<PAGE> 1
JOHN HANCOCK FUNDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SOVEREIGN
INVESTORS FUND
SEMI-ANNUAL REPORT
June 30, 1995
<PAGE> 2
DIRECTORS
Edward J. Boudreau, Jr.
Thomas W.L. Cameron
James F. Carlin*
Charles F. Fretz*
Harold R. Hiser, Jr.*
Charles L. Ladner*
Patricia P. McCarter*
Steven R. Pruchansky*
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
* 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
Michael P. DiCarlo
Senior Vice President
James K. Ho
Senior Vice President
John F. Snyder, III
Senior Vice President
John A. Morin
Vice President
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
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Educating shareholders has always been one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential rewards as well as the potential risks of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the Fund's
current investment strategies; and the outlook for the months ahead.
The ensuing financial statements provide a comprehensive look at the fund's
statistics and holdings.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information, feel
free to call one of our customer service representatives on our toll-free line
at 1-800-225-5291, from 8:00 a.m. to 8:00 p.m. eastern time, Monday through
Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY JOHN F. SNYDER III FOR THE PORTFOLIO MANAGEMENT TEAM
JOHN HANCOCK
SOVEREIGN INVESTORS FUND
Growth stocks take off in first half as economy
shows signs of slowing
After flat performance in 1994, the stock market went straight up during the
first half of 1995. Falling interest rates, combined with strong corporate
earnings, growing investor demand and tight supply, drove the market to new
heights. In just six months, the Standard & Poor's 500-Stock Index and the Dow
Jones Industrial Average each returned more than 18%. As inflation fears
subsided, the bond market also rallied with yields on the benchmark 30-year
Treasury bond falling sharply from 8.5% to 6.5%.
Growth stocks led the market. Early on, the winners were large, conservative
growth stocks with a history of steady earnings growth in all economic
conditions. Once interest rates started coming down, financial stocks benefited.
As the year progressed, people started believing we'd get just the right amount
of economic growth -- not so much that inflation would pick up, but not so
little that profits would disappear. While conservative growth stocks continued
to do well, their performance lagged compared to more aggressive growth stocks,
particularly technology stocks.
For the six months ended June 30, 1995, John Hancock Sovereign Investors
Fund's Class A, B, and C shares had total returns of 15.10%, 14.69% and 15.34%,
respectively, at net asset value. These six-month results nearly matched our
long-term average annual returns.
[A 2 1/4" x 3 3/4" photo of the Sovereign Investors Fund management team at
bottom right. Caption reads: "The Sovereign Investors management team (l-r):
Jere Estes, John Snyder, Tom Weary, Jim Moorhead."]
[CAPTION]
"...THE STOCK MARKET WENT STRAIGHT UP DURING THE FIRST HALF OF 1995."
3
<PAGE> 4
John Hancock Funds - Sovereign Investors Fund
[A chart with the heading "Top Five Common Stock Holdings" at the top of the
left hand column. The chart lists five holdings: 1) General Electric. 4.1% 2)
PepsiCo 3.1% 3) Procter & Gamble 3.1%; 4) Abbott Laboratories 2.6% 5) Johnson &
Johnson 2.5%. Footnote below reads: "As a percentage of net assets on June 30,
1995."]
Not surprisingly, however, the Fund lagged the average growth and income fund's
return of 16.75%, according to Lipper Analytical Services.(1) Risk-averse funds
like ours that tend not to follow the latest fad usually trail in strong up
markets. But they tend to fall less in down markets. In this case, we chose not
to jump into the fray with technology stocks, which can be volatile and usually
don't pay dividends.
LEADERS AND LAGGARDS
The biggest boost to performance came from our top five names. Four were
consumer nondurables -- a sector which includes food, pharmaceutical and
beverage companies and represents about 25% of the Fund's assets. As the fear of
health-care reform disappeared, for example, both Abbott Laboratories and
Johnson & Johnson delivered strong gains. PepsiCo addressed problems in its
restaurant business, helping its stock rebound nicely. For Procter & Gamble, a
variety of factors -- including the elimination of products with low returns
and the introduction of important new ones -- helped the stock appreciate more
than expected. Our largest investment -- General Electric -- delivered a solid
12% return for the period. While that was certainly attractive, it was somewhat
below what we had hoped.
As always, there were disappointments but particularly in retailing. The main
reason: Consumers weren't spending much, especially on apparel. That hurt
companies like V.F. Corporation, which manufactures blue jeans. Other consumer
cyclicals -- stocks that tend to move in tandem with the economy -- also felt
the pinch. As a result, we eliminated our investments in both Masco Corporation,
a company that makes plumbing fixtures for houses, and Shaw Industries, a carpet
manufacturer.
[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 "Johnson &
Johnson" followed by an up arrow and the phrase "International growth in new
products." The second listing is "Alco Standard Corp." followed by an up arrow
and the phrase "Growth of market share in North America." The third listing is
"V.F. Corporation" followed by a down arrow and the phrase "Slowdown in consumer
spending." Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."]
STRONG AND STEADY WINS THE RACE
We believe that after two and a half years of strong earnings, the market could
be near a turning point. No matter what happens with the economy, earnings will
probably grow at a slower rate. There also may be an increased probability of
negative earnings surprises from companies whose earnings are closely tied to
the economy. That makes finding stocks with strong, reliable earnings -- the
kind we always focus on -- even more important.
We're finding companies with predictable, superior earnings growth -- 12% or
better -- in a variety of industries. But they have one or more of three themes
in common. First, a
[CAPTION]
"THE BIGGEST BOOST TO PERFORMANCE CAME FROM OUR TOP FIVE NAMES."
4
<PAGE> 5
John Hancock Funds - Sovereign Investors Fund
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is a footnote reading: "For the six months ended June 30, 1995." The
chart is scaled in increments of 5% from top to bottom, with 20% at the top and
0% at the bottom. Within the chart there are four solid bars. The first
represents the 15.10% total return for John Hancock Sovereign Investors Fund:
Class A. The second represents the 14.69% total return for John Hancock
Sovereign Investors Fund: Class B. The third represents the 15.34% total return
for John Hancock Sovereign Investors Fund: Class C. The fourth represents the
16.75% total return for the average growth and income fund. Footnote below
reads: "Total returns for John Hancock Sovereign Investors Fund is at net asset
value with all distributions reinvested. The average growth and income fund is
tracked by Lipper Analytical Services.(1) See following page for historical
performance information."]
large part of their revenues come from outside the United States. An example is
The Interpublic Group, the world's largest advertising agency. Although based in
New York, the company does more than 60% of its business overseas. The agency
stands to benefit as more companies expand worldwide and look for a single
agency. Second, they are companies -- like Alco Standard Corporation, the
largest distributor and servicer of copiers in the country -- that dominate
their industry. Alco has been successfully growing its core business by buying
out small, office-supply companies. Third, many of our companies have large cash
flows (that is, earnings after capital expenditures). E. I. du Pont de Nemours
and Co., a worldwide chemical company, is a good example, with cash flow
building up to the tune of $3 billion a year. Like other companies with extra
cash, DuPont recently bought back some of its shares, pushing up its stock
price.
A WORD ON BONDS
We began the year with nearly 20% in bonds. But as the bond market rallied
through the spring, we became concerned that bonds had already posted most of
their total return (income plus or minus price appreciation). So we cut back our
stake to 11.3%, the Fund's lowest level in 10 years. To lower volatility, we
also decreased the average maturity of our bond holdings from 11 years to 5
years. Plus, we increased the average quality by shifting more assets out of
corporate bonds and into government bonds.
OPTIMISM LONG TERM, UNCERTAINTY NEAR TERM
We'd be hard pressed to say where the stock market will go from here. But long
term, we're optimistic. While a lot of companies are buying back shares, there
aren't many initial public offerings (IPOs) in the market right now. So supply
isn't increasing much. But demand is strong as the baby boomers age and save
more. What's more, interest from foreign investors will probably pick up once
the dollar strengthens.
At their current levels, stock prices seem reasonable. So, as long as
inflation remains under control and interest rates stay stable, we think the
stock market is still the place to be. But with uncertainty about the economy,
investors have to be more selective. We believe companies with predictable
earnings growth will become more attractive, which can only benefit John Hancock
Sovereign Investors Fund.
[CAPTION]
"...WE THINK THE STOCK MARKET IS STILL THE PLACE TO BE."
