<PAGE> 1
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
SOVEREIGN
U.S.GOVERNMENT
INCOME
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:
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.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
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 BARRY H. EVANS, VICE PRESIDENT AND PORTFOLIO MANAGER
JOHN HANCOCK SOVEREIGN
U.S.GOVERNMENT
INCOME FUND
BOND MARKET RALLY FUELS FUND PERFORMANCE;
TAME INFLATION AND SLOW ECONOMY BODE WELL FOR 1996
Bond investors got a well-deserved break in 1995. Almost from the outset of
the Fund's fiscal year last November, the market has been on a roll. Bond prices
rose steadily in the first half of 1995, as interest rates fell on news of a
slower economy and muted inflation. Since January, the benchmark 30-year U.S.
Treasury bond rose 27.1%. That was a welcome relief to bond investors who
suffered through 1994 -- one of the worst years in memory for bonds -- when the
Federal Reserve was intent on reigning in economic growth by raising interest
rates.
The slower growth this year actually caused the Fed to reverse course in July
and cut short-term interest rates to spur the economy. But the market had
already anticipated the move and bond prices didn't move much. Gains came more
fitfully in the third quarter, as investors struggled to measure the success of
the Fed's "soft landing" scenario -- moderate growth, tame inflation and no
signs of recession. In late summer, there were brief worries that the economy
was actually heating up. But inflation
[A 2 1/2" x 3 3/4" photo of Barry H. Evans, at bottom right. Caption reads: "
Barry H. Evans, Portfolio Manager."]
[CAPTION]
["BOND INVESTORS GOT A WELL-DESERVED BREAK IN 1995."]
3
<PAGE> 4
John Hancock Funds - Sovereign U.S. Government Income Fund
[Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into two sections. Going from top left to right:
U.S. Treasury Bonds and Notes 61%, U.S. Government Agency Bonds 39%. Footnote
below reads: "As a percentage of net assets on October 31, 1995."]
stayed tame and that kept the overall environment positive for bonds.
The upshot was rewarding for investors in John Hancock Sovereign U.S.
Government Income Fund. For the year ended October 31, 1995, the Fund's Class A
and B shares had total returns of 15.90% and 15.27% respectively, at net asset
value. That compared to the average general U.S. government fund's return of
14.70%, according to Lipper Analytical Services.(1)
TREASURIES, LONG DURATION BOOST PERFORMANCE
The Fund was well positioned to capture the rally right from the start. The Fund
had an above-average stake in U.S. Treasuries, mostly those with maturities
between 10 and 30 years. Interest-sensitive Treasuries tend to outperform other
government instruments when rates are falling quickly. For the year ended
October 31, these made up more than half the Fund's assets. In 1995, the 30-year
Treasury performed best, returning 27.1%. By comparison, 10-year Treasuries
returned 18.9% and short-term Treasuries averaged 8.8%. Over the last six
months, we've captured the longer bonds' performance and locked in profits by
paring back our Treasury holdings, from 70% of the Fund's assets to 61%.
At the same time that we sold some of our longer Treasuries, we began
adjusting the Fund's structure. We added more intermediate-term bonds and sold
some short- and long-term bonds. The old structure, known in bond parlance as a
"barbell" -- owning mostly short- and long-term bonds without much in the middle
- -- worked well in the last six months, as the yield curve flattened and stayed
flat. A flat yield curve happens when there is little difference between
short-term and long-term rates. The new structure, known as a "bullet," should
help the Fund perform as the yield curve begins to steepen and the difference
between short-term rates and long-term rates widens. We expect that's what will
happen soon, especially if the Federal Reserve continues to lower short-term
rates as we anticipate.
The Fund's above-average duration also boosted total return. Duration is a
measure of how sensitive a fund's share price is to changes in interest rates.
Usually, the longer the duration, the more a fund's share price will move in
response to interest-rate swings. So it paid to have a longer duration during
this year's rally. At times during the period the Fund's duration was as long as
6.5 years, compared to the average U.S. government fund's average of around five
years.
