<PAGE> 1
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SOVEREIGN
ACHIEVERS
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. Hodson
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 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
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 JOHN SNYDER FOR THE
PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
SOVEREIGN ACHIEVERS FUND
STOCKS RALLY STRONGLY; SLOWER ECONOMIC GROWTH
BODES WELL FOR HIGH-QUALITY GROWTH STOCKS
So far it has been a great year for stocks. From the start of the year through
the end of October, the market has soared 29% -- as measured by the Standard &
Poor's 500-Stock Index. Red-hot technology stocks have accounted for much of
this spectacular move, although they've had a few ups and downs along the way.
After soaring in the first half of the year, the group stumbled in mid-July when
Intel Corp., one of the market's high-tech darlings, stunned investors with
disappointing earnings. The stock dropped 10% on the news, and most other tech
stocks sold off in sympathy. Worries about insider sales and third-quarter
earnings added to the sector's woes in August. The group, however, has since
recovered most of its lost ground, ending October with many tech stocks
approaching their July highs.
[A 2 1/2" x 3 1/2" photo of The Sovereign Achievers portfolio management team at
bottom right. Caption reads: "The Sovereign Achievers management team (l-r):
Jere Estes, John Snyder, Tom Weary and Jim Moorhead."]
PERFORMANCE SCORECARD
For the year ended October 31, 1995, John Hancock Sovereign Achievers Fund's
Class A
[CAPTION]
"So far it has been a great year for stocks."
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) Alco Standard 3.9% 2) Pfizer 3.8% 3) Procter &
Gamble 3.6% 4) PepsiCo 3.5% 5) Interpublic Group 3.4%. A footnote below reads
"As a percentage of net assets on October 31, 1995."]
and Class B shares had total returns of 12.21% and 11.51%, respectively, at net
asset value. By comparison, the average growth fund returned 22.14% for the same
period, according to Lipper Analytical Services.1 The difference in performance
was due to the fact that we own almost no technology stocks, while many of our
peers have invested as much as 20% to 50% of their portfolios in the sector.
We believe the key to successful wealth building lies in sticking to a
time-tested investment discipline, no matter which way the markets' winds may
blow. So it's not that we don't like technology stocks, they simply don't meet
our primary investment criterion. As long-time shareholders know, Sovereign
Achievers Fund focuses on companies that have increased their dividends
consistently for at least the past five years. Most technology stocks don't fit
that bill. In fact, some of these companies didn't even exist five years ago and
many don't pay dividends. (There's one exception, however, which we'll discuss
later.)
TOP HOLDINGS, TOP PERFORMERS
Our biggest holdings have been our biggest winners this year. PepsiCo, our
number four holding, is up more than 45% after a lackluster performance over the
last couple of years. Concerns about the Pizza Hut division have faded as Pepsi
has introduced new products and services to fend off competition. What's more,
its soft drink and snack food businesses have continued their rapid growth.
Alco Standard was also a strong performer, jumping nearly 40% this year. By
acquiring smaller rivals in the highly-fragmented office supply industry, Alco
has been able to gain market share and deliver strong earnings growth of 20%.
Finally, our large drug holdings, including Abbott Laboratories and
Schering-Plough, rebounded strongly as health-care reform fears dissipated and
investors once again focused on the positive earnings fundamentals of these
companies.
NEW OPPORTUNITIES
Even with the market's strong upward move this year, we've found some attractive
new investment opportunities. Below are three of our favorites.
AMP, INC. This is just about the only technology company out there with a
history of rising dividends. In fact, it has raised its dividend
[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 Alco
Standard followed by an up arrow and the phrase "Growth in market share." The
second listing is Abbott Laboratories followed by an up arrow and the phrase
"Strong earnings growth." The third listing is Wal-Mart followed by a down arrow
and the phrase "Drop in consumer spending." Footnote below reads: "See "Schedule
of Investments." Investment holdings are subject to change."]
[CAPTION]
"Our biggest holdings have been our biggest winners this year."
4
<PAGE> 5
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 year ended October 31, 1995." The chart is
scaled in increments of 5% from bottom to top, with 25% at the top and 0% at the
bottom. Within the chart there are three solid bars. The first represents the
12.21% total return for the John Hancock Sovereign Achievers Fund: Class A. The
second represents the 11.51% total return for the John Hancock Sovereign
Achievers Fund: Class B. The third represents the 22.14% total return for the
average growth fund. A 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 page seven for historical performance information."]
consistently for the past 43 years. AMP is the global leader in the market for
electrical connectors. Simply put, the company makes the devices that hook
personal computers together in local and wide area networks. AMP's capital base
and technical prowess have made it the preferred vendor in the industry. We
believe that the secular move toward computer networking will sustain AMP's
mid-teens earnings growth rate for at least the next several years.
