<PAGE> 1
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
GOLD &
GOVERNMENT
FUND
ANNUAL REPORT
October 31, 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
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
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.]
Investors around the world have been watching Wall Street in awe for the better
part of 1995. Through October, the Standard & Poor's 500-Stock Index, a
widely-used barometer of stock performance, had grown by more than 25%.
Investors who stayed in the market after a disappointing 1994 have been
rewarded.
On another street, Pennsylvania Avenue, one of the hot topics many people are
watching is Medicare reform. While there's no clear-cut solution on the horizon,
today's Medicare debate should serve as another wake-up call to all Americans
about the need to have a financial plan and to save for retirement. Whether or
not the government changes the way health-care benefits are allotted to senior
citizens, the message is clear: your future security and well-being lies in your
own hands -- not Uncle Sam's.
We know you've heard it a hundred times. Pick up almost any financial
periodical today, and you'll see cover stories on retirement. Many of them will
perhaps scare you or make you think that the task of saving for retirement is
just too daunting. But take heart. We don't believe that and neither do many
financial experts.
Yet retirement planning is not to be taken lightly. To live the way you want
to -- the way you deserve to after all those years of hard work -- you need to
plan and save now, on a regular basis, no matter what your other costs, no
matter how small the amount, no matter what your current age. It may be easier
if you start earlier, but it's never too late.
Building a secure nest egg is indeed doable. Talk to your financial adviser
about establishing your retirement planning roadmap, if you haven't already. And
educate yourself by reading some of the many articles about how to save for
retirement. Take control of your future by saving today. That way, when it comes
time for retirement, you shouldn't have to think about any street but Easy
Street.
Sincerely,
/S/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY ANNE MCDONLEY, VICE PRESIDENT AND PORTFOLIO MANAGER
JOHN HANCOCK
GOLD & GOVERNMENT FUND
LACK OF INFLATION HELPS SPUR BOND MARKET RALLY,
BUT CONSTRAINS PRICE OF GOLD
Diminished fears of inflation and lower interest rates provided the fuel for a
powerful bond rally over the past year. What set off the rally last November was
the fact that investors began to believe that the interest-rate hikes made by
the Federal Reserve Board in 1994 were enough to slow the economy's growth rate
to a more moderate pace in 1995. Investors were further encouraged by the lack
of any inflationary pressures. In response to moderated economic growth and
subdued inflation, the Fed reversed its previous course and lowered the fed
funds rate -- the rate banks charge each other for overnight loans -- by 0.25%
in July. This action served to further cheer bond investors and helped extend
the rally into the late fall.
Meanwhile, gold tumbled late last year at the hands of speculative traders
who were skeptical that the previous run- up in gold prices in early 1994 could
continue. However, this year, the same lack of inflationary pressures that
buoyed the bond market helped to keep the price of gold in a narrow range.
During times of inflation, gold historically has served as a "safe haven"
investment. But without evidence that inflation was spiraling out of control,
investors shunned gold in favor of the stronger performing equity and bond
markets both here and abroad. From January through October of this year, the
price of gold remained within a narrow range between $380 an ounce and $393 an
ounce. It was unable to break the $400 level.
For the year ended October 31, 1995, the Fund's Class A and B shares had
total returns of -5.66% and -6.32%, respectively, at net asset value. These
returns were ahead of the average gold-oriented fund, which had a -13.50% total
return, according to Lipper Analytical Services1. The Fund's returns, however,
lagged the Lehman Government Bond Index, which was up 15.38%.
[CAPTION]
"...THE SAME LACK OF INFLATIONARY PRESSURES THAT BUOYED THE BOND MARKET HELPED
TO KEEP THE PRICE OF GOLD IN A NARROW RANGE."
[A 2 1/4" x 2 1/4" photo of Anne McDonley at bottom center. Caption reads: "Anne
McDonley, Portfolio Manager"]
3
<PAGE> 4
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 top left to right:
Gold/Precious Metal Stocks 47%, Short-Term Investments and Other 7%, U.S.
Government Bonds 46%. Footnote below reads: "As a percentage of net assets on
October 31, 1995."]