During the last six months, we continued to buy more mortgage-backed
securities to improve the Fund's yield and reverse the Fund's previous
underweighting in mortgage holdings. By October, 39% of the Fund was in mortgage
investments, compared to 20% a year earlier.
[CAPTION]
["AT THE SAME TIME THAT WE SOLD SOME OF OUR LONGER TREASURIES, WE BEGAN
ADJUSTING THE FUND'S STRUCTURE."]
4
<PAGE> 5
John Hancock Funds - Sovereign U.S. Government Income Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended October 31, 1995." The chart is
scaled in increments of 8% from bottom to top, with 16% at the top and 0% at the
bottom. Within the chart there are three solid bars. The first represents the
15.90% total return for the John Hancock Sovereign U.S. Government Income Fund,
Class A. The second represents the 15.27% total return for the John Hancock
Sovereign U.S. Government Income Fund, Class B. The third represents the 14.70%
total return for the average general U.S. government income fund. A footnote
below reads: "The total returns for John Hancock Sovereign U.S. Government
Income Fund are at net asset value with all distributions reinvested. The
average general U.S. government income fund is tracked by Lipper Analytical
Services. (1) See following page for historical performance information."]
We recently added Ginnie Mae and Fannie Mae securities with coupons averaging
7-7.5%. Bought at a discount, they should perform well even if the market
continues to rally. Typically, mortgages do best in a stable interest rate
environment and suffer more overall when rates fall, since borrowers tend to pay
off their mortgages early to refinance at a lower rate.
WHAT'S AHEAD
The bond market's next moves are closely tied to whether Congress succeeds in
cutting the budget deficit and whether the Fed lowers rates again in response to
their plan. Reducing the deficit is important because then the U.S. government
can borrow money at lower rates and cut inflation. Even though interest rates
could fall again with news of a good deficit package, there could also be some
volatility ahead. After all the budget discussion dies down, the stage could be
set for inflation concerns in early 1996 as investors re-focus on recent signs
of growth in both the leading indicators and exports. And because the market's
been so strong all year, it's more sensitive now to any piece of bad news.
So we're hedging our bets and taking a more cautious approach for now. We'll
keep duration only slightly longer than average, shorter than it has been. And a
more traditional bullet structure will help the Fund as the yield curve
steepens. If the economy speeds up or commodities prices spike, we'll buy more
mortgages to generate higher income.
But short-term prudence doesn't mean we're changing our long-term view. In
fact, we view any reversals or corrections as buying opportunities, and any
inflation scare as temporary. Even with bumps along the way, the economy's
growth rate seems to be holding at its moderate 2.5% rate and inflation remains
tame. At the same time, consumers are saddled with high debt levels and not much
growth in income. They don't appear willing or able to spend enough to spur the
economy. Capital spending, which has been the engine driving the latest economic
expansion, seems to be slowing and global economies are weak. In our view, these
factors provide a strong argument for lower interest rates. That bodes well for
patient bond investors.
[CAPTION]
["EVEN THOUGH INTEREST RATES COULD FALL AGAIN... THERE COULD ALSO BE SOME
VOLATILITY AHEAD."]
(1)Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is lower.
5
<PAGE> 6
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for the John Hancock Sovereign U.S. Government Income Fund. Total
return is a performance measure that equals the sum of all dividends 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 4.50%
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. 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 U.S. Government Income Fund: Class A 8.74% 20.02%(1) N/A
John Hancock Sovereign U.S. Government Income Fund: Class B 8.26% 46.33% 106.79%(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 U.S. Government Income Fund: Class A 8.74% 5.00%(1) N/A
John Hancock Sovereign U.S. Government Income Fund: Class B 8.26% 7.91% 8.11%(2)
</TABLE>
YIELDS
AS OF OCTOBER 31, 1995
<TABLE>
<CAPTION>
SEC 30-DAY
YIELD
-----
<S> <C>
John Hancock Sovereign U.S. Government
Income Fund: Class A 5.62%
John Hancock Sovereign U.S. Government
Income Fund: Class B 5.24%
</TABLE>
NOTES TO PERFORMANCE
(1)Class A shares started on January 3, 1992.