AUTOMATIC DATA PROCESSING (ADP). Corporate America has cut costs about as much
as it can with layoffs. As a result, companies are now turning to outsourcing
non-essential services as a way to bring costs down even more. ADP is one of the
biggest beneficiaries of this trend. The company is one of the leaders in
processing payrolls. In fact, one out of seven employees in the U.S. receives a
paycheck from ADP. The company also handles back-office functions for brokerage
firms, claims processing for insurance companies and servicing agreements for
auto dealers.
SIGMA-ALDRICH. Based in St. Louis, Missouri, this company sells specialty
research chemicals to pharmaceutical companies and universities. Sigma has a
significant edge over competitors, thanks to its low overhead, enormous
selection of nearly 76,000 chemical compounds and sophisticated information
systems used for distributing products. We believe the company will be able to
continue gaining market share and growing its earnings in the 15% range.
THE OUTLOOK
After such a spectacular rally this year, many are wondering whether stocks have
more room to run. No one knows for sure and we don't think it's worth the time
to worry about where the market is headed in the next quarter or two. Instead,
we try to keep a few observations in mind. Inflation is benign, and demographics
in the industrialized world will continue to act as a restraint. Productivity is
high and U.S. corporations are in their best competitive position in a long
time. The supply and demand equation is also favorable as investor appetite for
stocks remains strong and new issuance remains flat.
And most importantly, our high-quality growth stocks, in our opinion, are
likely to grow their earnings at almost twice the rate of the market. In the
last few months, we saw
- ----------------
(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're likely to see earnings drop back to more normal levels..."
5
<PAGE> 6
John Hancock Funds - Sovereign Achievers Fund
signs that corporate earnings were beginning to weaken. It wasn't only among
technology stocks such as Intel, but also among cyclicals such as Caterpillar
and consumer-staple companies such as Colgate-Palmolive. That's not surprising
given that for the last 10 quarters, earnings of companies in the S&P 500-Stock
Index have grown at an unusually high rate of 20%. Trees don't grow to the sky,
and neither do earnings. In our view, we're likely to see earnings drop back to
more normal levels of 8% to 10%. By contrast, the stable growth companies we
favor should increase earnings at about 15% to 17%.
What's more, their stocks are extremely compelling on a valuation basis,
selling close to the market multiple. (That is, high-quality growth stocks have
price-to-earnings multiples -- a measure of how much you're paying for earnings
power -- equal to that of the stock market.) In that environment, investors may
well end up scrambling to buy the high-quality, stable growth companies that
populate Sovereign Achievers Fund.
6
<PAGE> 7
A L0OK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Sovereign Achievers 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. 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. Prior to August 1992, different sales charges were in effect for
Class A shares and are not reflected in the performance data. 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>
LIFE
ONE FIVE OF
YEAR YEARS FUND
---- ----- ----
<S> <C> <C> <C>
John Hancock Sovereign Achievers Fund:
Class A 10.26% 25.16%(1) N/A
John Hancock Sovereign Achievers Fund:
Class B 10.30% 78.28% 85.73%(2)
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
LIFE
ONE FIVE OF
YEAR YEARS FUND
---- ----- ----
<S> <C> <C> <C>
John Hancock Sovereign Achievers Fund:
Class A 10.26% 6.18%(1) N/A
John Hancock Sovereign Achievers Fund:
Class B 10.30% 12.26% 7.61%(2)
</TABLE>
NOTES TO PERFORMANCE
(1) Class A shares started on January 3, 1992.
(2) Class B shares started on April 22, 1987.
7
<PAGE> 8
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John Hancock
Sovereign Achievers Fund would be worth on October 31, 1995, assuming you had
invested on the day each class of shares started and reinvested all
distributions. For comparison, we've shown the same $10,000 investment in the
Standard & Poor's 500 Stock Index -- an unmanaged index that includes 500 widely
traded common stocks and is a commonly used measure of stock market performance.
[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 $15,510 as of October 31, 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 $12,868 as of October 31,
1995. The third line represents the Sovereign Achievers Fund after sales charge
and is equal to $12,181 as of October 31, 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 two lines.
The first line represents the value of the Standard & Poor's 500 Stock Index and
is equal to $26,078 as of October 31, 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 $18,144
as of October 31, 1995.
*No contingent deferred sales charge applicable.]
8
<PAGE> 9
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 OCTOBER 31, 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
October 31, 1995
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
ASSETS:
Investments at value - Note C:
Common stocks (cost - $100,826,204) ....................... $111,913,000
Joint repurchase agreement (cost - $3,126,000) ............ 3,126,000
Corporate savings account ................................. 11,466
------------
115,050,466
Receivable for shares sold ................................. 74,422
Interest receivable ........................................ 508
Dividends receivable ....................................... 71,250
Other assets ............................................... 1,328
------------
Total Assets ............................. 115,197,974
------------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ............................. 91,346
Payable for investments purchased .......................... 1,077,100
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ....................................... 113,854
Accounts payable and accrued expenses ...................... 46,009
------------
Total Liabilities ........................ 1,328,309
------------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................ 101,872,756
Accumulated net realized gain on investments ............... 910,113
Net unrealized appreciation of investments ................. 11,086,796
------------
Net Assets ............................... $113,869,665
============================================================
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 - $27,691,989 / 2,168,607 .......................... $ 12.77
================================================================================
Class B - $86,177,676 / 6,790,262 .......................... $ 12.69
================================================================================
MAXIMUM OFFERING PRICE *
Class - A ($12.77 x 105.26%) ............................... $ 13.44
================================================================================
<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>
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS FOR THE PERIOD
STATED.
