UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4173
John Hancock Investors Trust
(Exact name of registrant as specified in charter)
101 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Susan S. Newton, Secretary
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-375-1702
Date of fiscal year end: December 31
Date of reporting period: December 31, 2004
ITEM 1. REPORT TO SHAREHOLDERS.
JOHN HANCOCK
Investors Trust
12.31.2004
Annual Report
[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 James A. Shepherdson, Chief Executive Officer, flush left next
to first paragraph.]
CEO CORNER
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 20
Trustees & officers
page 35
For more information
page 37
Dear Fellow Shareholders,
The stock market advanced for the second straight year, largely on the
wings of a strong post-election rally that produced solid returns for
the major indexes in 2004. For much of the year, the market was fairly
dull, moving mostly sideways as investors worried about higher interest
rates, sky-rocketing oil prices, the tight presidential election and the
war in Iraq. With the election over and oil prices moderating, investors
felt more confident, and the broad Standard & Poor's 500 Index wound up
returning 10.88% for the year. The Dow Jones Industrial Average returned
5.40% and a late and strong rally in technology stocks helped the Nasdaq
Composite Index move from a negative stance in October to finish the
year with a 9.15% return. Despite the Federal Reserve's five hikes in
short-term interest rates, bonds still turned in positive results, with
the Lehman Brothers Aggregate Bond Index up 4.34%.
The way this year has played out in the financial markets serves as a
good reminder of why keeping a long-term perspective is such a critical
element of successful investing. Getting caught up in the day-to-day
twists and turns of the market -- and trying to act on them -- can wreak
havoc with your portfolio and derail progress toward meeting your
overall financial objectives.
Since no one can predict the market's moves, the best way to reach your
goals is to stay invested and stick to your plan. Investing should be a
marathon, not a sprint. Do not try to time the market, and make sure you
work with your investment professional to ensure that your portfolio
remains properly diversified to meet your long-term objectives. For
example, after several years of dominance, small-cap stocks and value
stocks could now represent higher percentages of your portfolio than you
may want. If you are comfortable with your financial plan, it becomes
easier to ride out the market's daily ups and downs. It could also
provide you with a greater chance of success over time.
Sincerely,
/S/ JAMES A. SHEPHERDSON
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of December 31, 2004. 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
investment risk by
investing in a
diversified portfolio
of debt securities.
Over the last twelve months
* Bonds rallied for the fifth straight calendar year despite solid economic
growth and rising inflation.
* Lower-quality corporate bonds and mortgage-backed securities posted the
best results, while Treasury bonds lagged.
* The Fund shifted to a more defensive position, with higher credit quality
and reduced interest rate sensitivity.
[Bar chart with heading "John Hancock Investors Trust." Under the heading
is a note that reads "Fund performance for the year ended December 31,
2004." The chart is scaled in increments of 10% with 0% at the bottom and
30% at the top. The first bar represents the fund's 6.52% Net asset value.
The second bar represents the fund's 21.60% Market value. A note below the
chart reads "The total returns for the Fund include the reinvestment of all
distributions. The performance data contained within this material
represents past performance, which does not guarantee future results."]
Top 10 issuers
10.5% Federal National Mortgage Association
9.1% Federal Home Loan Mortgage Corp.
7.6% United States Treasury
1.0% General Motors Acceptance Corp.
1.0% Midland Funding Corp. II
0.9% Global Signal Trust
0.9% Government National Mortgage Association
0.8% NOVA Chemicals Corp.
0.8% International Paper Co.
0.8% Grupo Televisa SA
As a percentage of net assets plus the value of preferred shares on
December 31, 2004.
1
BY BARRY H. EVANS, CFA, AND JEFFREY N. GIVEN, CFA, PORTFOLIO MANAGERS
MANAGERS'
REPORT
JOHN HANCOCK
Investors Trust
The broad U.S. bond market gained ground overall in 2004 -- its fifth
consecutive year of positive performance -- as solid gains in long-term
bonds overcame declining prices in shorter-term securities. The U.S.
economy, bolstered by improving job growth, expanded by approximately 4%
in 2004, up from 3% growth the previous year. Inflation, as measured by
the consumer price index, also picked up, increasing from 2% in 2003 to
3.5% in 2004. Although some of the higher inflation was the result of
record-high oil prices, many segments of the economy -- especially
housing and medical care -- also experienced noteworthy price increases.
In response, the Federal Reserve embarked on a series of interest rate
increases in the second half of 2004. The Fed raised short-term interest
rates five times between June and December, each time by a quarter
point. As a result, the federal funds rate rose from a 46-year low of 1%
to 2.25% by the end of the year. Yields on bonds maturing in five years
or less followed suit, but longer-term bond yields declined, reflecting
the bond market's confidence that the Fed's gradual rate increases will
keep inflation in check and the economy growing at a moderate pace.
"The broad U.S. bond market
gained ground overall in
2004 -- its fifth consecutive
year of positive performance..."
For the year, the broad Lehman Brothers U.S. Aggregate Bond Index
returned 4.34%. Every major sector of the bond market posted positive
returns, but lower-quality, higher-yielding corporate bonds fared the
best. The Lehman Brothers Corporate High-Yield Index returned 11.13% for
the year as investors looked to maximize yield in a low-interest-rate
environment. Mortgage-backed securities and investment-grade corporate
bonds also produced solid results, while Treasury and government agency
securities lagged.
Fund performance
For the year ended December 31, 2004, John Hancock Investors Trust
produced a total return of 6.52% at net asset value and 21.60% at market
value. The difference in the Fund's net asset value (NAV) performance
and its market performance stems from the fact
2
that the market share price is subject to the dynamics of secondary
market trading, which could cause it to trade at a discount or premium
to the Fund's NAV share price at any time. For comparison, the average
closed-end general bond fund returned 11.23% at net asset value,
according to Lipper, Inc., while the Lehman Brothers Government/Credit
Bond Index returned 4.19%.
[Photos of Barry Evans and Jeff Given, flush right at top of page.]
Playing defense
The main theme in the portfolio during the year was a shift toward a
more defensive position in anticipation of rising interest rates. Our
efforts to lower the portfolio's risk profile included trading up in
credit quality, reducing the portfolio's sensitivity to interest rates
and trimming our exposure to preferred stocks.
Unfortunately, as lower-quality bonds continued to outperform and
interest rates remained relatively stable, our more conservative
positioning caused the portfolio's return to lag its peer group average.
Most of the funds in the Lipper group owned substantially higher
positions in lower-quality bonds than the portfolio, and a number of
these funds also held foreign bonds, which benefited significantly from
the decline in the U.S. dollar. Despite the negative impact on relative
performance, we believe that taking some risk off the table was a
prudent strategy given the economic and market conditions.
"The main theme in the portfolio
during the year was a shift
toward a more defensive position
in anticipation of rising
interest rates."
Upgrading credit quality
A key part of our defensive strategy was reducing the portfolio's
overall credit risk. The outperformance of lower-quality corporate bonds
in recent years has elevated valuations in this segment of the market.
Although the portfolio still has a meaningful position in lower-rated
bonds, we selectively sold some of our below-investment-grade corporate
securities during the past year and replaced them with higher-quality
corporate bonds.
For example, we sold our holdings of Delta Air Lines and retailer Toys R
Us, two below-investment-grade credits that face significant challenges.
Delta managed to avert bankruptcy after gaining concessions from its
pilots, but we don't think the company is out of the woods yet. Toys R
Us is spinning off its popular Babies R Us franchise, leaving a
pure-play toy retailer that is struggling to
3
compete with the major discount stores. To replace these bonds, we added
solid investment-grade credits such as telecommunications giant
BellSouth, beer producer Foster's and financial services firms Morgan
Stanley and Wachovia.
[Table at top left-hand side of page entitled "Top five industry groups1."
The first listing is Government-U.S. agencies 21%, the second is Government
- U.S. 8%, the third is Electric utilities 7%, the fourth is
Telecommunication services 6%, and the fifth is Broadcasting & cable TV 6%.]
We also eliminated our exposure to tobacco-related bonds, including
Altria (the parent company of Philip Morris) and Golden State Tobacco
(bonds backed by California's share of the legal settlement between the
major tobacco companies and 46 states). We decided to exit these
positions because of the high degree of litigation risk associated with
these securities.
