John Hancock Funds
Regional
Bank
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*
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 James K. Schmidt, CFA, Portfolio Manager
John Hancock
Regional Bank Fund
Larger banks outperform smaller ones in last six months;
positive industry fundamentals remain in place
After both posted stellar results in 1995, the stock and bond markets
have diverged this year. The equity market, as measured by the Standard
& Poor's 500-Stock Index, appreciated 6.0% between January and April and
the technology-laden NASDAQ index leaped 12.5%. Meanwhile bonds, haunted
by the specter of a resurgent economy and rising energy and commodity
prices, saw their prices drop sharply since February in anticipation of
higher inflation. The 30-year Treasury bond has declined by 10.2% since
year-end 1995.
After a strong finish in 1995, bank and thrift stocks have also shown
divergent performance in 1996. Larger capitalization stocks, such as
money center banks and superregionals, have posted solid gains while
returns on the small- and mid-sized banks and thrifts have lagged.
Because our strategy has been to concentrate on small, lesser known
issues, the Fund underperformed its peers in the recent period, despite
a strong absolute return. For the six months ended April 30, 1996, the
Fund's Class A and Class B shares posted total returns of 10.39% and
10.02%, respectively, at net asset value, compared to 12.01% for the
average financial services fund, according to Lipper Analytical
Services.1
A dichotomy
in bank stock
performance
appeared
during the
last six
months.
Why is there a dichotomy in bank stock performance? From our
perspective, the financial stock market in 1996 has been mainly
liquidity driven, as large sums of mutual fund and institutional cash
have flowed into bank stocks. Since this money needs to be deployed
quickly, the larger, more liquid stocks are bid up first. Then, all
other things being equal, the smaller banks and thrifts follow suit. We
expect this process to play out in the next few months, given that none
of the other variables -- industry fundamentals, valuation levels and
the consolidation process -- has changed much and each remains a
positive catalyst for stock prices.
A 2 1/4" x 3 1/4" photo of the portfolio management team. Caption
reads: "James K. Schmidt (seated) and Fund management team members:
(l-r) James Boyd, Patricia Ouimet, Thomas Finucane."
Chart with heading "Top Five Common Stock Holdings" at top of left hand
column. The chart lists five holdings: 1) Wells Fargo 3.3% 2) Greenpoint
Financial 2.0% 3) First of America Bank Corp. 1.8% 4) PNC Bank Corp. 1.7% 5)
U.S. Bancorp 1.6%. A footnote below reads: "As a percentage of net assets
on April 30, 1996."
"Bank stocks
are trading
at historically
inexpensive
levels."
Fundamentals sound; stocks still inexpensive
After record-breaking earnings in 1993 and 1994, banks and thrifts were
thought to be hard-pressed to repeat their past performance.
Nonetheless, according to recently released FDIC data, commercial bank
earnings for 1995 exceeded 1994 by almost 10%, while thrift income grew
at an even higher 14% rate. Net interest margins for the overall
industry -- that is, the amount banks earn from the difference between
what they charge borrowers and pay depositors -- continued a mild
compression, falling from 4.36% for 1994 to 4.29% for 1995. But that was
more than offset by strong loan growth, which was up 10.4% from December
1994. While banks were able to post these solid gains in net income, few
compromised the quality of their earnings. Although problem loan levels
continued to fall, banks still increased their loss provisions by 15%
over the levels set aside in 1994 as a prudent measure against the
recent increases in loan balances. Finally, bank earnings benefited from
a moderation in non-interest expense growth. The primary driver behind
this trend was the elimination in mid-1995 of FDIC premiums for the
highest rated banks, which represent the bulk of the industry.
Table entitled "Scorecard" at bottom of left hand column. The header
for the left column is "Investment"; the header for the right column
is "Recent performance ... and what's behind the numbers. The first
listing is Firstar followed by an up arrow and the phrase "Positive
cost-cutting program also portends takeover possibility." The second
listing is Lafayette American Bancorp. followed by an up arrow and
the phrase "Completes turnaround and sells for healthy premium." The
third listing is HF Ahmanson followed by a down arrow and the phrase
"Attempt for strategic overhaul met with skepticism about thrift
business." Footnote below reads: "See "Schedule of Investments."
Investment holdings are subject to change."
These banking trends have continued to be in evidence in recently
released earnings reports for the first quarter of 1996. The median bank
in the Fund posted a 12% gain in core earnings-per-share over the same
period in 1995. The earnings gains were driven by stable margins, static
expenses and fewer outstanding shares due to stock repurchases. Given
the recent mild resurgence in economic activity, our forecast for 10%
earnings growth for full-year 1996 over 1995 looks attainable. We are
pleased to see that overall asset quality has not deteriorated, even
though delinquencies are increasing in the unsecured consumer portion of
loan portfolios. With employment and real personal income continuing to
rise, we believe that any increases in non-performing assets this year
will be mild and will not jeopardize our earnings estimates.
Currently, the average regional bank stock in the Fund trades at an
inexpensive 10.5 times 1996 estimated earnings-per-share, or 61% of the
Standard & Poor's multiple of 16.9 times. In spite of the steady price
appreciation in bank stocks as a group over the last five years, this
relative multiple is still near the lower end of its 30-year range. Bank
stocks are trading at historically inexpensive levels. With future
earnings evolving in a much more predictable pattern, we continue to
believe that bank price-earnings multiples still have the potential to
expand.
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 top to bottom, with
15% at the top and 0% at the bottom. Within the chart, there are three
solid bars. The first represents the 10.39% total return for John Hancock
Regional Bank Fund: Class A. The second represents the 10.02% total return
for John Hancock Regional Bank Fund: Class B. The third represents the 12.01%
total return for the average financial services fund. Footnote below reads:
"Total returns for John Hancock Regional Bank Fund are at net asset value
with all distributions reinvested. The average financial services fund is
tracked by Lipper Analytical Services.(1) See page 7 for historical
performance information."
"... we
recently
added more
exposure to
the recovering
state of
California."
Consolidation scorecard
In the last six months, 13 of the Fund's holdings have announced their
intent to be acquired. Included in this list is Wells Fargo's successful
hostile bid for First Interstate. Although such unfriendly mergers will
be a rarity, we believe that bank managements will serve their
shareholders more scrupulously if the threat of a hostile takeover hangs
over the head of underperforming institutions. We felt that an important
principle was at stake in having Wells Fargo win the battle for First
Interstate, and we vigorously opposed First Interstate's intention to
accept an inferior (but friendlier to management) bid from First Bank
Systems. In 1996 year-to-date, there has been a similar amount of merger
activity to last year when measured by the number of transactions, but
considerably less when measured by their size. Last year witnessed a
number of gargantuan mergers, such as NBD/First Chicago, Chase/Chemical,
and First Union/First Fidelity. Large mergers such as this have not
materialized so far this year.
