John Hancock Funds
Income
Securities
Trust
FIRST QUARTER REPORT
March 31, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Gail D. Fosler*
Richard S. Scipione*
Edward J. Spellman*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President, Assistant Secretary and
Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Listed: New York Stock Exchange Symbol: JHS
John Hancock Closed-End Funds: 1-800-843-0090
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief
Executive Officer, flush right, next to second paragraph.
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
The bond market has brought investors back down to earth so far in 1996.
It was almost to be expected, coming on the heels of one of its best
years on record in 1995. This year began with the same
level of confidence that prevailed last year, and for the same
reasons. Inflation remained low, economic growth was slow and there were
real hopes for a budget deal in Washington.
But that optimism soured early into the new year, when it began to look
like there wouldn't be a budget accord any time soon, and bond prices
took the first of several tumbles. A surge in gold prices and signs that
employee compensation might be rising re-ignited inflation fears. Any
rise in inflation is bad for bonds because it tends to raise interest
rates, hurt bond prices and erode the value of a bond investor's fixed-
income stream. Another interest-rate cut by the Fed in January helped
bond prices recover somewhat, but investors remained concerned. It
wasn't surprising that the release of stronger-than-expected economic
data in February and early March sent bond prices tumbling again. Prices
did come back some, but not to their previous levels.
Our near-term outlook for the bond market is cautious. We may see more
strong economic news, which could dampen the bond market. However,
looking further out, we expect economic growth to remain moderate and
inflation to stay low, and that bodes well for interest rates and bond
prices. That said, after the spectacular year that bonds enjoyed in
1995, we believe investors should expect more modest results this year.
Sincerely,
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<TABLE>
<CAPTION>
Financial Statements
John Hancock Funds - Income Securities Trust
Statement of Assets and Liabilities
March 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Publicly traded bonds (cost - $160,785,423) $161,702,881
Joint repurchase agreement (cost - $618,000) 618,000
Corporate savings account 6
------------
162,320,887
Receivable for investments sold 2,986,562
Interest receivable 3,572,147
Other assets 6,025
------------
Total Assets 168,885,621
----------------------------------------------------------------------------
Liabilities:
Payable for variation margin 22,750
Payable for investments purchased 1,600,588
Payable to John Hancock Advisers, Inc. and affiliates - Note B 284,107
Accounts payable and accrued expenses 55,989
------------
Total Liabilities 1,963,434
-----------------------------------------------------------------------------
Net Assets:
Capital paid-in 166,632,039
Accumulated net realized loss on investments and financial futures contracts (647,474)
Net unrealized appreciation of investments and financial futures contracts 936,084
Undistributed net investment income 1,538
------------
Net Assets $166,922,187
=============================================================================
Net Asset Value Per Share:
(based on 10,347,171 shares of beneficial interest outstanding - 30 million shares
authorized with no par value) $16.13
=======================================================================================================
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value of what the
Fund owns, is due and owes on March 31, 1996. You'll also find the net asset value per share as of that
date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Three months ended March 31, 1996 (Unaudited)
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest $3,454,380
----------
Expenses:
Investment management fee - Note B 257,546
Transfer agent fee 26,172
Printing 17,400
Custodian fee 12,772
Auditing fee 9,168
New York Stock Exchange fee 5,824
Trustees' fees 3,569
Miscellaneous 1,599
Legal fees 1,139
----------
Total Expenses 335,189
-----------------------------------------------------------------------------------
Net Investment Income 3,119,191
-----------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments and Financial Futures Contracts:
Net realized loss on investments sold (30,226)
Net realized loss on financial futures contracts (43,078)
Change in net unrealized appreciation/depreciation of investments (6,151,942)
Change in net unrealized appreciation/depreciation of financial futures contracts 18,031
----------
Net Realized and Unrealized Loss on Investments and Financial Futures Contracts (6,207,215)
------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations ($3,088,024)
=================================================================================================
The Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operating
the Fund. It also shows net gains (losses) for the periods stated.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
March 31, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $3,119,191 $12,885,602
Net realized gain (loss) on investments sold and financial futures contracts (73,304) 312,164
Change in net unrealized appreciation/depreciation of investments and
financial futures contracts (6,133,911) 16,511,944
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations (3,088,024) 29,709,710
----------- -----------
Distributions to Shareholders:
