-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESALl7KFtRlD+46Ty9V1TPwEdYg6wjdHl2ozdwVuWwbdXbTjskjhpCZz7ApBdxfN Qi2cJzwfOgwkUXCR6VFRsw== 0000928816-00-000105.txt : 20000229 0000928816-00-000105.hdr.sgml : 20000229 ACCESSION NUMBER: 0000928816-00-000105 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN INVESTORS TRUST CENTRAL INDEX KEY: 0000759828 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04173 FILM NUMBER: 554831 BUSINESS ADDRESS: STREET 1: 101 HUNTINGTON AVE STREET 2: JOHN HANCOCK FUNDS CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6173751702 MAIL ADDRESS: STREET 1: JOHN HANCOCK FUNDS STREET 2: 101 HUNTINGTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199 N-30D 1 INVESTORS TRUST The latest report from your Fund's management team ANNUAL REPORT Investors Trust DECEMBER 31, 1999 TRUSTEES Dennis S. Aronowitz* Stephen L. Brown Richard P. Chapman, Jr.* William J. Cosgrove Leland O. Erdahl Richard A. Farrell Maureen R. Ford 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 Stephen L. Brown Chairman Maureen R. Ford Vice Chairman and Chief Executive Officer Anne C. Hodsdon President, Chief Operating Officer and Chief Investment Officer Osbert M. Hood Executive 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 INDEPENDENT AUDITORS Ernst & Young LLP 200 Clarendon Street Boston, Massachusetts 02116-5072 Listed New York Stock Exchange Symbol: JHI For Shareholder Assistance Refer to Page 26 CEO CORNER [A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer, flush right next to third paragraph.] DEAR FELLOW SHAREHOLDERS: As "The American Century" drew to a close this past year, the U.S. economy ended the era on a high note. With robust growth continuing in 1999, our economy stood poised to enter the history books for producing the longest expansion on record. The stock market also rang out the century in style. For an unprecedented fifth straight year, both the Dow Jones Industrial Average and the Standard & Poor's 500 Index produced 20%-plus returns. However, the market's advances were restricted to a very select group of stocks, primarily in the technology sector. Many others, including some of the household blue-chip names, languished or lost ground as the result of investors' seemingly insatiable appetite for tech stocks. Bonds struggled through their second-worst year in more than two decades, as the strength of the U.S. economy and the rebound of many others around the world provoked inflation fears. Though their outlook from here looks brighter, in many instances, bond mutual fund investors actually lost a little ground or made only slight advances in 1999. While we expect the market to broaden eventually, we also expect more volatility. More than ever, this type of environment calls for investment diversification. Since not all parts of your portfolio will perform equally well all the time, we believe it is important to allocate your assets among different types of investments and funds that target a variety of market segments. This strategy, executed under the guidance of a seasoned investment professional, could provide you with a better chance of both realizing results and weathering the market's changing conditions. The market's disappointingly narrow focus has created a widening gap in investment performance. Keep that in mind as you read the report from your fund's portfolio management team on the following pages. It's all too easy to get caught up in the headlines and miss what lies underneath. Sincerely, /S/ MAUREEN R. FORD MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER BY JAMES K. HO, CFA, PORTFOLIO MANAGER [A 3" x 2" photo at bottom right side of page of John Hancock Investors Trust. Caption below reads "Fund management team members (l-r): Ben Matthews, Jim Ho, Triet Nguyen and Tony Goodchild."] John Hancock Investors Trust Fund performance reflects a bond market under pressure Calendar year 1999 proved to be turbulent for the broad fixed-income market and John Hancock Investors Trust. After shaking off the yoke of impending global doom caused by events in 1998, most non-U.S. Treasury bond sectors began the year on an upward trek, rallying through mid-April. Inflation fears, a robust domestic economy and rising interest rates worldwide soon brought the welcomed rebound to an abrupt end. Although the Federal Reserve Board raised interest rates three times during the year, the domestic economy continued to chug along and investors' inflation concerns mounted. The uncertainty surrounding Y2K placed further pressure on bonds. Performance results U.S. Treasury bonds were by far the year's worst performers, while emerging-market debt topped the charts, exceeding most analysts' expectations. It seems the global economic rebound fostered an increased willingness among investors to take on the risks associated with emerging-market securities. The Fund had virtually no exposure to emerging markets because of their illiquidity and high-risk profiles. The bulk of our net assets remained in investment-grade corporate bonds, with a lesser focus on high-yield bonds and a fair representation in U.S. Treasury, agency and asset-backed issues. Thus, the Fund's performance reflects not only the broad market's downturn, but also the technical challenges that beset these sectors, such as heavy new issuance supply in the corporate arena and reduced Treasury borrowing. "...investors' inflation concerns mounted." For the 12 months ended December 31, 1999, the Fund