As 1996 unfolds, we expect a resumption of merger activity among major
banks. At the moment, some of the key acquirers are preoccupied with
integrating operations acquired last year. We believe the forces that
have driven the industry to consolidate from 14,000 banks in 1985 to
under 10,000 today are still in place and will eventually result in
fewer than 5,000 banks in existence.
Portfolio composition and outlook
Strategically, the Fund continues its focus on undervalued regional
banks and thrifts which exhibit healthy earnings prospects and which
might benefit from consolidation. While the Fund remains geographically
diverse, we recently added more exposure to the recovering state of
California. California has only recently emerged from a severe
recession, and now employment is growing in all parts of the state.
Merger activity is still in its infancy in California. Bank investors
have an opportunity to benefit from bank consolidation in the state that
is similar to the opportunity that existed in the Midwest ten years ago.
On the thrift side, the Fund has purchased a number of savings and loans
that have recently converted from mutual to public ownership. Measured
on a price-to-book basis, these converted thrifts are the least
expensive of all financial institutions. In many cases, they are worth
more dead than alive, i.e. their franchise value far exceeds their
market value. If Congress resolves the issue of recapitalizing the
underfunded thrift deposit insurance fund, and if it approves a
forgiveness of the tax liability that a commercial bank now faces in a
thrift acquisition, we expect many stock savings and loans ultimately to
be taken over by banks. We have built positions in many thrifts that are
plaintiffs in lawsuits against the U.S. Government seeking damages in
connection with the 1989 savings and loan "bailout bill." The Supreme
Court will soon issue a decision that we hope will allow our thrifts to
negotiate substantial settlements.
1Figures from Lipper Analytical Services include reinvested dividends
and do not take into account sales charges. Actual load-adjusted
performance, is lower.
"The overall
picture is
good for
banks."
Over the past six months, the Fund experienced steady inflows of cash.
Because we are very price sensitive in investing new funds, and because
many of the stocks we like have limited liquidity, the cash level in the
Fund has increased. Last fall, cash reached 22% of the Fund before
declining to 17% as of April 30. We expect to have 10% cash or less by
this Fall as we make new investments at a steady but deliberate pace.
We continue to see solid, long-term investment value in the bank and
thrift stocks the Fund holds. The overall picture is good for banks:
steady but not excessive growth, relatively low interest rates and
moderate inflation. What's more, the stocks are inexpensive: Despite
increasing profitability, the thrift and bank group still carries a low
valuation, trading around 40% of the market multiple. The fundamentals
are positive: favorable earnings and continued merger activity both
augur well for stock prices. Given these factors, we reiterate our
belief that the Funds can still generate attractive returns over the
next several years.
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 Regional Bank 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. Prior to August 1992, different sales charges were
in effect for Class A shares and are not reflected in the performance
data. The effect of the maximum contingent deferred sales charge for
Class B shares (maximum 5% and declining to 0% over six years) is
included in Class B performance. Remember that all figures represent
past performance and are no guarantee of how the Fund will perform in
the future. Also, keep in mind that the total return and share price of
the Fund's investments will fluctuate. As a result, your Fund's shares
may be worth more or less than their original cost, depending on when
you sell them. Please see your prospectus for risks associated with
industry segment investing.
CUMULATIVE RETURNS
For the period ended March 31, 1996
One Five Ten
Year Years Years
------ --------- --------
John Hancock Regional
Bank Fund: Class A(1) 31.70% 164.87% N/A
John Hancock Regional
Bank Fund: Class B 32.38% 271.80% 441.79%
AVERAGE ANNUAL TOTAL RETURNS
For the period ended March 31, 1996
One Five Ten
Year Years Years
------ --------- --------
John Hancock Regional
Bank Fund: Class A(1) 31.70% 25.81% N/A
John Hancock Regional
Bank Fund: Class B 32.38% 30.04% 18.41%
Notes to Performance
(1)Class A shares commenced on January 3, 1992.
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in the John
Hancock Regional Bank Fund would be worth on April 30, 1996, assuming
you either had invested on the day each class of shares started or have
been invested for the most recent ten years and have reinvested all
distributions. For comparison, we've shown the same $10,000 investment
in 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.
Regional Bank Fund
Class A shares
Line chart with the heading Regional Bank Fund: Class A, representing
the growth of a hypothetical $10,000 investment over the life of the
fund. Within the chart are three lines.
The first line represents the value of the hypothetical $10,000
investment made in the Regional Bank Fund on January 3, 1992, before
sales charge, and is equal to $27,770 as of April 30, 1996. The
second line represents the Regional Bank Fund after sales charge and
is equal to $26,379 as of April 30, 1996. The third line represents
the value of the Standard & Poor's 500 Stock Index and is equal to
$17,644 as of April 30, 1996.
Regional Bank Fund
Class B shares
Line chart with the heading Regional Bank Fund: Class B*, representing
the growth of a hypothetical $10,000 investment over the most recent
10 years. Within the chart are two lines.
The first line represents the value of the hypothetical $10,000 investment
made in the Regional Bank Fund on November 1, 1985, before contingent
deferred sales charge, and is equal to $71,015 as of April 30, 1996.
The second line represents the value of the Standard & Poor's 500 Stock
Index and is equal to $44,785 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, warrants and other
(cost - $1,569,983,458) $2,001,669,936
Preferred stocks (cost - $22,762,431) 26,160,904
Bonds (cost - $2,689,560) 3,269,960
Joint repurchase agreement
(cost - $205,906,000) 205,906,000
Short-term notes (cost - $196,972,893) 196,972,893
Corporate savings account 555,742
--------------
2,434,535,435
Cash 1,000,000
Receivable for shares sold 9,843,702
Dividends receivable 3,807,009
Interest receivable 95,334
Other assets 45,603
--------------
Total Assets 2,449,327,083
- --------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,835,255
Payable for shares repurchased 1,858,978
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 1,805,480
Accounts payable and accrued expenses 257,599
--------------
Total Liabilities 5,757,312
- --------------------------------------------------------------------------
Net Assets:
Capital paid-in 1,987,245,397
Accumulated net realized gain on investments 17,858,553
Net unrealized appreciation of investments 435,667,327
Undistributed net investment income 2,798,494
--------------
Net Assets $2,443,569,771
==========================================================================
Net Asset Value Per Share:
(Based on net asset values and shares of beneficial
interest outstanding - unlimited number of shares
authorized with no par value, respectively)
Class A - $669,432,892 / 22,744,585 $29.43
==========================================================================
Class B - $1,774,136,879 / 60,551,285 $29.30
==========================================================================
Maximum Offering Price Per Share*
Class A - ($29.43 x 105.26%) $30.98
==========================================================================
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
See notes to financial statements
</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
(losses) for the period stated.