Dividends from net investment income ($0.3050 and $1.2550 per share, respectively) (3,147,416) (12,862,006)
----------- -----------
From Fund Share Transactions *
(Market value of shares issued to shareholders in reinvestment of distributions) 425,295 1,768,167
----------- -----------
Net Assets:
Beginning of period 172,732,332 154,116,461
----------- -----------
End of period (including undistributed net investment income of
$1,538 and $29,763, respectively) $166,922,187 172,732,332
=========== ===========
* Analysis of Fund Share Transactions:
Shares outstanding, beginning of period 10,319,398 10,205,263
Shares issued to shareholders in reinvestment of distributions 27,773 114,135
----------- -----------
Shares outstanding, end of period 10,347,171 10,319,398
========== ==========
The Statement of Changes in Net Assets shows how the value of the Fund's net assets has changed since the end of
the previous period. The difference reflects earnings less expenses, any investment gains and losses, distributions
paid to shareholders, and any increase due to reinvestment of distributions in the Fund. The footnote illustrates the
number of Fund shares outstanding at the beginning of the period, reinvested and outstanding at the end of the period,
for the last two periods.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the period indicated,
investment returns, key ratios and supplemental data are listed as follows:
- --------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED)
-------------------
1996 1995
-------- --------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $16.74 $15.10
-------- --------
Net Investment Income 0.30 0.32
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts (0.60) 0.50
-------- --------
Total from Investment Operations (0.30) 0.82
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.31) (0.32)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts -- --
-------- --------
Total Distributions (0.31) (0.32)
-------- --------
Net Asset Value, End of Period $16.13 $15.60
======== ========
Per Share Market Value, End of Period $15.38 $14.88
Total Investment Return at Market Value (0.44%)(a) 10.44% (a)
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $166,922 $159,640
Ratio of Expenses to Average Net Assets 0.79%* 0.94%*
Ratio of Net Investment Income to Average Net Assets 7.33%* 8.22%*
Portfolio Turnover Rate 26% 18%
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the period indicated,
investment returns, key ratios and supplemental data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $15.10 $16.97 $16.31 $16.25 $15.19
--------- -------- -------- -------- --------
Net Investment Income 1.26 1.28 1.31 1.37 1.44
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts 1.64 (1.79) 0.80 0.07 1.08
--------- -------- -------- -------- --------
Total from Investment Operations 2.90 (0.51) 2.11 1.44 2.52
--------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (1.26) (1.28) (1.32) (1.38) (1.46)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts -- (0.08) (0.13) -- --
--------- -------- -------- -------- --------
Total Distributions (1.26) (1.36) (1.45) (1.38) (1.46)
--------- -------- -------- -------- --------
Net Asset Value, End of Period $16.74 $15.10 $16.97 $16.31 $16.25
========= ======== ======== ======== ========
Per Share Market Value, End of Period $15.75 $13.75 $16.50 $16.75 $17.00
Total Investment Return at Market Value 24.11% (8.70%) 7.22% 7.16% 23.25%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $172,732 $154,116 $170,988 $162,468 $159,990
Ratio of Expenses to Average Net Assets 0.84% 0.87% 0.84% 0.81% 0.74%
Ratio of Net Investment Income to Average Net Assets 7.77% 8.03% 7.67% 8.46% 9.28%
Portfolio Turnover Rate 105% 82% 95% 111% 92%
* On an annualized basis.
(a) Not annualized.
The Financial Highlights summarizes the impact of the following factors on a single share for the period indicated: the net
investment income, gains (losses), dividends and total investment return of the Fund. It shows how the Fund's net asset value
for a share has changed since the end of the previous period. It also shows the total investment return for each period based
on the market value of Fund shares. Additionally, important relationships between some items presented in the financial
statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
March 31, 1996 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Income Securities Trust on March 31, 1996. It's
divided into two main categories: publicly traded bonds and short-term investments. The securities are further broken down
by industry groups. Short-term investments, which represent the Fund's "cash" position, are listed last.
PAR VALUE
INTEREST S&P (000'S MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS
Aerospace (0.35%)
Jet Equipment Trust Ser 1995-B,
Cert 08-15-14, (R) 10.910% BB+ $ 550 $ 579,150
------------
Banks (13.46%)
Abbey National First Capital B.V.,
Sub Note 10-15-04 8.200 AA- 1,000 1,079,650
ABN Amro Bank N.V. - Chicago Branch,
Global Bond 05-31-05 7.250 AA- 1,000 1,022,520
African Development Bank,
Sub Note 12-15-03 9.750 AA 1,000 1,175,360
Bangkok Bank Public Company Ltd.
Note 09-15-05, (R) 7.250 BBB+ 500 493,130
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 900 1,046,250
Den Danske Bank Aktieselskab,
Sub Note 06-15-05, (R) 7.250 BBB+ 1,100 1,108,151
International Bank For Reconstruction and Development,
30 Yr Bond 07-15-17 9.250 AAA 4,000 4,888,080
Landeskreditbank Baden - Wurttemberg,
Sub Note 02-01-23 7.625 AAA 1,500 1,557,510
Midland American Capital Corp.,
Gtd Note 11-15-03 12.750 A 1,500 1,721,940
National Westminster Bank PLC - New York Branch,
Sub Note 05-01-01 9.450 AA- 1,250 1,403,075
Scotland International Finance No. 2 B.V.
