John Hancock Funds
Investors
Trust
ANNUAL REPORT
December 31, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Douglas M. Costle*
Leland O. Erdahl*
Richard A. Farrell*
Gail D. Fosler*
William F. Glavin*
Anne C. Hodsdon
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt*
Richard S. Scipione
Edward J. Spellman*
*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
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT and REGISTRAR
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
Listed New York Stock Exchange Symbol: JHI
John Hancock Closed-End Funds:
1-800-843-0090
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:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although it
seems a long way off, the issue is serious enough that at least one
group has already studied the problem, and experts and politicians alike
have weighed in with a slew of prescriptions. Legislative action could
be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this: in
1950, there were 16 workers paying into the Social Security system for
each retiree collecting benefits. Today, there are three workers for
each retiree and by 2019 there will be two. Starting then, the Social
Security Administration estimates that the amount paid out in Social
Security benefits will start to be greater than the amount collected in
Social Security taxes. Compounding the issue is the fact that people are
retiring earlier and living longer.
The state of the system has already left many people, especially younger
and middle-aged workers, feeling insecure about Social Security. A
recent survey by the Employee Benefits Research Institute (EBRI) found
that 79% of current workers polled had little confidence in the ability
of Social Security to maintain the same level of benefits as those
received by today's retirees. Instead, they said they expect to use
their own savings or employer-sponsored pensions for their retirement.
Yet, remarkably, another EBRI survey revealed that only slightly more
than half of America's current workers are saving money for retirement.
Fewer than half own IRAs or participate in employer-sponsored pension or
savings plans.
No matter how Social Security's problems get solved, one thing is clear.
Americans need to rely on themselves for accumulating the bulk of their
retirement savings. There's no law that says you should have to reduce
your standard of living once you stop working. So we encourage you to
save all that you can now, so you can live the way you'd like to later.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JAMES K. HO, CFA, PORTFOLIO MANAGER
John Hancock
Investors Trust
Conflicting economic data and inflation fears
produce lackluster returns in 1996
It was a disappointing year for bond investors. Coming off a spectacular
1995, with the economic climate promising more of the same in 1996,
bondholders were brought up short in the spring. That's when signs of a
faster-growing economy sparked inflation fears and rising interest
rates, which caused bond prices to go down, since they move in the
opposite direction of rates. It soon became clear that the Federal
Reserve, which had only just cut short-term interest rates in January to
boost a sagging economy, would make no further rate cuts.
"It was a
disappointing
year for
bond
investors."
A 2 1/4" x 3 1/4" photo of Fund management team at bottom right. Caption
reads: "Jim Ho (seated) and Fund management team members (l - r) Lester Duke,
Beverly Cleathero, Seth Robbins, Linda Carter"
Caught off guard by the unexpected health of the economy, investors
reversed course and began to wonder if the Fed would actually raise
rates to prevent an outbreak of inflation. Inflation is a bondholder's
nemesis because it erodes the value of their fixed-income stream. These
fears caused bond prices to slide and rates to rise throughout the first
half of the year. The yield on the bellwether 30-year Treasury bond,
which began the year at 5.95%, peaked in July at 7.2% and hovered around
that level through the summer, as the market reacted to each monthly set
of economic data. But despite the market's fears, actual inflation
remained tame and bonds rallied in the fall as the economy appeared to
slow. At year's end, the yield on the 30-year Treasury was 6.64%, three-
quarters of a percentage point above where it began the year. For the
year ending December 31, 1996, the Lehman Brothers government/corporate
bond index, a broad market measure, gained 2.90%. In this environment,
John Hancock Investors Trust significantly outperformed its peers. For
the year, the Fund posted a total return of 4.86% at net asset value,
compared to the average open-end corporate debt A-rated fund's average
2.49%, according to Lipper Analytical Services, Inc.
Chart with the heading "Top Five Bond Sectors" at top of left hand
column. The chart lists five sectors: 1) Banks & Financials 25%; 2) U.S.
Government & Agencies 22%; 3) Utilities 12%; 4)
Broadcasting/Communications 10% 5) Transport 5%. A footnote below
states: "As a percentage of net assets on December 31, 1996."
"Corporate
bonds
were a
relatively
bright
spot in
1996..."
Strategy, shorter-duration help Fund
As in the past, we kept the Fund's main strategy focused on careful
sector and credit decisions, rather than on making any major shifts in
portfolio duration. Duration measures how much a bond's price will rise
or fall with changes in interest rates. The longer the duration, the
more the bond's price will fall as rates are rising (and rise when rates
are falling.) In the first nine months of the year, we did maintain a
fairly conservative posture, keeping a shorter-than-average duration,
which helped us do better than our peers. We did this by utilizing a
barbell strategy, which overweights long- and short-duration securities
while underweighting those of intermediate duration. In February, our
average duration was as short as 4.7 years, which offered some
protection when bond prices began their descent. In September, when
prices began to rise, we shifted to a more neutral stance of 5.0 years
and moved away from the portfolio's barbell structure.
Table entitled "Scorecard" at bottom of left hand column. The header for
the left hand column is "Investment"; the header for the right column is
"Recent performance .. and what's behind the numbers." The first listing
is "Bank Capital Notes" followed by an up arrow and the phrase "Prices
rise with increased investor comfort in this new type of security." The
second listing is "Cleveland Electric" followed by an up arrow and the phrase
"Bonds improve with Ohio Edison's announced buyout." The third listing is
"Riverwood International" followed by a down arrow and the phrase "Declining
paper prices hurt earnings." Footnote below reads: "See "Schedule of
Investments". Investment holdings are subject to change."
Corporate bonds perform well
Corporate bonds were a relatively bright spot in 1996. The prices of
both high quality and high-yield issues improved compared to Treasuries.
In October and November, corporations took advantage of the lower cost
of financing to issue a flood of new bonds. This offered us the
opportunity to swap out of issues that had become rather highly valued
and replace them with new issues that were relatively cheap.