posted a total return of 0.09% at net asset value. This compares with the -2.61% return at net asset value of the average open-end corporate debt A-rated fund, according to Lipper, Inc. [Table at top left hand column entitled "Top Five Bond Sectors." The first listing is U.S. Government & Agencies 29%, the second is Financials 22%, the third Utilities 12%, the fourth Transportation 6% and the fifth Telecommunications 6%. A note below the table reads "As a percentage of net assets on December 31, 1999."] "Telecommuni- cation and cable issues were the Fund's star performers." Fund flexibility put to work We attribute the Fund's attractive relative performance to its flexibility that allows us to modify our allocations to the various fixed-income sectors in an effort to capture opportunity and minimize volatility. Our duration management -- the tactics we employ to manage the portfolio's sensitivity to interest rate changes -- also contributed to the Fund's ability to largely hold its ground. [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 Nextel followed by an up arrow with the phrase "Strong subscriber growth." The second listing is Ocean Energy followed by a sideways arrow with the phrase "Stabilization of oil prices." The third listing is Fine Air Services followed by a down arrow with the phrase "Weakened business fundamentals." A note below the table reads "See 'Schedule of Investments.' Investment holdings are subject to change."] Corporate bond moves We began 1999 bolstering the Fund's weighting in both investment-grade corporate bonds -- adding selectively to BBB-rated names -- as well as high-yield bonds. With the stage set for a positive move in oil and commodity bond prices, we initiated positions in some cyclical and industrial issues, including Ocean Energy, Lyondell Chemical and Packaging Corp. of America. We also purchased ProLogis Trust, a real estate investment trust obligation. These forays allowed the Fund to participate significantly in these sectors' run-up through mid-spring. By early summer, when increased volatility seemed imminent, we slightly decreased our corporate-bond exposure and avoided the worst of the summer's downdraft. As yields rose and prices then became attractive once again, we selectively added back to corporate and high-yield bonds and continued doing so through period's end. Recent BBB-rated and high-yield purchases include Dillard's, Lockheed Martin, Apache Finance Canada, Exodus Communications and Abitibi-Consolidated. Credit spreads (the difference in yield between bonds of different credit quality) narrowed throughout the final months as the expected heavy new issue supply failed to materialize. Many of the Fund's holdings bounced off their price lows. We took advantage of the sector's relative strength to move out of somewhat smaller, more illiquid positions, such as Primark and Marvel Entertainment. Sector highlights Telecommunication and cable issues were the Fund's star performers. The very same investor sentiment, dynamic growth potential and market technicals that fueled the stock performance of these companies are also doing so on the fixed-income side. Holdings such as Orange Plc, a wireless operator in the U.K., Chancellor Media, Adelphia Communications, Continental Cablevision, Metromedia Fiber Network, Global Crossing Holdings, SFX Entertainment, PSINet and Nextel Communications were some names that worked well for the Fund. Health-care and utility bonds, for the most part, remained depressed throughout the period. Disappointing performers included Integrated Health and Oakwood Homes Corporation, both of which we sold. [Bar chart at top of left hand column with heading "Fund Performance". Under the heading is a note that reads "For the year ended December 31, 1999." The chart is scaled in increments of .5% with -3.0% at the bottom and 0.5% at the top. The first bar represents the 0.09% total return for John Hancock Investors Trust. The second bar represents the -2.61% 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."] Yield curve and duration strategies The year-long decline in Treasury bond prices steadily pushed yields up to between 6.2% and 6.3%. At different points in the year, we used the proceeds from the sale of corporate and high-yield issues to bolster the Fund's stake in long-term Treasury bonds. We further modified our Treasury weighting later in the period by selling some intermediate-term holdings to create more of a barbell structure, so that the Fund's assets were clustered at both the short and long end of the Treasury maturity spectrum. Should the yield curve continue to flatten as we expect -- with yields at the longer end declining while short-term rates rise -- this positioning should help the Fund. We also utilized the Fund's investment in Treasury bonds to extend the portfolio's average duration slightly, bringing it back to more of a neutral level with its benchmark. Being neutral means we are making no major bets on the direction of interest rates at this time. In the fall, we swapped out of some mortgage-backed issues as they recovered in price and purchased a few government agency positions, such as Fannie Mae (Federal National Mortgage Association). Should the economy slow later in 2000, mortgage rates may likely decline. If so, agency bonds tend to have a structure that can benefit from such an event. "...the Fed's vigilance should set the stage for a bond market rebound..." Sights on the latter part of 2000 Until the economy shows signs of slowing and the Fed convinces investors that it has corralled the threat of higher inflation, fixed-income securities may be in for a bumpy ride in the months ahead. We believe the Fed's vigilance should set the stage for a bond market rebound in the latter months of 2000. Thus, our allocation efforts will be focused upon the opportunities that a more benign inflation, economic and interest-rate picture may reward. - ------------------------------------------------------------------------ This commentary reflects the views of the portfolio manager through the end of the Fund's period discussed in this report. Of course, the manager's views are subject to change as market and other conditions warrant. FINANCIAL STATEMENTS John Hancock Funds - Investors Trust
