SEMIANNUAL REPORT
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[PHOTO OMITTED]
Investors
Trust
June 30, 1998
[JHF 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 and Chief Operating Officer
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
Listed New York Stock Exchange Symbol: JHI
John Hancock Closed-End Funds:
1-800-843-0090
<PAGE>
DEAR FELLOW SHAREHOLDERS:
During the last decade, investors have become used to seeing stock market
returns averaging 15% or so each year. In the past three years, the stock market
has treated us to a record run, producing annual returns in excess of 20%.
After such a long and remarkable performance, many began this year wondering
what the market would do for an encore in 1998. The answer through the end of
June was more of the same. But tremors from Asia have also sparked increased
volatility, as corporate earnings and the U.S. economy have shown signs of
slowing. What's more, a good part of the market's advance has come from just a
small group of the largest companies in the major stock market indexes.
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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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The move ahead has been so narrow that some observers believe that most stocks
have actually been in a bear market this year. The bond market had its pockets
of volatility as well, although U.S. Treasury bonds benefited from their
safe-haven status.
While we don't make a practice of opining on what the market will do next, we
believe that after such a long run up, it would be wise for investors to set
more realistic expectations. Over the long term, the market's historical results
have been more in the 10% per year range, which is still a solid result,
considering it has been produced despite wars, depressions and other social
upheavals along the way.
In addition to adjusting, or at least re-examining, expectations, now could also
be a good time to review with your investment professional how your assets are
diversified, perhaps with an eye toward a more conservative approach. Stocks,
especially with their outsized gains of the last three years, might have grown
to represent a larger piece of your portfolio than you had originally intended,
given your objectives, time horizon and risk level.
At John Hancock Funds, our goal is to help you reach your financial objectives
and maintain wealth. One way we can do that is by helping you keep your feet on
the ground as you pursue your dreams.
Sincerely,
/s/Edward J. Boudreau, Jr.
- --------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
By James K. Ho, CFA, Portfolio Manager
John Hancock
Investors Trust
Asia's turmoil tempers ideal conditions on the home front
---------------------------------------------------------
During the first half of John Hancock Investors Trust's 1998 fiscal year, we
witnessed some of the very same factors that influenced its performance during
the final months of fiscal 1997. On the positive side, inflation was subdued,
interest rates remained low, unemployment was down, corporate profitability
remained high, and the general mood among consumers was upbeat.
The primary unfavorable element continued to be the economic and currency
weakness in many Asian nations. The ongoing turmoil, combined with increasing
political unrest in certain countries, caused bouts of price weakness among U.S.
investment-grade and high-yield bonds. Investors feared that Asia's woes would
eventually affect corporate earnings and credit quality stateside. Heavy new
issuance amid lackluster demand placed further downward pressure on these
sectors as the period progressed. Emerging-market debt around the world took the
brunt of the volatility, falling in response to each new wave of concern.
"...we took a slightly more defensive approach..."
In this environment, producing solid results required extensive research and
selective investing. For the six months ended June 30, 1998, John Hancock
Investors Trust produced a total return of 4.20% at net asset value, including
dividends reinvested at prices that were the lower of either the market median
price or the net asset value price. The Fund outperformed the average open-end
corporate debt A-rated fund, as tracked by Lipper Analytical Services, Inc.,
which produced a gain of 3.78%.
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[A 3 3/4" x 2 1/4" photo at bottom right of page of fund management team
members. Caption below reads "Jim Ho (seated) and Fund management team members
(l - r): Lester Duke, Beverly Cleathero and Seth Robbins."]
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3
<PAGE>
John Hancock Funds - Investors Trust
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[Chart at the top of left hand column with the heading "Top Five Bond Sectors".
The chart lists five sectors: 1.) U.S. Government & Agencies 30%; 2.) Banks &
Financials 25%; 3.) Utilities 11%; 4.) Media 6% and 5.) Transportation 6%. A
note below the chart reads "As a percentage of net assets on June 30, 1998."]
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Defensive orientation favored
As the semiannual period progressed, we took a slightly more defensive approach
to fixed-income investing than we had in fiscal 1997. We stayed relatively
neutral in terms of duration, which is a measure of sensitivity to interest-rate
changes, by keeping the Fund's average duration in line with its competitors and
benchmark, the Lehman Brothers Government/Corporate Bond Index.
On the corporate bond side - both investment-grade and high-yield - we upgraded
our credit exposure whenever possible, and selectively took advantage of price
weakness to either increase the Fund's exposure to certain issues or establish
new positions. For the most part, we favored bonds in sectors that stand to
perform well regardless of economic swings, such as utilities, media,
telecommunications, and healthcare. Merger and acquisition activity,
deregulation, and consolidation have been the catalysts of change and
opportunity in these industries. Several issues that contributed significantly
to performance included Time Warner, TCI Communications - the recent beneficiary
of a merger with AT&T - Nextel Communica-tions, News America Holdings,
Integrated Health Services, Cleveland Electric Illuminating Co. and Niagara
Mohawk Power Corp.
We've also lightened up on capital goods and cyclical credits, maintaining very
little exposure to paper, steel, oil and gas issues. As the period progressed,
we slightly increased our emphasis on high-quality asset-backed securities, such
as home equity loans, which have performed well. Our focus in mortgage-backed
securities was on discount coupon mortgages - those whose coupons are below
current market rates - as they tend to be relatively insulated from price swings
in a declining rate environment.
"We've also lightened up on capital goods and cyclical credits..."
Yield curve positioning - ahead of the market
It is often said that the best defense is a good offense - an adage that we
believe might well apply to yield curve strategies. The yield curve is a widely
followed graph illustrating the difference between short-term and long-term
interest rates. Throughout the period, we maintained a "bullet" position,
emphasizing intermediate-term government securities in the middle of the
maturity curve. Such a structure historically works well when the difference
between short- and long-term Treasuries widens, an occurrence known as a
steepening yield curve.