We also benefited from being early buyers of two types of new securities
that made their debut later in the year and were initially misunderstood
or not followed. The first was capital notes. These are notes issued by
banks, which carry them on their balance sheets as equity, but are able
to claim a deduction for the interest. Because investors did not seem to
know what to make of these high-quality securities at first, they came
to the market fairly cheap and we took advantage of that. The other new
security is home equity loan-backed securities, which appear to be
followed by relatively few analysts and investors. These are AAA-rated
securities with less prepayment risk than traditional mortgage-backed
securities. By watching the market closely and selling these securities
when they are trading at a modest premium, it is possible to reduce
prepayment risk even further, while achieving investment gains.
Bar chart with heading "Fund Performance" at top of the left hand
column. Under the heading is the footnote "For the year ended December
31, 1996." The chart is scaled in increments of 1% from top to bottom,
with 5% at the top and 0% at the bottom. Within the chart there are two
solid bars. The first represents the 4.86% total return for John Hancock
Investors Trust. The second represents the 2.49% total return for the
average open-end corporate debt A-rated fund. A footnote below reads:
"The total return for John Hancock Investors Trust is at net asset value
with all distributions reinvested. The average open-end corporate debt
A-rated fund is tracked by Lipper Analytical Services."
Airline equipment trusts were another good performer. These issues are
smaller, and therefore less liquid, than corporate debt issued by the
same airlines. Yet not only are they secured (by airline equipment), but
they are also less expensive than corporate debt, which is unsecured.
Elsewhere, two of our utility companies also provided us with
opportunities during the year. Cleveland Electric, a poorly regarded
Ohio utility, received a credit upgrade when the highly rated Ohio
Edison announced that it would buy the company. And we took advantage of
Public Service of New Mexico's offer to buy back some of its bonds at a
premium.
Finally, bonds from emerging markets, particularly those of corporations
in Argentina, Brazil and Venezuela, did well in 1996. Because no
corporation's credit rating can be higher than that of its country's
government, we were able to invest in a number of issues whose
creditworthiness we believe is better than their ratings showed. These
provided high yields at comparatively low risk.
Outlook
We're taking a cautious approach in the short term. The economy appears
to be showing some more strength, while interest rates remain relatively
low. As long as that's the case, there's a good chance that the Fed
could raise short-term rates to hold economic growth to a reasonable
pace and keep inflation in check. For now, we'll maintain a neutral
stance until the economy's direction becomes clearer. In the corporate
bond arena, we still favor the media sector, where consolidation is
benefiting large companies such as Viacom and Time-Warner. Overall,
domestic corporate bonds are fairly valued, and we'll be selective in
choosing individual securities.
We will look for more opportunities overseas, where the markets are not
as widely followed and there are still good values to be found.
"We're taking
a cautious
approach in
the short
term."
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.
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------------
DECEMBER 31,
-------------------------------
1995 1996
------------- -------------
<S> <C> <C>
Assets:
Investments at value -- Note C:
Publicly traded bonds and direct placement
security (cost -- 1995 -- $150,632,863;
1996 -- $150,057,155) $ 160,005,748 $ 154,227,781
Joint repurchase agreement (cost -- 1995
- -- 7,562,000; 1996 -- $5,481,000) 7,562,000 5,481,000
Corporate savings account 303 182
------------- -------------
167,568,051 159,708,963
Receivable for investments sold 71,493 --
Interest receivable 2,791,758 2,872,693
Other assets 3,263 5,784
------------- -------------
Total Assets 170,434,565 162,587,440
- --------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 4,079,982 --
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 280,717 288,602
Accounts payable and accrued expenses 99,635 75,857
------------- -------------
Total Liabilities 4,460,334 364,459
- --------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 157,992,094 159,628,540
Accumulated net realized loss on investments
and financial futures contracts ( 1,418,940) ( 1,587,874)
Net unrealized appreciation of investments
and financial futures contracts 9,372,885 4,171,197
Undistributed net investment income 28,192 11,118
------------- -------------
Net Assets $ 165,974,231 $ 162,222,981
======================================================================================
Net Asset Value Per Share:
(based on 7,560,164 and 7,642,129 shares
of beneficial interest outstanding --
20 million shares
authorized with no par value) $ 21.95 $ 21.23
======================================================================================
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 December 31, 1996. You'll also
find the net asset value and the maximum offering price per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
- --------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996
------------- -------------
<S> <C> <C>
Investment Income:
Interest $13,975,347 $13,724,157
----------- -----------
Expenses:
Investment management fee -- Note B 1,009,856 1,018,402
Transfer agent fee 118,736 100,613
Printing 88,282 87,271
Custodian fee 49,809 53,937
Auditing fee 37,100 42,800
New York Stock Exchange fee 16,991 16,400
Miscellaneous 13,403 2,535
Trustees' fees 12,967 14,024
Legal fees 3,898 2,088
Financial services fee -- Note B -- 30,295
------------- -------------
Total Expenses 1,351,042 1,368,365
- --------------------------------------------------------------------------------------
Net Investment Income 12,624,305 12,355,792
- --------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments and Financial
Futures Contracts:
Net realized gain on investments sold 1,088,238 40,162
Net realized loss on financial futures contracts ( 562,314) ( 209,096)
Change in net unrealized appreciation/
depreciation of investments 15,727,535 ( 5,201,688)
Change in net unrealized appreciation/
depreciation of financial futures contracts 97,813 --
------------- -------------
