John Hancock Funds
Disciplined
Growth
Fund
SEMI-ANNUAL REPORT
April 30, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
William F. Glavin*
Anne C. Hodsdon
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
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief
Executive Officer, flush right, next to second paragraph.
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
The stock market's record-breaking, whirlwind performance in 1995 will
be a tough act to follow in 1996. In fact, we've already seen greater
market volatility this year, particularly among last year's leaders --
technology stocks. That's to be expected after a year that saw market
indexes soar, including the Standard & Poor's 500-Stock Index's 37%
advance. While many of the same economic conditions that fostered the
stellar 1995 market are still in place -- slow economic growth, muted
inflation and decent corporate earnings -- it would be unrealistic to
expect the market to stage a repeat in 1996. The old saying "trees don't
grow to the sky" comes to mind. Shareholders would do well to temper
expectations of investment returns and perhaps revisit your investment
allocations with your financial advisor to determine if rebalancing your
portfolio makes sense.
No matter how you scale back your market expectations, you should always
be able to count on consistent customer service performance. At John
Hancock Funds, we never stop working to find ways to sustain and improve
the quality of information and the level of assistance we provide you.
Our commitment to this task is no less than John Hancock's loyalty was
to his fledgling country when he is said to have uttered, "if it does
the public good, burn Boston." We won't go that far, of course, but we
share our namesake's dedication to putting the public before all else.
In our case, that public is you, our shareholders. We take very
seriously the role you have entrusted to us, that of helping you achieve
your financial goals. Part of that will always involve good customer
service. So please do not hesitate to call your Customer Service
Representative at 1-800-225-5291 if you have any questions or need
information. We take pride in helping you with the same spirit that John
Hancock displayed at the dawning of America.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By John Snyder, Portfolio Manager
John Hancock
Disciplined Growth Fund
Fund broadens investment strategy;
focus on quality and reliability remains
Stocks experienced a volatile ride up during the last six months as
investors tried to figure out where the U.S. economy was headed. Late
last year and for the first few months of this year, the perception was
that economic growth was slowing, corporate earnings were shrinking and
a recession was lurking around the corner. In that environment,
investors flocked to stable growth stocks, particularly in the consumer
staple and drug sectors.
With a stronger-than-expected employment report in early March, however,
investors changed their minds. It now looked as if growth was
accelerating and, if anything, the Federal Reserve might have to raise
interest rates to curb a too-robust economy. The change in perception
brought a change in market leadership. Investors shifted out of stable
growth stocks and into more aggressive growth stocks and cyclical stocks
- -- those whose fortunes are closely tied to the ups and downs of the
economy.
A 2" x 3 1/4" photo of the portfolio management team at bottom right.
Caption reads: "John Snyder (r) and Fund management team members Jere
Estes and Anne McDermott."
"Stocks
experienced
a volatile
ride up
during the
last six
months ..."
More recently, volatility has increased even more, as investors'
perceptions seem to change with the latest economic news. In an attempt
to capture the next hot stock or stock group, we've seen traders
rotating back and forth between cyclical and defensive stocks almost on
a weekly basis. In addition to the sector rotation, there have been a
number of significant daily advances and setbacks. For instance, the
first quarter saw 36 "collars" on the New York Stock Exchange. A
"collar" occurs when the Dow Jones Industrial Average moves up or down
50 points, placing restrictions on certain computer-trading practices.
Until investors have a better sense of where the economy is headed, this
type of volatility is likely to continue.
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) PepsiCo 2.6% 2) BankAmerica
2.5% 3) Norwest 2.2% 4) Hewlett-Packard 2.2% 5) Kimberly-Clark 2.1%. A
footnote below reads: "As a percentage of net assets on April 30, 1996."
"Health-care
stocks ...
were among
our biggest
winners ..."
Performance report
Despite the market swings, John Hancock Disciplined Growth Fund managed
to report strong returns for the period. For the six months ended April
30, 1996, the Fund's Class A and B shares had total returns of 14.65%
and 14.27%, respectively, at net asset value. Those outpaced the
average growth fund's return of 13.15% for the same period, according to
Lipper Analytical Services.1
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 Pfizer followed by an up arrow and the phrase "Strong
earnings/drug pipeline." The second listing is PepsiCo followed by
an up arrow and the phrase "All businesses going strong." The third
listing is CPC International followed by a down arrow and the phrase
"Stock out of favor." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."