(2)Class B shares started on June 5, 1986.
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
Sovereign U.S. Government Income 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 Lehman Government Bond Index -- an unmanaged index that measures the
performance of U.S. Treasury bonds and U.S. Government Agency bonds.
SOVEREIGN U.S. GOVERNMENT INCOME FUND
CLASS A SHARES
Line chart with the heading Sovereign U.S. Government Income Fund: Class A,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are three lines.
The first line represents the value of the hypothetical $10,000 investment made
in the Sovereign U.S. Government Income Fund on January 3, 1992, before sales
charge, and is equal to $12,760 as of October 31, 1995. The second line
represents the value of the Lehman Government Bond Index and is equal to $12,720
as of October 31, 1995. The third line represents the Sovereign U.S. Government
Income Fund after sales charge and is equal to $12,181 as of October 31, 1995.
SOVEREIGN U.S. GOVERNMENT INCOME FUND
CLASS B SHARES*
Line chart with the heading Sovereign U.S. Government Income Fund: Class B,
representing the growth of a hypothetical $10,000 investment over the life of
the fund. Within the chart are two lines.
The first line represents the value of the Lehman Government Bond Index and is
equal to $21,250 as of October 31, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the Sovereign U.S. Government Income
Fund on June 5, 1986, before contingent deferred sales charge, and is equal to
$20,977 as of October 31, 1995.
*No contingent deferred sales charge applicable.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON OCTOBER 31, 1995. YOU'LL
ALSO FIND THE NET ASSET VALUE AND THE MAXIMUM OFFERING PRICE PER SHARE AS OF
THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
United States government and agencies obligations
(cost - $476,569,236) ............................... $495,332,079
Short-term investments (cost - $304,000) ............. 304,000
Corporate savings account ............................ 42,424
-------------
495,678,503
Receivable for shares sold ............................ 290,925
Interest receivable ................................... 6,510,777
Other assets .......................................... 23,327
-------------
Total Assets ........................ 502,503,532
-----------------------------------------------------------
LIABILITIES:
Dividend payable ...................................... 82,189
Payable for shares repurchased ........................ 129,833
Payable for variation margin .......................... 68,594
Payable to John Hancock Advisers, Inc. and
affiliates - Note B ................................. 340,459
Accounts payable and accrued expenses ................. 92,725
-------------
Total Liabilities ................... 713,800
-----------------------------------------------------------
NET ASSETS:
Capital paid-in ....................................... 531,489,254
Accumulated net realized loss on investments
and financial futures contracts ..................... ( 47,749,863)
Net unrealized appreciation of investments
and financial futures contracts ..................... 18,132,530
Distributions in excess of net investment income ...... ( 82,189)
-------------
Net Assets .......................... $501,789,732
===========================================================
NET ASSET VALUE PER SHARE:
(Based on net assets and shares of beneficial
interest outstanding - unlimited number of
shares authorized with no par value,
respectively)
Class A - $370,965,771 / 37,049,269 ................... $ 10.01
=============================================================================
Class B - $130,823,961 / 13,080,320 ................... $ 10.00
=============================================================================
MAXIMUM OFFERING PRICE PER SHARE:*
Class A - $(10.01 x 104.71%) .......................... $ 10.48
=============================================================================
</TABLE>
* On single retail sales of less than $100,000. On sales of $100,000 or more
and on group sales the offering price is reduced.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest ................................................. $ 39,948,407
------------
Expenses:
Investment management fee - Note B ...................... 2,514,147
Distribution/service fee - Note B
Class A ............................................... 1,004,768
Class B ............................................... 1,677,203
Transfer agent fee - Note B ............................. 1,230,861
Custodian fee ........................................... 114,796