Our positioning appeared to have been a bit premature. The yield curve has
continued to flatten, with the difference in yields between two-year Treasury
securities and 30-year issues a mere one-sixteenth of a percentage point at
period's end. However, we are holding steady with this approach because we
believe the difficulties in Asia may well create a drag on
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[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Niagara
Mohawk followed by an up arrow with the phrase "Improving fundamentals." The
second listing is Connecticut Light & Power followed by an up arrow with the
phrase "Reopening of plants." The third listing is Zilog followed by a down
arrow with the phrase "Semiconductors hurt by Asian crisis." A note below the
table reads "See `Schedule of Investments.' Investment holdings are subject to
change."]
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4
<PAGE>
John Hancock Funds - Investors Trust
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[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the six months ended June 30, 1998". The
chart is scaled in increments of 1% with 0% at the bottom and 5% at the top. The
first bar represents the 4.20% total return for John Hancock Investors Trust.
The second bar represents the 3.78% total return for the average open-end
corporate debt A-rated fund. A note below the chart reads "The total return for
John Hancock Investors Trust is at net asset value with all distributions
reinvested at prices that are the lower of either the market median price or the
net asset value price. The average open-end corporate debt A-rated fund is
tracked by Lipper Analytical Services, Inc.]
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the U.S. economy later this year. And as a result, the Federal Reserve Board may
be prompted to cut the federal funds rate in an effort to stimulate economic
growth. In this case, the yield curve would begin to steepen.
Knowing what to own and avoid Exhaustive research has always played a vital role
in our investment decisions and never more so than this past year. As the
fundamentals of many domestic and foreign corporate bonds came into question on
the heels of Asia's crises, knowing what to own, sell, and avoid helped the
Fund's performance. For example, when several Japanese banks came to market a
few months ago issuing attractively priced, high-yielding securities that
carried an investment-grade rating, many fund managers, including ourselves,
found the issues too compelling to ignore. However, we soon determined that the
risk was not worth the potential reward and sold our stake - a timely maneuver
since the bonds have dropped considerably in price since.
"...we are upbeat about the prospects for fixed-income securities."
To date, we have continued to avoid most Asian debt, believing the investment
environment remains murky. However, we are monitoring events in the Far East
closely to determine when, and if, there is a right time to reallocate assets to
that region. Our small investment in Latin American bonds has come under
pressure recently along with most emerging-market debt, yet we believe the
securities are well positioned to fully recover.
Optimism prevails
As we enter the second half of fiscal 1998, we are upbeat about the prospects
for fixed-income securities. The U.S. dollar's continuing strength, positive
developments on the U.S. budget front, and pressure from Asia's economic fallout
should help keep inflation in check and interest rates low. The wild card, of
course, remains the emerging markets and how their performance might influence
that of domestic investment-grade corporate and high-yield bonds. Clearly,
current investment conditions present the opportunity to capture value for those
willing to do their homework.
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 June 30, 1998. You'll also
find the net asset value per share as of that date.
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
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Assets:
Investments at value - Note C:
Publicly traded bonds and direct
placement security (cost - $155,566,666).............. $163,210,266
Preferred stocks and warrants
(cost - $2,603,651)................................... 2,639,260
Joint repurchase agreement (cost - $3,536,000)........ 3,536,000
Corporate savings account ............................ 343
------------
169,385,869
------------
Receivable for investments sold ...................... 2,772,620
Interest receivable .................................. 2,883,860
Dividend receivable .................................. 26,222
Receivable for futures variation
margin - Note A ...................................... 281
Other assets ......................................... 9,897
------------
Total Assets ............ 175,078,749
--------------------------------------------------
Liabilities:
Payable for investments purchased .................... 5,654,481
Dividend payable ..................................... 353,081
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .............................. 390,022
Accounts payable and accrued expenses ................ 74,214
------------
Total Liabilities ....... 6,471,798
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Net Assets:
Capital paid-in ...................................... 161,546,703
Accumulated net realized loss
on investments and financial
futures contracts .................................... (656,299)
Net unrealized appreciation of investments and
financial futures contracts .......................... 7,682,502
Undistributed net investment income .................. 34,045
------------
Net Assets ............ $168,606,951
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Net Asset Value Per Share:
(Based on 7,734,328 shares of beneficial
interest outstanding - 20 million shares
authorized with no par value) ........................ $21.80
===============================================================================
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, 1998 (Unaudited)
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Investment Income:
Interest ............................................. $6,601,535
Dividends ............................................ 64,206
------------
6,665,741
------------
Expenses:
Investment management fee - Note B ................... 517,540