INVESTMENT RECENT PERFORMANCE AND WHAT'S BEHIND THE NUMBERS
Pfizer UP Strong earnings/drug pipeline
PepsiCo UP All business going strong
CPC DOWN Stock out of favor
See "Schedule of Investments." Investment holdings are subject
to change.
- ---------------------------------------------------------------
Health-care stocks, such as Pfizer and Abbott Laboratories, were among
our biggest winners, thanks to solid earnings growth and a strong
pipeline of new drugs. PepsiCo was also a strong performer. With its
soft drink, snack and restaurant businesses going gangbusters, the
company is running on all cylinders. Finally, our retail stocks have
rebounded nicely after recent lackluster performance. Better weather and
a pick-up in consumer spending have lifted the stocks recently. With
fierce competition in the retail sector, it's critical to be the
product, service and price leader. That's what has helped our top
performing retail stocks, Pep Boys and Home Depot.
On the flip side, our food stocks have been disappointing. CPC
International, which makes household favorites, such as Skippy and
Hellmann's Mayonnaise, is one example. The company's underlying
fundamentals haven't changed, yet the stock has been out of favor. It's
difficult to know exactly why; money just seems to be going into other
stocks. Since the fundamentals are still intact, we will patiently hold
CPC International until the market recognizes it.
Change in fund name and investment strategy
Effective April 1, 1996, the Trustees of the Fund voted to broaden its
investment strategy and change its name to John Hancock Disciplined
Growth Fund. The Fund will continue to seek long-term capital growth,
but we will now use an earnings focus in selecting investments.
It's important to point out one thing that has not changed: our focus on
quality and stability. As long-time shareholders know, our previous
investment strategy was to invest in companies that had increased their
dividends consistently for at least the past five years. The new
strategy removes this limitation, allowing us to put more emphasis on
the predictability of company earnings, rather than dividends. This will
broaden our investment universe to include companies that have achieved
predictable earnings, but haven't necessarily passed those earnings
along to stockholders as dividends.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the six months ended April 30,
1996." The chart is scaled in increments of 5% from bottom to top, with
20% at the top and 0% at the bottom. Within the chart, there are three
solid bars. The first represents the 14.65% total return for John
Hancock Disciplined Growth Fund: Class A. The second represents the
14.27% total return for John Hancock Disciplined Growth Fund: Class B.
The third represents the 13.15% total return for the average growth
fund. Footnote below reads: "Total returns for John Hancock Disciplined
Growth Fund are at net asset value with all distributions reinvested.
The average growth fund is tracked by Lipper Analytical Services. (1)
See following page for historical performance information."
We do not expect the portfolio to change dramatically. For the most
part, we will maintain our current holdings. Under the new strategy, we
will also maintain sector weightings similar to those of the Standard &
Poor's 500-Stock Index. Within each sector, however, we will target
stocks with the best prospects for earnings growth and stability. The
biggest changes will be additions to the technology and energy sectors -
- - where the Fund has been underweighted relative to the S&P 500. We've
recently added technology names such as Microsoft, Cisco Systems and
Computer Associates as well as energy names such as Mobil, Chevron and
Amoco.
Outlook
There are several things to be aware of as we proceed through 1996.
First, historical standards suggest that the market is approaching full
valuation based on current earnings, book values and dividend levels.
Second, the bond and stock markets have diverged -- bond yields have
climbed rapidly, while stock prices have moved higher. Interest rates
can go somewhat higher, but they must eventually recede or stock prices
will begin to feel the competition.
Third, 1996 is an election year, so there will be no shortage of
political headlines. The stalemate between Republicans and Democrats in
Congress makes meaningful federal budget reductions unlikely before the
November election. Any progress on this front, real or imagined, will be
a surprise that should help the bond market first and then the stock
market.
Finally, the economic picture is fragile. Current forecasts show that
gross domestic product (GDP) growth -- the value of all goods and
services produced in the United States -- will slow to well below 3%.
Although consumer spending rose in the first quarter, that increase is
likely to be short-lived due to high consumer debt levels and the recent
rise in interest rates. In addition, lower government spending and
declining exports will dampen growth prospects. As a result, we're
likely to see earnings on the market drop back to more normal levels of
8% to 10% from their unusually high level of 20% in 1995. By contrast,
the stable growth companies that we favor should increase earnings at
about 12% to 15%, regardless of what the economy does. What's more, with
our new investment strategy, we will be able to take advantage of new
opportunities in high-quality companies with stable earnings, but not
necessarily steadily rising dividends. This will further broaden our
universe of investment opportunities.
