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John Hancock Funds
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Investors
Trust
SEMIANNUAL REPORT
June 30, 1997
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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
200 Clarendon Street
Boston, Massachusetts 02116
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
Listed New York Stock Exchange Symbol: JHI
John Hancock Closed-End Funds:
1-800-843-0090
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
The stock market has certainly put on a show since the start of the year. Stocks
began 1997 on the high wires, bolstered by a near-perfect "Goldilocks"
economy-not too hot, not too cold. In almost a straight shot, the Dow Jones
Industrial Average soared through the 7000 level for the first time in early
March. Just days later, stocks lost their footing and staged a month-long
free-fall in a nervous reaction to rising interest rates and economic data that
showed the economy was picking up steam. Stocks gave back all of their year's
gain and suffered their worst decline since 1990 during this period. No sooner
had real fears begun to beset investors then they were gone, erased in a
euphoric rally caused by strong earnings and no signs of inflation. By the end
of June, both the Dow and the broader Standard & Poor's 500 Stock Index had
risen by 20%-a level not many thought the market would reach all year, let alone
in six months. Bondholders have not enjoyed the same bounty, as the bond market
has mostly stayed worried about the strength of the economy, the direction of
interest rates, and the Federal Reserve's next moves to pre-empt inflation.
But the stock market's latest advance has amazed many analysts and left
them pondering their valuation models, since the market is now more expensive
than it has been in decades. It's impossible to know what will happen next in
the markets. But whether it's another strong move forward or a retreat, we
recommend keeping a long-term perspective, rather than over-focusing on the
market's daily twists and turns. While the economic backdrop seems to remain
near perfect, the one thing we believe investors should be prepared for is more
market volatility. It also makes sense to do something we've always advocated:
set realistic expectations, since, as we've also seen this year, markets can
move down as fast as they go up.
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A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
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Use this time of heightened volatility as an opportunity to review your
portfolio's asset allocations with your investment professional. After such a
strong advance in equities over the last two and a half years, it could be time
to rebalance your portfolio, if you haven't already, to maintain your desired
targets of diversification. As part of that process, make sure that your
investment strategies still reflect your individual time horizons, objectives
and risk tolerance. Despite turbulence, one thing remains constant. A
well-constructed plan and a cool head can be the best tools for reaching your
financial goals.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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by James K. Ho, CFA, Portfolio Manager
John Hancock
Investors Trust
Careful sector allocation and credit selection
help Fund performance in fitful environment
Fixed-income securities had a difficult time making headway during the first
three months of the semiannual period. Investors nervously awaited each new
economic report, hoping for some discernible signs as to the direction of the
economy and the Federal Reserve Board's stance on monetary policy. Market
turbulence was most pronounced in late February and March, prior to and in
response to the Fed's pre-emptive strike against inflation, which entailed a
.25% increase in the federal funds rate-the rate that member banks charge each
other for overnight loans.
The second quarter registered improved performance, as a series of economic
statistics indicating moderate growth and subdued inflation did much to calm
investors' inflation concerns. The possibility that the Fed would raise
short-term rates again in July became more remote with each new report, and set
the stage for what could wind up being an uneventful summer. By the end of the
six months ended June 30, 1997, the broad fixed-income market had rebounded
enough to effectively offset the weak performance experienced months earlier.
"...the
financial
strength of
corporate
America
helped boost
corporate
bond
prices..."
Against this fitful backdrop, John Hancock Investors Trust posted solid
results, producing a total return of 3.93% at net asset value. The Fund
outperformed the average open-end corporate debt A-rated fund, which produced a
gain of 2.68% at net asset value, as tracked by Lipper Analytical Services, Inc.
Fund begins fiscal year on a defensive note
Anticipating unsettled conditions upon entering
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A 2 1/4" x 3 3/4" photo of the Fund management team at bottom right. Caption
reads: "James K. Ho (seated) and Fund management team members (l - r) Lester
Duke, Bverly Cleathero, Seth Robbins, Linda Carter."
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3
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John Hancock Funds - Investors Trust
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Chart with the heading "Top Five Bond Sectors" at top left hand column. Chart
lists five holdings: 1) Banks & Financials 29 %; 2U.S. Government & Agencies
23%; 3) Utilities 14%; 4) Transportation 6%; 5) Media 6%. A footnote below
states "As a percentage of net assets on June 30, 1997."
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fiscal 1997, we kept the Fund's
average duration, a measure of the Fund's sensitivity to interest-rate changes,
shorter than its competitors and its benchmark, the Lehman Brothers
Government/Corporate Bond Index. We achieved this defensive orientation by
aligning assets at opposite ends of the yield curve, owning both short-term and
long-term securities to optimize total return potential. The yield curve
flattened as bonds experienced downward pressure during the first quarter. This
"barbell" strategy helped provide a level of stability.
"Media, finan-
cial services,
and utility
companies are
three areas we
have empha-
sized..."
As the period drew to a close, several leading indicators hinted at
weaker-than-expected economic growth and the market began to pick up steam.
Realizing the new data could well be enough to ease the Fed's inflation
concerns, we became a bit less defensive and adjusted duration to a slightly
more neutral position, redeploying assets in intermediate-term securities and
matching the benchmark's duration more closely. Believing the Fed will stand pat
on interest rates throughout the summer, we anticipate maintaining this "ladder"
positioning for the near term.