--------------------------------------------------------------------------------
(1) Figures from Lipper Analytical Services include reinvested dividends and do
not take into account sales charges. Actual load-adjusted performance is
lower.
5
<PAGE> 6
A LOOK AT PERFORMANCE
The tables on the right show the cumulative total returns and the average annual
total returns for John Hancock Sovereign Investors Fund. Total return is a
performance measure that equals the sum of all income and capital gains
dividends, assuming reinvestment of these distributions, and the change in the
price of the fund's shares, expressed as a percentage of the fund's 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. 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 JUNE 30, 1995
<TABLE>
<CAPTION>
ONE FIVE MOST RECENT
YEAR YEARS(1) TEN YEARS(1)
---- -------- ------------
<S> <C> <C> <C>
Sovereign Investors Fund: Class A(2) 12.89% 58.12% 209.02%
Sovereign Investors Fund: Class B(2) 12.97% 7.34% N/A
Sovereign Investors Fund: Class C 19.28% 19.35% N/A
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
ONE FIVE MOST RECENT
YEAR YEARS(1) TEN YEARS(1)
---- -------- ------------
<S> <C> <C> <C>
Sovereign Investors Fund: Class A(2) 12.89% 9.60% 11.94%
Sovereign Investors Fund: Class B(2) 12.97% 4.87% N/A
Sovereign Investors Fund: Class C 19.28% 8.58% N/A
</TABLE>
YIELDS
AS OF JUNE 30, 1995
<TABLE>
<CAPTION>
SEC 30-DAY
YIELD
-----
<S> <C>
Sovereign Investors Fund: Class A 2.22%
Sovereign Investors Fund: Class B 1.56%
Sovereign Investors Fund: Class C 2.77%
</TABLE>
NOTES TO PERFORMANCE
(1) Class B shares started on January 3, 1994. Class C shares started on May 7,
1993.
(2) Performance is affected by a 12b-1 plan, which commenced on July 1, 1989 and
January 3, 1994 for Class A shares and Class B shares, respectively.
Note: Participant-directed defined-contribution plans with at least 100 eligible
employees at inception of the Fund account may purchase Class A shares without
an initial sales charge as of March 15, 1995. If those shares are redeemed,
however, during the year following the calendar year end during which they were
purchased, a contingent deferred sales charge will be assessed.
6
<PAGE> 7
WHAT HAPPENED TO A $10,000 INVESTMENT...
The charts on the right show how much a $10,000 investment in John Hancock
Sovereign Investors Fund would be worth on June 30, 1995, assuming you have been
invested since the day each class of shares started or 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 an often used measure
of stock market performance.
John Hancock Sovereign Investors Fund
Class A shares
[Line chart with the heading John Hancock Sovereign Investors 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 $39,246 as of June 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the John Hancock Sovereign Investors
Fund on June 30, 1985, before sales charge, and is equal to $32,542 as of June
30, 1995. The third line represents the John Hancock Sovereign Investors Fund
after sales charge and is equal to $30,902 as of June 30, 1995.]
John Hancock Sovereign Investors Fund
Class B shares
[Line chart with the heading John Hancock Sovereign Investors Fund: Class B,
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 $12,176 as of June 30, 1995. The second line represents the value of
the hypothetical $10,000 investment made in the John Hancock Sovereign Investors
Fund on January 3, 1994, before contingent deferred sales charge, and is equal
to $11,234 as of June 30, 1995. The third line represents the John Hancock
Sovereign Investors Fund after contingent deferred sales charge and is equal to
$10,734 as of June 30, 1995.]
John Hancock Sovereign Investors Fund
Class C shares
[Line chart with the heading John Hancock Sovereign Investors Fund: Class C,
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 $13,159 as of June 30, 1995. The second line represents the
hypothetical $10,000 investment made in the John Hancock Sovereign Investors
Fund on May 6, 1993, and is equal to $11,935 as of June 30, 1995.]
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET AND SHOWS
THE VALUE OF WHAT THE FUND OWNS, IS DUE AND OWES ON JUNE 30, 1995. YOU'LL ALSO
FIND THE NET ASSET VALUE PER SHARE AS OF THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
-----------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Common and preferred stocks
(cost - $981,831,715) .................................. $1,150,252,700
Corporate bonds (cost - $87,603,392) ..................... 88,571,479
United States government and agencies
obligations (cost - $66,259,838) ....................... 68,606,050
Joint repurchase agreement
(cost - $53,111,000) ................................... 53,111,000
Short-term notes (cost - $41,369,674) .................... 41,369,674
Corporate savings account ................................ 9,795
--------------
1,401,920,698
Receivable for shares sold ................................. 1,295,934
Interest receivable ........................................ 3,708,482
Dividends receivable ....................................... 2,991,766
--------------
Total Assets ............................ 1,409,916,880
---------------------------------------------------------
LIABILITIES:
Payable for shares repurchased ............................. 501,583
Payable for investments purchased .......................... 16,021,515
Payable to John Hancock Advisers, Inc. .....................
and affiliates - Note B .................................. 2,342,429
Accounts payable and accrued expenses ...................... 3,381
--------------
Total Liabilities ....................... 18,868,908
---------------------------------------------------------
NET ASSETS:
Capital paid-in ............................................ 1,220,089,503
Accumulated net realized loss on investments ............... (823,321)
Net unrealized appreciation of investments ................. 171,735,284
Undistributed net investment income ........................ 46,506
--------------
Net Assets .............................. $1,391,047,972
=========================================================
NET ASSET VALUE PER SHARE:
(Based on net asset values and shares of beneficial
interest outstanding with $0.01 per share par value)
Class A - $1,183,772,922/73,202,788......................... $ 16.17
============================================================================
Class B - $190,868,253/11,804,259........................... $ 16.17
============================================================================
Class C - $16,406,797/1,014,479............................. $ 16.17
============================================================================
MAXIMUM OFFERING PRICE *
Class A - ($16.17 x 105.26%)................................ $ 17.02
============================================================================
</TABLE>
* 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.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S INVESTMENT INCOME EARNED AND
EXPENSES INCURRED IN OPERATING THE FUND. IT ALSO SHOWS NET GAINS (LOSSES) FOR
THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended June 30, 1995 (Unaudited)
------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $44,863) ................................................. $ 14,373,793
Interest ...................................................... 11,528,155
------------
25,901,948
------------
Expenses:
Investment management fee - Note B ............................ 3,779,169
Distribution/service fee - Note B
Class A .................................................... 1,700,266
Class B .................................................... 786,375
Transfer agent fee - Note B
Class A .................................................... 1,322,856
Class B .................................................... 212,511
Class C .................................................... 7,887
Custodian fee ................................................. 98,929
State taxes ................................................... 83,499
Directors' fees ............................................... 63,676
Registration and filing fees .................................. 49,274
Printing ...................................................... 37,780
Miscellaneous ................................................. 22,016
Auditing fee .................................................. 16,578
Legal fees .................................................... 15,066
------------
Total Expenses ............................. 8,195,882
----------------------------------------------------------
Net Investment Income ...................... 17,706,066
----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold ......................... 474,709
Change in net unrealized appreciation/depreciation
of investments .............................................. 165,847,596
------------
Net Realized and Unrealized
Gain on Investments ........................ 166,322,305
----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .................. $184,028,371
==========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.................................................................. $ 17,706,066 $ 38,545,407
Net realized gain on investments sold.................................................. 474,709 4,097,671
Change in net unrealized appreciation/depreciation of investments...................... 165,847,596 (66,910,292)
--------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations..................... 184,028,371 (24,267,214)
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income
Class A - ($0.2141 and $0.4593 per share, respectively) ............................. (15,761,876) (35,871,209)
Class B - ($0.1578 and $0.3553 per share, respectively) ............................. (1,726,585) (2,196,993)
Class C - ($0.2474 and $0.5100 per share, respectively) ............................. (242,724) (479,108)
Distributions from net realized gain on investments sold