"... historical
standards
suggest
that the
market is
approaching
full
valuation ..."
1Figures from Lipper Analytical Services include reinvested dividends
and do not take into account sales charges. Actual load-adjusted
performance is lower.
This commentary reflects the views of the portfolio manager through the
end of the Fund's period discussed in this report. Of course, the
manager's views are subject to change as market and other conditions
warrant.
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the
average annual total returns for the John Hancock Disciplined Growth
Fund. Total return is a performance measure that equals the sum of all
income and capital gain distributions, assuming reinvestment of these
distributions and the change in the price of the Fund's shares,
expressed as a percentage of the Fund's net asset value per share.
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 which 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.
CUMULATIVE TOTAL RETURNS
For the period ended March 31, 1996
One Five Life of
Year Years Fund
---- ----- -------
John Hancock
Disciplined Growth Fund: Class A(1) 15.04% 39.05% N/A
John Hancock
Disciplined Growth Fund: Class B(2) 15.33% 63.25% 105.75%
AVERAGE ANNUAL TOTAL RETURNS
For the period ended March 31, 1996
One Five Life of
Year Years Fund
---- ----- -------
John Hancock
Disciplined Growth Fund: Class A(1) 15.04% 8.08% N/A
John Hancock
Disciplined Growth Fund: Class B(2) 15.33% 10.30% 8.41%
Notes to Performance
(1)Class A shares commenced on January 3, 1992.
(2)Class B shares commenced on April 22, 1987.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Disciplined Growth Fund would be worth on April 30, 1996,
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.
*No contingent deferred sales charge applicable.
The Statement of Changes in Net Assets shows how the value of the Fund's
net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment gains and
losses, distributions paid to shareholders, and any increase or decrease
in money shareholders invested in the Fund. The footnote illustrates the
number of Fund shares sold, reinvested and redeemed during the last two
periods, along with the corresponding dollar values.
Disciplined Growth Fund
Class A shares
Line chart with the heading Disciplined Growth 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 $17,644 as of April 30, 1996. The second line
represents the value of the hypothetical $10,000 investment made in
the Disciplined Growth Fund on January 3, 1992, before sales charge,
and is equal to $13,773 as of April 30, 1996. The third line represents
the Disciplined Growth Fund after sales charge and is equal to $13,082
as of April 30, 1996.
Disciplined Growth Fund
Class B shares
Line chart with the heading Disciplined Growth 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 $29,665 as of April 30, 1996. The second
line represents the value of the hypothetical $10,000 investment made
in the Disciplined Growth Fund on April 22, 1987, before contingent
deferred sales charge, and is equal to $20,734 as of April 30, 1996.
*No contingent deferred sales charge applicable.
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet and
shows the value of what the Fund owns, is due and owes on April 30, 1996.
You'll also find the net asset value and the maximum offering price per
share as of that date.
Statement of Assets and Liabilities
April 30, 1996 (Unaudited)
- ---------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Common stocks (cost - $104,287,752) $119,671,937
Joint repurchase agreement (cost - $1,440,000) 1,440,000
Corporate savings account 126,873
------------
121,238,810
Receivable for shares sold 34,053
Interest receivable 263
Dividends receivable 95,765
Other assets 4,885
------------
Total Assets 121,373,776
- ---------------------------------------------------------------------
Liabilities:
Dividend payable 274
Payable for shares repurchased 37,058
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 119,534
Accounts payable and accrued expenses 25,639
------------
Total Liabilities 182,505
- ---------------------------------------------------------------------
Net Assets:
Capital paid-in 94,186,313
Accumulated net realized gain on investments 11,720,359
Net unrealized appreciation of investments 15,384,514
Net investment loss (99,915)
------------
Net Assets $121,191,271
=====================================================================
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 - $29,625,364 / 2,038,958 $14.53
=====================================================================
Class B - $91,565,907 / 6,363,410 $14.39
=====================================================================
Maximum Offering Price *
Class - A ($14.53 x 105.26%) $15.29
=====================================================================
* On a single retail sale of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
</TABLE>
<TABLE>
<CAPTION>
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.