Statement of Operations
Six months ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (including $228,770 received from
affiliated issuers) $25,062,990
Interest 11,386,228
--------------
36,449,218
--------------
Expenses:
Investment management fee - Note B 7,995,560
Distribution/service fee - Note B
Class A 870,697
Class B 7,589,556
Transfer agent fee - Note B 1,908,660
Registration and filing fees 465,681
Custodian fee 128,764
Trustees' fees 125,605
Printing 101,496
Miscellaneous 32,595
Legal fees 22,352
Auditing fee 13,939
--------------
Total Expenses 19,254,905
- --------------------------------------------------------------------------
Net Investment Income 17,194,313
- --------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold (including $2,938
on sales of investments in affiliated issuers) 18,107,435
Change in net unrealized appreciation/depreciation
of investments 157,437,568
--------------
Net Realized and Unrealized
Gain on Investments 175,545,003
- --------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $192,739,316
==========================================================================
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31,
(UNAUDITED) 1995
-------------- --------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $17,194,313 $17,043,670
Net realized gain on investments sold 18,107,435 14,650,736
Change in net unrealized appreciation/
depreciation of investments 157,437,568 235,518,324
-------------- --------------
Net Increase in Net Assets Resulting
from Operations 192,739,316 267,212,730
-------------- --------------
Distributions to Shareholders:
Dividends from net investment income
Class A - ($0.1412 and $0.4773
per share, respectively) (5,889,076) (5,715,567)
Class B - ($0.0911 and $0.3215
per share, respectively) (10,543,204) (9,516,354)
Distributions from net realized gain
on investments sold
Class A - ($0.2154 and $0.3413
per share, respectively) (4,107,407) (3,288,461)
Class B - ($0.2154 and $0.3413
per share, respectively) (10,792,197) (8,137,395)
-------------- --------------
Total Distributions to Shareholders (31,331,884) (26,657,777)
-------------- --------------
From Fund Share Transactions - Net* 559,083,963 743,338,429
-------------- --------------
Net Assets:
Beginning of period 1,723,078,376 739,184,994
-------------- --------------
End of period (including undistributed net
investment income of $2,798,494 and and
$2,036,461, respectively) $2,443,569,771 $1,723,078,376
============== ==============
* Analysis of Fund Share Transactions: SIX MONTHS ENDED
APRIL 30, 1996 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1995
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
CLASS A
Shares sold 11,985,798 $344,974,898 14,505,492 $363,725,341
Shares issued to shareholders
in reinvestment of distributions 285,161 8,116,074 359,736 7,817,904
---------- ------------ ---------- ------------
12,270,959 353,090,972 14,865,228 371,543,245
Less shares repurchased (7,457,592) (215,350,829) (7,018,102) (171,254,724)
---------- ------------ ---------- ------------
Net increase 4,813,367 $137,740,143 7,847,126 $200,288,521
========== ============ ========== ============
CLASS B
Shares sold 18,129,591 $516,585,696 26,194,033 $658,793,433
Shares issued to shareholders
in reinvestment of distributions 481,645 13,632,705 593,436 12,598,000
---------- ------------ ---------- ------------
18,611,236 530,218,401 26,787,469 671,391,433
Less shares repurchased (3,821,075) (108,874,581) (5,396,234) (128,341,525)
---------- ------------ ---------- ------------
Net increase 14,790,161 $421,343,820 21,391,235 $543,049,908
========== ============ ========== ============
The Statement of Changes in Net Assets shows how the value of the Fund's net assets has changed since the end of the previous
fiscal period. The difference reflects earnings less expenses, any investment gains and losses, distributions paid to
shareholders, and any increase or decrease in money shareholders invested in the Fund. The footnote illustrates the number of
Fund shares sold, reinvested and redeemed during the last two periods, along with the corresponding dollar values.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Financial Highlights summarizes the impact of the following factors on a single share for the period indicated: the net
investment income, gain (losses), distributions and total investment return of the Fund. It shows how the Fund's net asset
value for a share has changed since the end of the previous period. Additionally, important relationships between some
items presented in the financial statements are expressed in ratio form.
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 $27.14 $21.52 $21.62 $17.47 $13.47
-------- -------- -------- ------- -------
Net Investment Income 0.31*** 0.52*** 0.39*** 0.26*** 0.21
Net Realized and Unrealized
Gain on Investments 2.34 5.92 0.91 5.84 3.98
-------- -------- -------- ------- -------
Total from Investment
Operations 2.65 6.44 1.30 6.10 4.19
-------- -------- -------- ------- -------
Less Distributions:
Dividends from Net Investment
Income (0.14) (0.48) (0.34) (0.26) (0.19)
Distributions from Net Realized
Gain on Investments Sold (0.22) (0.34) (1.06) (1.69) --
-------- -------- -------- ------- -------
Total Distributions (0.36) (0.82) (1.40) (1.95) (0.19)
-------- -------- -------- ------- -------
Net Asset Value, End
of Period $29.43 $27.14 $21.52 $21.62 $17.47
======== ======== ======== ======= =======
Total Investment Return at
Net Asset Value (a) 10.39%(b) 31.00% 6.44% 37.45% 31.26%(b)
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $669,433 $486,631 $216,978 $94,158 $31,306
Ratio of Expenses to Average
Net Assets 1.33%* 1.39% 1.34% 1.35% 1.41%*
Ratio of Net Investment Income
to Average Net Assets 2.15%* 2.23% 1.78% 1.29% 1.64%*
Portfolio Turnover Rate 7% 14% 13% 35% 53%
Average Broker Commission Rate
(per share of security) (c) $0.07 N/A N/A N/A N/A
CLASS B
Per Share Operating Performance
Net Asset Value, Beginning
of Period $27.02 $21.43 $21.56 $17.44 $13.76 $8.13
-------- -------- -------- ------- ------- --------
Net Investment Income 0.20*** 0.36*** 0.23*** 0.15*** 0.18 0.29
Net Realized and Unrealized
Gain
on Investments 2.39 5.89 0.91 5.83 4.56 5.68
-------- -------- -------- ------- ------- --------
Total from Investment Operations 2.59 6.25 1.14 5.98 4.74 5.97
-------- -------- -------- ------- ------- --------
Less Distributions:
Dividends from Net Investment
Income (0.09) (0.32) (0.21) (0.17) (0.28) (0.34)
Distributions from Net Realized
Gain on Investments Sold (0.22) (0.34) (1.06) (1.69) (0.78) --
-------- -------- -------- ------- ------- --------
Total Distributions (0.31) (0.66) (1.27) (1.86) (1.06) (0.34)
-------- -------- -------- ------- ------- --------
Net Asset Value, End of Period $29.30 $27.02 $21.43 $21.56 $17.44 $13.76
======== ======== ======== ======= ======= ========
Total Investment Return at Net
Asset Value (a) 10.02%(b) 30.11% 5.69% 36.71% 37.20% 75.35%
Ratios and Supplemental Data
Net Assets, End of Period
(000's omitted) $1,744,137 $1,236,447 $522,207 $171,808 $56,016 $52,098
Ratio of Expenses to Average
Net Assets 2.03%* 2.09% 2.06% 1.88% 1.96% 2.04%
Ratio of Net Investment Income
to Average Net Assets 1.44%* 1.53% 1.07% 0.76% 1.21% 2.65%
Portfolio Turnover Rate 7% 14% 13% 35% 53% 75%
Average Broker Commission Rate
(per share of security) (c) $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.