Net Realized and Unrealized Gain
(Loss) on Investments and
Financial Futures Contracts 16,351,272 ( 5,370,622)
- --------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $28,975,577 $ 6,985,170
======================================================================================
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.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $ 12,624,305 $ 12,355,792
Net realized gain (loss) on investments
sold and financial futures contracts 525,924 ( 168,934)
Change in net unrealized appreciation/depreciation
of investments and financial futures contracts 15,825,348 ( 5,201,688)
------------ ------------
Net Increase in Net Assets
Resulting from Operations 28,975,577 6,985,170
------------ ------------
Distributions to Shareholders:
Dividends from net investment income
($1.6800 and $1.6300 per share,
respectively) ( 12,614,831) ( 12,372,866)
------------ ------------
From Fund Share Transactions:
(Market value of shares issued to shareholders
in reinvestment of distributions) 1,697,329 1,636,446
------------ ------------
Net Assets:
Beginning of period 147,916,156 165,974,231
------------ ------------
End of period (including undistributed net
investment income of $28,192 and $11,118,
respectively) $165,974,231 $162,222,981
============ ============
* Analysis of Fund Share Transactions:
Shares outstanding, beginning of period 7,477,780 7,560,164
Shares issued to shareholders in
reinvestment of distributions 82,384 81,965
------------ ------------
Shares outstanding, end of period 7,560,164 7,642,129
============ ============
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 due to reinvestment in the Fund. The footnote illustrates the number
of Fund shares outstanding at the beginning of the period, reinvested and outstanding
at the end of the period, for the last two periods.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key ratios
and supplemental data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 21.61 $ 21.62 $ 22.15 $ 19.78 $ 21.95
-------- -------- -------- -------- --------
Net Investment Income 1.85 1.76 1.68 1.68 1.63
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures Contracts 0.03 1.07 ( 2.34) 2.17 ( 0.72)
-------- -------- -------- -------- --------
Total from Investment Operations 1.88 2.83 ( 0.66) 3.85 0.91
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ( 1.87) ( 1.76) ( 1.68) ( 1.68) ( 1.63)
Distributions from Net Realized Gain on Investments
Sold and Financial Futures Contracts -- ( 0.49) ( 0.03) -- --
Temporary Overdistribution -- ( 0.05) -- -- --
-------- -------- -------- -------- --------
Total Distributions ( 1.87) ( 2.30) ( 1.71) ( 1.68) ( 1.63)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 21.62 $ 22.15 $ 19.78 $ 21.95 $ 21.23
======== ======== ======== ======== ========
Per Share Market Value, End of Period $ 23.50 $ 22.375 $ 17.88 $ 20.50 $ 19.50
Total Investment Return at Market Value 6.54% 5.35% ( 12.92%) 24.33% 3.13%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $157,757 $163,709 $147,916 $165,974 $162,223
Ratio of Expenses to Average Net Assets 0.82% 0.85% 0.88% 0.85% 0.85%
Ratio of Net Investment Income
to Average Net Assets 8.58% 7.78% 8.11% 7.93% 7.65%
Portfolio Turnover Rate 104% 99% 82% 102% 118%
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.
It also shows the total investment return for each period based on the market value of Fund shares.
Additionally, important relationships between some items presented in the financial statements are
expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
December 31, 1996
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Investors Trust on
December 31, 1996. It's divided into two main categories: publicly traded bonds and direct
placement security, and short-term investments. The securities are further broken down by
industry groups. Short-term investments, which represent the Fund's "cash" position, are
listed last.
PAR VALUE
INTEREST S&P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- -------- -------- ---------- ------
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY
Aerospace (0.38%)
Jet Equipment Trust,
Equipment Trust Cert Ser 95B2 08-15-14 (R) 10.910% BB+ $ 550 $ 620,186
------------
Banks (14.51%)
Abbey National First Capital, B.V.,
Sub Note 10-15-04 (United Kingdom) (Y) 8.200 AA- 1,000 1,072,570
ABN-Amro Bank N.V. -- Chicago Branch,
Sub Deb 05-31-05 7.250 AA- 500 508,040
African Development Bank,
Sub Note 12-15-03 (Supra National) (Y) 9.750 AA- 1,000 1,163,000
Banco Nacional de Obras y Servicios Publicos S.N.C.,
Note 11-15-03 (Mexico) (Y) 9.625 BB 590 592,950
Bank of New York,
Cap Sec 12-01-26 (R) 7.780 BBB+ 570 558,600
BankAmerica Institutional Capital A,
Gtd Cap Sec 12-31-26 (R) 8.070 A- 560 556,500
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 900 1,027,125
Chase Capital I,
Gtd Cap Sec 12-01-26 7.670 BBB+ 555 542,662
Den Danske Bank Aktieselskab,
Sub Note 06-15-05 (Denmark) (R) (Y) 7.250 A- 345 347,308
First Nationwide Holdings, Inc.,
Sr Sub Note 10-01-03 (R) 10.625 Ba3 250 270,000
Sr Note 04-15-03 (R) 12.500 B 575 636,813
Humpuss Funding Corp.,
Govt Guarantee 12-15-09 (R) 7.720 Baa2 530 524,175
International Bank For Reconstruction and Development,
30 Yr Bond 10-15-16 (Supra National) (Y) 8.625 AAA 3,800 4,438,172
Landeskreditbank Baden -- Wurttemberg,
Sub Note 02-01-23 (Germany) (Y) 7.625 AAA 1,300 1,379,924
Midland American Capital Corp.,
Deb 11-15-03 12.750 A 1,650 1,831,121
National Westminster Bank PLC -- New York Branch,
Sub Note 05-01-01 9.450 AA- 1,200 1,327,812
Republic New York Corp.,
Bond 12-04-26 (R) 7.530 A+ 570 558,691
Scotland International Finance No. 2, B.V.,
Gtd Sub Note 01-27-04 (Netherlands) (R) (Y) 8.800 A 2,000 2,205,340
Gtd Sub Note 11-01-06 (United Kingdom) (R) (Y) 8.850 A 750 843,315
Security Pacific Corp.,
Medium Term Sub Note 05-09-01 10.360 A 1,750 1,991,430
Sub Note 11-15-00 11.500 A 1,000 1,164,540
------------
23,540,088
------------
Broadcasting (8.44%)
Cablevision Systems Corp.,
Sr Sub Deb 04-01-04 10.750 B 685 712,400
Century Communications Corp.,
Sr Sub Deb 10-15-03 11.875 B+ 850 901,000
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 BBB+ 585 623,183
Sr Sub Deb 06-01-07 11.000 BBB 1,210 1,388,475
Jones Intercable, Inc.,
Sr Sub Deb 07-15-04 11.500 B+ 1,000 1,086,250
Le Groupe Videotron Ltee,
Sr Note 02-15-05 (Canada) (Y) 10.625 BB+ 250 275,000
News America Holdings Inc.,
Deb 08-10-18 8.250 BBB 910 918,772
Sr Note 10-15-99 9.125 BBB 1,000 1,067,040
NS Group Inc.,
Unit 07-15-03 13.500 B- 615 639,600
Rogers Cablesystems, Ltd.