Statement of Operations
Six months ended April 30, 1996 (Unaudited)
- ---------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes
of $1,291) $952,311
Interest 106,188
------------
1,058,499
------------
Expenses:
Distribution/service fee - Note B
Class A 43,313
Class B 450,725
Investment management fee - Note B 446,325
Transfer agent fee - Note B 152,599
Custodian fee 18,097
Printing 13,104
Registration and filing fees 12,783
Auditing fee 10,139
Trustees' fees 8,453
Legal 1,441
Miscellaneous 1,435
------------
Total Expenses 1,158,414
- ---------------------------------------------------------------------
Net Investment Loss (99,915)
- ---------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 11,720,372
Change in net unrealized appreciation/depreciation
of investments 4,297,718
------------
Net Realized and Unrealized Gain
on Investments 16,018,090
- ---------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $15,918,175
=====================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTON>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31,
(UNAUDITED) 1995
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) ($99,915) $230,696
Net realized gain on investments sold 11,720,372 890,733
Change in net unrealized appreciation/
depreciation of investments 4,297,718 11,617,034
------------ ------------
Net Increase in Net Assets Resulting
from Operations 15,918,175 12,738,463
------------ ------------
Distributions to Shareholders:
Dividends from net investment income
Class A - (none and $0.1015 per
share, respectively) -- (213,064)
Class B - (none and $0.0287 per
share, respectively) -- (216,094)
Distributions from net realized gain
on investments sold
Class A - ($0.1030 and $0.5222
per share, respectively) (218,913) (999,954)
Class B - ($0.1030 and $0.5222
per share, respectively) (691,213) (4,061,492)
------------ ------------
Total Distributions to Shareholders (910,126) (5,490,604)
------------ ------------
From Fund Share Transactions - Net* (7,686,443) (11,101,562)
------------ ------------
Net Assets:
Beginning of period 113,869,665 117,723,368
------------ ------------
End of period (including net investment loss
of $99,915 and none, respectively) $121,191,271 $113,869,665
============ ============
The Statement of Changes in Net Assets shows how the value of the Fund's
net assets has changed since the end of the previous period. The difference
reflects earnings less expenses, any investment gains and losses, distributions
paid to shareholders, and any increase or decrease in money shareholders
invested in the Fund. The footnote illustrates the number of Fund shares
sold, reinvested and redeemed during the last two periods, along with
the corresponding dollar values.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
* Analysis of Fund Share Transactions:
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31,
(UNAUDITED) 1995
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 206,390 $2,905,965 665,977 $8,286,634
Shares issued to shareholders in
reinvestment of distributions 15,749 211,679 106,291 1,186,137
-------- ---------- ---------- -----------
222,139 3,117,644 772,268 9,472,771
Less shares repurchased (351,788) (4,906,785) (542,110) (6,600,356)
-------- ---------- ---------- -----------
Net increase (decrease) (129,649) ($1,789,141) 230,158 $2,872,415
======== ========== ========== ===========
CLASS B
Shares sold 476,682 $6,498,447 531,328 $6,390,883
Shares issued to shareholders in
reinvestment of distributions 47,954 639,708 360,515 3,973,464
-------- ---------- ---------- -----------
524,636 7,138,155 891,843 10,364,347
Less shares repurchased (951,488) (13,035,457) (2,003,631) (24,338,324)
-------- ---------- ---------- -----------
Net decrease (426,852) ($5,897,302) (1,111,788) ($13,973,977)
======== ========== ========== ===========
see notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
the period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- --------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1996 -----------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
