield, we increased our position in mortgage-backed
securities, which was underweighted compared to other U.S. government funds. The
bulk of what we bought were Ginnie Mae and Fannie Mae securities with 8% coupons
(or stated interest rates). The Fund benefited as the mortgage sector -- which
returned 7.4% for the period, according to the Merrill Lynch Mortgage Index --
outperformed the government sector as a whole. But mortgages -- which do best
when rates are stable or falling gradually -- posted their biggest gains
relative to Treasuries in December and January. With the advantage of hindsight,
we wish we had increased our mortgage exposure faster to take full advantage of
this outperformance. But by the end of April, 30% of our investments were in
mortgage-backed securities, which was close to the average for other U.S.
government funds.
LONGER DURATION PAYS OFF, BARBELL DOESN'T
From November through April, we kept the Fund's duration in the neighborhood of
6 to 6.5 years. By comparison, the average U.S. government fund had a duration
closer to 5 years. Duration measures how sensitive a fund's share price is to
interest-rate changes. Usually, the longer the duration, the more the Fund's
share price will move down when interest rates rise or up when interest rates
fall. So having a longer duration helped when rates started falling in November.
Unfortunately, though, our barbell structure held back performance a bit.
When you own mostly bonds with either long (20- to 30-year) maturities or short
(two-, three-, or five-year) maturities, and not much in between, that's called
a barbell structure. As the yield curve steepened -- meaning the difference in
short-term and long-term rates widened --
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is lower.
[CAPTION]
"...WE INCREASED OUR POSITION IN MORTGAGE-BACKED SECURITIES..."
4
<PAGE> 65
John Hancock Funds - Sovereign U.S. Government Income Fund
[Pie chart with heading "Portfolio Diversification" at top of left column. The
pie is divided into two sections. From left to right: U.S. Treasury Bonds, 70%
and U.S. Government Agency Bonds, 30%. A footnote below reads: "As a percentage
of net assets on April 30, 1995."]
funds with more exposure to intermediate (10-year) maturities did better than
those with a barbell. Intermediate-term Treasuries had strong relative
performance in part because of government intervention during the recent
currency crisis. As the dollar hit historic lows against the Japanese yen,
central banks in the United States and abroad started buying short- and
intermediate-term Treasuries, pushing up prices. Owning more intermediate
securities would have served the Fund well.
POSITIVE MARKET AHEAD
Our outlook is optimistic. The bond market, which hates inflation, has done well
as the economy has shown continued signs of slowing. With evidence that its
previous rate hikes are working, it's unlikely the Federal Reserve will raise
rates again this year. The only concerns that might derail the current
environment are the traditional ones: the budget deficit and rising commodity
prices. If these stay in control, we believe rates on 30-year Treasuries could
fall below 7%.
Going forward, our strategy will be to keep the Fund's above-average
duration and barbell structure. Though it didn't work the way we hoped it would
over the last six months, we think the time is right for a barbell approach. A
barbell usually works best when the yield curve flattens, which is what we
expect to happen once the government stops buying Treasuries to prop up the
dollar. With a barbell, the Fund would benefit especially if inflation fears
lessen and long-term bonds rally. The Fund's above-average duration would also
be an advantage if rates do fall further.
What would change our strategy? If the economy seemed to be speeding up or
if we saw a spike in commodity prices, we would shorten duration to protect the
Fund from rising interest rates. Also, if yields on 30-year Treasuries stabilize
near 7%, we would increase our stake in mortgage-backed securities to generate
higher earnings. That would help us provide shareholders with a more competitive
yield, while maintaining our primary focus on total return.
[CAPTION]
"...IT'S UNLIKELY THE FEDERAL RESERVE WILL RAISE RATES AGAIN THIS YEAR."
5
<PAGE> 66
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Sovereign U.S. Government Income Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the period ended March 31, 1995,
with all distributions reinvested in shares. The average annualized total
returns for Class A Shares for the 1-year period and since inception on January
3, 1992 were (2.09%) and 3.23%, respectively, and reflect payment of the maximum
sales charge of 4.50%. The average annualized total returns for Class B shares
for the 1-year and 5-year periods and since inception on June 5, 1986 were
(2.90%), 6.96% and 7.65%, respectively, and reflect the applicable contingent
deferred sales charge (maximum contingent deferred sales charge is 5% and
declines to 0% over 6 years). The standard SEC yields for the 30-day period
ended April 30, 1995 for Class A and Class B shares were 6.09% and 5.87%,
respectively. All performance data shown represent past performance and should
not be considered indicative of future performance. Returns and principal values
of Fund investments will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
[Sovereign U.S. Government Income Fund
Class A shares
Line chart with the heading Sovereign U.S. Government
Income Fund: Class A, representing the growth of a
hypothetical $10,000 investment over the life of the fund.
Within the chart are three lines.
The first line represents the value of the Lehman
Government Bond Index and is equal to $11,974* as of April
30, 1995. The second line represents the value of the
hypothetical $10,000 investment made in the Sovereign U.S.
Government Income Fund on January 3, 1992, before sales
charge, and is equal to $11,759 as of April 30, 1995. The
third line represents the Sovereign U.S. Government Income
Fund after sales charge and is equal to $11,226 as of April
30, 1995.
Sovereign U.S. Government Income Fund
Class B shares
Line chart with the heading Sovereign U.S. Government
Income 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 value of the Lehman
Government Bond Index and is equal to $20,004* as of April
30, 1995. The second line represents the value of the
hypothetical $10,000 investment made in the Sovereign U.S.
Government Income Fund on June 5, 1986 and is equal to
$19,390** as of April 30, 1995.
* The Lehman Government Bond Index is an unmanaged index, which measures the
performance of U.S. Treasury bonds and U.S. Government Agency bonds.
** No applicable contingent deferred sales charge.]
6
<PAGE> 67
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- ------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies
securities (cost - $509,364,209) ............ $ 492,474,533
Short-term investments (cost - $73,565) ....... 73,565
-------------
492,548,098
Receivable for shares sold ...................... 43,956
Interest receivable ............................. 6,999,061
Other assets .................................... 23,327
-------------
Total Assets ................. 499,614,442
----------------------------------------------
LIABILITIES:
Dividend payable ................................ 1,659,974
Payable for shares repurchased .................. 265,129
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ........................... 351,133
Accounts payable and accrued expenses ........... 42,124
-------------
Total Liabilities ............ 2,318,360
----------------------------------------------
NET ASSETS:
Capital paid-in ................................. 551,283,075
Accumulated net realized loss on investments and
financial futures contracts ................... (36,846,536)
Net unrealized depreciation of investments and
financial futures contracts ................... (17,140,457)
-------------
Net Assets ................... $ 497,296,082
==============================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $311,088,575 / 32,607,292 ............. $ 9.54
=================================================================
Class B - $186,207,507 / 19,540,129 ............. $ 9.53
=================================================================
MAXIMUM OFFERING PRICE PER SHARE:*
Class A - ($9.54 x 104.71%) ..................... $ 9.99
=================================================================
</TABLE>
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- ------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ......................................... $ 20,043,159
------------
Expenses:
Investment management fee - Note B ............. 1,228,598
Distribution/service fee - Note B
Class A ....................................... 458,240
Class B ....................................... 930,603
Transfer agent fee - Note B
Class A ....................................... 529,494
Class B ....................................... 130,068
Custodian fee .................................. 64,259
Trustees' fees ................................. 54,078
Registration and filing fees ................... 30,351
Printing ....................................... 24,682
Auditing fee ................................... 23,833
Miscellaneous .................................. 10,251
Legal fees ..................................... 7,346
------------
Total Expenses ................ 3,491,803
----------------------------------------------
Net Investment Income ......... 16,551,356
----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold ............ (18,463,552)
Net realized loss on financial futures contracts . (1,585,250)
Change in net unrealized appreciation/depreciation
of investments ................................. 36,287,656
Change in net unrealized appreciation/depreciation
of financial futures contracts ................. (250,781)
------------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts ... 15,988,073
----------------------------------------------
Net Increase in Net Assets
Resulting from Operations ..... $ 32,539,429
==============================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 68
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............................................... $ 16,551,356 $ 36,554,449
Net realized loss on investments sold and financial futures
contracts .......................................................... (20,048,802) (16,408,904)
Change in net unrealized appreciation/depreciation of investments
and financial futures contracts ..................................... 36,036,875 (60,739,209)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations .... 32,539,429 (40,593,664)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3169 and $0.6544 per share, respectively) ............ (10,572,373) (22,812,484)
Class B - ($0.2941 and $0.6130 per share, respectively) ............ (5,978,983) (13,741,965)
Distributions from net realized gain on investments sold
Class A - (none and $0.3080 per share, respectively) ............... -- (10,604,649)
Class B - (none and $0.3080 per share, respectively) ............... -- (6,971,522)
-------------- --------------
Total Distributions to Shareholders ................................ (16,551,356) (54,130,620)
-------------- --------------
FROM FUND SHARE TRANSACTIONS -- NET* ................................... (30,962,986) (12,554,565)
-------------- --------------
NET ASSETS:
Beginning of period ................................................. 512,270,995 619,549,844
-------------- --------------
End of period ....................................................... $ 497,296,082 $ 512,270,995
============== ==============
</TABLE>
*ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .................................................. 635,416 $ 5,927,970 3,159,870 $ 31,833,752
Shares issued to shareholders in reinvestment
of distributions ............................................. 975,924 9,093,077 2,873,408 28,806,391
---------- ------------ ----------- ------------
1,611,340 15,021,047 6,033,278 60,640,143
Less shares repurchased ...................................... (3,139,203) (29,280,339) (6,370,807) (63,185,012)
---------- ------------ ----------- ------------
Net decrease ................................................. (1,527,863) ($14,259,292) (337,529) ($ 2,544,869)
========== ============ ======== ============
CLASS B
Shares sold .................................................. 713,730 $ 6,652,985 3,469,697 $ 34,758,586
Shares issued to shareholders in reinvestment
of distributions ............................................. 347,516 3,234,245 1,168,067 11,734,449
---------- ------------ ----------- ------------
1,061,246 9,887,320 4,637,764 46,493,035
Less shares repurchased ...................................... (2,857,364) (26,590,924) (5,742,895) (56,502,731)
---------- ------------ ----------- ------------
Net decrease ................................................. (1,796,118) ($16,703,694) (1,105,131) ($10,009,696)
========== ============ =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 69
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
-------------------------------------
(UNAUDITED) 1994 1993 1992(a)
---------------- ---- ---- -------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ................. $ 9.24 $ 10.89 $ 10.29 $ 10.51
-------- -------- -------- --------
Net Investment Income ................................ 0.32 0.65 0.68** 0.64
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts ........ 0.30 (1.34) 0.61 (0.22)
-------- -------- -------- --------
Total from Investment Operations .................. 0.62 (0.69) 1.29 0.42
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ................. (0.32) (0.65) (0.68) (0.64)
Distributions from Net Realized Gain on
Investments Sold and Financial Futures Contracts ... -- (0.31) (0.01) --
-------- -------- -------- --------
Total Distributions .................................. (0.32) (0.96) (0.69) (0.64)
-------- -------- -------- --------
Net Asset Value, End of Period ....................... $ 9.54 $ 9.24 $ 10.89 $ 10.29
======== ======== ======== ========
Total Investment Return at Net Asset Value ........... 7.21% (6.66%) 12.89% 4.93%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............ $311,089 $315,372 $375,416 $350,907
Ratio of Expenses to Average Net Assets .............. 1.23%* 1.23% 1.30% 1.06%*
Ratio of Net Investment Income to Average
Net Assets ......................................... 6.92%* 6.62% 6.47% 7.11%*
Portfolio Turnover Rate .............................. 53% 127% 273% 140%
</TABLE>
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: THE NET INVESTMENT INCOME, GAINS
(LOSSES), DISTRIBUTIONS AND TOTAL INVESTMENT RETURNS 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.