Winners and losers among corporate bonds
One of the best performers in the portfolio during the year was XM
Satellite Radio. The company's subscriber base continues to grow at a
stronger-than-expected rate, and more car makers are installing XM
products in their vehicles. In addition, we believe XM has better
technology than its competitors. Another strong contributor to
performance was Empresa Electrica Guacolda, an electric utility in
Chile. The dollar-denominated Empresa securities benefited from the
general outperformance of emerging-market bonds.
[Pie chart in middle of page with heading "Portfolio diversification1." The
chart is divided into four sections (from top to right): Corporate bonds 68%,
U.S. government & agencies 29%, Preferred stocks 2% and Foreign government
bonds 1%.]
On the downside, Ford Motor Credit detracted from portfolio performance.
Pension funding liabilities, disappointing product lineups and high cost
structures weighed on all of the domestic auto makers, increasing the
possibility of a credit-rating downgrade.
Reducing interest rate sensitivity
We began lowering the Fund's sensitivity to interest rates in early 2004
to protect the portfolio against the negative impact of rising
4
interest rates. We accomplished this by trading out of some longer-term
securities, which tend to suffer the biggest price declines when rates
rise, and adding shorter-term bonds to the portfolio. This positioning
helped neutralize the effects of leverage on the portfolio and reduced
overall portfolio volatility.
[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 Trump Casino
Holdings followed by an up arrow with the phrase "Successful restructuring
boosts bond values." The second listing is Beaver Valley Funding followed by
an up arrow with the phrase "Lease obligation bond benefited from improving
prospects at lessee First Energy." The third listing is Short-term bonds
followed by a down arrow with the phrase "Yields soared and prices fell due
to Fed rate hikes."]
Outlook
We expect interest rates to trend higher in 2005. The economy appears
poised for moderate but steady growth, and accelerating inflation
remains a threat. Therefore, we expect the Federal Reserve to continue
raising short-term rates, though at the same gradual pace as in 2004.
The futures market projects a federal funds rate -- currently at 2.25%
-- to be 3.5% by the end of 2005. We believe that interest rates will
rise across the board, with short-term rates rising more than long-term
rates in response to the Fed's moves.
"...we will continue to seek out oppor
tunities to upgrade the overall credit
quality of the portfolio."
Given this outlook, we plan to maintain our current defensive
positioning. Valuations among lower-quality, higher-yielding bonds are
stretched to historically high levels, so we will continue to seek out
opportunities to upgrade the overall credit quality of the portfolio. We
also intend to keep the interest rate sensitivity of the portfolio
relatively low, allowing it to hold up better in a rising interest rate
environment.
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.
1 As a percentage of the Fund's portfolio on December 31, 2004.
5
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
December 31, 2004
This schedule is divided into four main categories: bonds, preferred
stocks, U.S. government and agencies securities and short-term
investments. Bonds, preferred stocks and U.S. government and agencies
securities are further broken down by industry group. Short-term
investments, which represent the Fund's cash position, are listed last.
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Bonds 102.04% $176,688,558
(Cost $169,208,550)
Aerospace & Defense 0.69% 1,187,743
Jet Equipment Trust,
Equip Trust Ctf Ser 1995-B2 (B)(H)(S) 10.910% 08-15-14 D 550 2,750
Raytheon Co.,
Note 8.300 03-01-10 BBB- 1,000 1,184,993
Agricultural Products 0.53% 922,174
Corn Products International, Inc.,
Sr Note 8.450 08-15-09 BBB- 795 922,174
Airlines 1.65% 2,856,361
American Airlines, Inc.,
Pass Thru Ctf Ser 2001-2 (L) 7.858 10-01-11 A- 1,000 1,033,521
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1999-1A 6.545 02-02-19 A- 1,585 1,574,858
Northwest Airlines Corp.,
Pass Thru Ctf Ser 1996-1C 10.150 01-02-05 CCC+ 32 31,709
Pass Thru Ctf Ser 1996-1D 8.970 01-02-15 CCC+ 284 216,273
Apparel Retail 0.34% 590,488
Gap, Inc. (The),
Note (L) 10.300 12-15-08 BB+ 485 590,488
Asset Management & Custody Banks 0.88% 1,526,235
Rabobank Capital Fund II,
Perpetual Bond (5.260% to 12-31-13
then variable) (S) 5.260 12-29-49 AA 1,500 1,526,235
Auto Parts & Equipment 0.98% 1,700,379
American Axle & Manufacturing, Inc.,
Sr Note 5.250 02-11-14 BBB 500 480,059
TRW Automotive, Inc.,
Sr Note (L) 9.375 02-15-13 BB- 1,052 1,220,320
See notes to
financial statements.
6
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Automobile Manufacturers 0.15% $259,021
General Motors Corp.,
Sr Deb 8.375% 07-15-33 BBB- $250 259,021
Brewers 0.57% 994,193
Fosters Financial Corp.,
Note (S) 4.875 10-01-14 BBB+ 1,000 994,193
Broadcasting & Cable TV 8.58% 14,857,478
AT&T Broadband Corp.,
Gtd Note 8.375 03-15-13 BBB 980 1,208,434
British Sky Broadcasting Group Plc,
Gtd Sr Note (United Kingdom) 8.200 07-15-09 BBB- 905 1,046,100
Charter Communications Holdings II,
Sr Note 10.250 09-15-10 CCC- 2,000 2,120,000
Clear Channel Communications, Inc.,
Note 4.250 05-15-09 BBB- 1,000 989,880
Cox Enterprises, Inc.,
Note (S) 7.875 09-15-10 BBB 365 410,967
Grupo Televisa S.A.,
Note (Mexico) 8.000 09-13-11 BBB- 1,835 2,124,012
Innova S. de R.L.,
Note (Mexico) 9.375 09-19-13 B+ 1,500 1,706,250
Sr Note (Mexico) 12.875 04-01-07 B+ 37 37,641
Paxson Communications Corp.,
Gtd Sr Sub Note 10.750 07-15-08 CCC 1,000 1,050,000
Rogers Cablesystems Ltd.,
Sr Note Ser B (Canada) 10.000 03-15-05 BB+ 460 466,325
Shaw Communications, Inc.,
Sr Note (Canada) 8.250 04-11-10 BB+ 1,000 1,137,500
TCI Communications, Inc.,
Sr Deb 9.800 02-01-12 BBB 840 1,082,754
XM Satellite Radio, Inc.,
Sr Sec Note 12.000 06-15-10 CCC+ 622 734,738
Sr Sec Note, Step Coupon
(Zero to 12-31-05, then 14.000%) (O) Zero 12-31-09 CCC+ 728 742,877
Building Products 2.26% 3,914,625
D.R. Horton, Inc.,
Note 4.875 01-15-10 BB+ 750 746,250
KB Home,
Sr Note 5.750 02-01-14 BB+ 1,000 990,000
Pulte Homes, Inc.,
Sr Note (L) 6.250 02-15-13 BBB- 1,000 1,063,837
Toll Brothers, Inc.,
Gtd Sr Note 6.875 11-15-12 BBB- 1,000 1,114,538
See notes to
financial statements.
7
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Casinos & Gaming 3.13% $5,411,538
Chukchansi Economic Development Auth,
Sr Note (G)(S) 14.500% 06-15-09 CCC+ $1,000 1,260,000
Mohegan Tribal Gaming Auth,
Sr Sub Note 7.125 08-15-14 B+ 250 263,125
MTR Gaming Group, Inc.,
Gtd Sr Note Ser B 9.750 04-01-10 B+ 800 880,000
Premier Entertainment Biloxi,
1st Mtg Note 10.750 02-01-12 B- 25 27,313
Trump Casino Holdings,
LLC/Trump Casino Funding, Inc.,
Gtd Sr Sec 1st Mtg Note 12.625 03-15-10 CCC+ 500 541,250
Waterford Gaming LLC,
Sr Note (S) 8.625 09-15-12 B+ 1,355 1,449,850
Wynn Las Vegas LLC,
1st Mtg Note (S) 6.625 12-01-14 B+ 1,000 990,000
Commodity Chemicals 1.23% 2,136,050
Lyondell Chemical Co.,
Gtd Sec Note 9.500 12-15-08 B+ 1,010 1,095,850
RPM International, Inc.,
Sr Note 6.250 12-15-13 BBB 1,000 1,040,200
Consumer Finance 4.98% 8,629,703
Capital One Financial Corp.,
Sr Note 6.250 11-15-13 BBB- 1,000 1,075,188
CIT Group, Inc.,
Sr Note 5.000 02-13-14 A 720 718,818
Ford Motor Credit Co.,
Note 7.375 10-28-09 BBB- 1,925 2,076,436
General Motors Acceptance Corp.,
Note (L) 7.250 03-02-11 BBB- 2,450 2,565,057
Household Finance Corp.,
Note 6.375 10-15-11 A 615 679,204
HSBC Finance Corp.,
Sr Note 6.750 05-15-11 A 1,350 1,515,000
Department Stores 0.76% 1,311,025
Penney J.C. Co., Inc.,
Deb 7.650 08-15-16 BB+ 1,145 1,311,025
Diversified Banks 2.93% 5,066,298
Bank of New York,
Cap Security (S) 7.780 12-01-26 A- 620 675,630
Barclays Bank Plc,
Perpetual Bond (6.860% to 6-15-32
then variable) (United Kingdom) (S) 6.860 09-29-49 A+ 1,580 1,776,862
See notes to
financial statements.