Trustees' fees .......................................... 99,134
Printing ................................................ 48,744
Auditing fee ............................................ 41,500
Registration and filing fees ............................ 38,551
Miscellaneous ........................................... 19,571
Legal fees .............................................. 12,254
------------
Total Expenses ......................... 6,801,529
-----------------------------------------------------------
Net Investment Income .................. 33,146,878
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FINANCIAL FUTURES CONTRACTS:
Net realized loss on investments sold .................... ( 24,497,814)
Net realized loss on financial futures contracts ......... ( 6,419,981)
Change in net unrealized appreciation/depreciation of
investments ............................................ 71,940,175
Change in net unrealized appreciation/depreciation of
financial futures contracts ............................ ( 630,313)
------------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts ............ 40,392,067
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .............. $ 73,538,945
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income 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 .............................................................. $ 33,146,878 $ 36,554,449
Net realized loss on investments sold and financial futures contracts .............. ( 30,917,795) ( 16,408,904)
Change in net unrealized appreciation/depreciation of
investments and financial futures contracts ...................................... 71,309,862 ( 60,739,209)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ................... 73,538,945 ( 40,593,664)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - $(0.6504 and $0.6544 per share, respectively) ........................... ( 22,638,537) ( 22,812,484)
Class B - $(0.5970 and $0.6130 per share, respectively) ........................... ( 10,503,561) ( 13,741,965)
Distributions from net realized gain on investments sold
Class A - (none and $0.3080 per share, respectively) .............................. -- ( 10,604,649)
Class B - (none and $0.3080 per share, respectively) .............................. -- ( 6,971,522)
------------- -------------
Total Distributions to Shareholders ............................................... ( 33,142,098) ( 54,130,620)
------------- -------------
FROM FUND SHARE TRANSACTIONS -- NET* ................................................. ( 50,878,110) ( 12,554,565)
------------- -------------
NET ASSETS:
Beginning of period ................................................................ 512,270,995 619,549,844
------------- -------------
End of period (including distributions in excess
of net investment income of $82,189 and none, respectively) ...................... $ 501,789,732 $ 512,270,995
============= =============
</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 .......................................... 7,317,218 $ 72,500,554 3,159,870 $ 31,833,752
Shares issued to shareholders in reinvestment
of distributions ................................... 2,046,427 19,655,465 2,873,408 28,806,391
------------- ------------- ------------- -------------
9,363,645 92,156,019 6,033,278 60,640,143
Less shares repurchased .............................. ( 6,449,531) ( 62,018,777) (6,370,807) ( 63,185,012)
------------- ------------- ------------- -------------
Net increase (decrease) .............................. 2,914,114 $ 30,137,242 ( 337,529) ($ 2,544,869)
============= ============= ============= =============
CLASS B
Shares sold .......................................... 1,566,023 $ 15,058,524 3,469,697 $ 34,758,586
Shares issued to shareholders in reinvestment
of distributions ................................... 622,218 5,939,906 1,168,067 11,734,449
------------- ------------- ------------- -------------
2,188,241 20,998,430 4,637,764 46,493,035
Less shares repurchased .............................. (10,444,168) ( 102,013,782) (5,742,895) ( 56,502,731)
------------- ------------- ------------- -------------
Net decrease ......................................... ( 8,255,927) ($ 81,015,352) (1,105,131) $ (10,009,696)
============= ============= ============= =============
</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 - Sovereign U.S. Government Income Fund
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding
throughout the period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
