The latest report from your
Fund's management team
SEMIANNUAL REPORT
Investors
Trust
JUNE 30, 1999
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Stephen L. Brown
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
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
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
For Shareholder Assistance
Refer to Page 26
CHAIRMAN'S MESSAGE
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting
ready to celebrate this historic transition to a new millennium. At John
Hancock Funds, we share the excitement, but we aren't popping the champagne
corks just yet. Rather, we are staying on the course that we set more than
two years ago to ensure that the transition to a new millennium is a smooth
one for our shareholders.
As many already know, the Year 2000 has created more than the prospect of
New Year's festivities of epic proportions. It has also presented the world
with a challenge: making sure that older computers, and any equipment
powered by computer chips, can properly read and process the date "00" as
2000, not 1900. Much has been written about how the world will weather the
change. Some view it as a non-event, while others see the potential for
disruptions. How much disruption, and for how long, depends on whom you
talk to.
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an
important issue to be dealt with and we have made it a top priority. Two
years ago, John Hancock Funds put a full-time team of experts on the case
and established a company-wide program to evaluate all computer
applications and to modify or replace those that needed changing.
These modifications and replacements for all mission-critical systems are
done and successfully compliance tested. The rest of 1999 will be spent
completing the few remaining non mission-critical systems, testing with our
business partners and continuing to participate in industry testing. We
have also established additional contingency plans beyond our regular ones
to prepare for any challenges that the Year 2000 might present. In the end,
John Hancock will spend approximately $90-$95 million to ensure we make a
successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is
featuring articles with more detailed information on Y2K matters of
importance to our shareholders. I encourage you to read them, or contact
one of our Customer Service Representatives at 1-800-225-5291 for another
copy. For your own peace of mind, we also recommend that you save your 1999
statements, especially those you receive between October and December, so
that you are able to check them against the first one you receive in 2000.
It's a measure of prudence, not panic. Good record keeping is part of good
planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we
have taken will provide shareholders with as smooth a transition as
possible. Once that occurs, we will happily raise our glasses to toast the
New Year, future prosperity and our hopes to serve you well into the
2000's.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JAMES K. HO, CFA, PORTFOLIO MANAGER
John Hancock
Investors Trust
Late-period jitters caused many bond sectors to
give back earlier gains in the last six months
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock
Investors Trust. Caption below reads "Fund management team members (l-r):
"Ben Matthews, Lee Crockett, Jim Ho, Tony Goodchild and Beverly
Cleathero."]
Positive investor sentiment ushered John Hancock Investors Trust into 1999,
then stalled out in the final two months of the semiannual period as
inflation fears mounted. Although last year's global credit concerns
receded and investors renewed their interest in yield-enhanced domestic
bond sectors -- such as investment-grade corporate bonds, high-yield issues
and mortgage-backed and asset-backed securities -- the continued strength of
the U.S. economy rekindled investors' worries about rising interest rates.
As a result, the dramatic rebound within these sectors was fairly short-lived
and many bonds gave back earlier gains.
Throughout the six months ended June 30, 1999, we balanced defensive
strategies with selective opportunism, staying fully invested to meet the
market's challenges head on. Although our efforts enabled the Fund to avoid
the brunt of the recent market-wide downturn, it did not escape unscathed.
John Hancock Investors Trust produced a total return of -0.99% at net asset
value, compared with the -2.42% return at net asset value of the average
open-end corporate debt A-rated fund, according to Lipper, Inc.
Forward thinking
As the Fund entered fiscal 1999, we had already begun to initiate
strategies that allowed us to participate in the recovery of several
fixed-income sectors early this spring, while avoiding the pitfalls of
others. Here is what we did:
[Table at top left hand column entitled "Top Five Bond Sectors." The first
listing is U.S. Government & Agencies 27%, the second is Banks & Financials
21%, the third Utilities 11%, the fourth Media 7% and the fifth
Transportation 7%. A note below the table reads "As a percentage of net
assets on June 30, 1999."]
"...we sold
some of the
Fund's U.S.
Treasury
holdings."
* Increased corporate bond exposure. Because of last year's rout in the
financial markets, the valuations of investment-grade corporate bonds
and high-yield securities had become historically attractive. Starting
in late December and continuing on through early February, we bolstered
the Fund's position in these issues, believing they were poised for a
comeback, given investors' growing comfort with bonds outside the Treasury
market. In particular, we shifted focus a bit from the higher-quality
A-rated bonds to BBB-rated names, those at the lowest end of the
investment-grade spectrum. Our tack proved advantageous and was one of
the main reasons the Fund outperformed the Lipper average. Our high-yield
bond exposure also helped, as their prices held up the best during the
recent downturn.
[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
Continental Cablevision followed by an up arrow with the phrase "Upcoming
merger with AT&T and likely credit upgrade." The second listing is Liberty
Mutual followed by a sideways arrow with the phrase "Lackluster operating
results." The third listing is Integrated Health Services followed by a
down arrow with the phrase "Company experiencing financial difficulties." A
note below the table reads "See 'Schedule of Investments.' Investment
holdings are subject to change."]
* Trimmed U.S. Treasury weighting. To finance our increased focus on
corporate bonds, we sold some of the Fund's U.S. Treasury holdings.
We did so before the so-called "flight from quality" was in full
effect, realizing some profits as a result.
* Pared-down emphasis on mortgages. The Fund started the fiscal year with
significant emphasis on mortgage-backed and asset-backed securities. As
these holdings appreciated, we slightly trimmed the Fund's exposure.
* Shortened duration. Although we typically don't take large bets on
interest-rate moves, we are able to adjust the Fund's sensitivity through a
mathematical measure known as duration. A longer duration typically offers
greater potential for price gains when interest rates decline, and price
losses when rates rise. A shorter duration helps cushion against price
declines as a result of rising rates, but may also inhibit a portfolio from
fully participating in a rally when interest rates decline. Throughout the
period, we kept the Fund's duration relatively short, which helped
considerably during the market's recent turbulence.
Emerging markets avoided
Although emerging-market bonds rallied impressively in the early months
of the period, we stayed, for the most part, clear of these issues. We
believed the risks were too great. As it turned out, emerging-market
debt backtracked to 1998's price levels as the period progressed. The
uncertain future of those markets and their general lack of liquidity
revived investors' concerns.