8
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Diversified Banks (continued)
Mizuho Financial Group Cayman Ltd.,
Gtd Note (Cayman Islands) 8.375% 12-29-49 A2 $750 $821,925
Royal Bank of Scotland Group Plc,
Perpetual Bond (7.648% to 09-30-31
then variable) (United Kingdom) 7.648 08-29-49 A 630 766,977
Wachovia Corp.,
Sub Note 5.250 08-01-14 A- 1,000 1,024,904
Diversified Chemicals 1.91% 3,313,800
NOVA Chemicals Corp.,
Note (Canada) 7.400 04-01-09 BB+ 1,955 2,135,838
Potash Corp. of Saskatchewan, Inc.,
Note (Canada) 7.750 05-31-11 BBB+ 1,000 1,177,962
Diversified Commercial Services 1.97% 3,417,371
Brascan Corp.,
Note (Canada) 5.750 03-01-10 A- 1,750 1,851,600
Hutchison Whampoa International Ltd.,
Gtd Note (United Kingdom) (S) 6.500 02-13-13 A- 750 808,271
Sotheby's Holdings, Inc.,
Note 6.875 02-01-09 BB- 750 757,500
Electric Utilities 9.26% 16,039,240
AES Eastern Energy L.P.,
Pass Thru Ctf Ser 1999-A 9.000 01-02-17 BB+ 377 428,355
Beaver Valley Funding Corp.,
Sec Lease Obligation Bond 9.000 06-01-17 BB+ 915 1,082,161
BVPS II Funding Corp.,
Collateralized Lease Bond 8.890 06-01-17 BB+ 700 845,250
CalEnergy Co., Inc.,
Sr Bond 8.480 09-15-28 BBB- 525 690,559
El Paso Electric Co.,
1st Mtg Ser E 9.400 05-01-11 BBB 1,000 1,103,985
Empresa Electrica Guacolda S.A.,
Sr Sec Note (Chile) (S) 8.625 04-30-13 BBB- 850 970,703
Exelon Generation Co., LLC,
Note 5.350 01-15-14 A- 1,000 1,025,382
HQI Transelect Chile S.A.,
Sr Note (Chile) 7.875 04-15-11 A- 1,175 1,358,591
IPALCO Enterprises, Inc.,
Sr Sec Note 8.625 11-14-11 BB- 315 352,800
Midland Funding Corp. II,
Deb Ser B 13.250 07-23-06 BB- 2,220 2,448,871
See notes to
financial statements.
9
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Electric Utilities (continued)
MSW Energy Holdings, II LLC/MSW
Energy Finance Co. II, Inc.,
Sr Sec Note Ser B 7.375% 09-01-10 BB- $750 $787,500
PNPP II Funding Corp.,
Deb 9.120 05-30-16 BB+ 471 554,061
PPL Capital Funding,
Gtd Sr Note Ser A 4.330 03-01-09 BBB- 500 494,180
System Energy Resources, Inc.,
Sec Bond (S) 5.129 01-15-14 BBB 500 500,410
TransAlta Corp.,
Note (Canada) 5.750 12-15-13 BBB- 2,000 2,059,504
TXU Corp.,
Sec Bond 7.460 01-01-15 BBB 674 743,630
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 8.090 01-02-17 BBB- 536 593,298
Electrical Components & Equipment 0.94% 1,626,301
AMETEK, Inc.,
Sr Note 7.200 07-15-08 BBB 1,500 1,626,301
Environmental Services 0.65% 1,128,750
Allied Waste North America, Inc.,
Gtd Sr Sub Note Ser B 10.000 08-01-09 B+ 1,075 1,128,750
Food Retail 1.01% 1,748,586
Delhaize America, Inc.,
Gtd Note (L) 8.125 04-15-11 BB+ 1,500 1,748,586
Foreign Government 1.12% 1,937,775
Colombia, Republic of,
Note (Colombia) 10.000 01-23-12 BB 1,000 1,155,000
Mexican States, United,
Global Med Term Note Ser A (Mexico) 6.375 01-16-13 BBB- 735 782,775
Gas Utilities 1.97% 3,406,601
Duke Capital LLC,
Sr Note 8.000 10-01-19 BBB- 750 915,254
Kinder Morgan Energy Partners,
Sr Note 5.000 12-15-13 BBB+ 1,345 1,343,998
Magellan Midstream Partners, L.P.,
Note 6.450 06-01-14 BBB 590 638,030
NorAm Energy Corp.,
Deb 6.500 02-01-08 BBB 475 509,319
Health Care Facilities 0.67% 1,156,802
HCA, Inc.,
Note 8.750 09-01-10 BB+ 1,012 1,156,802
See notes to
financial statements.
10
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Health Care Services 0.84% $1,455,404
Wellpoint, Inc.,
Note (S) 5.000% 12-15-14 BBB+ $1,460 $1,455,404
Highways & Railtracks 1.58% 2,727,518
CSX Corp.,
Sr Note 4.875 11-01-09 BBB 2,000 2,039,862
TFM S.A. de C.V.,
Gtd Sr Disc Deb (Mexico) 11.750 06-15-09 B 675 687,656
Hotels, Resorts & Cruise Lines 2.77% 4,792,551
Harrah's Operating Co., Inc.,
Gtd Sr Note 8.000 02-01-11 BBB- 735 853,672
Gtd Sr Note 5.500 07-01-10 BBB- 720 745,290
Hyatt Equities LLC,
Note (S) 6.875 06-15-07 BBB 1,050 1,104,745
Meditrust,
Note 7.000 08-15-07 BB- 1,700 1,795,625
Starwood Hotels & Resorts Worldwide, Inc.,
Gtd Sr Note 7.375 05-01-07 BB+ 275 293,219
Industrial Conglomerates 1.05% 1,824,804
Bombardier, Inc.,
Note (Canada) (S) 6.750 05-01-12 BB 500 458,750
Vedanta Resources Plc,
Sr Note (United Kingdom) (S) 6.625 02-22-10 BB 760 769,054
Waste Services, Inc.,
Sr Sub Note (L) (S) 9.500 04-15-14 CCC 600 597,000
Industrial Machinery 1.81% 3,125,235
Kennametal, Inc.,
Sr Note 7.200 06-15-12 BBB 1,385 1,539,060
Manitowoc Co., Inc., (The)
Sr Note 7.125 11-01-13 B+ 500 541,250
Trinity Industries Leasing Co.,
Pass Thru Ctf (S) 7.755 02-15-09 Ba1 980 1,044,925
Investment Banking & Brokerage 0.74% 1,289,647
Citigroup, Inc.,
Sub Note 6.000 10-31-33 A+ 540 558,841
Morgan Stanley,
Sub Note 4.750 04-01-14 A 750 730,806
IT Consulting & Other Services 0.86% 1,484,059
NCR Corp.,
Note 7.125 06-15-09 BBB- 375 414,059
Unisys Corp.,
Sr Note 6.875 03-15-10 BB+ 1,000 1,070,000
See notes to
financial statements.