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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 "Owens
Illinois" followed by an up arrow and the phrase "Tender offer sparks gains from
sale of bonds." The second listing is "Riverwood International" followed by a
horizontal arrow and the phrase "Stabilization in paper prices." The third
listing is "TCI Communicatios, Inc." followed by an up arrow and the phrase
"Benefited from consolidation trend." Footnote below reads: "See "Schedule of
Investments". Investment holdings are subject to change."
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Emerging markets add value
With the exception of a few weeks in late March and early April, yield
spreads-the difference in yields offered by corporate and Treasury bonds, and
corporate bonds of varying credit quality-continued to narrow, contributing to
the Fund's solid performance. Investors' continuing appetite for yield and the
financial strength of corporate America helped boost corporate bond prices and
push yields lower, bringing them closer to one another and to the yields offered
by Treasury securities. The Fund benefited substantially as corporate bonds
comprised the bulk of the portfolio's net assets.
As a natural result of narrowing yield spreads, risk premiums have come
down. This means that the level of return one anticipates earning in exchange
for taking on more risk is not as much as it was a year or two ago. The
challenge for us then was to find securities with attractive yield potential
commensurate with the risks involved in owning them. Given this reality, we have
begun to upgrade the portfolio's credit quality by slightly reducing exposure to
high-yield bonds.
One way we have been able to improve quality without sacrificing yield has
been to explore opportunities in emerging-market corporate bonds whose values
are pegged to the U.S. dollar. As privatization and fiscal responsibility take
hold in many emerging nations, attractive opportunities are coming to market.
Our in-depth credit research has led us to several issues positioned to perform
well, particularly bonds involved in project finance. Bonds issued by Transgas
in Colombia to finance the construction of gas pipelines is a fine example.
Other solid performers include Petros Mexicanos, a state-
4
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John Hancock Funds - Investors Trust
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Bar chart with heading "Fund Performance" at top of the left hand column. Under
the heading is the footnote "For the six months ended June 30, 1997." The chart
is scaled in increments of 1% from top to bottom, with 4% at the top and 0% at
the bottom. Within the chart there are two solid bars. The first represents the
3.93% total return for John Hancock Investors Trust. The second represents the
2.68% total return for the average open-end corporate debt A-rated debt 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, Inc."
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owned oil company in Mexico; Yanacocha, a Peruvian mining company, and Camuzzi
Gas, a gas company in Argentina. Issues such as these are compelling to own
because no corporation's credit rating is allowed to be higher than that of its
home country's government bonds. Consequently, the better creditworthiness of
many emerging-market corporate debt securities is often masked.
Three industry sectors stand out
The Fund's portfolio is broadly diversified with roughly 200 securities
representing nearly 20 industry sectors. Media, financial services and utility
companies are three areas we have emphasized over the period. The deregulation
and consolidation that is taking place in the media sector has created numerous
opportunities for debt issuers to receive credit upgrades. TCI Communications,
Inc. is one holding that has performed extremely well.
Deregulation is also a theme in the utility industry. Many companies with
below-investment-grade ratings are being acquired by more financially sound
firms. Long Island Lighting is in the process of being purchased by
investment-grade rated Brooklyn Union Gas. The bonds issued by Long Island
Lighting have enjoyed substantial price appreciation in anticipation of that
event.
"...inflation
worries
will likely
remain..."
Three types of financial securities have also helped the Fund: Yankee
bonds, surplus notes and bank capital notes. Yankee bonds are dollar-denominated
high quality foreign bank securities issued in the Unites States; surplus notes
are highly-rated debt issued by insurance companies; and bank capital notes are
junior subordinated debt of a bank that is carried on balance sheets as equity,
yet interest is deductible. These securities have not been widely followed by
analysts, either because they are fairly new to the market or misunderstood. By
conducting extensive research, we understood their potential early on and the
Fund benefited when the market began to recognize it.
Outlook: optimistic yet cautious
Market conditions appear more favorable now than when the fiscal year began.
Although we are optimistic, we fully realize that with strong labor numbers and
high consumer confidence, inflation worries will likely remain and the Fed may
raise interest rates before year's end. Our plan is to keep the Fund's duration
relatively similar to its benchmark for the near term and closely monitor
upcoming economic reports for signals that would encourage us to shorten
duration once again. Selectivity will continue to be emphasized in terms of
credit quality and valuation.
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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.
5
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FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
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, 1997. You'll also
find the net asset value and the maximum offering price per share as of that
date.