Class A - (none and $0.1105 per share, respectively) ................................ -- (8,643,183)
Class B - (none and $0.1105 per share, respectively) ................................ -- (601,125)
Class C - (none and $0.1105 per share, respectively) ................................ -- (99,934)
-------------- --------------
Total Distributions to Shareholders ................................................ (17,731,185) (47,891,552)
-------------- --------------
FROM FUND SHARE TRANSACTIONS-- NET* .................................................... (8,677,728) 36,823,322
-------------- --------------
Beginning of period ................................................................... 1,233,428,514 1,268,763,958
-------------- --------------
End of period (including undistributed net investment income of $46,506
and $71,625, respectively).......................................................... $1,391,047,972 $1,233,428,514
============== ==============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS PAID TO
SHAREHOLDERS, AND ANY INCREASE OR DECREASE IN MONEY SHAREHOLDERS INVESTED IN THE
FUND. THE FOOTNOTE ILLUSTRATES THE NUMBER OF FUND SHARES SOLD, REINVESTED AND
REDEEMED DURING THE LAST TWO PERIODS, ALONG WITH THE CORRESPONDING DOLLAR
VALUES.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (continued)
-----------------------------------------------------------------------------------------------------------------------------------
* ANALYSIS OF FUND SHARE TRANSACTIONS:
SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
--------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold ...................................................... 7,238,379 $ 111,475,357 10,349,215 $ 151,120,247
Shares issued to shareholders in reinvestment of distributions ... 906,516 14,329,798 2,834,406 40,225,646
----------- ------------- ------------ -------------
8,144,895 125,805,155 13,183,621 191,345,893
Less shares repurchased .......................................... (11,527,967) (176,917,203) (19,930,271) (291,424,469)
----------- ------------- ------------ -------------
Net decrease ..................................................... (3,383,072) $ (51,112,048) (6,746,650) $(100,078,576)
=========== ============= ============ =============
CLASS B
Shares sold ...................................................... 3,561,055 $ 54,831,307 9,346,868 $ 136,349,532
Shares issued to shareholders in reinvestment of distributions ... 100,970 1,597,529 181,850 2,588,170
----------- ------------- ------------ -------------
3,662,025 56,428,836 9,528,718 138,937,702
Less shares repurchased .......................................... (854,504) (13,247,573) (531,980) (7,682,774)
----------- ------------- ------------ -------------
Net increase ..................................................... 2,807,521 $ 43,181,263 8,996,738 $ 131,254,928
=========== ============= ============ =============
CLASS C
Shares sold ...................................................... 186,315 $ 2,843,438 527,530 $ 7,700,516
Shares issued to shareholders in reinvestment of distributions ... 15,336 242,657 33,614 478,279
----------- ------------- ------------ -------------
201,651 3,086,095 561,144 8,178,795
Less shares repurchased .......................................... (249,871) (3,833,038) (172,765) (2,531,825)
----------- ------------- ------------ -------------
Net increase (decrease) .......................................... (48,220) $ (746,943) 388,379 $ 5,646,970
=========== ============= ============ =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period indicated, investment returns, key ratios, and supplemental data are as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 ---------------------------
CLASS A (UNAUDITED) 1994 1993
------- ---------------- ---------- ----------
<S> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $ 14.24 $ 15.10 $ 14.78
---------- ---------- ----------
Net Investment Income ...................................... 0.22 0.46 0.44
Net Realized and Unrealized Gain (Loss) on Investments ..... 1.92 (0.75) 0.39
---------- ---------- ----------
Total from Investment Operations .......................... 2.14 (0.29) 0.83
---------- ---------- ----------
Less Distributions:
Dividends from Net Investment Income ....................... (0.21) (0.46) (0.42)
Distributions from Net Realized Gain on Investments Sold ... -- (0.11) (0.09)
---------- ---------- ----------
Total Distributions ....................................... (0.21) (0.57) (0.51)
---------- ---------- ----------
Net Asset Value, End of Period ............................. $ 16.17 $ 14.24 $ 15.10
========== ========== ==========
Total Investment Return at Net Asset Value ................. 15.10%(c) (1.85%) 5.71%
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .................. $1,183,773 $1,090,231 $1,258,575
Ratio of Expenses to Average Net Assets .................... 1.17%* 1.16% 1.10%
Ratio of Net Investment Income to Average Net Assets ....... 2.79%* 3.13% 2.94%
Portfolio Turnover Rate .................................... 24% 45% 46%
CLASS B (a)
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ....................... $ 14.24 $ 15.02(d)
---------- ----------
Net Investment Income ...................................... 0.16 0.38(e)
Net Realized and Unrealized Loss on Investments ............ 1.93 (0.69)
---------- ----------
Total from Investment Operations .......................... 2.09 (0.31)
---------- ----------
Less Distributions:
Dividends from Net Investment Income ....................... (0.16) (0.36)
Distributions from Net Realized Gain on Investments Sold ... -- (0.11)
---------- ----------
Total Distributions ....................................... (0.16) (0.47)
---------- ----------
Net Asset Value, End of Period ............................. $ 16.17 $ 14.24
========== ==========
Total Investment Return at Net Asset Value ................. 14.69%(c) (2.04%)(c)
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .................. $ 190,868 $ 128,069
Ratio of Expenses to Average Net Assets .................... 1.76%* 1.86%*
Ratio of Net Investment Income to Average Net Assets ....... 1.90%* 2.57%*
Portfolio Turnover Rate .................................... 24% 45%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
CLASS A 1992(f) 1991(f) 1990(f)
------- -------- -------- -------
<S> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $ 14.31 $ 11.94 $ 12.60
-------- -------- -------
Net Investment Income ...................................... 0.47 0.54 0.58
Net Realized and Unrealized Gain (Loss) on Investments ..... 0.54 3.03 (0.05)
-------- -------- -------
Total from Investment Operations .......................... 1.01 3.57 0.53
-------- -------- -------
Less Distributions:
Dividends from Net Investment Income ....................... (0.45) (0.53) (0.59)
Distributions from Net Realized Gain on Investments Sold ... (0.09) (0.67) (0.60)
-------- -------- -------
Total Distributions ....................................... (0.54) (1.20) (1.19)
-------- -------- -------
Net Asset Value, End of Period ............................. $ 14.78 $ 14.31 $ 11.94
======== ======== =======
Total Investment Return at Net Asset Value ................. 7.23% 30.48% 4.38%
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted) .................. $872,932 $194,055 $83,470
Ratio of Expenses to Average Net Assets .................... 1.13% 1.18% 1.14%
Ratio of Net Investment Income to Average Net Assets ....... 3.32% 4.01% 4.77%
Portfolio Turnover Rate .................................... 30% 67% 55%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
Financial Highlights (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 7, 1993
SIX MONTHS ENDED YEAR ENDED (COMMENCEMENT OF
JUNE 30, 1995 DECEMBER 31, OPERATIONS) TO
CLASS C (b) (UNAUDITED) 1994 DECEMBER 31, 1993
----------- ---------------- ------------ -----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................. $ 14.24 $ 15.11 $ 14.79(d)
------- ------- -------
Net Investment Income............................................ 0.26 0.52 0.27(e)
Net Realized and Unrealized Gain (Loss) on Investments........... 1.92 (0.77) 0.48
------- ------- -------
Total from Investment Operations................................ 2.18 (0.25) 0.75
------- ------- -------
Less Distributions:
Dividends from Net Investment Income............................. (0.25) (0.51) (0.34)
Distributions from Net Realized Gain on Investments Sold......... -- (0.11) (0.09)
------- ------- -------
Total Distributions............................................. (0.25) (0.62) (0.43)
------- ------- -------
Net Asset Value, End of Period................................... $ 16.17 $ 14.24 $ 15.11
======= ======= =======
Total Investment Return at Net Asset Value....................... 15.34%(c) (1.57%) 5.13%(c)
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's omitted)........................ $16,407 $15,128 $10,189
Ratio of Expenses to Average Net Assets.......................... 0.69%* 0.81% 0.88%*
Ratio of Net Investment Income to Average Net Assets............. 3.01%* 3.53% 3.17%*
Portfolio Turnover Rate.......................................... 24% 45% 46%
</TABLE>
* On an annualized basis.
(a) Class B shares commenced operations on January 3, 1994.
(b) Class C shares commenced operations on May 7, 1993.
(c) Not annualized.
(d) Initial price to commence operations.
(e) On average month end shares outstanding.
(f) These periods are covered by the report of other independent auditors (not
included herein).
THE FINANCIAL HIGHLIGHTS SUMMARIZES THE IMPACT OF THE FOLLOWING FACTORS ON A
SINGLE SHARE FOR THE PERIOD INDICATED: NET INVESTMENT INCOME, GAINS (LOSSES),
DIVIDENDS 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.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 13
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
Per share earnings and dividends and their compound growth rates are shown for
the most recently reported ten year periods on common stocks.