11
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Leisure Facilities 0.46% $798,875
Cinemark USA, Inc.,
Sr Sub Note 9.000% 02-01-13 B- $700 798,875
Leisure Products 0.78% 1,356,113
Brunswick Corp.,
Note 5.000 06-01-11 BBB+ 1,000 1,027,613
K2 Corp.,
Sr Note (S) 7.375 07-01-14 BB 300 328,500
Metal & Glass Containers 1.27% 2,197,500
BWAY Corp.,
Sr Sub Note 10.000 10-15-10 B- 500 520,000
Owens-Brockway Glass Container, Inc.,
Gtd Sr Sec Note 8.750 11-15-12 BB- 1,000 1,127,500
Gtd Sr Sec Note 8.250 05-15-13 B 500 550,000
Multi-Line Insurance 0.63% 1,085,974
Assurant, Inc.,
Note 5.625 02-15-14 BBB+ 490 506,047
Massachusetts Mutual Life Insurance Co.,
Surplus Note (S) 7.625 11-15-23 AA 470 579,927
Multi-Media 1.17% 2,020,736
News America Holdings, Inc.,
Gtd Sr Deb 8.250 08-10-18 BBB- 510 632,354
Time Warner, Inc.,
Deb 9.125 01-15-13 BBB+ 1,080 1,388,382
Office Services & Supplies 1.51% 2,612,313
Office Depot, Inc.,
Sr Note 6.250 08-15-13 BBB- 1,500 1,600,581
Steelcase, Inc.,
Sr Note 6.375 11-15-06 BBB- 980 1,011,732
Oil & Gas Exploration & Production 5.45% 9,443,834
Alberta Energy Co. Ltd.,
Note (Canada) 8.125 09-15-30 A- 685 888,100
Gazprom,
Loan Part Note (Russia) (L)(S) 9.625 03-01-13 BB- 1,000 1,180,000
Grant Prideco Escrow Corp.,
Sr Note Ser B 9.000 12-15-09 BB- 500 553,750
Occidental Petroleum Corp.,
Sr Deb 10.125 09-15-09 BBB+ 1,102 1,360,274
Pemex Project Funding Master Trust,
Gtd Note (Mexico) 9.125 10-13-10 BBB- 1,065 1,276,935
Plains Exploration & Production Co.,
Sr Note (L) 7.125 06-15-14 BB- 500 545,000
See notes to
financial statements.
12
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Oil & Gas Exploration & Production (continued)
Salton Sea Funding Corp.,
Sr Sec Note Ser C 7.840% 05-30-10 BB+ $1,760 $1,908,901
TEPPCO Partners, L.P.,
Gtd Sr Note 7.625 02-15-12 BBB 1,500 1,730,874
Oil & Gas Refining & Marketing 0.58% 1,008,870
Enterprise Products Operations L.P.,
Sr Note (S) 5.600 10-15-14 BB+ 1,000 1,008,870
Other Diversified Financial Services 1.27% 2,192,857
Glencore Funding LLC,
Gtd Note (S) 6.000 04-15-14 BBB 1,365 1,320,607
Humpuss Funding Corp.,
Note (S) 7.720 12-15-09 B2 204 192,145
St. George Funding Co.,
Perpetual Bond (8.485% to 06-30-17
then variable) (Australia) (S) 8.485 12-31-49 BBB+ 595 680,105
Paper Packaging 0.80% 1,391,125
Stone Container Corp.,
Sr Note 9.750 02-01-11 B 275 301,125
Sr Note 8.375 07-01-12 B 1,000 1,090,000
Paper Products 3.23% 5,599,794
Abitibi-Consolidated Co.,
Gtd Sr Note (Canada) 6.950 12-15-06 BB 2,000 2,075,000
International Paper Co.,
Note 5.850 10-30-12 BBB 2,000 2,131,044
MDP Acquisitions Plc,
Sr Note (Ireland) 9.625 10-01-12 B 1,250 1,393,750
Pharmaceuticals 1.90% 3,292,891
Medco Health Solutions, Inc.,
Sr Note (L) 7.250 08-15-13 BBB 1,550 1,733,906
Wyeth,
Note 5.500 03-15-13 A 1,500 1,558,985
Property & Casualty Insurance 0.59% 1,025,196
Ohio Casualty Corp.,
Note 7.300 06-15-14 BB 750 807,147
URC Holdings Corp.,
Sr Note (S) 7.875 06-30-06 AA- 205 218,049
Publishing 0.26% 450,628
Dex Media West,
Sr Sub Note 9.875 08-15-13 B 391 450,628
See notes to
financial statements.
13
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Real Estate Investment Trusts 1.45% $2,499,938
Healthcare Realty Trust, Inc.,
Sr Note 8.125% 05-01-11 BBB- $165 192,212
iStar Financial, Inc.,
Sr Note 7.000 03-15-08 BBB- 785 845,292
ProLogis Trust,
Sr Note 7.050 07-15-06 BBB+ 490 514,887
TriNet Corporate Realty Trust, Inc.,
Sr Note 7.700 07-15-17 BB+ 600 691,922
Ventas Realty L.P.,
Sr Note (S) 6.625 10-15-14 BB 250 255,625
Real Estate Management & Development 0.79% 1,374,262
Post Apartment Homes,
Sr Note 5.125 10-12-11 BBB 830 831,297
Socgen Real Estate Co. LLC,
Perpetual Bond Ser A (7.640% to
09-30-07 then variable) (S) 7.640 12-29-49 A 495 542,965
Regional Banks 0.95% 1,644,399
Greater Bay Bancorp,
Sr Note Ser B 5.250 03-31-08 BBB- 540 554,031
NB Capital Trust IV,
Gtd Cap Security 8.250 04-15-27 A- 980 1,090,368
Telecommunication Services 8.94% 15,476,171
AT&T Corp.,
Sr Note 9.050 11-15-11 BB+ 1,740 2,003,175
BellSouth Corp.,
Bond 5.200 09-15-14 A 350 356,728
Deb 6.300 12-15-15 A 1,109 1,206,269
Deutsche Telekom International Finance B.V.,
Bond (Coupon rate step up/down
on rating) (Netherlands) 8.500 06-15-10 BBB+ 950 1,131,804
France Telecom S.A.,
Note (France) 8.500 03-01-11 BBB+ 1,150 1,371,838
Qwest Capital Funding, Inc.,
Gtd Note (L) 7.000 08-03-09 B 1,700 1,678,750
SBC Communications, Inc.,
Note 5.100 09-15-14 A 830 837,714
Sprint Capital Corp.,
Gtd Sr Bond 7.625 01-30-11 BBB- 1,000 1,161,039
Note 6.875 11-15-28 BBB- 820 897,725
Telecom Italia Capital,
Gtd Note (Luxembourg) (S) 4.950 09-30-14 BBB+ 1,500 1,469,609
See notes to
financial statements.
14
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Telecommunication Services (continued)
Telefonos de Mexico S.A. de C.V.,
Note (Mexico) 4.500% 11-19-08 BBB- $1,750 $1,761,662
Telus Corp.,
Note (Canada) 8.000 06-01-11 BBB 1,350 1,599,858
Telecommunications Equipment 0.84% 1,451,491
Corning, Inc.,
Med Term Note 8.300 04-04-25 BB+ 1,150 1,210,266
Note 6.300 03-01-09 BB+ 230 241,225
Thrifts & Mortgage Finance 6.37% 11,030,215
Ameriquest Mortgage Securities, Inc.,
Pass Thru Ctf Ser 2003-IA1 Class A-4 4.965 11-25-33 AAA 2,000 2,031,159
Bear Stearns Commercial Mortgage
Securities, Inc.,
Commercial Sub Bond Ser 2004-ESA
Class C (S) 4.937 05-14-16 AA 1,000 1,022,472
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 8.100 08-15-25 AAA 211 224,917
Countrywide Alternative Loan Trust,
Mtg Asset Backed Pass Thru Ctf
Ser 2004-24CB 6.000 11-25-34 AAA 1,273 1,308,256
Credit-Based Asset Servicing and
Securitization LLC,
Mtg Asset Backed Ctf
Ser 2004-CB4 Class A3 4.632 05-25-35 AAA 1,000 1,013,276
Deutsche Mortgage & Asset
Receiving Corp.,
Commercial Mtg Pass-Thru Ctf
Ser 1998-C1 Class C 6.861 06-15-31 A2 400 433,692
DLJ Mortgage Acceptance Corp.,
Commercial Mortgage Pass Thru
Ctf Ser 1996-CF1 Class B1 (S) 8.354 03-13-28 A 1,465 1,537,693
Global Signal Trust,
Sub Bond Ser 2004-1A Class D (S) 5.098 01-15-34 BBB 2,000 2,003,440
Sub Bond Ser 2004-2A Class D (S) 5.093 12-15-14 Baa2 385 382,955
MBNA Master Credit Card Trust,
Sub Bond Ser 1998-E Class C (S) 6.600 09-15-10 BBB 1,000 1,072,355
Tobacco 0.61% 1,050,000
Commonwealth Brands, Inc.,
Sr Sec Sub Note (G)(S) 10.625 09-01-08 B 1,000 1,050,000
Trucking 0.33% 569,370
CNF, Inc.,
Sr Deb Ser B 6.700 05-01-34 BBB- 535 569,370
See notes to
financial statements.