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what the Fund owns, is due and owes on December 31, 1999. You'll also find the net asset value per share as of that date. Statement of Assets and Liabilities December 31, 1999 - -------------------------------------------------------------------- Assets: Investments at value - Note C: Publicly traded bonds and direct placement security (cost - $147,078,861) $144,147,301 Preferred stocks and warrants (cost - $1,753,621) 1,771,378 Joint repurchase agreement (cost - $10,344,000) 10,344,000 Corporate savings account 410 ------------ 156,263,089 Interest receivable 2,779,080 Dividends receivable 20,332 Receivable for futures variation margin - Note A 8,000 Other assets 12,020 ------------ Total Assets 159,082,521 ------------ Liabilities: Payable for investments purchased 701,737 Payable to John Hancock Advisers, Inc. and affiliates - Note B 279,769 Accounts payable and accrued expenses 98,350 ------------ Total Liabilities 1,079,856 ------------ Net Assets: Capital paid-in 163,887,561 Accumulated net realized loss on investments and financial futures contracts (3,048,760) Net unrealized depreciation of investments and financial futures contracts (2,880,915) Undistributed net investment income 44,779 ------------ Net Assets $158,002,665 ============ Net Asset Value Per Share: (Based on 7,855,417 shares of beneficial interest outstanding - 20 million shares authorized with no par value) $20.11 ====================================================================
The Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated. Statement of Operations Year ended December 31, 1999 - -------------------------------------------------------------------- Investment Income: Interest $12,687,737 Dividends 88,409 ------------ 12,776,146 ------------ Expenses: Investment management fee - Note B 1,027,548 Transfer agent fee - Note B 82,309 Custodian fee 65,516 Printing 44,683 Auditing fee 41,164 Accounting and legal services fee - Note B 28,893 New York Stock Exchange fee 16,170 Trustees' fees 8,078 Miscellaneous 6,499 Legal fees 1,854 ------------ Total Expenses 1,322,714 ----------- Net Investment Income 11,453,432 ----------- Realized and Unrealized Gain (Loss) on Investments and Financial Futures Contracts: Net realized loss on investments sold (2,052,143) Net realized gain on financial futures contracts 20,655 Change in net unrealized appreciation/depreciation of investments (10,794,971) Change in net unrealized appreciation/depreciation of financial futures contracts 32,732 ------------ Net Realized and Unrealized Loss on Investments and Financial Futures Contracts (12,793,727) ------------ Net Decrease in Net Assets Resulting from Operations ($1,340,295) ============ See notes to financial statements.
Statement of Changes in Net Assets - ------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, -------------------------------- 1998 1999 -------------- ---------------- Increase (Decrease) in Net Assets: From Operations: Net investment income $11,725,185 $11,453,432 Net realized gain (loss) on investments sold and financial futures contracts 19,912 (2,031,488) Change in net unrealized appreciation/depreciation of investments and financial futures contracts 631,486 (10,762,239) -------------- -------------- Net Increase (Decrease) in Net Assets Resulting from Operations 12,376,583 (1,340,295) -------------- -------------- Distributions to Shareholders: Dividends from net investment income ($1.5150 and $1.4675 per share, respectively) (11,728,676) (11,458,690) -------------- -------------- From Fund Share Transactions - Net: * (Market value of shares issued in reinvestment of distributions) 1,789,588 1,306,175 -------------- -------------- Net Assets: Beginning of period 167,057,980 169,495,475 -------------- -------------- End of period (including undistributed net investment income of $49,935 and $44,779, respectively) $169,495,475 $158,002,665 ============== ============== * 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 72,454 -------------- -------------- Shares outstanding, end of period 7,782,963 7,855,417 ============== ============== 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.