9
<PAGE> 70
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED OCTOBER 31,
---------------------------------------------------------
(UNAUDITED) 1994 1993 1992(a) 1991 1990
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........ $ 9.23 $ 10.88 $ 10.28 $ 10.29 $ 9.83 $ 10.01
-------- -------- -------- -------- -------- --------
Net Investment Income ....................... 0.29 0.61 0.66** 0.76 0.85 0.85+
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures
Contracts ................................. 0.30 (1.34) 0.61 -- 0.51 (0.25)
-------- -------- -------- -------- -------- --------
Total from Investment Operations ......... 0.59 (0.73) 1.27 0.76 1.36 0.60
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ........ (0.29) (0.61) (0.66) (0.77) (0.90) (0.78)
Distributions from Net Realized Gain on
Investments Sold and Financial Futures
Contracts ............................... -- (0.31) (0.01) -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions ...................... (0.29) (0.92) (0.67) (0.77) (0.90) (0.78)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period .............. $ 9.53 $ 9.23 $ 10.88 $ 10.28 $ 10.29 $ 9.83
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset Value .. 6.93% (7.05%) 12.66% 7.58% 14.46% 6.24%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ... $186,208 $196,899 $244,133 $197,032 $164,347 $133,778
Ratio of Expenses to Average Net Assets ..... 1.73%* 1.64% 1.51% 1.55% 1.51% 1.54%+
Ratio of Net Investment Income to Average
Net Assets .................................. 6.42%* 6.19% 6.23% 7.35% 8.53% 8.54%+
Portfolio Turnover Rate ..................... 53% 127% 273% 140% 62% 63%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
+ Net of expense reimbursement per share, amounting to less than $.01 for the
year ended October 31, 1990. Absent of such reductions for the year ended
October 31, 1990 the ratio of expenses to average net assets would have been
1.55% and the ratio of net investment income to average net assets would
have been 8.53%. Without the reimbursement, total investment return would be
lower.
(a) Class A shares commenced operations on January 3, 1992.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 71
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- -----------------------------------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SOVEREIGN U.S. GOVERNMENT INCOME FUND ON APRIL 30, 1995. THE SCHEDULE CONSISTS
OF TWO MAIN CATEGORIES: U.S. GOVERNMENT AND AGENCIES SECURITIES AND SHORT-TERM
INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION,
ARE LISTED LAST.
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- --------- ------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES SECURITIES
GOVERNMENTAL - U.S. (68.71%)
United States Treasury, Bond ............ 10.750% 08-15-05 $134,885 $ 169,808,075
United States Treasury, Bond** .......... 9.250 02-15-16 60,000 71,231,400
United States Treasury, Bond ............ 8.125 08-15-19 72,000* 77,096,160
United States Treasury, Note ............ 8.500 08-15-95 18,250* 18,381,217
United States Treasury, Note ............ 7.750 01-31-00 5,000* 5,170,300
-------------
341,687,152
-------------
GOVERNMENTAL - U.S. AGENCIES (30.32%)
Federal Home Loan Mortgage Corp,
CMO REMIC 1064-D ....................... 8.250 08-15-19 4,416 4,481,880
CMO REMIC 1122-E ....................... 8.000 05-15-20 8,150 8,233,810
CMO REMIC 1142-H ....................... 7.950 12-15-20 10,000 10,028,100
CMO REMIC 1442-S ....................... 4.620# 12-15-97 42 35,708
CMO REMIC Gold ......................... 9.000 03-01-25 9,967* 10,253,685
Federal National Mortgage Association,
30 Yr Pass Thru Ctf .................... 8.000 10-01-24 9,903* 9,878,380
GTD REMIC Pass Thru Ctf 1990-42-E ...... 9.800 05-25-19 13,837 14,157,271
GTD REMIC Pass Thru Ctf 1991-76-M ...... 9.000 07-25-06 5,000 5,187,500
GTD REMIC Pass Thru Ctf 1991-159-C ..... 7.000 10-25-04 19,592 19,469,233
GTD REMIC Pass Thru Ctf 1991-G8-E ...... 9.000 04-25-21 6,000 6,204,375
GTD REMIC Pass Thru Ctf G 17-B ......... 8.750 09-25-19 1,918 1,935,651
Multicurrency PERLS .................... 10.500 08-29-95 1,000 253,750
Multicurrency PERLS .................... 11.450 07-10-96 1,000 132,500
Multicurrency PERLS .................... 13.050 06-07-95 1,500 20,625
Financing Corp.,
Bond Ser C ............................. 9.800 11-30-17 7,000 8,494,080
Government National Mortgage Association,
30 Yr Pass Thru Ctf .................... 8.500 12-15-24 to 50,829* 51,830,333
01-15-25
Student Loan Marketing Association,
Multicurrency PERLS .................... 10.000 11-19-96 1,000 151,250
Multicurrency PERLS .................... 11.100 04-07-97 200 39,250
------------
150,787,381
------------
TOTAL U.S. GOVERNMENT AND
AGENCIES SECURITIES
(Cost $509,364,209) (99.03%) 492,474,533
------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 72
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- -------- -------- --------- ------------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.01%)
Investment in a joint repurchase agreement transaction with
B.T. Securities Corp. - Dated 04-28-95, Due 05-01-95
(secured by U.S. Treasury Bond, 10.75% Due 08-15-05
and U.S. Treasury Note, 6.875% Due 10-31-96) Note A............... 5.930% 05-01-95 $ 70 $ 70,000
------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account Current Rate 3.00%................. 3,565
------------
TOTAL SHORT-TERM INVESTMENTS (0.01%) 73,565
------- ------------
TOTAL INVESTMENTS (99.04%) $492,548,098
======= ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** U.S. Treasury Bonds with a value of $237,438 owned by the Fund were
designated as margin deposits for futures contracts at April 30, 1995.
# Represents rate in effect on April 30, 1995.
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.
12
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management investment
company registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Sovereign U.S. Government Income Fund
(the "Fund"), John Hancock Gold & Government Fund, John Hancock Regional Bank
Fund, John Hancock Sovereign Achievers Fund and John Hancock Managed Tax-Exempt
Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund was known as
John Hancock Freedom Gold & Government Fund and John Hancock Regional Bank Fund
was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemption, 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/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $16,832,068 of capital
loss carryforwards available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforwards expire as follows:
October 31, 1997 -- $282,637, and October 31, 2002 -- $16,549,431.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class as explained previously.
13
<PAGE> 74
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
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 manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates. At the
time the Fund enters into a financial futures contract, it is required to
deposit with its custodian a specified amount of cash or U.S. government
securities, known as "initial margin", equal to a certain percentage of the
value of the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of trade or
U.S. commodity exchange. Subsequent payments, known as "variation margin", are
made to and from the broker on a daily basis as the market price of the
financial futures contract fluctuates. Daily variation margin adjustments,
arising from this "mark to market", are recorded by the Fund as unrealized gains
or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1995, open positions in financial futures contracts were as
follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- ---------- -------------- -------- ------------
<S> <C> <C> <C>
JUNE 1995 75 TREASURY BOND SHORT $250,781
========
</TABLE>
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 (a) 0.50% of the first $500,000,000 of the Fund's
average daily net asset value, and (b) 0.45% of the Fund's average daily net
asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended April 30, 1995, net
sales charges received with regard to sales of Class A shares of the Fund
amounted to $170,351. Out of this amount, $18,446 was retained and used for
printing prospectuses, advertising, sales literature, and other purposes,
$16,808 was paid as sales commissions to unrelated broker-dealers and $135,097
was paid as sales commissions to sales personnel of John Hancock Distributors,
Inc. ("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony")
14
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
and Sutro & Co., Inc. ("Sutro"). The Adviser's indirect parent, John Hancock
Mutual Life Insurance Company, is the indirect sole shareholder of Distributors
and John Hancock Freedom Securities Corporation and its subsidiaries, which
include FDC, Tucker Anthony and Sutro, all of which are broker-dealers.