1995 1994 1993 1992(a) 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CLASS A
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 9.24 $ 10.89 $ 10.29 $ 10.51
-------- -------- ------- --------
Net Investment Income ........................ 0.65 0.65 0.68** 0.64
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts . 0.77 ( 1.34) 0.61 ( 0.22)
-------- -------- ------- --------
Total from Investment Operations .......... 1.42 (0.69) 1.29 0.42
-------- -------- ------- --------
Less Distributions:
Dividends from Net Investment Income ......... ( 0.65) ( 0.65) ( 0.68) ( 0.64)
Distributions from Net Realized
Gain on Investments Sold .................... -- ( 0.31) ( 0.01) --
-------- -------- ------- --------
Total Distributions ....................... ( 0.65) ( 0.96) ( 0.69) ( 0.64)
-------- -------- ------- --------
Net Asset Value, End of Period ............... $ 10.01 $ 9.24 $ 10.89 $ 10.29
======== ======== ========= ========
Total Investment Return at Net Asset Value (b) 15.90% ( 6.66)% 12.89% 5.33%(c)
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $370,966 $315,372 $375,416 $350,907
Ratio of Expenses to Average Net Assets ...... 1.17% 1.23% 1.30% 1.06%*
Ratio of Net Investment Income
to Average Net Assets ....................... 6.76% 6.62% 6.47% 7.11%*
Portfolio Turnover Rate ...................... 94% 127% 273% 140%
CLASS B
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 9.23 $ 10.88 $ 10.28 $ 10.29 $ 9.83
-------- -------- -------- -------- --------
Net Investment Income ........................ 0.60 0.61 0.66** 0.76 0.85
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts... 0.77 ( 1.34) 0.61 -- 0.51
-------- -------- -------- -------- --------
Total from Investment Operations .......... 1.37 ( 0.73) 1.27 0.76 1.36
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ......... ( 0.60) ( 0.61) ( 0.66) ( 0.77) ( 0.90)
Distributions from Net Realized Gain
on Investments Sold ......................... -- ( 0.31) ( 0.01) -- --
-------- -------- -------- -------- --------
Total Distributions ....................... ( 0.60) ( 0.92) ( 0.67) ( 0.77) ( 0.90)
--------- -------- -------- -------- --------
Net Asset Value, End of Period ............... $ 10.00 $ 9.23 $ 10.88 $ 10.28 $ 10.29
======== ======== ======== ======== ========
Total Investment Return at Net
Asset Value (b).............................. 15.27% ( 7.05)% 12.66% 7.58% 14.46%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .... $130,824 $196,899 $244,133 $197,032 $164,347
Ratio of Expenses to Average Net Assets ...... 1.72% 1.64% 1.51% 1.55% 1.51%
Ratio of Net Investment Income to
Average Net Assets .......................... 6.24% 6.19% 6.23% 7.35% 8.53%
Portfolio Turnover Rate ...................... 94% 127% 273% 140% 62%
</TABLE>
* On an annualized basis
** On average month end shares outstanding.
(a) Class A shares commenced operations on January 3, 1992.
(b) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SOVEREIGN U.S. GOVERNMENT INCOME FUND ON OCTOBER 31, 1995. THE SCHEDULE CONSISTS
OF TWO MAIN CATEGORIES: U.S. GOVERNMENT AND AGENCIES OBLIGATIONS AND SHORT-TERM
INVESTMENTS. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION,
ARE LISTED LAST.
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES OBLIGATIONS
GOVERNMENTAL - U.S. (59.88%)
United States Treasury, Note........................................... 8.500% 11-15-95 $ 4,560* $ 4,564,286
United States Treasury, Note........................................... 9.375 04-15-96 16,000* 16,264,960
United States Treasury, Note........................................... 9.125 05-15-99 12,000* 13,269,360
United States Treasury, Bond........................................... 10.750 08-15-05 89,885 120,445,900
United States Treasury, Bond **........................................ 9.250 02-15-16 63,000 83,356,560
United States Treasury, Bond........................................... 8.125 08-15-19 52,000* 62,595,000
------------
300,496,066
------------
GOVERNMENTAL - U.S. AGENCIES (38.83%)
Federal Home Loan Mortgage Corp,
CMO REMIC 1064-D...................................................... 8.250 08-15-19 3,299 3,325,442
CMO REMIC 1122-E...................................................... 8.000 05-15-20 7,114 7,229,767
CMO REMIC 1142-H...................................................... 7.950 12-15-20 10,000 10,359,300
CMO REMIC 1442-S...................................................... 5.070# 12-15-97 42 38,848
Federal National Mortgage Association,
30 Yr Pass Thru Ctf................................................... 9.000 02-01-10 10,756* 11,267,124