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, ------------------------------------------------------------------------ 1995 1996 1997 1998 1999 -------- -------- -------- -------- -------- Per Share Operating Performance Net Asset Value, Beginning of Period $19.78 $21.95 $21.23 $21.70 $21.78 -------- -------- -------- -------- -------- Net Investment Income 1.68 1.63 1.59 1.52 1.47 Net Realized and Unrealized Gain (Loss) on Investments and Financial Futures Contracts 2.17 (0.72) 0.47 0.08 (1.67) -------- -------- -------- -------- -------- Total from Investment Operations 3.85 0.91 2.06 1.60 (0.20) -------- -------- -------- -------- -------- Less Distributions: Dividends from Net Investment Income (1.68) (1.63) (1.59) (1.52) (1.47) -------- -------- -------- -------- -------- Net Asset Value, End of Period $21.95 $21.23 $21.70 $21.78 $20.11 ======== ======== ======== ======== ======== Per Share Market Value, End of Period $20.500 $19.500 $22.063 $21.938 $16.563 Total Investment Return at Market Value(1) 24.33% 3.13% 22.12% 6.66% (18.16%) Ratios and Supplemental Data Net Assets, End of Period (000s omitted) $165,974 $162,223 $167,058 $169,495 $158,003 Ratio of Expenses to Average Net Assets 0.85% 0.85% 0.84% 0.82% 0.81% Ratio of Net Investment Income to Average Net Assets 7.93% 7.65% 7.44% 6.92% 6.98% Portfolio Turnover Rate 102% 118% 141% 239% 183% (1) Assumes dividend reinvestment 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.
Schedule of Investments December 31, 1999 - ---------------------------------------------------------------------------------------------------- The Schedule of Investments is a complete list of all securities owned by Investors Trust on December 31, 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. INTEREST CREDIT PAR VALUE MARKET ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE - -------------------------- --------- ------- -------------- --------- PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY Aerospace (0.38%) Jet Equipment Trust, Equipment Trust Cert Ser 95B2 08-15-14 (R) 10.910% BBB $550 $601,557 ------------ Automobile/Trucks (0.72%) Chrysler Financial Co. LLC, Medium Term Note Ser S 11-15-01 5.690 A+ 495 484,758 ERAC USA Finance Co., Note 02-15-05 (R) 6.625 BBB+ 690 655,024 ------------ 1,139,782 ------------ Banks (10.17%) Abbey National First Capital, B.V., Sub Note (United Kingdom) 10-15-04 (Y) 8.200 AA- 1,000 1,031,320 African Development Bank, Sub Note (Supranational) 12-15-03 (Y) 9.750 AA- 1,000 1,092,800 Bank of Boston, Sub Note 12-01-05 6.625 A- 485 464,092 Bank of New York, Cap Security 12-01-26 (R) 7.780 A- 620 567,275 Barclay's North American Capital Corp., Gtd Cap Note 05-15-21 9.750 AA- 900 963,666 First Union National Bank, Sub Note 12-01-28 6.500 A 505 420,362 International Bank for Reconstruction and Development, 30 Yr Bond (Supranational) 10-15-16 (Y) 8.625 AAA 3,800 4,227,500 National Westminster Bank Plc - New York Branch, Sub Note 05-01-01 9.450 AA- 1,200 1,237,080 NB Capital Trust IV, Gtd Cap Security 04-15-27 8.250 A- 320 315,200 Scotland International Finance No. 2, B.V., Gtd Sub Note (United Kingdom) 01-27-04 (R) (Y) 8.800 A 2,000 2,095,400 Gtd Sub Note (United Kingdom) 11-01-06 (R) (Y) 8.850 A+ 750 787,005 Security Pacific Corp., Medium Term Sub Note 05-09-01 10.360 A 1,750 1,827,035 Sub Note 11-15-00 11.500 A 1,000 1,039,220 ------------ 16,067,955 ------------ Beverages (0.51%) Canandaigua Brands, Inc., Sr Sub Note Ser C 12-15-03 8.750 B+ 445 442,775 Seagram (Joseph) & Sons, Inc., Deb 09-15-11 8.875 BBB- 340 359,897 ------------ 802,672 ------------ Broker Services (0.39%) Goldman Sachs Group, Inc., Medium Term Note Ser B 10-01-09 7.350 A+ 635 619,893 ------------ Chemicals (0.67%) Akzo Nobel, Inc., Bond 11-15-03 (R) 6.000 A 310 294,888 DuPont (E.I.) de Nemours & Co., Note 10-15-09 6.875 AA- 360 348,685 Equistar Chemicals L.P., Note 02-15-04 8.500 BBB- 425 421,813 ------------ 1,065,386 ------------ Computers (0.99%) Ceridian Corp., Sr Note 06-01-04 7.250 BBB 410 395,498 Exodus Communications, Inc., Sr Note 12-15-09 (R) 10.750 B- 180 183,150 PSINet, Inc., Sr Note 11-01-08 11.500 B- 315 330,750 Sr Note 08-01-09 11.000 B- 175 180,250 Verio, Inc., Sr Note 04-01-05 10.375 B- 205 207,050 Sr Note 11-15-09 (R) 10.625 B- 265 271,625 ------------ 1,568,323 ------------ Energy (0.60%) CalEnergy Co., Inc., Sr Bond 09-15-28 8.480 BBB- 505 520,766 P&L Coal Holdings Corp., Sr Sub Note Ser B 05-15-08 9.625 B 435 423,037 ------------ 943,803 ------------ Finance (3.14%) Bombardier Capital, Inc., Note 01-15-02 (R) 6.000 A- 500 487,650 CIT Group Holdings, Inc., Note 10-15-01 5.500 A+ 600 586,596 FINOVA Capital Corp., Note 11-01-02 6.250 A- 450 436,532 Ford Motor Credit Co., Note 04-28-03 6.125 A+ 605 586,965 Note 10-28-09 7.375 A+ 635 626,904 General Motors Acceptance Corp., Note 12-01-01 6.375 A 600 593,364 Household Finance Corp., Note 11-01-02 5.875 A 750 722,370 Marlin Water Trust & Marlin Water Capital Corp., Sr Sec Note 12-15-01 (R) 7.090 BBB 485 476,804 Merrill Lynch Mortgage Investors, Inc., Sub Bond Ser 1992-B Class B 04-15-12 8.500 Aaa 57 56,890 Yanacocha Receivables Master Trust, Pass Thru Cert Ser 1997-A (Peru) 06-15-04 (R) (Y) 8.400 BBB- 427 393,190 ------------ 4,967,265 ------------ Government - Foreign (1.20%) Nova Scotia, Province of, Deb (Canada) 04-01-22 (Y) 8.750 A- 750 821,332 Ontario, Province of, Bond (Canada) 06-04-02 (Y) 7.750 AA- 500 509,130 Saskatchewan, Province of, Bond (Canada) 12-15-20 (Y) 9.375 A 480 565,358 ------------ 1,895,820 ------------ Government - U.S. (17.39%) United States Treasury, Bond 08-15-17 8.875 Aaa 3,686 4,454,863 Bond 05-15-18 9.125 Aaa 3,250 4,027,952 Bond 02-15-23 7.125 Aaa 10,866 11,312,484 Note 05-15-01 8.000 Aaa 275 281,358 Note 05-15-02 7.500 Aaa 920 944,435 Note 08-15-03 5.750 Aaa 688 673,917 Note 02-15-05 7.500 Aaa 2,764 2,882,769 Note 07-15-06 7.000 Aaa 2,827 2,895,470 ------------ 27,473,248 ------------ Government - U.S. Agencies (11.19%) Federal