ANNUAL REPORT
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[GRAPHIC OMITTED]
Investors
Trust
DECEMBER 31, 1997
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
--------------------------------------------
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 02109-1803
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
--------------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
The financial markets in 1997 were anything but dull. Bond investors enjoyed the
benefits of a strong economy with no inflation. Stock investors were treated to
record-breaking performance by the Dow Jones Industrial Average, but with
record-breaking volatility. After two years of strong advances with relatively
minor swings, the stock market's recent sharp drops and enormous rebounds have
caused a fair share of investor concern.
The latest round began in October and was largely due to uncertainty in
foreign markets. Southeast Asia sneezed and the rest of the world caught a cold.
On October 27, the Dow experienced its largest one-day point decline, dropping
554 points. In percentage terms, however, that roughly 7% decline didn't even
register on the list of 10 largest drops. The next day, the market bounced right
back, as the Dow had a record one-day vault of 337 points. In short order, the
U.S. market had bounced back, yet it and many markets remained edgy and more
volatile as investors sorted out the Asian turmoil and its implications on
economic growth, interest rates and corporate earnings.
In the face of such uncertainty, a trusted investment professional can be
your best ally. Now, more than ever, your investment professional can help you
take the emotion out of investment decisions. At a time when your instincts
might have you react to the heat of the market's moment, your investment
professional can serve as an objective voice to put current events in a
longer-term perspective. He or she can also help you evaluate your investments
in any market environment to ensure that they fit your risk tolerance and time
horizons. On an ongoing basis, your investment professional is there for you to
check out new investment ideas or to get an informed opinion about current
economic and market conditions.
We encourage you to take advantage of this important resource. Working
together, you can draw up a detailed road map to help reach your financial
destination regardless of the conditions along the way.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
2
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BY JAMES K. HO, CFA, PORTFOLIO MANAGER
John Hancock
Investors Trust
Bond investors fared well in 1997 despite
pockets of nerve-wracking volatility
Fiscal 1997 began last January amid an unsettled market environment, as
investors speculated on whether or not the Federal Reserve Board would raise
interest rates to slow economic growth and head off inflation. Investor
uncertainty culminated in a brief period of market turbulence in late February
and March, as investors reacted to the Fed's 0.25% increase in short-term rates.
Markets then regained their footing and moved forward with considerable
strength until midsummer, when leading indicators began to suggest that economic
growth was accelerating faster than anticipated and that higher inflation might
yet be on the way. Investors responded to the data in knee-jerk fashion, causing
bond prices to tumble and yields to rise across the board during much of August.
With September's arrival, investors' inflation fears had abated. Bond prices
turned upward yet again.
Meanwhile, Asia's currency woes had continued to quietly build steam
throughout the summer. Finally, the fiscal ills plaguing the Asian region boiled
over into world markets in late October and early November. U.S.
investment-grade corporate bonds, high-yield bonds, and emerging-market debt
issues took a drubbing as investors worldwide flocked to the safety of U.S.
Treasury securities. In fact, U.S. Treasury securities rallied so tremendously
that by the Fund's fiscal year end, the yield on the bellwether 30-year Treasury
bond tested historic lows, ending
"...bonds wound up having a good year."
[A 2 1/4" x 3" photo of the portfolio management team at bottom right. Caption
reads: Jim Ho (seated) and Fund management team members (l - r): Lester Duke,
Beverly Cleathero, Seth Robbins and Linda Carter]
3
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John Hancock Funds - Investors Trust
Asian turmoil creates a buying opportunity in corporate bonds.
[Page 4 Chart with the heading "Top Five Bond Sectors" at top of left hand
column. The chart lists five sectors: 1) U.S. Government & Agencies 30%; 2)
Banks & Financials 26%; 3) Utilities 13%; 4) Media 7% 5) Transportation 6%. A
footnote below states: "As a percentage of net assets on December 31, 1997."]
at 5.92%. By the year's end, the U.S. corporate and high-yield markets had also
begun to regain their footing. Overall, bonds wound up having a good year.
For John Hancock Investors Trust, fiscal 1997 also wrapped up on an
attractive note. The Fund produced a strong total return of 10.32% at net asset
value, outperforming the average open-end corporate debt A-rated fund's 9.17%
return, according to Lipper Analytical Services, Inc.
Duration and yield curve strategies pay off
While we generally try to avoid making duration adjustments and yield curve
positioning the focal points of our investment management, the strategies we
employed during the year contributed to the Fund's solid performance. Throughout
the period, we kept the Fund's average duration -- a measure of the Fund's
sensitivity to interest rate changes -- relatively short-to-neutral in
comparison to other comparable bond funds and its benchmark, the Lehman Brothers
Government/Corporate Bond Index. In doing so, we aligned the Fund's assets at
opposite ends of the yield curve -- a widely followed graph illustrating the
difference between short-term and long-term interest rates -- owning both
short-term and long-term securities. This positioning is known as a "barbell"
structure and helped the Fund as the yield curve flattened considerably during
the fiscal year. In fact, the difference in yield between the 2-year Treasury
note and the 30-year Treasury bond was only slightly more than a quarter of a
percentage point by fiscal year end.