GOLD FLAT IN 1995; OTHER METALS VOLATILE
Although the price of gold has been nearly flat so far in 1995, the stock prices
of several of the Fund's gold mining and exploration companies have improved
this year. That's due in part to the fact that the worldwide demand for gold has
outstripped the supply. What's more, the holiday season typically generates an
increased demand for jewelry made from gold. As a result, the earnings for some
gold exploration and mining companies have been quite strong and their stock
prices have risen. The shares of one of our largest holdings, Kinross Gold
Corp., have risen in excess of 53% from the end of 1994, while Pan American
Silver Corp. shares were up 80% from year end. Unfortunately, our gold share
prices failed to rebound enough to wipe out their losses in the fourth quarter
of last year. Hecla Mining, on the other hand, has depreciated in value by 30%
so far in 1995 because of a write-off resulting from its overestimating the
amount of high-grade ore in one of its mines.
Unlike gold, the prices of other precious metals have been more volatile this
year. Silver rebounded this year on limited supply and the hopes that it would
be the next leader in the metals market. The price of copper was volatile, as
investors pushed the commodity's price to new highs, only to shy away from it
later. The price of platinum moved to new highs too, as rumors of new uses for
the metal filtered through the market.
BEHIND THE TACTICAL MOVES
At the end of October 1994, there were many reasons to believe that gold
stocks would outperform government bonds. Chief among them was that in the past,
the Fed has had a difficult time achieving a "soft landing," in which inflation
would stay low and the economy would grow at a moderate, but steady pace. With
the economy growing at an annual rate of 5.1% in the fourth quarter, we reasoned
that the economy was in danger of heating up and that the rate of inflation
could rise. Under those conditions, bond prices would likely fall and gold could
rise. So, at the beginning of the period, we had about 60% of the Fund's assets
invested in gold and other precious metal stocks. The balance was in short-term
U.S. Treasuries and cash.
This strategy hurt the Fund's performance late last year, when gold stocks
tumbled faster than expected, and in the new year, when the bond market's rally
potential was thought to be at its peak. When the bond market's rally proved
more resilient, we modified our mix to a more neutral 50/50 allocation between
Treasuries/cash and precious metals stocks. As we changed our
[CAPTION]
"WHEN THE BOND MARKET'S RALLY PROVED MORE RESILIENT, WE MODIFIED OUR MIX..."
[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 Kinross Gold
followed by an up arrow and the phrase "Strong management/good cash flows. The
second listing is Pan American Silver followed by an up arrow and the phrase
"Acquisitions increase market share." The third listing is Santa Fe Gold
followed by a down arrow and the phrase "Delays in production." Footnote below
reads: "See "Schedule of Investments." Investment holdings are subject to
change."]
4
<PAGE> 5
John Hancock Funds - Gold & Government Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended October 31, 1995." The chart is
scaled in increments of 10% across the top, with -20% at the far left and 20% at
the far right. Within the chart there are four solid bars one on top of the
other. From top to bottom, the first represents the -5.66% total return for the
John Hancock Gold & Government Fund, Class A. The second represents the -6.32%
total return for the John Hancock Gold & Government Fund, Class B. The third
represents the -13.50% total return for the average gold-oriented fund. The
fourth represents the 15.38% return for the Lehman Brothers Government Bond
index. A footnote below reads: "The 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."]
Treasury holdings, we concentrated on high-yielding securities. If the market
were to reverse course, their higher yields and price premiums could help
insulate them from dramatic price declines. We held Treasuries for yield
purposes and stocks for their total return potential.
CONSOLIDATING GOLD STOCKS
As we moved to a more neutral stance, we sold weaker gold and precious metal
stocks that we thought lacked liquidity or the potential for price appreciation.
However, we did hold onto the companies we believe are the strongest and best
managed, with better prospects for growth. As we mentioned, our top performer
was the Canadian-based Pan American Silver Corp. Its silver mine acquisitions in
Mexico, Bolivia and Peru made it a major player in silver mining, and the stock
price has nearly doubled since we bought it in mid-1994. Kinross Gold, with
strong management and asset growth and good cash flow also did quite well. But
not all of our gold holdings glittered. Santa Fe Pacific Gold was forced to
delay production when it experienced a wall slide in its Twin Creeks mine,
causing gold production to decline 18%. However, we think the company's
prospects are still quite strong, and it represents good value among the larger
capitalization North American gold companies.