Home Loan Mortgage Corp., 20 Yr Pass Thru Ctf 01-01-16 11.250 AAA 210 228,527 Federal National Mortgage Assn., 15 Yr SF Pass Thru Ctf 02-01-08 7.500 AAA 197 199,128 15 Yr SF Pass Thru Ctf 09-01-10 7.000 AAA 468 462,812 15 Yr SF Pass Thru Ctf 10-01-12 7.000 AAA 110 108,480 15 Yr SF Pass Thru Ctf 12-01-12 6.500 AAA 1,002 973,036 30 Yr Pass Thru Ctf 11-01-28 6.500 AAA 268 252,875 30 Yr SF Pass Thru Ctf 10-01-23 7.000 AAA 485 471,236 Benchmark Bond 05-15-29 6.250 AAA 2,135 1,900,150 Benchmark Note 08-15-04 6.500 AAA 1,510 1,491,125 Benchmark Note 09-15-09 6.625 AAA 3,770 3,661,612 Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 6.940 AAA 341 333,450 Government National Mortgage Assn., 30 Yr SF Pass Thru Ctf 07-15-28 6.500 AAA 1,634 1,533,086 30 Yr SF Pass Thru Ctf 02-15-28 to 04-15-29 7.000 AAA 3,146 3,038,815 30 Yr SF Pass Thru Ctf 03-15-24 to 01-15-29 + 7.500 AAA 2,240 2,215,931 30 Yr SF Pass Thru Ctf 08-15-27 to 01-15-30 + 8.000 AAA 171 172,963 30 Yr SF Pass Thru Ctf 04-15-21 9.000 AAA 192 201,435 30 Yr SF Pass Thru Ctf 11-15-19 to 02-15-25 9.500 AAA 352 373,010 30 Yr SF Pass Thru Ctf 11-15-20 10.000 AAA 57 61,550 ------------ 17,679,221 ------------ Insurance (3.14%) Conseco, Inc., Note 10-15-06 9.000 BBB+ 445 455,012 Equitable Life Assurance Society USA, Surplus Note 12-01-05 (R) 6.950 A+ 550 533,307 Fairfax Financial Holdings Ltd., Note (Canada) 04-15-26 (Y) 8.300 BBB+ 405 359,089 Liberty Mutual Insurance Co., Surplus Note 10-15-26 (R) 7.875 A 155 143,313 Massachusetts Mutual Life Insurance Co., Surplus Note 11-15-23 (R) 7.625 AA 1,100 1,075,470 New York Life Insurance Co., Surplus Note 12-15-23 (R) 7.500 AA- 1,500 1,372,500 Sun Canada Financial Co., Sub Note 12-15-07 (R) 6.625 AA- 725 678,528 URC Holdings Corp., Sr Note 06-30-06 (R) 7.875 A- 340 343,070 ------------ 4,960,289 ------------ Leasing Companies (0.19%) United Rentals (North America), Inc., Sr Sub Note Ser B 04-01-09 9.000 BB- 320 300,800 ------------ Leisure (1.28%) Harrah's Operating Co., Inc., Sr Note 01-15-09 7.500 BBB- 450 420,165 HMH Properties, Inc., Sr Note Ser A 08-01-05 7.875 BB 260 239,850 Premier Parks, Inc., Sr Note 06-15-07 9.750 B- 240 238,800 SFX Entertainment, Inc., Sr Sub Note 12-01-08 9.125 B- 490 464,275 Trump Hotels & Casino Resorts Funding, Inc./Holdings, L.P., Sr Note 06-15-05 15.500 B- 550 455,125 Waterford Gaming LLC, Sr Note 03-15-10 (R) 9.500 B+ 205 205,000 ------------ 2,023,215 ------------ Media (4.68%) Adelphia Communications Corp., Sr Note Ser B 10-01-02 9.250 B+ 525 528,281 Sr Note Ser B 07-15-03 8.125 B+ 252 240,660 Century Communications Corp., Sr Note 08-15-00 9.500 BB- 275 275,000 Chancellor Media Corp., Sr Sub Note 10-01-08 9.000 B 315 327,600 Charter Communications Holdings, LLC, Sr Note 04-01-09 8.625 B+ 430 400,438 Comcast Cable Communications, Inc., Note 11-15-08 6.200 BBB 310 280,352 Continental Cablevision, Inc., Sr Note 05-15-06 8.300 BBB 415 429,745 CSC Holdings, Inc., Sr Note Ser B 07-15-09 8.125 BB+ 485 489,850 Sr Sub Deb 05-15-16 10.500 BB- 310 342,550 Echostar DBS Corp., Sr Note 02-01-09 9.375 B 330 330,825 Falcon Holdings Group L.P./Falcon Funding Corp., Sr Deb Ser B 04-15-10 8.375 B 195 196,463 Garden State Newspapers, Inc., Sr Sub Note 07-01-11 8.625 B+ 265 242,475 Sr Sub Note Ser B 10-01-09 8.750 B+ 265 249,100 Liberty Media Group, Note 07-15-29 (R) 8.500 BBB- 425 433,003 Mediacom LLC/Mediacom Capital Corp., Sr Note Ser B 04-15-08 8.500 B+ 310 289,075 News America Holdings, Inc., Gtd Sr Deb 08-10-18 8.250 BBB- 412 412,177 Rogers Cablesystems Ltd., Sr Note Ser B (Canada) 03-15-05 (Y) 10.000 BB+ 460 492,200 TCI Communications, Inc., Sr Deb 02-15-26 7.875 AA- 505 507,783 Time Warner, Inc., Deb 01-15-13 9.125 BBB 530 580,435 TV Guide, Inc., Sr Sub Note Ser B 03-01-09 8.125 B+ 345 344,137 ------------ 7,392,149 ------------ Medical (0.93%) Dynacare, Inc., Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 530 514,100 Fresenius Medical Care Capital Trust II, Gtd Trust Preferred Security 02-01-08 7.875 B+ 390 362,700 IASIS Healthcare Corp., Sr Sub Note 10-15-09 (R) 13.000 B- 230 236,900 Quest Diagnostics, Inc., Sr Sub Note 12-15-06 10.750 B+ 345 362,250 ------------ 1,475,950 ------------ Metal (0.18%) Golden Northwest Aluminium, Inc., 1st Mtg Note 12-15-06 12.000 BB- 270 283,500 ------------ Mortgage Banking (3.30%) Commercial Mortgage Acceptance Corp., Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-08 6.790 Aaa 669 653,192 ContiMortgage Home Equity Loan Trust, Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 8.100 AAA 480 483,750 Credit Suisse First Boston Mortgage Securities Corp., Commercial Mtg Pass Thru Ctf Ser 1998-C1 Class A-1A 12-17-07 6.260 AAA 571 548,226 Deutsche Mortgage & Asset Receiving Corp., Commercial Mtg Pass Thru Ctf Ser 1998-C1 Class C 03-15-08 6.861 A2 400 368,813 FirstPlus Home Loan Trust, Pass Thru Ctf Ser 1998-4 Class A-5 01-10-18 6.380 AAA 700 677,031 GMAC Commercial Mortgage Securities, Inc., Pass Thru Ctf Ser 1997-C2 Class A-3 11-15-07 6.566 Aaa 680 637,500 IMC Home Equity Loan Trust, Pass Thru Ctf Ser 1996-1 Class A-5 12-25-13 6.290 AAA 691 686,804 Salomon Brothers Mortgage Securities VII, Inc., Mtg Pass Thru Ctf Ser 1997-HUD2 Class A-2 07-25-24 6.750 Aaa 437 431,690 UCFC Home Equity Loan Trust, Pass Thru Ctf Ser 1996-D1 Class A6 02-15-25 7.180 AAA 730 726,806 ------------ 5,213,812 ------------ Municipals (0.89%) Massachusetts Bay Transportation Authority, Gen Trans Sys Ser 1998B 03-01-28 5.000 AAA 570 477,403 Massachusetts Water Resource Authority, Ref