Transfer agent fee - Note B .......................... 48,713
Custodian fee ........................................ 34,646
Printing ............................................. 28,771
Auditing fee ......................................... 16,938
Financial services fee - Note B ...................... 15,677
New York Stock Exchange fee .......................... 7,456
Trustees' fees ....................................... 4,779
Miscellaneous ........................................ 2,823
Legal fees ........................................... 1,196
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Total Expenses .......... 678,539
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Net Investment Income ... 5,987,202
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Realized and Unrealized Gain on Investments and
Financial Futures Contracts:
Net realized gain on investments sold ................ 378,384
Net realized gain on financial futures contracts ..... 3,110
Change in net unrealized appreciation/depreciation
of investments ....................................... 430,547
Change in net unrealized appreciation/
depreciation of financial futures contracts .......... 2,117
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Net Realized and
Unrealized Gain on
Investments and
Financial Futures
Contracts ............... 814,158
--------------------------------------------------
Net Increase in Net
Assets Resulting from
Operations .............. $6,801,360
==================================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
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YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1998
1997 (UNAUDITED)
------------ -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ................................ $12,239,004 $5,987,202
Net realized gain on investments sold
and financial futures contracts ...................... 550,081 381,494
Change in net unrealized appreciation/
depreciation of investments and
financial futures contracts .......................... 3,078,641 432,664
------------ ------------
Net Increase in Net Assets Resulting
from Operations ...................................... 15,867,726 6,801,360
------------ ------------
Distributions to Shareholders:
Dividends from net investment income
($1.5900 and $0.7775 per share,
respectively) ........................................ (12,196,800) (6,006,479)
------------ ------------
From Fund Share Transactions - Net: *
Market value of shares issued in
reinvestment of distributions ........................ 1,164,073 754,090
------------ ------------
Net Assets:
Beginning of period .................................. 162,222,981 167,057,980
------------ ------------
End of period (including undistributed
net investment income of $53,322 and
$34,045, respectively) ............................... $167,057,980 $168,606,951
============ ============
* Analysis of Fund Share Transactions:
Shares outstanding, beginning of period .............. 7,642,129 7,699,521
Shares issued to shareholders in
reinvestment of distributions ........................ 57,392 34,807
============ ============
Shares outstanding, end of period .................... 7,699,521 7,734,328
</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
<TABLE>
<CAPTION>
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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YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------------------------------------- JUNE 30, 1998
1993 1994 1995 1996 1997 (UNAUDITED)
-------- -------- -------- -------- -------- ----------
<S> <C> <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 $21.70
-------- -------- -------- -------- -------- --------
Net Investment Income ................... 1.76 1.68 1.68 1.63 1.59 0.78
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures
Contracts ............................... 1.07 (2.34) 2.17 (0.72) 0.47 0.10
-------- -------- -------- -------- -------- --------
Total from Investment Operations ........ 2.83 (0.66) 3.85 0.91 2.06 0.88
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income..... (1.76) (1.68) (1.68) (1.63) (1.59) (0.78)
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) (0.78)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $22.15 $19.78 $21.95 $21.23 $21.70 $21.80
======== ======== ======== ======== ======== ========
Per Share Market Value, End of Period.... $22.375 $17.875 $20.500 $19.500 $22.063 $20.500
Total Investment Return at Market Value.. 5.35% (12.92%) 24.33% 3.13% 22.12% (3.63%)(1)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted). $163,709 $147,916 $165,974 $162,223 $167,058 $168,607
Ratio of Expenses to Average Net Assets .. 0.85% 0.88% 0.85% 0.85% 0.84% 0.81%(2)
Ratio of Net Investment Income
to Average Net Assets .................... 7.78% 8.11% 7.93% 7.65% 7.44% 7.14%(2)
Portfolio Turnover Rate .................. 99% 82% 102% 118% 141% 123%
</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),
distributions and total investment return of the Fund. It shows how the Fund's
net asset value for a share has changed since the end of the previous period. 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>
John Hancock Funds - Investors Trust
Schedule of Investments
June 30, 1998 (Unaudited)
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The Schedule of Investments is a complete list of all securities owned by
Investors Trust on June 30, 1998. 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 (0.43%)
Jet Equipment Trust,
Equipment Trust Cert Ser 95B2 08-15-14 (R).................. 10.910% BBB- $550 $721,160
-----------
Automobile/Trucks (0.74%)
ERAC US Finance Co.,
Note 02-15-05 (R) .......................................... 6.625 BBB 690 683,661
Ford Motor Co.,
Deb 11-15-25 ............................................... 7.125 A 365 388,462
Bond 02-15-28 ..................................... 6.625 A1 180 180,149
-----------
1,252,272
-----------
Banks (12.17%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04, (Y) .................... 8.200 AA- 1,000 1,101,080
ABN-Amro Bank N.V.- Chicago Branch,
Gtd Sub Deb (Netherlands) 05-31-05, (Y) .................... 7.250 AA- 500 525,285
African Development Bank,
Sub Note (Supra National) 12-15-03, (Y) .................... 9.750 AA- 1,000 1,174,990
Banc One Corp.,
Sub Deb 10-15-26 ........................................... 7.625 A+ 355 395,243
Bank of New York,