OUTLOOK AND STRATEGY
We believe it is prudent to maintain a neutral stance, keeping roughly half of
the Fund invested in Treasury securities and cash, and the other half in gold
and other precious metals stocks. Right now there are no definitive signs where
the economy, inflation and the bond market are headed. However, it's possible
that the bond market's rally is near its last inning and doesn't have much room
to improve further. If the Fed cuts interest rates again, we could see a
short-term rise in bond prices, but the action probably won't be enough to
extend the rally over a longer period.
Many experts predict that gold prices are poised to go higher, mainly because
demand continues to outpace supply. Eventually gold may break through the $400
an ounce barrier and go as high as $450. If that occurs, we expect the prices of
gold stocks to rise in tandem and help the Fund's performance. However, there
are plenty of things that could upset that optimism especially given gold's
inability to break that barrier in 1995. Despite strong supply/ demand
fundamentals, we'll continue to remain neutral on the gold market for 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]
"WE BELIEVE IT IS PRUDENT TO MAINTAIN A NEUTRAL STANCE..."
5
<PAGE> 6
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Gold & Government Fund. Total return is a
performance measure that equals the sum of all dividend and capital gains,
assuming reinvestment of these distributions and the change in the price of the
Fund's shares, expressed as a percentage of the Fund's average net assets.
Performance figures include the maximum applicable sales charge of 5% for Class
A shares. Prior to April 30, 1992, different sales charges were in effect for
Class A shares and are not reflected in the performance data. The effect of the
maximum contingent deferred sales charge for Class B shares (maximum 5% and
declining to 0% over six years) is included in Class B performance. Remember
that all figures represent past performance and are no guarantee of how the Fund
will perform in the future. Also, keep in mind that the total return and share
price of the Fund's investments will fluctuate. As a result, your Fund's shares
may be worth more or less than their original cost, depending on when you sell
them.
Note: Participant-directed defined-contribution plans with at least 100 eligible
employees at inception of the Fund account may purchase Class A shares without
an initial sales charge as of March 15, 1995. If those shares are redeemed,
however, during the year following the calendar year end during which they were
purchased, a contingent deferred sales charge will be assessed.
CUMULATIVE TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
<S> <C> <C> <C>
John Hancock Gold & Government
Fund: Class A (7.37%) 6.37%(1) N/A
John Hancock Gold & Government
Fund: Class B (8.10%) 21.89% 89.99%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ONE FIVE TEN
YEAR YEARS YEARS
---- ----- -----
<S> <C> <C> <C>
John Hancock Gold & Government
Fund: Class A (7.37%) 1.67%(1) N/A
John Hancock Gold & Government
Fund: Class B (8.10%) 4.04% 6.63%
</TABLE>
YIELDS
AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
SEC 30-DAY
YIELD
-----
<S> <C>
John Hancock Gold & Government Fund: Class A 1.42%
John Hancock Gold & Government Fund: Class B 0.87%
</TABLE>
NOTES TO PERFORMANCE
(1) Class A shares started on January 3, 1992.
6
<PAGE> 7
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John Hancock
Gold & Government Fund would be worth on October 31, 1995, assuming either you
had invested on the day each class of shares started or have been invested for
the most recent ten years and have reinvested all distributions. For comparison,
we've shown the same $10,000 investment in both the Lehman Government Bond Index
and the Lipper Gold Fund Index. The Lehman Government Bond Index is an unmanaged
index that measures the performance of U.S. Treasury bonds and U.S. Government
Agency bonds. The Lipper Gold Fund Index is an unmanaged index of the ten
largest funds within the gold fund category.
[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 four lines.
The first line represents the value of the Lehman Government Bond Index and is
equal to $13,173 as of October 31, 1995. The second line represents the value of
the Lipper Gold Fund Index and is equal to $12,684 as of October 31, 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 $10,274 as of October 31, 1995. The forth line represents the Gold &
Government Fund after sales charge and is equal to $9,758 as of October 31,
1995.]