Gen Rev Ser D 08-01-24 5.000 AAA 490 415,731 New York State Dormitory Authority, Mental Hlth Serv Facil Imp Rev Ser 1998D 02-15-23 5.000 AAA 600 510,174 ------------ 1,403,308 ------------ Oil & Gas (1.76%) Amerada Hess Corp., Bond 10-01-29 7.875 BBB 510 497,403 Apache Finance Canada Corp., Note (Canada) 12-15-29 (Y) 7.750 BBB+ 345 333,788 CMS Panhandle Holding Co., Sr Note 07-15-29 7.000 BBB- 310 273,792 Lyondell Chemical Co., Sr Sec Note Ser A 05-01-07 9.625 BB 255 260,737 Ocean Energy, Inc., Sr Sub Note Ser B 07-15-07 8.875 B- 215 213,387 Petroleum Geo-Services, Sr Note (Norway) 03-30-08 (Y) 6.625 BBB 455 420,675 Snyder Oil Corp., Sr Sub Note 06-15-07 8.750 BB- 280 280,000 Triton Energy Ltd., Sr Note 04-15-02 8.750 BB- 495 498,712 ------------ 2,778,494 ------------ Paper & Paper Products (1.07%) Abitibi-Consolidated, Inc., Deb (Canada) 08-01-29 (Y) 8.500 BBB- 345 332,577 Fort James Corp., Sr Note 09-15-02 6.500 BBB 455 445,977 Packaging Corp. of America, Sr Sub Note Ser B 04-01-09 9.625 B 190 194,275 S.D. Warren Co., Sr Sub Note Ser B 12-15-04 12.000 B+ 685 715,825 ------------ 1,688,654 ------------ Real Estate Investment Trust (1.35%) American Health Properties, Inc., Note 01-15-07 7.500 BBB- 260 230,350 Cabot Industrial Properties, L.P., Note 05-01-04 7.125 BBB- 365 350,510 Camden Property Trust, Note 04-15-04 7.000 BBB 400 385,932 Liberty Property L.P., Medium Term Note 06-05-02 6.600 BBB- 340 329,630 ProLogis Trust, Note 04-15-04 6.700 BBB+ 375 357,660 TriNet Corporate Realty Trust, Inc., Note 05-15-01 7.300 BB 500 483,470 ------------ 2,137,552 ------------ Retail (1.08%) Dillard's, Inc., Deb 08-01-18 7.130 BBB 410 351,386 Great Atlantic & Pacific Tea Co., Inc. (The), Note 04-15-07 7.750 BBB- 280 262,332 Kmart Corp., Note 12-01-04 8.375 BB+ 170 169,481 Meyer (Fred), Inc., Note 03-01-08 7.450 BBB- 495 482,031 Pathmark Stores, Inc., Sub Note 06-15-02 11.625 CCC+ 485 169,750 Safeway, Inc., Note 11-15-01 5.875 BBB 270 263,701 ------------ 1,698,681 ------------ Soap & Cleaning Preparations (0.42%) Procter & Gamble Co. (The), Bond 09-15-09 6.875 AA 685 669,142 ------------ Steel (0.67%) National Steel Corp., 1st Mtg Bond Ser D 03-01-09 9.875 B+ 315 323,662 UCAR Global Enterprises, Inc., Sr Sub Note Ser B 01-15-05 12.000 B 700 731,500 ------------ 1,055,162 ------------ Telecommunications (5.53%) AXIA, Inc., Sr Sub Note 07-15-08 10.750 B- 183 167,903 Clearnet Communications, Inc., Sr Disc Note, Step Coupon (10.125%, 05-01-04) (Canada) 05-01-09 (A) (Y) Zero B3 655 397,913 Sr Disc Note, Step Coupon (14.75%, 12-15-00) (Canada) 12-15-05 (A) (Y) Zero B3 170 166,600 Crown Castle International Corp., Sr Note 05-15-11 9.000 B 440 433,400 Global Crossing Holdings Ltd., Sr Note 11-15-06 (R) 9.125 BB 180 177,750 Sr Note 11-15-09 (R) 9.500 BB 420 415,275 Hermes Europe Railtel BV, Sr Note (Netherlands) 08-15-07 (Y) 11.500 B 320 328,000 Sr Note (Netherlands) 01-15-09 (Y) 10.375 B 165 163,350 LCI International, Inc., Sr Note 06-15-07 7.250 BB+ 405 389,395 Level 3 Communications, Inc., Sr Note 05-01-08 9.125 B 250 236,250 McLeodUSA, Inc., Sr Note 11-01-08 9.500 B+ 355 355,887 Metromedia Fiber Network, Inc., Sr Note Ser B 11-15-08 10.000 B+ 430 439,675 MetroNet Communications Corp., Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 260 301,600 Nextel Communications, Inc., Sr Disc Note, Step Coupon (9.95%, 02-15-03) 02-15-08 (A) Zero B 350 245,875 Sr Note 11-15-09 (R) 9.375 B 355 348,787 NEXTLINK Communications, Inc., Sr Note 11-15-08 10.750 B 425 437,750 NTL Communications Corp., Sr Note Ser B 10-01-08 11.500 B- 475 513,000 Omnipoint Corp., Sr Note 09-15-09 (R) 11.500 CCC+ 285 307,800 Orange Plc, Sr Note (United Kingdom) 08-01-08 (Y) 8.000 BBB 355 361,212 RCN Corp., Sr Note Ser B 10-15-07 10.000 B3 245 243,775 Sprint Capital Corp., Note 05-01-19 6.900 BBB+ 505 459,287 TeleCorp PCS, Inc., Sr Sub Disc Note, Step Coupon (11.625%, 04-15-04) 04-15-09 (A) Zero B3 320 201,600 Tritel PCS, Inc., Sr Disc Note, Step Coupon (12.75%, 05-15-04) 05-15-09 (A) (R) Zero B3 140 88,200 Triton PCS, Inc., Gtd Sr Sub Disc Note, Step Coupon (11.00%, 05-01-03) 05-01-08 (A) Zero CCC+ 265 187,488 United Pan-Europe Communications N.V., Sr Note (Netherlands) 11-01-09 (R) (Y) 11.250 B 200 205,000 WorldCom, Inc., Note 08-15-01 6.125 A- 685 677,595 Worldwide Fiber, Inc., Sr Note (Canada) 12-15-05 (Y) 12.500 B+ 465 485,925 ------------ 8,736,292 ------------ Transportation (5.87%) America West Airlines, Pass Thru Ctf Ser 1996-1B 01-02-08 6.930 A- 381 361,518 Continental Airlines, Pass Thru Ctf Ser 1996-C 10-15-13 9.500 BBB+ 456 469,150 Pass Thru Ctf Ser 1999-1A 08-02-20 6.545 AA+ 610 554,167 Sr Note 12-15-05 8.000 BB- 430 396,675 Delta Air Lines, Inc., Deb 12-15-29 (R) 8.300 BBB- 345 335,444 Equip Tr Ctf Ser A 06-01-08 10.000 BBB 2,000 2,209,920 Fine Air Services, Inc., Sr Note 06-01-08 9.875 B 425 361,250 Humpuss Funding Corp., Note (Indonesia) 12-15-09 (R) (Y) 7.720 B3 216 151,427 Lockheed Martin Corp., Bond 12-01-29 8.500 BBB- 410 411,435 Northwest Airlines, Inc., Note 03-15-04 8.375 BB 315 297,971 Northwest Airlines 1996-1 Pass Through Trusts, Pass Thru Ctf Ser 1996-1C 01-02-05 10.150 BBB- 246 243,397 Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 379 377,971 NWA Trust, Sr Note Ser A 12-21-12 9.250 AA 548 570,708 Railcar Trust No. 1992-1, Pass Thru Ser 1992-1 Class A 06-01-04 7.750 AAA 1,088 1,098,507 USAir, Inc., Pass Thru Ctf Ser 1989-A2 01-01-13 9.820 BB 550 525,250 U.S. Airways, Inc., Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 