Cap Security 12-01-26 (R) .................................. 7.780 A- 570 608,931
BankBoston NA,
Sub Note 03-25-08 .......................................... 6.375 A2 510 509,740
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 ...................................... 9.750 AA- 900 1,006,830
International Bank For Reconstruction and Development,
30 Yr Bond (Supranational) 10-15-16, (Y) ................... 8.625 Aaa 3,800 4,894,590
Fleet Financial Group, Inc.,
Note 05-15-08 .............................................. 6.375 A- 470 474,724
Landeskreditbank Baden-DWuerttemberg,
Sub Note (Germany) 02-01-23, (Y) ........................... 7.625 AAA 1,300 1,509,079
National Westminster Bank PLC - New York Branch,
Sub Note 05-01-01 .......................................... 9.450 AA- 1,200 1,302,612
NB Capital Trust IV,
Gtd Cap Security 04-15-27 .................................. 8.250 A- 735 820,885
</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>
Banks (continued)
Scotland International Finance No. 2 B.V.,
Gtd Sub Note (United Kingdom) 01-27-04 (R), (Y)............. 8.800% A $2,000 $2,252,420
Gtd Sub Note (Netherlands) 11-01-06 (R), (Y)....... 8.850 A+ 750 870,870
Security Pacific Corp.,
Sub Note 11-15-00 .......................................... 11.500 A 1,000 1,118,960
Medium Term Sub Note 05-09-01 ..................... 10.360 A1 1,750 1,949,868
-----------
20,516,107
-----------
Building (0.17%)
M.D.C. Holdings, Inc.,
Sr Note 02-01-08 ........................................... 8.375 BB- 290 290,000
-----------
Containers (0.23%)
Stone Container Corp.,
Unit 04-01-02 .............................................. 12.250 B- 375 382,500
-----------
Cosmetics & Personal Care (0.64%)
Global Health Sciences, Inc.,
Sr Note 05-01-08 (R) ....................................... 11.000 B+ 280 276,500
Johnson & Johnson,
Deb 11-15-23 ............................................... 6.730 AAA 750 800,025
-----------
1,076,525
-----------
Electronics (0.17%)
Zilog, Inc.,
Sr Sec Note 03-01-05 (R) ................................... 9.500 B 390 284,700
-----------
Energy (1.06%)
AES Corp.,
Sr Sub Note 07-15-06 ....................................... 10.250 B+ 670 728,625
Sr Sub Note 08-15-07 .............................. 8.375 B+ 390 393,900
CalEnergy Company, Inc.,
Sr Note 09-15-06 ........................................... 9.500 BB+ 435 472,310
P & L Coal Holdings Corp.,
Sr Sub Note 05-15-08 (R) ................................... 9.625 B 180 184,950
-----------
1,779,785
-----------
Finance (3.15%)
CIT Group Holdings, Inc.,
Deb 03-15-01 ............................................... 9.250 A 1,000 1,080,190
Constitution Capital Trust I,
Gtd Cap Security 04-15-27 (R) .............................. 9.150 BBB 400 450,064
DR Investments,
Sr Note 05-15-07 (R) ....................................... 7.450 A- 450 477,333
Merrill Lynch Mortgage Investors, Inc.,
Sub Bond Ser 1992-B Class B 04-15-12 ....................... 8.500 Aaa 322 330,222
Midland American Capital Corp.,
Gtd Deb 11-15-03 ........................................... 12.750 A 1,650 1,688,280
Niantic Bay Fuel Trust,
Bond 06-04-03 (R) .......................................... 8.590 NR 265 67,271
</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)
United Companies Financial Corp.,
Sr Note 01-15-04 ........................................... 7.700% BB+ $575 $569,037
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A (Peru)
06-15-04 (R), (Y) .......................................... 8.400 BBB- 466 453,401
-----------
5,315,798
-----------
Funeral Services & Related (0.43%)
Loewen Group International, Inc.,
Gtd Sr Note Ser 4 10-15-03 ................................. 8.250 BB+ 710 727,750
-----------
Glass Products (0.20%)
Vicap S.A. de C.V.,
Gtd Sr Note (Mexico) 05-15-07 (R), (Y) ..................... 11.375 B+ 325 333,125
-----------
Government -D Foreign (2.20%)
Federative Republic of Brazil,
Global Bond (Brazil) 04-07-08, (Y) ......................... 9.375 BB- 375 333,281
Nova Scotia, Province of,
Deb (Canada) 04-01-22, (Y) ................................. 8.750 A- 750 966,300
Ontario, Province of,
Bond (Canada) 06-04-02, (Y) ................................ 7.750 AA- 500 530,955
Panama, Republic of,
Note (Panama) 02-13-02 (R), (Y)............................. 7.875 BB+ 720 705,600
Quebec, Province of,
Deb (Canada) 10-01-13, (Y) ................................. 13.000 A+ 500 531,470
Saskatchewan, Province of,
Bond (Canada) 12-15-20, (Y)................................. 9.375 A 480 654,216
-----------
3,721,822
-----------
Government - U.S. (21.53%)
United States Treasury,
Bond 08-15-17 .............................................. 8.875 Aaa 3,801 5,181,827
Bond 05-15-18 .............................................. 9.125 Aaa 3,250 4,549,480
Bond 02-15-23 .............................................. 7.125 Aaa 5,311 6,282,754
Note 05-15-01 .............................................. 8.000 Aaa 945 1,006,132
Note 05-15-02 .............................................. 7.500 Aaa 5,159 5,505,633
Note 08-15-03 .............................................. 5.750 Aaa 3,355 3,390,630
Note 02-15-05 .............................................. 7.500 Aaa 4,489 4,968,739
Note 07-15-06 .............................................. 7.000 Aaa 4,954 5,409,917
-----------
36,295,112
-----------
Government - U.S. Agencies (7.99%)
Federal Home Loan Mortgage Corp.,
20 Yr Pass Thru Ctf 01-01-16 ............................... 11.250 AAA 389 435,697
Federal National Mortgage Assn.,
15 Yr SF Pass Thru Ctf 01-25-05............................. 8.000 AAA 1,000 1,032,500
15 Yr SF Pass Thru Ctf 02-01-08............................. 7.500 AAA 378 388,850
15 Yr SF Pass Thru Ctf 06-01-10 +........................... 7.000 AAA 955 972,305
15 Yr SF Pass Thru Ctf 02-15-11 + ......................... 6.500 AAA 1,245 1,251,997
30 Yr SF Pass Thru Ctf 10-01-23 ............................ 7.000 AAA 683 693,152
</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 -D U.S. Agencies (continued)
Federal National Mortgage Assn. (continued),
30 Yr Pass Thru Ctf 03-01-24 + ............................. 6.500% AAA $285 $283,840
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22................ 6.940 AAA 367 381,327
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 11-15-19 to 02-15-25 ................ 9.500 AAA 772 832,844
30 Yr SF Pass Thru Ctf 11-15-20 ............................ 10.000 AAA 182 200,536