[Line chart with the heading Gold & Government Fund: Class B, representing the
growth of a hypothetical $10,000 investment over the most recent 10 years.
Within the chart are three lines.
The first line represents the value of the Lehman Government Bond Index and is
equal to $25,053 as of October 31, 1995. The second line represents the value of
the Lipper Gold Fund Index and is equal to $20,075 as of October 31, 1995. The
third line represents the value of the hypothetical $10,000 investment made in
the Gold & Government Fund on October 31, 1985, before contingent deferred sales
charge, and is equal to $17,227.]
*No contingent deferred sales charge applicable.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies
obligations (cost - $16,415,727) ........................ $ 16,199,018
Common stocks (cost - $12,705,916) ........................ 13,954,615
Preferred stocks (cost - $2,521,200) ...................... 2,520,000
Short-term investments (cost - $334,000) .................. 334,000
Corporate savings account ................................. 745
-----------
33,008,378
Receivable for shares sold ................................. 977
Receivable for investments sold ............................ 1,810,885
Interest receivable ........................................ 472,857
Dividends receivable ....................................... 26,880
Other assets ............................................... 7,553
-----------
Total Assets ............................. 35,327,530
-----------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ............................. 19,743
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ....................................... 35,150
Accounts payable and accrued expenses ...................... 54,038
-----------
Total Liabilities ........................ 108,931
-----------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................ 46,354,966
Accumulated net realized loss on investments,
financial futures contracts and foreign
currency transactions ..................................... (12,267,172)
Net unrealized appreciation of investments ................. 1,030,790
Undistributed net investment income ........................ 100,015
----------
Net Assets ............................... $ 35,218,599
===========================================================
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 - $18,299,704 / 1,386,291 .......................... $ 13.20
=============================================================================
Class B - $16,918,895 / 1,284,093 .......................... $ 13.18
=============================================================================
MAXIMUM OFFERING PRICE PER SHARE*
Class A - ($13.20 x 105.26%) ............................... $ 13.89
=============================================================================
</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 ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 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 LOSSES FOR THE PERIOD
STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ...................................................... $ 1,669,566
Dividends (net of foreign withholding taxes
of $9,576) ................................................... 202,310
---------
1,871,876
---------
Expenses:
Investment management fee - Note B ........................... 354,905
Distribution/service fee - Note B
Class A .................................................... 49,874
Class B .................................................... 274,154
Transfer agent fee - Note B .................................. 112,262
Custodian fee ................................................ 42,500
Auditing fee ................................................. 37,003
Printing ..................................................... 19,830
Registration and filing fees ................................. 9,605
Trustees' fees ............................................... 7,397
Miscellaneous ................................................ 1,828
Legal fees ................................................... 1,051
---------
Total Expenses .............................. 910,409
-----------------------------------------------------------
Net Investment Income ....................... 961,467
-----------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS, FINANCIAL FUTURES CONTRACTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments sold ......................... ( 3,599,702)
Net realized loss on financial futures contracts .............. ( 139,109)
Net realized loss on foreign currency transactions ............ ( 1,590)
Change in net unrealized appreciation/depreciation
of investments and financial futures contracts ............... ( 277,671)
---------
Net Realized and Unrealized
Loss on Investments, Financial
Futures Contracts and
Foreign Currency Transactions ............... ( 4,018,072)
------------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ................... ($3,056,605)
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............................................................................. $ 961,467 $ 2,406,590
Net realized loss on investments sold, financial futures contracts
and foreign currency transactions ................................................................ ( 3,740,401) ( 7,084,743)
Change in net unrealized appreciation/depreciation of investments
and financial futures contracts .................................................................. ( 277,671) ( 3,014,455)
------------ ------------
Net Decrease in Net Assets Resulting from Operations ............................................. ( 3,056,605) ( 7,692,608)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.3546 and $0.6674 per share, respectively) .......................................... ( 461,398) ( 803,396)