Statement of Assets and Liabilities
June 30, 1997 (Unaudited)
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Assets:
Investments at value - Note C:
Publicly traded bonds and direct placement security
(cost - $148,142,460) ...................................... $151,851,056
Joint repurchase agreement (cost - $4,983,000) ............. 4,983,000
------------
............................................................... 156,834,056
Receivable for investments sold .............................. 5,362,548
Interest receivable .......................................... 2,895,738
Other assets ................................................. 5,784
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Total Assets ..................... 165,098,126
-------------------------------------------------
Liabilities:
Payable for investments purchased ............................ 1,759,338
Dividend payable ............................................. 385,295
Payable for futures variation margin - Note A ................ 563
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................... 319,892
Accounts payable and accrued expenses ........................ 50,943
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Total Liabilities ................ 2,516,031
-------------------------------------------------
Net Assets:
Capital paid-in .............................................. 160,024,574
Accumulated net realized loss on investments
and financial futures contracts ............................ ( 1,216,727)
Net unrealized appreciation of investments
and financial futures contracts ............................ 3,711,292
Undistributed net investment income .......................... 62,956
------------
Net Assets ....................... $162,582,095
=================================================
Net Asset Value Per Share:
(Based on 7,662,181 shares of beneficial
interest outstanding - 20 million shares
authorized with no par value) ................................ $ 21.22
=================================================
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended June 30, 1997 (Unaudited)
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Investment Income:
Interest ..................................................... $6,829,847
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Expenses:
Investment management fee - Note B ......................... 505,062
Transfer agent fee - Note B ................................ 59,205
Printing ................................................... 41,806
Custodian fee .............................................. 31,520
Auditing fee ............................................... 20,415
Financial services fee - Note B ............................ 15,054
New York Stock Exchange fee ................................ 8,925
Trustees' fees ............................................. 7,158
Miscellaneous .............................................. 2,914
Legal fees ................................................. 2,557
----------
Total Expenses ................... 694,616
-------------------------------------------------
Net Investment Income ............ 6,135,231
-------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold ........................ 377,217
Net realized loss on financial futures contracts ............. ( 6,070)
Change in net unrealized appreciation/depreciation
of investments ............................................. ( 462,030)
Change in net unrealized appreciation/depreciation
of financial futures contracts ............................. 2,125
----------
Net Realized and Unrealized Loss on
Investments and Financial
Futures Contracts ................ ( 88,758)
-------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ........ $6,046,473
=================================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1997
1996 (UNAUDITED)
--------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ................................................................... $ 12,355,792 $ 6,135,231
Net realized gain (loss) on investments sold and financial futures contracts ............ ( 168,934) 371,147
Change in net unrealized appreciation/depreciation of investments and
financial futures contracts ........................................................... ( 5,201,688) ( 459,905)
------------- -------------
Net Increase in Net Assets Resulting from Operations .................................. 6,985,170 6,046,473
------------- -------------
Distributions to Shareholders:
Dividends from net investment income ($1.6300 and $0.7950 per share, respectively) ...... ( 12,372,866) ( 6,083,393)
From Fund Share Transactions - Net*:
(Market value of shares issued in reinvestment of distributions) ........................ 1,636,446 396,034
------------- -------------
Net Assets:
Beginning of period ..................................................................... 165,974,231 162,222,981
------------- -------------
End of period (including undistributed net investment income
of $11,118 and $62,956, respectively) .................................................. $ 162,222,981 $ 162,582,095
============= =============
* Analysis of Fund Share Transactions:
Shares outstanding, beginning of period ................................................. 7,560,164 7,642,129
Shares issued to shareholders in reinvestment of distributions .......................... 81,965 20,052
------------- -------------
Shares outstanding, end of period ....................................................... 7,642,129 7,662,181
============= =============
</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 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.
7
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------------------------------------- JUNE 30, 1997
1992 1993 1994 1995 1996 (UNAUDITED)
-------- -------- -------- -------- -------- -----------
<S> <C> <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 $ 21.23
-------- -------- -------- -------- -------- --------
Net Investment Income ................................... 1.85 1.76 1.68 1.68 1.63 0.80
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures Contracts ........ 0.03 1.07 ( 2.34) 2.17 ( 0.72) ( 0.01)
-------- -------- -------- -------- -------- --------
Total from Investment Operations ........................ 1.88 2.83 ( 0.66) 3.85 0.91 0.79
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income .................... ( 1.87) ( 1.76) ( 1.68) ( 1.68) ( 1.63) ( 0.80)
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) ( 0.80)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $ 21.62 $ 22.15 $ 19.78 $ 21.95 $ 21.23 $ 21.22
======== ======== ======== ======== ======== ========
Per Share Market Value, End of Period ................... $ 23.50 $ 22.375 $ 17.88 $ 20.50 $ 19.50 $ 20.625
Total Investment Return at Market Value ................. 6.54% 5.35% ( 12.92%) 24.33% 3.13% 9.98%(1)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................ $157,757 $163,709 $147,916 $165,974 $162,223 $162,582
Ratio of Expenses to Average Net Assets ................ 0.82% 0.85% 0.88% 0.85% 0.85% 0.86%(2)
Ratio of Net Investment Income to Average Net Assets .... 8.58% 7.78% 8.11% 7.93% 7.65% 7.62%(2)
Portfolio Turnover Rate ................................. 104% 99% 82% 102% 118% 65%
</TABLE>
(1) Not annualized.
(2) Annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for each 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.
8
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FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
Schedule of Investments
June 30, 1997 (Unaudited)
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The Schedule of Investments is a complete list of all securities owned by
Investors Trust on June 30, 1997. 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.