*** On average month end shares outstanding
(a) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Not annualized.
(c) Average Broker 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 four main categories: common
stocks, warrants and other, preferred stocks, bonds and short-term investments.
Common stocks, warrants and other 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, STATE, DESCRIPTION SHARES VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, WARRANTS AND OTHER
Money Center Banks (2.21%)
Bankers Trust New York Corp. (NY) 90,000 $6,243,750
Chase Manhattan Corp. (NY) 522,808 36,008,401
Morgan (J.P.) & Co, Inc. (NY) 141,000 11,861,625
--------------
54,113,776
--------------
Super Regional Banks (14.12%)
Banc One Corp. (OH) 772,268 26,836,313
BankAmerica Corp. (CA) 460,987 34,919,765
Bank of Boston Corp. (MA) 476,250 23,038,594
Bank of New York, Inc. (NY) 757,000 36,714,500
Barnett Banks, Inc.(FL) 400,000 25,350,000
First Bank Systems, Inc. (MN) 189,865 11,439,366
First Chicago NBD Corp. (IL)
(formerly NBD Bancorp Inc.) 783,213 32,307,536
First Union Corp. (NC) 259,800 15,977,700
Fleet Financial Group, Inc. (MA) 833,648 35,846,864
KeyCorp. (OH) 399,305 15,423,156
Mellon Bank Corp. (PA) 88,201 4,740,804
NationsBank Corp. (NC) 245,918 19,611,960
Norwest Corp. (MN) 520,216 18,792,812
PNC Bank Corp. (PA) 1,346,900 40,743,725
Wachovia Corp. (NC) 70,000 3,080,000
--------------
344,823,095
--------------
Regional Banks (42.96%)
ABC Bancorp. (GA) 130,000 1,885,000
American Bancorp. (WV) 74,000 1,729,750
American Bancshares., Inc.*(FL) 60,000 397,500
AmSouth Bancorp. (AL) 237,293 9,106,119
ANB Corp. (IN) 73,000 1,204,500
Atlantic Bank & Trust Co *(MA) 29,500 221,250
Bancfirst Corp. (OK) 143,000 3,003,000
Bancorp. Hawaii, Inc. (HI) 670,450 24,303,813
Banknorth Group, Inc. (VT) 371,500 13,002,500
BanPonce Corp. (PR) 406,000 18,879,000
BayBanks, Inc. (MA) 265,000 27,758,750
B M J Financial Corp. (NJ) 132,632 1,773,953
BNH Bancshares., Inc. *(CT) 545,000 1,124,062
Boatmen's Bancshares., Inc. (MO) 712,234 27,599,067
Boatmen's Bancshares., Inc.
(Dep Shares) (MO) 65,000 2,210,000
Brenton Banks, Inc. (IA) 176,600 4,238,400
Bryn Mawr Bank Corp. (PA) 55,200 1,380,000
BT Financial Corp. (PA) 19,950 753,112
Regional Banks (continued)
California Commercial
Bankshares. *(CA) 52,747 316,482
California Community Bancshares. (CA)
(formerly Continental Pacific Bank) 5,000 67,500
California State Bank (CA) 64,600 960,925
Carnegie Bancorp. (NJ) 49,612 731,784
CB Bancshares, Inc. (HI) 60,000 1,830,000
CCB Financial Corp. (NC) 136,000 7,021,000
Central Fidelity Banks, Inc. (VA) 55,000 1,897,500
Centura Banks, Inc. (NC) 238,325 8,698,863
Citizens Banking Corp. ( MI ) 38,400 1,113,600
City National Corp. (CA) 100,000 1,412,500
CM Bank Holding Co. (LA) 8,000 1,280,000
CNB Bancshares, Inc. (IN) 81,245 2,325,627
Colonial BancGroup, Inc. (AL) 196,500 6,656,437
Comerica, Inc. (MI) 387,798 16,869,213
Commerce Bancshares, Inc. (MO) 123,651 4,513,248
Commercial Bancshares, Inc. (FL) + 159,000 2,186,250
Community First Bankshares, Inc. (ND) 62,500 1,437,500
Compass Bancshares, Inc. (AL) 533,500 17,872,250
Continental Pacific Bank *(CA) 30,020 405,270
Corestates Financial Corp. (PA) 936,124 36,508,836
Crestar Financial Corp. (VA) 544,600 30,701,825
CU Bancorp. (CA) 46,211 473,663
Cullen/Frost Bankers., Inc., (TX) 125,000 6,156,250
Cupertino National Bancorp. (CA) 30,003 397,540
Dauphin Deposit Corp. (PA) 38,000 1,092,500
Deposit Guaranty Corp. (MS) 128,100 6,148,800
Evergreen Bancorp., Inc. (NY) 95,350 2,240,725
F & M National Corp. (VA) 83,250 1,332,000
First American Corp. (TN) 842,800 36,029,700
First of America Bank Corp.(MI) 981,205 44,399,526
First Citizens Bancshares., Inc.