30 Yr SF Pass Thru Ctf 04-15-21 ............................ 9.000 AAA 370 398,110
30 Yr SF Pass Thru Ctf 03-15-24 to 02-15-26 + .............. 7.500 AAA 2,717 2,792,690
30 Yr Pass Thru Ctf 08-01-24 + ............................. 7.000 AAA 715 726,390
30 Yr SF Pass Thru Ctf 01-15-27 to 08-15-27 ................ 8.000 AAA 300 311,161
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 ............................ 8.625 AAA 2,500 2,763,200
-----------
13,464,599
-----------
Household (0.23%)
WestPoint Stevens, Inc.,
Sr Note 06-15-05 (R) ....................................... 7.875 BB 385 387,888
-----------
Insurance (4.78%)
Conseco, Inc.,
Note 06-15-05 .............................................. 6.800 BBB 485 485,810
Equitable Life Assurance
Society of the United States,
Surplus Note 12-01-05 (R) .................................. 6.950 A 550 570,972
Fairfax Financial Holdings Ltd.,
Note (Canada) 04-15-26, (Y)................................. 8.300 BBB+ 670 760,303
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R)................................... 8.200 A+ 1,050 1,184,411
Surplus Note 10-15-26 (R) .................................. 7.875 A2 415 468,373
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) ................................. 7.625 AA 1,100 1,247,323
NAC Re Corp.,
Note 06-15-99 .............................................. 8.000 A- 355 360,982
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) .................................. 7.500 AA- 1,500 1,567,215
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R)................................... 6.625 AA 725 750,738
URC Holdings Corp.,
Sr Note 06-20-06 (R) ....................................... 7.875 A- 615 663,278
-----------
8,059,405
-----------
Leisure (1.12%)
Mohegan Tribal Gaming Authority,
Sr Sec Note Ser B 11-15-02 ................................. 13.500 BB+ 150 190,875
Showboat Marina Casino
Partnership/Finance Corp.,
1st Mtg Note Ser B 03-15-03 ................................ 13.500 BB- 500 585,000
Sun International Hotels Ltd.,
Gtd Sr Sub Note 03-15-07 ................................... 9.000 B+ 225 235,688
Gtd Sr Sub Note (Bahamas) 12-15-07, (Y) .................... 8.625 B+ 250 257,500
</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)
Trump Hotels & Casino Resorts
Funding, Inc./Holdings, L.P.,
Sr Note 06-15-05 ........................................... 15.500% B- $550 $618,750
-----------
1,887,813
-----------
Media (6.08%)
Adelphia Communications Corp.,
Sr Note 07-15-02 (R) ....................................... 8.125 B 230 228,705
Sr Note Ser B 10-01-02 ..................................... 9.250 B2 525 543,375
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- 680 700,611
Comcast Corp.,
Sr Sub Deb 07-15-12 ........................................ 10.625 BB+ 585 754,650
Continental Cablevision, Inc.,
Sr Sub Deb 06-01-07 ........................................ 11.000 BBB- 1,210 1,321,066
Cumulus Media, Inc.,
Sr Sub Note 07-01-08 ....................................... 10.375 CCC+ 200 202,750
Garden State Newspapers, Inc.,
Sr Sub Note 10-01-09 ....................................... 8.750 B+ 265 268,975
Le Groupe Videotron Ltee,
Sr Note (Canada) 02-15-05, (Y) ............................. 10.625 BBB- 515 565,604
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 ........................................ 8.250 BBB- 507 572,038
OpTel, Inc.,
Sr Note 07-01-02 (R) ++ .................................... 11.500 B- 185 185,000
Rogers Cablesystems Ltd.,
Sr Sec Second Priority Note (Canada) 08-01-02, (Y).......... 9.625 BB+ 290 310,300
Sr Note Ser B (Canada) 03-15-05, (Y)............... 10.000 BB+ 800 888,000
SFX Broadcasting, Inc.,
Sr Sub Note Ser B 05-15-06 ................................. 10.750 B- 310 341,775
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- 520 632,866
TKR Cable I, Inc.,
Sr Deb 10-30-07 ............................................ 10.500 BBB- 1,875 2,062,838
-----------
10,251,003
-----------
Medical (2.11%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06, (Y) ............................. 10.750 B+ 260 274,950
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08 (R)................... 7.875 B+ 390 386,100
Integrated Health Services, Inc.,
Sr Sub Note 01-15-08 ....................................... 9.250 B- 478 496,523
PharMerica, Inc.,
Sr Sub Note 04-01-08 (R) ................................... 8.375 B 170 170,850
</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)
Physician Sales & Service, Inc.,
Gtd Sr Sub Note 10-01-07 ................................... 8.500% B $268 $276,040
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 ....................................... 10.750 B+ 340 379,950
Sola International, Inc.,
Note 03-15-08 .............................................. 6.875 BBB- 410 409,754
Tenet Healthcare Corp.,
Sr Sub Note 01-15-07 ....................................... 8.625 BB- 390 399,750
Sr Sub Note 12-01-08 (R) ................................... 8.125 BB- 230 230,288
Vencor, Inc.,
Sr Sub Note 05-01-05 (R) ................................... 9.875 B- 200 195,500
Watson Pharmaceuticals, Inc.,
Sr Note 05-15-08 ........................................... 7.125 BBB- 335 339,606
-----------
3,559,311
-----------
Metals (0.15%)
Freeport-McMoRan Copper & Gold, Inc.,
Sr Note 11-15-26 ........................................... 7.200 CCC+ 325 261,424
-----------
Mortgage Banking (3.84%)
ContiFinancial Corp.,
Sr Note 03-15-02 ........................................... 7.500 BB+ 475 476,615
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 ................ 8.100 AAA 160 166,475
Countywide Home Loans , Inc.,
Mortgage Pass Thru Ctf Ser 1997-7 Cl A8 12-25-27 ........... 7.250 Aaa 914 960,382
CS First Boston Mortgage Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser 1998-C1
Class A-1A 05-17-40 ........................................ 6.260 AAA 645 649,938
Deutsche Mortgage & Asset Receiving Corp.,
Commercial Mtg Pass-Through Ctf Ser
1998-C1 Class C 03-15-08 ................................... 6.861 A2 400 408,625
FirstPlus Home Loan Trust,
Pass Thru Ctf Ser 1998-4 Class A-5 01-01-01 ................ 6.380 AAA 700 700,431
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C2 Class A-3 11-15-07 ............... 6.566 AAA 680 696,575
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-1 Class A-5 12-25-13 ................ 6.290 AAA 720 721,125