Class B - ($0.2571 and $0.5659 per share, respectively) .......................................... ( 471,583) ( 1,761,166)
Distributions from 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 ............................................................ ( 932,981) ( 3,609,388)
------------ ------------
FROM FUND SHARE TRANSACTIONS -- NET* ................................................................ ( 16,252,479) ( 5,494,834)
------------ ------------
NET ASSETS:
Beginning of period ............................................................................... 55,460,664 72,257,494
------------ ------------
End of period (including undistributed net investment
income of $100,015 and $73,119, respectively) .................................................... $ 35,218,599 $ 55,460,664
============ ============
</TABLE>
* ANALYSIS OF FUND SHARE TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
1995 1994
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ........................................................ 910,305 12,990,091 310,979 $ 4,916,203
Shares issued to shareholders in reinvestment of distributions ..... 26,761 375,618 57,814 900,802
----------- ------------ ----------- ----------
937,066 13,365,709 368,793 5,817,005
Less shares repurchased ............................................ ( 698,341) ( 9,602,941) ( 426,433) ( 6,603,119)
----------- ------------ ----------- ----------
Net increase (decrease) ............................................ 238,725 $ 3,762,768 ( 57,640) ($ 786,114)
=========== ============ =========== ==========
CLASS B
Shares sold ........................................................ 985,367 $13,372,127 557,733 $ 8,893,162
Shares issued to shareholders in reinvestment of distributions ..... 24,145 334,553 117,910 1,843,490
----------- ------------ ----------- ----------
1,009,512 13,706,680 675,643 10,736,652
Less shares repurchased ............................................ (2,446,361) ( 33,721,927) (1,026,605) ( 15,445,372)
----------- ------------ ----------- ----------
Net decrease ....................................................... (1,436,849) ($20,015,247) ( 350,962) ($ 4,708,720)
=========== ============ =========== ==========
</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 YEAR. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS PAID TO
SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE
FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD, REINVESTED AND
REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------
1995 1994 1993 1992(a)
------- ------- ------- -------
<S> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period..................................... $ 14.35 $ 16.91 $ 15.19 $ 15.31
------- ------- ------- -------
Net Investment Income.................................................... 0.37 0.63 0.76** 0.72
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts, Foreign Currency
Transactions and Written Options.... ( 1.17) ( 2.28) 1.76 ( 0.21)
------- ------- ------- -------
Total from Investment Operations...................................... ( 0.80) ( 1.65) 2.52 0.51
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income..................................... ( 0.35) ( 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................................................... ( 0.35) ( 0.91) ( 0.80) ( 0.63)
------- ------- ------- -------
Net Asset Value, End of Period........................................... $ 13.20 $ 14.35 $ 16.91 $ 15.19
======= ======= ======= =======
Total Investment Return at Net Asset Value (c)........................... (5.66%) (10.10%) 17.10% 3.44%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)................................ $18,300 $16,469 $20,385 $17,593
Ratio of Expenses to Average Net Assets.................................. 1.60% 1.53% 1.59% 1.68%*
Ratio of Net Investment Income to Average Net Assets..................... 2.72% 4.02% 4.84% 5.49%*
Portfolio Turnover Rate.................................................. 55% 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.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................... $ 14.33 $ 16.89 $ 15.17 $ 15.13 $ 14.51
------- ------- ------- ------- -------
Net Investment Income.............................................. 0.25 0.53 0.69** 0.83 0.87+
Net Realized and Unrealized Gain (Loss) on Investments, Financial
Futures Contracts, Foreign Currency Transactions and
Written Options.................................................. ( 1.14) ( 2.28) 1.76 0.11 0.76
------- ------- ------- ------- -------
Total from Investment Operations................................ ( 0.89) ( 1.75) 2.45 0.94 1.63
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income............................... ( 0.26) ( 0.57) ( 0.73) ( 0.90) ( 1.01)
Distributions in excess of Net Realized
Gain on Investments Sold, Written
Options and Financial Futures Contracts........................... ----- ( 0.24) ----- ----- -----
------- ------- ------- ------- -------
Total Distributions................................................ ( 0.26) ( 0.81) ( 0.73) ( 0.90) ( 1.01)
------- ------- ------- ------- -------
Net Asset Value, End of Period..................................... $ 13.18 $ 14.33 $ 16.89 $15.17 $ 15.13
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (c)..................... ( 6.32%) (10.70%) 16.56% 6.42% 11.78%+
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted).......................... $16,919 $38,992 $51,872 $36,103 $56,928
Ratio of Expenses to Average Net Assets............................ 2.32% 2.18% 2.11% 1.63% 1.82%+
Ratio of Net Investment Income to Average Net Assets............... 1.83% 3.41% 4.29% 5.56% 5.96%+
Portfolio Turnover Rate............................................ 55% 147% 118% 209% 134%
</TABLE>
* On an annualized basis.