--------------------------------------------------------------------------------
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY
SOVEREIGN INVESTORS FUND ON JUNE 30, 1995. IT'S DIVIDED INTO FIVE MAIN
CATEGORIES: COMMON STOCKS, PREFERRED STOCKS, CORPORATE BONDS, U.S. GOVERNMENT
AND AGENCIES OBLIGATIONS AND SHORT-TERM INVESTMENTS. THE COMMON STOCKS ARE
FURTHER BROKEN DOWN BY INDUSTRY GROUPS. SHORT-TERM INVESTMENTS, WHICH REPRESENT
THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS (79.97%) RATE VALUE
--------- ---- -----
<S> <C> <C> <C>
BANKS (4.58%)
100,000* First Tennessee National Corp. @ 46 3/8.................................. $ 4,637,500
Tennessee-based bank holding company
Earnings P/S.$2.02, 1.55, 2.20, 1.30, 1.96, 2.45, 2.99, 3.24, 3.53, 4.34 8.9%
Dividends P/S.....$.72, .75, .79, .85, .97, 1.08, 1.14, 1.26, 1.50, 1.73 10.2%
Price/Earnings Ratio................................................10.9
399,000 First Union Corp. @ 45 1/4............................................... 18,054,750
North Carolina-based bank holding company
Earnings P/S.$2.57, 2.55, 2.76, 2.40, 2.52, 2.52, 2.37, 2.92, 4.83, 5.03 7.7%
Dividends P/S....$.58, .65, .77, .86, 1.00, 1.08, 1.12, 1.28, 1.50, 1.72 12.8%
Price/Earnings Ratio.................................................9.4
300,000 KeyCorp. @ 31 3/8........................................................ 9,412,500
Multi-regional bank holding company
Earnings P/S.$1.72, 1.88, 2.10, 2.32, 2.32, 2.45, 2.52, 2.69, 2.97, 3.31 7.5%
Dividends P/S........$.46, .48, .60, .68, .80, .88, .92, .98, 1.12, 1.28 12.0%
Price/Earnings Ratio.................................................9.5
590,000 NationsBank Corp. @ 53 5/8............................................... 31,638,750
Largest superregional bank in the Southeast
Earnings P/S..$2.51, 2.01, 2.87, 4.44, 2.61, .76, 1.39, 4.42, 5.42, 6.19 10.5%
Dividends P/S....$.66, .78, .86, .94, 1.10, 1.42, 1.48, 1.51, 1.64, 1.88 12.3%
Price/Earnings Ratio.................................................8.9
------------
63,743,500
------------
BASIC INDUSTRY (1.01%)
567,000 Sonoco Products Corp. @ 24 3/4.......................................... 14,033,250
------------
Containers, paper products and packaging
Earnings P/S.....$.63, .77, 1.10, 1.18, 1.21, .53, 1.04, .94, 1.24, 1.44 9.6%
Dividends P/S...........$16, .18, .21, .30, .39, .43, .44, .48, .50, .53 14.2%
Price/Earnings Ratio................................................17.7
CHEMICALS (8.74%)
500,000 Air Products & Chemicals, Inc. @ 55 3/4................................. 27,875,000
Producer of industrial and specialty chemicals and gases
Earnings P/S.$1.17, 1.42, 1.95, 1.93, 2.08, 2.23, 2.45, 1.76, 2.05, 2.84 10.4%
Dividends P/S..........$.32, .39, .45, .55, .63, .69, .75, .83, .89, .95 12.9%
Price/Earnings Ratio................................................20.7
491,200 Crompton & Knowles Corp. @ 14 1/8....................................... 6,938,200
Produces and markets specialty chemicals
Earnings P/S..........$.17, .24, .36, .50, .61, .73, .64, .72, .91, 1.02 22.0%
Dividends P/S.......$.075, .079, .084, .11, .15, .20, .25, .31, .38, .46 22.3%
Price/Earnings Ratio................................................13.9
275,000* E.I. du Pont de Nemours and Co. @ 68 3/4................................ 18,906,250
Nation's largest chemical manufacturer
Earnings P/S.$2.12, 2.46, 3.03, 3.53, 3.40, 3.38, 1.84, 1.52, 1.04, 4.46 8.6%
Dividends P/S.$1.00, 1.02, 1.10, 1.23, 1.45, 1.62, 1.68, 1.74, 1.76,....
1.82.......................................................... 6.9%
Price/Earnings Ratio................................................16.2
640,000 PPG Industries, Inc. @ 43............................................... 27,520,000
Manufacturer of specialty chemicals, coatings and resins
Earnings P/S.$1.33, 1.60, 2.13, 2.09, 2.22, 1.74, 1.22, 1.66, 1.45, 2.92 9.1%
Dividends P/S........$.41, .47, .56, .64, .74, .82, .86, .94, 1.04, 1.12 11.8%
Price/Earnings Ratio................................................15.6
300,000 Rohm & Haas Co. @ 54 7/8................................................ 16,462,500
Manufacturer of specialty chemicals and plastics
Earnings P/S.$2.50, 2.86, 3.46, 2.65, 3.10, 2.91, 2.70, 2.52, 1.87, 3.97 5.3%
Dividends P/S...$.70, .78, .86, 1.02, 1.16, 1.22, 1.24, 1.28, 1.36, 1.44 8.3%
Price/Earnings Ratio................................................14.9
145,000 RPM, Inc. @ 19 7/8...................................................... 2,881,875
Manufacturer of specialty chemicals and coatings to waterproof
and rustproof structures
Earnings P/S..........$.39, .43, .48, .56, .65, .51, .62, .55, .91, 1.01 11.2%
Dividends P/S..........$.21, .23, .27, .31, .34, .37, .42, .46, .49, .53 10.8%
Price/Earnings Ratio................................................20.1
100,000* Sigma - Aldrich Corp. @ 49 1/8.......................................... 4,912,500
Manufacturer of biochemical and organic
products used for research and diagnostics
Earnings P/S...$.69, .85, 1.15, 1.30, 1.44, 1.17, 1.67, 1.98, 2.21, 2.27 14.1%
Dividends P/S..........$.11, .13, .15, .17, .19, .20, .23, .26, .30, .34 13.4%
Price/Earnings Ratio................................................21.8
500,000 Witco Corp. @ 32 1/4.................................................... 16,125,000
Producer of special petroleum chemicals
Earnings P/S...$1.47, 1.46, 1.53, .80, 1.38, 1.53, 1.65, 1.18, .65, 2.04 3.7%
Dividends P/S.........$.49, .54, .60, .72, .83, .86, .91, .92, .96, 1.06 9.0%
Price/Earnings Ratio................................................16.3
------------
121,621,325
------------
COMPUTER & OFFICE EQUIPMENT (1.98%)
345,000 Alco Standard Corp. @ 79 7/8............................................ 27,556,875
------------
Distributor of office and paper products
Earnings P/S..$1.28, 1.68, 2.29, 3.91, 2.56, 1.62, 2.07, 2.36, .10, 1.48 1.6%
Dividends P/S.........$.61, .63, .65, .70, .78, .85, .89, .93, .97, 1.01 5.8%
Price/Earnings Ratio................................................53.6
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 14
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS (79.97%) RATE VALUE
--------- ---- -----
<S> <C> <C> <C>
CONSUMER CYCLICALS & SERVICES (5.09%)
240,000* Albertson's, Inc. @ 29 3/4.............................................. $ 7,140,000
Idaho-based operator of supermarkets and
combination food-drug stores
Earnings P/S........$.38, .47, .61, .74, .88, .91, .88, 1.21, 1.39, 1.70 18.1%
Dividends P/S..........$.09, .10, .12, .14, .19, .23, .27, .31, .35, .42 18.7%
