ITEM 1. REPORT TO STOCKHOLDERS
John Hancock
Investors
Trust
SEMI
ANNUAL
REPORT
6.30.03
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Chairman and Chief Executive Officer, flush
left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 16
For your information
page 29
Dear Fellow Shareholders,
The stock market made a strong recovery in the first half of 2003.
Historically low interest rates, improving corporate earnings and
government stimulus in the form of tax cuts gave investors hope that the
economy would soon begin to strengthen. Most of the market's move up
occurred in the second quarter, and the breadth of the rally was
enormous. As a result, the major indexes were able to wipe out their
first-quarter losses and post solid gains for the first six months of
the year. With technology leading the way, the tech-heavy Nasdaq
Composite Index rose 21.51% through June, the Dow Jones Industrial
Average was up 9.02% and the Standard & Poor's 500 Index returned
11.75%. With falling interest rates, bonds also did well, continuing
their upward trend for a fourth consecutive year. High yield bonds led
the pack, returning 18.49% in the first half as measured by the Lehman
High Yield Index.
After the jarring stock-market losses of the last three years, it's a
welcome relief for investors to be reminded that the market is indeed
cyclical, and does move up -- not just down. And mutual fund investors
will finally like what they see in their second-quarter statements:
positive results. With the exception of bear funds, which bet on the
market going down, every fund category tracked by Morningstar, Inc. and
Lipper, Inc. posted double-digit gains in the quarter.
Whether this rally can be sustained depends in large part on whether the
economy actually does rebound, and by how much, and how corporate
earnings fare. It will also depend on how soon a lot of the investors
still sitting on the sidelines decide to get back into the stock market.
No matter what happens next, the dramatic reversal in the stock market's
fortunes, and other economic improvements, could be signals that it's
time for investors to review their portfolios with their investment
professionals to make sure they are well-positioned to meet their
long-term investment objectives.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of June 30, 2003. They
are subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
a high level of
current income
consistent with
prudent invest-
ment risk by
investing in a
diversified
portfolio of debt
securities.
Over the last six months
* Bonds rallied amid lingering economic weakness and low inflation.
* Corporate bonds were the best performers, especially lower-quality
bonds, followed by Treasury and mortgage-backed securities.
* The Fund added more lower-quality corporate bonds while reducing its
position in mortgage-backed bonds.
[Bar chart with heading "John Hancock Investors Trust". Under the
heading is a note that reads "Fund performance for the six months ended
June 30, 2003." The chart is scaled in increments of 3% with 0% at the
bottom and 9% at the top. The first bar represents the 8.95% total
return for John Hancock Income Securities Trust. A note below the chart
reads "The total return for the Fund is at net asset value with all
distributions reinvested."]
Top 10 issuers
13.6% Federal National Mortgage Assn.
4.9% United States Treasury
1.2% Nextel Communications, Inc., 11.125%
1.2% Ford Motor Credit Co.
1.1% NiSource Finance Corp.
1.1% General Motors Acceptance Co.
1.1% Sealed Air Corp.
1.1% Federal Home Loan Mortgage Corp.
1.0% Targeted Return Index Securities Trust
1.0% Midland Funding Corp. II
As a percentage of net assets on June 30, 2003.
MANAGERS'
REPORT
BY BARRY H. EVANS, CFA, AND JEFFREY N. GIVEN, CFA, PORTFOLIO MANAGERS
John Hancock
Investors Trust
U.S. bonds posted moderate gains during the first six months of 2003.
Bonds rallied thanks to a lethargic economy and low inflation, which led
the Federal Reserve to cut short-term interest rates in June. It was the
Fed's 13th rate cut since the beginning of 2001. Bonds also benefited
from safe-haven demand early in the year as investors grew jittery about
the impending war with Iraq. Bonds produced positive returns despite a
sharp stock market rally, which attracted investor demand away from the
bond market, and despite increased issuance by both corporations and the
federal government.
Corporate bonds, which typically offer the highest yields in the bond
market, were the best performers. Treasury and other government bonds
also fared well, while mortgage-backed securities lagged.
"U.S. bonds posted moder
ate gains during the first
six months of 2003."
FUND PERFORMANCE
For the six months ended June 30, 2003, John Hancock Investors Trust
produced a total return of 8.95% at net asset value. The average
closed-end general bond fund returned 11.60% according to Lipper Inc.,
while the Lehman Brothers Government/Credit Bond Index returned 5.23%.
PORTFOLIO THEMES
In the first six months of 2003, there were two key themes in the
portfolio, both of which carried over from the last half of 2002. The
first was an emphasis on higher-yielding securities, such as corporate
and mortgage-backed bonds. These bonds made up more than two-thirds of
the portfolio throughout the six-month period. The other theme was
lowering the overall credit quality of the portfolio by investing in
lower-rated corporate bonds, which we thought offered the best relative
values in the bond market.
[Photos of Barry Evans and Jeffrey Given flush right next to first
paragraph.]
CORPORATE BONDS ENHANCE PERFORMANCE
We increased our holdings of corporate bonds, which comprised more than
half of the portfolio throughout the first half of 2003. With Treasury
bond yields at their lowest levels in decades, many investors shifted
into corporate bonds to capture higher yields. Lower-quality bonds,
which offer the highest yields in the corporate market, attracted the
most demand and produced the best returns. The Lehman Brothers
High-Yield Corporate Index, an index of lower-rated bonds, returned
nearly 20% in the first half of the year.
Another factor behind the outperformance of corporate bonds, especially
lower-rated bonds, was a general trend toward improved fiscal
responsibility. Many corporations have been reducing debt and shoring up
their balance sheets in an effort to restore financial health and
investor confidence.
"Our focus on lower-rated
corporate bonds was a
key contributor to Fund
performance."
Our focus on lower-rated corporate bonds was a key contributor to Fund
performance. During the past six months, we reduced our exposure to
mortgage-backed securities and added more lower-quality corporate bonds
to the portfolio. In particular, we boosted our holdings of
below-investment-grade bonds (also known as "high-yield" or "junk"
bonds) from 22% to 37% of the portfolio. We also increased our position
in corporate bonds rated BBB, the lowest investment-grade rating.