<TABLE>
<CAPTION>
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY
Aerospace (0.39%)
Jet Equipment Trust,
Equipment Trust Cert Ser 95B2 08-15-14 (R) ........... 10.910% BBB- $ 550 $ 640,640
-----------
Banks (12.05%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04, (Y) ............... 8.200 AA- 1,000 1,065,430
ABN-Amro Bank N.V. - Chicago Branch,
Gtd Sub Deb (Netherlands) 05-31-05, (Y) ............... 7.250 AA- 500 506,475
African Development Bank,
Sub Note (Supra National) 12-15-03, (Y) ............... 9.750 AA- 1,000 1,153,000
Bank of New York,
Cap Security 12-01-26 (R) ............................ 7.780 A- 570 549,338
Banque National de Paris - New York Branch,
Sub Note (France) 01-15-07, (Y) ....................... 7.200 A 520 516,932
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 ................................ 9.750 AA- 900 1,004,157
Dao Heng Bank Ltd.,
Sub Note (Hong Kong) 01-24-07 (R), (Y) ................ 7.750 BBB 500 501,345
Humpuss Funding Corp.,
Gtd Note 12-15-09 (R) ................................ 7.720 Baa2 518 513,320
International Bank For Reconstruction and Development,
30 Yr Bond (Supra National) 10-15-16, (Y) ............. 8.625 AAA 3,800 4,432,206
Landeskreditbank Baden - Wuerttemberg,
Sub Note (Germany) 02-01-23, (Y) ...................... 7.625 AAA 1,300 1,354,873
National Westminster Bank PLC - New York Branch,
Sub Note 05-01-01 .................................... 9.450 AA- 1,200 1,308,948
Scotland International Finance No. 2 B.V.,
Gtd Sub Note (United Kingdom) 11-01-06 (R), (Y) ....... 8.850 A+ 750 835,195
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (Netherlands) 01-27-04 (R), (Y) .......... 8.800 A 2,000 2,180,780
Security Pacific Corp.,
Medium Term Sub Note 05-09-01 ........................ 10.360 A 1,750 1,957,760
Sub Note 11-15-00 .................................... 11.500 A 1,000 1,140,590
State Street Institutional Capital B,
Cap Security 02-28-27 (R) ............................ 8.035 A 570 571,425
-----------
19,591,774
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
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FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Chemicals (0.55%)
OPP Petroquimica S.A., (Brazil),
Bond (Brazil) 10-29-04 (R), (Y) ....................... 11.000% BB- $ 545 $ 567,481
Sociedad Quimica y Minera de Chile S.A.,
Loan Part Ctf (Chile) 09-15-06 (R), (Y) ............... 7.700 BBB+ 320 324,000
-----------
891,481
-----------
Containers (0.40%)
Stone Container Corp.,
Unit (Sr Sub Deb & Supplemental Interest Cert) 04-01-02 10.750 B- 630 642,600
-----------
Cosmetics & Personal Care (0.43%)
Johnson & Johnson,
Deb 11-15-23 .......................................... 6.730 AAA 750 706,005
-----------
Energy (1.17%)
AES China Generating Co. Ltd.,
Note (China) 12-15-06, (Y) ............................ 10.125 BB- 285 300,675
AES Corp.,
Sr Sub Note 06-15-00 ................................. 9.750 B+ 635 655,638
Sr Sub Note 07-15-06 ................................. 10.250 B+ 450 489,375
CalEnergy Co. Inc.,
Sr Note 09-15-06 ..................................... 9.500 BB- 435 463,462
-----------
1,909,150
-----------
Finance (11.31%)
APP Finance II Mauritius Ltd.,
Bond (Indonesia) 02-15-04 (R), (Y) .................... 12.000 B+ 575 586,500
Banc One Credit Card Master Trust,
Asset Backed Ctf Ser 1994-B Class A 12-15-99 ......... 7.550 AAA 1,000 1,006,250
British Telecom Finance, Inc.,
Gtd Deb (United Kingdom) 02-15-19, (Y) ................ 9.625 AAA 1,075 1,173,685
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 ................... 8.890 BB+ 700 703,507
CIT Group Holdings, Inc.,
Deb 03-15-01 ......................................... 9.250 A 1,000 1,085,170
Constitution Capital Trust I,
Cap Security 04-15-27 (R) ............................ 9.150 BBB 400 401,028
ContiFinancial Corp.,
Sr Note 08-15-03 ..................................... 8.375 BB+ 385 393,181
CS First Boston,
Sub Note 05-15-06 (R) ................................ 7.750 AA- 485 501,922
CSW Investments,
Sr Note (United Kingdom) 08-01-06 (R), (Y) ............ 7.450 A- 450 452,651
DSPL Finance Co. B.V.,
Gtd Sr Sec Note (Netherlands) 12-30-10 (R), (Y) ....... 9.120 BBB 500 513,125
SEE NOTES TO FINANCIAL STATEMENTS.
10
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FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Finance (continued)
Green Tree Home Improvement Loan Trust,
Pass Thru Ctf Ser 1995-D Class M-1 09-15-25 .......... 6.950% Aa2 $ 650 $ 647,563
Pass Thru Ctf Ser 1996-F Class HI: A3 10-15-26 ....... 6.750 AAA 300 295,107
Pass Thru Ctf Ser 1997-A Class HI: A3 08-15-23 ....... 7.050 AAA 575 577,335
Greenpoint Capital Trust I,
Cap Security 06-01-27 (R) ............................ 9.100 BB 350 351,330
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-1 Class A-5 12-25-13 .......... 6.290 AAA 720 706,725
MBNA Master Credit Card Trust,
Ser 1995-D Class A 11-15-02 .......................... 6.050 AAA 1,585 1,568,151
Merrill Lynch Mortgage Investors, Inc.,
Sub Bond Ser 1992-B Class B 03-15-12 ................. 8.500 Aaa 365 373,478
Midland American Capital Corp.,
Gtd Deb 11-15-03 ..................................... 12.750 A 1,650 1,784,393
Polytama International Finance B.V.,
Gtd Sec Note (Indonesia) 06-15-07, (Y) ................ 11.250 B+ 495 507,530