<TABLE>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $2,000) ....... $ 1,979,608
Interest ..................................................... 526,784
-----------
2,506,392
-----------
Expenses:
Distribution/service fee - Note B
Class A ................................................... 74,479
Class B ................................................... 873,032
Investment management fee - Note B .......................... 866,401
Transfer agent fee - Note B ................................. 323,804
Custodian fee ............................................... 40,301
Printing .................................................... 29,877
Trustees' fees .............................................. 22,566
Auditing fee ................................................ 22,500
Registration and filing fees ................................ 13,675
Miscellaneous ............................................... 7,889
Legal ....................................................... 1,172
-----------
Total Expenses ............................. 2,275,696
------------
Net Investment Income ...................... 230,696
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold ........................ 890,733
Change in net unrealized appreciation/depreciation
of investments .............................................. 11,617,034
-----------
Net Realized and Unrealized
Gain on Investments ........................ 12,507,767
------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .................. $12,738,463
============================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............................................................................ $ 230,696 $ 439,388
Net realized gain on investments sold ............................................................ 890,733 5,079,274
Change in net unrealized appreciation/depreciation of investments ................................ 11,617,034 (4,547,665)
------------ ------------
Net Increase in Net Assets Resulting from Operations ........................................... 12,738,463 970,997
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.1015 and $0.0985 per share, respectively) ......................................... (213,064) (192,364)
Class B - ($0.0287 and $0.0196 per share, respectively) ......................................... (216,094) (155,215)
Distributions from net realized gain on investments sold
Class A - ($0.5222 and $0.4437 per share, respectively) ......................................... (999,954) (865,748)
Class B - ($0.5222 and $0.4437 per share, respectively) ......................................... (4,061,492) (3,478,874)
------------ ------------
Total Distributions to Shareholders .............................................................. (5,490,604) (4,692,201)
------------ ------------
FROM FUND SHARE TRANSACTIONS-- NET* ................................................................ (11,101,562) 4,219,619
------------ ------------
NET ASSETS:
Beginning of period .............................................................................. 117,723,368 117,224,953
------------ ------------
End of period (including undistributed net investment income of none and $198,462, respectively).. $113,869,665 $117,723,368
============ ============
</TABLE>
<TABLE>
<CAPTION>
* ANALYSIS OF FUND SHARE TRANSACTIONS: YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 665,977 $ 8,286,634 2,105,977 $ 25,842,725
Shares issued to shareholders in reinvestment of distributions... 106,291 1,186,137 85,071 1,034,292
---------- ------------ ---------- ------------
772,268 9,472,771 2,191,048 26,877,017
Less shares repurchased.......................................... (542,110) (6,600,356) (2,139,424) (26,191,185)
---------- ------------ ---------- ------------
Net increase..................................................... 230,158 $ 2,872,415 51,624 $ 685,832
========== ============ ========== ============
CLASS B
Shares sold...................................................... 531,328 $ 6,390,883 1,454,076 $ 17,601,685
Shares issued to shareholders in reinvestment of distributions... 360,515 3,973,464 281,030 3,417,866
---------- ------------ ---------- ------------
891,843 10,364,347 1,735,106 21,019,551
Less shares repurchased.......................................... (2,003,631) (24,338,324) (1,456,639) (17,485,764)
---------- ------------ ---------- ------------
Net increase (decrease).......................................... (1,111,788) $(13,973,977) 278,467 $ 3,533,787
========== ============ ========== ============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS PAID TO
SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE
FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD DURING THE PERIOD,
ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
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>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
CLASS A**
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................. $ 12.02 $ 12.39 $ 10.99 $ 12.81
------- ------- ------- -------
Net Investment Income ............................................ 0.08(a) 0.10 0.08(a) 0.06(a)
Net Realized and Unrealized Gain (Loss) on Investments............ 1.29 0.07 1.34 (0.06)
------- ------- ------- -------
Total from Investment Operations.................................. 1.37 0.17 1.42 0.00
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.............................. (0.10) (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............................................... (0.62) (0.54) (0.02) (1.82)