As the period drew to a close, we adjusted duration to a more solidly
neutral position and shifted to a "bullet" strategy, redeploying assets in
intermediate-term securities, thereby matching the benchmark's duration more
closely. We have positioned the portfolio thus, believing the Fed will leave
interest rates alone or perhaps even cut short-term rates should corporate
profits come under pressure and the economy begin to slow as a result of Asia's
economic turmoil. This, in turn, would most likely result in a steepening of the
yield curve. Emphasizing intermediate-term securities, we believe, will best
serve the Fund should the yield curve begin to steepen in the months ahead.
Sector strengths
In pursuing a high level of current income consistent with prudent investment
risk, the Fund focuses on corporate bonds, while placing a secondary emphasis on
U.S. Government and government agency securities. Investment-grade corporate
bonds comprise the bulk of the portfolio's net assets and, therefore, its
performance. However, each sector in which we chose to invest provided the Fund
with respectable performance at different times during the year.
[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 "Nextel"
followed by an up arrow and the phrase "Strong demand for wireless
communications." The second listing is "NB Capital Trust" followed by a
horizontal arrow and the phrase "Callable bond structure hurt by declining
interest rates." The third listing is "TCI, Inc." followed by an up arrow and
the phrase "Improvement in cable operations." Footnote below reads: "See
"Schedule of Investments". Investment holdings are subject to change."]
4
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John Hancock Funds - Investors Trust
[CHART OMITTED]
[Page 5 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,
1997." The chart is scaled in increments of 2% from bottom to top, with 12% at
the top and 0% at the bottom. Within the chart there are two solid bars. The
first represents the 10.32% total return for John Hancock Investors Trust. The
second represents the 9.17% 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, Inc."]
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Exposure to emerging-market corporate bonds early in the fiscal year
proved fruitful; however, we gave back some, but not all, of the gains during
the carnage of late October/early November. Fortunately, we discerned that
turbulence was mounting in the Asian nations and sold out of most positions in
that region during late summer, thereby avoiding much of the downturn.
Naturally, volatility spilled over into other emerging markets, such as Latin
America, in which the Fund had some exposure. We opportunistically sold out of
many positions there as well, anticipating further turmoil down the road.
As it became increasingly evident that investors worldwide were looking to
U.S. Treasury securities as the safest haven, we opted to increase our weighting
of U.S. Treasury issues slightly. On the other hand, the downward pressure that
Asia's turmoil placed on U.S. high-yield and investment-grade corporate bonds
also presented us with attractive buying opportunities in those groups.
Believing that the fundamentals of many U.S. corporations remain solid, we
bought on dips as selective credits grew more appealing on a valuation basis. We
added to such existing holdings as Time Warner and TCI Communications. After
conducting extensive research, we selectively purchased several high-yield
bonds, including Physicians Sales & Service, Garden State Newspapers and Nextel
Communications. The three main industry sectors we emphasized in the corporate
arena included media, utilities and financial services, particularly banks.
Keeping a watchful eye on Asia
Current market conditions seem to suggest that bonds could continue to fare well
in the months ahead. The impact of Asia's currency crisis may begin to create a
drag on the U.S. economy in the form of cheaper export prices and lower
corporate profitability. This prospect, combined with Fed Chairman Greenspan's
recent remarks about the potential for deflation, hint at a classical bias
toward lower interest rates. Given such a possibility, we expect to maintain a
duration-neutral strategy and a "bullet" structure along the yield curve. We
also will continue to upgrade the overall portfolio by moving into industry
sectors that we believe are less subject to the vagaries of the economy --
media, utilities, and healthcare, for example. As always, selectivity will
continue to be emphasized in terms of credit quality and valuation.
"...bonds could continue to fare well in the months ahead."
- --------------------------------------------------------------------------------
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
<PAGE>
==============================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 December 31, 1997. You'll
also find the net asset value per share as of that date.
Statement of Assets and Liabilities
December 31, 1997
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Assets:
Investments at value - Note C:
Publicly traded bonds and direct placement
security (cost - $156,505,960) ....................... $ 163,752,965
Joint repurchase agreement (cost -$3,138,000) .......... 3,138,000
Corporate savings account .............................. 821
-------------
166,891,786
Receivable for investments sold .......................... 26,000
Interest receivable ...................................... 2,935,274
Receivable for variation margin - Note A ................. 594
Other assets ............................................. 6,721
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Total Assets ........................ 169,860,375