Nomura Asset Securities Corp.,
Pass Thru Ctf Ser 1998-D6 Class A-1A 03-17-28 .............. 6.280 AAA 487 491,389
Salomon Brothers Mortgage Securities VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2 Class A-2 7-25-24 .......... 6.750 Aaa 437 444,101
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-D1 Class A6 02-15-25 ................ 7.180 AAA 730 755,094
-----------
6,470,750
-----------
Oil & Gas (1.58%)
Camuzzi Gas Pampeana S.A.,
Bond (Argentina) 12-15-01, (Y).............................. 9.250 BBB- 390 392,925
</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>
Oil & Gas (continued)
Norsk Hydro ASA,
Deb (Norway) 10-01-16, (Y) ................................. 7.500% A $690 $771,800
Petroleum Geo-Services,
Sr Note (Norway) 03-30-08, (Y).............................. 6.625 BBB 530 530,954
Union Pacific Resources Group Inc.,
Deb 05-15-28 ............................................... 7.150 BBB 425 425,055
YPF Sociedad Anonima,
Sr Note (Argentina) 03-15-03, (Y)........................... 7.250 BBB- 555 539,294
-----------
2,660,028
-----------
Paper & Paper Products (0.65%)
Fort James Corp.,
Sr Note 09-15-02 ........................................... 6.500 BBB- 455 458,153
Repap New Brunswick,
Sr Note (Canada) 04-15-05, (Y)............................ 10.625 CCC+ 185 186,850
S.D. Warren Co.,
Sr Sub Note Ser B 12-15-04 ................................. 12.000 B+ 415 458,575
-----------
1,103,578
-----------
Real Estate Investment Trust (0.74%)
American Health Properties, Inc.,
Note 01-15-07 .............................................. 7.500 BBB- 390 399,984
Liberty Property L.P.,
Med Term Note 06-05-02 ..................................... 6.600 BBB- 340 340,340
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 .............................................. 7.300 BBB- 500 507,915
-----------
1,248,239
-----------
Retail (1.96%)
Kroger Co. (The),
Lease Ctf 02-01-09 ......................................... 12.950 BBB- 1,910 2,129,650
May Department Stores Co. (The),
Deb 06-15-18 ............................................... 10.750 A 126 133,133
Safeway, Inc.,
Deb 01-15-09 ............................................... 13.500 BBB 474 528,882
Southern Foods Group L.P.,
Sr Sub Note 09-01-07 (R) ................................... 9.875 B 495 516,038
-----------
3,307,703
-----------
Steel (0.36%)
Bayou Steel Corp.,
1st Mtg Bond 05-15-08 (R) .................................. 9.500 B 275 272,594
IVACO, Inc.,
Sr Note (Canada) 09-15-05, (Y) ............................. 11.500 B+ 310 340,225
-----------
612,819
-----------
Telecommunications (3.59%)
Compagnie De Radiocomunicaciones Moviles S.A.,
Bond (Argentina) 05-08-08 (R), (Y).......................... 9.250 Ba3 75 72,000
Esprit Telecom Group PLC,
Sr Note (United Kingdom) 06-15-08 (R), (Y) ................. 10.875 B- 285 282,150
</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>
Telecommunications (continued)
FaciliCom International,
Sr Note 01-15-08 (R) ....................................... 10.500% NR $330 $323,400
FLAG Ltd.,
Sr Note 01-30-08 (R) ....................................... 8.250 B+ 470 473,525
McLeodUSA, Inc.,
Sr Note 03-15-08 (R) ....................................... 8.375 B+ 392 392,980
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07, (Y) ............................. 12.000 B 510 586,500
Nextel Communications, Inc.,
Sr Disc Note, Step Coupon
(9.75%, 02-15-99) 08-15-04 ................................. Zero CCC+ 930 904,425
Sr Disc Note, Step Coupon
(9.95%, 02-15-03) 02-15-08 (R) ............................ Zero CCC+ 420 267,750
NEXTLINK Communications, Inc.,
Sr Note 10-01-07 ........................................... 9.625 B 205 209,100
Sr Note 03-15-08 (R) ....................................... 9.000 B 153 153,000
Paging Network, Inc.,
Sr Sub Note 10-15-08 ....................................... 10.000 B 300 309,750
Qwest Communications International, Inc.,
Sr Note Ser B 04-01-07 ..................................... 10.875 BB+ 445 512,863
Satelites Mexicanos S.A. de C.V.,
Sr Note (Mexico) 11-01-04 (R), (Y) ......................... 10.125 B- 155 151,125
TCI Communications, Inc.,
Sr Deb 08-01-15 ........................................... 8.750 BBB- 624 751,246
Teligent, Inc.,
Sr Note 12-01-07 ........................................... 11.500 CCC 387 391,838
Viatel, Inc.,
Unit (Sr Note & Preferred Stock) 04-15-08 (R) .............. 11.250 Caa1 264 276,540
-----------
6,058,192
-----------
Textile (0.75%)
Tommy Hilfiger USA,
Gtd Note 06-01-03 .......................................... 6.500 BBB- 465 466,744
Tropical Sportswear International Corp.,
Sr Sub Note 06-15-08 (R) ................................... 11.001 B- 280 280,700
Unifi, Inc.,
Note, Ser B 02-01-08 ....................................... 6.500 A- 525 519,068
-----------
1,266,512
-----------
Tobacco (0.49%)
RJR Nabisco, Inc.,
Note 12-01-02 .............................................. 8.625 BBB- 445 459,325
Note 09-15-03 .............................................. 7.625 BBB- 365 362,901
-----------
822,226
-----------
Transportation (5.86%)
America West Airlines,
Pass Thru Ctf Ser B 01-02-08 ............................... 6.930 A- 497 504,864
Continental Airlines,
Pass Thru Ctf Ser 96-C 10-15-13 ............................ 9.500 BBB+ 481 555,466
</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>
Transportation (continued)
Delta Air Lines, Inc.,
Equip Tr Ctf Ser A 06-01-08 ................................ 10.000% BBB $2,000 $2,471,820
Enterprises Shipholding Corp.,
Sr Note (Greece) 05-01-08 (R), (Y).......................... 8.875 BB 260 254,800
Fine Air Services, Inc.,
Sr Note 06-01-02 (R) ....................................... 9.875 B 425 415,438
Humpuss Funding Corp.,
Gtd Note (Indonesia) 12-15-09 (R), (Y) ..................... 7.720 B3 492 359,460
Northwest Airlines Corp.,
Gtd Note 03-15-04 .......................................... 8.375 BB 410 422,776
Pass Thru Ctf Ser 1996-1D 01-02-15 ......................... 8.970 BBB- 391 440,651
Northwest Airlines Inc.,
Pass Thru Ctf Ser 1996-1C 01-02-05 ......................... 10.150 BB+ 309 327,773
NWA Trust,
Sr Note Ser A 06-21-14 ..................................... 9.250 A2 563 675,555
Railcar Trust No. 1992-1,
Pass Thru Ser 1992-1 Class A 06-01-04 ...................... 7.750 AAA 1,379 1,452,011
Scandinavian Airlines System,
Deb (Sweden) 07-20-99, (Y) ................................. 9.125 A3 700 724,500