------- ------- ------- -------
Net Asset Value, End of Period.................................... $ 12.77 $ 12.02 $ 12.39 $ 10.99
======= ======= ======= =======
Total Investment Return at Net Asset Value (c).................... 12.21% 1.35% 12.97% 0.19%(b)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $27,692 $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.............. 0.69% 0.83% 0.64% 0.62%*
Portfolio Turnover Rate........................................... 65% 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
------- ------- ------- ------- -------
Net Investment Income ............................................ 0.01(a) 0.03 0.02(a) 0.01(a) 0.07
Net Realized and Unrealized Gain on Investments................... 1.28 0.07 1.33 1.05 2.67
------- ------- ------- ------- -------
Total from Investment Operations.................................. 1.29 0.10 1.35 1.06 2.74
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income.............................. (0.03) (0.02) (0.01) (0.03) (0.20)
Distributions from Net Realized Gain on Investments Sold.......... (0.52) (0.44) -- (1.76) (0.05)
Distributions from Capital Paid-In................................ -- -- -- (0.01) --
------- ------- ------- ------- -------
Total Distributions............................................... (0.55) (0.46) (0.01) (1.80) (0.25)
------- ------- ------- ------- -------
Net Asset Value, End of Period.................................... $ 12.69 $ 11.95 $ 12.31 $ 10.97 $ 11.71
======= ======= ======= ======= =======
Total Investment Return at Net Asset Value (c).................... 11.51% 0.78% 12.34% 7.22% 30.21%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)......................... $86,178 $94,431 $93,853 $23,525 $21,826
Ratio of Expenses to Average Net Assets........................... 2.11% 2.10% 2.09% 2.27% 2.24%
Ratio of Net Investment Income to Average Net Assets.............. 0.06% 0.25% 0.17% 0.10% 0.66%
Portfolio Turnover Rate........................................... 65% 60% 71% 246% 217%
<FN>
* On an annualized basis.
** Class A shares commenced operations on January 3, 1992.
(a) On average month end shares outstanding.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
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 OCTOBER 31, 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.
SCHEDULE OF INVESTMENTS
October 31, 1995
Per share earnings and dividends and their compound growth rates as well as
price/earnings ratios are shown for the most recently reported five year periods
on common stocks, but are not audited.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS (98.28%) RATE VALUE
<S> <C> <C>
ADVERTISING (3.40%)
100,000 Interpublic Group of Cos., Inc. (The) ............................... $3,875,000
----------
One of the largest advertising agencies in the world.
Earnings P/S ......................... $1.23, 1.43, 1.49, 1.79, 2.04 13.5%
Dividends P/S ........................ $.41, .45, .49, .55, .61 10.4%
Price/Earnings Ratio.................. 18.6
Banks (5.76%)
50,000* BankAmerica Corp..................................................... 2,875,000
Provides retail and wholesale banking services in the Western United
States and other select markets.
Earnings P/S ......................... $4.55, 4.27, 4.77, 5.17, 6.15 7.8%
Dividends P/S ........................ $1.20, 1.30, 1.40, 1.60, 1.84 11.3%
Price/Earnings Ratio.................. 9.6
125,000 Norwest Corp. ....................................................... 3,687,500
Minneapolis-based superregional bank.
Earnings P/S ......................... $.94, 1.58, 1.75, 2.16, 2.67 29.8%
Dividends P/S ........................ $.47, .54, .64, .77, .90 17.6%
Price/Earnings Ratio.................. 11.9
----------
6,562,500
----------
CAPITAL GOODS (7.82%)
35,000* Emerson Electric Co.................................................. 2,493,750
Long-established manufacturer of electrical and electronic products.
Earnings P/S ......................... $2.83, 2.96, 3.15, 4.04, 4.16 10.1%
Dividends P/S ........................ $1.34, 1.40, 1.47, 1.60, 1.84 8.3%
Price/Earnings Ratio.................. 17.7
40,000* Illinois Tool Works, Inc............................................. 2,325,000
Manufacturer of industrial components and other specialty products
and equipment for high-volume manufacturing.
Earnings P/S ......................... $1.63, 1.68, 1.78, 2.22, 3.17 18.1%
Dividends P/S ........................ $.40, .45, .49, .54, .62 11.6%
Price/Earnings Ratio.................. 18.7
150,000 Myers Industries, Inc. .............................................. 2,156,250
Manufacturer of polymer and metal products for the transportation
industries.
Earnings P/S ......................... $.65, .80, .84, 1.02, 1.00 11.4%
Dividends P/S ........................ $.09, .10, .11, .13, .14 11.7%
Price/Earnings Ratio.................. 13.9
85,000 Stewart & Stevenson Services, Inc. .................................. 1,933,750
Leading manufacturer of custom diesel and gas turbine power systems.
Earnings P/S ......................... $1.03, 1.23, 1.54, 1.90, 2.09 19.4%
Dividends P/S ........................ $.14, .18, .22, .26, .30 21.0%
Price/Earnings Ratio.................. 10.8
----------
8,908,750
----------
CHEMICALS - DIVERSIFIED (7.32%)
50,000* Air Products & Chemicals, Inc. ...................................... 2,581,250
Produces and distributes industrial gases.