15
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Wireless Telecommunication Service 3.05% $5,278,251
America Movil S.A. de C.V.,
Gtd Note (Mexico) (S) 5.750% 01-15-15 BBB- $1,225 1,222,206
AT&T Wireless Services , Inc.,
Sr Note 8.125 05-01-12 A 1,475 1,783,045
Mobile Telesystems Finance S.A.,
Gtd Sr Note (Luxembourg) (S) 9.750 01-30-08 BB- 350 369,250
Nextel Communications, Inc.,
Sr Note 7.375 08-01-15 BB 1,250 1,375,000
Rogers Wireless, Inc.
Sr Sub Note (Canada) (S) 8.000 12-15-12 B+ 500 528,750
Credit
Issuer, description rating (A) Shares Value
Preferred stocks 2.43% $4,204,023
(Cost $4,081,298)
Agricultural Products 0.59% 1,017,188
Ocean Spray Cranberries, Inc., 6.25%, Ser A (S) BB+ 12,500 1,017,188
Diversified Banks 0.61% 1,046,835
Abbey National Plc, 7.375% (United Kingdom) A- 38,700 1,046,835
Electric Utilities 0.63% 1,096,600
Ameren Corp., 9.75%, Conv BBB+ 20,000 575,200
DTE Energy Co., 8.75%, Conv BBB 20,000 521,400
Gas Utilities 0.60% 1,043,400
KeySpan Corp., 8.75%, Conv A 20,000 1,043,400
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
U.S. government and agencies securities 42.66% $73,867,687
(Cost $73,486,829)
Government U.S. 11.36% 19,675,398
United States Treasury,
Bond (L) 9.125% 05-15-18 AAA $555 807,221
Bond (L) 5.375 02-15-31 AAA 2,725 2,946,619
Note (L) 4.250 11-15-14 AAA 15,880 15,921,558
Government U.S. Agency 31.30% 54,192,289
Federal Home Loan Mortgage Corp.,
15 Yr Pass Thru Ctf 4.500 08-01-19 AAA 968 965,389
15 Yr Pass Thru Ctf 4.500 11-01-19 AAA 1,194 1,191,157
20 Yr Pass Thru Ctf 11.250 01-01-16 AAA 46 50,280
See notes to
financial statements.
16
FINANCIAL STATEMENTS
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Government U.S. Agency (continued)
30 Yr Pass Thru Ctf 6.000% 08-01-34 AAA $19,822 $20,487,324
30 Yr Pass Thru Ctf 6.000 09-01-34 AAA 777 802,565
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 7.500 02-01-08 AAA 18 18,731
15 Yr Pass Thru Ctf 7.000 09-01-10 AAA 52 55,077
15 Yr Pass Thru Ctf 7.000 10-01-12 AAA 21 22,777
15 Yr Pass Thru Ctf 7.000 02-01-16 AAA 1,465 1,553,542
15 Yr Pass Thru Ctf 7.000 04-01-17 AAA 71 75,089
15 Yr Pass Thru Ctf 4.500 10-01-19 AAA 1,228 1,223,666
30 Yr Pass Thru Ctf 6.500 11-01-34 AAA 993 1,041,785
30 Yr Pass Thru Ctf 6.000 12-01-33 AAA 6,647 6,875,959
30 Yr Pass Thru Ctf 6.000 01-01-34 AAA 8,978 9,287,455
30 Yr Pass Thru Ctf 6.000 08-01-34 AAA 4,196 4,340,854
30 Yr Pass Thru Ctf 5.500 04-01-33 AAA 22 22,759
30 Yr Pass Thru Ctf 5.500 05-01-34 AAA 1,165 1,183,867
CMO REMIC 2003-17-QT 5.000 08-25-27 AAA 1,595 1,614,007
Financing Corp.,
Bond 9.400 02-08-18 AAA 785 1,124,732
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 10.000 11-15-20 AAA 11 11,731
30 Yr Pass Thru Ctf 9.500 11-15-19 AAA 8 8,874
30 Yr Pass Thru Ctf 9.500 01-15-21 AAA 11 12,557
30 Yr Pass Thru Ctf 9.500 02-15-25 AAA 13 14,831
30 Yr Pass Thru Ctf 6.500 06-15-34 AAA 2,095 2,207,281
Interest Par value
Issuer, description, maturity date rate (000) Value
Short-term investments 0.51% $883,000
(Cost $883,000)
Joint Repurchase Agreement 0.51% 883,000
Investment in a joint repurchase
agreement transaction with
Morgan Stanley -- Dated 12-31-04,
due 01-03-05 (secured by U.S.
Treasury Inflation Indexed Bond
3.875% due 04-15-29) 1.600% $883,000 883,000
Total investments 147.64% $255,643,268
Other assets and liabilities, net (47.64%) ($82,485,016)
Total net assets 100.00% $173,158,252
See notes to
financial statements.
17
FINANCIAL STATEMENTS
Notes to Schedule of Investments
(A) Credit ratings are unaudited and are rated by Moody's Investors Service where Standard & Poor's ratings are
not available, unless indicated otherwise.
(B) This security is fair valued in good faith under procedures established by the Board of Trustees.
(G) Security rated internally by John Hancock Advisers, LLC.
(H) Non-income-producing issuer filed for protection under the Federal Bankruptcy Code or is in default of
interest payment.
(L) All or a portion of this security is on loan as of December 31, 2004.
(O) Cash interest will be paid on this obligation at the stated rate beginning on the stated date.
(S) 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 $34,778,460 or 20.08% of the Fund's net assets as of
December 31, 2004.
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.
18
FINANCIAL STATEMENTS
PORTFOLIO
CONCENTRATION
December 31, 2004
(unaudited)
This table shows the
Fund's investments,
aggregated by
various industries.
Industry distribution Value as a percentage of Fund's total investments
------------------------------------------------------------------------------
Aerospace & defense 0.47%
Agricultural products 0.76
Airlines 1.12
Apparel retail 0.23
Asset management & custody banks 0.60
Auto parts & equipment 0.67
Automobile manufacturers 0.10
Brewers 0.39
Broadcasting & cable TV 5.81
Building products 1.53
Casinos & gaming 2.12
Commodity chemicals 0.84
Consumer finance 3.38
Department stores 0.51
Diversified banks 2.39
Diversified chemicals 1.30
Diversified commercial services 1.34
Electric utilities 6.70
Electrical components & equipment 0.64
Environmental services 0.44
Food retail 0.68
Foreign government 0.76
Gas utilities 1.74
Government U.S. 7.70
Government U.S. agency 21.20
Health care facilities 0.45
Health care services 0.57
Highways & railtracks 1.07
Hotels, resorts & cruise lines 1.88
Industrial conglomerates 0.71
Industrial machinery 1.22
Investment banking & brokerage 0.50
IT consulting & other services 0.58
Leisure facilities 0.31
Leisure products 0.53
Metal & glass containers 0.86
Multi-line insurance 0.42
Multi-media 0.79
Office services & supplies 1.02
Oil & gas exploration & production 3.69
Oil & gas refining & marketing 0.39
Other diversified financial services 0.86
Paper packaging 0.54
Paper products 2.19
Pharmaceuticals 1.29
Property and casualty insurance 0.40
Publishing 0.18
Real estate investment trusts 0.98
Real estate management & development 0.54
Regional banks 0.64
Telecommunication services 6.05
Telecommunications equipment 0.57
Thrifts & mortgage finance 4.31
Tobacco 0.41
Trucking 0.22
Wireless telecommunication service 2.06
Short-term investments 0.35
Total investments 100.00%
See notes to
financial statements.