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 April 30, 1995
the contingent deferred sales charges received by JH Funds amounted to $306,529.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors for distribution and service expenses at an annual rate not to
exceed 0.30% of the Fund's average daily net assets attributable to Class A
shares and 1.00% of the Fund's average daily net assets attributable to Class B
shares to reimburse the Co-Distributors for their distribution/service costs. Up
to a maximum of 0.25% of these payments may be service fees as defined by the
amended Rules of Fair Practice of the National Association of Securities
Dealers. Under the amended Rules of Fair Practice, curtailment of a portion of
the Fund's 12b-1 payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services,
Inc. ("Investor Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. Prior to January 1, 1995, Investor Services was known as John Hancock
Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer agent fees
based on transaction volume and the number of shareholder accounts. Prior to
January 1, 1995, the Fund paid Investor Services a monthly transfer agent fee
equivalent, on an annual basis, to 0.34% and 0.12% of the average daily net
asset value of Class A and Class B shares of the Fund, respectively, plus out of
pocket expenses incurred by Investor Services on behalf of the Fund for proxy
mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock Funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of obligations of the U.S.
government and its agencies, other than short-term securities, during the period
ended April 30, 1995 aggregated $295,521,834 and $259,805,153, respectively.
The cost of investments owned at April 30, 1995 (including the short-term
investments) for federal income tax purposes was $509,434,209. Gross unrealized
appreciation and depreciation of investments aggregated $2,447,205 and
$19,336,881, respectively, resulting in net unrealized depreciation of
$16,889,676.
15
<PAGE> 76
Bulk Rate
[LOGO] JOHN HANCOCK FUNDS U.S. Postage
A Global Investment Management Firm PAID
101 Huntington Avenue Boston, MA 02199-7603 Brockton, MA
Permit No. 582
[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."]
- --------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Sovereign U.S. Government Income Fund. It may be used as sales literature when
preceded or accompanied by the current prospectus, which details charges,
investment objectives and operating policies.
[A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."]
JHF 020SA 4/95
<PAGE> 77
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
MANAGED
TAX-EXEMPT
FUND
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 78
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
William A. Barron, III*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Patrick Grant*
Ralph Lowell, Jr.*
John A. Moore*
Patti McGill Peterson*
John W. Pratt*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Michael P. DiCarlo
Senior Vice President
Thomas C. Goggins
Senior Vice President
James K. Ho
Senior Vice President
James K. Schmidt
Senior Vice President
Andrew F. St. Pierre
Senior Vice President
Barry H. Evans
Vice President
Anne M. McDonley
Vice President
John A. Morin
Vice President
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT
John Hancock Investor Services Corporation
P.O. Box 9116
Boston, Massachusetts 02205-9116
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential risks as well as the potential rewards of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our Customer Service Representatives at 1-800-225-5291, from
8:00 a.m. to 8:00 p.m. eastern standard time, Monday through Friday.
Sincerely,
/s/ EDWARD J. BOUDREAU, JR.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 79
BY FRANK LUCIBELLA, SECOND VICE PRESIDENT AND
PORTFOLIO MANAGER
JOHN HANCOCK
MANAGED
TAX-EXEMPT FUND
EXPECTATIONS OF SLOWER ECONOMIC GROWTH BOOST MUNICIPAL BOND
MARKET; OUTLOOK TURNS MORE CAUTIOUS FOR THE REMAINDER OF YEAR
The municipal bond market enjoyed one of its strongest rallies of the decade
during the past six months. After hitting their lows last November, municipal
bond prices steadily improved. The market seemed to be less concerned that
interest rates would climb higher. That optimism was based on continuing
evidence that the economy's strong fourth-quarter 1994 growth was showing signs
of slowing down. Many investors reasoned that slower, non-inflationary growth
would eliminate the need for the Federal Reserve Board to push interest rates
higher. The first quarter of 1995 was especially strong, and municipals topped
the charts as the best performing fixed-income category during that period.
[A 2 1/2" x 2 1/2" photo of Frank Lucibella. Caption reads: "Frank Lucibella,
Portfolio Manager."]
The market hit a rough spot, however, late in the period. Politicians floated
the notion of a flat tax -- a uniform rate on individual and corporate income --
which would virtually eliminate exemptions for interest income. Investors became
fearful that under that type of taxation, municipal bonds could lose their
tax-exempt status, and perhaps their appeal.
[CAPTION]
"THE MUNICIPAL BOND MARKET ENJOYED ONE OF ITS STRONGEST RALLIES..."
3
<PAGE> 80
John Hancock Funds - Managed Tax-Exempt Fund
[Chart with heading "Top Five Sectors" at top of left hand column. The chart
lists five sectors: 1) Health Care 17% 2) Electric Utilities 15% 3) Pollution
Control 14% 4) Housing 11% 5) Education 9%. A footnote below reads: "As a
percentage of net assets on April 30, 1995."]
A LOOK AT PERFORMANCE
For the six months ended April 30, 1995, John Hancock Managed Tax-Exempt Fund's
Class A and Class B shares posted returns of 7.83% and 7.42%, respectively,
at net asset value. Those returns were slightly ahead of the average general
municipal bond fund's return of 7.30%, according to Lipper Analytical
Services.(1)
During the period, we kept the Fund's duration neutral. Duration measures how
sensitive a fund's share price is to changes in interest rates. By maintaining
this neutral stance, we avoided betting that interest rates would rise or fall
and kept the Fund's performance in line with its peers. As tempting as it was to
bet on the direction of interest rates over the short-term, we remained cautious
on the longer-term outlook. After such a strong rally, there's a threat that
interest rates could go higher over the next several months.
PORTFOLIO CHANGES
The market's strength provided us with an opportunity to upgrade the Fund's
credit quality and liquidity. As the difference in yield between high- and
low-quality bonds narrowed, we were able to replace some lower-quality bonds
with higher-quality bonds without sacrificing a lot of yield. Liquidity has
become a more important concern for the municipal bond market over the past
year. Three large municipal bond market dealers have left the market, taking a
certain amount of liquidity with them. Going forward, we think it's especially
important to focus on liquid issues since they're easier to buy and sell. What's
more, the more liquid the security, the more fairly priced it tends to be.
Throughout the period, we modified some of our sector weightings. Electric
utility bonds grew to 15% of the Fund's assets by the end of the period. In 1993
and 1994, these bonds dropped to relatively cheap levels on fears that the
industry was becoming increasingly more competitive. We've emphasized bonds --
such as North Carolina Municipal Power Agency -- that we think are more
insulated from competitive pressures. Health care remained the Fund's largest
sector concentration at 17%. After the Clinton administration's health-care
reform package was pronounced dead on arrival, the prices of many health-care
bonds slowly improved. We were also helped by some credit upgrades. The credit
rating of Temple University Hospital in Philadelphia was upgraded from Baa to
A-, while Boston's Deaconess Hospital had its credit rating confirmed at A.
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers. The first listing is Deaconess
Hospital followed by an up arrow and the phrase "Reaffirmed credit rating." The
second listing is Temple University Hospital followed by an up arrow and the
phrase "Credit upgrade." The third listing is West Felicia for Gulf States
followed by a down arrow and the phrase "Poor earnings/competitive pressures."
Footnote below reads: "See "Schedule of Investments." Investment holdings are
subject to change."]
[CAPTION]
"THE MARKET'S STRENGTH PROVIDED WITH AN OPPORTUNITY TO UPGRADE ... CREDIT
QUALITY AND LIQUIDITY."
4
<PAGE> 81
John Hancock Funds - Managed Tax-Exempt Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart
is scaled in increments of 2% from top to bottom, with 8% at the top and 0% at
the bottom. Within the chart, there are three solid bars. The first represents
the 7.83% total return for John Hancock Managed Tax-Exempt Fund: Class A. The
second represents the 7.42% total return for John Hancock Managed Tax-Exempt
Fund: Class B. The third represents the 7.30% total return for the average
general municipal bond fund. Footnote below reads: "Total returns for John
Hancock Managed Tax-Exempt Fund are at net asset value with all distributions
reinvested. The average general municipal bond fund is tracked by Lipper
Analytical Services.(1) See following page for historical performance
information."]
Finally, we modified our holdings across states, selling those that had
already appreciated and buying those with more upside potential. For example, we
took profits in some of our New York holdings and bought California insured
bonds at rock bottom prices. California's economy continues to improve, and we
believe that trend will continue for the balance of the year. In addition, a
healthy supply of new bonds issued in Florida pushed prices down, so we
increased our holdings there as well.
OUTLOOK AND STRATEGY
Worries about the future of tax reform could cause some volatility in the
market. In our view, it's unlikely that any major tax reform will be enacted
before the 1996 presidential election. So the market seems to be jumping the
gun.