Earnings P/S ......................... $2.23, 2.45, 1.76, 2.05, 3.29 10.2%
Dividends P/S ........................ $.75, .83, .89, .95, 1.01 7.7%
Price/Earnings Ratio.................. 16.7
100,000 Ecolab Inc. ......................................................... 2,900,000
Leading developer/marketer of cleaning products.
Earnings P/S ......................... $.93, .95, 1.17, 1.35, 1.34 9.6%
Dividends P/S ........................ $ .35, .36, .38, .44, .50 9.3%
Price/Earnings Ratio.................. 21.7
60,000* Sigma-Aldrich Corporation............................................ 2,850,000
Manufactures and distributes biochemical and organic products for
research and diagnostic purposes.
Earnings P/S ......................... $1.25, 1.85, 2.08, 2.21, 2.52 19.2%
Dividends P/S ........................ $.20, .23, .26, .30, .34 14.2%
Price/Earnings Ratio.................. 18.1
----------
8,331,250
----------
COMMERCIAL SERVICES (8.33%)
50,000* Alco Standard Corporation ........................................... 4,425,000
Distributes office products and paper products.
Earnings P/S ........................ $1.95, 2.22, (.05), 1.12, 3.63 16.8%
Dividends P/S ....................... $.85, .89, .93, .97, 1.01 4.4%
Price/Earnings Ratio................. 24.8
30,000* Cintas Corporation................................................... 1,260,000
Designs, plans and implements corporate-identity uniform rentals and
sales throughout the U.S.
Earnings P/S ........................ $.69, .85, .99, 1.18, 1.40 19.4%
Dividends P/S ....................... $.095, .11, .14, .17, .20 20.5%
Price/Earnings Ratio................. 32.1
125,000 Sysco Corp. ......................................................... 3,796,875
Largest distributor of foodservice products.
Earnings P/S ........................ $.86, .95, 1.10, 1.24, 1.42 13.4%
Dividends P/S ....................... $.14, .22, .28, .36, .44 33.2%
Price/Earnings Ratio................. 21.2
----------
9,481,875
----------
CONSUMER DURABLES (1.27%)
100,000 Juno Lighting, Inc. ................................................. 1,450,000
----------
Manufactures/markets full line of recessed and track lighting
fixtures.
Earnings P/S ........................ $.70, .80, .95, 1.18, 1.13 12.7%
Dividends P/S ....................... $.14, .19, .23, .26, .30 21.0%
Price/Earnings Ratio................. 13.1
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
<S> <C> <C>
CONSUMER NON-DURABLES (14.66%)
35,000* Kimberly-Clark Corporation........................................... $ 2,541,875
Leading producer of consumer and personal care products.
Earnings P/S ........................ $3.01, 3.37, 1.95, 3.55, 3.66 5.0%
Dividends P/S ....................... $1.45, 1.64, 1.70, 1.75, 1.79 5.4%
Price/Earnings Ratio................. 20.3
100,000 McCormick & Co., Inc. ............................................... 2,475,000
Manufacturer of spices, mixes, teas, and other food related products.
Earnings P/S ........................ $.92, 1.09, 1.15, 1.30, 1.23 7.5%
Dividends P/S ....................... $.28, .38, .44, .48, .52 16.7%
Price/Earnings Ratio................. 20.9
75,000 PepsiCo Inc. ........................................................ 3,956,250
Second largest soft drink company.
Earnings P/S ........................ $1.35, 1.63, 1.73, 2.13, 2.42 15.7%
Dividends P/S ....................... $.46, .51, .61, .68, .76 13.4%
Price/Earnings Ratio................. 21.6
50,000 Procter & Gamble Co. (The)........................................... 4,050,000
Produces laundry and cleaning products, personal care items, food,
beverages, etc.
Earnings P/S ........................ $2.43, 2.43, .63, 2.07, 3.93 12.8%
Dividends P/S ....................... $1.00, 1.08, 1.17, 1.32, 1.50 10.7%
Price/Earnings Ratio................. 20.8
125,000 Sara Lee Corp. ...................................................... 3,671,875
Manufactures brand name packaged foods and consumer products.
Earnings P/S ........................ $1.41, 1.28, 1.43, .46, 1.66 4.2%
Dividends P/S ....................... $.47, .50, .58, .64, .68 9.7%
Price/Earnings Ratio................. 17.9
-----------
16,695,000
-----------
DIVERSIFIED OPERATIONS (7.04%)
100,000* Corning Inc. ........................................................ 2,612,500
Worldwide technology and healthcare services company.
Earnings P/S ........................ $1.60, 1.69, .72, .54, (.46) NMF
Dividends P/S ....................... $.45, .53, .62, .68, .69 11.3%
Price/Earnings Ratio................. 15.2
100,000* Federal Signal Corporation........................................... 2,237,500
Manufactures fire trucks and street sweepers, as well as public
safety equipment.