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05 ......................... 11.200 BB 880 990,343
Wisconsin Central Transportation Corp.,
Note 04-15-08 .............................................. 6.625 BBB- 280 278,180
-----------
9,873,637
-----------
Utilities (11.40%)
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 .............................. 9.000 BB- 565 646,105
British Telecom Finance, Inc.,
Gtd Deb (United Kingdom) 02-15-19, (Y) ..................... 9.625 AAA 1,075 1,145,937
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 ......................... 8.890 BB- 700 809,373
Calpine Corp.,
Sr Note 05-15-06 ........................................... 10.500 BB- 465 509,173
Sr Note 07-15-07 .................................. 8.750 BB- 190 195,223
CE Casecnan Water & Energy Co., Inc.,
Sr Note Ser A (Philippine Islands) 11-15-05, (Y) ........... 11.450 BB 400 399,000
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 ..................................... 9.500 BB+ 1,045 1,154,253
EIP Funding-PNM,
Sec Fac Bond 10-01-12 ...................................... 10.250 Ba2 710 838,430
Enersis S.A.,
Note (Cayman Islands) (Chile) 12-01-16, (Y) ................ 7.400 A- 295 269,550
First PV Funding Corp.,
Deb Ser 86A 01-15-14 ....................................... 10.300 BB- 200 213,110
Deb Ser 86B 01-15-16 ....................................... 10.150 BB- 293 312,101
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<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 Holding Corp.,
Sec Note 01-31-03 (r) ...................................... 15.750% BBB $1,744 $1,883,186
GTE Corp.,
Deb 11-01-20 ............................................... 10.250 A 1,500 1,679,595
Hydro-Quebec,
Gtd Deb (Canada) 02-01-03, (Y) ............................. 7.375 A+ 750 788,753
Gtd Bond (Canada) 02-01-21, (Y) ................... 9.400 A+ 515 684,775
Gtd Bond (Canada) 01-15-22, (Y) ................... 8.400 A+ 845 1,031,720
Iberdrola International B.V.,
Note (Spain) 10-01-02, (Y) ................................. 7.500 AA- 1,000 1,046,330
Long Island Lighting Co.,
Deb 07-15-19 ............................................... 8.900 A- 380 402,709
Deb 11-01-22 ...................................... 9.000 A- 360 410,612
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 .................................. 10.330 BB- 975 1,047,601
Midland Funding Corp. II,
Deb 07-23-05 ............................................... 11.750 B 300 360,882
Deb Ser B 07-23-06 ................................ 13.250 B 225 291,022
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico) 11-15-09 (R), (Y) ..................... 9.625 BB 280 261,800
Niagara Mohawk Power Corp.,
Sr Note Sr G 10-01-08 ...................................... 7.750 BB- 340 348,075
North Atlantic Energy Corp.,
1st Mtg Bond 06-01-02 ...................................... 9.050 B+ 545 560,200
Puget Sound Energy Capital Trust I,
Gtd Cap Security Ser B 06-01-27 ............................ 8.231 Baa2 355 369,058
System Energy Resources, Inc.,
1st Mtg 08-01-01 ........................................... 7.710 BBB- 590 603,871
U.S. West Capital Funding Inc.,
Co Gtd 7-15-28 ............................................. 6.875 A- 360 360,029
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 ......................... 8.090 BBB- 575 596,010
-----------
19,218,483
-----------
TOTAL PUBLICLY TRADED BONDS AND DIRECT PLACEMENT
SECURITY Cost $155,566,666) (96.80%)163,210,266
------ -----------
NUMBER OF
SHARES OR WARRANTS
------------------
PREFERRED STOCKS AND WARRANT
California Federal Preferred Capital Corp., 9.125%,
Ser A, Preferred Stock ..................................... 20,715 565,778
Connecticut Light & Power Co.,
5.30%, Ser 1993, Preferred Stock ........................... 21,749 1,000,454
MetroNet Communications Corp.,
Warrant (Canada) (R) ....................................... 510 24,480
Time Warner, Inc.,
10.25%, Ser M, Preferred Stock ............................. 944 1,048,548
-----------
2,639,260
-----------
TOTAL PREFERRED STOCKS AND WARRANT
(Cost $2,603,651) (1.56%) 2,639,260
------ -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<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 (2.10%)
Investment in a joint repurchase agreement
transaction with Toronto Dominion
Securities USA, Inc. -D Dated 06-30-98,
due 07-01-98 (Secured by U. S. Treasury
Notes, 5.000% thru 9.125% due 02-15-99
thru 05-15-18)- Note A ..................................... 5.750% $3,536 $3,536,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.95% ......................................... 343
------------
TOTAL SHORT-TERM INVESTMENTS (2.10%) 3,536,343
-------- ------------
TOTAL INVESTMENTS (100.46%) 169,385,869
-------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.46%) (778,918)
-------- ------------
TOTAL NET ASSETS (100.00%) $168,606,951
======== ============
</TABLE>
(r) Direct placement securities are restricted as 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 JUNE 30,
DATE COST NET ASSETS 1998
----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Fitchburg Holdings Corp., Sec. Note,
15.75%, 01-31-03 02-10-81 $2,293,925 1.12% $1,883,186
</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 $21,399,407 or 12.69% of net assets as of
June 30, 1998.
(Y) Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer; however, security is U.S. dollar
denominated.
+ These securities, having an aggregate value of $3,501,775 or 2.08% 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 $2,561,130 and $1,038,244 of
U.S. Treasury Bond, 7.125%, 02-15-23, and U.S. Treasury Note, 7.500%,
02-15-05, have been segregated to cover the when-issued commitments.
++ This security, having an aggregate value of $185,000 or 0.11% of the Fund's
net assets, has been purchased as a forward commitment; that is, the Fund
has agreed on trade date to take delivery of and make payment for such
security on a delayed basis subsequent to the date of this schedule. The
purchase price and interest rate of such security is fixed at trade date,
although the Fund does not earn any interest on such security until
settlement date. The Fund has instructed its Custodian Bank to segregate
assets with a current value at least equal to the amount of the forward
commitment. Accordingly, the market value of $190,378 of U.S. Treasury
Bond, 9.125%, 05-15-18, has been segregated to cover the forward
commitment.