As far as the interest-rate environment goes, we remain cautious. Despite
some recent indications to the contrary, we believe that there is still a decent
amount of strength left in the economy. The decline in interest rates we've seen
so far in 1995 may give a boost to the economy later in the year, spurring
housing, auto and retail sales. While the notion of a "soft landing" -- in which
the economy grows moderately with low inflation -- is tempting, history suggests
that it's difficult to achieve.
With that in mind, we'll keep the Fund positioned with a neutral duration. If
interest rates stabilize or rise from here, total return will be more dependent
on yield than on price appreciation. For that reason, we'll continue to try to
improve the Fund's yield as we see opportunities to do so.
- --------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and
do not take into account sales charges. Actual load-adjusted performance
is lower.
[CAPTION]
"...THERE IS STILL A DECENT AMOUNT OF STRENGTH LEFT IN THE ECONOMY."
5
<PAGE> 82
NOTES TO PERFORMANCE INFORMATION
John Hancock Funds - Managed Tax-Exempt Fund
In accordance with the reporting requirements of the Securities and Exchange
Commission, the following data are supplied for the periods ended March 31,
1995, with all distributions reinvested in shares. The average annualized total
returns for Class A shares for the 1-year period and since inception on January
3, 1992 were 2.04% and 5.16%, respectively, and reflect payment of the maximum
sales charge of 4.50%. The average annualized total returns for Class B shares
for the 1-year and 5-year periods and since inception on April 22, 1987 were
1.02%, 7.33% and 8.26%, respectively, and reflect the applicable contingent
deferred sales charge (maximum contingent deferred sales charge is 5% and
declines to 0% over 6 years). The standard SEC yield for the 30-day period
ended April 30, 1995 for Class A and Class B shares were 4.95% and 4.49%,
respectively. The Adviser voluntarily waived a portion of the management fee and
reduced a portion of the custodian fees during the period. Without the waiver of
expenses, the average annualized total returns for the 1-year period and since
inception on January 3, 1992 for Class A shares would have been 1.97% and 4.97%,
respectively. The average annualized total returns for the 1-year and 5-year
periods and since inception on April 22, 1987 for Class B shares would have been
0.95%, 7.08% and 7.80%, respectively. All performance data shown represent past
performance and should not be considered indicative of future performance.
Returns and principal values of Fund investments will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. A portion of the Fund's income may be subject to federal, state, or local
taxes.
HYPOTHETICAL $10,000 INVESTMENT OVER LIFE OF FUND (OR MOST RECENT TEN YEARS)
[Managed Tax-Exempt Fund
Class A shares
Line chart with the heading Managed Tax-Exempt Fund: Class
A, representing the growth of a hypothetical $10,000
investment over the life of the fund (or most recent 10
years). Within the chart are three lines.
The first line represents the value of the Lehman
Municipal Bond Index and is equal to $12,420* as of April
30, 1995. The second line represents the value of the
hypothetical $10,000 investment made in the Managed
Tax-Exempt Fund on January 3, 1992, before sales charge,
and is equal to $12,333 as of April 30, 1995. The third
line represents the Managed Tax-Exempt Fund after sales
charge and is equal to $11,778 as of April 30, 1995.
Managed Tax-Exempt Fund
Class B shares
Line chart with the heading Managed Tax-Exempt Fund: Class
B, representing the growth of a hypothetical $10,000
investment over the life of the fund (or most recent 10
years). Within the chart are two lines.
The first line represents the value of the hypothetical
$10,000 investment made in the Managed Tax-Exempt Fund on
April 22, 1987 and is equal to $18,789** as of April
30, 1995. The second line represents the value of the
Lehman Municipal Bond Index and is equal to $18,074* as of
April 30, 1995.
* The Lehman Municipal Bond Index is an unmanaged index that includes
approximately 15,000 bonds and is commonly used as a measure of municipal
bond performance.
** No applicable contingent deferred sales charge.]
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 83
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON APRIL 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF THAT
DATE.
Statement of Assets and Liabilities
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value - Note C:
Tax-exempt long-term bonds (cost - $214,290,371) ....... $ 223,242,197
Cash ..................................................... 1,152,339
Segregated assets for financial futures
contracts ............................................... 200,000
Receivable for shares sold ............................... 153,592
Receivable for investments sold .......................... 5,114,805
Interest receivable ...................................... 4,711,717
Variation margin receivable .............................. 23,437
Other assets ............................................. 29,127
-------------
Total Assets .......................... 234,627,214
-----------------------------------------------------------
LIABILITIES:
Dividend payable ......................................... 569,151
Payable for shares repurchased ........................... 268,115
Payable for investments purchased ........................ 3,951,452
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ................................ 107,444
Accounts payable and accrued expenses .................... 2,131
-------------
Total Liabilities ..................... 4,898,293
-----------------------------------------------------------
NET ASSETS:
Capital paid-in .......................................... 221,275,968
Accumulated net realized loss on investments
and financial futures contracts ........................ (231,685)
Net unrealized appreciation of investments
and financial futures contracts ........................ 8,684,638
-------------
Net Assets ............................ $ 229,728,921
===========================================================
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, respectively)
Class A - $19,761,657 / 1,753,285 ........................ $ 11.27
==============================================================================
Class B - $209,967,264 / 18,625,677 ...................... $ 11.27
==============================================================================
Maximum Offering Price Per Share*
Class A - ($11.27 x 104.71%) ............................ $ 11.80
==============================================================================
</TABLE>
* On single retail sales of less than $100,000. On sales of $100,000 or more and
on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest ............................................... $ 7,730,115
------------
Expenses:
Distribution/service fee - Note B
Class A ............................................. 28,323
Class B ............................................. 1,033,461
Investment management fee - Note B ................... 676,723
Transfer agent fee - Note B
Class A ............................................. 5,964
Class B ............................................. 68,861
Custodian fee ........................................ 36,164
Trustees' fees ....................................... 24,678
Registration and filing fees ......................... 21,673
Auditing fee ......................................... 19,012
Printing ............................................. 13,606
Legal fees ........................................... 9,585
Miscellaneous ........................................ 5,119
------------
Total Expenses ...................... 1,943,169
Less Expense Reductions -
Note B .............................. (75,840)
---------------------------------------------------
Net Expenses ........................ 1,867,329
---------------------------------------------------
Net Investment Income ............... 5,862,786
---------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FINANCIAL FUTURES CONTRACTS:
Net realized gain on investments sold .................. 1,392,601
Net realized loss on financial futures contracts ....... (731,356)
Change in net unrealized appreciation/depreciation
of investments ....................................... 9,544,567
Change in net unrealized appreciation/depreciation of
financial futures contracts .......................... (420,719)
------------
Net Realized and Unrealized Gain
on Investments and Financial
Futures Contracts ................... 9,785,093
---------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ........... $ 15,647,879
===================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 84
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income .................................................................... $ 5,862,786 $ 12,831,192
Net realized gain (loss) on investments sold and financial futures contracts ............. 661,245 (739,886)
Change in net unrealized appreciation/depreciation of investments and financial futures
contracts .............................................................................. 9,123,848 (27,862,425)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ........................ 15,647,879 (15,771,119)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3174 and $0.6387 per share, respectively) ................................ (551,482) (1,070,853)
Class B - ($0.2792 and $0.5610 per share, respectively) ................................ (5,311,304) (11,760,339)
Distributions from net realized gain on investments sold and financial futures contracts
Class A - (none and $0.0898 per share, respectively) ................................... -- (120,420)
Class B - (none and $0.0898 per share, respectively) ................................... -- (1,901,276)
------------- -------------
Total Distributions to Shareholders ................................................... (5,862,786) (14,852,888)
------------- -------------
FROM FUND SHARE TRANSACTIONS -- NET* ...................................................... (18,090,299) (1,927,851)
------------- -------------
NET ASSETS:
Beginning of period ...................................................................... 238,034,127 270,585,985
------------- -------------
End of period ............................................................................ $ 229,728,921 $ 238,034,127
============= =============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
--------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ..................................................... 198,962 $ 2,164,914 1,179,686 $ 13,702,193
Shares issued to shareholders in reinvestment of distributions .. 30,941 338,066 60,754 696,640
------------ ------------ ------------ ------------
229,903 2,502,980 1,240,440 14,398,833
Less shares repurchased ......................................... (419,409) (4,460,242) (472,296) (5,404,052)
------------ ------------ ------------ ------------
Net increase (decrease) ......................................... (189,506) ($1,957,262) 768,144 $ 8,994,781
============ ============ ============ ============
CLASS B
Shares sold ..................................................... 498,790 $ 5,423,893 2,722,911 $ 31,724,838
Shares issued to shareholders in reinvestment of distributions .. 236,980 2,589,254 586,954 6,775,123
------------ ------------ ------------ ------------
735,770 8,013,147 3,309,865 38,499,961
Less shares repurchased.......................................... (2,223,063) (24,146,184) (4,333,843) (49,422,593)
------------ ------------ ------------ ------------
Net decrease..................................................... (1,487,293) ($16,133,037) (1,023,978) ($10,922,632)
============ ============ ============ ============
</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 FISCAL PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS
PAID TO SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS
INVESTED IN THE FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD,
REINVESTED AND REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE
CORRESPONDING DOLLAR VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 85
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 ------------------------------------
(UNAUDITED) 1994 1993 1992(a)
---------------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................................. $ 10.79 $ 12.13 $ 11.12 $ 11.25
-------- -------- -------- --------
Net Investment Income ................................................. 0.32 0.64 0.70 0.55
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts ..................................... 0.48 (1.25) 1.05 (0.11)
-------- -------- -------- --------
Total from Investment Operations ..................................... 0.80 (0.61) 1.75 0.44
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income .................................. (0.32) (0.64) (0.70) (0.53)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts ..................................... -- (0.09) (0.04) (0.04)
-------- -------- -------- --------
Total Distributions .................................................. (0.32) (0.73) (0.74) (0.57)
-------- -------- -------- --------
Net Asset Value, End of Period ........................................ $ 11.27 $ 10.79 $ 12.13 $ 11.12
======== ======== ======== ========
Total Investment Return at Net Asset Value ............................ 7.83% (5.22%) 16.10% 4.74%*
Total Adjusted Investment Return at Net Asset Value (b)(c) ............ 7.76% (5.79%) 15.77% 4.51%*
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ............................. $ 19,762 $ 20,968 $ 14,244 $ 9,589
Ratio of Expenses to Average Net Assets** ............................. 1.01%* 0.95% 0.70% 0.78%*
Ratio of Adjusted Expenses to Average Net Assets (b) .................. 1.08%* 1.02% 1.03% 1.01%*
Ratio of Net Investment Income to Average Net Assets** ................ 5.84%* 5.52% 5.98% 6.24%*
Ratio of Adjusted Net Investment Income to Average Net Assets (b) ..... 5.77%* 5.42% 5.65% 6.01%*
Portfolio Turnover Rate ............................................... 34% 59% 23% 23%
** Expense Reimbursement Per Share .................................... $ 0.004 $ 0.01 $ 0.04 $ 0.02
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for the periods indicated: the net investment income, gains
(losses), distributions and total investment returns 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.