Sr Note Ser B 03-15-05 (Canada) (Y) 10.000 BB+ 800 852,000
SFX Broadcasting, Inc.,
Sr Sub Note Ser B 05-15-06 10.750 B- 475 498,750
TeleWest PLC,
Sr Deb 10-01-06 (United Kingdom) (Y) 9.625 BB 365 372,300
Time Warner Inc.,
Deb 01-15-13 9.125 BBB- 1,000 1,091,700
TKR Cable I, Inc.,
Sr Deb 10-30-07 10.500 BBB- 2,000 2,102,140
Viacom, Inc.,
Sr Note 06-01-05 7.750 BB+ 575 566,185
Sub Deb 07-07-06 8.000 BB- 625 604,688
------------
13,699,483
------------
Chemicals (0.62%)
OPP Petroquimica S.A.,
Bond 10-29-04 (Brazil) (R) (Y) 11.000 B+ 685 681,575
Sociedad Quimica y Minera de Chile S.A.,
Loan Part Ctf 09-15-06 (Chile) (R) (Y) 7.700 BBB+ 320 328,288
------------
1,009,863
------------
Commercial Real Estate (0.31%)
Trinet Corp. Realty Trust,
Note 05-15-01 7.300 BBB- 500 506,200
------------
Cosmetics & Toiletries (0.44%)
Johnson & Johnson,
Deb 11-15-23 6.730 AAA 750 713,640
------------
Energy (0.48%)
AES China Generating Co. Ltd.,
Note 12-15-06 (China) (Y) 10.125 BB- 285 294,975
AES Corp.,
Sr Sub Note 07-15-06 10.250 B+ 450 483,750
------------
778,725
------------
Finance (10.02%)
Access Financial Mortgage Loan Trust,
Pass thru Ctf Ser 1996-A4 03-18-20 6.775 AAA 515 514,839
Banc One Credit Card Master Trust,
Class A Asset Backed Ctf Ser 1994-B 12-15-99 7.550 AAA 1,000 1,014,370
CIT Group Holdings, Inc.,
Deb 03-15-01 9.250 A 1,000 1,097,870
ContiFinancial Corp.,
Sr Note 08-15-03 8.375 BB+ 600 616,860
CS First Boston,
Sub Note 05-15-06 (R) 7.750 A2 485 505,482
CSW Investments,
Sr Note 08-01-06 (United Kingdom) (R) (Y) 7.450 A- 450 456,705
DSPL Finance Co., B.V.,
Sr Sec Note 12-30-10 9.120 BBB 500 515,550
GreenTree Home Improvement Loan Trust,
Ctf Home Improv Ln Ser 1995-D Class M-2 09-15-25 6.950 Aa2 650 650,800
IMC Home Equity Loan Trust,
Class A-5 Ser 1996 12-25-13 6.290 AAA 720 697,388
Intertek Finance PLC
Sr Sub Note 11-01-06 (United Kingdom) (R) (Y) 10.250 B2 250 260,000
MBNA Master Credit Card Trust,
Class A Ser 1995-D 11-15-02 6.050 AAA 1,585 1,572,114
Merrill Lynch Mortgage Investors, Inc.,
Class B Sub Bond Ser 1992 B, 04-15-12 8.500 Aaa 392 403,747
Midland Funding Corp. II,
Deb 07-23-05 11.750 B- 300 332,148
Deb 07-23-06 13.250 B- 225 259,949
Midland Cogeneration Venture,
Sr Sec Lease Oblig Ser C 07-23-02 10.330 BB- 1,246 1,324,362
Money Store Home Equity Trust,
Ser 1995-C 09-15-11 6.375 AAA 305 298,519
Ser 1996-B 04-15-12 7.350 AAA 500 506,250
Polysindo International Finance Co. B.V.,
Company Guaranty 06-15-06 (Indonesia) (Y) 11.375 BB 225 245,813
Santander Financial Issuances Ltd.,
Note 04-15-05 (Cayman Islands) (Y) 7.875 A+ 1,000 1,046,300
Standard Credit Card Master Trust I,
Class A Credit Card Part Ctf Ser 1994-2 04-07-08 7.250 AAA 1,000 1,022,500
Class A Credit Card Part Ctf Ser 1995-2 01-07-02 8.625 AAA 1,250 1,253,750
United Companies Financial Corp.,
Sr Note 01-15-04 7.700 BBB- 575 574,270
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1994-A 07-10-18 6.100 AAA 340 334,900
Pass Thru Ctf Ser 1994-A 01-15-25 7.180 AAA 730 736,388
------------
16,240,874
------------
Funeral Services (0.44%)
Loewen Group International, Inc.,
Sr Gtd Note 10-15-03 (R) 8.250 BB+ 710 719,727
------------
Glass Products (1.33%)
Owens-Illinois, Inc.,
Sr Deb 12-01-03 11.000 BB 1,940 2,158,250
------------
Government -- Foreign (2.33%)
Brazil, Republic of,
For Govt Gtd 04-15-09 (Brazil) (Y) 6.653# B+ 750 609,375
Nova Scotia, Province of,
Deb 04-01-22 (Canada) (Y) 8.750 A- 750 870,263
Ontario, Province of,
Bond 06-04-02 (Canada) (Y) 7.750 AA- 500 528,010
Deb 08-31-12 (Canada) (Y) 15.250 AA- 350 390,523
Quebec, Province of,
Deb 10-01-13 (Canada) (Y) 13.000 A+ 500 575,025
Saskatchewan, Province of,
Govt Gtd 12-15-20 (Canada) (Y) 9.375 A- 480 592,320
Venezuela, Republic of,
Deb 12-18-07 (Venezuela) (Y) 6.500# Ba2 250 220,000
------------
3,785,516
------------
Government -- U.S. (13.25%)
United States Treasury,
Bond 08-15-17 8.875 AAA 4,168 5,148,147
Bond 05-15-18 9.125 AAA 3,250 4,116,840
Bond 02-15-23 7.125 AAA 805 840,468
Note 04-15-98 7.875 AAA 1,000 1,026,090
Note 05-15-98 9.000 AAA 2,485 2,589,842
Note 02-15-99 8.875 AAA 1,850 1,957,245
Note 11-30-99 7.750 AAA 3,100 3,239,004
Note 05-15-01 8.000 AAA 1,100 1,175,449
Note 02-15-05 7.500 AAA 1,312 1,403,223
------------
21,496,308
------------
Government -- U.S. Agencies (8.37%)
Federal Home Loan Mortgage Corp.,