(Class A) (NC) 30,844 1,896,906
First Colonial Group, Inc. (PA) 23,000 445,625
Regional Banks (continued)
First Commerce Corp. (LA) 809,887 $27,536,158
First Merchants Corp. (IN) 22,500 601,875
First Patriot Bankshares. (VA) 56,100 589,050
First Security Corp. (UT) 275,000 6,943,750
First Source Corp. (IN) 60,002 1,380,038
First State Bancorp. (NM) 77,500 881,562
First Tennesse National Corp.(TN) 984,500 32,488,500
Firstar Corp. (WI) 68,676 3,193,434
Firstbank Corp. (MI) 47,463 1,400,147
Firstbank of Illinois Co. (IL) 59,775 1,867,969
FirstMerit Corp. (OH) 50,000 1,512,500
FNBCorp. (PA) 52,823 1,247,942
FNB Rochester Corp. *(NY) 153,737 1,498,936
Franklin Bank, NA (MI) 103,881 1,246,575
Fulton Financial Corp. (PA) 197,025 3,940,510
Gateway Bancorp., Inc. (KY) 42,500 605,625
Hancock Holdings Co. (MS) 233,000 8,446,250
Hibernia Corp. (Class A) (LA) 1,354,000 13,878,500
Hubco, Inc. (NJ) 112,500 2,137,500
Huntington Bancshares., Inc. (OH) 47,250 1,145,812
Independent Bank Corp. (MA) 285,000 2,280,000
Integra Financial Corp. (PA) 350,980 25,928,647
Interchange Financial Services Corp. (NJ) 115,500 2,281,125
Keystone Financial, Inc. (PA) 15,000 483,750
Lafayette American Bancorp., Inc. (CT) 321,513 3,496,454
Liberty Bancorp., Inc. (OK) 15,000 547,500
LSB Bancshares., Inc. (NC) 13,408 214,528
Magna Group, Inc. (MO) 275,000 6,187,500
Mainstreet Bankgroup, Inc. (VA) 188,700 3,160,725
Mark Twain Bancshares., Inc. (MO) 15,000 566,250
Marshall and Ilsley Corp. (WI) 401,480 10,839,960
Mercantile Bancorp., Inc. (MO) 773,262 34,410,159
Mercantile Bankshares Corp. (MD) 340,000 8,712,500
Merchants Bancorp., Inc. (IL) 30,800 900,900
MetroBanCorp. (IN) 75,000 478,125
Michigan Financial Corp. (MI) 51,552 1,469,232
Mississippi Valley Bancshares., Inc. (MO) 75,500 2,283,875
Mountain Parks Financial Corp. *(CO) 65,000 1,446,250
National City Bancshares., Inc. (IN) 44,667 1,273,009
National City Corp. (OH) 16,687 615,316
North Fork Bancorp., Inc. (NY) 572,309 13,592,339
North Valley Bancorp. (CA) 76,600 1,876,712
Old Kent Financial Corp. (MI) 327,451 12,279,416
One Valley Bancorp., Inc. (WV) 49,000 1,525,125
Pacific Bank N.A. *(CA) 66,923 1,371,922
Regional Banks (continued)
Peoples Bank Corp. of Indianapolis (IN) 22,500 $587,812
Pinnacle Financial Services, Inc. (MI) 100,000 2,012,500
Premier Bankshares Corp. (VA) 113,333 2,025,827
Premier Financial Services, Inc. (IL) 160,500 1,685,250
Princeton National Bancorp., Inc. (IL) 64,500 1,225,500
Provident Bancorp., Inc. (OH) 97,500 4,972,500
Regions Financial Corp. (AL) 190,240 8,774,820
Republic Bancorp., Inc. (MI) 87,901 999,874
Republic New York Corp. (NY) 484,600 28,773,125
Riggs National Corp. (DC) 600,000 7,500,000
SC Bancorp.*(CA) 219,051 1,533,357
Seacoast Banking Corp. (Class A) (FL) 118,500 2,577,375
Signet Banking Corp. (VA) 705,600 17,287,200
Simmons First National Corp. (AR) + 189,000 6,237,000
Southern National Corp. (NC) 1,292,963 36,041,344
Southtrust Corp. (AL) 793,000 21,510,125
Southwest Bancorp., Inc. (OK) 180,500 3,429,500
State Financial Services Corp.
(Class A) (WI) 57,600 950,400
State Street Boston Corp.(MA) 25,000 1,246,875
Sterling Bancshares. (TX) 160,725 2,491,238
Summit Bancorp. (NJ)
(formerly UJB Financial Corp.) 838,750 29,775,625
Surety Capital Corp. *(TX) 120,000 457,500
Susquehanna Bancshares., Inc. (PA) 427,175 12,281,281
Texas Regional Bancshares., Inc.
(Class A) (TX) 152,500 3,393,125
Today'sBancorp., Inc. (IL) 102,200 3,014,900
Trico Bancshares. (CA) 163,050 2,812,613
Trustmark Corp. (MS) 72,000 1,656,000
UnionBanCal Corp. (CA)
(formerly Union Bank) 375,800 18,977,900
Union Planters Corp. (TN) 1,186,164 35,733,190
US Bancorp. (OR) 1,178,527 38,154,812
USBANCORP., Inc. (PA) 48,000 1,656,000
UST Corp. (MA) 70,000 927,500
Vectra Banking Corp. *(CO) 35,000 428,750
Vermont Financial Services (VT) 224,500 7,127,875
Washington Bancorp. *(IA) 25,000 275,000
Wells Fargo & Co. (CA) 336,967 81,756,541
Westamerica Bancorp. (CA) 67,800 3,220,500
West Coast Bancorp., Inc. (FL) 30,000 435,000
West Coast Bancorp. (OR) 12,750 237,469
Whitney Holding Corp. (LA) 307,500 9,378,750
Wilmington Trust Corp. (DE) 59,000 1,865,875
Regional Banks (continued)
Zions Bancorp. (UT) 102,500 $7,636,250
--------------
1,049,817,651
--------------
Thrifts (19.97%)
ALBANKFinancial Corp. (NY) 14,000 374,500
Ahmanson [H.F] & Co. (CA) 1,250,000 29,687,500
Ambanc Holding Co. Inc. * (NY) 255,000 2,438,437
American Federal Bank FSB (SC) 200,000 3,150,000
American National Bancorp., Inc. (MD)
(formerly American National
Savings Bank) 177,300 1,795,163
Astoria Financial Corp. (NY) 315,000 16,773,750
Avondale Financial Corp. *(IL) 100,000 1,375,000
BankUnited Financial Corp.