9
<PAGE> 86
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61 $ 10.78
-------- -------- -------- -------- -------- -------
Net Investment Income .......................... 0.28 0.56 0.64 0.66 0.68 0.73
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts .. 0.48 (1.25) 1.05 0.04 0.61 (0.14)
-------- -------- -------- -------- -------- -------
Total from Investment Operations .............. 0.76 (0.69) 1.69 0.70 1.29 0.59
-------- -------- -------- -------- -------- -------
Less Distributions:
Dividends from Net Investment Income ........... (0.28) (0.56) (0.64) (0.64) (0.72) (0.72)
Distributions from Net Realized Gain on
Investments Sold and Financial Futures
Contracts .................................... -- (0.09) (0.04) (0.06) (0.06) (0.04)
-------- -------- -------- -------- -------- -------
Total Distributions ........................... (0.28) (0.65) (0.68) (0.70) (0.78) (0.76)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of Period ................. $ 11.27 $ 10.79 $ 12.13 $ 11.12 $ 11.12 $ 10.61
======== ======== ======== ======== ======== ========
Total Investment Return at Net Asset Value ..... 7.42% (5.85%) 15.51% 6.39% 12.55% 5.66%
Total Adjusted Investment Return at Net
Asset Value (b)(c) ........................... 7.35% (5.92%) 15.18% 6.20% 12.24% 5.10%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) ...... $209,967 $217,066 $256,342 $226,943 $199,955 $140,803
Ratio of Expenses to Average Net Assets** ...... 1.71%* 1.62% 1.23% 1.35% 1.19% 0.95%
Ratio of Adjusted Expenses to Average
Net Assets (b) ............................... 1.78%* 1.69% 1.56% 1.54% 1.50% 1.51%
Ratio of Net Investment Income to Average
Net Assets** ................................. 5.14%* 4.84% 5.49% 5.74% 6.19% 6.74%
Ratio of Adjusted Net Investment Income to
Average Net Assets (b) ........................ 5.07%* 4.77% 5.16% 5.55% 5.88% 6.18%
Portfolio Turnover Rate ........................ 34% 59% 23% 23% 30% 54%
** Expense Reimbursement Per Share ............. $ 0.004 $ 0.01 $ 0.04 $ 0.02 $ 0.04 $ 0.06
</TABLE>
* On an annualized basis.
(a) Class A shares commenced operations on January 3, 1992.
(b) On an unreimbursed basis without expense reduction.
(c) Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 87
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
MANAGED TAX-EXEMPT FUND ON APRIL 30, 1995. IT HAS ONE MAIN CATEGORY: TAX-EXEMPT
LONG-TERM BONDS. THE TAX-EXEMPT BONDS ARE FURTHER BROKEN DOWN BY STATE. UNDER
EACH STATE IS A LIST OF THE SECURITIES OWNED BY THE FUND.
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT LONG-TERM BONDS
ALABAMA (1.07%)
Birmingham, City of,
GO Iss of 1989 ....................................... 7.350% 03-01-14 A1** $ 750 $ 820,492 6.72%
Citronelle Industrial Development Board,
Stauffer Chemical Co Proj 1982 ....................... 8.000 12-01-12 NR 500 555,490 7.20
Cullman, County of,
Wtr Rev Iss of 1989 .................................. 6.900 05-01-13 AAA 1,000 1,075,800 6.41
---------
2,451,782
---------
ALASKA (1.89%)
Alaska Housing Finance Corp,
Coll Home Mtg Ser A-3 GNMA/FNMA Coll ................. 7.700 12-01-13 AAA 700 740,117 7.28
Coll Home Mtg Ser B-1 GNMA Coll ...................... 7.650 06-01-24 AAA 2,000 2,102,420 7.28
Coll Home Mtg Ser B-2 GNMA Coll ...................... 7.875 06-01-24 AAA 415 440,306 7.42
Valdez Alaska Marine Terminal,
Rev Ref Sohio Pipe Line Co. Proj Ser 1985 ............ 7.125 12-01-25 AA- 1,000 1,054,210 6.76
---------
4,337,053
---------
ARIZONA (2.96%)
Arizona Municipal Financing Program,
Cert of Part Ser 25 .................................. 7.875 08-01-14 AAA 1,000 1,231,970 6.39
Navajo, County of,
Poll Control Corp Rev Ref Arizona Pub Serv Co Ser A .. 5.875 08-15-28 BBB 3,000 2,722,890 6.47
Pima, County of,
Swr Rev Ref Ser 1991 ................................. 6.750 07-01-15 AAA 460 504,380 6.16
Pima, County of,
Swr Rev Ref Ser 1991 ................................. 6.750 07-01-15 AAA 540 568,890 6.41
Salt River Agriculture Project,
Ref Salt River Proj Ser B ............................ 5.250 01-01-19 AA 2,000 1,779,140 5.90
---------
6,807,270
---------
ARKANSAS (0.32%)
Arkansas Development Finance Auth,
Single Family Mtg Rev Ref Ser 1991 A ................. 8.000 08-15-11 AA 690 744,952 7.41
---------
CALIFORNIA (2.52%)
Central Valley Finance Agency,
California Cogeneration Proj Rev Carson Ice
Gen Proj .......................................... 6.100 07-01-13 BBB- 1,900 1,773,441 6.54
California Cogeneration Proj Rev Carson Ice
Gen Proj .......................................... 6.200 07-01-20 BBB- 2,000 1,847,040 6.71
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 88
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Sacramento Municipal Utilities District,
Elec Rev Ref Ser 1992 A Inflos ............................. 8.311%# 08-15-18 AAA $ 1,000 $1,020,000 8.15%
Southern California Public Power Auth,
Transmission Proj Rev Ref Sub Ser A ........................ 5.000 07-01-22 AAA 1,375* 1,156,224 5.95
----------
5,796,705
----------
COLORADO (1.42%)
Colorado Housing Finance Auth,
Single Family Prog Sr Iss A-2 .............................. 7.625 08-01-17 AA 1,115 1,162,778 7.31
Single Family Residential Rev Ser C ........................ 8.750 09-01-17 Aa** 495 520,586 8.32
Douglas County School District No. Re. 1,
Douglas and Elbert Counties CO, GO Improvement Ser 1994A ... 6.400 12-15-11 AA 1,500 1,569,315 6.12
----------
3,252,679
----------
CONNECTICUT (0.90%)
Connecticut Health & Educational Facilities Auth,
Rev Quinnipiac College Ser D ............................... 6.000 07-01-23 BBB- 2,500 2,080,125 7.21
----------
DELAWARE (0.96%)
Delaware State Economic Development Auth,
Rev Ref Poll Control Delmarva Pwr Ser B .................... 6.750 05-01-19 AAA 2,000* 2,094,700 6.44
Delaware State Housing Auth,
Multi Family Mtg ........................................... 7.000 07-01-14 A+ 145 101,500 10.00
----------
2,196,200
----------
DISTRICT OF COLUMBIA (1.41%)
Metropolitan Washington D.C. Airports Auth,
Gen Arpt Rev Ser A ......................................... 5.750 10-01-20 AAA 2,500* 2,314,775 6.21
Washington D.C. Metropolitan Area Transportation Auth,
Gross Rev Ref .............................................. 5.125 01-01-09 AAA 1,000* 929,640 5.51
----------
3,244,415
----------
FLORIDA (8.93%)
Broward, County of,
Resource Recovery SES Broward Co., L.P. South Proj ......... 7.950 12-01-08 A 4,580 4,980,200 7.31
Citrus, County of,
Poll Control Rev Ref Ser 199A Florida Pwr Corp Crystal River
Pwr Plant Proj ........................................... 6.625 01-01-27 A+ 1,750* 1,799,122 6.44
Florida Turnpike Auth,
Rev Ref Dept of Trans Ser A ................................ 5.000 07-01-19 AAA 1,000* 860,630 5.81
Florida State Division Board of Finance Dept.,
Gen Svc Rev Dept Environ Preservation 2000 A ............... 5.750 07-01-10 AAA 1,250* 1,241,138 5.79
Hernando, County of,
Criminal Justice Complex Rev Ser 1986 ...................... 7.650 07-01-16 AAA 500 605,630 6.32
Lee, County of,
Hosp Board of Directors Hosp Rev Inflos .................... 8.658# 04-01-20 AAA 2,000 2,130,000 8.13
Orange County Health Facilities Auth,