30 Yr SF Pass Thru Ctf 01-01-16 11.250 AAA 566 626,913
Federal National Mortgage Assn.,
15 Yr SF Pass Thru Ctf 01-25-05 8.000 AAA 1,000 1,030,310
15 Yr SF Pass Thru Ctf 02-01-08 7.500 AAA 358 364,330
15 Yr SF Pass Thru Ctf 02-01-08 7.500 AAA 207 210,696
15 Yr SF Pass Thru Ctf 10-01-23 7.000 AAA 816 801,613
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 02-15-24 to 02-15-26 7.500 AAA 3,894 3,899,581
30 Yr SF Pass Thru Ctf 01-15-23 to 03-15-23 8.500 AAA 1,495 1,564,597
30 Yr SF Pass Thru Ctf 04-15-21 9.000 AAA 597 636,769
30 Yr SF Pass Thru Ctf 11-15-19 to 02-15-25 9.500 AAA 1,374 1,487,716
30 Yr SF Pass Thru Ctf 11-15-20 10.000 AAA 297 326,221
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 8.625 AAA 2,500 2,632,800
------------
13,581,546
------------
Insurance (5.15%)
Conseco, Inc.,
Sr Note 12-15-04 10.500 BBB 715 843,893
Equitable Life Assurance Society of the United States,
Surplus Note 12-01-05 (R) 6.950 A 550 539,220
Fairfax Financial Holdings Ltd.,
Note 04-15-26 (Canada) (Y) 8.300 BBB+ 670 702,046
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R) 8.200 A+ 1,050 1,115,037
Surplus Note 10-15-26 (R) 7.875 A+ 415 416,598
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 1,100 1,100,836
Nac Re Corp.,
Note 06-15-99 8.000 A- 355 366,261
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 1,500 1,453,380
Phoenix Home Life Mutual Life Insurance Co.,
Surplus Note 12-01-06 (R) 6.950 A+ 610 598,372
Sun Canada Financial Co.,
Note 12-15-07 (Canada) (R) (Y) 6.625 AA 725 695,232
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 500 519,345
------------
8,350,220
------------
Leasing Companies (0.25%)
Ryder TRS Inc.,
Sr Sub Note 12-01-06 (R) 10.000 B+ 395 410,800
------------
Leisure and Recreation (0.85%)
Mohegan Tribal Gaming Authority,
Sr Note 11-15-02 13.500 BB+ 150 196,500
Showboat Marina Casino Partnership,
1st Mtg Ser B 03-15-03 13.500 B 500 551,250
Trump Hotels & Casinos Resorts Funding, Inc.,
Sr Note 06-15-05 15.500 B+ 550 627,000
------------
1,374,750
------------
Medical Products (0.16%)
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 250 263,125
------------
Oil & Gas (3.40%)
Ashland Oil, Inc.,
SF Deb 10-15-17 11.125 BBB 1,000 1,086,720
Camuzzi Gas, Pampeana S.A.,
Medium Term Note 12-15-01 (Argentina) (R) (Y) 9.250 BB- 315 318,150
Enserch Exploration Inc.,
Pass thru Ctf 01-02-09 (R) 7.540 BBB 510 501,075
Iberdrola International B.V.,
Gtd Note 10-01-02 (R) 7.500 AA- 1,000 1,038,750
Maxus Energy Corp.,
Deb 05-01-13 11.250 BB- 125 126,875
Norsk Hydro ASA,
Deb 10-01-16 (Norway) (Y) 7.500 A 690 706,153
Petroliam Nasional Berhad,
Bond 10-15-26 (Malaysia) (R) (Y) 7.625 A+ 580 588,491
Transgas de Occidenta S.A.,
Sr Note 11-01-10 (Colombia) (R) (Y) 9.790 BBB- 620 645,854
TransTexas Gas Corp.,
Sr Note 06-15-02 11.500 BB- 470 507,600
------------
5,519,668
------------
Paper & Paper Products (1.49%)
Georgia-Pacific Corp.,
Deb 01-15-18 9.750 BBB- 655 683,329
Deb 02-15-18 9.500 BBB- 450 470,736
Indah Kiat International Finance,
Co Gtd Ser C 06-15-06 (Indonesia) (Y) 12.500 BB 250 275,000
SD Warren Co.,
Sr Sub Note 12-15-04 12.000 B+ 415 448,200
Stone Consolidated Corp.,
Sr Note 12-15-00 (Canada) (Y) 10.250 BB+ 500 532,500
------------
2,409,765
------------
Retail (2.15%)
Flagstar Corp.,
Bond 09-15-01 10.750 B- 370 334,850
Kroger Co. (The),
Lease Ctf 02-01-09 12.950 BB+ 1,910 2,110,550
May Department Stores Co. (The),
Deb 06-15-18 10.750 A 126 134,292
Safeway Stores, Inc.,
Lease Ctf 01-15-09 13.500 BBB 474 524,138
Smith's Food & Drug Centers, Inc.,
Sr Sub Note 05-15-07 11.250 B- 350 386,750
------------
3,490,580
------------
Steel (0.70%)
IVACO Inc.,
Sr Note 09-15-05 (Canada) (Y) 11.500 B+ 550 547,938
Weirton Steel Corp.,
Sr Note 03-01-98 11.500 B 149 153,470
Sr Note 07-01-04 11.375 B 420 426,300
------------
1,127,708
------------
Telecommunications (1.82%)
Comtel Brasileira Ltd.,
Note 09-26-04 (Brazilian Cruzeiro) (R) 10.750 NR 455 468,650
IMPSAT Corp.,
Sr Gtd Note 07-15-03 (Argentina) (Y) 12.125 BB- 555 588,300
Paging Network Inc.,
Sr Sub Note 10-15-08 10.000 B 545 547,725
TCI Communications, Inc.,
Sr Deb 08-01-15 8.750 BBB- 575 568,031
Teleport Communications Group, Inc.,
Note 07-01-06 9.875 B 110 117,425
Total Access Communication Public Co. Ltd.,
Bond 11-04-06 (Thailand) (R) (Y) 8.375 BBB- 650 654,355
------------
2,944,486
------------
Textile (0.07%)