Price/Earnings Ratio................................................17.4
400,000 McDonald's Corp. @ 39 1/8............................................... 15,650,000
Dominant force in the fast food industry
Earnings P/S.....$.63, .73, .86, .98, 1.10, 1.12, 1.21, 1.33, 1.50, 1.74 11.9%
Dividends P/S..........$.10, .11, .12, .14, .15, .17, .18, .20, .21, .23 9.7%
Price/Earnings Ratio................................................21.8
900,000 Sysco Corp. @ 29 1/2.................................................... 26,550,000
Largest distributor of food service products
Earnings P/S........$.34, .35, .45, .60, .73, .81, .90, 1.00, 1.16, 1.33 16.4%
Dividends P/S..........$.05, .06, .07, .08, .09, .10, .14, .22, .28, .36 24.5%
Price/Earnings Ratio................................................22.4
400,000 V.F. Corp. @ 53 3/4..................................................... 21,500,000
International apparel manufacturer
Earnings P/S.$2.05, 2.65, 2.55, 2.72, 1.33, 1.44, 3.00, 4.07, 3.78, 4.28 8.5%
Dividends P/S.....$.58, .66, .75, .85, .91, 1.00, 1.02, 1.11, 1.22, 1.30 9.4%
Price/Earnings Ratio................................................12.9
------------
70,840,000
------------
CONSUMER DURABLES (2.14%)
676,500 Leggett & Platt, Inc. @ 44.............................................. 29,766,000
------------
Produces intermediate products for the home furnishings industry
Earnings P/S....$.95, 1.11, 1.09, 1.29, .84, .70, 1.28, 1.74, 2.24, 2.93 13.3%
Dividends P/S..........$.17, .20, .28, .32, .37, .42, .43, .46, .54, .62 15.5%
Price/Earnings Ratio................................................15.8
CONSUMER NON-DURABLES (9.81%)
250,000* Anheuser-Busch Cos., Inc. @ 56 7/8...................................... 14,218,750
Nation's largest brewer
Earnings P/S.$1.69, 2.04, 2.45, 2.68, 2.95, 3.02, 3.31, 3.43, 2.22, 3.98 10.0%
Dividends P/S......$.37, .44, .54, .66, .80, .94, 1.06, 1.20, 1.36, 1.52 17.0%
Price/Earnings Ratio................................................13.9
300,000 Campbell Soup Co. @ 49.................................................. 14,700,000
Leading food manufacturer and distributor
Earnings P/S........$.86, .95, .94, .05, .02, .33, 1.85, .98, 2.42, 2.80 14.0%
Dividends P/S.........$.31, .33, .36, .42, .46, .50, .58, .76, .97, 1.12 15.3%
Price/Earnings Ratio..................................................17
935,000 PepsiCo, Inc. @ 45 5/8.................................................. 42,659,375
Second largest soft drink company
Earnings P/S....$.58, .76, .97, 1.13, 1.35, 1.40, 1.38, 1.64, 1.99, 2.27 16.4%
Dividends P/S..........$.19, .21, .22, .27, .32, .38, .46, .51, .61, .70 15.6%
Price/Earnings Ratio................................................19.4
600,000 Procter & Gamble Co. (The) @ 71 7/8..................................... 43,125,000
Leading producer of household consumer products
Earnings P/S...$1.04, .46, 1.48, 1.74, 2.25, 2.43, 2.57, 2.54, .70, 2.50 10.2%
Dividends P/S......$.65, .67, .68, .70, .83, .93, 1.00, 1.08, 1.17, 1.32 8.2%
Price/Earnings Ratio................................................27.7
765,000 Sara Lee Corp. @ 28 1/2................................................. 21,802,500
Manufacturer of brand name packaged food and consumer products
Earnings P/S.......$.51, .59, .71, .88, .94, 1.03, 1.49, 1.36, 1.47, .52 0.2%
Dividends P/S..........$.20, .25, .30, .36, .42, .47, .50, .58, .64, .68 14.6%
Price/Earnings Ratio................................................53.9
------------
136,505,625
------------
DIVERSIFIED OPERATIONS (3.33%)
600,000* Corning Inc. @ 32 3/4................................................... 19,650,000
Operations are in laboratory services, fiber
optics, specialty materials and consumer products
Earnings P/S.$.93, 1.03, 1.63, 1.40, 1.54, 1.55, 1.75, 1.32, (.07), 1.39 4.6%
Dividends P/S..........$.33, .35, .36, .38, .41, .46, .53, .62, .68, .69 8.5%
Price/Earnings Ratio................................................25.9
465,000 Minnesota Mining &
Manufacturing Co. @ 57 1/4.............................................. 26,621,250
Diversified manufacturer of industrial,
commercial, health care and consumer products
Earnings P/S.$1.70, 2.01, 2.55, 2.80, 2.96, 2.89, 2.65, 2.88, 2.87, 3.31 7.7%
Dividends P/S...$.88, .90, .93, 1.06, 1.30, 1.46, 1.56, 1.60, 1.66, 1.76 8.0%
Price/Earnings Ratio................................................17.8
------------
46,271,250
------------
ELECTRICAL EQUIPMENT (8.67%)
425,000* AMP Inc. @ 42 1/4....................................................... 17,956,250
Produces and sells electrical/electronic products and systems
Earnings P/S..$.76, 1.16, 1.48, 1.32, 1.35, 1.31, 1.23, 1.39, 1.45, 1.88 10.6%
Dividends P/S..........$.36, .37, .43, .50, .60, .68, .72, .76, .80, .84 9.9%
Price/Earnings Ratio................................................23.1
400,000 Emerson Electric Co. @ 71 1/2........................................... 28,600,000
Produces and sells electrical/electronic products and systems
Earnings P/S.$1.87, 2.00, 2.31, 2.63, 2.75, 2.79, 2.88, 3.05, 3.81, 3.89 8.5%
Dividends P/S...$.88, .93, .98, 1.03, 1.16, 1.28, 1.34, 1.40, 1.47, 1.60 6.9%
Price/Earnings Ratio................................................19.3
1,000,000 General Electric Co. @ 56 3/8........................................... 56,375,000
Dominant force in home appliances, electrical
power, and financial services
Earnings P/S.$1.37, 1.60, 1.88, 2.18, 2.43, 2.48, 2.54, 2.55, 2.57, 3.56 11.2%
Dividends P/S......$.55, .58, .65, .70, .82, .94, 1.02, 1.12, 1.26, 1.44 11.3%
Price/Earnings Ratio................................................16.8
300,000* W.W. Grainger, Inc. @ 58 3/4............................................ 17,625,000
Leading distributor of electrical equipment
Earnings P/S.$1.24, 1.48, 1.57, 1.96, 2.19, 2.31, 2.38, 2.70, 3.04, 2.61 8.6%
Dividends P/S..........$.33, .36, .39, .43, .50, .57, .61, .65, .71, .78 10.0%
Price/Earnings Ratio................................................23.2
------------
120,556,250
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 15
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
--------- ---- -----
<S> <C> <C> <C>
ENERGY (1.78%)
350,000 Exxon Corp. @ 70 5/8..................................................... $ 24,718,750
------------
Major factor in the crude oil, natural gas and
chemical industry
Earnings P/S..$3.71, 3.43, 3.95, 2.32, 3.96, 4.73, 3.73, 3.70, 4.19, 4.48 2.1%
Dividends P/S.$1.73, 1.80, 1.90, 2.15, 2.30, 2.47, 2.68, 2.83, 2.88, 2.91 5.9%
Price/Earnings Ratio.................................................15.9
HEALTHCARE (7.22%)