Earnings P/S ........................ $.65, .73, .74, .97, 1.18 16.1%
Dividends P/S ....................... $.27, .32, .36,.42, .50 16.7%
Price/Earnings Ratio................. 19.5
50,000 General Electric Co. ................................................ 3,162,500
Dominant force in home appliances, electrical power, and financial
services.
Earnings P/S ........................ $2.54, 2.54, 2.33, 3.31, 3.78 10.5%
Dividends P/S ....................... $1.02, 1.12, 1.26, 1.44, 1.64 12.6%
Price/Earnings Ratio................. 16.7
-----------
8,012,500
-----------
ELECTRONICS (2.60%)
75,000* AMP Incorporated .................................................... $ 2,943,750
-----------
World's largest producer of electronic and electrical connection
devices.
Earnings P/S ........................ $1.24, 1.34, 1.41, 1.62, 1.94 11.8%
Dividends P/S ....................... $.72, .76, .80, .84, .92 6.3%
Price/Earnings Ratio................. 20.2
HEALTHCARE (9.40%)
80,000 Abbott Laboratories ................................................. 3,180,000
Major pharmaceutical and healthcare firm.
Earnings P/S ........................ $1.22, 1.41, 1.63, 1.82, 2.06 14.0%
Dividends P/S ....................... $.48, .58, .66, .74, .82 14.3%
Price/Earnings Ratio................. 19.1
75,000* Pfizer, Inc.......................................................... 4,303,125
Leading ethical pharmaceutical producer.
Earnings P/S ........................ $1.30, 1.21, .99, 2.01, 2.39 16.4%
Dividends P/S ....................... $.66, .74, .84, .94, 1.04 12.0%
Price/Earnings Ratio................. 24.6
60,000 Schering-Plough Corp. ............................................... 3,217,500
Major pharmaceutical corporation.
Earnings P/S ........................ $1.44, 1.74, 2.05, 2.34, 2.72 17.2%
Dividends P/S ....................... $.64, .75, .87, .99, 1.13 15.3%
Price/Earnings Ratio................. 20.0
-----------
10,700,625
-----------
INFORMATION PROCESSING (3.95%)
30,000* Automatic Data Processing, Inc. ..................................... 2,145,000
Largest independent computing services firm in the U.S.
Earnings P/S ........................ $1.67, 1.88, 2.13, 2.44, 2.85 14.3%
Dividends P/S ....................... $.375, .43, .49, .56, .65 14.7%
Price/Earnings Ratio................. 24.9
50,000* General Motors Class E Stock......................................... 2,356,250
Class E stock represents GM's wholly-owned subsidiary Electronic Data
Systems, a major computer services firm.
Earnings P/S ........................ $1.10, 1.29, 1.46, 1.64, 1.89 14.5%
Dividends P/S ....................... $.28, .32, .36, .40, .48 14.4%
Price/Earnings Ratio................. 25.4
-----------
4,501,250
-----------
INSURANCE (4.75%)
50,000* AFLAC Incorporated.................................................. 2,037,500
Large holding company with insurance and broadcasting interests.
Earnings P/S ........................ $1.38, 1.72, 2.16, 2.72, 3.40 25.3%
Dividends P/S ....................... $.30, .34, .39, .45, .51 14.2%
Price/Earnings Ratio...... .......... 12.4
40,000 American International Group, Inc ................................... 3,375,000
Leading global insurance company.
Earnings P/S ........................ $3.20, 3.28, 3.92, 4.43, 5.10 12.4%
Dividends P/S ....................... $.21, .24, .26, .29, .32 11.1%
Price/Earnings Ratio................. 16.9
-----------
5,412,500
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
<S> <C> <C>
PACKAGING (2.80%)
75,000* Bemis Company, Inc................................................... $ 1,950,000
Producer of a broad range of flexible packaging and equipment and
pressure sensitive materials.
Earnings P/S ........................ $.98, 1.14, .84, 1.33, 1.55 12.1%
Dividends P/S ....................... $.42, .46, .50, .54, .64 11.1%
Price/Earnings Ratio................. 16.7
50,000* Sonoco Products, Co.................................................. 1,237,500
Manufactures packaging products for consumer and industrial markets
worldwide.
Earnings P/S ........................ $1.07, 1.13, .99, 1.26, 1.65 11.4%
Dividends P/S ....................... $.43, .44, .48, .50, .53 5.4%
Price/Earnings Ratio................. 14.9
------------
3,187,500
------------
PUBLISHING (5.23%)
92,000 A.H. Belo Corp. ..................................................... 3,185,500
Publishes 8 newspapers and operates 6 TV stations.
Earnings P/S ........................ $.51, .82, 1.06, 1.44, 1.74 35.9%
Dividends P/S ....................... $.26, .27, .28, .30, .32 5.3%
Price/Earnings Ratio................. 20.4
50,000* Reuters Holdings PLC, American
Depository Receipts (ADR)............................................ 2,775,000
International news and information organization.