Santander Financial Issuances Ltd.,
Gtd Sub Note (Spain) 04-15-05, (Y) .................... 7.875 A+ 660 686,539
Standard Credit Card Master Trust,
Credit Card Part Ctf Ser 1995-10 Class A 02-07-01 .... 5.900 AAA 485 482,575
Termoemcali Funding Corp.,
Sr Sec Note 12-15-14 (R) ............................. 10.125 BBB- 360 390,600
Trump Hotels & Casino Resorts Funding,
Inc./Holdings, L.P.,
Sr Sec Note 06-15-05 ................................. 15.500 B+ 550 638,000
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-D1 Class A6 02-15-25 .......... 7.180 AAA 730 728,631
United Companies Financial Corp.,
Sr Note 07-15-04 ..................................... 7.700 BBB- 575 566,841
Viasystems Inc.,
Sr Sub Note 06-01-07 (R) ............................. 9.750 B- 285 288,118
Wharf International Finance Ltd.,
Gtd Note (Cayman Islands) 03-13-07 (R), (Y) ........... 7.625 A 480 477,859
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A (Mexico) 06-15-05 (R), (Y) .. 8.400 BBB- 485 495,913
-----------
18,383,707
-----------
Food (0.16%)
Arisco Produtos Alimenticios S.A.,
Bond (Brazil) 05-22-05 (R), (Y) ....................... 10.750 NR 250 255,625
-----------
Funeral Services & Related (0.45%)
Loewen Group International, Inc.,
Gtd Sr Note 10-15-03 ................................. 8.250 BB+ 710 733,963
-----------
Glass Products (0.29%)
Vicap S.A. de C.V.,
Gtd Sr Note (Mexico) 05-15-07 (R), (Y) ................ 11.375 B+ 450 470,025
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Government - Foreign (3.10%)
City of Moscow (Russia),
Note (Russia) 05-31-00 (R), (Y) ....................... 9.500% NR $ 575 $ 581,469
Croatia, Republic of,
Sr Note (Croatia) 02-27-02 (R), (Y) ................... 7.000 BBB- 500 486,840
Nova Scotia, Province of,
Deb (Canada) 04-01-22, (Y) ............................ 8.750 A- 750 854,498
Ontario, Province of,
Bond (Canada) 06-04-02, (Y) ........................... 7.750 AA- 500 522,435
Deb (Canada) 08-31-12, (Y) ............................ 15.250 AA- 350 375,522
Petroleos Mexicanos,
Gtd Note (Mexico) 06-01-07 (R), (Y) ................... 9.000 NR 595 604,669
Quebec, Province of,
Deb (Canada) 10-01-13, (Y) ............................ 13.000 A+ 500 562,455
Republic of Panama, (Panama),
Note (Panama) 02-13-02 (R), (Y) ....................... 7.875 BB+ 475 472,625
Saskatchewan, Province of,
Bond (Canada) 12-15-20, (Y) ........................... 9.375 A- 480 581,587
-----------
5,042,100
-----------
Government - U.S. (15.23%)
United States Treasury,
Bond 08-15-17 ........................................ 8.875 AAA 4,077 4,965,664
Bond 05-15-18 ........................................ 9.125 AAA 3,250 4,058,958
Bond 02-15-23 + ...................................... 7.125 AAA 3,961 4,079,830
Note 04-15-98 ........................................ 7.875 AAA 1,000 1,016,250
Note 02-15-99 ........................................ 8.875 AAA 3,260 3,401,614
Note 11-30-99 ........................................ 7.750 AAA 2,075 2,147,293
Note 05-15-01 ........................................ 8.000 AAA 1,323 1,397,419
Note 05-15-02 ........................................ 7.500 AAA 2,196 2,297,916
Note 02-15-05 ........................................ 7.500 AAA 1,312 1,388,253
-----------
24,753,197
-----------
Government - U.S. Agencies (8.14%)
Federal Home Loan Mortgage Corp.,
20 Yr Pass Thru Ctf 01-01-16 ......................... 11.250 AAA 520 581,377
Federal National Mortgage Assn.,
15 Yr SF Pass Thru Ctf 01-25-05 ...................... 8.000 AAA 1,000 1,029,060
15 Yr SF Pass Thru Ctf 02-01-08 ...................... 7.500 AAA 528 538,030
15 Yr SF Pass Thru Ctf 06-01-10 ...................... 7.000 AAA 955 952,909
30 Yr SF Pass Thru Ctf 10-01-23 ...................... 7.000 AAA 784 772,460
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 11-15-19 to 11-15-20 ........... 9.500 AAA 108 116,641
30 Yr SF Pass Thru Ctf 11-15-20 ....................... 10.000 AAA 286 315,431
30 Yr Sf Pass Thru Ctf 01-15-21 to 02-15-25 ........... 9.500 AAA 1,064 1,150,632
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Government - U.S. Agencies (continued)
30 Yr SF Pass Thru Ctf 04-15-21 ....................... 9.000% AAA $ 528 $ 564,285
30 Yr Sf Pass Thru Ctf 01-15-23 to 03-15-23 ........... 8.500 AAA 1,355 1,416,582
30 Yr SF Pass Thru Ctf 03-15-24 to 02-15-26 ........... 7.500 AAA 3,113 3,122,555
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 ...................... 8.625 AAA 2,500 2,676,000
-----------
13,235,962
-----------
Insurance (4.80%)
Conseco, Inc.,
Sr Note 12-15-04 ..................................... 10.500 BBB 715 838,767
Equitable Life Assurance Society of the United States,
Surplus Note 12-01-05 (R) ............................ 6.950 A 550 544,844
Fairfax Financial Holdings Ltd.,
Note 04-15-26 ........................................ 8.300 BBB+ 670 695,447
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R) ............................ 8.200 A+ 1,050 1,118,471
Surplus Note 10-15-26 (R) ............................ 7.875 NR 415 414,087
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) ............................ 7.625 AA 1,100 1,094,258
NAC Re Corp.,
Note 06-15-99 ........................................ 8.000 A- 355 364,745