BB 632 647,424 Wisconsin Central Transportation Corp., Note 04-15-08 6.625 BBB- 280 256,354 ------------ 9,268,568 ------------ Utilities (11.54%) AES Corp., Sr Sub Note 07-15-06 10.250 BB 670 680,050 AES Eastern Energy, Pass Thru Ctf 07-02-17 (R) 9.000 BBB- 395 371,557 Beaver Valley Funding Corp., Sec Lease Oblig Bond 06-01-17 9.000 BB- 565 566,413 BVPS II Funding Corp., Collateralized Lease Bond 06-01-17 8.890 BB- 700 708,750 Calpine Corp., Sr Note 05-15-06 10.500 BB+ 465 489,413 Cleveland Electric Illuminating Co., 1st Mtg Ser B 05-15-05 9.500 BB+ 1,150 1,187,375 CMS Energy Corp., Sr Note 01-15-04 6.750 BB 380 362,968 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- 210 212,575 Note 06-05-03 (R) 8.590 B+ 265 264,470 East Coast Power, LLC, Sec Note 03-31-12 (R) 7.066 BBB- 500 450,000 EIP Funding-PNM, Sec Fac Bond 10-01-12 10.250 BBB- 685 725,319 Fitchburg Holding Corp., Sec Note 01-31-03 (r) 15.750 BBB 1,315 1,383,642 GG1B Funding Corp., Deb 01-15-11 7.430 BBB- 393 380,860 GTE North, Inc., Deb Ser H 11-15-08 5.650 AA- 615 545,025 Hydro-Quebec, Gtd Bond (Canada) 02-01-21 (Y) 9.400 A+ 740 858,282 Gtd Bond (Canada) 01-15-22 (Y) 8.400 A+ 330 350,094 Gtd Deb Ser IF (Canada) 02-01-03 (Y) 7.375 A+ 750 754,290 Iberdrola International B.V., Note (Spain) 10-01-02 (Y) 7.500 AA- 1,000 1,006,340 Long Island Lighting Co., Deb 03-15-23 8.200 A- 615 613,462 Midland Funding Corp. I, Deb Ser C-91 07-23-02 10.330 BBB- 761 783,454 Midland Funding Corp. II, Deb Ser A 07-23-05 11.750 BB 550 593,917 Deb Ser B 07-23-06 13.250 BB 225 264,285 Monterrey Power S.A. de C.V., Sr Sec Bond (Mexico) 11-15-09 (R) (Y) 9.625 BB 145 129,775 Niagara Mohawk Power Corp., Sec Fac Bond 01-01-18 8.770 BBB 740 755,621 North Atlantic Energy Corp., 1st Mtg Ser A 06-01-02 9.050 BB+ 405 410,467 Northeast Utilities, Note Ser A 12-01-06 8.580 BB+ 99 99,937 PECO Energy Transition Trust, Pass Thru Ctf Ser 1999-A Class A-6 03-01-09 6.050 AAA 480 450,298 PNPP II Funding Corp., Deb 05-30-16 9.120 BB- 420 433,138 System Energy Resources, Inc., 1st Mtg 08-01-01 7.710 BBB- 590 590,708 U.S. WEST Capital Funding, Inc., Deb 07-15-28 6.875 A- 505 441,749 Waterford 3 Funding Corp., Sec Lease Obligation Bond 01-02-17 8.090 BBB- 886 848,174 ------------ 18,236,808 ------------ TOTAL PUBLICLY TRADED BONDS AND DIRECT PLACEMENT SECURITY (Cost $147,078,861) (91.23%) 44,147,301 ------ ------------ NUMBER OF SHARES OR WARRANTS -------- PREFERRED STOCKS AND WARRANTS California Federal Preferred Capital Corp., 9.125%, Ser A, Preferred Stock 35,650 804,353 CSC Holdings, Inc., 11.125% Ser M, Preferred Stock 5,447 595,085 CSC Holdings, Inc., 11.750%, Ser H, Preferred Stock 959 106,209 MetroNet Communications Corp., Warrant (Canada) (R) (Y) ** 510 68,850 Packaging Corp. of America, 12.375%, Preferred Stock (R) 1,798 196,881 ------------ 1,771,378 ------------ TOTAL PREFERRED STOCKS AND WARRANTS (Cost $1,753,621) (1.12%) 1,771,378 ------- ------------ INTEREST PAR VALUE RATE (000s OMITTED) -------- ------------ SHORT-TERM INVESTMENTS Joint Repurchase Agreement (6.55%) Investment in a joint repurchase agreement transaction with Barclay's, Inc. - Dated 12-31-99, due 01-03-00 (Secured by U.S. Treasury Bond 10.625% due 03-15-15 and U.S. Treasury Notes 5.375% thru 7.125% due 01-31-00 thru 05-15-00) - Note A 2.490% $10,344 10,344,000 ------- ------------ Corporate Savings Account (0.00%) Investors Bank & Trust Company Daily Interest Savings Account Current Rate 4.50% 410 ------- ------------ TOTAL SHORT-TERM INVESTMENTS (6.55%) 10,344,410 ------- ------------ TOTAL INVESTMENTS (98.90%) 156,263,089 ------- ------------ OTHER ASSETS AND LIABILITIES, NET (1.10%) 1,739,576 ------- ------------ TOTAL NET ASSETS (100.00%) $158,002,665 ======= ============ (A) Cash interest will be paid on this obligation at the stated rate beginning on the stated date. (r) Direct placement securities are restricted to resale. They have been valued in accordance with procedures approved by the Trustees after consideration of restrictions as to resale, financial condition and prospects of the issuer, general market conditions and pertinent information in accordance with the Fund's By-Laws and the Investment Company Act of 1940, as amended. The Fund has limited rights to registration under the Securities Act of 1933 with respect to these restricted securities. Additional information on these securities is as follows: MARKET VALUE AS A MARKET PERCENTAGE VALUE ACQUISITION ACQUISITION OF FUND'S AS OF ISSUER, DESCRIPTION DATE COST NET ASSETS DECEMBER 31, 1999 - ------------------- -------- ---------- ---------- ----------------- Fitchburg Holding Corp., Sec. Note, 15.750%, 01-31-03 02-10-81 $1,329,504 0.88% $1,383,642 (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 $15,345,875 or 9.71% of net assets as of December 31, 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 $692,515 or 0.38% of the Fund's net assets, have been purchased on a when-issued basis. 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 $725,154 of United States Treasury Bond, 8.875%, 08-15-17, has been segregated to cover the when-issued commitments. * 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. 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.