Polysindo Eka Perkasa (P.T.),
Sec Note Co Gtd 06-15-01 (India) (Y) 13.000 BB 100 112,000
------------
Tobacco (0.59%)
RJR Nabisco, Inc.,
Note 12-01-02 8.625 BBB- 100 102,074
Note 09-15-03 7.625 BBB- 885 848,432
------------
950,506
------------
Transportation (5.17%)
America West Airlines, Inc.,
Pass Thru Ctf Ser B 01-02-08 6.930 A- 515 510,494
Continental Airlines,
Pass Thru Ctf Ser 96-C 10-15-13 9.500 BBB 500 562,455
Delta Air Lines, Inc.,
Equip Tr Ctf Ser A 06-01-08 10.000 BBB 2,000 2,391,960
NWA Trust,
Sr Note Ser A 06-21-14 9.250 AA 578 657,837
Northwest Airlines, Inc.,
Pass Thru Ctf Ser 1996-1C 01-02-05 10.150 BB+ 400 420,000
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 400 436,000
Rail Car Trust,
Class A Pass Thru Ctf Ser 1992-1 06-01-04 7.750 AAA 1,593 1,664,753
Scandinavian Airlines System,
Bond 07-20-99 (Multinational) (Y) 9.125 A3 700 742,875
USAir, Inc.,
Pass thru Ctr Ser 1990-A1 03-19-05 11.200 B+ 975 995,307
------------
8,381,681
------------
Utilities (12.35%)
AMTROL Inc.,
Sr Sub Note 12-31-06 (R) 10.625 B- 325 335,562
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB+ 700 693,552
CalEnergy Co., Inc.,
Sr Note 09-15-06 (R) 9.500 Ba2 435 450,224
Calpine Corp.,
Sr Note 05-15-06 10.500 B+ 465 491,737
CE Casecnan Water & Energy Co., Inc.,
Sr Note Ser A 11-15-05 (Philippine Islands) (Y) 11.450 BB 400 449,000
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB 795 838,230
CSW Investments,
Sr Note 08-01-01 (United Kingdom) (R) (Y) 6.950 A- 580 582,957
CTC Mansfield Funding Corp.,
Deb 03-30-03 10.250 B+ 450 456,640
Sec Lease Oblig 09-30-16 11.125 B+ 1,900 2,004,500
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BB- 732 775,436
Enersis S.A.,
Note 12-01-16 (Cayman Islands) (Y) 7.400 A- 795 773,933
First PV Funding Corp.,
Deb Ser 86A 01-15-14 10.300 BB- 226 240,690
Deb Ser 86B 01-15-16 10.150 BB- 719 763,938
Fitchburg Holding Corp.,
Sec Note 01-31-03 (r) 15.750 2,083 2,244,280
GTE Corp.,
Deb 11-15-17 10.300 A- 500 541,225
Deb 11-01-20 10.250 A- 1,500 1,713,120
Hydro-Quebec,
Deb 02-01-03 (Canada) (Y) 7.375 A+ 750 770,348
Deb 02-01-21 (Canada) (Y) 9.400 A+ 900 1,085,328
Long Island Lighting Co.,
Deb 03-15-03 7.050 BB+ 750 732,683
Deb 07-15-19 8.900 BB+ 190 193,848
Gen Ref Bond 05-01-21 9.750 BBB- 450 480,546
Gen Ref Mtg 07-01-24 9.625 BBB- 750 797,633
Louisiana Power & Light Co.,
Sec Lease Oblig Bond Ser B 01-02-17 10.670 BBB- 1,350 1,444,905
System Energy Resources, Inc.,
1st Mtg 08-01-01 7.710 BBB- 590 603,275
Tenaga Nasional Berhad,
Note 06-15-04 (Malaysia) (R) (Y) 7.875 A+ 550 578,496
------------
20,042,086
------------
TOTAL PUBLICLY TRADED BONDS AND
DIRECT PLACEMENT SECURITY
(Cost $150,057,155) ( 95.07%) $154,227,781
----- ------------
<CAPTION>
PAR VALUE
INTEREST (000'S MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- -------- ---------- ------
<S> <C> C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.38%)
Investment in a joint repurchase
agreement transaction with Lehman
Brothers, Inc., Dated 12-31-96, due
01-02-97 (secured by U.S. Treasury
Bonds, 7.250% thru 12.500%, due
08-15-14 thru 08-15-22) -- Note A 6.700 $ 5,481 $ 5,481,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rates 4.75% 182
------------
TOTAL SHORT-TERM INVESTMENTS ( 3.38%) 5,481,182
----- ------------
TOTAL INVESTMENTS ( 98.45%) $159,708,963
===== ============
<CAPTION>
NOTES TO SCHEDULE OF INVESTMENTS
(r) The security listed below is a direct placement security and is restricted as to resale.
The Fund has limited rights to registration under the Securities Act of 1933 with respect to
restricted securities (not including Rule 144A securities). In certain circumstances the Fund
may bear a portion of the cost of such registrations; otherwise, such costs would be borne by
the issuer. Additional information on this restricted security is as follows:
MARKET MARKET
VALUE AS A VALUE
PERCENTAGE AS OF
ACQUISITION ACQUISITION OF FUND'S DECEMBER 31,
DATE COST NET ASSETS 1996
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Fitchburg Holdings Corp., Sec. Note,
15.75%, 01-31-03 02-10-81 $2,293,925 1.38% $2,244,280
(R) These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such
securities may be resold, normally to qualified institutional buyers, in transactions exempt from
registration. Rule144A securities amounted to $23,084,089 as of December 31, 1996.