Pockets of emphasis
While the Fund remains broadly diversified within the corporate bond
sector, we have maintained pockets of emphasis in utility, media, financial
holdings and telecommunications, owning both investment-grade and high-yield
issues.
[Bar chart at top of left hand column with heading "Fund Performance".
Under the heading is a note that reads "For the six months ended June 30,
1999." The chart is scaled in increments of .5% with -2.5% at the bottom
and 0% at the top. The first bar represents the -0.99% total return for
John Hancock Investors Trust. The second bar represents the -2.42% total
return for 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. The average open-end
corporate debt A-rated fund is tracked by Lipper, Inc.]
* Utilities -- The fairly recent deregulation of the utility industry, the
steady demand for its product and its yield potential make this sub-
sector a perennial favorite. Several holdings have performed well for the
Fund, including CalEnergy, Niagara Mohawk Power Corp. and Northeast
Utilities, which was recently upgraded to investment-grade status as it
successfully completed the nuclear decommissioning of the Millstone Three
power plant.
* Telecommunications -- Despite some recent growing pains, many of the Fund's
telecom holdings represent dynamic opportunity. Global Crossing Holdings,
NEXTLINK Communications, Nextel Communications and Qwest Communications
International are among several holdings that have been noteworthy
performers.
* Media -- With the rapid advances in technology, many media companies have
the wherewithal to evolve with the times. Continental Cablevision, which was
recently acquired by AT&T, CSC Holdings, Adelphia Communications and TCI
Communications are several Fund holdings worthy of mention.
* Finance -- Within the financial arena, we focused on higher-grade issues
such as Merrill Lynch, Household Finance and BankBoston.
REIT, oil, gas and paper holdings
One subtle, timely shift we made over the period was our increased emphasis
on three sectors -- real estate investment trusts (REITs), oil and gas and
paper, all of whose valuations had become extremely attractive by the time
the fiscal year began. Given the economy's strength, we believed there was
room for improvement, which did, in fact, take place near the period's end.
Occidental Petroleum, Union Pacific, Packaging Corp. of America and ProLogis
Trust were several holdings that contributed to performance.
"We are
keeping a
watchful eye
on upcoming
economic reports..."
Research and selectivity are keys
We are keeping a watchful eye on upcoming economic reports and what they
might portend for fixed-income markets in the months ahead. Given the
possibility of further market weakness, we shall keep the portfolio's
duration relatively short. Despite the correction, we are confident that
our extensive research capabilities and heightened selectivity within the
corporate arena shall serve to benefit the Fund once the current
uncertainties subside.
- ------------------------------------------------------------------------------
This commentary reflects the views of the portfolio manager through the end
of the Fund's period discussed in this report. Of course, the manager's
views are subject to change as market and other conditions warrant.
FINANCIAL STATEMENTS
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, 1999. You'll
also find the net asset value per share as of that date.
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- -----------------------------------------------
Assets:
Investments at value - Note C:
Publicly traded bonds and direct placement
security (cost - $154,258,676) $154,847,900
Preferred stocks and warrants (cost - $276,076) 331,870
Joint repurchase agreement (cost - $5,502,000) 5,502,000
Corporate savings account 961
160,682,731
------------
Receivable for investments sold 2,481,580
Interest receivable 2,763,188
Other assets 12,020
------------
Total Assets 165,939,519
- -------------------------------------------------------------------
Liabilities:
Payable for investments purchased 3,184,366
Dividend payable 321,709
Payable for futures variation margin - Note A 4,417
Payable to John Hancock Advisers, Inc.
and affiliates - Note B 267,668
Accounts payable and accrued expenses 87,013
------------
Total Liabilities 3,865,173
- -------------------------------------------------------------------
Net Assets:
Capital paid-in 162,907,780
Accumulated net realized loss on investments and
financial futures contracts (1,542,165)
Net unrealized appreciation of investments and
financial futures contracts 645,018
Undistributed net investment income 63,713
------------
Net Assets $162,074,346
===================================================================
Net Asset Value Per Share:
(Based on 7,798,646 shares of beneficial
interest outstanding - 20 million shares
authorized with no par value) $20.78
===================================================================
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, 1999 (Unaudited)
- -------------------------------------------------------------------
Investment Income:
Interest $6,335,555
Dividends 15,145
-----------
6,350,700
-----------
Expenses:
Investment management fee - Note B 509,757
Transfer agent fee - Note B 45,807
Custodian fee 36,202
Printing 26,434
Auditing fee 21,761
Accounting and legal services fee - Note B 11,812
New York Stock Exchange fee 8,582
Trustees' fees 4,409
Miscellaneous 3,088
Legal fees 1,525
-----------
Total Expenses 669,377
- -------------------------------------------------------------------
Net Investment Income 5,681,323
- -------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts:
Net realized loss on investments sold (566,119)
Net realized gain on financial futures contracts 41,417
Change in net unrealized appreciation/depreciation
of investments (7,236,150)
Change in net unrealized appreciation/depreciation
of financial futures contracts (156)
-----------
Net Realized and Unrealized
Loss on Investments and
Financial Futures Contracts (7,761,008)
- -------------------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ($2,079,685)
===================================================================
See notes to financial statements.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1999
1998 (UNAUDITED)
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $11,725,185 $5,681,323
Net realized gain (loss) on investments sold and financial futures contracts 19,912 (524,702)
Change in net unrealized appreciation/depreciation of investments
and financial futures contracts 631,486 (7,236,306)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations 12,376,583 (2,079,685)
------------ ------------
Distributions to Shareholders:
Dividends from net investment income ($1.5150 and $0.7275 per share, respectively) (11,728,676) (5,667,545)
------------ ------------
From Fund Share Transactions - Net: *
Market value of shares issued in reinvestment of distributions 1,789,588 326,101
------------ ------------
Net Assets:
Beginning of period 167,057,980 169,495,475
------------ ------------
End of period (including undistributed net investment income
of $49,935 and $63,713, respectively) $169,495,475 $162,074,346
============ ============
* Analysis of Fund Share Transactions:
Shares outstanding, beginning of period 7,699,521 7,782,963
Shares issued to shareholders in reinvestment of distributions 83,442 15,683
------------ ------------
Shares outstanding, end of period 7,782,963 7,798,646
============ ============
</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.