Earnings P/S ........................ $1.18, 1.47, 1.60, 2.04, 2.41 19.6%
Dividends P/S ....................... $.53, .64, .66, .78, 1.00 17.2%
Price/Earnings Ratio................. 23.0
------------
5,960,500
------------
RECREATION (2.02%)
40,000* Walt Disney Co. (The)................................................ 2,305,000
------------
Diversified international, family entertainment company.
Earnings P/S ........................ $1.30, 1.44, 1.79, 1.47, 2.53 18.1%
Dividends P/S ....................... $.17, .20, .24, .29, .35 19.8%
Price/Earnings Ratio................. 22.8
RETAIL (6.41%)
50,000* Home Depot, Inc. (The)............................................... 1,862,500
Operates retail warehouse-type stores selling building and home
improvement products.
Earnings P/S ........................ $.52, .71, .95, 1.18, 1.42 28.5%
Dividends P/S ....................... $.04, .06, .08, .11, .15 39.2%
Price/Earnings Ratio................. 28.4
125,000* Pep Boys-Manny, Moe & Jack .......................................... 2,734,375
Retailer of automotive parts and accessories, automotive maintenance,
and service and installation of parts.
Earnings P/S ........................ $.60, .82, .97, 1.21, 1.32 21.8%
Dividends P/S ....................... $.13, .14, .15, .17, .19 10.0%
Price/Earnings Ratio................. 18.1
125,000 Wal-Mart Stores, Inc. ............................................... 2,703,125
Operates a chain of discount department stores.
Earnings P/S ........................ $.62, .77, .93, 1.08, 1.23 18.7%
Dividends P/S ....................... $.09, .11, .13, .16, .19 20.5%
Price/Earnings Ratio................. 19.3
------------
7,300,000
------------
TELECOMMUNICATIONS (5.52%)
100,000* Century Telephone Enterprises, Inc. ................................. $ 2,900,000
Holding company provides local telephone services in designated areas
in 15 states.
Earnings P/S ........................ $.72, 1.09, 1.39, 1.59, 2.12 31.0%
Dividends P/S ....................... $.28, .2868, .2932,.31, .32 3.4%
Price/Earnings Ratio................. 13.9
80,000* Frontier Corporation................................................. 2,160,000
Holding company providing long distance telecommunication services
nationally.
Earnings P/S ........................ $1.14, 1.01, 1.15, 1.50, 1.02 NMF
Dividends P/S ....................... $.75, .77, .79, .81, .83 2.6%
Price/Earnings Ratio................. 26.2
35,000* Royal PTT Nederland NV (ADR).. ...................................... 1,225,000
Provides postal and telecommunications throughout the Netherlands.
Earnings P/S ........................ $3.42, 3.49, 3.59, 3.86, 4.42 6.6%
Dividends P/S ....................... $1.36, 1.40, 1.45, 1.95, 2.30 14.0%
Price/Earnings Ratio................. 8.0
------------
6,285,000
------------
TOTAL COMMON STOCKS
(Cost $100,826,204) 111,913,000
------------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
(000's SHORT-TERM INTEREST
OMITTED) INVESTMENTS (2.76%) RATE
-------- --------
<S> <C> <C> <C>
$3,126 JOINT REPURCHASE AGREEMENT (2.75%)
Investment in a joint repurchase agreement transaction with SBC
Capital Markets - Dated 10-31-95, Due 11-01-95 (secured by U.S.
Treasury Bond, 8.750% Due 05-15-17, and by U.S. Treasury Note, 5.75%
Due 09-30-97) Note A ................................................ 5.89% 3,126,000
------------
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company Daily Interest Savings Account Current
Rate 3.00%........................................................... 11,466
------------
TOTAL SHORT-TERM INVESTMENTS 3,137,466
------------
TOTAL INVESTMENTS (101.04%) $115,050,466
======= ============
<FN>
* Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 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.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
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 & 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, redemptions, dividends, and liquidation, except that
certain expenses subject to the approval of the Trustees, may be applied
differently to each class of shares in accordance with current regulations of
the Securities and Exchange Commission. Shareholders of a class which bears
distribution/service expenses under terms of a distribution plan, have exclusive
voting rights to 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 large 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 or, in the case of some foreign securities,
on the date thereafter when the Fund is made aware of the dividend. 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 principals. Dividends paid by the Fund with
respect to each class of shares will be calculated in the same manner, at the
same time and will be in the same amount, except for the effect of expenses that
may be applied differently to each class 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 calculated 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
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
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. 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 with regard to sales of Class A shares amounted to
$62,799. Out of this amount, $9,734 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $24,390 was paid
as sales commissions to unrelated brokers-dealers, and $28,675 was paid as sales
commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., ("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 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, contingent deferred sales charges paid to JH Funds amounted to $251,285.