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Liabilities:
Payable for investments purchased ........................ 1,957,706
Dividend payable ......................................... 380,504
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ................................ 370,425
Accounts payable and accrued expenses .................... 93,760
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Total Liabilities ................... 2,802,395
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Net Assets:
Capital paid-in .......................................... 160,792,613
Accumulated net realized loss on investments and
financial futures contracts ............................ (1,037,793)
Net unrealized appreciation of investments and
financial futures contracts ............................ 7,249,838
Undistributed net investment income ...................... 53,322
-------------
Net Assets .......................... $ 167,057,980
========================================================
Net Asset Value Per Share:
(Based on 7,699,521 shares of beneficial
interest outstanding - 20 million shares
authorized with no par value) .......................... $ 21.70
===========================================================================
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
Year ended December 31, 1997
- --------------------------------------------------------------------------------
Investment Income:
Interest .................................................... $13,614,749
-----------
Expenses:
Investment management fee - Note B ........................ 1,029,725
Transfer agent fee - Note B ............................... 104,004
Printing .................................................. 74,149
Custodian fee ............................................. 62,269
Auditing fee .............................................. 36,500
Financial services fee - Note B ........................... 29,961
New York Stock Exchange fee ............................... 16,525
Trustees' fees ............................................ 12,959
Miscellaneous ............................................. 6,268
Legal fees ................................................ 3,385
-----------
Total Expenses ......................... 1,375,745
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Net Investment Income .................. 12,239,004
---------------------------------------------------------
Realized and Unrealized Gain on Investments and
Financial Futures Contracts:
Net realized gain on investments sold ....................... 545,751
Net realized gain on financial futures contracts ............ 4,330
Change in net unrealized appreciation/depreciation
of investments ............................................ 3,076,985
Change in net unrealized appreciation/depreciation
of financial futures contracts ............................ 1,656
-----------
Net Realized and Unrealized
Gain on Investments and
Financial Futures Contracts ............ 3,628,722
---------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .............. $15,867,726
=========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ........................................ $ 12,355,792 $ 12,239,004
Net realized gain (loss) on investments sold and
financial futures contracts ............................... (168,934) 550,081
Change in net unrealized appreciation/depreciation of
investments and financial futures contracts ............... (5,201,688) 3,078,641
------------- -------------
Net Increase in Net Assets Resulting from Operations ...... 6,985,170 15,867,726
------------- -------------
Distributions to Shareholders:
Dividends from net investment income ($1.6300 and $1.5900
per share, respectively) .................................. (12,372,866) (12,196,800)
------------- -------------
From Fund Share Transactions - Net: *
(Market value of shares issued in reinvestment
of distributions) ......................................... 1,636,446 1,164,073
------------- -------------
Net Assets:
Beginning of period .......................................... 165,974,231 162,222,981
------------- -------------
End of period (including undistributed net investment income
of $11,118 and $53,322, respectively) .................... $ 162,222,981 $ 167,057,980
============= =============
* 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 57,392
------------- -------------
Shares outstanding, end of period ............................ 7,642,129 7,699,521
============= =============
</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>
==============================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:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ............... $ 21.62 $ 22.15 $ 19.78 $ 21.95 $ 21.23
-------- -------- -------- -------- --------
Net Investment Income .............................. 1.76 1.68 1.68 1.63 1.59
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures Contracts .. 1.07 (2.34) 2.17 (0.72) 0.47
-------- -------- -------- -------- --------
Total from Investment Operations ................... 2.83 (0.66) 3.85 0.91 2.06
-------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income ............... (1.76) (1.68) (1.68) (1.63) (1.59)
Distributions from Net Realized Gain on Investments
Sold and Financial Futures Contracts ............ (0.49) (0.03) -- -- --
Temporary Overdistribution ......................... (0.05) -- -- -- --
-------- -------- -------- -------- --------
Total Distributions ................................ (2.30) (1.71) (1.68) (1.63) (1.59)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ..................... $ 22.15 $ 19.78 $ 21.95 $ 21.23 $ 21.70
======== ======== ======== ======== ========