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) ............................ 7.500 AA- 1,500 1,414,425
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) ............................ 6.625 AA 725 689,700
URC Holdings Corp.,
Sr Note 06-20-06 (R) ................................. 7.875 A- 615 634,803
-----------
7,809,547
-----------
Leisure (0.47%)
Mohegan Tribal Gaming Authority,
Sr Sec Note Ser B 11-15-02 ........................... 13.500 BB+ 150 196,500
Showboat Marina Casino Partnership/Finance Corp.,
1st Mtg Note Ser B 03-15-03 .......................... 13.500 B 500 572,500
-----------
769,000
-----------
Media (5.53%)
Azteca Holdings S.A., (Mexico),
Sr Note (Mexico) 06-15-02 (R), (Y) .................... 11.000 B- 180 183,825
Century Communications Corp.,
Sr Note 08-15-00 ..................................... 9.500 BB- 275 284,625
Comcast Corp.,
Sr Sub Deb 07-15-12 .................................. 10.625 BB+ 585 690,300
Continental Cablevision, Inc.,
Sr Sub Deb 06-01-07 .................................. 11.000 BBB 1,210 1,360,585
Le Groupe Videotron Ltee,
Sr Note (Canada) 02-15-05, (Y) ........................ 10.625 BB+ 250 278,750
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Media (continued)
News America Holdings Inc.,
Gtd Sr Deb 08-10-18 .................................. 8.250% BBB $ 735 $ 741,306
Sr Note 10-15-99 ..................................... 9.125 BBB 1,000 1,054,240
Rogers Cablesystems Ltd.,
Sr Note Ser B (Canada) 03-15-05, (Y) .................. 10.000 BB+ 800 864,000
SFX Broadcasting, Inc.,
Sr Sub Note Ser B 05-15-06 ........................... 10.750 B- 475 513,000
TeleWest Communications PLC,
Sr Deb (United Kingdom) 10-01-06, (Y) ................. 9.625 B+ 365 375,950
Time Warner, Inc.,
Deb 01-15-13 ......................................... 9.125 BBB- 565 624,732
TKR Cable I, Inc.,
Sr Deb 10-30-07 ...................................... 10.500 BBB- 1,495 1,648,761
Viacom Inc.,
Sr Note 06-01-05 ..................................... 7.750 BB+ 373 370,176
-----------
8,990,250
-----------
Medical (0.45%)
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 ................................. 10.750 B+ 340 369,750
Tenet Healthcare Corp.,
Sr Sub Note 01-15-07 ................................. 8.625 B+ 345 351,900
-----------
721,650
-----------
Mortgage Banking (0.87%)
Deutsche Financial Capital 1997-1,
Note 09-15-27 ........................................ 7.100 NR 920 914,250
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 ........................................ 7.300 BBB- 500 505,000
-----------
1,419,250
-----------
Oil & Gas (2.49%)
Ashland Oil, Inc.,
SF Deb 10-15-17 ...................................... 11.125 BBB 1,000 1,067,560
Camuzzi Gas Pampeana S.A.,
Note 12-15-01 ......................................... 9.250 BBB- 315 328,388
Enserch Exploration, Inc.,
Pass Thru Ctf 01-02-09 (R) ........................... 7.540 NR 510 504,992
Maxus Energy Corp.,
Deb 05-01-13 ......................................... 11.250 BBB- 125 129,375
Norsk Hydro ASA,
Deb (Norway) 10-01-16, (Y) ............................ 7.500 A 690 697,604
Petroliam Nasional Berhad,
Bond (Malaysia) 10-15-26 (R), (Y) ..................... 7.625 A+ 580 579,223
Transgas de Occidenta S.A.,
Sr Note (Colombia) 11-01-10 (R), (Y) .................. 9.790 BBB- 707 747,672
-----------
4,054,814
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Paper & Paper Products (1.62%)
Copamex Industrias, S.A. de C.V.,
Bond (Mexico) 04-30-04 (R), (Y) ....................... 11.375% BB $ 425 $ 457,406
Georgia Pacific Corp.,
Deb 01-15-18 ......................................... 9.750 BBB- 655 683,663
Deb 02-15-18 ......................................... 9.500 BBB- 450 468,995
Indah Kiat International Finance Co.,
Gtd Sec Bond Ser C (Indonesia) 06-15-06, (Y) .......... 12.500 BB 490 554,925
S.D. Warren Co.,
Sr Sub Note 12-15-04 ................................. 12.000 B+ 415 460,650
-----------
2,625,639
-----------
Retail (2.01%)
Kroger Co. (The),
Lease Ctf 02-01-09 ................................... 12.950 BBB- 1,910 2,122,965
May Department Stores Co. (The),
Deb 06-15-18 ......................................... 10.750 A 126 132,349
Safeway Inc.,
Deb 01-15-09 ......................................... 13.500 BBB 474 527,222
Supermercados Norte,
Bond (Argentina) 02-09-04 (R), (Y) .................... 10.875 NR 470 481,750
-----------
3,264,286
-----------
Steel (0.81%)
CSN Iron, S.A.,
Gtd Note (Panama) 06-01-07 (R), (Y) ................... 9.125 NR 485 471,360
IVACO Inc.,
Sr Note (Canada) 09-15-05, (Y) ........................ 11.500 B+ 310 332,475
NS Group, Inc.,
Unit (Sr Sec Note & Warrant) 07-15-03 ................ 13.500 NR 300 357,000
Weirton Steel Corp.,
Sr Note 03-01-98 ..................................... 11.500 B 149 152,725
-----------
1,313,560
-----------
Telecommunications (1.91%)
Impsat Corp.,
Gtd Sr Sec Note (Argentina) 07-15-03, (Y) ............. 12.125 BB- 345 370,013
Jasmine Submarine,
Gtd Sr Note 05-30-11 (R) ............................. 8.483 Baa1 500 501,265
NEXTEL Communications, Inc.,
Note 09-01-03 ......................................... 11.500 CCC- 670 579,550
Paging Network, Inc.,
Sr Sub Note (Brazil) 10-15-08, (Y) .................... 10.000 B 475 461,344
Qwest Communications International Inc.,