<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:
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------- JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $22.15 $19.78 $21.95 $21.23 $21.70 $21.78
-------- -------- -------- -------- -------- -----------
Net Investment Income 1.68 1.68 1.63 1.59 1.52 0.73
Net Realized and Unrealized Gain (Loss)
on Investments and Financial Futures Contracts (2.34) 2.17 (0.72) 0.47 0.08 (1.00)
-------- -------- -------- -------- -------- -----------
Total from Investment Operations (0.66) 3.85 0.91 2.06 1.60 (0.27)
-------- -------- -------- -------- -------- -----------
Less Distributions:
Dividends from Net Investment Income (1.68) (1.68) (1.63) (1.59) (1.52) (0.73)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts (0.03) -- -- -- -- --
-------- -------- -------- -------- -------- -----------
Total Distributions (1.71) (1.68) (1.63) (1.59) (1.52) (0.73)
-------- -------- -------- -------- -------- -----------
Net Asset Value, End of Period $19.78 $21.95 $21.23 $21.70 $21.78 $20.78
======== ======== ======== ======== ======== ===========
Per Share Market Value, End of Period $17.875 $20.500 $19.500 $22.063 $21.938 $18.313
Total Investment Return at Market Value(1) (12.92%) 24.33% 3.13% 22.12% 6.66% (13.37%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $147,916 $165,974 $162,223 $167,058 $169,495 $162,074
Ratio of Expenses to Average Net Assets 0.88% 0.85% 0.85% 0.84% 0.82% 0.81%(3)
Ratio of Net Investment Income to Average Net Assets 8.11% 7.93% 7.65% 7.44% 6.92% 6.86%(3)
Portfolio Turnover Rate 82% 102% 118% 141% 239% 96%
(1) Assumes dividend reinvestment.
(2) Not annualized.
(3) Annualized.
</TABLE>
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.
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- ----------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
Investors Trust on June 30, 1999. It's divided into three main categories:
publicly traded bonds and direct placement security, preferred stocks and
warrants, and short-term investments. The securities are further broken down
by industry groups. Short-term investments, which represent the Fund's "cash"
position, are listed last.
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ------ ------- ------- ------------
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY
Aerospace (0.40%)
Jet Equipment Trust,
Equipment Trust Cert Ser 95B2 08-15-14 (R) 10.910% BBB- $550 $649,990
------------
Automobile/Trucks (0.91%)
Chrysler Financial Co. LLC,
Medium Term Note Ser S 11-15-01 5.690 A+ 495 488,357
ERAC USA Finance Co.,
Note 02-15-05 (R) 6.625 BBB+ 690 667,706
United Rentals, Inc.,
Note 04-01-09 (R) 9.000 BB- 330 323,400
------------
1,479,463
------------
Banks (10.55%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04 (Y) 8.200 AA- 1,000 1,057,090
African Development Bank,
Sub Note (Supranational) 12-15-03 (Y) 9.750 AA- 1,000 1,136,040
Banc One Corp.,
Sub Deb 10-15-26 7.625 A 490 490,661
Bank of Boston,
Sub Note 12-01-05 6.625 BBB+ 440 430,254
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 570 556,599
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 900 976,401
First Union National Bank,
Sub Note 12-01-28 6.500 A 480 416,606
International Bank for Reconstruction and Development,
30 Yr Bond (Supranational) 10-15-16 (Y) 8.625 AAA 3,800 4,523,900
National Westminster Bank Plc - New York Branch,
Sub Note 05-01-01 9.450 AA- 1,200 1,267,584
NB Capital Trust IV,
Gtd Cap Security 04-15-27 8.250 A- 320 325,942
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (United Kingdom) 01-27-04 (R) (Y) 8.800 A 2,000 2,152,640
Gtd Sub Note (United Kingdom) 11-01-06 (R) (Y) 8.850 A+ 750 820,313
Security Pacific Corp.,
Medium Term Sub Note 05-09-01 10.360 A 1,750 1,871,398
Sub Note 11-15-00 11.500 A 1,000 1,069,790
------------
17,095,218
------------
Beverages (0.27%)
Canandaigua Brands, Inc.,
Sr Sub Notes Ser C 12-15-03 8.750 B+ 445 437,212
------------
Broker Services (0.27%)
Merrill Lynch & Co., Inc.,
Note 11-15-18 6.875 AA- 470 440,775
------------
Building (0.42%)
Oakwood Homes Corp.,
Sr Note 03-01-04 7.875 BBB- 280 271,863
Owens Corning,
Note 03-15-09 7.000 BBB- 435 410,005
------------
681,868
------------
Chemicals (0.71%)
Akzo Nobel, Inc.,
Note 11-15-03 (R) 6.000 A 310 300,700
Equistar Chemicals, L.P.,
Sr Note 02-15-04 (R) 8.500 BBB- 425 425,000
Monsanto Co.,
Deb 12-01-28 (R) 6.600 A 475 427,785
------------
1,153,485
------------
Computers (0.93%)
Ceridian Corp.,
Sr Note 06-01-04 (R) 7.250 BBB 410 410,345
Primark Corp.,
Sr Sub Note 12-15-08 9.250 B+ 350 332,500
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 315 330,750
Verio, Inc.,
Sr Note 04-01-05 10.375 B- 435 439,350
------------
1,512,945
------------
Cosmetics & Personal Care (0.45%)
Johnson & Johnson,
Deb 11-15-23 6.730 AAA 750 731,707
------------
Energy (0.90%)
AES Corp.,
Sr Sub Note 07-15-06 10.250 B+ 670 690,100
CalEnergy Co., Inc.,
Sr Bond 09-15-28 8.480 BBB- 310 330,826
P & L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 435 432,825
------------
1,453,751
------------
Finance (3.35%)
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 BBB+ 500 489,250
CIT Group Holdings, Inc.,
Note 10-15-01 5.500 A+ 600 589,740
Constitution Capital Trust I,
Gtd Cap Security 04-15-27 (R) 9.150 BBB 400 402,452
FINOVA Capital Corp.,
Note 11-01-02 6.250 A- 450 443,340
Ford Motor Credit Co.,