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
+ Reflects expense limitations in effect during the year indicated (see Note
B). As a result of such limitations, expenses of Class B shares for the year
ended, October 31, 1991 reflect reductions of $0.01 per share. Absent of
such reductions, for the year ended October 31, 1991, the ratio of expenses
to average net assets would have been 1.91% and the ratio of net investment
income to average net assets would have been 5.87%. Without the
reimbursement, total investment return would be lower.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY GOLD
& GOVERNMENT FUND ON OCTOBER 31, 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.
<TABLE>
<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. (46.00%)
United States Treasury, Note................................... 9.375% 04-15-96 $3,000 $ 3,049,680
United States Treasury, Note................................... 9.000 05-15-98 6,300 6,787,242
United States Treasury, Bond................................... 13.125 05-15-01 2,000 2,681,240
United States Treasury, Bond................................... 13.375 08-15-01 2,700 3,680,856
-----------
TOTAL U.S. GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $16,415,727) (46.00%) 16,199,018
------ -----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
------ -- ------
<S> <C> <C>
COMMON STOCKS
GOLD AND MINING PRODUCTS (39.62%)
Battle Mountain Gold Co......................................... 55,000 419,375
Hecla Mining Co.**.............................................. 200,000 1,475,000
Hemlo Gold Mines, Inc. (Canada)................................. 50,000 412,500
Kinross Gold Corp. (Canada)**................................... 500,000 3,625,000
Newmont Gold Co................................................. 35,000* 1,260,000
Pan American Silver Corp. (Canada)**............................ 100,000* 662,500
Placer Dome, Inc. (Canada) ..................................... 32,000 700,000
Prime Resource Group Inc. (Canada)**............................ 281,800 2,042,740
Santa Fe Pacific Gold Corp...................................... 100,000 987,500
Stillwater Mining Co.**......................................... 100,000* 1,687,500
TVX Gold, Inc. (Canada)**....................................... 105,000 682,500
----------
TOTAL COMMON STOCKS
(Cost $ 12,705,916) (39.62%) 13,954,615
------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
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 (7.16%)
Freeport-McMoRan Copper & Gold, Inc., Ser SILV**.......................................... 120,000 $ 2,520,000
----------
TOTAL PREFERRED STOCKS
(Cost $ 2,521,200) (7.16%) 2,520,000
------ ----------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S
RATE DATE OMITTED)
---- ---- --------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.95%)
Investment in a joint repurchase agreement
transaction with SBC Capital Markets Inc.--
Dated 10-31-95, Due 11-01-95
(secured by U.S. Treasury Bond, 8.75%
Due 05-15-17, U.S. Treasury Note, 5.750%
Due 09-30-97) Note A............................................ 5.890% 11-01-95 $334 334,000
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%.............................................. 745
-----------
TOTAL SHORT-TERM INVESTMENTS (00.95%) 334,745
------- -----------
TOTAL INVESTMENTS (93.73%) $33,008,378
======= ===========
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended October 31, 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.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
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 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. 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. 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 $11,789,591 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 distribution will be made. The carryforwards expire as follows:
October 31, 2002 -- $8,066,420, and October 31, 2003 -- $3,723,171
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. Foreign income may be subject to foreign
withholding taxes which are accrued as applicable.