Per Share Market Value, End of Period .............. $ 22.375 $ 17.875 $ 20.500 $ 19.500 $ 22.063
Total Investment Return at Market Value ............ 5.35% (12.92%) 24.33% 3.13% 22.12%
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ........... $163,709 $147,916 $165,974 $162,223 $167,058
Ratio of Expenses to Average Net Assets ............ 0.85% 0.88% 0.85% 0.85% 0.84%
Ratio of Net Investment Income to Average Net Assets 7.78% 8.11% 7.93% 7.65% 7.44%
Portfolio Turnover Rate ............................ 99% 82% 102% 118% 141%
</TABLE>
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
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
Schedule of Investments
December 31, 1997
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The Schedule of Investments is a complete list of all securities owned by
Investors Trust on December 31, 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 CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY
Aerospace (0.41%)
Jet Equipment Trust,
Equipment Trust Cert Ser 95B2 08-15-14 (R) ................... 10.910% BBB- $ 550 $ 686,582
-----------
Banks (11.93%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04, (Y) ...................... 8.200 AA- 1,000 1,093,930
ABN-Amro Bank N.V. - Chicago Branch,
Gtd Sub Deb (Netherlands) 05-31-05, (Y) ...................... 7.250 AA- 500 524,890
African Development Bank,
Sub Note (Supra National) 12-15-03, (Y) ...................... 9.750 AA- 1,000 1,181,150
Bank of New York,
Cap Security 12-01-26 (R) .................................... 7.780 A- 570 592,407
Banque National de Paris - New York Branch,
Sub Note (France) 01-15-07, (Y) .............................. 7.200 A1 520 537,612
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 ........................................ 9.750 AA- 900 1,014,993
International Bank For Reconstruction and Development,
30 Yr Bond (Supra National) 10-15-16, (Y) .................... 8.625 Aaa 3,800 4,775,840
Landeskreditbank Baden - Wuerttemberg,
Sub Note (Germany) 02-01-23, (Y) ............................. 7.625 AAA 1,300 1,473,303
National Westminster Bank PLC - New York Branch,
Sub Note 05-01-01 ............................................ 9.450 AA- 1,200 1,310,964
NB Capital Trust IV,
Cap Security 04-15-27 ........................................ 8.250 A- 550 600,193
Scotland International Finance No. 2 B.V.,
Gtd Sub Note (United Kingdom) 01-27-04 (R), (Y) .............. 8.800 A 2,000 2,247,260
Gtd Sub Note (United Kingdom) 11-01-06 (R), (Y) .............. 8.850 A+ 750 862,430
Security Pacific Corp.,
Medium Term Sub Note 05-09-01 ................................ 10.360 A1 1,750 1,969,660
Sub Note 11-15-00 ............................................ 11.500 A 1,000 1,135,450
State Street Institutional Capital B,
Cap Security 03-15-27 (R) .................................... 8.035 A 570 609,866
-----------
19,929,948
-----------
Broker Services (0.31%)
CS First Boston,
Sub Note 05-15-06 (R) ........................................ 7.750 AA- 485 518,935
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Building (0.69%)
Georgia-Pacific Corp.,
Deb 01-15-18 ................................................. 9.750% BBB- $ 655 $ 680,918
Deb 02-15-18 ................................................. 9.500 BBB- 450 469,139
-----------
1,150,057
-----------
Chemicals (0.20%)
Sociedad Quimica y Minera de Chile S.A.,
Loan Part Ctf (Chile) 09-15-06 (R), (Y) ...................... 7.700 BBB+ 320 329,114
-----------
Containers (0.55%)
Riverwood International Corp.,
Gtd Sr Sub Note 04-01-08 ..................................... 10.875 CCC+ 285 269,325
Stone Container Corp.,
Unit 04-01-02 ................................................ 12.250 B- 630 652,050
-----------
921,375
-----------
Cosmetics & Personal Care (0.46%)
Johnson & Johnson,
Deb 11-15-23 ................................................. 6.730 AAA 750 767,003
-----------
Energy (0.72%)
AES Corp.,
Sr Sub Note 07-15-06 ......................................... 10.250 B+ 670 725,275
CalEnergy Co. Inc.,
Sr Note 09-15-06 ............................................. 9.500 BB- 435 475,333
-----------
1,200,608
-----------
Finance (6.22%)
CIT Group Holdings, Inc.,
Deb 03-15-01 ................................................. 9.250 A 1,000 1,089,070
Constitution Capital Trust I,
Cap Security 04-15-27 (R) .................................... 9.150 BBB 400 450,328
ContiFinancial Corp.,
Sr Note 08-15-03 ............................................. 8.375 BB+ 385 398,475
DR Investments,
Sr Note 05-15-07 (R) ......................................... 7.450 A- 450 478,805
DSPL Finance Co. B.V.,
Gtd Sr Sec Note (Indonesia) 12-30-10 (R), (Y) ................ 9.120 BBB 500 398,900
Ford Motor Credit Co.,
Note 12-08-05 ................................................ 6.250 A 230 227,537
Green Tree Home Improvement Loan Trust,
Pass Thru Ctf Ser 1995-D Class M-1 09-15-25 .................. 6.950 Aa2 650 660,461
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-1 Class A-5 12-25-13 .................. 6.290 AAA 720 716,175
Industrial Credit Investment Corporation of India Ltd.,
Bond (India) 08-15-07 (R), (Y) ............................... 7.550 BB+ 520 431,184
MBNA Master Credit Card Trust,
Ser 1995-D Class A 11-15-02 .................................. 6.050 AAA 1,585 1,586,981
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Finance (continued)
Merrill Lynch Mortgage Investors, Inc.,
Sub Bond Ser 1992-B Class B 04-15-12 ......................... 8.500% Aaa $ 341 $ 346,115
Midland American Capital Corp.,
Gtd Deb 11-15-03 ............................................. 12.750 A 1,650 1,737,648
Standard Credit Card Master Trust,
Credit Card Part Ctf Ser 1995-10 Class A 02-07-01 ............ 5.900 AAA 485 484,239
Susa Partnership, LP,