Note 04-28-03 6.125 A 605 596,494
General Motors Acceptance Corp.,
Note 12-01-01 6.375 A 600 599,820
Household Finance Corp.,
Note 11-01-02 5.875 A 750 730,275
Note 02-01-09 5.875 A 360 327,074
Marlin Water Trust & Marlin Water Capital Corp.,
Sr Sec Note 12-15-01 (R) 7.090 BBB 600 601,500
Merrill Lynch Mortgage Investors, Inc.,
Sub Bond Ser 1992-B Class B 04-15-12 8.500 Aaa 245 246,088
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A 06-15-04 (R) 8.400 BBB- 441 408,249
------------
5,434,282
------------
Food (0.18%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 285 293,550
------------
Government - Foreign (1.24%)
Nova Scotia, Province of,
Deb (Canada) 04-01-22 (Y) 8.750 A- 750 884,415
Ontario, Province of,
Bond (Canada) 06-04-02 (Y) 7.750 AA- 500 520,690
Saskatchewan, Province of,
Bond (Canada) 12-15-20 (Y) 9.375 A 480 597,038
------------
2,002,143
------------
Government - U.S. (17.83%)
United States Treasury,
Bond 08-15-17 8.875 Aaa 4,696 5,999,140
Bond 05-15-18 9.125 Aaa 3,250 4,260,035
Bond 02-15-23 7.125 Aaa 5,486 6,080,024
Note 05-15-01 8.000 Aaa 275 286,946
Note 05-15-02 7.500 Aaa 2,470 2,591,178
Note 08-15-03 5.750 Aaa 2,018 2,019,251
Note 02-15-05 7.500 Aaa 2,359 2,539,605
Note 07-15-06 7.000 Aaa 4,837 5,123,447
------------
28,899,626
------------
Government - U.S. Agencies (9.29%)
Federal Home Loan Mortgage Corp.,
20 Yr Pass Thru Ctf 01-01-16 11.250 AAA 273 298,611
Federal National Mortgage Assn.,
15 Yr SF Pass Thru Ctf 02-01-08 7.500 AAA 230 234,571
15 Yr SF Pass Thru Ctf 09-01-10 7.000 AAA 532 534,165
15 Yr SF Pass Thru Ctf 10-01-12 7.000 AAA 117 117,494
15 Yr SF Pass Thru Ctf 12-01-12 6.500 AAA 1,091 1,074,558
30 Yr Pass Thru Ctf 11-01-28 6.500 AAA 276 266,719
30 Yr SF Pass Thru Ctf 10-01-23 7.000 AAA 523 518,072
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 6.940 AAA 349 353,496
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 07-15-28 to 04-15-29 6.500 AAA 2,482 2,385,903
30 Yr SF Pass Thru Ctf 02-15-28 to 04-15-29 7.000 AAA 3,313 3,269,430
30 Yr SF Pass Thru Ctf 03-15-24 to 07-22-29 + 7.500 AAA 2,358 2,381,510
30 Yr SF Pass Thru Ctf 01-15-27 to 08-15-27 8.000 AAA 183 187,645
30 Yr SF Pass Thru Ctf 04-15-21 9.000 AAA 232 246,899
30 Yr SF Pass Thru Ctf 11-15-19 to 02-15-25 9.500 AAA 386 413,752
30 Yr SF Pass Thru Ctf 11-15-20 10.000 AAA 92 98,252
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 8.625 AAA 2,500 2,667,525
------------
15,048,602
------------
Insurance (3.70%)
Conseco, Inc.,
Note 06-15-05 6.800 BBB 220 207,772
Equitable Life Assurance Society of the United States,
Surplus Note 12-01-05 (R) 6.950 A 550 548,944
Fairfax Financial Holdings Ltd.,
Note (Canada) 04-15-26 (Y) 8.300 BBB+ 405 388,836
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R) 8.200 A+ 455 484,429
Surplus Note 10-15-26 (R) 7.875 A+ 155 153,954
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 1,100 1,134,650
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 1,500 1,461,465
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA 725 697,813
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 615 625,326
Willis Corroon Corp.,
Sr Sub Note 02-01-09 (R) 9.000 B+ 310 299,538
------------
6,002,727
------------
Leisure (2.17%)
Harrah's Operating Co., Inc.,
Sr Note 01-15-09 7.500 BBB- 425 411,884
Sr Sub Note 12-15-05 7.875 BB+ 165 159,225
HMH Properties, Inc.,
Sr Note Ser A 08-01-05 7.875 BB 270 254,475
Marvel Enterprises, Inc.,
Sr Note 06-15-09 (R) 12.000 NR 420 433,650
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 240 242,400
SC International Services, Inc.,
Sr Sub Note Ser B 09-01-07 9.250 B 285 293,550
SFX Entertainment, Inc.,
Sr Sub Note 12-01-08 9.125 B- 490 475,300
Sun International Hotels Ltd.,
Sr Sub Note (Bahamas) 03-15-07 (Y) 9.000 B+ 225 225,000
Sr Sub Note (Bahamas) 12-15-07 (Y) 8.625 B+ 250 245,000
Trump Hotels & Casino Resorts Funding, Inc./Holdings, L.P.,
Sr Note 06-15-05 15.500 B- 550 561,000
Waterford Gaming LLC,
Sr Note 03-15-10 (R) 9.500 B+ 210 210,000
------------
3,511,484
------------
Manufacturing (0.03%)
Globe Manufacturing Corp.,
Sr Sub Note Ser B 08-01-08 10.000 B- 65 48,750
------------
Media (6.69%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 525 531,562
Sr Note Ser B 07-15-03 8.125 B 252 244,440
Century Communications Corp.,
Sr Note 08-15-00 9.500 BB- 275 280,500
Comcast Cellular Holdings, Inc.,
Sr Note Ser B 05-01-07 9.500 BBB- 885 986,775
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 BBB 415 440,892
CSC Holdings, Inc.,
Sr Note 07-15-08 7.250 BB+ 320 304,864
Sr Sub Deb 05-15-16 10.500 BB- 310 356,500
Falcon Holdings Group L.P.,/Falcon Funding Corp.,
Sr Deb Ser B 04-15-10 8.375 B 305 301,188
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 (R) 8.625 B+ 265 249,100
Sr Sub Note Ser B 10-01-09 8.750 B+ 265 259,038
Liberty Media Group,
Note 07-15-29 (R) + 8.500 BBB- 545 543,512
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 8.500 B+ 310 297,600
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 527 543,100
Rogers Cablesystems Ltd.,
Sr Note Ser B (Canada) 03-15-05 (Y) 10.000 BB+ 800 856,000
Sr Sec 2nd Priority Note (Canada) 08-01-02 (Y) 9.625 BB+ 290 303,775
SFX Broadcasting, Inc.,
Sr Sub Note Ser B 05-15-06 10.750 B- 310 337,125
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 AA- 480 505,843
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB 520 588,671