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
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
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.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially expressed in
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Fund. Transactions affecting
statement of operations accounts and net realized gain/(loss) on investments are
translated at the rates prevailing at the dates of the transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts for speculative purposes and/or to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. At the time the Fund enters into a financial futures contract, it
will be 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 on 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", will be 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. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuation imposed by an exchange.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures contracts.
At October 31, 1995, there were no open position 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
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
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 contract's
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.
There were no written option transactions for the period ended October 31,
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 October 31, 1995, net
sales charges received on sales of Class A shares amounted to $3,733. Out of
this amount, $557 was retained and used for printing prospectuses, advertising,
sales literature and other purposes, $1,128 was paid as sales commissions to
unrelated broker-dealers and $2,048 was paid as sales commissions to sales
personnel of John Hancock Distributors, Inc. ("Distributors"), Tucker Anthony
Incorporated ("Tucker Anthony") and Sutro & Co., Inc. ("Sutro"), all of which
are broker dealers. The Adviser's indirect parent, John Hancock Mutual Life
Insurance Company, is the indirect sole shareholder of Distributors and John
Hancock Freedom Securities Corporation and its subsidiaries, which include FDC,
Tucker Anthony and Sutro.
Class B shares which are redeemed within six years of purchase will be
subject to a contingent deferred sales charge ("CDSC") at declining rates
beginning at 5.0% of the lesser of the current market value at the time of
redemption or the original purchase cost of the shares being redeemed. Proceeds
from the CDSC are paid to JH Funds and are used in whole or in part to defray
its expenses related to providing distribution related services to the Fund in
connection with the sale of Class B shares. For the period ended October 31,
1995 the contingent deferred sales charges paid to JH Funds amounted to $66,652.
In addition, to reimburse 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 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
exceed 0.30% of Class A
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Gold & Government Fund
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 on Class B shares was decreased to 0.95% effective August 1,
1995 and decreased to 0.90% effective October 1, 1995.
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. 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 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 the period January 1, 1995 and through September 30, 1995 Class A and
Class B shares paid transfer agent fees based on the number of shareholder
accounts and certain out-of-pocket expenses. For the eleven months ended
September 30, 1995 the transfer agent expense, calculated as a class specific
expense was $34,231 for Class A and $70,396 for Class B, respectively. Effective
October 1, 1995 transfer agent expense is being treated as a fund expense based
on the number of shareholder accounts in the Fund and certain out-of-pocket
expenses.
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 then obligations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995, aggregated $4,466,153 and $17,809,838, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $19,566,429 and $17,879,328, respectively, during the period
ended October 31, 1995.
The cost of investments owned at October 31, 1995 for Federal Income Tax
purposes was $32,438,784. Gross unrealized appreciation and depreciation of
investments aggregated $2,191,951 and $1,623,102, respectively, resulting in net
unrealized appreciation of $568,849.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified $1,590 from
accumulated net realized loss on investments sold to undistributed net
investment income. This represents the amount necessary to report these balances
on a tax basis, excluding certain temporary differences, as of October 31, 1995.
Additional adjustments may be needed in subsequent reporting periods. These
reclassifications, which have no impact on the net asset value of the Fund, are
primarily attributable to certain differences in the computation of
distributable income and capital gains under federal tax rules versus generally
accepted accounting principles.
17
<PAGE> 18
John Hancock Funds - Gold & Government Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Gold & Government Fund and the Trustees of
Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of John Hancock Gold & Government Fund
(the "Fund") (formerly known as John Hancock Freedom Gold & Government Fund) (a
portfolio of Freedom Investment Trust) at October 31, 1995, and the results of
its operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal year ended October
31, 1995.
Shareholders will receive a 1995 U.S. Treasury Department Form 1099-DIV in
January of 1996. This will reflect the total of all distributions which are
taxable for the calendar year 1995.
For the fiscal year ending October 31, 1995, 15.95% of the ordinary income
distributions qualify for the dividends received deduction.
18
<PAGE> 19
NOTES
John Hancock Funds - Gold & Government Fund
19
<PAGE> 20
[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 the page. A
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right, a cube in lower left and a diamond in lower right. A tag line below
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- --------------------------------------------------------------------------------
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.