Note 12-01-07 ................................................ 7.000 BBB 340 341,768
United Companies Financial Corp.,
Sr Note 01-15-04 ............................................. 7.700 BBB- 575 578,784
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A (Peru) 06-15-04 (R), (Y) ........... 8.400 BBB- 475 475,300
-----------
10,401,770
-----------
Funeral Services & Related (0.43%)
Loewen Group International, Inc.,
Gtd Sr Note 10-15-03 ......................................... 8.250 BB+ 710 726,863
-----------
Glass Products (0.29%)
Vicap S.A. de C.V.,
Gtd Sr Note (Mexico) 05-15-07 (R), (Y) ....................... 11.375 B+ 450 480,375
-----------
Government - Foreign (2.35%)
Croatia, Republic of,
Sr Note (Croatia) 02-27-02 (R), (Y) .......................... 7.000 BBB- 500 500,825
Nova Scotia, Province of,
Deb (Canada) 04-01-22, (Y) ................................... 8.750 A- 750 932,243
Ontario, Province of,
Bond (Canada) 06-04-02, (Y) .................................. 7.750 AA- 500 531,405
Panama, Republic of,
Note (Panama) 02-13-02 (R), (Y) .............................. 7.875 BB+ 505 486,063
Quebec, Province of,
Deb (Canada) 10-01-13, (Y) ................................... 13.000 A+ 500 547,275
Deb (Canada) 07-15-23, (Y) ................................... 7.500 A+ 270 290,129
Saskatchewan, Province of,
Bond (Canada) 12-15-20, (Y) .................................. 9.375 A 480 636,557
-----------
3,924,497
-----------
Government - U.S. (21.68%)
United States Treasury,
Bond 08-15-17 ................................................ 8.875 Aaa 4,081 5,416,875
Bond 05-15-18 ................................................ 9.125 Aaa 3,250 4,426,598
Bond 02-15-23 + .............................................. 7.125 Aaa 4,724 5,392,729
Note 04-15-98 ................................................ 7.875 Aaa 1,000 1,006,720
Note 02-15-99 ................................................ 8.875 Aaa 1,985 2,053,542
Note 11-30-99 ................................................ 7.750 Aaa 2,722 2,822,796
Note 05-15-01 ................................................ 8.000 Aaa 548 585,417
Note 05-15-02 ................................................ 7.500 Aaa 8,217 8,769,100
Note 02-15-05 ................................................ 7.500 Aaa 5,226 5,743,688
-----------
36,217,465
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Government - U.S. Agencies (8.63%)
Federal Home Loan Mortgage Corp.,
20 Yr Pass Thru Ctf 01-01-16 ................................. 11.250% AAA $ 473 $ 530,882
Federal National Mortgage Assn.,
15 Yr SF Pass Thru Ctf 01-25-05 .............................. 8.000 AAA 1,000 1,042,500
15 Yr SF Pass Thru Ctf 02-01-08 .............................. 7.500 AAA 472 485,307
15 Yr SF Pass Thru Ctf 06-01-10 + + .......................... 7.000 AAA 955 969,019
30 Yr SF Pass Thru Ctf 10-01-23 .............................. 7.000 AAA 740 748,886
30 Yr Pass Thru Ctf 03-01-24 + + ............................. 6.500 AAA 285 281,438
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 ................. 6.940 AAA 373 385,897
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 11-15-19 to 02-15-25 .................. 9.500 AAA 915 990,215
30 Yr SF Pass Thru Ctf 11-15-20 .............................. 10.000 AAA 231 257,822
30 Yr SF Pass Thru Ctf 04-15-21 .............................. 9.000 AAA 465 504,154
30 Yr SF Pass Thru Ctf 01-15-23 to 03-15-23 .................. 8.500 AAA 1,234 1,301,153
30 Yr SF Pass Thru Ctf 03-15-24 to 02-15-26 + + .............. 7.500 AAA 3,692 3,782,918
30 Yr SF Pass Thru Ctf 01-15-27 to 08-15-27 .................. 8.000 AAA 347 360,432
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 .............................. 8.625 AAA 2,500 2,783,850
-----------
14,424,473
-----------
Insurance (4.95%)
Conseco, Inc.,
Sr Note 12-15-04 ............................................. 10.500 BBB 715 860,345
Equitable Life Assurance Society of the United States,
Surplus Note 12-01-05 (R) .................................... 6.950 A 550 561,875
Fairfax Financial Holdings Ltd.,
Note 04-15-26 ................................................ 8.300 BBB+ 670 742,976
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R) .................................... 8.200 A+ 1,050 1,158,623
Surplus Note 10-15-26 (R) .................................... 7.875 A2 415 456,770
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) .................................... 7.625 AA 1,100 1,202,058
NAC Re Corp.,
Note 06-15-99 ................................................ 8.000 A- 355 363,303
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) .................................... 7.500 AA- 1,500 1,523,070
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) .................................... 6.625 AA 725 738,420
URC Holdings Corp.,
Sr Note 06-30-06 (R) ......................................... 7.875 A- 615 663,505
-----------
8,270,945
-----------
Leisure (1.00%)
Mohegan Tribal Gaming Authority,
Sr Sec Note Ser B 11-15-02 ................................... 13.500 BB+ 150 192,375
Showboat Marina Casino Partnership/Finance Corp.,
1st Mtg Note Ser B 03-15-03 .................................. 13.500 B 500 602,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Leisure (continued)
Sun International Hotels Ltd.,
Sub Note 12-15-07 ............................................ 8.625% B+ $ 250 $ 253,750
Trump Hotels & Casino Resorts Funding, Inc./Holdings, L.P.,
Sr Note 06-15-05 ............................................. 15.500 B- 550 629,750
-----------
1,678,375
-----------
Media (7.11%)
Adelphia Communications Corp.,
Sr Note 10-01-02 ............................................. 9.250 B3 525 535,500
Century Communications Corp.,