NOTES TO FINANCIAL STATEMENTS John Hancock Funds - Investors Trust NOTE A - ACCOUNTING POLICIES John Hancock Investors Trust (the "Fund") is a closed-end investment management company registered under the Investment Company Act of 1940. Significant accounting policies of the Fund are as follows: VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the basis of market quotations, valuations provided by independent pricing services or at fair value as determined in good faith in accordance with procedures approved by the Trustees. Short-term debt investments maturing within 60 days are valued at amortized cost, which approximates market value. JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the Securities and Exchange Commission, the Fund, along with other registered investment companies having a management contract with John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The Berkeley Financial Group, 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 $1,814,032 of capital loss carryforwards available, to the extent provided by regulations, to offset future net realized capital gains. To the extent such carryforwards are used by the Fund, no capital gain distributions will be made. The carryforwards expire as follows: December 31, 2002 -- $273,582, December 31, 2004 -- $4,374 and December 31, 2007 -- $1,536,076. Additionally, net capital losses of $167,296 attributable to security transactions incurred after October 31, 1999 are treated as arising on the first day (January 1, 2000) of the Fund's next taxable year. 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 December 31, 1999, open positions in financial futures contracts were as follows: UNREALIZED EXPIRATION OPEN CONTRACT POSITION APPRECIATION - ---------- ------------- -------- ------------ MAR 00 16 U.S. TREASURY BOND SHORT $32,888 ======= At December 31, 1999, the Fund has deposited in a segregated account $18,000 par value of U.S. Treasury Bond, 7.125% Due 02-15-23, to cover margin requirements on open 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 year ended December 31, 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 year was estimated to be at an annual rate of less than 0.02% of the average net assets of the Fund. Mr. Stephen L. Brown, Ms. Maureen R. Ford, 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 year ended December 31, 1999 aggregated $137,212,936 and $140,847,861, respectively. Purchases and proceeds from sales of obligations of the U.S. government and its agencies aggregated $146,523,282 and $148,396,240, respectively. The cost of investments owned at December 31, 1999 (excluding corporate savings account) for federal income tax purposes was $159,993,037. Gross unrealized appreciation and depreciation of investments at December 31, 1999 aggregated $2,078,375 and $5,808,733, respectively, resulting in net unrealized depreciation of $3,730,358. NOTE D - RECLASSIFICATION OF ACCOUNTS During the year ended December 31, 1999, the Fund has reclassified amounts to reflect a decrease in accumulated net realized loss on investments of $191, an increase in undistributed net investment income of $102 and a decrease in capital paid-in of $293. This represents the amount necessary to report these balances on a tax basis, excluding certain temporary differences, as of December 31, 1999. Additional adjustments may be needed in subsequent reporting periods. These reclassifications, which have no impact on the net asset value of the Fund, are primarily attributable to certain differences in the computation of distributable income and capital gains under federal tax rules versus generally accepted accounting principles. The calculation of net investment income per share in the financial highlights excludes these adjustments. REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS To the Board of Trustees and Shareholders of John Hancock Investors Trust We have audited the accompanying statement of assets and liabilities of the John Hancock Investors Trust (the "Fund"), including the schedule of investments, as of December 31, 1999, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers, or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the John Hancock Investors Trust at December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /S/ ERNST & YOUNG LLP Boston, Massachusetts February 10, 2000 TAX INFORMATION NOTICE (UNAUDITED) For federal income tax purposes, the following information is furnished with respect to the taxable distributions of the Fund during its fiscal year ended December 31, 1999. With respect to the ordinary dividends paid by the Fund for the fiscal year ended December 31, 1999, 0.77% of the dividends qualify for the corporate dividends received deduction. DIVIDENDS AND DISTRIBUTIONS During 1999, dividends from net investment income totaling $1.4675 per share were paid to shareholders. The dates of payment and the amounts per share are as follows: INCOME PAYMENT DATE DIVIDEND - ------------ -------- March 31, 1999 $0.3625 June 30, 1999 0.3650 September 30, 1999 0.3725 December 30, 1999 0.3675 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 have taken 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. [THIS PAGE INTENTIONALLY LEFT BLANK] A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page. A box sectioned in quadrants with a triangle in upper left, a circle in upper right, a cube in lower left and a diamond in lower right. A tag line below reads: "A Global Investment Management Firm." 101 Huntington Avenue, Boston, MA 02199-7603 Bulk Rate U.S. Postage PAID S. Hackensack, NJ Permit No. 750 A recycled logo in lower left hand corner with the caption "Printed on Recycled Paper." P500A 12/99 2/00 -----END PRIVACY-ENHANCED MESSAGE-----