19
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
December 31, 2004
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 $247,659,677) including
$27,507,327 of securities loaned $255,643,268
Cash 162
Cash segregated for futures contracts 501,250
Receivable for shares sold 311,779
Interest receivable 3,376,998
Other assets 15,013
Total assets 259,848,470
Liabilities
Payable for futures variation margin 187,888
Payable to affiliates
Management fees 354,698
Other 7,945
Other payable and accrued expenses 124,033
Total liabilities 674,564
Auction Preferred Shares (APS) Series A, at value, unlimited
number of shares of beneficial interest authorized with
no par value, 1,720 shares issued, liquidation preference
of $25,000 per share 43,007,827
APS Series B, at value, unlimited number of shares of
beneficial interest authorized with no par value,
1,720 shares issued, liquidation preference
of $25,000 per share 43,007,827
Net assets
Common shares capital paid-in 167,750,954
Accumulated net realized loss on investments, financial
futures contracts and options (2,477,713)
Net unrealized appreciation of investments and financial
futures contracts 7,850,814
Accumulated net investment income 34,197
Net assets applicable to common shares $173,158,252
Net asset value per common share
Based on 8,160,880 common shares outstanding --
20 million shares authorized with no par value $21.22
See notes to
financial statements.
20
FINANCIAL STATEMENTS
OPERATIONS
For the year ended
December 31, 2004
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 $15,414,916
Dividends 441,014
Securities lending 51,737
Total investment income 15,907,667
Expenses
Investment management fees 1,369,752
APS auction fees 236,294
Custodian fees 76,389
Transfer agent fees 71,283
Accounting and legal services fees 68,035
Printing 54,155
Professional fees 44,842
Miscellaneous 43,512
Registration and filing fees 23,926
Trustees' fees 14,783
Interest 3,128
Security lending fees 1,643
Total expenses 2,007,742
Net investment income 13,899,925
Realized and unrealized gain (loss)
Net realized gain (loss) on
Investments 953,171
Financial futures contracts (2,093,220)
Options (31,600)
Change in net unrealized appreciation (depreciation) of
Investments (420,724)
Financial futures contracts (171,125)
Net realized and unrealized loss (1,763,498)
Distributions to APS Series A (652,357)
Distributions to APS Series B (652,774)
Increase in net assets from operations $10,831,296
See notes to
financial statements.
21
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in Net
Assets show how
the value of the
Fund's net assets
has changed
during the last
two periods. The
difference reflects
earnings less
expenses, any
investment
gains and losses,
distributions, if
any, paid to
shareholders and
the net of Fund
share transactions.
Year Year
ended ended
12-31-03 12-31-04
Increase in net assets
From operations
Net investment income $10,991,576 $13,899,925
Net realized gain (loss) 4,125,672 (1,171,649)
Change in net unrealized
appreciation (depreciation) 5,201,422 (591,849)
Distributions to APS Series A and B 1 (164,641) (1,305,131)
Increase in net assets resulting
from operations 20,154,029 10,831,296
Distributions to common shareholders
From net investment income (11,408,065) (13,527,084)
From net realized gains (4,815,418) --
(16,223,483) (13,527,084)
From Fund share transactions 663,868 1,256,063
Net assets
Beginning of period 170,003,563 174,597,977
End of period 2 $174,597,977 $173,158,252
1 APS Series A and B were issued on 11-4-03.
2 Includes accumulated (distributions in excess of) net investment
income of ($9,826) and $34,197, respectively.
See notes to
financial statements.
22
FINANCIAL HIGHLIGHTS
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 12-31-00 1 12-31-01 1,2 12-31-02 1 12-31-03 12-31-04
Per share operating performance
Net asset value,
beginning of period $20.11 $20.79 $20.98 $21.21 $21.55
Net investment income 3 1.42 1.32 1.20 1.37 1.71
Net realized and unrealized
gain (loss) on investments 0.68 0.21 0.25 1.14 (0.21)
Distributions to APS Series A and B 4 -- -- -- (0.02) (0.16)
Total from
investment operations 2.10 1.53 1.45 2.49 1.34
Less distributions
to common shareholders
From net investment income (1.42) (1.34) (1.22) (1.42) (1.67)
From net realized gains -- -- -- (0.60) --
(1.42) (1.34) (1.22) (2.02) (1.67)
Capital charges
Offering costs and underwriting
discounts related to APS -- -- -- (0.13) --
Net asset value, end of period $20.79 $20.98 $21.21 $21.55 $21.22
Per share market value,
end of period $19.25 $19.04 $19.12 $19.98 $22.46
Total return at market value 5 (%) 25.75 5.96 6.89 15.29 21.60
Ratios and supplemental data
Net assets applicable to common
shares, end of period (in millions) $165 $167 $170 $175 $173
Ratio of expenses
to average net assets (%) 0.83 0.82 0.84 0.88 6 1.16 6
Ratio of net investment income
to average net assets (%) 6.97 6.20 5.74 6.25 7 8.03 7
Portfolio turnover (%) 247 300 314 245 128
Senior securities
Total APS Series A outstanding (in millions) -- -- -- $43 $43
Total APS Series B outstanding (in millions) -- -- -- $43 $43
Involuntary liquidation preference APS
Series A per unit (in thousands) -- -- -- $25 $25
Involuntary liquidation preference APS
Series B per unit (in thousands) -- -- -- $25 $25
Average market value per unit
(in thousands) -- -- -- $25 $25
Asset coverage per unit 8 -- -- -- $74,836 $74,713
See notes to
financial statements.
23
FINANCIAL HIGHLIGHTS
Notes to Financial Highlights
1 Audited by previous auditor.
2 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 on per share amounts 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 made these changes to amortization and accretion, 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.
3 Based on the average shares outstanding.
4 APS Series A and B were issued on 11-4-03.
5 Assumes dividend reinvestment.
6 Ratios calculated on the basis of expenses relative to the average net assets
of common shares. Without the exclusion of preferred shares, the ratios of
expenses would have been 0.82% and 0.77% for the years ended 12-31-03 and
12-31-04, respectively.
7 Ratios calculated on the basis of net investment income relative to the
average net assets of common shares. Without the exclusion of preferred
shares, the ratios of net investment income would have been 5.81% and 5.36%
for the years ended 12-31-03 and 12-31-04, respectively.
8 Calculated by subtracting the Fund's total liabilities from the Fund's total
assets and dividing that amount by the number of APS outstanding, as of the
applicable 1940 Act Evaluation Date, which may differ from the financial
reporting date.
See notes to
financial statements.
24
NOTES TO
STATEMENTS
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 which have a
remaining maturity of 60 days or less may be valued at amortized cost,
which approximates market value. The Fund determines the net asset value
of the common shares each business day.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Ex change
Commission, the Fund, along with other registered investment companies
having a man age ment contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of John Hancock Financial
Services, Inc., 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 rea l ized 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 deliv ery" basis, which means
that the securities will be delivered to the Fund at a future date,
usually beyond 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.
Options
The Fund may enter into option contracts. Listed options will be valued
at the last quoted sales price on the exchange on which they are
primarily traded.
25
Over-the-counter options are valued at the mean between the last bid and
asked prices. Upon the writing of a call or put op tion, an amount equal
to the premium received by the Fund will be included in the Fund's
Statement of Assets and Liabilities as an asset and corresponding
liability. The amount of the liability will be subsequently marked to
market to reflect the current market value of the written option.
The Fund may use option contracts to manage its exposure to the price
volatility of financial instruments. Writing puts and buying calls will
tend to increase the Fund's exposure to the underlying instrument, and
buying puts and writing calls will 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 will reflect 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
contract's 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 and liquidity risks
in over-the-counter option contracts, the Fund continuously monitors 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
Statement of Assets and Liabilities. The Fund had no written option
transactions during the year ended December 31, 2004.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the
Fund negotiated lender fees. 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 December 31, 2004, the Fund loaned
securities having a market value of $27,507,327 collateralized by
securities in the amount of $28,224,488. Securities lending expenses are
paid by the Fund to the Adviser.