[Table at top left-hand side of page entitled "Top five sectors". The
first listing is Government -- U.S. agencies 16%, the second is Utilities
12%, the third Media 9%, the fourth Finance 8%, and the fifth
Telecommunications 7%.]
BOTTOM-UP APPROACH
In selecting corporate bonds for the portfolio, we use a bottom-up
approach that evaluates potential investments on a company- by-company
basis. The end result is a diversified portfolio of bonds from a variety
of industries.
For example, we recently added bonds issued by XM Satellite Radio,
Dayton Power & Light and Sealed Air to the portfolio. XM provides
commercial-free satellite radio services and has seen a sharp increase
in subscriber growth, especially since General Motors began installing
the service in many of its cars. Dayton is a Midwestern utility that we
thought had better prospects than the market had priced into the value
of its bonds. Sealed Air makes bubble wrap and other packaging products,
and we believe this company is well positioned to benefit from an
improving economy.
[Pie chart in middle of page with heading "Portfolio diversification As
a percentage of net assets on 6-30-03". The chart is divided into five
sections (from top to left): Corporate bonds 71%, U.S. government &
agency bonds 21%, Foreign government bonds 1%, Preferred stocks 6% and
Short-term investments & other 1%.]
MORTGAGES STRUGGLE
We were disappointed in the performance of our mortgage-backed
securities during the past six months. In 2002, mortgage- backed
securities underperformed other high-quality bonds as falling mortgage
rates led to a significant refinancing boom. When mortgage rates hit
record lows in late 2002, we sold some of our other high-quality bonds
and bought mortgage-backed bonds, increasing our position to more than
25% of the portfolio.
[Table at top of page entitled "SCORECARD". The header for the left
column is "INVESTMENT" and the header for the right column is "PERIOD'S
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is Telus
followed by an up arrow with the phrase "Telecom provider recovered from
credit-rating downgrade." The second listing is PanAmSat followed by an
up arrow with the phrase "Satellite TV company beat earnings
expectations." The third listing is Great Central Mines followed by a
down arrow with the phrase "Hurt by doubts about amount of gold in an
Australian mine."]
We expected mortgage-backed securities to outperform in a relatively
stable interest-rate environment. Unfortunately, mortgage rates
continued to fall in the first half of 2003, triggering two additional
refinancing waves in March and May. As a result, mortgages didn't
perform as well as we anticipated, posting returns that were comparable
to short-term Treasury bonds.
We cut back somewhat on our mortgage-backed holdings because we felt
that lower-rated corporate bonds offered better values. However, we
still think mortgage-backed securities look attractive and expect to
maintain our current position.
OUTLOOK
We believe that we are in the beginning stages of an economic recovery,
but it will be several quarters before we know for sure that the economy
is back on track. The Fed is likely to remain on hold until a clear
direction for the economy is evident. Given an environment of moderate
economic growth and low inflation, we believe interest rates should be
relatively stable during the second half of the year.
"We believe that we are in
the beginning stages of an
economic recovery..."
We continue to favor lower-quality corporate bonds despite their recent
outperformance. These bonds still offer a substantial yield advantage
over Treasury bonds, and issuers continue to improve their balance
sheets.
This commentary reflects the views of the portfolio manager through the
end of the Fund's period discussed in this report. The manager's
statements reflect his own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
1 Figures from Lipper, Inc. include reinvested dividends and do not take
into account sales charges. Actual load-adjusted performance is lower.
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. The managers'
statements reflect their own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
June 30, 2003
(unaudited)
This schedule is divided into three main categories: publicly traded
bonds, preferred stocks and short-term investments. Publicly traded
bonds and preferred stocks are further broken down by industry group.
Short-term investments, which represent the Fund's cash position, are
listed last.
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
PUBLICLY TRADED BONDS 93.98% $169,064,240
(Cost $161,371,495)
Aerospace 0.70% 1,266,097
Jet Equipment Trust,
Equipment Trust Ctf Ser 95B2 08-15-14 (B) (R) 10.910% CC $550 37,571
Raytheon Co.,
Note 03-01-10** 8.300 BBB- 1,000 1,228,526
Automobiles/Trucks 1.15% 2,060,830
ERAC USA Finance Co.,
Note 12-15-09 (R) 7.950 BBB+ 325 388,102
Hertz Corp.,
Sr Note 06-01-12 7.625 BBB 365 370,728
TRW Automotive, Inc.,
Sr Note 02-15-13 (R) 9.375 B+ 1,200 1,302,000
Banks 2.28% 4,099,619
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 620 710,049