Hosp Rev Orlando Regional Medical Center ................... 8.260# 10-29-21 AAA 1,000 1,040,000 7.94
Orlando Utilities Commission,
Water & Elec Rev Sub Ref Ser A ............................. 5.250 10-01-23 AA- 3,500* 3,066,455 5.99
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 89
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA (CONTINUED)
Tallahassee, City of,
Consol Util Sys Rev Ser 1991 B ......................... 6.900% 10-01-14 AA- $ 1,000 $ 1,066,730 6.47%
Tampa, City of,
Cap Imp Prog Rev Ser B Iss of 1988 ..................... 8.375 10-01-18 A- 3,500 3,720,290 7.88
-----------
20,510,195
-----------
GEORGIA (1.10%)
Georgia Municipal Electric Auth,
Pwr Rev Ref Gen Ser B .................................. 6.375 01-01-16 AAA 2,500 2,531,200 6.30
-----------
ILLINOIS (6.12%)
Illinois, State of,
Build Illinois Sales Tax Rev Ser V ..................... 6.375 06-15-14 AAA 2,035 2,070,063 6.27
Build Illinois Sales Tax Rev Ser V ..................... 6.375 06-15-17 AAA 2,000 2,007,340 6.35
Dedicated Tax .......................................... 6.250 12-15-20 AAA 500 507,005 6.16
Toll Highway Priority Rev Ser A ........................ 6.375 01-01-15 A+ 2,000 1,999,760 6.38
Illinois Health Facilities Auth,
Rev Methodist Hlth Serv Corp Ser 1991 B ................ 9.061# 05-01-21 AAA 1,000 1,086,250 8.34
Rev Methodist Medical Center Illinois Ref A ............ 8.000 10-01-14 A 1,000 1,014,550 7.89
Rev Swedish-American Hosp .............................. 7.400 04-01-20 AAA 750 839,085 6.61
Public Building Commission of Chicago,
Bldg Rev Ser 1990A (Board of Ed of the
City of Chicago) .................................... 7.000 01-01-20 AAA 2,000 2,283,800 6.13
Bldg Rev Ser 1990A (Board of Ed of the
City of Chicago) .................................... 7.125 01-01-15 AAA 1,000 1,121,320 6.35
Bldg Rev Ser 1990B (Board of Ed of the
City of Chicago) .................................... 7.000 01-01-15 AAA 1,000 1,137,050 6.16
-----------
14,066,223
-----------
INDIANA (2.14%)
Hammond Local Public Improvement,
Bond Bank Ser A Township of Schererville
Multi-Financing Prog .................................. 7.000 03-15-09 AAA 750 798,750 6.57
Indiana State Office Building Commission,
Indiana Government Center .............................. 7.750 07-01-09 A+ 500 550,575 7.04
Indiana Transportation Finance Auth,
Airport Facil Lease Rev Ser A .......................... 6.250 11-01-16 A 2,500 2,433,750 6.42
Indianapolis Local Public Improvement,
Bank Bonds Ser D ....................................... 6.750 02-10-20 A+ 1,100 1,127,478 6.59
-----------
4,910,553
-----------
KANSAS (3.18%)
Kansas City, City of,
Util Sys Ref & Impt Rev Ser 1994........................ 6.375 09-01-23 AAA 4,500 4,599,720 6.24
Sedgwick, County of,
GNMA Coll Mtg Ln Rev Ser C.............................. 8.625 11-01-18 AAA 2,490 2,695,973 7.97
-----------
7,295,693
-----------
LOUISIANA (2.25%)
Calcasieu Parish Public Trust Auth,
Mtg Rev Ref 1991 Ser A.................................. 7.750 06-01-12 A** 575 618,982 7.20
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 90
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
LOUISIANA (CONTINUED)
De Soto, Parish of,
Environ Imp Rev Int'l Paper Co Proj Ser A ............ 7.700% 11-01-18 A- $ 2,750* $2,985,675 7.09%
Louisiana, State of,
GO Ser A Iss of 1992 ................................. 6.500 05-01-11 AAA 1,500 1,564,830 6.23
----------
5,169,487
----------
MAINE (0.57%)
Maine State Housing Auth,
Mtg Purchase Ser A-3 ................................. 7.800 11-15-15 AA- 1,250 1,315,663 7.41
----------
MASSACHUSETTS (7.12%)
Greater New Bedford Regional Refuse Management District,
Mass GO Landfill ..................................... 5.875 05-01-13 Baa** 750 705,960 6.24
Massachusetts Health & Educational Facilities Auth,
Childrens Hosp Ser D ................................. 7.750 12-01-18 AA 850 934,329 7.05
Rev Dana Farber Cancer Proj Ser G-1 .................. 6.250 12-01-22 A 1,600* 1,536,976 6.51
Rev New England Deaconess Hosp Iss Ser D ............. 6.875 04-01-22 A 2,450 2,483,173 6.78
Rev St. Elizabeth's Hosp of Boston Ser E ............. 9.060# 08-15-21 AAA 1,000 1,070,000 8.47
Rev Ref Worcester Polytech Institute Ser E ........... 6.750 09-01-11 A+ 1,840* 1,941,439 6.40
Massachusetts Housing Finance Agency,
Insured Rental Ser A ................................. 6.650 07-01-19 AAA 5,500 5,603,510 6.53
Single Family Hsg Ser 8 .............................. 7.700 06-01-17 A+ 1,000 1,060,290 7.26
Massachusetts Water Pollution Abatement Trust,
Wtr Poll Abatement Rev (SESD Ln Prog) 1994 Ser A ..... 6.375 02-01-15 AA- 1,000 1,018,170 6.26
----------
16,353,847
----------
MICHIGAN (1.21%)
Michigan Housing Development Auth,
Single Family Mtg Rev Ser A .......................... 7.500 06-01-15 AA 1,415 1,495,881 7.09
Michigan State Hospital Financing Auth,
Rev Ref Hosp Genesys Hlth Sys Ser A .................. 8.100 10-01-13 BBB 1,250* 1,285,375 7.88
----------
2,781,256
----------
MINNESOTA (0.13%)
Minnesota Housing Finance Agency
Single Family Mtg 1990 Ser C ......................... 7.700 07-01-14 AA 280 295,053 7.31
----------
NEVADA (1.65%)
Nevada Housing Division,
Single Family Proj Sr Rev Ser 1989 Iss A-1 ........... 7.350 04-01-16 AA 975 1,005,011 7.13
Single Family Proj Sr Rev Ser 1990 Iss C-1 ........... 7.850 10-01-15 AA 360 377,140 7.49
Nevada, State of,
GO Ltd Tax Municipal Bond Bank Proj No. 38 ........... 6.750 07-01-09 AA 975 1,074,265 6.13
GO Ltd Tax Municipal Bond Bank Proj No. 38 ........... 6.750 07-01-09 AA 25 26,195 6.44
Reno Hospital,
Rev St. Mary's Regional Medical Center Ser A ......... 7.750 07-01-07 AAA 720 792,828 7.04
Rev St. Mary's Regional Medical Center Ser A ......... 7.750 07-01-07 AAA 480 524,093 7.10
----------
3,799,532
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 91
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
NEW JERSEY (0.46%)
New Jersey Turnpike Auth,
Turnpike Rev 1991 Ser C ................................ 6.500% 01-01-16 AAA $ 1,000* $ 1,068,520 6.08%
-----------
NEW YORK (9.53%)
New York Local Government Assistance Corp.,
Ser 1991 C Pub Benefit Corp. ........................... 7.000 04-01-10 A 2,000* 2,153,540 6.50
Ser 1992 A Pub Benefit Corp. ........................... 6.875 04-01-19 A 2,000* 2,132,220 6.45
New York State Dormitory Authority,
City Univ Sys 2nd Gen Rev Ser A ........................ 5.750 07-01-09 BBB 1,000 948,820 6.06
State Univ Ed Facil Rev Ser 1990B ...................... 7.000 05-15-16 BBB+ 5,000 5,222,450 6.70
State Univ Ed Facil Rev Ser 1993A ...................... 5.875 05-15-11 BBB+ 1,000 952,570 6.17
New York State Environmental Facilities Corp,
State Wtr Poll Control Revolving Fund Rev Ser 1990 A,
NYC Municipal Wtr Fin Auth Proj ........................ 7.500 06-15-12 A 600 660,612 6.81
New York State Medical Care Facilities Finance Agency,
Mental Hlth Serv Imp Rev Ser F ......................... 6.500 08-15-12 BBB+ 2,000 2,016,380 6.45
Mental Hlth Serv Imp Rev Ser F ......................... 5.250 02-15-19 AAA 1,000* 881,380 5.96
New York State Mortgage Agency,
Rev Homeownership Ser BB-2 ............................. 7.950 10-01-15 Aa** 560 592,273 7.52
New York Urban Development Auth ..........................