Deb 05-15-29 6.625 BBB 470 414,634
TKR Cable I, Inc.,
Sr Deb 10-30-07 10.500 AA- 1,875 1,998,150
TV Guide, Inc.,
Sr Sub Note 03-01-09 (R) 8.125 B+ 520 492,700
------------
10,835,969
------------
Medical (1.44%)
Dynacare, Inc.,
Sr Note Ser B (Canada) 01-15-06 (R) (Y) 10.750 B+ 270 272,700
Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 260 262,600
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08 7.875 B+ 390 362,700
Guidant Corp.,
Note 02-15-06 6.150 A- 400 375,000
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 345 393,300
Sr Sub Note 07-01-09 (R) + 9.875 B+ 365 370,475
Sola International, Inc.,
Note 03-15-08 6.875 BBB- 135 118,257
Watson Pharmaceuticals, Inc.,
Sr Note 05-15-08 7.125 BBB- 180 171,900
------------
2,326,932
------------
Metal (0.61%)
Golden Northwest Aluminium, Inc.,
1st Mtg Note 12-15-06 (R) 12.000 BB- 270 278,775
National Steel Corp.,
1st Mtg Bond Ser D 03-01-09 9.875 B+ 275 280,500
Rohm & Haas Co.,
Deb 07-15-29 (R) 7.850 A- 435 434,682
------------
993,957
------------
Mortgage Banking (3.19%)
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 8.100 AAA 480 492,000
Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser 1998-C1 Class A-1A 12-17-07 6.260 AAA 601 591,130
Deutsche Mortgage & Asset Receiving Corp.,
Commercial Mtg Pass-Through Ctf Ser 1998-C1 Class C 03-15-08 6.861 A2 400 382,047
First Union-Lehman Brothers-Bank of America,
Pass Thru Ctf Ser 1998-C2 Class A-1 06-18-07 6.280 AAA 467 461,633
FirstPlus Home Loan Trust,
Pass Thru Ctf Ser 1998-4 Class A-5 01-01-01 6.380 AAA 700 683,129
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C2 Class A-3 11-15-07 6.566 Aaa 680 660,450
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-1 Class A-5 12-25-13 6.290 AAA 720 720,468
Salomon Brothers Mortgage Securities VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2 Class A-2 07-25-24 6.750 Aaa 437 435,088
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-D1 Class A6 02-15-25 7.180 AAA 730 736,388
------------
5,162,333
------------
Oil & Gas (2.08%)
Burlington Resources, Inc.,
Deb 03-01-29 7.375 A- 480 473,904
Camuzzi Gas Pampeana S.A.,
Bond (Argentina) 12-15-01 (Y) 9.250 BBB- 140 137,200
CMS Panhandle Holding Co.,
Sr Note 07-15-29 (R) 7.000 BBB- 310 283,650
Conoco, Inc.,
Note 04-15-29 6.950 A- 470 440,023
El Paso Energy Corp.,
Sr Note 05-15-09 6.750 BBB- 370 353,350
PEMEX Finance Ltd.,
Note (Cayman Islands) 02-15-08 (R) (Y) 6.550 AAA 450 434,250
Petroleos Mexicanos,
Gtd Sr Note (Mexico) 12-02-08 (R) (Y) 9.375 BB 200 196,000
Petroleum Geo-Services,
Sr Note (Norway) 03-30-08 (Y) 6.625 BBB 455 428,305
Triton Energy Ltd.,
Sr Note 04-15-02 8.750 B+ 495 485,100
Valero Energy Corp.,
Note 03-15-06 7.375 BBB- 145 140,960
------------
3,372,742
------------
Paper & Paper Products (0.94%)
Fort James Corp.,
Sr Note 09-15-02 6.500 BBB- 455 455,136
Packaging Corp. of America,
Sr Sub Note 04-01-09 (R) 9.625 B 335 340,025
S.D. Warren Co.,
Sr Sub Note Ser B 12-15-04 12.000 B+ 685 731,238
------------
1,526,399
------------
Real Estate Investment Trust (1.40%)
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB- 390 339,690
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB- 365 355,620
Camden Property Trust,
Note 04-15-04 7.000 BBB 400 391,292
Liberty Property L.P.,
Medium Term Note 06-05-02 6.600 BBB- 340 329,800
ProLogis Trust,
Note 04-15-04 6.700 BBB+ 375 363,750
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BBB- 500 495,745
------------
2,275,897
------------
Retail (1.30%)
Great Atlantic & Pacific Tea Co., Inc. (The),
Note 04-15-07 7.750 BBB- 505 488,997
Meyer (Fred), Inc.,
Note 03-01-08 7.450 BBB- 780 786,903
Pathmark Stores, Inc.,
Sub Note 06-15-02 11.625 CCC+ 560 571,200
Safeway, Inc.,
Note 11-15-01 5.875 BBB 270 265,518
------------
2,112,618
------------
Telecommunications (6.00%)
AXIA, Inc.,
Sr Sub Note 07-15-08 10.750 B- 183 180,255
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon (10.125%, 05-01-04)
(Canada) 05-01-09 (A) Zero NR 350 199,500
Electric Lightwave, Inc.,
Note 05-15-04 (R) 6.050 AA- 215 208,819
Global Crossing Holdings Ltd.,
Sr Note 05-15-08 9.625 BB 335 361,800
GTE North, Inc.,
Deb Ser H 11-15-08 5.650 AA- 615 566,163
Hermes Europe Railtel BV,
Sr Note (Netherlands) 08-15-07 (Y) 11.500 B 265 277,588
Sr Note (Netherlands) 01-15-09 (Y) 10.375 B 155 156,938
Intermedia Communications, Inc.,
Sr Note Ser B 06-01-08 8.600 B 65 59,800
LCI International, Inc.,
Sr Note 06-15-07 7.250 BB+ 405 397,674
Lenfest Communications,
Sr Sub Note 06-15-06 10.500 BB- 610 701,500
McLeodUSA, Inc.,
Sr Note 11-01-08 9.500 B+ 335 336,675
Sr Note 02-15-09 (R) 8.125 B+ 310 288,300
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B 510 524,025
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 (Y) 12.000 B 260 302,575
Nextel Communications, Inc.,
Sr Disc Note, 08-15-04 9.750 B- 295 299,425
Sr Disc Note, Step Coupon (9.95%, 02-15-03) 02-15-08 (A) Zero B- 225 155,250
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 350 359,625
NTL Communications Corp.,
Sr Note 10-01-08 (R) 11.500 B- 405 443,475
Orange Plc,
Sr Note (United Kingdom) 08-01-08 (Y) 8.000 BB- 405 383,738
Pegasus Communications Corp.,
Sr Note Ser B 10-15-05 9.625 B- 170 166,600
Qwest Communications International, Inc.,
Sr Note Ser B 11-01-08 7.250 BB+ 430 414,950
RCN Corp.,
Sr Note 10-15-07 10.000 NR 245 246,225
Sprint Capital Corp.,