----------------- ----------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
Per Share Operating Performance
Net Asset Value, Beginning of Period $12.77 $12.02 $12.39 $10.99 $12.81
------- ------- ------- ------- ------
Net Investment Income 0.02(a) 0.08(a) 0.10 0.08(a) 0.06(a)
Net Realized and Unrealized Gain
(Loss) on Investments 1.84 1.29 0.07 1.34 (0.06)
------- ------- ------- ------- ------
Total from Investment Operations 1.86 1.37 0.17 1.42 0.00
------- ------- ------- ------- ------
Less Distributions:
Dividends from Net Investment Income -- (0.10) (0.10) (0.02) (0.07)
Distributions in Net Realized
Gain on Investments Sold (0.10) (0.52) (0.44) -- (1.74)
Distributions from Capital Paid-In -- -- -- -- (0.01)
------- ------- ------- ------- ------
Total Distributions (0.10) (0.62) (0.54) (0.02) (1.82)
------- ------- ------- ------- ------
Net Asset Value, End of Period $14.53 $12.77 $12.02 $12.39 $10.99
======= ======= ======= ======= ======
Total Investment Return at Net
Asset Value (c) 14.65%(b) 12.21% 1.35% 12.97% 0.19%(b)
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $29,625 $27,692 $23,292 $23,372 $1,771
Ratio of Expenses to Average
Net Assets 1.42%* 1.46% 1.53% 1.60% 1.73%*
Ratio of Net Investment Income
to Average Net Assets 0.36%* 0.69% 0.83% 0.64% 0.62%*
Portfolio Turnover Rate 53% 65% 60% 71% 246%
Average Broker Commission Rate
(Per Share of Security)(d) $0.07 N/A N/A N/A N/A
CLASS B
Per Share Operating
Performance
Net Asset Value,
Beginning of Period $12.69 $11.95 $12.31 $10.97 $11.71 $9.22
------- ------- ------- ------- ------ -----
Net Investment Income (Loss) (0.02)(a) 0.01(a) 0.03 0.02(a) 0.01(a) 0.07
Net Realized and Unrealized
Gain on Investments 1.82 1.28 0.07 1.33 1.05 2.67
------- ------- ------- ------- ------ -----
Total from Investment
Operations 1.80 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 (0.10) (0.52) (0.44) -- (1.76) (0.05)
Distributions from Capital
Paid-In -- -- -- -- (0.01) --
------- ------- ------- ------- ------ ------
Total Distributions (0.10) (0.55) (0.46) (0.01) (1.80) (0.25)
------- ------- ------- ------- ------ ------
Net Asset Value, End of
Period $14.39 $12.69 $11.95 $12.31 $10.97 $11.71
======= ======= ======= ======= ====== ======
Total Investment Return at
Net Asset Value (c) 14.27%(b) 11.51% 0.78% 12.34% 7.22% 30.21%
Ratios and Supplemental
Data
Net Assets, End of Period
(000's omitted) $91,566 $86,178 $94,431 $93,853 $23,525 $21,826
Ratio of Expenses to Average
Net Assets 2.11%* 2.11% 2.10% 2.09% 2.27% 2.24%
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.34%)* 0.06% 0.25% 0.17% 0.10% 0.66%
Portfolio Turnover Rate 53% 65% 60% 71% 246% 217%
Average Broker Commission Rate
(Per Share of Security) (d) $0.07 N/A N/A N/A N/A N/A
* 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.
(d) Average commission rate (per share of security) as required by amended disclosure
requirements effective September 1, 1995.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
The Schedule of Investments is a complete list of all securities owned by the Fund
on April 30, 1996. It's divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
Schedule of Investments
April 30, 1996 (Unaudited)
- ---------------------------------------------------------------------------------------
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- -------------------------------------- ----------- --------------
<S> <C> <C>
Advertising (0.97%)
Interpublic Group of Cos., Inc. (The) 25,000 $1,168,750
-----------
Aerospace/Defense (1.96%)
Lockheed Martin Corp. 15,000 1,209,375
Rockwell International Corp. 20,000 1,170,000
-----------
2,379,375
-----------
Banks (5.83%)
BankAmerica Corp. 40,000 3,030,000
First Tennessee National Corp. 40,000 1,320,000
Norwest Corp. 75,000 2,709,375
-----------
7,059,375
-----------
Capital Goods (5.04%)
Emerson Electric Co. 10,000 836,250
General Electric Co. 20,000 1,550,000
Illinois Tool Works, Inc. 20,000 1,345,000
Myers Industries, Inc. 50,000 906,250