Ref Correctional Cap Facil Ser A ....................... 5.250 01-01-21 BBB 2,705* 2,267,547 6.26
Port Authority of New York and New Jersey,
Cons Seventy Second Ser 1992 ........................... 7.350 10-01-27 AA- 2,000* 2,209,280 6.65
Triborough Bridge & Tunnel Auth,
Rev Ref Ser 1987 L ..................................... 8.000 01-01-07 A+ 500 548,600 7.29
Rev Gen Purpose Ser X .................................. 6.500 01-01-19 A+ 1,250 1,303,650 6.23
-----------
21,889,322
-----------
NORTH CAROLINA (1.45%)
North Carolina Eastern Municipal Power Agency,
Pwr Sys Rev Ref Ser 1993 ............................... 5.000 01-01-15 A 4,000* 3,327,080 6.01
-----------
OHIO (3.55%)
Cleveland, City of,
Pub Pwr Sys First Mtg Ser 1994A ........................ 7.000 11-15-16 AAA 5,860* 6,543,158 6.27
Cuyahoga, County of,
Hosp Imp Rev Deaconess Hosp of Cleveland Proj
Ser 1985 B ............................................ 7.450 10-01-18 A+ 750 853,530 6.55
Hosp Rev Meridia Hlth Sys Ser 1991 ..................... 7.000 08-15-23 A 750 770,745 6.81
----------
8,167,433
----------
OKLAHOMA (0.73%)
Tulsa County Industrial Auth,
Hlth Care Rev St. Francis Hosp Inc. .................... 6.900 12-15-05 AA 1,500 1,666,725 6.21
-----------
OREGON (0.91%)
Portland, City of,
Swr Sys Rev 1994 Ser A ................................. 6.250 06-01-15 A+ 2,050 2,089,237 6.13
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 92
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
<CAPTION>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- -------- -------- ------ --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA (4.46%)
Northumberland County Auth,
Commonwealth Lease Rev Ser 1991 ............................ 6.250% 10-15-09 AAA $ 1,000 $ 1,031,540 6.06%
Pennsylvania Turnpike Commission,
Turnpike Rev Ser K ......................................... 7.625 12-01-09 AAA 500 563,170 6.77
Philadelphia, City of,
Gas Works Rev Ser 14 ....................................... 6.375 07-01-26 BBB 1,000* 960,090 6.64
Wtr & Wastewater Rev ....................................... 5.750 06-15-13 BBB 4,000 3,864,320 5.95
Philadelphia Hospital & Higher Education Facilities Auth,
Hosp Rev Children's Hosp Philadelphia Proj Ser A ........... 7.875 07-01-08 AA 500 538,540 7.31
Hosp Rev Temple Univ Hosp Ser A ............................ 6.625 11-15-23 A- 3,375 3,292,549 6.79
-----------
10,250,209
-----------
SOUTH CAROLINA (2.68%)
James Island Public Service District,
Charleston County Swr Sys Ref .............................. 7.500 06-01-18 AAA 1,250 1,388,612 6.75
Lexington County School District No. 1,
Cert of Part 1989 Ser B Pelion High School Proj ............ 7.650 09-01-09 AAA 1,145 1,275,496 6.87
Richland, County of,
Poll Control Rev Union Camp Corp Proj Ser 1992 B ........... 6.625 05-01-22 A 2,460 2,487,331 6.55
Poll Control Rev Union Camp Corp Proj Ser C ................ 6.550 11-01-20 A 1,000 1,007,720 6.50
-----------
6,159,159
-----------
SOUTH DAKOTA (0.48%)
South Dakota Health & Educational Facilities Auth,
Rev Ser 1989 Sioux Valley Hosp Iss ......................... 7.625 11-01-13 AA- 925 1,020,950 6.91
Rev Ser 1989 Sioux Valley Hosp Iss ......................... 7.625 11-01-13 AA- 75 81,376 7.03
-----------
1,102,326
-----------
TENNESSEE (5.62%)
Eastside Utility District of Hamilton,
Waterworks Rev Iss ......................................... 6.750 11-01-11 BBB+ 1,000 1,028,600 6.56
Humphreys, County of,
Indl Devel Board Solid Waste Disp Rev (E.I. DuPont
DeNemours & Co.)............................................ 6.700 05-01-24 AA 6,500 6,595,875 6.60
Maury County Industrial Development Board,
Multi-Modal Interchangeable Rate Poll Control Ref
Ref Saturn Corp Proj Ser 1994 .............................. 6.500 09-01-24 BBB+ 2,400 2,332,416 6.69
Metropolitan Nashville & Davidson County Health & Education
Facility Board,
Rev Ref Vanderbilt Univ Ser A ............................. 7.625 05-01-16 AA 1,750 1,909,548 6.99
Tennessee Housing Development Agency,
Homeownership Prog Proj J .................................. 7.750 07-01-17 A+ 1,000 1,043,280 7.43
-----------
12,909,719
-----------
TEXAS (6.12%)
Austin, City of,
Utility Sys Rev Ref Ser B .................................. 7.800 11-15-12 A 1,000 1,092,700 7.14
Corpus Christi Housing Finance Corp,
Single Family Mtg Sr Rev Ref Ser 1991 A .................... 7.700 07-01-11 AAA 770 830,191 7.14
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 93
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
El Paso Housing Finance Corp,
Single Family Mtg Rev Ref Bonds 1991 Ser A.............. 8.750% 10-01-11 A** $ 695 $ 762,332 7.98%
Harris County Health Facilities Development Corp,
Hospital Rev Saint Luke's Episcopal..................... 8.250 02-15-08 AAA 1,475 1,675,025 7.26
SCH Hlth Care Sys Rev Sisters of Charity Ser 1991 A.... 7.100 07-01-21 AA 1,000 1,058,880 6.71
Harris, County of,
Toll Road Unltd Tax & Sub Lien Rev Ref................. 8.100 08-01-08 AA+ 250 278,382 7.27
Toll Road Unltd Tax & Sub Lien Rev Ref................. 8.125 08-01-15 AA+ 250 278,570 7.29
Houston Water & Sewer System,
Rev Ref Prior Lien Ser B............................... 6.750 12-01-08 A 1,500 1,584,840 6.39
Rev Ref Prior Lien Ser B............................... 6.375 12-01-14 A 2,200 2,216,280 6.33
North Central Texas Health Facility Development Corp,
Hospital Rev Baylor Univ Medical Center Ser 1991 A..... 9.188# 05-15-16 AA 1,000 1,062,500 8.65
Texas Housing Agency,
Mtg Rev Single Family Ser A............................ 8.250 03-01-17 A+ 1,030 1,065,607 7.97
Texas, State of,
Veterans' Land Board GO................................ 7.125 12-01-09 AA 1,000 1,059,730 6.72
Veterans' Land Board GO................................ 8.250 12-01-10 AA 390 407,854 7.89
Veterans' Land Board GO Prerefunded.................... 8.250 12-01-10 AAA 610 692,533 7.27
-----------
14,065,424
-----------
UTAH (3.22%)
Intermountain Power Agency,
Pwr Supply Rev Ref Ser A................................ 5.000 07-01-21 AA 2,000 1,657,380 6.03
Pwr Supply Spec Oblig-Registered-1st Crossover Ser...... 5.000 07-01-16 AA- 1,935 1,634,920 5.92
Salt Lake City Hospital,
Rev Ref IHC Hosp Inc Ser B.............................. 8.000 05-15-07 AA 350 384,612 7.28
Rev Ref IHC Hosp Inc VRDN/RIBS.......................... 8.957# 05-15-20 AAA 1,500 1,603,125 8.38
Rev Ref Ser A........................................... 8.125 05-15-15 AAA 1,000 1,180,590 6.88
Utah Housing Finance Agency,
Single Family Mtg Sr Bonds 1990 Iss B-2................. 7.700 07-01-15 AA 470 484,236 7.47
Single Family Mtg Sr Bonds 1991 Iss B-1................. 7.500 07-01-16 AA 420 443,448 7.10
-----------
7,388,311
-----------
VIRGINIA (1.87%)
Arlington County Industrial Development Auth,
Hosp Facil Rev Arlington Hosp Ser 1991 A................ 7.125 09-01-21 A1** 500 562,655 6.33
Fairfax County Industrial Development Auth,
Rev RITES............................................... 9.077# 08-29-23 AA- 1,000 1,205,000 7.53
Fredericksburg Industrial Auth,
Hosp Facil Rev.......................................... 8.607# 08-15-23 AAA 1,500 1,584,375 8.15
Norfolk Industrial Development Board,
Ref Childrens Hosp Kings................................ 5.500 06-01-13 AAA 1,000 936,820 5.87
----------
4,288,850
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 94
FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
<TABLE>
PAR VALUE YIELD
INTEREST MATURITY S&P (000'S MARKET AT
STATE, ISSUER, DESCRIPTION RATE DATE RATING OMITTED) VALUE MARKET+
- -------------------------- ---- ---- ------ ------- ------ ------
<S> <C>
WASHINGTON (4.19%)
Seattle, Port of,
GO Ser 1994 A........................................... 5.750% 05-01-14 AA+ $ 4,100 $ 3,826,284 6.16%
Tacoma Electric System,
Rev Iss of 1989......................................... 7.375 01-01-08 AAA 1,000 1,097,380 6.72
Rev VRDN/RIBS Iss of 1991............................... 8.566# 01-01-15 AAA 1,000 1,048,750 8.17
University of Washington,
Housing & Dining Sys Rev Ser 1991....................... 7.000 12-01-21 AAA 750 815,415 6.44
Washington Public Power Supply System,
Nuclear Proj No 3 Rev Ref Ser 1993C..................... 5.375 07-01-15 AA 2,000* 1,742,780 6.17
Washington, State of,
GO Ser A of 1990........................................ 6.750 02-01-15 AA 1,000 1,084,770 6.22
-----------
9,615,379
-----------
WEST VIRGINIA (1.93%)
West Virginia Parkways Economic Development & Tourism Auth,
Iss of 1989............................................. 7.125 07-01-19 AAA 2,000 2,196,260 6.49
West Virginia Water Development Auth,
Wtr Dev Rev Ln Prog II Ser B............................ 7.500 11-01-29 AAA 2,000 2,239,340 6.70
-----------
4,435,600
-----------
WISCONSIN (0.98%)
Sturgeon Bay, City of,
Door County Combined Util Mtg Rev Ser 1990.............. 7.500 01-01-10 AAA 770 867,282 6.66
Door County Combined Util Mtg Rev Ser 1990.............. 7.500 01-01-10 AAA 230 252,758 6.82
Wisconsin Public Power Inc,
Pwr Supply Sys Rev Ser 1990A............................ 7.400 07-01-20 AAA 1,000 1,123,630 6.59
-----------
2,243,670
-----------
WYOMING (1.15%)
Sweetwater County Pollution Control,
Rev Idaho Pwr Co. Ser A................................. 7.625 12-01-14 A- 500 523,290 7.29
Rev Idaho Pwr Co. Ser B................................. 7.625 12-01-13 A- 1,000 1,046,280 7.29
Rev Idaho Pwr Co. Ser B MBIA............................ 7.625 12-01-13 AAA 1,000 1,065,780 7.15
-----------
2,635,350
-----------
TOTAL TAX-EXEMPT LONG-TERM BONDS
(Cost $214,290,371) (97.18%) $223,242,197
===== ============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
[FN]
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
** Rated by Moody's Investors Services or John Hancock Advisers, Inc. where
Standard & Poor's ratings are not available. NR Security is not rated.