Note 05-01-19 6.900 BBB+ 470 435,211
Viatel, Inc.,
Sr Note 04-15-08 11.250 NR 435 441,525
WorldCom, Inc.,
Note 08-15-01 6.125 A- 685 682,835
Note 08-15-28 6.950 BBB+ 695 658,825
Worldwide Fiber, Inc.,
Sr Note (Canada) 12-15-05 (R) (Y) 12.500 B- 465 467,325
------------
9,716,621
------------
Textile (0.34%)
Tropical Sportswear International Corp.,
Sr Sub Note Ser A 06-15-08 11.000 B- 150 155,625
WestPoint Stevens, Inc.,
Sr Note 06-15-05 7.875 BB 410 400,775
------------
556,400
------------
Transportation (6.72%)
America West Airlines,
Pass Thru Ctf Ser B 01-02-08 6.930 A- 419 406,988
Continental Airlines,
Pass Thru Ctf Ser 1996-C 10-15-13 9.500 BBB+ 465 494,110
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 AA+ 610 574,925
Continental Airlines, Inc.,
Sr Note 12-15-05 8.000 BB- 430 420,325
Delta Air Lines, Inc.,
Equip Tr Ctf Ser A 06-01-08 10.000 BBB 2,000 2,327,720
Fine Air Services, Inc.,
Sr Sub Note 06-01-08 9.875 B 425 382,500
Humpuss Funding Corp.,
Gtd Note (Indonesia) 12-15-09 (R) (Y) 7.720 B3 464 317,591
Northwest Airlines, Inc.,
Note 03-15-04 8.375 BB 505 486,042
Northwest Airlines 1996-1 Pass Through Trusts,
Pass Thru Ctf Ser 1996-1C 01-02-05 10.150 BBB- 273 275,506
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 381 381,490
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 548 593,639
Railcar Trust No. 1992-1,
Pass Thru Ser 1992-1 Class A 06-01-04 7.750 AAA 1,189 1,225,644
Scandinavian Airlines System,
Deb (Sweden) 07-20-99 (Y) 9.125 A3 700 701,750
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 BB 817 878,807
Ucar Global Enterprises, Inc.,
Sr Sub Note Ser B 01-15-05 12.000 B 700 742,000
Union Pacific Corp.,
Deb 02-01-29 6.625 BBB- 470 412,152
Wisconsin Central Transportation Corp.,
Note 04-15-08 6.625 BBB- 280 267,400
------------
10,888,589
------------
Utilities (11.23%)
AES Eastern Energy,
Pass Thru Ctf 07-02-17 (R) 9.000 BBB- 395 382,795
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 9.000 BB- 565 604,550
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB- 700 755,125
Calpine Corp.,
Sr Note 05-15-06 10.500 BB 465 497,550
Sr Note 04-15-09 7.750 BB 400 380,000
CE Casecnan Water & Energy Co., Inc.,
Sr Note Ser A (Philippine Islands) 11-15-05 (Y) 11.450 BB+ 400 356,000
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 1,150 1,216,125
CMS Energy Corp.,
Sr Note Ser B 01-15-04 6.750 BB 380 360,305
Sr Note 01-15-09 7.500 BB 570 524,400
Connecticut Light & Power Co.,
1st Ref Mtg Ser C 06-01-02 7.750 BBB- 210 214,922
Note 06-05-03 (R) 8.590 NR 265 265,345
East Coast Power, LLC,
Sec Note 03-31-12 (R) 7.066 BBB- 500 457,969
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BB- 694 771,492
Fitchburg Holding Corp.,
Sec Note 01-31-03 (r) 15.750 BBB 1,469 1,546,003
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 397 386,670
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 (Y) 9.400 A+ 740 907,255
Gtd Bond (Canada) 01-15-22 (Y) 8.400 A+ 330 368,811
Gtd Deb Ser IF (Canada) 02-01-03 (Y) 7.375 A+ 750 770,700
Iberdrola International B.V.,
Note (Spain) 10-01-02 (Y) 7.500 AA- 1,000 1,032,570
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 615 641,138
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 10.330 BBB- 847 893,181
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 550 627,000
Deb Ser B 07-23-06 13.250 BB 225 268,958
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico) 11-15-09 (R) (Y) 9.625 BB 145 123,250
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 740 773,019
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB- 405 416,389
Northeast Utilities,
Note Ser A 12-01-06 8.580 BB- 110 109,038
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A Class A-6 03-01-09 6.050 AAA 480 459,749
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 420 456,750
System Energy Resources, Inc.,
1st Mtg 08-01-01 7.710 BBB- 590 597,375
U.S. West Capital Funding, Inc.,
Deb 07-15-28 6.875 A- 160 146,224
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 8.090 BBB- 886 891,207
------------
18,201,865
------------
TOTAL PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY
(Cost $154,258,676) (95.54%) 154,847,900
------- ------------
NUMBER OF
SHARES OR
WARRANTS
--------
PREFERRED STOCKS AND WARRANTS
CSC Holdings, Inc., 11.750%, Ser H, Preferred Stock 880 98,120
MetroNet Communications Corp., Warrant (Canada) (R) (Y)** 510 53,550
Packaging Corp. of America, 12.375%, Preferred Stock (R) 1,700 180,200
------------
331,870
------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $276,076) (0.20%) 331,870
------- ------------
PAR VALUE
INTEREST (000s MARKET
ISSUER, DESCRIPTION RATE OMITTED) VALUE
- ------------------- ------ ------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.40%)
Investment in a joint repurchase agreement transaction with
SBC Warburg, Inc. - Dated 06-30-99, due 07-01-99
(Secured by U. S. Treasury Bonds 9.875% due 11-15-15
and 11.250% due 02-15-15) - Note A 4.800% $5,502 $5,502,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 961
------------
TOTAL SHORT-TERM INVESTMENTS (3.40%) 5,502,961
------- ------------
TOTAL INVESTMENTS (99.14%) 160,682,731
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.86%) 1,391,615
------- ------------
TOTAL NET ASSETS (100.00%) $162,074,346
======= ============
(A) Cash interest will be paid on this obligation at the stated
rate beginning on the stated date.