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 shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Accordingly, the Fund will make payments to the
Co-Distributors for their distribution and service expenses, at an annual rate
not to exceed 0.30% of Class A average daily net assets and 1.00% of Class B
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 0.85% during the period from November 1, 1994 through
January 31, 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 Investor Services a monthly
transfer agent fee equivalent, on an annual basis, to 0.30% and 0.27%
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Achievers Fund
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 the period January 1, 1995 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 $70,404 for Class A and $252,765 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 for 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 October 31, 1995, aggregated $70,174,317 and
$80,539,940, respectively. There were no purchases or sales of obligations of
the U.S. government and its agencies during the period ended October 31, 1995.
The cost of investments owned at October 31, 1995 (including the joint
repurchase agreement) for Federal income tax purposes was $103,952,204. Gross
unrealized appreciation and depreciation of investments aggregated $15,561,474
and $4,474,678, respectively, resulting in net unrealized appreciation of
$11,086,796.
17
<PAGE> 18
John Hancock Funds - Sovereign Achievers Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock
Sovereign Achievers Fund and the
Board of Trustees of Freedom Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for the per share earnings and dividends,
their compound growth rates and price/earnings ratios), 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 Sovereign Achievers Fund (the "Fund") (a portfolio of Freedom
Investment Trust) at October 31, 1995, the results of its operations, and 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 and brokers, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal income purposes, the following information is furnished with respect
to the distributions of the Fund during its fiscal year ended October 31, 1995.
The Fund designated distributions to shareholders of $3,279,085 as a
long-term capital gain. These amounts were reported on the 1994 U.S. Treasury
Department form 1099-DIV. It is anticipated that there will be a distribution
from net realized gains from sales of securities to shareholders of record on
December 22, 1995 and payable December 28,1995. Shareholders will receive a 1995
U.S. Treasury Department Form 1099-DIV in January 1996 representing their
proportionate share.
For the fiscal year ended October 31, 1995, 100% of the ordinary income
distributions qualify for the corporate dividends received deduction.
18
<PAGE> 19
JOHN HANCOCK FUNDS - SOVEREIGN ACHIEVERS FUND
HISTORICAL DATA (UNAUDITED)
The table below shows the record of the Fund from its inception in 1987.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<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 $0.070 $10.99 $ 1.74
1993 1,886,825 0.024 12.39 --
1994 1,938,449 0.099 12.02 0.44
1995 2,168,607 0.107 12.77 0.5169
<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 $0.020 $ 8.34 $ --
1988 1,450,348 0.090 10.29 0.14
1989 2,067,791 0.120 11.52 0.09
1990 1,920,447 0.200 9.22 0.28
1991 1,863,882 0.200 11.71 0.05
1992 2,144,696 0.030 10.97 1.76
1993 7,623,583 0.013 12.31 --
1994 7,902,050 0.020 11.95 0.44
1995 6,790,262 0.034 12.69 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.
</TABLE>
DIVIDEND INCREASES (UNAUDITED)
Listed below are the most recent dividend increases for the common stocks held
in the Sovereign Achievers Fund as of October 31, 1995.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
PERCENT OF
DIVIDEND INCREASE
-----------------
<S> <C>
Abbott Laboratories ........................................ 10.5%
AFLAC ...................................................... 13.0
A.H. Belo Corp. ............................................ 6.7
Air Products ............................................... 6.1
Alco Standard .............................................. 7.7
American International Group ............................... 10.8
AMP, Inc. .................................................. 9.5
Automatic Data Processing .................................. 16.7
BankAmerica ................................................ 15.0
Bemis ...................................................... 18.5
Century Telephone .......................................... 3.1
Cintas ..................................................... 17.7
Corning, Inc. .............................................. 5.9
Disney ..................................................... 20.0
Ecolabs .................................................... 13.6
Emerson Electric ........................................... 14.0
Federal Signal Corp. ....................................... 19.1
Frontier Corp. ............................................. 2.5
General Electric ........................................... 13.9
General Motors, Cl E ....................................... 8.3
Home Depot ................................................. 25.0
Interpublic Group .......................................... 10.7
Illinois Tool Works ........................................ 13.3
Juno Lighting .............................................. 14.3
Kimberly Clark ............................................. 2.3
McCormick .................................................. 8.3
Myers Industries ........................................... 9.9
Norwest Bank ............................................... 14.3
PepsiCo .................................................... 11.1
Pep Boys ................................................... 11.8
Pfizer, Inc. ............................................... 10.6
Procter & Gamble ........................................... 14.3
Royal PTT Nederland ........................................ 18.0
Rueters Holdings ........................................... 28.2
Sara Lee Corp. ............................................. 11.8
Schering-Plough ............................................ 13.7
Sigma-Aldrich .............................................. 9.1
Sonoco Products ............................................ 12.5
Stewart & Stevensen ........................................ 14.3
Sysco ...................................................... 22.2
Wal-Mart Stores ............................................ 17.7
</TABLE>
The average dividend increase for this group was 12.83%
19
<PAGE> 20
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
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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 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 caption "Printed on Recycled
Paper."]
JHD 3500A 10/95
12/95