Sr Note 08-15-00 ............................................. 9.500 BB- 275 287,375
Clear Channel Communications, Inc.,
Deb 10-15-27 ................................................. 7.250 BBB- 525 528,150
Comcast Cable Communications Inc.,
Note 05-01-17 ................................................ 8.875 BBB- 180 213,149
Comcast Corp.,
Sr Sub Deb 07-15-12 .......................................... 10.625 BB+ 585 724,563
Continental Cablevision, Inc.,
Sr Sub Deb 06-01-07 .......................................... 11.000 BBB 1,210 1,343,536
Garden State Newspapers, Inc.,
Sr Sub Note 10-01-09 (R) ..................................... 8.750 B+ 430 432,150
Hearst-Argyle Television, Inc.,
Sr Note 11-15-07 ............................................. 7.000 Baa3 485 488,584
Le Groupe Videotron Ltee,
Sr Note (Canada) 02-15-05, (Y) ............................... 10.625 Ba3 250 275,245
News America Holdings Inc.,
Gtd Sr Deb 08-10-18 .......................................... 8.250 BBB- 680 742,363
Sr Note 10-15-99 ............................................. 9.125 BBB- 1,000 1,045,970
Rogers Cablesystems Ltd.,
Sr Note Ser B (Canada) 03-15-05, (Y) ......................... 10.000 BB+ 800 880,000
SFX Broadcasting, Inc.,
Sr Sub Note Ser B 05-15-06 ................................... 10.750 B- 475 521,313
TeleWest Communications PLC,
Sr Deb (United Kingdom) 10-01-06, (Y) ........................ 9.625 B+ 365 385,075
Time Warner, Inc.,
Deb 01-15-13 ................................................. 9.125 BBB- 540 643,016
TKR Cable I, Inc.,
Sr Deb 10-30-07 .............................................. 10.500 BBB- 1,875 2,113,688
Videotron Holdings PLC,
Sr Discount Note (United Kingdom) 08-15-05, (Y) .............. 11.000 BBB+ 805 712,014
-----------
11,871,691
-----------
Medical (1.06%)
Integrated Health Services, Inc.,
Sr Sub Note 01-15-08 (R) ..................................... 9.250 B 570 581,400
Physician Sales & Services, Inc.,
Sr Sub Note 10-01-07 (R) ..................................... 8.500 B 228 232,560
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Medical (continued)
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 ......................................... 10.750% B+ $ 340 $ 370,600
Tenet Healthcare Corp.,
Sr Sub Note 01-15-07 ......................................... 8.625 B+ 565 583,363
-----------
1,767,923
-----------
Mortgage Banking (2.07%)
Countywide Home Loans, Inc.,
Mortgage Pass Thru Ctf Ser 1997-7 Cl A8 12-25-27 ............. 7.250 Aaa 919 946,621
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C2 Class A3 11-15-07 .................. 6.566 AAA 680 687,650
Money Store Residential Trust 1997-I (The),
Pass Thru Ctf Ser 1997-I Class A-3 08-15-12 .................. 6.680 AAA 625 622,070
Salomon Brothers Mortgage Securities VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2 Class A-2 07-25-24 ........... 6.750 Aaa 437 440,640
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-D1 Class A6 02-15-25 .................. 7.180 AAA 730 758,486
-----------
3,455,467
-----------
Oil & Gas (0.99%)
Camuzzi Gas Pampeana S.A.,
Note 12-15-01 ................................................ 9.250 BBB- 315 315,000
Norsk Hydro ASA,
Deb (Norway) 10-01-16, (Y) ................................... 7.500 A 690 743,227
Transgas de Occidenta S.A.,
Sr Note (Colombia) 11-01-10 (R), (Y) ......................... 9.790 BBB- 590 607,578
-----------
1,665,805
-----------
Paper & Paper Products (0.94%)
Celulosa Arauco Y Constitucion S.A.,
Note (Chile) 09-15-09 (R), (Y) ............................... 7.200 Baa3 540 528,660
Indah Kiat International Finance Co.,
Gtd Sec Bond Ser B (Indonesia) 06-15-02, (Y) ................. 11.875 BB 135 130,275
Gtd Sec Bond Ser C (Indonesia) 06-15-06, (Y) ................. 12.500 BB 255 247,350
Indah Kiat Pulp & Paper Corp. (P.T.),
Sr Sec Note (Canadian Dollar) 11-01-00 (R) ................... 8.875 BB 225 202,500
S.D. Warren Co.,
Sr Sub Note 12-15-04 ......................................... 12.000 B+ 415 463,763
-----------
1,572,548
-----------
Real Estate Investment Trust (0.31%)
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 ................................................ 7.300 BBB- 500 511,180
-----------
Retail (2.53%)
Fort James Corp.,
Sr Note 09-15-02 ............................................. 6.500 BBB- 455 457,102
Kroger Co. (The),
Lease Ctf 02-01-09 ........................................... 12.950 BBB- 1,910 2,139,200
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Retail (continued)
May Department Stores Co. (The),
Deb 06-15-18 ................................................. 10.750% A $ 126 $ 134,422
Safeway Inc.,
Deb 01-15-09 ................................................. 13.500 BBB 474 531,253
Southern Foods Group L.P.,
Sr Sub Note 09-01-07 (R) ..................................... 9.875 B 495 517,275
Supermercados Norte,
Bond (Argentina) 02-09-04 (R), (Y) ........................... 10.875 B1 470 445,325
-----------
4,224,577
-----------
Steel (0.29%)
IVACO Inc.,
Sr Note (Canada) 09-15-05, (Y) ............................... 11.500 B+ 310 337,125
Weirton Steel Corp.,
Sr Note 03-01-98 ............................................. 11.500 B 149 149,745
-----------
486,870
-----------
Telecommunications (2.38%)
Esprit Telecom Group Plc,
Sr Note (United Kingdom) 12-15-07, (Y) ....................... 11.500 N/R 245 252,350
Iridium LLC/Iridium Capital Corp.,
Gtd Sr Note Ser A 07-15-05 ................................... 13.000 B- 560 587,957
Metronet Communications Corp.,
Unit (Sr Note & Warrant) (Canada) 08-15-07 (R), (Y) .......... 12.000 N/R 510 589,050
Nextel Communications, Inc.,
Sr Disc Note (Step Coupon, 11.50%, 09-01-98) 09-01-03 ........ Zero CCC 605 601,219
Sr Disc Note (Step Coupon, 9.75%, 02-15-99) 08-15-04 ......... Zero CCC 675 600,750