Senior Notes 04-01-07 (R) ............................. 10.875 B2 445 482,825
TCI Communications, Inc.,
Sr Deb 08-01-15 ...................................... 8.750 BBB- 678 710,612
-----------
3,105,609
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Tobacco (0.50%)
RJR Nabisco, Inc.,
Note 12-01-02 ........................................ 8.625% BBB- $ 445 $ 457,429
Note 09-15-03 ........................................ 7.625 BBB- 365 359,510
-----------
816,939
-----------
Transportation (5.57%)
America West Airlines,
Pass Thru Ctf Ser B 07-02-09 ......................... 6.930 A- 515 508,563
Continental Airlines,
Pass Thru Ctf Ser 96-C 04-15-15 ...................... 9.500 BBB 490 551,279
Delta Air Lines, Inc.,
Equipment Trust Ctf Ser A 06-01-08 ................... 10.000 BBB 2,000 2,374,300
Greater Beijing First Expressways Ltd.,
Sr Note (China) 06-15-04 (R), (Y) ..................... 9.250 NR 450 454,500
Northwest Airlines Inc.,
Gtd Note 03-15-04 .................................... 8.375 BB- 770 782,705
Pass Thru Ctf Ser 1996-1C 01-02-05 ................... 10.150 BB+ 325 344,680
Pass Thru Ctf Ser 1996-1D 07-02-16 ................... 8.970 BBB- 395 430,205
NWA Trust,
Sr Note Ser A 06-21-14 ............................... 9.250 AA 571 643,906
Rail Car Trust,
Pass Thru Ser 1992-1 Class A 06-01-04 ................ 7.750 AAA 1,521 1,576,843
Scandinavian Airlines System,
Deb (Multinational) 07-20-99, (Y) ..................... 9.125 A3 700 733,688
USAir, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05 ................... 11.200 BB+ 626 661,506
-----------
9,062,175
-----------
Utilities (12.70%)
Calpine Corp.,
Sr Note 05-15-06 ..................................... 10.500 B+ 465 502,200
CE Casecnan Water & Energy Co., Inc.,
Sr Note Ser A (Philippine Islands) 11-15-05, (Y) ...... 11.450 BB 400 444,000
Cleveland Electric Illuminating Co. & Toledo Edison Co.,
Sec Note Ser A 07-01-04 (R) .......................... 7.670 BB+ 565 570,650
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 ............................... 9.500 BB 1,045 1,124,053
Compania Paranaense de Energy,
Note (Brazil) 05-02-05 (R), (Y) ....................... 9.750 BB- 250 258,750
EIP Funding-PNM,
Sec Fac Bond 10-01-12 ................................ 10.250 Ba2 725 792,000
Enersis S.A.,
Note (Chile) 12-01-16, (Y) ............................ 7.400 A- 795 770,292
Entergy Louisiana, Inc.,
Sec Lease Oblig Bond 01-02-17 ........................ 8.090 NR 490 491,225
Fideicomiso Petacalco Trust,
Sr Sec Note (Mexico) 12-23-09 (R), (Y) ................ 10.160 BB 450 466,313
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
PAR VALUE
INTEREST S&P (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
Utilities (continued)
First PV Funding Corp.,
Deb Ser 86A 01-15-14 ................................. 10.300% BB- $ 219 $ 230,949
Deb Ser 86B 01-15-16 ................................. 10.150 BB- 719 757,848
Fitchburg Holding Corp.,
Sec Note 01-31-03 (r) ................................ 15.750 1,979 2,136,806
GTE Corp.,
Deb 11-15-17 ......................................... 10.300 A 500 531,480
Deb 11-01-20 ......................................... 10.250 A 1,500 1,694,685
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21, (Y) ....................... 9.400 A+ 900 1,067,886
Gtd Deb Ser IF (Canada) 02-01-03, (Y) ................. 7.375 A+ 750 763,695
Iberdrola International B.V.,
Note (Spain) 10-01-02, (Y) ............................ 7.500 AA- 1,000 1,028,680
Long Island Lighting Co.,
Deb 07-15-19 ......................................... 8.900 BB+ 190 198,031
Gen Ref Mtg 05-01-21 ................................. 9.750 BBB- 900 912,096
Gen Ref Mtg 07-01-24 ................................. 9.625 BBB- 1,045 1,071,125
Louisiana Power & Light,
Lt Corporate Bonds 01-02-17 .......................... 10.670 BBB- 1,350 1,437,831
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 ............................ 10.330 BB 1,183 1,265,377
Midland Funding Corp. II,
Deb 07-23-05 ......................................... 11.750 B 300 349,191
Deb Ser B 07-23-06 ................................... 13.250 B 225 273,929
Puget Sound Energy Inc.,
Jr Sub Deb 06-01-27 (R) ............................... 8.231 BBB 320 324,800
System Energy Resources, Inc.,
1st Mtg 08-01-01 ..................................... 7.710 BBB- 590 603,275
Tenaga Nasional Berhad,
Note (Malaysia) 06-15-04 (R), (Y) ..................... 7.875 A+ 550 574,941
-----------
20,642,108
-----------
TOTAL PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY
(Cost $148,142,460) (93.40%) $151,851,056
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
================================================================================
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ---- -------- -----
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.06%)
Investment in a joint repurchase agreement transaction
with Toronto Dominion Securities, Ltd., Dated 06-30-97,
Due 07-01-97 (secured by U.S. Treasury Notes, 5.625%
thru 8.125%, Due 07-31-97 thru 11-15-04) - Note A 5.970% $ 4,983 $ 4,983,000
------- ------------
TOTAL SHORT-TERM INVESTMENTS ( 3.06%) 4,983,000
------- ------------
TOTAL INVESTMENTS ( 96.46%) $156,834,056
======= ============
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS
(r) The security listed below is restricted to resale. It has been valued in
accordance with procedures approved by the Trustees after consideration of
restrictions as to resale, financial condition and prospects of the issuer,
general market conditions and pertinent information in accordance with the
Fund's By-Laws and the Investment Company Act of 1940, as amended. The Fund has
limited rights to registration under the Securities Act of 1933 with respect to
these restricted securities in certain circumstances. Additional information on
this security is as follows:
<TABLE>
<CAPTION>
MARKET MARKET
VALUE AS A VALUE
PERCENTAGE AS OF
AQUISITION AQUISITION OF FUND'S JUNE 30,
DATE COST NET ASSETS 1997
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fitchburg Holdings Corp., Sec. Note, 15.75%, 01-31-03 02-10-81 $2,293,925 1.31% $2,136,806
</TABLE>
(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. Rule 144A
securities amounted to $26,984,683 or 16.60% of net assets as of June 30, 1997.
(Y) Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer; however, security is U.S. dollar
denominated.
+ A portion of this United States Treasury Bond with a value of $106,090 owned
by the Fund was designated as margin deposits for futures contracts as of June
30, 1997.
* Credit ratings are unaudited and rated by Moody's Investors Services or John
Hancock Advisers, Inc. where Standard & Poor's 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.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
(UNAUDITED)
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. To the extent such carryforward is used by the Fund,
no capital gains distributions will be made. The carryforward expires as
follows: December 31, 2002 - $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 underlying 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 futures contract being traded. Each day, the futures contract is
valued at the official settlement price of the board of trade or U.S.
commodities exchange 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 adjust-
19
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
ments, 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 June 30, 1997, open positions in financial futures contracts were as
follows:
UNREALIZED
EXPIRATION OPEN CONTRACT POSITION APPRECIATION
- ---------- ------------- -------- ------------
SEP 97 2 U.S. TREASURY NOTE LONG $2,125
======
At June 30, 1997, the Fund has deposited in a segregated account $103,000
par value of U.S. Treasury Bond, 7.125% due 02-15-23, to cover margin
requirements on open 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 the period was
estimated to be 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. 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 June 30, 1997, 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 June 30, 1997 aggregated $56,498,844 and $58,193,643, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $42,342,237 and $43,046,499, respectively.
The cost of investments owned at June 30, 1997 (excluding the corporate
savings account) for federal income tax purposes was $153,125,460. Gross
unrealized appreciation and depreciation of investments at June 30, 1997
aggregated $5,120,425 and $1,411,829, respectively, resulting in net unrealized
appreciation of $3,708,596.
20
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
DIVIDENDS AND DISTRIBUTIONS
During 1997, dividends from net investment income totaling $ 0.7950 per share
was paid to shareholders. The dates of payment and the amounts per share are as
follows:
INCOME
PAYMENT DATE DIVIDEND
- ------------ --------
March 31, 1997 $0.3975
June 30, 1997 $0.3975
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 distri-buted 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
invest-
21
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
ment 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.
All correspondence of additional information concerning the plan should be
directed to the plan agent, State Street Bank and Trust Company, at P.O. Box
8209, Boston, MA 02266-8209 (telephone 1-800-426-5523).
SHAREHOLDER MEETING
On April 23, 1997, the Annual Meeting of John Hancock Investors Trust was held.
The Shareholders elected the following Trustees with the votes as
indicated:
NAME OF TRUSTEE FOR WITHHELD
- --------------- --- --------
Dennis S. Aronowitz 6,316,133 108,765
Edward J. Boudreau, Jr. 6,324,370 100,528
Richard P. Chapman, Jr. 6,322,596 102,302
William J. Cosgrove 6,322,504 102,394
Douglas M. Costle 6,298,990 125,908
Leland O. Erdahl 6,291,601 133,297
Richard A. Farrell 6,327,113 97,785
Gail D. Fosler 6,297,864 127,034
William F. Glavin 6,296,642 128,256
Anne C. Hodsdon 6,322,008 102,890
Dr. John A. Moore 6,298,324 126,574
Patti McGill Peterson 6,298,154 126,744
John W. Pratt 6,320,003 104,895
Richard S. Scipione 6,321,172 103,726
Edward J. Spellman 6,326,786 98,112
The Shareholders also ratified the Trustees' selection of Ernst & Young LLP
as auditor for the fiscal year ending December 31, 1997, with the votes
tabulated as follows: 6,305,960 FOR, 30,710 AGAINST and 88,228 ABSTAINING.
22
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NOTES
John Hancock Funds - Investors Trust
23
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