(r) Direct placement security is restricted as to resale. It has
been valued in accordance with procedures approved by the Trustees
after consideration of restrictions as to resale, financial condition
and prospects of the issuer, general market conditions and pertinent
information in accordance with the Fund's By-Laws and the Investment
Company Act of 1940, as amended. The Fund has limited rights to
registration under the Securities Act of 1933 with respect to this
restricted security. Additional information on this security is as
follows:
MARKET
VALUE AS A MARKET
PERCENTAGE VALUE
ACQUISITION ACQUISITION OF FUND'S AS OF
ISSUER, DESCRIPTION DATE COST NET ASSETS JUNE 30, 1999
- ------------------- -------- --------- ---------- -------------
Fitchburg Holding Corp., Sec. Note, 15.750%, 01-31-03 02-10-81 $1,485,512 0.95% $1,546,003
(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 $21,770,186 or 13.43% of net assets
as of June 30, 1999.
(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 $1,529,709 or 0.94%
of the Fund's net assets, have been purchased as a forward commitment;
that is, the Fund has agreed on trade date to take delivery of and
make payment for such securities on a delayed basis subsequent to
the date of this schedule. The purchase price and 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 the forward commitment. Accordingly, the
market value of $1,596,875 of United States Treasury Bond, 8.875%,
08-15-17, 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.
** Non-income producing security.
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.
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Investors Trust (the "Fund") is a closed-end investment
management company registered under the Investment Company Act
of 1940.
Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost, which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having a management contract with John Hancock
Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley
Financial Group, 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 qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to federal income tax on taxable
income which is distributed to shareholders. Therefore, no federal
income tax provision is required. For federal income tax purposes,
the Fund has $279,478 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 -- $275,104 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 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, 1999, there were no open positions in financial futures
contracts.
OPTIONS Listed options are valued at the last quoted sales price on the
exchange on which they are primarily traded. Over-the-counter options are
valued at the mean between the last bid and asked prices. Upon the writing
of a call or put option, an amount equal to the premium received by the
Fund is included in the Statement of Assets and Liabilities as an
asset and corresponding liability. The amount of the liability is
subsequently marked to market to reflect the current market value of the
written option.
The Fund may use options contracts to manage its exposure to the stock
market. Writing puts and buying calls tend to increase the Fund's exposure
to the underlying instrument and buying puts and writing calls tend to
decrease the Fund's exposure to the underlying instrument, or hedge other
Fund investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure
of the Fund in these contracts, but the actual exposure will be limited to
the change in value of the contract over the period the contract remains
open.
Risks may also arise if counterparties do not perform under the contracts'
terms ("credit risk"), or if the Fund is unable to offset a contract
with a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options have minimal credit risk as the exchanges act as counterparties
to each transaction, and only present liquidity risk in highly unusual
market conditions. To minimize credit risk and liquidity risks in
over-the-counter option contracts, the Fund will continuously
monitor the creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit risk
may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended June 30,
1999.
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 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,
accounting and legal services for the Fund. The compensation for the period
was estimated to be at an annual rate of less than 0.02% of the average net
assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, 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.
The investment had no impact on the operations of the Fund.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of securities, other than
obligation of the U.S. government and its agencies and short-term
securities, during the period ended June 30, 1999, aggregated $78,192,192
and $76,466,849, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies aggregated $73,574,086
and $76,547,171, respectively.
The cost of investments owned at June 30, 1999 (excluding the corporate
savings account) for federal income tax purposes was $160,249,530. Gross
unrealized appreciation and depreciation of investments at June 30, 1999
aggregated $4,043,322 and $3,611,082, respectively, resulting in net
unrealized appreciation of $432,240.
DIVIDENDS AND DISTRIBUTIONS
During 1999, dividends from net investment income totaling $0.7275 per
share were paid to shareholders. The dates of payment and the amounts per
share are as follows:
INCOME
PAYMENT DATE DIVIDEND
- ------------ --------
March 30, 1999 $0.3625
June 30, 1999 0.3650
INVESTMENT OBJECTIVE AND POLICY
John Hancock Investors Trust is a closed-end diversified management
investment company, shares of which were initially offered to the
public on January 29, 1971 and are publicly traded on the New York Stock
Exchange. Its primary investment objective is to generate income for
distribution to its shareholders, with capital appreciation as a
secondary objective. The preponderance of the Fund's assets are invested in
a diversified portfolio of debt securities, some of which may carry equity
features. Up to 50% of the value of the Fund's assets may be invested in
restricted securities acquired through direct placement. The Fund may issue
a single class of senior securities not to exceed 33 1/3% of the market or
fair value of its net assets and may borrow from banks as a temporary
measure for emergency purposes in amounts not to exceed 5% of its total
assets taken at cost. Substantially all of the Fund's net investment income
per year will be distributed to shareholders in quarterly payments. Net
realized short-term capital gains, if any, will be distributed annually;
however, net realized long-term capital gains may be retained and reinvested.