Qwest Communications International Inc.,
Sr Note Ser B 04-01-07 ....................................... 10.875 B+ 445 506,188
TCI Communications, Inc.,
Sr Deb 08-01-15 .............................................. 8.750 BBB- 504 584,131
Teligent, Inc.,
Sr Note 12-01-07 ............................................. 11.500 CCC 250 250,625
-----------
3,972,270
-----------
Tobacco (0.51%)
RJR Nabisco, Inc.,
Note 12-01-02 ................................................ 8.625 BBB- 445 473,743
Note 09-15-03 ................................................ 7.625 BBB- 365 373,074
-----------
846,817
-----------
Transportation (5.65%)
America West Airlines, Inc.,
Pass Thru Ctf Ser B 01-02-08 ................................. 6.930 A- 510 515,755
Continental Airlines,
Pass Thru Ctf Ser 96-C 10-15-13 .............................. 9.500 BBB+ 490 570,123
Delta Air Lines, Inc.,
Equip Tr Ctf Ser A 06-01-08 .................................. 10.000 BBB 2,000 2,489,940
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Transportation (continued)
Humpuss Funding Corp.,
Gtd Note (Indonesia) 12-15-09 (R), (Y) ....................... 7.720% Baa3 $ 505 $ 408,378
MRS Logistica S.A.,
Bond Ser B (Brazil) 08-15-05 (R), (Y) ........................ 10.625 B 430 388,075
Northwest Airlines Inc.,
Gtd Note 03-15-04 ............................................ 8.375 BB- 250 257,385
Pass Thru Ctf Ser 1996-1C 01-02-05 ........................... 10.150 BB+ 325 347,932
Pass Thru Ctf Ser 1996-1D 01-02-15 ........................... 8.970 BBB- 393 436,145
NWA Trust,
Sr Note Ser A 06-21-14 ....................................... 9.250 A2 563 665,554
Railcar Trust No. 1992-1,
Pass Thru Ser 1992-1 Class A 06-01-04 ........................ 7.750 AAA 1,469 1,540,690
Scandinavian Airlines System,
Deb (Sweden) 07-20-99, (Y) ................................... 9.125 A3 700 731,500
U.S. Air, Inc.,
Pass Thru Ctf Ser 1989-A2 01-01-13 ........................... 9.820 A- 345 381,656
Pass Thru Ctf Ser 1990-A1 03-19-05 ........................... 11.200 BB+ 622 697,921
-----------
9,431,054
-----------
Utilities (13.36%)
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-07 (R), (Y) ................... 7.050 A- 339 345,180
British Telecom Finance, Inc.,
Gtd Deb (United Kingdom) 02-15-19, (Y) ....................... 9.625 AAA 1,075 1,159,751
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 ........................... 8.890 BB- 700 783,261
Calpine Corp.,
Sr Note 05-15-06 ............................................. 10.500 B+ 465 499,873
Sr Note 07-15-07 (R) ......................................... 8.750 BB- 190 193,800
CE Casecnan Water & Energy Co., Inc.,
Sr Note Ser A (Philippine Islands) 11-15-05, (Y) ............. 11.450 BB 400 412,000
CE Energy,
Note 12-30-07 (R) ............................................ 6.995 BBB+ 485 489,596
Cleveland Electric Illuminating Co. & Toledo Edison Co.,
Sec Note Ser B 07-01-04 ...................................... 7.670 Ba1 565 588,306
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 ....................................... 9.500 BB+ 1,045 1,158,924
EIP Funding-PNM,
Sec Fac Bond 10-01-12 ........................................ 10.250 Ba2 718 836,118
Enersis S.A.,
Note (Chile) 12-01-16, (Y) ................................... 7.400 A- 795 788,847
Fideicomiso Petacalco Trust,
Sr Sec Note (Mexico) 12-23-09 (R), (Y) ....................... 10.160 BB 450 459,000
First PV Funding Corp.,
Deb Ser 86A 01-15-14 ......................................... 10.300 BB- 202 218,408
Deb Ser 86B 01-15-16 ......................................... 10.150 BB- 690 746,904
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- -------- -----
<S> <C> <C> <C> <C>
Utilities (continued)
Fitchburg Holdings Corp.,
Sec Note 01-31-03 (r) ........................................ 15.750% BBB $1,866 $ 2,014,954
GTE Corp.,
Deb 11-01-20 ................................................. 10.250 A 1,500 1,694,310
Hydro-Quebec Corp.,
Gtd Deb (Canada) 02-01-03, (Y) ............................... 7.375 A+ 750 784,538
Gtd Bond (Canada) 02-01-21, (Y) .............................. 9.400 A+ 900 1,162,080
Iberdrola International B.V.,
Note (Spain) 10-01-02, (Y) ................................... 7.500 AA- 1,000 1,052,460
Long Island Lighting Co.,
Deb 07-15-19 ................................................. 8.900 BB+ 380 404,354
Gen Ref Bond 05-01-21 ........................................ 9.750 BBB 1,060 1,086,500
Gen Ref Mtg 07-01-24 ......................................... 9.625 BBB 1,045 1,064,594
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 .................................... 10.330 BB 1,081 1,162,341
Midland Funding Corp. II,
Deb 07-23-05 ................................................. 11.750 B 300 360,405
Deb Ser B 07-23-06 ........................................... 13.250 B 225 289,087
North Atlantic Energy Corp.,
1st Mtg Bond 06-01-02 ........................................ 9.050 B+ 580 596,031
Philippine Long Distance Telephone Co.,
Note (Philippine Islands) 03-06-07, (Y) ...................... 7.850 BB+ 530 461,763
Puget Sound Energy, Inc.,
Jr Sub Deb 06-01-27 (R) ...................................... 8.231 Baa3 320 333,888
System Energy Resources, Inc.,
1st Mtg 08-01-01 ............................................. 7.710 BBB- 590 611,848
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 ........................... 8.090 BBB- 535 559,257
-----------
22,318,378
-----------
TOTAL PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY
(Cost $156,505,960) (98.02%) 163,752,965
-------- -----------
</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 (1.88%)
Investment in a joint repurchase agreement transaction with HSBC