893,000 Abbott Laboratories @ 40 1/2............................................. 36,166,500
Major pharmaceutical and healthcare firm
Earnings P/S.......$.49, .58, .70, .84, .97, 1.11, 1.15, 1.32, 1.53, 1.73 15.0%
Dividends P/S...........$.17, .20, .24, .29, .34, .40, .48, .58, .66, .74 17.8%
Price/Earnings Ratio.................................................19.6
513,000 Johnson & Johnson @ 67 5/8............................................... 34,691,625
Major producer of prescription and non-prescription drugs, toiletries,
medical instruments and supplies
Earnings P/S...$.45, 1.18, 1.41, 1.60, 1.72, 1.98, 2.25, 2.55, 2.82, 3.29 24.7%
Dividends P/S.........$.32, .34, .40, .48, .56, .66, .77, .89, 1.01, 1.13 15.0%
Price/Earnings Ratio.................................................19.8
414,000 Merck & Co., Inc. @ 49................................................... 20,286,000
World's largest ethical drug manufacturer
Earnings P/S......$.54, 74, 1.02, 1.26, 1.52, 1.59, 1.89, 2.18, 1.87, 2.45 18.3%
Dividends P/S..........$.18, .21, .27, .43, .55, .64, .77, .92, 1.03, 1.14 22.8%
Price/Earnings Ratio....................................................20
100,000* Pfizer Inc. @ 92 3/8...................................................... 9,237,500
Leading ethical pharmaceutical producer
Earnings P/S....$.98, 1.02, 1.18, 1.01, 1.19, 1.21, 1.11, 1.69, 1.11, 2.18 9.3%
Dividends P/S............$.37, .41, .45, .50, .55, .60, .66, .74, .84, .94 10.9%
Price/Earnings Ratio..................................................20.4
------------
100,381,625
------------
INSURANCE (3.87%)
400,000 AFLAC Corp. @ 43 3/4...................................................... 17,500,000
Global specialty insurer
Earnings P/S......$.78, .93, 1.08, .80, 1.15, 1.22, 1.54, 1.89, 2.48, 3.00 16.1%
Dividends P/S............$.14, .16, .18, .20, .23, .26, .30, .34, .39, .45 13.9%
Price/Earnings Ratio..................................................14.5
226,000 Chubb Corp. @ 80 1/8...................................................... 18,108,250
Broadly based property-casualty insurance organization
Earnings P/S...$3.53, 3.97, 4.27, 4.91, 6.07, 6.29, 6.44, 6.98, 3.10, 6.78 7.5%
Dividends P/S.....$.76, .80, .89, 1.08, 1.16, 1.32, 1.48, 1.60, 1.72, 1.84 10.3%
Price/Earnings Ratio..................................................11.9
475,000* Reliastar Financial Corp. @ 38 1/4........................................ 18,168,750
Financial services company engaged in life/
health insurance and consumer finance
Earnings P/S...$2.29, 1.86, 1.58, 2.07, 1.99, 1.96, 1.67, 2.26, 2.83, 3.48 4.8%
Dividends P/S............$.40, .43, .47, .57, .59, .65, .69, .73, .79, .88 9.2%
Price/Earnings Ratio..................................................10.8
------------
53,777,000
------------
MEDIA AND INFORMATION SERVICES (2.73%)
250,000 Gannett Co., Inc @ 54 1/4................................................. 13,562,500
Publishes 81 daily/50 nondaily newspapers,
operates 10 TV , 8 FM and 7 AM stations
Earnings P/S...$1.71, 1.98, 2.26, 2.47, 2.36, 2.21, 2.06, 2.48, 2.81, 3.33 7.7%
Dividends P/S.....$.77, .86, .94, 1.02, 1.11, 1.21, 1.24, 1.26, 1.30, 1.34 6.3%
Price/Earnings Ratio..................................................16.8
517,600 Interpublic Group Inc. @ 37 1/2........................................... 19,410,000
One of the largest advertising agencies in the world
Earnings P/S......$.62, .75, .91, 1.05, 1.19, 1.17, 1.32, 1.39, 1.69, 1.89 13.2%
Dividends P/S............$.18, .20, .22, .26, .32, .37, .41, .45, .49, .55 13.2%
Price/Earnings Ratio..................................................19.1
100,000* Reuters Holdings PLC ADR @ 50 1/8......................................... 5,012,500
Electronic publisher of worldwide news,
market information and trading systems
Earnings P/S**.........$3.30, 4.80, 6.50, 7.60, 10.90, 12.40, 13.70, 14.0,
18.0, 21.7......................................... 23.3%
Dividends P/S**.$.81, 1.38, 1.83, 2.25, 3.25, 3.75, 4.25, 5.30, 6.50, 8.00 29.0%
Price/Earnings Ratio..................................................25.5
**Pence Per Ordinary Share ------------
37,985,000
------------
METALS - STEEL (1.26%)
328,000* Nucor Corp. @ 53 1/2...................................................... 17,548,000
------------
Nation's fifth largest steelmaker in the U.S.
Earnings P/S...........$.55, .60, .84, .68, .88, .86, .78, .98, 1.57, 2.97 20.6%
Dividends P/S............$.07, .08, .09, .10, .11, .12, .13, .14, .16, .18 11.1%
Price/Earnings Ratio..................................................20.6
POLLUTION CONTROL (1.78%)
873,000 WMX Technologies Inc. @ 28 3/8............................................ 24,771,375
------------
Nation's largest provider of waste management services
Earnings P/S......$.88, .73, 1.03, 1.22, 1.49, 1.52, 1.28, 1.88, .87, 1.49 6.0%
Dividends P/S............$.11, .13, .17, .21, .27, .34, .40, .48, .56, .60 20.7%
Price/Earnings Ratio..................................................20.6
RETAIL (4.37%)
400,000 May Dept. Stores Co. (The) @ 41 5/8....................................... 16,650,000
Operates 318 department stores and 3,295 shoe stores
Earnings P/S...$1.22, 1.45, 1.82, 1.76, 1.83, 1.99, 2.03, 2.42, 2.83, 3.07 10.8%
Dividends P/S............$46, .51, .56, .62, .69, .77, .81, .83, .90, 1.01 9.1%
Price/Earnings Ratio....................................................14
550,000* Pep Boys - Manny, Moe & Jack (The) @ 26 3/4............................... 14,712,500
Retailer of automotive parts and accessories
Earnings P/S............$52, .62, .76, .63, .66, .63, .73, .93, 1.13, 1.30 10.7%
Dividends P/S............$.06, .07, .08, .09, .11, .12, .13, .14, .15, .17 12.3%
Price/Earnings Ratio..................................................22.3
1,100,000 Wal-Mart Stores, Inc. @ 26 3/4............................................ 29,425,000
Operates chain of discount department stores
Earnings P/S...........$.20, .28, .37, .48, .50, .59, .73, .90, 1.05, 1.20 22.0%
Dividends P/S..........$.018, .021, .03, .04, .06, .07, .09, .11, .13, .17 28.3%
Price/Earnings Ratio..................................................21.9
------------
60,787,500
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 16
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
<TABLE>
<CAPTION>
COMPOUND
NUMBER GROWTH MARKET
OF SHARES COMMON STOCKS RATE VALUE
--------- ---- ------
<S> <C> <C> <C>
TECHNOLOGY (2.68%)
350,000* Automatic Data Processing,
Inc. @ 62 7/8............................................................. $ 22,006,250
Largest independent computing services firm in the U.S.