(Y) Parenthetical disclosure of a foreign country in the security description represents country of
foreign issuer, however, security is U.S. dollar denominated.
* Credit ratings are unaudited and are rated by Moody's Investor Services or John Hancock Advisers, Inc.
where Standard and Poors ratings are not available. The percentage shown for each investment category
is the total value of that category as a percentage of the net assets of the Fund.
# Represents rate in effect on December 31, 1996.
See notes to financial statements.
</TABLE>
NOTES TO
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
NOTE A -
ACCOUNTING POLICIES
John Hancock Investors Trust (the "Fund") is a closed-end investment
management company registered under the Investment Company Act of 1940.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or, at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The
Berkeley Financial Group, may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more repurchase agreements, whose underlying securities are obligations
of the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investment, to its
shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has $749,047 of capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforward is used by the
Fund, no capital gain distributions will be made.The carryforward
expires as follows: December 31, 2003 - $744,673 and December 31, 2004 -
$4,374. Additionally, net capital losses of $196,852 attributable to
security transactions occurring after October 31, 1996 are treated as
arising on the first day (January 1, 1997) of the Fund's next taxable
year.
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 dividends and distributions to shareholders from
net investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with federal income tax
regulations, which may differ from generally accepted accounting
principles.
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. Actual results
could differ from these estimates.
DISCOUNT ON SECURITIES The Fund accretes original issue 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.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates
and other market conditions. Buying futures tends to increase the Fund's
exposure to the underlying instrument. Selling futures tends to decrease
the Fund's exposure to the underling instrument or hedge other Fund
instruments. At the time the Fund enters into a financial futures
contract, it will be required to deposit with its custodian a specified
amount of cash or U.S. government securities, known as "initial margin",
equal to a certain percentage of the value of the financial future
contracts being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities
exchange on which it trades. Subsequent payments, known as "variation
margin", to and from the broker are made on a daily basis as the market
price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market", are recorded by
the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks
of entering into futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. In addition, the Fund could be prevented from opening or
realizing the benefits of closing out futures positions because of
position limits or limits on daily price fluctuations imposed by an
exchange.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures
transactions.
At December 31, 1996, there were no open positions in financial futures
contracts.
NOTE B -
MANAGEMENT FEE AND ADMINISTRATIVE SERVICES
Under the present investment management contract, the Fund pays a
quarterly management fee to the Adviser, for a continuous investment
program, equivalent on an annual basis, to the sum of (a) 0.650% of the
first $150,000,000 of the Fund's average weekly net asset value, (b)
0.375% of the next $50,000,000, (c) 0.350% of the next $100,000,000 and
(d) 0.300% of the Fund's average weekly net asset value in excess of
$300,000,000.
In the event normal operating expenses of the Fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceeds 1.5%
of the first $30,000,000 of the Fund's average weekly net asset value
and 1.0% of the Fund's average weekly net asset value in excess of
$30,000,000, 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 Fund has an agreement with the Adviser to perform necessary tax and
financial management services for the Funds. The compensation for 1996
is to be paid at an annual rate of 0.01875% of the average net assets of
each Fund.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are trustees and/or officers of the Adviser and/or its
affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. Effective with the fees paid
for 1995, the unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. At
December 31, 1996, the Fund's investment to cover the deferred
compensation liability had unrealized appreciation of $571.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligation
of the U.S. government and its agencies and short-term securities,
during the period ended December 31, 1996 aggregated $87,858,828 and
$80,328,943, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies aggregated
$92,739,219 and $101,013,802, respectively.
The cost of investments owned at December 31, 1996 (excluding the
corporate savings account) for Federal income tax purposes was
$156,124,065. Gross unrealized appreciation and depreciation of
investments at December 31, 1996 aggregated $5,385,858 and $1,801,142,
respectively, resulting in net unrealized appreciation of $3,584,716.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
John Hancock Investors Trust
We have audited the accompanying statement of assets and liabilities of
the John Hancock Investors Trust (the "Trust"), as of December 31, 1996
and 1995, including the schedule of investments as of December 31, 1996,
and the related statements of operations and changes in net assets for
each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of December 31,
1996 and 1995, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of John Hancock Investors Trust at December 31, 1996
and 1995, the results of its operations and changes in its net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 7, 1997
<TABLE>
<CAPTION>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations for each of the two years in
the period ended December 31, 1996 and 1995 are as follows:
1996
------------
THREE MONTHS ENDED
------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------- ------------- ------------
(000's OMITTED EXCEPT
PER SHARE DATA)
-----------------------
<S> <C> <C> <C> <C>
Net investment income $3,068 $3,076 $3,135 $3,077
Dividends from net investment
income 3,100 3,108 3,116 3,049
Net realized and unrealized gain
on investments and financial
futures contracts (6,040) (2,052) 516 2,205
Per share of beneficial interest:
Net investment income 0.41 0.40 0.41 0.41
Dividends 0.41 0.41 0.41 0.40
Net asset value at end of quarter $21.15 $20.87 $20.94 $21.23
<CAPTION>
1995
------------
THREE MONTHS ENDED
------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------- ------------- ------------
(000's OMITTED EXCEPT
PER SHARE DATA)
-----------------------
<S> <C> <C> <C>
Net investment income $3,141 $3,169 $3,167 $3,147
Dividends from net investment
income 3,141 3,149 3,158 3,167
Net realized and unrealized gain
on investments and financial
futures contracts 5,013 7,063 64 4,211
Per share of beneficial interest:
Net investment income 0.42 0.42 0.42 0.42
Dividends 0.42 0.42 0.42 0.42
Net asset value at end of quarter $20.45 $21.39 $20.40 $21.95
</TABLE>
DIVIDENDS AND DISTRIBUTIONS
During 1996, dividends from net investment income totaling $1.63 per
share was paid to shareholders. The dates of payment and the amounts per
share are as follows:
INCOME
PAYMENT DATE DIVIDEND
---------------------------------- ----------------------
March 29, 1996 $0.4100
June 28, 1996 0.4100
September 30, 1996 0.4100
December 30, 1996 0.4000
INVESTMENT OBJECTIVE AND POLICY
John Hancock Investors Trust is a closed-end diversified management
investment company, shares of which were initially offered to the public
on January 29, 1971 and are publicly traded on the New York Stock
Exchange. Its primary investment objective is to generate income for
distribution to its shareholders, with capital appreciation as a
secondary objective. The preponderance of the Fund's assets are invested
in a diversified portfolio of debt securities, some of which may carry
equity features. Up to 50% of the value of the Fund's assets may be
invested in restricted securities acquired through direct placement. The
Fund may issue a single class of senior securities not to exceed 33 1/3%
of the market or fair value of its net assets and may borrow from banks
as a temporary measure for emergency purposes in amounts not to exceed
5% of its total assets taken at cost. Substantially all of the Fund's
net investment income per year will be distributed to shareholders in
quarterly payments. Net realized short-term capital gains, if any, will
be distributed annually; however, net realized long-term capital gains
may be retained and reinvested. All distributions are paid in cash
unless the shareholder elects to participate in the Automatic Dividend
Reinvestment Plan.