Barclays Bank Plc,
Perpetual Bond (6.86% to 6-15-32 than variable)
(United Kingdom) 06-15-49 (R) 6.860 A+ 495 572,226
Capital One Bank,
Note 06-13-13 6.500 BB+ 750 742,967
Corporacion Andina de Fomento,
Note (Supra National) 05-21-13 5.200 A 760 769,922
Royal Bank of Scotland Group Plc,
Perpetual Bond (7.648% to 09-30-31 then variable)
(United Kingdom) 08-31-49 7.648 A- 630 799,402
Zions Financial Corp.,
Note (6.95% to 05-15-06 then variable) 05-15-11 6.950 BBB- 455 505,053
Building 1.87% 3,357,919
Georgia-Pacific Corp.,
Sr Note 02-01-13 (R)+ 9.375 BB+ 1,000 1,102,500
Pulte Homes Inc,
Sr Note 02-15-13** 6.250 BBB- 1,000 1,109,371
Toll Brothers, Inc.,
Note 11-15-12 (R) 6.875 BBB- 1,000 1,146,048
Business Services -- Misc. 0.82% 1,466,500
Muzak LLC/Muzak Finance Corp.,
Sr Note 02-15-2009 (R)** 10.000 B 1,400 1,466,500
Chemicals 0.58% 1,045,000
NOVA Chemicals Corp.,
Note (Canada) 09-15-2005 7.000 BB+ 1,000 1,045,000
Computers 0.81% 1,451,940
NCR Corp.,
Note 06-15-09 7.125 BBB- 375 411,940
Unisys Corp.,
Sr Note 03-15-10 6.875 BB+ 1,000 1,040,000
Containers 2.58% 4,642,437
Owens-Brockway Glass Container, Inc.,
Gtd Sr Sec Note 11-15-12 8.750 BB 1,000 1,085,000
Sr Note 05-15-13 (R) 8.250 B+ 500 522,500
Riverwood International Corp.,
Gtd Sr Sub Note 04-01-08 10.875 CCC+ 1,036 1,061,900
Sealed Air Corp.,
Sr Note 04-15-08 (R)+ 5.375 BBB 1,880 1,973,037
Diversified Operations 1.17% 2,104,140
Hutchison Whampoa International Ltd.,
Note (U.S. Virgin Islands) 02-13-13 (R) 6.500 A- 1,000 1,049,140
Tyco International Group SA,
Note (Luxembourg) 10-15-11** 6.375 BBB- 1,000 1,055,000
Energy 0.38% 691,580
CalEnergy Co., Inc.,
Sr Bond 09-15-28 8.480 BBB- 525 691,580
Finance 7.56% 13,602,843
Bank One Issuance Trust,
Pass Thru Ctf Ser 2003-C1 09-15-10 4.540 BBB 1,000 1,038,078
Capital One Master Trust,
Sub Bond Pass Thru Ctf Ser 2000-3 10-15-10 7.900 BBB 540 575,921
Citibank Credit Card Issuance Trust,
Pass Thur Ctf Ser 2003-C3 Class C3 04-07-10 4.450 BBB 1,000 1,030,001
Conseco Finance Securitizations Corp.,
Home Equity Pass Thru Ctf Ser 2002-A
Class A-3 04-15-32 5.330 AAA 830 842,926
Ford Motor Credit Co.,
Note 10-28-09+ 7.375 BBB 2,000 2,096,624
General Motors Acceptance Corp.,
Note 08-28-12** 6.875 BBB 2,000 1,995,312
Household Finance Corp.,
Note 05-15-11 6.750 A 1,350 1,567,848
Mirant Americas Generation, Inc.
Sr Note 05-01-06 7.625 CC 500 385,000
PDVSA Finance Ltd.,
Note (Cayman Islands) 11-16-12 8.500 B- 540 494,100
Sears Roebuck Acceptance Corp.,
Note 10-15-27 7.500 BBB+ 1,000 1,067,418
St. George Funding Co.,
Perpetual Bond (8.485% to 06-31-17
then variable) 12-31-49 (R) 8.485 Baa1 595 664,795
Targeted Return Index Securities Trust,
Ctf-02 08-15-08 (R)+ 6.539 Baa3 1,680 1,844,820
Food 0.50% 906,300
Corn Productions International, Inc.,
Sr Note 08-15-09 8.450 BBB- 795 906,300
Government -- Foreign 1.52% 2,735,000
Columbia, Republic of,
Note (Colombia) 01-23-12 10.000 BB 500 560,000
United Mexican States,
Global Med Term Note Ser A (Mexico) 01-16-13 6.375 BBB- 1,000 1,060,000
Panama, Republic of,
Bond (Panama) 01-16-23** 9.375 BB 1,000 1,115,000
Government -- U.S. 4.94% 8,897,584
United States Treasury,
Bond 05-15-18** 9.125 AAA 555 860,705
Bond 02-15-31** 5.375 AAA 6,040 6,801,372
Inflation Indexed Note 01-15-11** 3.500 AAA 1,088 1,235,507
Government -- U.S. Agencies 16.07% 28,899,082
Federal Home Loan Mortgage Corp.,
20 Yr Pass Thru Ctf 01-01-16 11.250 AAA 73 81,340
CMO REMIC 2496-PE 07-15-31 5.500 AAA 620 649,651
CMO REMIC 2563-PA 03-15-31 4.250 AAA 1,208 1,232,050
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 02-01-08 7.500 AAA 45 48,554
15 Yr Pass Thru Ctf 09-01-10 7.000 AAA 125 133,373
15 Yr Pass Thru Ctf 10-01-12 7.000 AAA 25 26,388
15 Yr Pass Thru Ctf 04-01-17 7.000 AAA 148 157,714
15 Yr Pass Thru Ctf 02-01-18+ 5.500 AAA 3,088 3,207,907
15 Yr Pass Thru Ctf 05-01-18 5.000 AAA 955 987,988
15 Yr Pass Thru Ctf 06-01-18 5.000 AAA 995 1,029,368
30 Yr Pass Thru Ctf 07-01-33 5.000 AAA 5,030 5,110,168
30 Yr Pass Thru Ctf 07-01-33 5.500 AAA 8,705 8,996,078
CMO REMIC 2002-73-PE 10-25-31+ 5.500 AAA 1,500 1,562,717
CMO REMIC 2003-16-PD 10-25-16 5.000 AAA 1,275 1,349,557
CMO REMIC 2003-17-QT 08-25-27+ 5.000 AAA 1,595 1,631,047
Commercial Mtg Pass Thru Ctf Ser 1997-M8
Class A-1 01-25-22 6.940 AAA 216 223,667
Financing Corp.,
Bond 02-08-18 9.400 Aaa 785 1,198,746
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 07-01-33 5.000 AAA 1,035 1,059,904
30 Yr Pass Thru Ctf 04-15-21 9.000 AAA 73 81,297
30 Yr Pass Thru Ctf 11-15-19 to 02-15-25 9.500 AAA 91 102,240
30 Yr Pass Thru Ctf 11-15-20 10.000 AAA 25 29,328
Insurance 2.67% 4,802,406
Fund American Cos., Inc.,
Sr Note 05-15-13 5.875 BBB- 1,315 1,375,005
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 470 586,715
MONY Group, Inc. (The),
Sr Note 12-15-05 7.450 BBB+ 480 510,249
QBE Insurance Group Ltd.,
Bond 07-01-23 (R) 5.647 BBB 1,000 971,556
UnumProvident Corp.,
Sr Note 03-01-11 7.625 BBB- 900 963,000
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 AA 340 395,881
Leisure 4.39% 7,902,083
Chukchansi Economic Development Auth.