Financial futures contracts
The Fund may buy and sell financial futures contracts. 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's instruments. At the time the Fund
enters into financial futures contracts, it is required to deposit with
its custodian a specified amount of cash or U.S. government securities,
known as "initial margin," equal to a certain percentage of the value of
the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange on which it trades. Subsequent
payments to and from the broker, known as "variation margin," 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 financial futures contracts include the possibility
that there may be an illiquid market and/or that a change in the value
of the contracts may not correlate
26
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 financial futures positions because of position limits or
limits on daily price fluctuation 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 financial
futures contracts. On December 31, 2004, the Fund had deposited $501,250
in a segregated account to cover margin requirements on open financial
futures contracts.
The Fund had the following financial futures contracts open on
December 31, 2004:
NUMBER OF APPRECIATION
OPEN CONTRACTS CONTRACTS POSITION EXPIRATION (DEPRECIATION)
------------------------------------------------------------------------------
U.S. 20-Year Treasury Bond 100 Short March 05 ($111,638)
U.S. 10-Year Treasury Note 375 Short March 05 47,180
U.S. 10-Year Treasury Note 50 Short March 05 (68,319)
------------------------------------------------------------------------------
($132,777)
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 $1,668,465 of a capital
loss carryforward, 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 distribution will be made. The
entire amount of the loss carryforward expires December 31, 2012.
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, if any, on the ex-dividend date. During
the year ended Decem ber 31, 2003, the tax char ac ter of distributions
paid was as follows: ordinary income $14,361,583 and long-term capital
gains $2,026,541. For the year ended Decem ber 31, 2004, the tax
character of distributions paid was as follows: ordinary income
$14,832,215. As of December 31, 2004, the components of distributable
earnings on a tax basis in cluded $60,386 of undistributed ordinary in
come.
Such distributions and distributable earnings, 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
27
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)
0.650% of the first $150,000,000 of the Fund's average daily net asset
value and the value attributable to the Auction Preferred Shares
(collectively, "managed assets"), (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 managed assets in excess of $300,000,000.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period amounted to $68,035. The Fund also paid the Adviser the amount of
$784 for certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and officer of the Adviser, as
well as affiliated Trustee of the Fund, and is compensated by the
Adviser. 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 Compen sation 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
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
Note C
Fund share transactions
This listing illustrates the number of Fund common shares distributions
reinvested, offering costs and underwriting discount charged to capital
paid-in, reclassification of capital accounts and the number of common
shares outstanding at the beginning and end of the last two periods,
along with the corresponding dollar value.
Year ended 12-31-03 Year ended 12-31-04
Shares Amount Shares Amount
Beginning of period 8,015,867 $166,689,302 8,102,295 $167,056,970
Distributions reinvested 86,428 1,731,668 58,585 1,226,299
Offering costs and
underwriting discount
related to Auction
Preferred Shares -- (1,067,800) -- 29,764
Reclassification of
capital accounts -- (296,200) -- (562,079)
End of period 8,102,295 $167,056,970 8,160,880 $167,750,954
Auction preferred shares
The Fund issued a total of 3,440 Auction Preferred Shares: 1,720 shares
of Series A Auction Preferred Shares and 1,720 shares of Series B
Auction Preferred Shares (collectively, the "Preferred Shares" or "APS")
on November 4, 2003 in a public offering. The offering costs of $178,036
and the underwriting discount of $860,000 have been charged to capital
paid-in of common shares.
28
Dividends on the APS, which accrue daily, are cumulative at a rate that
was established at the offering of the APS and has been reset every 7
days thereafter by an auction. Dividend rates on APS Series A ranged
from 1.00% to 2.65% and Series B from 1.00% to 2.67% during the year
ended December 31, 2004. Accrued dividends on APS are included in the
value of APS on the Fund's Statement of Assets and Liabilities.
The APS are redeemable at the option of the Fund, at a redemption price
equal to $25,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The APS are also subject to mandatory redemption
at a redemption price equal to $25,000 per share, plus accumulated and
unpaid dividends, if the Fund is in default on its asset coverage
requirements with respect to the APS as defined in the Fund's by-laws.
If the dividends on the APS shall remain unpaid in an amount equal to
two full years' dividends, the holders of the APS, as a class, have the
right to elect a majority of the Board of Trustees. In general, the
holders of the APS and the common shareholders have equal voting rights
of one vote per share, except that the holders of the APS, as a class,
vote to elect two members of the Board of Trustees, and separate class
votes are required on certain matters that affect the respective
interests of the APS and common shareholders.
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 year ended December 31, 2004, aggregated $255,467,290 and
$262,305,434, respectively. Purchases and proceeds from maturities of
obligations of the U.S. government aggregated $67,906,958 and
$61,609,069, respectively, during the year ended December 31, 2004.
The cost of investments owned on December 31, 2004, including short-term
investments, for federal income tax purposes was $248,711,746. Gross
unrealized appreciation and depreciation of investments aggregated
$8,541,766 and $1,610,244, respectively, resulting in net unrealized
appreciation of $6,931,522. The difference between book basis and tax
basis net unrealized appreciation of investments is attributable
primarily to the tax deferral of losses on certain sales of securities
and amortization of premiums and accretion of discounts on debt
securities.
Note E
Reclassification
of accounts
During the year ended December 31, 2004, the Fund reclassified amounts
to reflect an increase in accumulated net realized loss on investments
of $414,234, an increase in accumulated net investment income of
$976,313 and a decrease in capital paid-in of $562,079. This represents
the amounts necessary to report these balances on a tax basis, excluding
certain temporary differences, as of December 31, 2004. 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 accounting principles generally accepted in the United
States of America, and book and tax differences in accounting for
deferred compensation and amortization of premiums and accretion of
discounts on debt securities. The calculation of net investment in come
per share in the Fund's Financial Highlights excludes these adjustments.
29
AUDITORS'
REPORT
Report of
Independent
Registered Public
Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Investors Trust,
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of John
Hancock Investors Trust (the "Fund") at December 31, 2004, the results
of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at December 31, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion. The financial
highlights for each of the periods ended on or before December 31, 2002,
were audited by other independent auditors, whose report dated February
7, 2003, expressed an unqualified opinion thereon.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 17, 2005
30
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund, if any, paid during its
taxable year ended December 31, 2004.
With respect to the ordinary dividends paid by the Fund for the fiscal
year ended December 31, 2004, 1.05% of the dividends qualifies for the
corporate dividends-received deduction.
The Fund hereby designates the maximum amount allowable of its net
taxable income as qualified dividend income as provided in the Jobs and
Growth Tax Relief Reconciliation Act of 2003. This amount will be
reflected on Form 1099-DIV for the calendar year 2004.
Shareholders will be mailed a 2004 U.S. Treasury Department Form
1099-DIV in January 2005. This will reflect the total of all
distributions that are taxable for the calendar year 2004.
31
Investment
objective
and policy
The Fund is a closed-end diversified management investment company,
common 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 3313% 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 3313% of total assets.
By-laws
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 that
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, which 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 August 21, 2003, shareholders approved the amendment of the Fund's
by-laws, effective August 26, 2003, to provide for the issuance of
preferred shares. Effective March 9, 2004, the Trustees approved
additional changes to conform the Fund's maximum dividend rate on the
preferred shares with the rate used by other John Hancock funds.
On September 14, 2004, the Trustees approved an amendment to the Fund's
by-laws increasing the maximum applicable dividend rate ceiling on the
preferred shares to conform with the modern calculation methodology used
by the industry and other John Hancock funds.
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'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
32
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
The Fund pays quarterly dividends from net investment income and intends
to distribute any available net realized capital gains annually. All
distributions are paid in cash unless the shareholder elects to
participate in the Dividend Reinvestment Plan.
During the year ended December 31, 2004, the Fund paid to shareholders
dividends from net investment income totaling $1.665 per share. The
dates of payment and the amounts per share are as follows:
INCOME
PAYMENT DATE DIVIDEND
--------------------------------
March 31, 2004 $0.410
June 30, 2004 0.420
September 30, 2004 0.420
December 31, 2004 0.415
Dividend
reinvestment plan
The Fund offers its common shareholders a Dividend Reinvestment Plan
(the "Plan"), which offers the opportunity to earn compounded yields.