FINANCIAL FUTURES CONTRACTS
The Fund may buy and sell financial futures contracts and options on
futures contracts to hedge against the effects of fluctuations in
interest rates and other market conditions. The Fund's ability to hedge
successfully will depend on the Adviser's ability to predict accurately
the future direction of interest rate changes and other market factors.
There is no assurance that a liquid market for futures and options will
always exist. In addition, the Fund could be prevented from opening, or
realizing the benefits of closing out, a futures or options position
because of position limits or limits on daily price fluctuations imposed
by an exchange.
The Fund will not engage in transactions in futures contracts and
options on futures for speculation, but only for hedging or other
permissible risk management purposes. All of the Fund's futures
contracts and options on futures will be traded on a U.S. commodity
exchange or board of trade. The Fund will not engage in a transaction in
futures or options on futures if, immediately thereafter, the sum of
initial margin deposits on existing positions and premiums paid for
options on futures would exceed 5% of the Fund's total assets.
DIVIDEND REINVESTMENT PLAN
John Hancock Investors Trust offers shareholders the opportunity to
elect to receive shares of the Fund's Common Shares in lieu of cash
dividends. The Plan is available to all shareholders without charge.
Any shareholder of record of John Hancock Investors Trust ("Investors")
may elect to participate in the Automatic Dividend Reinvestment Plan
(the "Plan") and receive shares of Investors' Common Shares in lieu of
all or a portion of the cash dividends.
Shareholders may join the Plan by filling out and mailing an
authorization card showing an election to reinvest all or a portion of
dividend payments. If received in proper form by State Street Bank and
Trust Company, P.O. Box 8209, Boston, Massachusetts 02266-8209 (the
"Agent Bank") not later than seven business days before the record date
for a dividend, the election will be effective with respect to all
dividends paid after such record date. Shareholders whose shares are
held in the name of a broker or nominee should contact the broker, bank,
or nominee to participate in the Plan.
Participation in the Plan may be terminated at any time by written
notice to the Agent Bank and such termination will be effective
immediately. However, notice of termination must be received seven days
prior to the record date of any distribution to be effective for that
distribution. Upon termination, certificates will be issued representing
the number of full shares of Common Shares held by the Agent Bank. A
shareholder will receive a cash payment for any fractional share held.
The Agent Bank will act as agent for participating shareholders. The
Board of Trustees of Investors will declare dividends from net
investment income payable in cash or, in the case of shareholders
participating in the Plan, partially or entirely in Investors' Common
Shares. The number of shares to be issued for the benefit of each
shareholder will be determined by dividing the amount of the cash
dividend otherwise payable to such shareholder on shares included under
the Plan by the per share net asset value of the Common Shares on the
date for payment of the dividend, unless the net asset value per share
on the payment date is less than 95% of the market price per share on
that date, in which event the number of shares to be issued to a
shareholder will be determined by dividing the amount of the cash
dividend payable to such shareholder by 95% of the market price per
share of the Common Shares on the payment date. The market price of the
Common Shares on a particular date shall be the mean between the highest
and lowest sales price on the New York Stock Exchange on that date. Net
asset value will be determined in accordance with the established
procedures of Investors. However, if as of such payment date the market
price of the Common Shares is lower than such net asset value per share,
the number of shares to be issued will be determined on the basis of
such market price. Fractional shares, carried out to three decimal
places, will be credited to your account. Such fractional shares will be
entitled to future dividends.
The shares issued to participating shareholders, including fractional
shares, will be held by the Agent Bank in the name of the participant. A
confirmation will be sent to each shareholder promptly, normally within
seven days, after the payment date of the dividend. The confirmation
will show the total number of shares held by such shareholder before and
after the dividend, the amount of the most recent cash dividend which
the shareholder has elected to reinvest and the number of shares
acquired with such dividend.
The reinvestment of dividends does not in any way relieve participating
shareholders of any Federal, state or local income tax which may be due
with respect to such dividend. Dividends reinvested in shares will be
treated on your Federal income tax return as though you had received a
dividend in cash in an amount equal to the fair market value of the
shares received, as determined by the prices for shares of the Fund on
the New York Stock Exchange as of the dividend payment date.
Distributions from the Fund's long-term capital gains will be processed
as noted above for those electing to reinvest in shares and will be
taxable to you as long-term capital gains. The confirmation referred to
above will contain all the information you will require for determining
the cost basis of shares acquired and should be retained for that
purpose. At year end, each account will be supplied with detailed
information necessary to determine total tax liability for the calendar
year.
Additional information may be obtained from the Customer Service
Department, John Hancock Investors Trust, 101 Huntington Avenue, Boston,
Massachusetts 02199-7603, 1 (800) 843-0090.
SHAREHOLDER REPORTS
In accordance with the requirements of the Investment Company Act of
1940, the Fund will mail to shareholders an annual report within 60 days
after the end of each fiscal year and a semi-annual report within 60
days after the end of each second fiscal quarter. To reduce fund
expenses, the Fund has discontinued the practice of mailing reports to
shareholders after the end of each first and third fiscal quarters.
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
S. Hackensack, NJ
Permit No. 750
A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper." P500A 12/96
2/97