Sr Note 06-15-09 (R) 14.500 N/R 1,000 1,102,500
Cinemark USA, Inc.,
Sr Sub Note 02-01-13 (R) 9.000 B- 700 759,500
Harrah's Operating Co., Inc.,
Sr Sub Note 12-15-05 7.875 BB+ 715 777,563
HMH Properties, Inc.,
Sr Note Ser A 08-01-05 7.875 B+ 330 335,775
Hyatt Equities LLC,
Note 06-15-07 (R) 6.875 BBB 1,050 1,093,530
MTR Gaming Group, Inc.,
Gtd Sr Note 04-01-10 (R) 9.750 B+ 500 515,000
Toys "R" Us, Inc.,
Note 04-15-13 7.875 BBB- 1,000 1,075,715
Trump Hotels & Casino Resorts Inc.,
1st Mtg Note 03-15-10 (R) 11.625 B- 1,000 955,000
Waterford Gaming LLC,
Sr Note 09-15-12 (R) 8.625 B+ 700 735,000
Wynn Las Vegas LLC,
2nd Mtg Note 11-01-10 12.000 CCC+ 500 552,500
Machinery 0.84% 1,515,804
Kennametal, Inc.,
Sr Note 06-15-12 7.200 BBB 1,385 1,515,804
Media 7.63% 13,719,079
British Sky Broadcasting Group Plc,
Sr Note (United Kingdom) 07-15-09 8.200 BB+ 905 1,072,425
Charter Comms Holdings, LLC
Sr Note 10-01-09 10.750 CCC- 2,000 1,550,000
Clear Channel Communications,
Gtd Note 11-01-08 8.000 BBB- 770 895,125
Continental Cablevision, Inc.,
Deb 08-01-13 9.500 BBB 640 736,688
EchoStar DBS Corp.,
Sr Note 02-01-09** 9.375 BB- 1,010 1,076,913
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 265 276,263
Grupo Televisa SA,
Note (Mexico) 09-13-11 8.000 BBB- 835 948,768
Innova S. de R.L.,
Sr Note (Mexico) 04-01-07 12.875 B- 160 163,200
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 510 664,526
Paxson Communications Corp.,
Gtd Sr Sub Note 07-15-08 10.750 CCC+ 500 537,500
Rogers Cablesystems Ltd.,
Sr Note Ser B (Canada) 03-15-05 10.000 BBB- 460 499,100
Shaw Communications Inc.,
Sr Note (Canada) 04-11-10 8.250 BB+ 1,000 1,112,500
TCI Communications, Inc.,
Deb 02-01-12 9.800 BBB 840 1,112,730
Deb 04-15-22 10.125 BBB 320 454,079
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB+ 1,080 1,383,212
XM Satellite Radio, Inc.,
Sr Sec Note 06-15-10 (R) 12.000 CCC+ 700 686,000
Sr Sec Note, Step Coupon
(14.00% to 12-31-05) 12-31-09 (A) Zero Caa1 772 550,050
Medical 1.59% 2,860,854
Advanced Medical Optics, Inc.,
Sr Sub Note 07-15-10 9.250 B 500 542,500
AmeriPath, Inc.,
Sr Sub Note 04-01-13 (R) 10.500 B- 200 214,500
HCA -- The Healthcare Co.,
Note 09-01-10 8.750 BBB- 1,012 1,178,854
Tenet Healthcare Corp.,
Sr Note 12-01-11 6.375 BBB- 1,000 925,000
Metal 1.79% 3,221,083
Brascan Corp.,
Note (Canada) 03-01-10 5.750 A- 1,000 1,064,383
Great Central Mines Ltd.,
Sr Note (Australia) 04-01-08 8.875 D 340 170,000
Inco Ltd.,
Bond (Canada) 09-15-32 7.200 BBB- 470 518,017
Noranda, Inc.,
Note (Canada) 02-15-11 8.375 BBB- 1,175 1,322,092
Yanacocha Receivables Master Trust,
Pass Thru Ctf Ser 1997-A 06-15-04 (R) 8.400 BBB- 146 146,591
Mortgage Banking 2.34% 4,210,937
ContiMortgage Home Equity Loan Trust,
Home Equity Pass Thru Ctf Ser 1995-2
Class A-5 08-15-25 8.100 AAA 388 388,036
Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser 1998-C1
Class A-1A 05-17-40 6.260 AAA 696 744,055
Deutsche Mortgage & Asset Receiving Corp.,
Commercial Mtg Pass-Thru Ctf Ser 1998-C1
Class C 06-15-31 6.861 A2 400 456,083
GMAC Commercial Mortgage Securities, Inc.,
Commercial Mtg Pass Thru Ctf Ser 1998-C1
Class A-1 05-15-30 6.853 Aaa 912 967,842
MBNA Master Credit Card Trust,
Sub Bond Ser 1999-B Class C 08-15-11+ 6.650 BBB 1,500 1,654,921
Office 0.50% 896,419
Moore North America Finance, Inc.,
Sr Note 01-15-11 (R) 7.875 BB- 250 260,625
Xerox Corp.,
Sr Note 06-15-13 7.625 B+ 635 635,794
Oil & Gas 5.72% 10,296,295
Alberta Energy Co. Ltd.,
Note (Canada) 09-15-30 8.125 A- 685 935,033
Enterprise Products Partners L.P.,
Note 03-01-33 (R) 6.875 BBB 1,000 1,132,591
Gazprom,
Note (Russia) 03-01-13 (R) 9.625 B+ 1,000 1,102,500
Grant Prideco Escrow Corp.,
Sr Note Ser B 12-15-09 9.000 BB- 500 555,000
Kinder Morgan, Inc.,
Sr Note 09-01-12 6.500 BBB 1,320 1,513,113
Louis Dreyfus Natural Gas Corp.,
Sr Note 12-01-07 6.875 BBB+ 330 380,611
Lyondell Chemical Co.,
Sr Note 12-15-08** 9.500 BB 1,010 959,500
Nova Chemicals Corp.,
Sr Note (Canada) 05-15-06 7.000 BB+ 265 279,575
Occidental Petroleum Corp.,
Sr Deb 09-15-09 10.125 BBB+ 1,102 1,472,899
Pemex Project Funding Master Trust,
Gtd Note 10-13-10 9.125 BBB- 1,065 1,288,650
Tosco Corp.,
Note 02-15-30 8.125 A- 505 676,823
Paper & Paper Products 2.94% 5,286,937
Abitibi-Consolidated, Inc.,
Bond (Canada) 08-01-10 8.550 BB+ 1,100 1,232,174
Corporacion Durango S.A. de C.V.,