Stewart & Stevenson Services, Inc. 50,000 1,468,750
-----------
6,106,250
-----------
Chemicals - Diversified (3.12%)
Air Products & Chemicals, Inc. 15,000 856,875
Ecolab Inc. 40,000 1,300,000
Sigma-Aldrich Corp. 30,000 1,620,000
-----------
3,776,875
-----------
Commercial Services (1.06%)
Sysco Corp. 40,000 1,285,000
-----------
Consumer Durables (5.14%)
Clayton Homes, Inc. 60,000 1,110,000
Cooper Tire and Rubber, Co. 50,000 1,225,000
Juno Lighting, Inc. 80,000 1,185,000
Leggett & Platt, Inc. 50,000 1,287,500
Newell, Co. 50,000 1,425,000
-----------
6,232,500
-----------
Consumer Non-Durables (10.54%)
ConAgra, Inc. 30,000 1,158,750
CPC International, Inc. 15,000 1,036,875
Kimberly-Clark Corp. 35,000 2,541,875
PepsiCo Inc. 50,000 3,175,000
Procter & Gamble Co. (The) 30,000 2,535,000
Sara Lee Corp. 75,000 2,325,000
-----------
12,772,500
-----------
Diversified Operations (2.96%)
Alco Standard Corp. 20,000 $1,157,500
Corning Inc. 40,000 1,390,000
Federal Signal Corp. 40,000 1,045,000
-----------
3,592,500
-----------
Energy (10.37%)
Amoco Corp. 17,000 1,241,000
Chevron Corp. 22,000 1,276,000
Enron Corp. 35,000 1,408,750
Enron Oil & Gas, Co. 50,000 1,325,000
Mobil Corp. 10,000 1,150,000
Questar Corp. 40,000 1,400,000
Repsol SA, American Depositary
Receipts (ADR) 50,000 1,850,000
Sonat, Inc. 37,500 1,635,937
Williams Cos., Inc. 25,000 1,278,125
-----------
12,564,812
-----------
Financial Services (4.59%)
Advanta Corp. (Class A) 30,000 1,676,250
Federal National Mortgage Association 40,000 1,225,000
Franklin Resources, Inc. 25,000 1,431,250
Travelers Group, Inc. 20,000 1,230,000
-----------
5,562,500
-----------
Healthcare (9.16%)
Abbott Laboratories 40,000 1,625,000
American Home Products, Corp. 12,500 1,318,750
Amgen, Inc.* 20,000 1,150,000
HealthCare COMPARE Corp.* 25,000 1,178,125
Johnson & Johnson 12,500 -----------
Pfizer, Inc. 30,000 2,066,250
Schering-Plough Corp. 25,000 1,434,375
United Healthcare Corp. 20,000 1,170,000
-----------
11,098,750
-----------
Information Processing (1.34%)
Automatic Data Processing, Inc. 20,000 $777,500
General Motors (Class E) 15,000 845,625
-----------
1,623,125
-----------
Insurance (4.57%)
AFLAC Inc. 75,000 2,325,000
American International Group, Inc. 20,000 1,827,500
Providian Corp. 30,000 1,383,750
-----------
5,536,250
-----------
Medical (1.56%)
Medtronic, Inc. 20,000 1,062,500
Nellcor Puritan Bennett, Inc.* 17,000 833,000
-----------
1,895,500
-----------
Packaging (1.77%)
Bemis Co., Inc. 40,000 1,295,000
Sonoco Products, Co. 30,000 851,250
-----------
2,146,250
-----------
Publishing (1.33%)
A.H. Belo Corp. 25,000 931,250
Reuters Holdings PLC (ADR) 10,000 676,250
-----------
1,607,500
-----------
Recreation (1.02%)
Walt Disney Co. (The) 20,000 1,240,000
-----------
Retail (4.42%)
Dollar General Corp. 50,000 1,318,750
Home Depot, Inc. (The) 50,000 2,368,750
Pep Boys-Manny, Moe & Jack 50,000 1,668,750
-----------
5,356,250
-----------
Steel (1.01%)
Worthington Industries, Inc. 60,000 1,222,500
-----------
Technology (11.96%)
AMP, Inc. 50,000 2,237,500
Cisco Systems, Inc.* 25,000 1,296,875
Computer Associates International, Inc. 17,000 1,247,375
Diebold, Inc. 30,000 1,155,000
Hewlett-Packard, Co. 25,000 2,646,875
Microsoft Corp.* 12,000 1,360,500
Molex, Inc. 60,000 1,950,000
Pitney Bowes, Inc. 25,000 1,218,750
3Com Corp.* 30,000 1,383,750
-----------
14,496,625
-----------
Telecommunications (4.11%)
Century Telephone Enterprises, Inc. 75,000 $2,456,250
Frontier Corp. 80,000 2,530,000
-----------
4,986,250
-----------
Transportation (1.06%)
CSX Corp. 25,000 1,281,250
-----------
Utilities (3.86%)
Duke Power, Co. 25,000 1,175,000
LG&E Energy Corp. 60,000 1,267,500
NIPSCO Industries, Inc. 30,000 1,076,250
Teco Energy, Inc. 50,000 1,162,500
-----------
4,681,250
-----------
TOTAL COMMON STOCKS
(Cost $104, (98.75%) 119,671,937
-----------
<CAPTION>
INTEREST PAR VALUE
RATE (000'S OMITTED)
----------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.19%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Market, Inc. -
Dated 04-30-96, due
05-01-96 (secured by U.S.