Earnings P/S.....$.70, .84, 1.07, 1.23, 1.44, 1.58, 1.79, 2.02, 2.29, 2.67 16.0%
Dividends P/S............$.17, .19, .21, .25, .29, .34, .39, .45, .51, .58 14.6%
Price/Earnings Ratio................................................... 24
350,000 General Motors Corp. Class E @ 43 1/2..................................... 15,225,000
Leading provider of information processing services
Earnings P/S.......$.53, .66, .79, .91, 1.04, 1.03, 1.21, 1.37, 1.55, 1.77 14.3%
Dividends P/S............$.05, .10, .13, .17, .24, .28, .32, .36, .40, .48 28.6%
Price/Earnings Ratio..................................................24.9
--------------
37,231,250
--------------
TELECOMMUNICATIONS (4.29%)
540,000 ALLTEL Corp. @ 25 3/8..................................................... 13,702,500
One of the country's largest telephone systems
Earnings P/S.....$.77, .90, 1.04, 1.13, 1.18, 1.18, 1.10, 1.29, 1.43, 1.46 7.4%
Dividends P/S............$.41, .44, .45, .51, .57, .64, .70, .74, .80, .88 8.9%
Price/Earnings Ratio..................................................17.7
250,000 Bell Atlantic Corp. @ 56.................................................. 14,000,000
Provides telephone services in
Mid-Atlantic states
Earnings P/S...$2.93, 3.12, 3.33, 2.72, 3.38, 2.46, 3.27, 3.14, 3.45, 3.25 1.2%
Dividends P/S..$1.70, 1.80, 1.92, 2.04, 2.20, 2.36, 2.52, 2.60, 2.68, 2.76 5.5%
Price/Earnings Ratio..................................................17.7
692,700 Frontier Corp. @ 24....................................................... 16,624,800
Provides telephone service to the city of
Rochester N.Y. and outlying areas
Earnings P/S........$.89, .93, 1.06, .99, .86, .87, 1.20, 1.09, 1.26, 1.56 6.4%
Dividends P/S............$.61, .64, .66, .68, .71, .73, .75, .77, .79, .81 3.2%
Price/Earnings Ratio..................................................15.7
450,000 GTE Corp. @ 34 1/8........................................................ 15,356,250
Largest independent local telephone
holding company
Earnings P/S...$1.72, 1.61, 1.77, 2.08, 1.93, 1.58, 1.95, 1.96, 1.07, 2.59 4.7%
Dividends P/S..$1.04, 1.10, 1.24, 1.30, 1.40, 1.52, 1.64, 1.76, 1.85, 1.88 6.8%
Price/Earnings Ratio..................................................13.5
--------------
59,683,550
--------------
TOBACCO (2.67%)
389,000 Philip Morris Cos., Inc. @ 74 3/8......................................... 28,931,875
Global tobacco, brewing and food company
Earnings P/S...$1.55, 1.94, 2.22, 3.18, 3.83, 3.98, 4.45, 5.63, 4.02, 5.71 15.6%
Dividends P/S.....$.50, .62, .79, 1.01, 1.25, 1.55, 1.91, 2.35, 2.60, 3.03 22.2%
Price/Earnings Ratio..................................................13.4
275,000 UST Inc. @ 29 3/4......................................................... 8,181,250
Leading producer of smokeless tobacco
Earnings P/S........$.46, .56, .71, .82, .98, 1.18, 1.23, 1.56, 1.65, 1.94 17.3%
Dividends P/S...........$.22, .25, .30, .37, .46, .55, .66, .80, .96, 1.12 19.8%
Price/Earnings Ratio..................................................15.3
--------------
37,113,125
--------------
UTILITIES (1.97%)
200,000 Florida Progress Corp. @ 31 1/4........................................... $ 6,250,000
Holding Co. for Florida Power electric utility services
Earnings P/S...$2.47, 2.49, 2.35, 2.39, 2.14, 2.38, 2.09, 2.06, 2.24, 2.36 NMF
Dividends P/S..$1.44, 1.54, 1.61, 1.67, 1.72, 1.78, 1.84, 1.90, 1.95, 1.99 3.7%
Price/Earnings Ratio..................................................13.2
400,000 National Fuel Gas Co. @ 28 5/8............................................ 11,450,000
Integrated natural gas system serving New York, Pennsylvania and Ohio
Earnings P/S...$1.75, 1.49, 1.65, 1.93, 1.83, 1.95, 1.89, 1.88, 2.05, 2.10 2.0%
Dividends P/S..$1.02, 1.12, 1.19, 1.25, 1.32, 1.40, 1.45, 1.49, 1.53, 1.57 4.9%
Price/Earnings Ratio..................................................13.1
260,000 Union Electric Co. @ 37 1/4............................................... 9,685,000
Largest electric utility in Missouri
Earnings P/S...$2.89, 2.91, 2.56, 2.91, 2.74, 2.68, 2.98, 2.95, 2.71, 3.01 0.5%
Dividends P/S..$1.78, 1.86, 1.92, 1.94, 2.02, 2.10, 2.18, 2.26, 2.34, 2.40 3.4%
Price/Earnings Ratio..................................................12.3
--------------
27,385,000
--------------
TOTAL COMMON STOCKS
(Cost $949,502,737) 1,112,276,250
--------------
PREFERRED STOCKS (2.73%)
100,000* Allstate Corp. $2.30 Pfd
Stock @ 40 3/4............................................................ 4,075,000
350,000 American Express Co. DECS, 6 1/4%
Conv @ 48 1/2............................................................. 16,975,000
277,300* Browing-Ferris 7.25% Pfd @ 36 1/2 10,121,450
60,000 Sonoco Products Co. 4.50% Conv
Ser AA @ 55 1/2........................................................... 3,330,000
100,000* Sprint Corp. 8.25% Conv
Pfd @ 34 3/4.............................................................. 3,475,000
--------------
TOTAL PREFERRED STOCKS
(Cost $32,328,978) 37,976,450
--------------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
(000'S
OMITTED) CORPORATE BONDS (6.37%)
--------
<S> <C> <C>
$ 8,500* American Brands, Note 9.125%,
03-01-16 @ 106.07740...................................................... 9,016,579
5,000 BankAmerica Corp., Sub Note 8.125%,
02-01-02 @ 104.46......................................................... 5,238,000
5,000 Black & Decker Corp., Note 7.00%,
02-01-06 @ 96.673......................................................... 4,833,650
10,000 Coastal Corp. (The), Sr Deb 11.75%,
06-15-06 @ 108............................................................ 10,800,000
5,000 Comcast Corp., Sr Sub Deb 10.25%,
10-15-01 @ 106.75......................................................... 5,337,500
5,000 Georgia-Pacific Corp., Deb 9.50%,
02-15-18 @ 105.008........................................................ 5,250,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 17
FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
<TABLE>
<CAPTION>
PAR VALUE
(000'S MARKET
OMITTED) CORPORATE BONDS VALUE
--------- ------
<S> <C> <C>
$ 5,000 GTE North Inc. ,Telephone Facility Lease
Bonds, 9.60%, 01-01-02 @ 114.058........ $ 5,702,900
5,000* K-Mart Funding Corp., Deb 8.80%,
07-01-10 @ 109.195...................... 5,459,750
5,000 NationsBank Corp., Sub Note 6.875%,
02-15-05 @ 98.761....................... 4,938,050
5,000 NCNB Corp., Sub Note 9.125%,
10-15-01 @ 110.842...................... 5,542,100
4,000 Owen-Illinois, Inc., Sr Sub Note 10.00%,
08-01-02 @ 101.75....................... 4,070,000
10,000 RBSG Capital Corp., Gtd Cap Note
10.125%, 03-01-04 @ 119.539............. 11,953,900
5,000 USF&G Corp., Sr Notes 8.375%,
06-15-01 @ 106.39....................... 5,319,500
5,000 Wells Fargo & Co., Deb 8.20%,
11-01-96 @ 102.183...................... 5,109,150
----------------
TOTAL CORPORATE BONDS
(Cost $87,603,392) 88,571,479
----------------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (4.93%)
5,000* Federal Home Loan Bank, Sr. Sub
8.23%, 07-19-04 @ 101.578............... 5,078,900
5,000 Federal Home Loan Mort. Corp. Sr
Sub 6.55%, 04-02-03 @ 98.297............ 4,914,850
5,000 Federal Home Loan Mort. Corp. Sr
Sub 7.50%, 07-23-07 @ 100.997........... 5,049,850
10,000 Federal National Mort. Assn. Sr Sub
7.30%, 07-10-02 @ 100.859............... 10,085,900
5,000 United States Treasury, Note 7.875%,
11-15-99 @ 107.109...................... 5,355,450
5,000 United States Treasury, Note 7.75%,
12-31-99 @ 106.766...................... 5,338,300
10,000 United States Treasury, Note 8.00%,
05-15-01 @ 100.781...................... 10,959,400
10,000 United States Treasury, Note 7.25%,
08-15-04 @ 106.859...................... 10,685,900
10,000 United States Treasury, Note 7.875%,
11-15-04 @ 111.375...................... 11,137,500
----------------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $66,259,838) 68,606,050
----------------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
(000'S SHORT-TERM INTEREST MARKET
OMITTED) INVESTMENTS (6.79%) RATE VALUE
--------- -------- ------
<S> <C> <C> <C>
JOINT REPURCHASE AGREEMENT (3.82%)
$53,111 Investment in a joint repurchase agreement
transaction with Lehman Brothers
Inc.- Dated 06-30-95, due 07-03-95
(secured by U.S. Treasury Bill, 5.45%
due 12-28-95; and by US Treasury
Note, 6.875% due 12-28-95) -
Note A....................... 6.18% $ 53,111,000
----------------
SHORT-TERM NOTES (2.97%)
4,000 Bell Atlantic Financial, 5.97%
07/19/1995.......................... 3,984,743
1,000 Dayton Hudson Corp., 6.00%
07/17/1995.......................... 994,833
34,915 Federal Home Loan Bank, 6.00%
07/03/1995.......................... 34,897,542
500 Pennsylvannia Power & Light, 6.03%
07/12/1995.......................... 498,074
1,000 Pennsylvannia Power & Light, 6.02%
07/26/1995.......................... 994,482
--------------
TOTAL SHORT-TERM NOTES 41,369,674
--------------
CORPORATE SAVINGS ACCOUNT (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 3.00%........... 9,795
--------------
TOTAL SHORT-TERM INVESTMENTS 94,490,469
--------------
TOTAL INVESTMENTS (100.79%) $1,401,920,698
======= ==============
<FN>
* Securities, other than short-term investments, newly added to the portfolio
for six months ended June 30, 1995.