Sr Note (Mexico) 07-15-09 (B) (R) 13.750 D 500 210,000
International Paper Co.,
Note 10-30-12** 5.850 BBB 1,000 1,089,888
MDP Acquisitions Plc,
Sr Note (Ireland) 10-01-12 9.625 B 1,250 1,381,250
Stone Container Corp.,
Sr Note 02-01-11 9.750 B 275 301,125
Sr Note 07-01-12 8.375 B 1,000 1,072,500
Real Estate Investment Trusts 0.39% 706,844
Healthcare Realty Trust, Inc.,
Sr Note 05-01-11 8.125 BBB- 165 183,466
iStar Financial, Inc.,
Sr Note 03-15-08 7.000 BB+ 500 523,378
Real Estate Operations 0.57% 1,019,694
Socgen Real Estate Co. LLC,
Perpetual Bond Ser A (7.64% to 09-30-07
then variable) 12-31-49 (R) 7.640 A 880 1,019,694
Retail 0.91% 1,644,525
Delhaize America, Inc.,
Gtd Note 04-15-06 7.375 BB+ 1,005 1,055,250
Gap, Inc. (The),
Note (Coupon increase/decrease on rating
upgrade/downgrade) 12-15-08 10.550 BB+ 485 589,275
Revenue Bonds 0.49% 884,871
Golden State Tobacco Securitization Corp.,
Rev Ser 2003-A-1 06-01-39+ 6.750 A- 980 884,871
Telecommunications 5.59% 10,057,801
AT&T Wireless Services, Inc.,
Sr Note 03-01-11** 7.875 BBB 975 1,151,496
Deutsche Telekom International Finance B.V.,
Bond (Coupon rate step-up/down on rating)
(Netherlands) 06-15-10 8.000 BBB+ 950 1,166,960
France Telecom SA,
Note (France) 03-01-11 7.750 BBB 1,130 1,422,178
Mobile Telesystems Finance S.A.,
Gtd Sr Note (Luxembourg) 01-30-08 (R) 9.750 B+ 350 380,625
PanAmSat Corp.,
Sr Note 02-01-12 8.500 B- 1,300 1,407,250
Qwest Capital Funding, Inc.,
Gtd Note 08-15-06 7.750 CCC+ 1,700 1,589,500
Sprint Capital Corp.,
Note 05-01-19** 6.900 BBB- 1,000 1,047,448
Telus Corp.,
Note (Canada) 06-01-11 8.000 BBB 1,350 1,559,250
VoiceStream Wireless Corp.,
Sr Note 09-15-09 11.500 BBB+ 285 333,094
Transportation 2.03% 3,647,296
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 A- 266 257,334
Delta Air Lines, Inc.,
Equip Tr Ctf Ser A 06-01-08+ 10.000 BB+ 2,000 1,590,000
Humpuss Funding Corp.,
Note 12-15-09 (R) 7.720 B3 252 201,491
Northwest Airlines 1996-1 Pass Through Trusts,
Pass Thru Ctf Ser 1996-1C 01-02-05 10.150 B 68 38,256
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 B+ 313 203,615
TFM S.A. de C.V.,
Gtd Sr Disc Note (Mexico) 06-15-09 11.750 B+ 1,330 1,356,600
Utilities 9.85% 17,714,128
AES Eastern Energy L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17 9.000 BB+ 395 419,688
Beaver Valley Funding Corp.,
Sec Lease Obligation Bond 06-01-17 9.000 BBB- 915 1,096,846
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BBB- 700 841,190
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BBB 1,150 1,156,940
CMS Energy Corp.,
Sr Note Ser B 01-15-04 6.750 B+ 380 383,800
DPL, Inc.,
Sr Note 09-01-11 6.875 BBB- 1,000 1,097,655
Dynegy Holdings, Inc.,
Sr Note 03-15-05 8.125 CCC+ 1,500 1,458,750
Empresa Electrica Guacolda SA,
Sr Note (Chile) 04-30-13 (R) 8.625 BBB- 1,000 1,048,717
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 282 294,078
HQI Transelect Chile SA,
Sr Note (Chile) 04-15-11 7.875 A- 1,175 1,360,908
IPALCO Enterprises, Inc.,
Sr Sec Note 11-14-11 7.625 BB- 315 344,925
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB- 1,375 1,485,000
Deb Ser B 07-23-06 13.250 BB- 225 254,250
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 A 712 741,086
NiSource Finance Corp.,
Note 11-15-03 7.500 BBB 1,315 1,339,638
Note 11-15-10 7.875 BBB 600 708,420
Pinnacle Partners,
Sr Note 08-15-04 (R) 8.830 BB+ 665 689,937
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BBB- 475 593,641
Reliant Resources, Inc.,
Sr Sec Note 07-15-13 (R) 9.500 B 1,000 1,007,500
Southern California Edison Co.,
1st Mtg Bond 02-15-07 (R) 8.000 BB 680 745,450
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 8.090 BBB- 588 645,709
Waste Disposal Service & Equip. 0.81% 1,450,313
Allied Waste North America, Inc.,
Sr Sub Note Ser B 08-01-09** 10.000 B+ 1,365 1,450,313
ISSUER, DESCRIPTION SHARES VALUE
PREFERRED STOCKS 5.51% $9,899,890
(Cost $9,423,470)
Banks 0.59% 1,056,510
Abbey National Plc, 7.375% (United Kingdom) 38,700 1,056,510
Media 1.51% 2,722,005
CSC Holdings, Inc., 11.125%, Ser M 16,632 1,704,780
CSC Holdings, Inc., 11.75%, Ser H 9,900 1,017,225
Telecommunications 1.22% 2,188,575
Nextel Communications, Inc., 11.125%, Ser E 2,055 2,188,575
Utilities 2.19% 3,932,800
Ameren Corp., 9.75%, Conv 20,000 568,400
Dominion Resources, Inc., 9.50%, Conv 20,000 1,179,200