Treasury Bonds, 10.375%,
Due 11-15-12, and 7.25%,
Due 05-15-16) Note A 5.33% $1,440 1,440,000
-----------
Corporate Savings Account (0.10%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 126,873
-----------
TOTAL SHORT-TERM INVESTMENTS (01.29%) 1,566,873
------ -----------
TOTAL INVESTMENTS (100.04%) $121,238,810
======= ===========
* Non-income producing security.
The percentage shown for each investment category is the
total value of that category as a percentage of the net assets of the Fund.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is a diversified open-end
management investment company, registered under the Investment Company
Act of 1940. The Trust consists of six series portfolios: John Hancock
Disciplined Growth Fund (the "Fund"), John Hancock Regional Bank Fund,
John Hancock Sovereign U.S. Government Income Fund, John Hancock Gold &
Government Fund, John Hancock Managed Tax-Exempt Fund and John Hancock
Financial Industries Fund, which commenced operations on March 14, 1996.
Prior to April 1, 1996, the Fund was known as John Hancock Sovereign
Achievers Fund. The investment objective of the Fund is to achieve
capital appreciation.
The Trustees have authorized the issuance of multiple 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 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. 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 investments, to its
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date 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 class level based on the appropriate net assets of each
class and the specific expense rate(s) applicable to each class.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues, and expenses of the Fund.
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. Prior to April 1, 1996, the Adviser 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 paid
SAMCORP 40% of its management fee. The agreement was terminated as of
April 1, 1996.
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, the fee payable
to the Adviser will be reduced to the extent of such excess, and the
Adviser will make additional arrangements necessary to eliminate any
remaining excess expenses. The current limits are 2.5% of the first
$30,000,000 of the Fund's average daily net asset value, 2.0% of the
next $70,000,000, and 1.5% of the remaining average daily net asset
value.
John Hancock Funds, Inc. ("JH Funds"), a wholly owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-
Distributors for shares of the Fund. For the period ended April 30,
1996, net sales charges received with regard to sales of Class A shares
amounted to $40,313. Out of this amount, $5,733 was retained and used
for printing prospectuses, advertising, sales literature and other
purposes, $13,599 was paid as sales commissions to unrelated broker-
dealers and $20,981 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 April 30, 1996, the contingent
deferred sales charges paid to JH Funds amounted to $99,559.
In addition, to reimburse the Co-Distibutors 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-Distibutors 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 Corporation ("Investor Services"), a wholly-owned subsidiary of
The Berkeley Financial Group. The Fund pays Investor Services a fee
based on the number of shareholder accounts and certain out-of-pocket
expenses.
Mr. Edward J. Boudreau, Jr. and Ms. Anne C. Hodsdon are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. 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 makes investments into other John Hancock funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover
the Fund's deferred compensation liability are recorded on the Fund's
books as an other asset. The deferred compensation liability and the
related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investment as well as
any unrealized gains or losses. At April 30, 1996, the Fund's
investments to cover the deferred compensation liability had unrealized
appreciation of $329.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies and short-term securities,
during the period ended April 30, 1996, aggregated $60,463,263 and
$68,722,088, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended April 30, 1996.
The cost of investments owned at April 30, 1996 (excluding the corporate
savings account) for federal income tax purposes was $105,727,752. Gross
unrealized appreciation and depreciation of investments aggregated
$17,558,304 and $2,174,119, respectively, resulting in net unrealized
appreciation of $15,384,185.
[EMPTY PAGE]
[EMPTY PAGE]
A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads: "A Global Investment Management Firm."
John Hancock Funds
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 582
This report is for the information of shareholders of the John Hancock
Disciplined Growth Fund. It may be used as sales literature when
preceded or accompanied by the current prospectus, which details
charges, investment objectives and operating policies.
A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."
350SA 4/96
6/96