(ClassA) *(FL) 62,000 480,500
Bay View Capital Corp. (CA) 314,000 10,362,000
Bedford Bancshares, Inc. (VA) 30,000 521,250
Bell Bancorp., Inc. (IL) 100,000 3,725,000
BostonFed Bancorp., Inc. (MA) 325,700 4,030,538
Cal Fed Bancorp., Inc. *(CA)
(formerly California Federal Bank) 58,334 1,042,720
California Financial Holding Co. (CA) 191,000 4,142,313
Calumet Bancorp., Inc. *(IL) + 138,000 3,829,500
Cameron Financial Corp. (MO) 95,000 1,330,000
Capital Savings Bancorp., Inc. (MO) 15,751 299,269
Catskill Financial Corp.* (NY) 120,000 1,275,000
CB Bancorp., Inc. *(IN) 57,870 940,387
CCF Holding Co. (GA) + 59,000 715,375
Cenfed Financial Corp. (CA) 33,000 759,000
Center Banks, Inc. (NY) 34,600 484,400
CFX Corp. (NH) 42,346 576,963
Charter Financial, Inc. (IL) 150,000 1,743,750
Charter One Financial, Inc. (OH) 191,000 6,661,125
Coast Savings Financial, Inc. *(CA) 246,100 7,659,863
Coastal Bancorp., Inc. (TX) 65,000 1,186,250
Collective Bancorp., Inc. (NJ) 520,000 12,577,500
Commercial Federal Corp. (NE) 174,400 6,692,600
Commonwealth Savings Bank (PA) 50,000 1,062,500
Community Financial Corp. *(IL) 25,000 306,250
Crazy Woman Creek
Bancorp., Inc. *(WY) 50,000 534,375
CSB Financial Corp. (VA) 112,000 2,324,000
CSB Financial Group, Inc. *(IL) 50,000 465,625
Damen Financial Corp. *(IL) 75,000 862,500
Dime Bancorp., Inc.*(NY) 1,212,500 14,853,125
Eagle Bancshares. (GA) 174,000 2,566,500
East Texas Financial Services, Inc. (TX) 44,000 687,500
Thrifts (continued)
Elmira Savings Bank (NY) 34,950 $618,178
Family Bancorp., (MA) 107,500 2,230,625
Farmers & Mechanics Bank *(CT) 41,300 826,000
Fed One Bancorp. Inc. (WV) 25,000 378,125
FFW Corp. (IN) 15,000 292,500
Fidelity Federal Bank. (Class A) *(CA) 643,644 5,873,254
Fidelity Financial of Ohio (OH) 100,000 1,000,000
Financial Bancorp., Inc., (NY) 45,000 596,250
First Ashland Financial Corp. (KY) 30,000 532,500
First Bankshares, Inc. (MO) 48,000 798,000
First Bell Bancorp., Inc. (PA) 392,500 5,396,875
First Colorado Bancorp., Inc. (CO) 550,000 6,668,750
First Defiance Financial Corp. (OH) + 545,500 5,858,750
First Federal Bancorp. *(MN) 42,000 577,500
First Federal Bancshares of
Eau Claire, Inc. (WI) 81,700 1,143,800
First Federal Capital Corp. (WI) 39,945 868,804
First Financial Corp. (WI) 115,151 2,706,039
First Financial Corp. of
Western Maryland (MD) 90,500 1,810,000
First Independence Corp. (KS) 35,500 652,312
First Indiana Corp. (IN) 49,399 1,234,975
First Keystone Financial, Inc. *(PA) 43,000 747,125
First Mutual Bancorp., Inc. (IL) + 235,000 2,937,500
First Republic Bancorp., Inc. *(CA) 229,162 3,380,140
First Savings Bank of Washington
Bancorp., Inc. (WA) 140,000 2,117,500
First Southern Bancshares.(AL) 35,000 490,000
Flushing Financial Corp. *(NY) 100,000 1,575,000
FMS Financial Corp. (NJ) 24,000 366,000
Fort Bend Holdings Corp. (TX) + 44,000 808,500
Fort Thomas Financial Corp. (KY) 60,000 866,250
Frankfort First Bancorp.(KY) 145,000 2,247,500
GA Financial, Inc. *(PA) 440,000 4,895,000
Glendale Federal Bank *(CA) 851,900 14,908,250
Golden West Financial Corp. (CA) 30,000 1,578,750
Great American Bancorp., Inc. (IL) 50,000 687,500
Great Southern Bancorp., Inc. (MO) 14,900 394,850
Great Western Financial Corp. (CA) 280,000 6,440,000
Greenpoint Financial Corp. (NY) 1,707,000 49,289,625
Harbor Federal Bancorp., Inc. (MD) 80,000 1,050,000
Hardin Bancorp., Inc. (MO) 15,500 186,000
HF Financial Corp. (SD) 150,000 2,250,000
HMN Financial, Inc. *(MN) 125,000 1,906,250
Home Federal Bancorp. (IN) 20,500 512,500
Home Financial Corp. (FL) 160,000 2,220,000
Thrifts (continued)
IBS Financial Corp. (NJ) 55,000 $756,250
Imperial Thrift & Loan Assn. *(CA) 260,000 3,737,500
Industrial Bancorp., Inc. (OH) 185,000 2,798,125
ISB Financial Corp. (LA) 335,000 5,192,500
Jefferson Bancorp., Inc. (LA) 37,500 820,898
Kankakee Bancorp., Inc. (IL) 31,020 593,257
Kentucky First Bancorp., Inc. (KY) 65,000 796,250
Klamath First Bancorp., Inc. (OR) 525,000 7,218,750
Lakeview Financial Corp. (NJ) 8,300 162,887
Landmark Bancshares., Inc. (KS) 110,000 1,650,000
Leader Financial Corp. (TN) 245,000 10,780,000
Life Bancorp., Inc. (VA) 100,000 1,425,000
Little Falls Bancorp., Inc. *(NJ) 150,000 1,650,000
Logansport Financial Corp. (IN) 50,000 625,000
Long Island Bancorp., Inc. (NY) 552,500 15,331,875
MAF Bancorp., Inc. (IL) 168,850 4,432,312
Marion Capital Holdings, Inc. (IN) 72,500 1,477,187
Marshalltown Financial Corp. *(IA) 20,000 330,000
MassBank Corp. (MA) 35,000 1,146,250
MFB Corp. *(IN) 100,000 1,425,000
Mid Continent Bancshares., Inc. (KS) 18,500 330,687
Mississippi View Holding Co. (MN) 50,000 581,250
MLF Bancorp., Inc. (PA) 55,000 1,326,875
Morgan Financial Corp. (CO) + 42,000 488,250
Monterey Bay Bancorp., Inc. *(CA) 100,000 1,187,500
MSB Bancorp., Inc. (NY) 15,000 258,750
New Hampshire Thrift
Bancshares., Inc. (NH) 30,000 301,875
North Central Bancshares., Inc. (IA) 170,000 1,806,250
Northeast Indiana Bancorp., Inc. (IN) 60,000 765,000
N.S. Bancorp., Inc. (IL) 70,000 2,887,500