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service or John Hancock Advisers, Inc.
where Standard & Poor's ratings are not available.
NR = Not rated.
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.
19
<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.
Effective June 1,1998, the Fund determines the net asset value of the Common
Shares each business day at the close of regular trading.
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,
Inc., 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 a 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 carryforward expires
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 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 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
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Investors Trust
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, 1998, open positions in financial futures contracts were as follows:
UNREALIZED
EXPIRATION OPEN CONTRACT POSITION APPRECIATION
- ---------- ------------- -------- ------------
SEP 98 1 U.S. TREASURY NOTE LONG $2,117
=========
At June 30, 1998, the Fund had deposited in a segregated account $30,000 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, exceed 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 by 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 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 June 30, 1998, 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 obligations of the
U.S. government and its agencies and short-term securities, during the period
ended June 30, 1998, aggregated $77,082,662 and $77,523,155, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $124,782,943 and $123,133,877, respectively.
The cost of investments owned at June 30, 1998 (including the joint repurchase
agreement) for federal income tax purposes was $161,979,974. Gross unrealized
appreciation and depreciation of investments at June 30, 1998 aggregated
$8,908,066 and $1,502,514, respectively, resulting in net unrealized
appreciation of $7,405,552.
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John Hancock Funds - Investors Trust
DIVIDENDS AND DISTRIBUTIONS
During 1998, dividends from net investment income totaling $0.7775 per share was
paid to shareholders. The dates of payment and the amounts per share are as
follows:
INCOME
PAYMENT DATE DIVIDEND
- ------------ --------
March 31, 1998 $0.3975
June 30, 1998 $0.3800
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 331/3% of the
market or fair value of its net assets and may borrow from banks as a temporary
measure for emergency purposes in amounts not to exceed 5% of its total assets
taken at cost. Substantially all of the Fund's net investment income per year
will be distributed to shareholders in quarterly payments. Net realized
short-term capital gains, if any, will be distributed annually; however, net
realized long-term capital gains may be retained and reinvested. All
distributions are paid in cash unless the shareholder elects to participate in
the Automatic Dividend Reinvestment Plan.
FINANCIAL FUTURES CONTRACTS
The Fund may buy and sell financial futures contracts and options on futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. The Fund's ability to hedge successfully will depend on
the Adviser's ability to predict accurately the future direction of interest
rate changes and other market factors. There is no assurance that a liquid
market for futures and options will always exist. In addition, the Fund could be
prevented from opening, or realizing the benefits of closing out, a futures or
options position because of position limits or limits on daily price
fluctuations imposed by an exchange. The Fund will not engage in transactions in
futures contracts and options on futures for speculation, but only for hedging
or other permissible risk management purposes. All of the Fund's futures
contracts and options on futures will be traded on a U.S. commodity exchange or
board of trade.
The Fund will not engage in a transaction in futures or options on
futures if, immediately thereafter, the sum of initial margin deposits on
existing positions and premiums paid for options on futures would exceed 5% of
the Fund's total assets.
DIVIDEND REINVESTMENT PLAN
John Hancock Investors Trust offers shareholders the opportunity to elect to
receive shares of the Fund's Common Shares in lieu of cash dividends. The Plan
is available to all shareholders without charge.
Any shareholder of record of John Hancock Investors Trust ("Investors") may
elect to participate in the Automatic Dividend Reinvestment Plan (the "Plan")
and receive shares of Investors' Common Shares in lieu of all or a portion of
the cash dividends.
Shareholders may join the Plan by filling out and mailing an authorization card
showing an election to reinvest all or a portion of dividend payments. If
received in proper form by State Street Bank and Trust Company, P.O. Box 8209,
Boston, Massachusetts 02266-8209 (the "Agent Bank") not later than seven
business days before the record date for a dividend, the election will be
effective with respect to all dividends paid after such record date.
Shareholders whose shares are held in the name of a broker or nominee should
contact the broker, bank, or nominee to participate in the Plan.
Participation in the Plan may be terminated at any time by written
notice to the Agent Bank and such termination will be effective immediately.
However, notice of termination must be received seven days prior to the record
date of any distribution to be effective for that distribution. Upon
termination, certificates will be issued representing the number of full shares
of Common Shares held by the Agent Bank. A shareholder will receive a cash
payment for any fractional share held.
The Agent Bank will act as agent for participating shareholders. The Board of
Trustees of Investors will declare dividends from net investment income payable
in cash or, in the case of shareholders participating in the Plan, partially or
entirely in Investors' Common Shares. The number of shares to be issued for the
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<PAGE>
John Hancock Funds - Investors Trust
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).
YEAR 2000 COMPLIANCE
The Adviser and the Fund's service providers are taking steps to address any
year 2000-related computer problems. However, there is some risk that these
problems could disrupt the Fund's operations or financial markets generally.
SHAREHOLDER MEETING
On April 16, 1998, 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 6,252,573 119,750
Edward J. Boudreau, Jr. 6,253,277 119,046
Richard P. Chapman, Jr. 6,260,077 112,246
William J. Cosgrove 6,254,319 118,004
Douglas M. Costle 6,244,497 127,826
Leland O. Erdahl 6,242,482 129,841
Richard A. Farrell 6,258,947 113,376
Gail D. Fosler 6,257,837 114,486
William F. Glavin 6,247,175 125,148
Anne C. Hodsdon 6,254,736 117,587
Dr. John A. Moore 6,251,536 120,787
Patti McGill Peterson 6,247,772 124,551
John W. Pratt 6,247,782 124,541
Richard S. Scipione 6,249,468 122,855
Edward J. Spellman 6,258,883 113,440
The Shareholders also ratified the Trustees' Selection of Ernst & Young LLP as
auditors for the fiscal year ending December 31, 1998, with the votes tabulated
as follows: 6,269,201 FOR, 31,413 AGAINST and 71,709 ABSTAINING.
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INTERNET: www.jhancock.com/funds S. Hackensack, NJ
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