Securities, Inc., Dated 12-31-97, Due 01-02-98 (secured by
U.S. Treasury Notes, 9.250% thru 11.250%, Due 02-15-15
thru 02-15-16) - Note A........................................ 6.600% $3,138 $3,138,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account,
Current Rate 4.95%............................................. 821
------------
TOTAL SHORT-TERM INVESTMENTS (1.88%) 3,138,821
------- ------------
TOTAL INVESTMENTS (99.90%) 166,891,786
------- ------------
OTHER ASSETS AND LIABILITIES (0.10%) 166,194
------- ------------
TOTAL NET ASSETS (100.00%) $167,057,980
======= ============
</TABLE>
NOTES TO THE SCHEDULE OF INVESTMENTS
(r) Direct placement securities are restricted to resale. They have 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. Additional information on these securities is as
follows:
<TABLE>
<CAPTION>
MARKET MARKET
VALUE AS A VALUE
PERCENTAGE AS OF
ACQUISITION ACQUISITION OF FUND'S DECEMBER 31,
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 1.21% $2,014,954
</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 $22,607,110 or 13.53% of net assets as of
December 31, 1997.
(Y) Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer, however, security is U.S. dollar
denominated.
+ A portion of this United States Treasury Bond with a value of $103,311
owned by the Fund was designated as margin deposits for futures contracts
as of December 31, 1997.
++ These securities having an aggregate value of $1,957,272 or 1.17% of the
Fund's net assets, have been purchased on a when issued basis. The
purchase price and the interest rate of such securities are fixed at trade
date, although the Fund does not earn any interest on such securities
until settlement date. The Fund has instructed its Custodian Bank to
segregate assets with a current value at least equal to the amount of its
when-issued commitments. Accordingly, the market values of $746,392 and
$1,270,513 of U.S. Treasury Bond, 9.125%, 05-15-18 and U.S. Treasury Note,
7.500%, 02-15-05 have been segregated to cover the when-issued
commitments.
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investor 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
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 $425,504 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 gain distributions will be made. The carryforwards expire as follows:
December 31, 2003 -- $421,130 and December 31, 2004 -- $4,374.
DIVIDENDS, INTEREST AND DISTRIBUTIONS 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 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
19
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - Investors Trust
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, 1997, open positions in financial futures contracts were
as follows:
UNREALIZED
EXPIRATION OPEN CONTRACT POSITION APPRECIATION
- ---------- ------------- -------- ------------
MAR 98 1 U.S. TREASURY NOTE SHORT $1,656
======
At December 31, 1997, the Fund has deposited in a segregated account
$90,500 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 year was
estimated to be at an annual rate of less than 0.02% 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 December 31, 1997, the Fund's investment to cover the deferred
compensation liability had unrealized appreciation of $1,176.
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 year
ended December 31, 1997 aggregated $102,498,826 and $110,675,481, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $121,429,643 and $109,191,792, respectively.
The cost of investments owned at December 31, 1997 (excluding the
corporate savings account) for federal income tax purposes was $159,982,724.
Gross unrealized appreciation and depreciation of investments at December 31,
1997 aggregated $8,373,774 and $1,465,533, respectively, resulting in net
unrealized appreciation of $6,908,241.
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John Hancock Funds - Investors Trust
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 John
Hancock Investors Trust (the " Trust"), including the schedule of investments,
as of December 31, 1997, and the related statements of operations for the year
then ended, the statement of 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 periods 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, 1997, by correspondence with the custodian
and brokers, or other appropriate auditing procedures where replies from brokers
were not received. 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, 1997, the results of its operations
for the year then ended, 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 6, 1998
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during the fiscal year ended December
31, 1997.
None of the distributions qualify for the dividends received deduction
available to corporations.
Shareholders will be mailed a 1997 U.S. Treasury Department Form 1099-DIV
in January of 1998. This will reflect the tax character of all distributions for
calendar year 1997.
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John Hancock Funds - Investors Trust
DIVIDENDS AND DISTRIBUTIONS
During 1997, dividends from net investment income totaling $1.5900 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
September 30, 1997 $0.3975
December 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 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
22
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John Hancock Funds - Investors Trust
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.
All correspondence or additional information concerning the plan should be
directed to the Plan Agent, State Street Bank and Trust Company, at P.O. Box
8209, Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
23
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