NS & L Bancorp. (MO) 35,000 455,000
PALFED, Inc. (SC) 233,600 2,993,000
Pamrapo Bancorp., Inc. (NJ) 29,500 567,875
Patriot Bank Corp. (PA) 185,000 2,405,000
Peekskill Financial Corp. *(NY) 192,000 2,220,000
Pennfirst Bancorp., Inc. (PA) 81,290 1,036,453
Peoples Heritage Financial
Group, Inc. (ME) 383,600 8,007,650
Permanent Bancorp., Inc. (IN) 113,500 1,674,125
PFF Bancorp., Inc. *(CA) 860,000 9,890,000
Piedmont Bancorp., Inc. (NC) 20,000 270,000
Pittsburgh Home Financial Corp. *(PA) 100,000 1,068,750
Potters Financial Corp. (OH)
(formerly Potters Savings & Loan Co.) 25,000 421,875
Primary Bank *(NH) 80,000 1,050,000
Thrifts (continued)
PVF Capital Corp. *(OH) 18,150 356,194
QCF Bancorp., Inc. *(MN) 50,000 756,250
Quaker City Bancorp., Inc. *(CA) 45,000 649,688
RCSB Financial, Inc. (NY) 135,000 3,172,500
River Bank America. *(NY) 250,000 2,062,500
Roosevelt Financial Group, Inc. (MO) 1,210,623 23,304,493
Security Bancorp. (MT) 21,000 441,000
SFS Bancorp., Inc. *(NY) 45,000 573,750
Sobieski Bancorp., Inc. *(IN) 40,000 510,000
Southern Banc Co., Inc. (AL) 60,500 760,031
Southern Financial Bancorp. (VA)
(formerly Southern Financial
Federal Savings Bank) 58,271 932,344
Southern Missouri Bancorp., Inc.(MO) 80,000 1,160,000
Sovereign Bancorp., Inc. (PA) 28,111 312,730
Springfield Institution for Savings *(MA) 102,500 1,729,687
Standard Financial, Inc. (IL) 170,000 2,528,750
Statewide Financial Corp. *(NJ) 190,000 2,386,875
Sterling Financial Corp. *(WA) 150,378 2,067,691
Tappan Zee Financial, Inc. (NY) 72,500 870,000
TCF Financial Corp. (MN) 176,826 6,255,220
Teche Holding Co. (LA) 81,000 1,073,250
TeleBanc Financial Corp. *(VA) 100,000 750,000
Texarkana First Financial Corp. (AR) 96,800 1,488,300
Troy Hill Bancorp., Inc. (PA) 40,000 560,000
Virginia First Financial Corp.(VA) 260,000 3,022,500
Washington Federal, Inc. (WA) 374,850 7,871,850
Washington Mutual, Inc. (WA) 740,000 20,535,000
Webster Financial Corp. (CT) 45,000 1,248,750
WesterFed Financial Corp. (MT) 230,000 3,335,000
WSFS Financial Corp. *(DE) 79,400 605,425
--------------
487,871,989
--------------
Other - Financial (2.52%)
Capital One Financial Corp. 753,100 22,216,450
CapMac Holdings, Inc. 15,000 436,875
ContiFinancial Corp. * 11,000 350,625
Donaldson Lufkin & Jenrette, Inc. 20,000 675,000
Enhance Financial Services Group, Inc., 50,000 1,356,250
Federal National Mortgage Assn. 65,000 1,990,625
Financial Security Assurance
Holdings Ltd. 10,000 270,000
First Merchants Acceptance Corp. * 174,000 4,219,500
First USA, Inc. 10,000 562,500
First Washington Realty Trust. 79,470 1,609,268
Imperial Credit Industries, Inc. * 29,600 769,600
Investors Financial Services Corp. 40,000 855,000
Other - Financial (continued)
KBK Capital Corp. * 19,000 $124,688
Lomas Financial Corp. * 180,000 2,813
Olympic Financial Ltd. * 180,000 4,005,000
Onyx Acceptance Corp. * 84,700 1,609,300
Penncorp Financial Group, Inc. 36,000 1,102,500
PMC Capital, Inc. 25,000 328,125
Prime Residential, Inc. 70,000 1,268,750
Prime Retail, Inc. 15,000 168,750
Salomon, Inc. 80,000 3,250,000
Southwest Gas Corp. 17,700 294,263
Student Loan Marketing Assn. . 80,000 5,860,000
Travelers / Aetna Property
Casualty Corp. (Class A) * 58,500 1,616,063
Union Acceptance Corp. (Class A) * 200,000 3,100,000
WFS Financial, Inc. * 179,500 3,590,000
--------------
61,631,945
--------------
WARRANTS (0.14%)
Carnegie Bancorp.*(NJ) 29,000 87,000
Glendale Federal Bank*(CA) 400,000 3,250,000
--------------
3,337,000
--------------
OTHER (0.00%)
California Federal Bank *(CA)
Goodwill Litigation Security 10,833 74,480
--------------
TOTAL COMMON STOCKS,
WARRANTS AND OTHER
(Cost $1,569,983,458) (81.92%) 2,001,669,936
------- --------------
PREFERRED STOCKS
California Federal Bank, Ser B,
10.625% (CA) 13,333 1,441,631
Chevy Chase Savings 13.00% (MD) 50,000 1,562,500
Community Bank, Ser B, 13.00% (CA) 40,000 1,060,000
Fidelity Federal Bank, Ser A,
12.00% (CA) 40,000 1,085,000
FirstFederal Financial Corp., Ser A,
7.00% (OH) 10,000 575,000
First Nationwide Bank 11.50% (CA) 30,000 3,367,500
First Washington Realty Trust Ser A,
9.75% (MD) 113,498 2,950,948
Glendale Federal Bank, Ser E,
8.75% (CA) 100,000 4,700,000
Prime Retail Inc. Ser B, 8.50% (MD) 210,000 3,727,500
Riggs National Corp., Ser B,
10.75% (DC) 64,300 1,784,325
PREFERRED STOCKS (continued)
Roosevelt Financial Group, Inc.,
Ser F, 6.50% (MO) 16,000 1,147,000
Southwest Bancorp, Inc. Ser A,
9.20% (OK) 20,000 512,500
Suncoast Savings and Loan Assn.,
Ser A, 8.00% (FL) 28,000 399,000
Walden Residential, Ser A, 9.16% (TX) 56,000 1,400,000
Washington Mutual Inc,
Ser D, $6.00 (WA) 4,000 448,000
--------------
TOTAL PREFERRED STOCKS
(Cost $22,762,431) (1.07%) 26,160,904
------- --------------
<CAPTION>
INTEREST PAR VALUE MARKET
ISSUER, STATE, DESCRIPTION RATE (000'S OMITTED) VALUE
- ----------------------------------------------------- -------------- --------------
<S> <C> <C> <C>
BONDS
Bank of New York, Inc.
Conv Note 08-15-01. 7.50% 200.00 495,500
Susquehanna Bancshares, Inc.