DTE Energy Co., 8.75%, Conv 20,000 525,800
KeySpan Corp., 8.75%, Conv 20,000 1,059,000
TECO Energy, Inc., 9.50%, Conv 31,600 600,400
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 7.34% $13,207,000
(Cost $13,207,000)
Joint Repurchase Agreement
Investment in a Joint Repurchase Agreement
Transaction with UBS Warburg, Inc. -- Dated
06-30-03, due 07-01-03 (Secured by
U.S. Treasury Bonds, 5.250% thru 7.875%
due 02-15-21 thru 11-25-28) 1.100% $13,207 13,207,000
TOTAL INVESTMENTS 106.83% $192,171,130
OTHER ASSETS AND LIABILITIES, NET (6.83%) ($12,279,623)
TOTAL NET ASSETS 100.00% $179,891,507
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(B) Non-income-producing issuer, filed for protection under the Federal
Bankruptcy Code or is in default on interest payment.
(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 $28,740,191 or 15.98% of
net assets as of June 30, 2003.
+ These securities having an aggregate value of $17,190,914 or 9.56%
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 $17,548,444 of Georgia-Pacific Corp., 9.375% due 02-01-13, Sealed Air
Corp., 5.375% due 04-15-08, Ford Motor Credit Co., 7.375% due 10-28-09,
Federal National Mortgage Association., 5.000% thru 5.500% due 02-01-18
thru 10-25-31, MBNA Master Credit Card Trust, 6.650% due 08-15-11,
Golden State Tobacco Securitization Corp., 6.750% due 06-01-39, Delta
Air Lines, Inc., 10.000% due 06-01-08 and Targeted Return Index
Securities Trust, 6.539% due 08-15-08, 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, LLC
where Standard & Poor's ratings are not available.
** All or a portion of this security is on loan on June 30, 2003.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S.-dollar-denominated.
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.
ASSETS AND
LIABILITIES
June 30, 2003
(unaudited)
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes.
You'll also find
the net asset
value for each
common share.
ASSETS
Investments at value (cost $184,001,965) including
$16,792,791 of securities loaned $192,171,130
Cash 315
Receivable for investments sold 4,944,641
Dividends and interest receivable 2,855,063
Other assets 12,158
Total assets 199,983,307
LIABILITIES
Payable for investments purchased 19,791,914
Payable to affiliates
Management fee 262,710
Other 6,930
Other payables and accrued expenses 30,246
Total liabilities 20,091,800
NET ASSETS
Capital paid-in 167,181,210
Accumulated net realized gain on investments 4,507,474
Net unrealized appreciation of investments 8,169,165
Accumulated net investment income 33,658
Net assets $179,891,507
NET ASSET VALUE PER SHARE
Based on 8,040,948 common shares outstanding $22.37
See notes to
financial statements.
OPERATIONS
For the period ended
June 30, 2003
(unaudited) 1
This 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.
INVESTMENT INCOME
Interest (including security lending income of $9,129
and net of foreign withholding taxes of $3,718) $5,406,578
Dividends 485,242
Total investment income 5,891,820
EXPENSES
Investment management fee 534,350
Transfer agent fee 40,594
Custodian fee 32,806
Printing 27,385
Accounting and legal services fee 26,248
Auditing fee 16,715
Registration and filing fee 11,428
Trustees' fee 4,887
Miscellaneous 3,828
Legal fee 1,718
Interest expense 1,175
Total expenses 701,134
Net investment income 5,190,686
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 4,640,487
Change in net unrealized appreciation (depreciation)
of investments 4,927,924
Net realized and unrealized gain 9,568,411
Increase in net assets from operations $14,759,097
1 Semiannual period from 1-1-03 through 6-30-03.
See notes to
financial statements.
CHANGES IN
NET ASSETS
This 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 dif-
ference reflects
earnings less
expenses, any
investment gains
and losses,
distributions to
shareholders, if
any, and any
increase or
decrease due to
reinvestment of
distributions.
YEAR PERIOD
ENDED ENDED
12-31-02 6-30-03 1
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income $9,586,571 $5,190,686
Net realized gain 1,816,809 4,640,487
Change in net unrealized
appreciation (depreciation) 189,536 4,927,924
Increase in net assets resulting
from operations 11,592,916 14,759,097
Distributions to shareholders
From net investment income (9,716,328) (5,363,061)