30 Yr Pass Thru Ctf................................................... 7.000 05-01-24 19,808* 19,640,580
30 Yr Pass Thru Ctf................................................... 8.000 10-01-24 9,592* 9,829,145
GTD REMIC Pass Thru Ctf 1990-42-E..................................... 9.800 05-25-19 10,083 10,231,316
GTD REMIC Pass Thru Ctf 1991-76-M..................................... 9.000 07-25-06 5,000 5,212,500
GTD REMIC Pass Thru Ctf 1991-159-C.................................... 7.000 10-25-04 16,858 17,042,380
GTD REMIC Pass Thru Ctf 1991-G8-E..................................... 9.000 04-25-21 6,000 6,375,938
GTD REMIC Pass Thru Ctf G 17-B........................................ 8.750 09-25-19 1,291 1,302,489
Multicurrency PERLS+.................................................. 11.450 07-10-96 1,000 190,000
Financing Corp.,
Bond Ser C............................................................ 9.800 11-30-17 7,000 9,415,000
Government National Mortgage Association,
30 Yr Pass Thru Ctf................................................... 7.000 06-15-23 9,190* 9,126,862
30 Yr Pass Thru Ctf................................................... 7.500 01-15-23to 21,692* 21,976,939
01-15-24
30 Yr Pass Thru Ctf................................................... 8.000 01-15-25 10,099* 10,392,869
30 Yr Pass Thru Ctf................................................... 8.500 01-15-25 40,100* 41,754,514
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
<TABLE>
<CAPTION>
PAR VALUE
INTEREST MATURITY (000'S MARKET
ISSUER, DESCRIPTION RATE DATE OMITTED) VALUE
- ------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
GOVERNMENTAL - U.S. AGENCIES (CONTINUED)
Student Loan Marketing Association,
Multicurrency PERLS+.................................................. 10.000% 11-19-96 $1,000 $ 96,250
Multicurrency PERLS+.................................................. 11.100 04-07-97 200 28,750
-------------
194,836,013
-------------
TOTAL U.S. GOVERNMENT AND
AGENCIES OBLIGATIONS
(Cost $476,569,236) (98.71)% 495,332,079
------ -------------
SHORT TERM INVESTMENTS
JOINT REPURCHASE AGREEMENT (0.06%)
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, 5.75% Due 09-30-97) Note A ........................ 5.890 11-01-95 304 304,000
-------------
CORPORATE SAVINGS ACCOUNT (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account Current Rate 3.00% ..................... 42,424
-------------
TOTAL SHORT-TERM INVESTMENTS ( 0.07)% 346,424
-------------
TOTAL INVESTMENTS (98.78)% $ 495,678,503
====== =============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended October 31, 1995.
** U.S. Treasury Bonds with a value of $674,791 owned by the Fund were
designated as margin deposits for future contracts at October 31, 1995.
# Represents rate in effect on October 31, 1995.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
+ Principal Exchange Rate Linked Securities (PERLS). PERLS are debt instruments
that are denominated in U.S. dollars and pay interest in U.S. dollars, but
whose principal repayments are linked to the performance of the U.S. dollar
versus a foreign currency. If the foreign currency gains value against the
U.S. dollar when the PERL matures, redemption will be at a premium. The
redemption will be at a discount if the foreign dollar loses value against
the U.S. dollar. As of 10/31/95, the Fund has PERLS with a total cost of
$2,244,963 and a total value of $315,000, or 0.06% of the Fund's total net
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income 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 U.S. Government Income Fund
(the "Fund"), John Hancock Gold & Government Fund, John Hancock Regional Bank
Fund, John Hancock Sovereign Achievers Fund and John Hancock Managed Tax-Exempt
Fund. Prior to January 1, 1995, John Hancock Gold & Government Fund was known as
John Hancock Freedom Gold & Government Fund and John Hancock Regional Bank Fund
was known as John Hancock Freedom Regional Bank Fund.
The Trustees have authorized the issuance of two classes of 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 $43,025,223 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, 1998 -- $282,637, October 31, 2002 -- $16,549,431 and October 31,
2003 -- $26,193,155.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are determined in
conformity with income tax regulations, which may differ from generally accepted
accounting principles. Dividends paid by the Fund with respect to each class of
shares will be calculated in the same manner, at the same time and will be in
the same amount, except for the effect of expenses that may be applied
differently to each class as explained previously.