Conv Sub Deb 02-01-05 9.00 2,000.00 2,149,460
Sierra Tahoe Bancorp
Conv Sub Deb 02-01-04 8.50 500.00 625,000
--------------
TOTAL BONDS
(Cost $2,689,560) (0.13%) 3,269,960
------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (8.43%)
Investment in a joint repurchase
agreement transaction with
SBC Capital Markets, Inc.,
Dated 04-30-96, Due 05-01-96
(secured by U.S.Treasury Bonds
10.375% due 11-15-12, and
7.250% due 05-15-16) -
Note A 5.33 205,906 205,906,000
--------------
Short-Term Notes (8.06%)
American Telephone &
Telegraph Co. due 06-04-96 5.29 10,000 9,950,039
Bear Stearns Cos., Inc.,
due 05-01-96 5.33 15,000 15,000,000
Bear Stearns Cos., Inc.,
due 05-08-96 5.33 15,000 14,984,454
Bear Stearns Cos., Inc.,
due 05-23-96 5.32 20,000 19,934,978
Bear Stearns Cos., Inc.,
due 05-28-96 5.32 15,000 14,940,150
Short-Term Notes (continued)
Ford Motor Credit Co.,
due 05-03-96 5.30 7,485 $7,482,796
Ford Motor Credit Co.,
due 05-10-96 5.30 15,000 14,980,125
Ford Motor Credit Co.,
due 05-17-96 5.26 10,000 9,976,622
GTE Northwest, Inc.,
due 05-02-96 5.32 25,000 24,996,305
International Business
Machines due 05-24-96 5.29 25,000 24,915,507
Merrill Lynch & Co., Inc.
due 05-31-96 5.33 15,000 14,933,375
Philip Morris Cos., Inc.,
due 06-03-96 5.30 25,000 24,878,542
--------------
196,972,893
--------------
Corporate Savings Account (0.02%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 555,742
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $403,434,635) (16.51%) 403,434,635
------- --------------
TOTAL INVESTMENTS (99.63%) $2,434,535,435
======= ==============
*Non-income producing security.
+Denotes an affiliated company in which the Fund has ownership of at least
5% of the voting securities. Investments in affiliates at April 30, 1996 were as follows:
<CAPTION> <C> <C>
AFFILIATE COST DIVIDEND INCOME
- -------------------- -------------- --------------
CCF Holding Co. (GA) $674,750 $20,650
Calumet Bancorp., Inc. (IL) 3,082,000 .....
Commercial Bancshares, Inc. (FL) 1,983,875 15,900
First Defiance Financial Corp. (OH) 5,680,000 76,300
First Mutual Bancorp, Inc. (IL) 2,681,875 32,900
Fort Bend Holdings Corp. (TX) 493,225 6,160
Morgan Financial Corp. (CO) 333,500 16,380
Simmons First National Corp. (AR) 4,905,875 60,480
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>
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Freedom Investment Trust (the "Trust") is an open-end management
investment company, registered under the Investment Company Act of 1940.
The Trust consists of six series portfolios: John Hancock Regional Bank
Fund (the "Fund"), John Hancock Gold & Government Fund, John Hancock
Sovereign U.S. Government Income Fund, John Hancock Disciplined Growth
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, John Hancock Disciplined Growth Fund was known as John
Hancock Sovereign Achievers Fund. The investment objective of the Fund
is to achieve capital appreciation from a portfolio of equity securities
of regional banks and lending institutions.
The Trustees have authorized the issuance of two classes of the Fund,
designated as Class A and Class B shares. The shares of each class
represent an interest in the same portfolio of investments of the Fund
and have equal rights to voting, redemption, dividends, and liquidation,
except that certain expenses, subject to the approval of the Trustees,
may be applied differently to each class of shares in accordance with
current regulations of the Securities and Exchange Commission and the
Internal Revenue Service. Shareholders of a class which bears
distribution/ service expenses under the terms of a distribution plan,
have exclusive voting rights regarding such distribution plan.
Significant policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or, at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
instruments maturing within 60 days are valued at amortized cost which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The
Berkeley Financial Group, may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more repurchase agreements, whose underlying securities are obligations
of the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
FEDERAL INCOME TAXES The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all its taxable income,
including any net realized gain on investments, to its shareholders.
Therefore, no federal income tax provision is required.
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.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on
investment securities is recorded on the accrual basis.
The fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from generally accepted accounting principles. Dividends paid by
the Fund with respect to each class of shares will be calculated in the
same manner, at the same time and will be in the same amount, except for
the effect of expenses that may be applied differently to each class as
explained previously.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative sizes of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized
gains (losses) are 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.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on
securities purchased from either the date of issue or the date of
purchase over the life of the security, as required by the Internal
Revenue Code.
NOTE B --
MANAGEMENT FEE AND
TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a
monthly management fee to the Adviser, for a continuous investment
program equivalent, on an annual basis, to the sum of (a) 0.80% of the
first $500,000,000 of the Fund's average daily net asset value and (b)
0.75% of the Fund's average daily net asset value in excess of
$500,000,000.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive
state limit where the Fund is registered to sell shares of beneficial
interest, the fee payable to the Adviser will be reduced to the extent
of such excess, and the Adviser will make additional arrangements
necessary to eliminate any remaining excess expenses. The current limits
are 2.5% of the first $30,000,000 of the Fund's average daily net asset
value, 2.0% of the next $70,000,000, and 1.5% of the remaining average
daily net asset value.
John Hancock Funds, Inc. ("JH Funds"), a wholly-owned subsidiary of the
Adviser, and Freedom Distributors Corporation ("FDC") act as Co-
Distributors for shares of the Fund. For the period ended April 30,
1996, JH Funds received net sales of $5,799,403 with regard to sales of
Class A shares. Out of this amount, $900,705 was retained and used for
printing prospectuses, advertising, sales literature and other purposes,
$4,185,377 was paid as sales commissions to unrelated broker-dealers,
and $713,321 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 are
subject to a contingent deferred sales charge ("CDSC") at declining
rates beginning at 5.00% of the lesser of the current market value at
the time of redemption or the original purchase cost of the shares being
redeemed. Proceeds from the CDSC are paid to JH Funds and are used in
whole or in part to defray its expenses related to providing
distribution related services to the Fund in connection with the sale of
Class B shares. For the period ended April 30, 1996, the contingent
deferred sales charges received by JH Funds amounted to $2,063,878.
In addition, to compensate the Co-Distributors for the services they
provide as distributors of shares of the Fund, the Fund has adopted
Distribution Plans with respect to Class A and Class B pursuant to Rule
12b-1 under the Investment Company Act of 1940. Accordingly, the Fund
will make payments to the Co-Distributors for distribution and service
expenses, at an annual rate not exceed 0.30% of Class A 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 Corporation ("Investor Services"), a wholly-owned subsidiary of
The Berkeley Financial Group. The Fund pays transfer agent fees based on
the number of shareholder accounts and certain out-of-pocket expenses.
Mr. 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 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 defined
compensation liability and unrealized appreciation of $1,976.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other then obligations
of the U.S. government and its agencies and short-term securities,
during the period ended April 30, 1996, aggregated $635,526,695 and
$112,325,048, 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 $1,998,562,226.
Gross unrealized appreciation and depreciation of investments aggregated
$440,474,020 and $5,056,553, respectively, resulting in net unrealized
appreciation of $435,417,467.
[BLANK PAGE]
[BLANK 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
Regional Bank Fund. It may be used as sales literature when preceded
or accompanied by the current prospectus, which details charges,
investment objectives and operating policies.
A recycled logo in lower left hand corner with the caption " Printed
on Recycled Paper."
010SA 4/96
6/96