From Fund share transactions 727,479 491,908
NET ASSETS
Beginning of period 167,399,496 170,003,563
End of period 2 $170,003,563 $179,891,507
1 Semiannual period from 1-1-03 through 6-30-03. Unaudited.
2 Includes accumulated net investment income of $206,033 and $33,658,
respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
PERIOD ENDED 12-31-98 12-31-99 12-31-00 12-31-01 1 12-31-02 6-30-03 2
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $21.70 $21.78 $20.11 $20.79 $20.98 $21.21
Net investment income 3 1.52 1.47 1.42 1.32 1.20 0.65
Net realized and unrealized
gain (loss) on investments 0.08 (1.67) 0.68 0.21 0.25 1.18
Total from
investment operations 1.60 (0.20) 2.10 1.53 1.45 1.83
Less distributions
From net investment income (1.52) (1.47) (1.42) (1.34) (1.22) (0.67)
Net asset value,
end of period $21.78 $20.11 $20.79 $20.98 $21.21 $22.37
Per share market value,
end of period $21.93 $16.56 $19.25 $19.04 $19.12 $20.90
Total return at
market value 4 (%) 6.66 (18.16) 25.75 5.96 6.89 12.91 5
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $169 $158 $165 $167 $170 $180
Ratio of expenses
to average net assets (%) 0.82 0.81 0.83 0.82 0.84 0.81 6
Ratio of net investment income
to average net assets (%) 6.92 6.98 6.97 6.20 5.74 5.98 6
Portfolio turnover (%) 239 183 247 300 314 128
1 As required, effective January 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies, as revised,
relating to the amortization of premiums and accretion of discounts on debt
securities. The effect of this change for the year ended December 31, 2001,
was to decrease net investment income per share by $0.02, increase net
realized and unrealized gain per share by $0.02, and, had the Fund not
amortized premiums on debt securities, the ratio of net investment income
to average net assets would have been 6.31%. Per share ratios and
supplemental data for periods prior to January 1, 2001, have not been
restated to reflect this change in presentation.
2 Semiannual period from 1-1-03 through 6-30-03. Unaudited.
3 Based on the average of the shares outstanding.
4 Assumes dividend reinvestment.
5 Not annualized.
6 Annualized.
See notes to
financial statements.
NOTES TO
STATEMENTS
Unaudited
NOTE A
Accounting policies
John Hancock Investors Trust (the "Fund") is a closed-end diversified
management investment 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, LLC (the
"Adviser"), a wholly owned subsidiary of The Berkeley Financial Group, LLC,
may participate in a joint repurchase agreement transaction. Aggregate cash
balances are invested in one or more large 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. Some securities may be purchased on
a "when-issued" or "forward delivery" basis, which means that the securities
will be delivered to the Fund at a future date, usually beyond the customary
settlement date.
Discount and premium on securities
The Fund accretes discount and amortizes premium from par value on
securities from either the date of issue or the date of purchase over the
life of the security.
Expenses
The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will
be allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and
the relative sizes of the funds.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the Fund
negotiated lender fees. These fees are included in interest income. The
loans are collateralized at all times with cash or securities with a market
value at least equal to the market value of the securities on loan. As with
other extensions of credit, the Fund may bear the risk of delay of the
loaned securities in recovery or even loss of rights in the collateral,
should the borrower of the securities fail financially. On June 30, 2003,
the Fund loaned securities having a market value of $16,792,791
collateralized by securities in the amount of $17,239,824.
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 that is distributed to
shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has $31,569 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent that such carryforward
is used by the Fund, no capital gain distributions will be made. The
entire amount of the loss carryforward expires December 31, 2008.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend date
or, in the case of some foreign securities, on the date thereafter when the
Fund identifies the dividend. Interest income on investment securities is
recorded on the accrual basis. The Fund may place a debt obligation on
non-accrual status and reduce related interest income by ceasing current
accruals and writing off interest receivables when the collection of
interest has become doubtful. Foreign income may be subject to foreign
withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment
income and net realized gains on the ex-dividend date. The Fund's net
investment income is declared and distributed quarterly.
Such distributions, on a tax basis, are determined in conformity with
income tax regulations, which may differ from accounting principles
generally accepted in the United States of America. Distributions in
excess of tax basis earnings and profits, if any, are reported in the
Fund's financial statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with the Adviser. Under
the investment management contract, the Fund pays a quarterly management
fee to the Adviser equivalent, on an annual basis, to the sum of: (a)
0.65% 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 daily 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. There were no
management fee reductions during the period ended June 30, 2003.
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 at an annual rate of approximately 0.03% of the average net
assets of the Fund.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors 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 investments as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C
Fund common share transactions
This listing illustrates the number of Fund's common shares reinvested,
the reclassification of capital accounts and the number of shares
outstanding at the beginning and end of the last two periods, along with
the corresponding dollar value. The Fund has 20 million common shares
authorized with no par value.
YEAR ENDED 12-31-02 YEAR ENDED 6-30-03 1
SHARES AMOUNT SHARES AMOUNT
Beginning of period 7,978,242 $165,640,253 8,015,867 $166,689,302
Distributions
reinvested 37,625 727,479 25,081 491,908
Reclassification of
capital accounts -- 321,570 -- --
End of period 8,015,867 $166,689,302 8,040,948 $167,181,210
1 Semiannual period from 1-1-03 through 6-30-03. Unaudited.
NOTE D
Investment transactions
Purchases and proceeds from sales or maturities of securities, other
than short-term securities and obligations of the U.S. government,
during the period ended June 30, 2003, aggregated $509,085,406 and
$188,987,223, respectively. Purchases and proceeds from sales or
maturities of obligations of the U.S. government aggregated $25,776,728
and $31,358,597, respectively, during the period ended June 30, 2003.
The cost of investments owned on June 30, 2003, including short-term
investments, for federal income tax purposes was $184,232,207. Gross
unrealized appreciation and depreciation of investments aggregated
$10,035,748 and $2,096,825, respectively, resulting in net unrealized
appreciation of $7,938,923. The difference between book basis and tax
basis net unrealized appreciation of investments is attributable
primarily to the tax deferral of losses on wash sales and amortization
of premiums and accretion of discounts on debt securities.
INVESTMENT OBJECTIVE AND POLICY
The Fund 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. The Fund's 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 also invest in repurchase
agreements. 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. The Fund may lend portfolio
securities not to exceed 33-1/3% of total assets.
FINANCIAL FUTURES CONTRACTS AND OPTIONS
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 may use options
contracts to manage its exposure to the stock market. 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.
DIVIDENDS AND DISTRIBUTIONS
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 shareholders elect to participate in the
Dividend Reinvestment Plan.