NMF No Meaningful Figure
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Sovereign Investors Fund, Inc. (the "Corporation"), is an open-end
investment management company, registered under the Investment Company Act of
1940. The Corporation consists of two series portfolios: John Hancock Sovereign
Investors Fund (the "Fund") and John Hancock Sovereign Balanced Fund.
The Directors have authorized the issuance of multiple classes of the Fund,
designated as Class A, Class B and Class C. 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 Directors, 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 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 Directors. Short-term debt investments maturing within 60 days
are valued at amortized cost which approximates market value.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investment, to its shareholders. Therefore, no Federal income tax provision is
required. Additionally, net capital losses of $1,217,935 attributable to
security transactions incurred after October 31, 1994 are treated as arising on
the first day (January 1, 1995) of the Fund's current taxable year.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis.
The Fund records all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ from
generally accepted accounting principles. Dividends paid by the Fund, with
respect to each class of shares will be calculated in the same manner and 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 Corporation 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 size of the Funds.
CLASS ALLOCATIONS Income, common expenses and realized and unrealized gains
(losses) are determined at the Fund level and allocated daily to each class of
shares based on the appropriate net assets of the respective classes.
Distribution/service fees, if any, are calculated daily at the class level based
on the appropriate net assets of each class and the specific expense rate(s)
applicable to each class.
DISCOUNT ON SECURITIES The Fund accretes discount from par value on securities
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 quarterly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of John Hancock Funds
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
("JH Funds"), for a continuous investment program equivalent on an annual basis,
to the sum of (a) 0.60% of the first $750,000,000 of the Fund's average daily
net asset value, (b) 0.55% of the next $1,500,000,000, (c) 0.50% of the next
$2,500,000,000 and (d) 0.45% of the Fund's average daily net asset value in
excess of $2,500,000,000. The Adviser has entered into a service agreement with
Sovereign Asset Management Corporation ("SAMCORP") an affiliate of the Adviser,
to provide certain investment research and portfolio management services to the
Fund, for which the Adviser pays SAMCORP 40% of its management fee.
In the event normal operating expenses of the Fund, exclusive of certain
expenses prescribed by state law, are in excess of the most restrictive state
limit where the Fund is registered to sell shares, 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.
The Fund has a distribution agreement with John Hancock Funds ("JH Funds"),
a wholly-owned subsidiary of the Adviser. For the period ended June 30, 1995, JH
Funds received net sales charges of $1,718,678 with regard to sales of Class A
shares. Out of this amount, $266,772 was retained and used for printing
prospectuses, advertising, sales literature and other purposes, $715,235 was
paid as sales commissions to unrelated broker-dealers, and $736,671 was paid as
sales commissions to sales personnel of John Hancock Distributors, Inc.
("Distributors"), Tucker Anthony, Incorporated ("Tucker Anthony") and Sutro &
Co., Inc. ("Sutro"). 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
Tucker Anthony and Sutro, all of which are broker-dealers.
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 June 30, 1995
contingent deferred sales charges received by JH Funds amounted to $259,589.
In addition, to compensate JH Funds for the services it provides as
distributor of shares of the Fund, the Fund has adopted a Distribution Plan 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 JH Funds 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 JH Funds for its distribution/service costs. Up to a maximum of 0.25%
of these 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 director and officer of the Adviser as well
as Director of the Fund. The compensation of unaffiliated Directors is borne by
the Fund. Effective with the fees paid for 1995, the unaffiliated Trustees may
elect to defer for tax purposes their receipt of this compensation under the
John Hancock Group of Funds Deferred Compensation Plan. The Fund will make
investments into other John Hancock funds, as applicable, to cover its liability
with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be
recorded on the Fund's books as an other asset. The deferred
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Sovereign Investors Fund
compensation liability will be marked to market on a periodic basis and income
earned by the investment will be recorded on the Fund's books.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended June 30, 1995, aggregated $280,958,781 and $317,794,733, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $10,191,922 and $19,406,300, respectively, during the period
ended June 30, 1995.
The cost of investments owned at June 30, 1995 (excluding the corporate
savings account), for Federal income tax purposes was $1,230,454,068. Gross
unrealized appreciation and depreciation of investments aggregated $182,724,803
and $11,267,968, respectively, resulting in net unrealized appreciation of
$171,456,835.
20
<PAGE> 21
John Hancock Funds - Sovereign Investors Fund
<TABLE>
HISTORICAL DATA (Unaudited)
The table below shows the record of the Fund during the past periods.
--------------------------------------------------------------------------------
<CAPTION>
CLASS A PER SHARE
YEAR ----------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C>
1985 2,105,220 $.53 $ 11.31 $ .435
1986 2,807,182 .55 12.36 .865
1987 3,701,248 .58 10.96 .90
1988 4,099,131 .604 11.19 .382
1989 5,274,426 .607 12.60 .58
1990 6,991,411 .59 11.94 .60
1991 13,560,178 .53 14.31 .67
1992 59,053,529 .45 14.78 .09
1993 83,332,510 .42 15.10 .09
1994 76,585,860 .46 14.24 .11
1995* 73,202,788 .21 16.17 --
</TABLE>
<TABLE>
<CAPTION>
CLASS B PER SHARE
YEAR ----------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C>
1994 8,996,738 $.36 $14.24 $ .11
1995* 11,804,259 .16 16.17 --
</TABLE>
<TABLE>
<CAPTION>
CLASS C PER SHARE
YEAR ----------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C>
1993 674,320 $.34 $15.11 $ .09
1994 1,062,699 .51 14.24 .11
1995* 1,014,479 .25 16.17 --
<FN>
* For the period ended June 30, 1995.
</TABLE>
<TABLE>
DIVIDEND INCREASES (Unaudited)
Listed below are the most recent dividend increases for the common stocks held
in the Sovereign Investors Fund as of June 30, 1995
--------------------------------------------------------------------------------
<CAPTION>
PERCENT OF
COMPANY DIVIDEND INCREASE
------- -----------------
<S> <C>
Abbott Laboratories................................. 10.53%
AFLAC............................................... 13.0
Air Products........................................ 6.1
Albartson's......................................... 18.2
Alco Standard ...................................... 4.0
ALLTEL.............................................. 9.1
AMP, Inc............................................ 9.5
Anheuser Busch...................................... 10.0
Automatic Data Processing, Inc...................... 16.7
Bell Atlantic Corp.................................. 1.4
Campbell............................................ 10.7
Chubb............................................... 6.5
Corning, Inc........................................ 5.9
Crompton & Knowles................................... 12.5
E. I. DuPont De Nemours & Co., Inc.................. 10.6
Emerson Electric.................................... 10.3
Exxon............................................... 4.2
First Tennessee National Corp....................... 11.9
First Union Corp.................................... 13.0
Florida Progress Corp............................... 2.0
Frontier Corp....................................... 2.5
Gannett............................................. 3.0
General Electric.................................... 13.9
General Motors, CI E................................ 8.3
GTECorp............................................. 3.3
Interpublic Group................................... 10.7
Johnson & Johnson................................... 13.8
KeyCorp............................................. 12.5
Legget & Platt, Inc................................. 12.5
May Department Stores............................... 9.6
McDonald's.......................................... 12.5
Merck............................................... 13.3
Minnesota Mining & Manufacturing.................... 6.8
National Fuel Gas................................... 2.5
NationsBank......................................... 8.7
Nucor Corp.......................................... 55.6
Pep Boys (The)...................................... 11.8
PepsiCo............................................. 11.1
Pfizer, Inc......................................... 10.6
Phillip Morris...................................... 19.6
PPG Industries....................................... 3.4
Procter & Gamble.................................... 14.3
Reliastar Financial................................. 11.1
Rohm and Haas....................................... 10.8
RPM, Inc. .......................................... 7.7
Sara Lee............................................ 6.3
Sigma Aldrich....................................... 9.1
Sonoco Products..................................... 18.2
Sysco............................................... 22.2
Union Electric Co................................... 2.5
UST, Inc............................................ 16.1
V F Corp. .......................................... 6.3
W. W. Grainger, Inc................................. 15.0
Wal-Mart............................................ 17.6
Witco Corp.......................................... 12.0
WMX Technologies, Inc............................... 15.4
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The average dividend increase for this group was.... 11.02%
=====
</TABLE>
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NOTES
John Hancock Funds - Sovereign Investors Fund
22
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NOTES
John Hancock Funds - Sovereign Investors Fund
23
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