All distributions are paid in cash unless the shareholder elects to
participate in the Automatic Dividend Reinvestment Plan.
FINANCIAL FUTURES CONTRACTS
The Fund may buy and sell financial futures contracts and options on
futures contracts to hedge against the effects of fluctuations in interest
rates and other market conditions. The Fund's ability to hedge successfully
will depend on the Adviser's ability to predict accurately the future
direction of interest rate changes and other market factors. There is no
assurance that a liquid market for futures and options will always exist.
In addition, the Fund could be prevented from opening, or realizing the
benefits of closing out, a futures or options position because of position
limits or limits on daily price fluctuations imposed by an exchange.
The Fund will not engage in transactions in futures contracts and options
on futures for speculation, but only for hedging or other permissible risk
management purposes. All of the Fund's futures contracts and options on
futures will be traded on a U.S. commodity exchange or board of trade. The
Fund will not engage in a transaction in futures or options on futures if,
immediately thereafter, the sum of initial margin deposits on existing
positions and premiums paid for options on futures would exceed 5% of the
Fund's total assets.
DIVIDEND REINVESTMENT PLAN
John Hancock Investors Trust offers shareholders the opportunity to elect
to receive shares of the Fund's Common Shares in lieu of cash
dividends. The Plan is available to all shareholders without charge.
Any shareholder of record of John Hancock Investors Trust ("Investors") may
elect to participate in the Automatic Dividend Reinvestment Plan (the "Plan")
and receive shares of Investors' Common Shares in lieu of all or a portion
of the cash dividends. Shareholders may join the Plan by filling out and
mailing an authorization card showing an election to reinvest all or a
portion of dividend payments. If received in proper form by State Street Bank
and Trust Company, P.O. Box 8209, Boston, Massachusetts 02266-8209 (the
"Agent Bank") not later than seven business days before the record date for
a dividend, the election will be effective with respect to all dividends paid
after such record date. Shareholders whose shares are held in the name of a
broker or nominee should contact the broker, bank, or nominee to participate
in the Plan.
Participation in the Plan may be terminated at any time by written notice
to the Agent Bank and such termination will be effective immediately.
However, notice of termination must be received seven days prior to the
record date of any distribution to be effective for that distribution.
Upon termination, certificates will be issued representing the number
of full shares of Common Shares held by the Agent Bank. A shareholder
will receive a cash payment for any fractional share held.
The Agent Bank will act as agent for participating shareholders. The Board
of Trustees of Investors will declare dividends from net investment income
payable in cash or, in the case of shareholders participating in the Plan,
partially or entirely in Investors' Common Shares. The number of shares
to be issued for the benefit of each shareholder will be determined by
dividing the amount of the cash dividend otherwise payable to such
shareholder on shares included under the Plan by the per share net
asset value of the Common Shares on the date for payment of the dividend,
unless the net asset value per share on the payment date is less than 95%
of the market price per share on that date, in which event the number of
shares to be issued to a shareholder will be determined by dividing the
amount of the cash dividend payable to such shareholder by 95% of the
market price per share of the Common Shares on the payment date. The
market price of the Common Shares on a particular date shall be the mean
between the highest and lowest sales price on the New York Stock Exchange
on that date. Net asset value will be determined in accordance with the
established procedures of Investors. However, if as of such payment date
the market price of the Common Shares is lower than such net asset value
per share, the number of shares to be issued will be determined on the
basis of such market price. Fractional shares, carried out to three decimal
places, will be credited to your account. Such fractional shares will be
entitled to future dividends.
The shares issued to participating shareholders, including fractional
shares, will be held by the Agent Bank in the name of the participant. A
confirmation will be sent to each shareholder promptly, normally within
seven days, after the payment date of the dividend. The confirmation will
show the total number of shares held by such shareholder before and after
the dividend, the amount of the most recent cash dividend which the
shareholder has elected to reinvest and the number of shares acquired with
such dividend.
The reinvestment of dividends does not in any way relieve participating
shareholders of any federal, state or local income tax which may be due
with respect to such dividend. Dividends reinvested in shares will be
treated on your federal income tax return as though you had received
a dividend in cash in an amount equal to the fair market value of the
shares received, as determined by the prices for shares of the Fund on
the New York Stock Exchange as of the dividend payment date. Distributions
from the Fund's long-term capital gains will be processed as noted above
for those electing to reinvest in shares and will be taxable to you as
long-term capital gains. The confirmation referred to above will contain
all the information you will require for determining the cost basis of
shares acquired and should be retained for that purpose. At year end, each
account will be supplied with detailed information necessary to determine
total tax liability for the calendar year.
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 COMMUNICATION AND ASSISTANCE
If you have any questions concerning the John Hancock Investors Trust, we
will be pleased to assist you. If you hold shares in your own name and not
with a brokerage firm, please address all notices, correspondence,
questions or other communications regarding the Fund to the transfer agent at:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 426-5523
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
SHAREHOLDER MEETING
On March 18, 1999, the Annual Meeting of John Hancock Investors Trust was
held.
The Shareholders elected the following Trustees with the votes as indicated:
WITHHELD
NAME OF TRUSTEE FOR AUTHORITY
- --------------- --- --------
Dennis S. Aronowitz 5,244,200 90,877
Edward J. Boudreau, Jr. 5,244,093 90,984
Stephen L. Brown 5,250,907 84,170
Richard P. Chapman, Jr. 5,234,451 100,626
William J. Cosgrove 5,251,087 83,990
Douglas M. Costle 5,249,165 85,912
Leland O. Erdahl 5,248,100 86,977
Richard A. Farrell 5,242,397 92,680
Gail D. Fosler 5,243,713 91,365
William F. Glavin 5,237,881 97,197
Anne C. Hodsdon 5,236,630 98,447
Dr. John A. Moore 5,242,464 92,613
Patti McGill Peterson 5,225,200 109,877
John W. Pratt 5,256,487 78,591
Richard S. Scipione 5,252,358 82,720
The Shareholders also ratified the Trustees' Selection of Ernst & Young LLP
as auditors for the fiscal year ending December 31, 1999, with the votes
tabulated as follows: 5,272,479 FOR, 12,219 AGAINST and 50,379 ABSTAINING.
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