During the fiscal period ended June 30, 2003, the Fund paid to
shareholders dividends from net investment income totaling $0.6675 per
share. The dates of payment and the amounts per share are as follows:
INCOME
PAMENT DATE DIVIDEND
- -------------------------------
March 31, 2003 $0.3300
June 30, 2003 0.3375
DIVIDEND REINVESTMENT PLAN
The Fund offers its shareholders the opportunity to elect to receive
shares of the Fund in lieu of cash dividends. Any shareholder of record
of the Fund may elect to participate in the Automatic Dividend
Reinvestment Plan (the "Plan") and receive Fund's common shares in lieu
of all or a portion of the cash dividends. The Plan is available to all
shareholders without charge. Mellon Investor Services (the "Plan Agent")
will act as agent for participating shareholders.
Shareholders may join the Plan by notifying the Plan Agent by telephone, in
writing or by visiting the Plan Agent's Web site at www.melloninvestor.com
showing an election to reinvest all or a portion of dividend payments. If
received by the Plan Agent prior to 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 or nominee to determine whether and how
they may participate in the Plan.
The Board of Trustees of the Fund will declare dividends from net
investment income payable in cash or, in the case of shareholders
participating in the Plan, partially or entirely in the Fund's 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 the Fund. 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 four decimal
places, will be credited to shareholder's account. Such fractional
shares will be entitled to future dividends.
The shares issued to participating shareholders, including fractional
shares, will be held by the Plan Agent 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.
Participation in the Plan may be terminated at any time by contacting
the Plan Agent by telephone, in writing or by visiting the Plan Agent's
Web site, and such termination will be effective immediately. However,
notice of termination must be received 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 Plan Agent. A shareholder will receive a cash
payment for any fractional share held.
The reinvestment of dividends will not relieve participants of any federal,
state or local income tax which may be due with respect to such dividend.
Dividends reinvested in common 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 common 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, Mellon Bank, N.A. c/o Mellon Investor
Services at P.O. Box 3338, South Hackensack, NJ 07606-1938 (telephone
1-800-852-0218).
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning the Fund, 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:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Telephone: 1-800-852-0218
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
SHAREHOLDER MEETINGS
In November 2002, the Board of Trustees adopted several amendments to
the Fund's by-laws, including provisions relating to the calling of a
special meeting and requiring advance notice of shareholder proposals or
nominees for Trustee. The advance notice provisions in the by-laws
require shareholders to notify the Fund in writing of any proposal which
they intend to present at an annual meeting of shareholders, including
any nominations for Trustee, between 90 and 120 days prior to the first
anniversary of the mailing date of the notice from the prior year's
annual meeting of shareholders. The notification must be in the form
prescribed by the by-laws. The advance notice provisions provide the
Fund and its Trustees with the opportunity to thoughtfully consider and
address the matters proposed before the Fund prepares and mails its
proxy statement to shareholders. Other amendments set forth the
procedures that must be followed in order for a shareholder to call a
special meeting of shareholders. Please contact the Secretary of the
Fund for additional information about the advance notice requirements or
the other amendments to the by-laws.
On March 20, 2003, the Annual Meeting of the Fund was held to elect
eleven Trustees and to ratify the actions of the Trustees in selecting
independent auditors for the Fund. Proxies covering 6,919,966 shares of
beneficial interest were voted at the meeting.
The shareholders elected the following Trustees to serve until their
respective successors are duly elected and qualified, with the votes
tabulated as follow:
WITHHELD
FOR AUTHORITY
- ----------------------------------------------------------------------
Dennis S. Aronowitz 6,806,180 113,786
Richard P. Chapman, Jr 6,816,723 103,243
William Cosgrove 6,810,418 109,548
John M. DeCiccio 6,770,001 149,965
Richard Farrell 6,810,292 109,674
Maureen R. Ford 6,814,648 105,318
William F. Glavin 6,801,223 118,743
John A. Moore 6,809,036 110,930
Patti McGill Peterson 6,810,787 109,179
John W. Pratt 6,807,234 112,732
The shareholders also ratified the Trustees' selection of
PricewaterhouseCoopers LLP as the Fund's independent auditors for the fiscal
year ending December 31, 2003, with the votes tabulated as follows:
6,770,743 FOR, 45,600 AGAINST and 103,621 ABSTAINING.
FOR YOUR
INFORMATION
TRUSTEES
Dennis S. Aronowitz
Richard P. Chapman, Jr.
William J. Cosgrove
John M. DeCiccio
Richard A. Farrell
Maureen R. Ford
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt
*Members of the Audit Committee
OFFICERS
Maureen R. Ford
Chairman, President
and Chief Executive Officer
William L. Braman
Executive Vice President
and Chief Investment Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President
and Secretary
William H. King
Vice President and Treasurer
Thomas H. Connors
Vice President and
Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT AND REGISTRAR
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
STOCK SYMBOL
Listed New York Stock Exchange:
JHI
For shareholder assistance refer to page 25
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Customer service representatives 1-800-852-0218
Portfolio commentary 1-800-344-7054
24-hour automated information 1-800-843-0090
TDD Line 1-800-231-5469
The Fund's voting policies and procedures are available without charge,
upon request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site http://www.sec.gov
PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-852-0218
1-800-843-0090 EASI-Line
1-800-231-5469 (TDD)
www.jhfunds.com
P50SA 6/03
8/03
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
See attached Exhibit "Proxy Voting Policies and Procedures".
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's principal executive officer and principal financial officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Not applicable at this time.
(b)(1) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b)(2) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule
30a-2(b) under the Investment Company Act of 1940, are attached. The
certifications furnished pursuant to this paragraph are not deemed to be "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise
subject to the liability of that section. Such certifications are not deemed to
be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent that the Registrant
specifically incorporates them by reference.
(c) Proxy Voting Policies and Procedures
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By:
- -----------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: August 27, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:
- -----------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: August 27, 2003
By:
- -----------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: August 27, 2003