+ The yield is unaudited and not calculated in accordance with guidelines
established by the U.S. Securities and Exchange Commission and is unaudited.
# Represents rate in effect on April 30, 1995.
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.
18
<PAGE> 95
John Hancock Funds - Managed Tax-Exempt Fund
PORTFOLIO CONCENTRATION (UNAUDITED)
- --------------------------------------------------------------------------------
THE JOHN HANCOCK MANAGED TAX-EXEMPT FUND INVESTS PRIMARILY IN SECURITIES ISSUED
BY VARIOUS STATES AND THEIR VARIOUS POLITICAL SUBDIVISIONS. THE PERFORMANCE OF
THE FUND IS CLOSELY TIED TO THE ECONOMIC CONDITIONS WITHIN THE APPLICABLE STATES
AND THE FINANCIAL CONDITION OF THE STATES AND THEIR AGENCIES AND MUNICIPALITIES.
THE CONCENTRATION OF INVESTMENTS BY STATES AND CREDIT RATINGS FOR INDIVIDUAL
SECURITIES HELD BY THE FUND IS SHOWN IN THE SCHEDULE OF INVESTMENTS. IN
ADDITION, THE CONCENTRATION OF INVESTMENTS CAN BE AGGREGATED BY VARIOUS SECTOR
CATEGORIES.
THE TABLE BELOW SHOWS THE PERCENTAGES OF THE FUND'S INVESTMENTS AT APRIL 30,
1995 ASSIGNED TO THE VARIOUS SECTOR CATEGORIES.
<TABLE>
MARKET VALUE AS A PERCENTAGE OF
SECTOR DISTRIBUTION THE FUND'S NET ASSETS:
------------------- ----------------------
<S> <C>
General Obligation............................ 4.24%
Revenue Bonds - Electric...................... 14.55
Revenue Bonds - Health/Education.............. 25.41
Revenue Bonds - Housing....................... 11.10
Revenue Bonds - Transportation................ 7.74
Revenue Bonds - Pollution Control ............ 13.91
Revenue Bonds - Water & Sewer ................ 7.67
Revenue Bonds - Other......................... 12.56
-----
TOTAL TAX-EXEMPT LONG-TERM BONDS 97.18%
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is a an open-end investment management
company, registered under the Investment Company Act of 1940. The Trust consists
of five series portfolios: John Hancock Managed Tax-Exempt Fund (the "Fund"),
John Hancock Gold & Government Fund, John Hancock Regional Bank Fund, John
Hancock Sovereign U.S. Government Income Fund and John Hancock Sovereign
Achievers Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund
was known as John Hancock Freedom Gold & Government Fund and John Hancock
Regional Bank Fund was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of shares of the
Fund, designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund and have
equal rights to voting, redemption, 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/service expenses under the
terms of a distribution plan, have exclusive voting rights regarding such
distribution plan. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services
or, at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock Advisers,
Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $793,052 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforwards are used by the Fund,
no capital gain distributions will be made. The carryforward expires October 31,
2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Interest income on investment securities
is recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously.
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.
20
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
PREMIUM AND DISCOUNT For tax-exempt issues, the Fund amortizes the amount paid
in excess of par value on securities purchased from either the date of purchase
or date of issue to date of sale, maturity or to next call date, if applicable.
The premium amortization reduces interest income. The Fund accretes original
issue discount from par value on securities purchased from either the date of
issue or the date of purchase over the life of the security, as required by the
Internal Revenue Code. The Fund records market discount on bonds purchased after
April 30, 1993 at time of disposition.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. At the time the Fund enters into a financial futures
contract, it is required to deposit with its custodian a specified amount of
cash or U.S. government securities, known as "initial margin," equal to a
certain percentage of the value of the financial futures contract being traded.
Each day, the futures contract is valued at the official settlement price of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin," are made to and from the broker on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the Fund
as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At April 30, 1995 open positions in financial futures contracts were as
follows:
<TABLE>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- ---------- -------------- -------- ------------
<S> <C> <C> <C>
JUNE 1995 50 TREASURY BOND SHORT ($175,782)
JUNE 1995 75 MUNI BOND SHORT (91,406)
--------
($267,188)
========
</TABLE>
At April 30, 1995, the Fund has deposited in a segregated account $200,000 to
cover margin requirements on open financial futures 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 the sum of (a) 0.60% of the first $250,000,000 of the Fund's
average daily net asset value, (b) 0.50% of the next $500,000,000, and (c) 0.45%
of the Fund's average daily net asset value in excess of $750,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value. Additionally, the Adviser may
voluntarily waive part or all of its management fee for a period under the terms
21
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
of the Advisory Agreement. Such a waiver was provided to John Hancock Managed
Tax-Exempt Fund for the period ended April 30, 1995 in the amount of $56,393.
Such waiver may be discontinued at any time. Furthermore, $19,447 of custodian
fees have been reduced by balance credits applied during the period ended April
30, 1995.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended April 30, 1995, net
sales charges received with regard to sales of Class A shares of the Fund
amounted to $50,451. Out of this amount, $6,361 was retained and used for
printing prospectuses, advertising, sales literature and other purposes, $7,222
was paid as sales commissions to unrelated broker-dealers and $36,868 was paid
as sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries, which include the
broker-dealers FDC, Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase are 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
sales of Class B shares. For the period ended April 30, 1995 the contingent
deferred sales charges received by JH Funds amounted to $243,514.
In addition, to compensate the Co-Distributors for the services they provide
as distributors of shares of the Fund, the Fund has adopted a Distribution Plan
with respect to Class A and Class B shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors, for distribution and service expenses at an annual rate not to
exceed 0.30% of the Fund's average net assets attributable to Class A shares and
1.00% of the Fund's average daily net assets attributable to Class B shares, to
reimburse the Co-Distributors for their distribution/service costs. Up to a
maximum of 0.25% of these payments may be service fees as defined by the amended
Rules of Fair Practice of the National Association of Securities Dealers. Under
the amended Rules of Fair Practice, curtailment of a portion of the Fund's 12b-1
payments could occur under certain circumstances.
The Fund has a transfer agent agreement with John Hancock Investor Services
Corporation ("Investor Services"), a wholly-owned subsidiary of The Berkeley
Financial Group. Prior to January 1, 1995, Investor Services was known as John
Hancock Fund Services, Inc. Effective January 1, 1995, the Fund pays transfer
agent fees based on transaction volume and the number of shareholder accounts.
Prior to January 1, 1995, the Fund paid Investor Services a monthly transfer
agent fee equivalent, on an annual basis, to 0.03% and 0.06% of the average
daily net asset value of Class A and Class B shares of the Fund, respectively,
plus out of pocket expenses incurred by Investor Services on behalf of the Fund
for proxy mailings.
Edward J. Boudreau, Jr. is a director and officer of the Adviser, and its
affiliates, as well as a Trustee of the Fund. The compensation of unaffiliated
Trustees is borne by the Fund. Effective with the fees paid for 1995, the
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund will make investments into other John Hancock funds, as applicable, to
cover its liability with regard to the deferred compensation. Investments to
cover the Fund's deferred compensation liability will be recorded on the Fund's
books as an other asset. The deferred compensation liability will be marked to
market on a periodic basis and income earned by the investment will be recorded
on the Fund's books.
22
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Managed Tax-Exempt Fund
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1995, aggregated $75,717,046 and
$95,064,185, respectively.
The cost of investments owned at April 30, 1995 for federal income tax
purposes was $214,290.371. Gross unrealized appreciation and depreciation of
investments aggregated $10,342,685 and $1,390,859, respectively, resulting in
net unrealized appreciation of $8,951,826.
23
<PAGE> 100
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 HUNTINGTON AVENUE BOSTON, MA 02199-7603 PAID
Brockton, MA
Permit No. 582
[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."]
- -------------------------------------------------------------------------------
This report is for the information of shareholders of the John Hancock
Managed Tax-Exempt 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."]
JHF 070SA 4/95