EXPENSES The majority of the expenses of the Trusts are directly identifiable to
an individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the Funds.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
from either the date of issue or the date of purchase over the life of the
security, as required by the Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts 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 of the
board of trade or U.S. commodities exchange. Subsequent payments, known as
"variation margin," to and from the broker are made on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," 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 contract may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
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, open positions in financial futures contracts were as
follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- ---------- -------------- -------- ------------
<S> <C> <C> <C>
DEC 1995 255 TREASURY BOND SHORT $630,313
========
</TABLE>
At October 31, 1995, the Fund has deposited in a segregated account $510,000
par value of U.S. Treasury Bond, 9.250%, 02-15-16, to cover margin requirements
on open financial futures contracts.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITHAFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to the Adviser for a continuous investment program equivalent, on
an annual basis, to the sum of (a) 0.50% of the first $500,000,000 of the Fund's
average daily net asset value, and (b) 0.45% of the Fund's average daily net
asset value in excess of $500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares of beneficial interest, the
fee payable to the Adviser will be reduced to the extent of such excess and the
Adviser will make additional arrangements necessary to eliminate any remaining
excess expenses. The current limits are 2.5% of the first $30,000,000 of the
Fund's average daily net asset value, 2.0% of the next $70,000,000, and 1.5% of
the remaining average daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-Distributors for
shares of the Fund. Prior to January 1, 1995, JH Funds was known as John Hancock
Broker Distribution Services, Inc. For the period ended October 31, 1995, net
sales charges received on sales of Class A shares of the Fund amounted to
$318,650. Out of this amount, $36,205 was retained and used for printing
prospectuses, advertising, sales literature, and other purposes, $32,541 was
paid as
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
sales commissions to unrelated broker-dealers and $249,904 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 received by JH Funds amounted to
$401,486.
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 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.
The Fund has a transfer agent agreement with John Hancock Investor Services,
Inc. ("Investor Services"), a wholly-owned subsidiary of The Berkeley Financial
Group. Prior to January 1, 1995, Investor Services was known as John Hancock
Fund Services, Inc. Prior to January 1, 1995, the Fund paid Investor Services a
monthly transfer agent fee equivalent, on an annual basis, to 0.34% and 0.12% of
the average daily net asset value of Class A and Class B shares of the Fund,
respectively, plus out of pocket expenses incurred by Investor Services on
behalf of the Fund.
For 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 $955,090 for Class A and $236,223 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 and maturities of obligations of the U.S.
government and its agencies, other than short-term securities, during the period
ended October 31, 1995 aggregated $517,280,371 and $515,295,631, respectively.
The cost of investments owned at October 31, 1995 for federal income tax
purposes was $478,159,173. Gross unrealized appreciation and depreciation of
investments aggregated $21,577,131 and $4,100,225, respectively, resulting in
net unrealized appreciation of $17,476,906.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign U.S. Government Income Fund
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended October 31, 1995, the Fund has reclassified amounts to
reflect an increase in distributions in excess of net investment income of
$86,969, an increase in accumulated net realized loss on investments and
financial futures contracts of $34,334 and an increase in capital paid-in of
$121,303. This represents the cumulative amounts 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.
16
<PAGE> 17
John Hancock Funds - Sovereign U.S. Government Income Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of John Hancock Sovereign U.S. Government Income 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 Sovereign U.S.
Government Income Fund (the "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.
None of the distributions qualify for the dividends received deduction
available to corporations.
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.
17
<PAGE> 18
NOTES
John Hancock Funds - Sovereign U.S. Government Income Fund
18
<PAGE> 19
NOTES
John Hancock Funds - Sovereign U.S. Government Income 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
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 the John Hancock Sovereign U.S.
Government Income Fund. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
[A recycled logo in lower left hand corner with caption "Printed on Recycled
Paper."]