Any holder of common shares of record of the Fund may elect to
participate in the Plan and receive the Fund's common shares in lieu of
all or a portion of the cash dividends. The Plan is available to all
common 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 in proper form 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 the 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
33
the total number of shares held by such shareholder before and
after the dividend, the amount of the most recent cash dividend that 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 common 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, P.O. Box 3338, South Hackensack, New Jersey 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.
34
TRUSTEES
& OFFICERS
This chart provides information about the Trustees and Officers who
oversee your John Hancock fund. Officers elected by the Trustees manage
the day-to-day operations of the Fund and execute policies formulated by
the Trustees.
Independent Trustees
Name, age Number of
Position(s) held with Fund Trustee John Hancock
Principal occupation(s) and other of Fund funds overseen
directorships during past 5 years since 1 by Trustee
Charles L. Ladner, 2 Born: 1938 2004 49
Independent Chairman (since 2004); Chairman and Trustee, Dunwoody
Village, Inc. (retirement services) (until 2003); Senior Vice President and
Chief Financial Officer, UGI Corporation (public utility holding company)
(retired 1998); Vice President and Director for AmeriGas, Inc. (retired
1998); Director of AmeriGas Partners, L.P. (until 1997) (gas distribution);
Director, EnergyNorth, Inc. (until 1995); Director, Parks and History
Association (since 2001).
Richard P. Chapman, Jr., 2 Born: 1935 1975 39
President and Chief Executive Officer, Brookline Bancorp Inc. (lending)
(since 1972); Director, Lumber Insurance Co. (insurance) (until 2000);
Chairman and Director, Northeast Retirement Services, Inc. (retirement
administration) (since 1998).
William J. Cosgrove, Born: 1933 1991 39
Vice President, Senior Banker and Senior Credit Officer, Citibank, N.A.
(retired 1991); Executive Vice President, Citadel Group Representatives,
Inc. (financial reinsurance) (until 2004); Director, Hudson City Savings Bank
(since 1995); Director, Hudson City Bancorp (since 1999); Trustee, Scholarship
Fund for Inner City Children (since 1986).
John A. Moore, 2 Born: 1939 1996 49
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (until 2003); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson, 2 Born: 1943 1996 49
Executive Director, Council for International Exchange of Scholars and
Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1998); Former President of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (until 2003); Director, Ford
Foundation, International Fellowships Program (since 2002); Director,
Lois Roth Endowment (since 2002); Director, Council for International
Educational Exchange (since 2003).
35
Non-Independent Trustees 3
Name, age Number of
Position(s) held with Fund Trustee John Hancock
Principal occupation(s) and other of Fund funds overseen
directorships during past 5 years since 1 by Trustee
James A. Shepherdson, Born: 1952 2004 49
President and Chief Executive Officer
Executive Vice President, Manulife Financial Corporation (since 2004);
Director, President and Chief Executive Officer, John Hancock Advisers, LLC
(the "Adviser") and The Berkeley Financial Group, LLC ("The Berkeley Group")
(holding company); Director, President and Chief Executive Officer, John
Hancock Funds, LLC ("John Hancock Funds"); President, Director and Chief
Executive Officer, Sovereign Asset Management Corporation ("SAMCorp");
Director, Chairman and President, NM Capital Management, Inc.; President,
John Hancock Retirement Services, John Hancock Life Insurance Company
(until 2004); Chairman, Essex Corporation (until 2004); Co-Chief Executive
Officer, MetLife Investors Group (until 2003); Senior Vice President,
AXA/Equitable Insurance Company (until 2000).
Principal officers who are not Trustees
Name, age
Position(s) held with Fund Officer
Principal occupation(s) and of Fund
directorships during past 5 years since
William H. King, Born: 1952 1988
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each
of the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 1984
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Director, Senior
Vice President and Secretary, NM Capital Management, Inc.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or
her successor is elected.
2 Member of Audit Committee.
3 Non-independent Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
36
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent and registrar
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Transfer agent for APS
Deutsche Bank Trust
Company Americas
280 Park Avenue
New York, NY 10017
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
Independent registered
public accounting firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
Stock symbol
Listed New York Stock
Exchange:
JHI
For shareholder assistance
refer to page 35
How to contact us
Internet www.jhfunds.com
Mail Regular mail:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Phone 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
A listing of month-end portfolio holdings is available on our Web site,
www.jhfunds.com. A more detailed portfolio holdings summary is available
on a quarterly basis 60 days after the fiscal quarter on our Web site
or upon request by calling 1-800-225-5291, or on the Securities and
Exchange Commission's Web site, www.sec.gov.
37
[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
PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
P500A 12/04
2/05
ITEM 2. CODE OF ETHICS.
As of the end of the period, December 31, 2004, the registrant has adopted
a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its
Chief Executive Officer, Chief Financial Officer and Treasurer
(respectively, the principal executive officer, the principal financial
officer and the principal accounting officer, the "Senior Financial
Officers"). A copy of the code of ethics is filed as an exhibit to this
Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Charles L. Ladner is the audit committee financial expert and is
"independent", pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the
principal accountant(s) for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant(s) in
connection with statutory and regulatory filings or engagements amounted to
$31,000 for the fiscal year ended December 31, 2003 and $32,500 for the
fiscal year ended December 31, 2004. These fees were billed to the
registrant and were approved by the registrant's audit committee.
(b) Audit-Related Services
There were no audit-related fees during the fiscal year ended December 31,
2003 and fiscal year ended December 31, 2004 billed to the registrant or to
the registrant's investment adviser (not including any sub-adviser whose
role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that provides
ongoing services to the registrant ("control affiliates").
(c) Tax Fees
The aggregate fees billed for professional services rendered by the
principal accountant(s) for the tax compliance, tax advice and tax planning
("tax fees") amounted to $4,000 for the fiscal year ended December 31, 2003
and $4,200 for the fiscal year ended December 31, 2004. The nature of the
services comprising the tax fees was the review of the registrant's income
tax returns and tax distribution requirements. These fees were billed to
the registrant and were approved by the registrant's audit committee. There
were no tax fees billed to the control affiliates.
(d) All Other Fees
The all other fees billed to the registrant for products and services
provided by the principal accountant were none for the fiscal year ended
December 31, 2003 and $5,000 for the fiscal year ended December 31, 2004.
There were no other fees during the fiscal year ended December 31, 2003 and
December 31, 2004 billed to control affiliates for products and services
provided by the principal accountant. The nature of the services comprising
the all other fees was related to the principal accountant's report on the
registrant's Eligible Asset Coverage. These fees were approved by the
registrant's audit committee.
(e)(1) See attachment "Approval of Audit, Audit-related, Tax and Other
Services", with the audit committee pre-approval policies and procedures.
(e)(2) There were no fees that were approved by the audit committee
pursuant to the de minimis exception for the fiscal years ended December
31, 2003 and December 31, 2004 on behalf of the registrant or on behalf of
the control affiliates that relate directly to the operations and financial
reporting of the registrant.
(f) According to the registrant's principal accountant, for the fiscal year
ended December 31, 2004, the percentage of hours spent on the audit of the
registrant's financial statements for the most recent fiscal year that were
attributed to work performed by persons who were not full-time, permanent
employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant(s)
for services rendered to the registrant and rendered to the registrant's
control affiliates for each of the last two fiscal years of the registrant
were $4,000 for the fiscal year ended December 31, 2003, and $120,662 for
the fiscal year ended December 31, 2004.
(h) The audit committee of the registrant has considered the non-audit
services provided by the registrant's principal accountant(s) to the
control affiliates and has determined that the services that were not
pre-approved are compatible with maintaining the principal accountant(s)'
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee
comprised of independent trustees. The members of the audit committee are
as follows:
Richard P. Chapman, Jr.
Charles L. Ladner
Dr. John A. Moore
Patti McGill Peterson
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) There were no material changes to previously disclosed John Hancock
Funds - Administration Committee Charter.
ITEM 11. 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
accounting 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 12. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive
officer and principal accounting 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)(1) Separate certifications for the registrant's principal executive
officer and principal accounting 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)(1) Proxy Voting Policies and Procedures are attached.
(c)(2) Approval of Audit, Audit-related, Tax and Other Services is
attached.
(c)(3) Contact person at the registrant.
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.
John Hancock Investors Trust
By:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: February 17, 2005
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:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: February 17, 2005
By:
------------------------------
William H. King
Vice President and Treasurer
Date: February 17, 2005