Sub Gtd Note 01-27-04, (R) 8.800 A+ 2,000 2,212,760
Sub Gtd Note 11-01-06, (R) 8.850 A+ 750 850,816
Security Pacific Corp.,
Medium Term Sub Note 04-26-01 10.500 A- 1,500 1,748,010
Sub Note 11-15-00 11.500 A- 1,000 1,187,320
Toronto Dominion Bank - New York Branch,
Sub Note 01-15-09 6.450 AA- 500 473,550
Westdeutsche Landesbank Girozentrale - New York Branch,
Sub Note 06-15-05 6.750 AA+ 500 497,015
------------
22,465,137
------------
Broadcasting (7.59%)
Cablevision Systems Corp.,
Sr Sub Deb 04-01-04 0.108 B 1,000 1,055,000
Century Communications Corp.,
Sr Sub Deb 10-15-03 11.875 B+ 1,250 1,337,500
Chancellor Broadcasting Co.,
Sr Sub Note 10-01-04 9.375 B- 450 432,000
Comcast Corp.,
Sr Sub Deb 05-15-05 9.375 B+ 250 252,500
Continental Cablevision, Inc.,
Sr Note 05-15-06, (R) 8.300 BB+ 625 645,311
Sr Sub Deb 06-01-07 11.000 BB- 1,210 1,379,400
Jones Intercable, Inc.,
Sr Note 03-15-02 9.625 BB 300 310,500
Sr Sub Deb 07-15-04 11.500 B+ 1,000 1,107,500
Le Groupe Videotron Ltee,
Sr Note 02-15-05 10.625 BB+ 250 262,500
Rogers Cablesystems Ltd.,
Sr Sec Second Priority Note 03-15-05 10.000 BB+ 750 780,000
Sr Sub Deb 12-01-15 11.000 BB- 250 267,500
TeleWest PLC,
Sr Deb 10-01-06 9.625 BB 450 448,875
TKR Cable I, Inc.,
Sr Deb 10-30-07 10.500 BBB- 2,000 2,265,840
Turner Broadcasting Systems, Inc.,
Sr Note 07-01-13 8.375 BB+ 350 349,300
Viacom Inc.,
Sr Deb 01-15-16 7.625 BB+ 650 599,547
Sub Deb 07-07-06 8.000 BB+ 1,000 947,500
Young Broadcasting Corp.,
Sr Sub Note 01-15-06, (R) 9.000 B 250 233,750
------------
12,674,523
------------
Containers (0.48%)
Riverwood International Corp.,
Sr Sub Note 04-01-08 10.875 B 800 798,000
------------
Cosmetics & Toiletries (0.43%)
Johnson & Johnson,
Deb 11-15-23 6.730 AAA 750 713,152
------------
Finance (6.75%)
Banc One Credit Card Master Trust,
Class A Asset Backed Ctf Ser 1994-B 12-15-99 7.550 AAA 1,000 1,024,370
CIT Group Holdings, Inc. (The),
Medium Term Sr Sub Cap Note 03-15-01 9.250 A 1,000 1,108,720
Goldman Sachs Group, L.P. (The),
Note 02-15-06, (R) 0.068 A+ 500 491,875
Great Western Financial Corp.,
Note 02-01-02 8.600 BBB+ 1,250 1,348,413
Greentree Financial Corp.,
Ctf Home Improv Ln Ser 1995-D CI M-2 09-15-25 6.950 AAA 650 647,764
MBNA Master Credit Card Trust,
Ser 1995-D Asset Backed Ctf 06-15-00 6.050 AAA 1,585 1,568,643
Merrill Lynch Mortgage Investors, Inc.,
Sr/Sub Pass Thru Ctf Ser 1992, Class B (Sub) 04-15-12 8.500 AA 442 451,694
Santander Financial Issuances Ltd.,
Sub Gtd Note 04-15-05 7.875 A+ 1,000 1,055,320
Standard Credit Card Master Trust I,
Class A Credit Card Part Ctf Ser 1993-2 10-07-04 5.950 AAA 1,335 1,271,160
Class A Credit Card Part Ctf Ser 1994-2 04-07-08 7.250 AAA 1,000 1,022,810
Class A Credit Card Part Ctf Ser 1995-2 01-07-00 8.625 AAA 1,250 1,275,000
------------
11,265,769
------------
Glass Products (0.49%)
Owens-Illinois, Inc.,
Sr Deb 12-01-03 11.000 BB 750 822,188
------------
Gold Mining & Processing (1.14%)
Magma Copper Co.,
Sr Sub Note 12-15-01 12.000 BB+ 1,750 1,909,845
------------
Governmental - Foreign (2.05%)
Brazil, Republic of,
Disc Bond Z-L 04-15-24 4.250 B+ 250 127,187
Nova Scotia, Province of,
Deb 04-01-22 8.750 A- 750 840,593
Ontario, Province of,
Bond 06-04-02 7.750 AA- 500 527,335
Deb 05-01-11 15.125 AA- 325 345,862
Deb 08-31-12 15.250 AA- 350 411,260
Quebec, Province of,
Deb 10-01-13 13.000 A+ 500 592,335
Saskatchewan, Province of,
Deb 12-15-20 9.375 BBB+ 480 573,701
------------
3,418,273
------------
Governmental - U.S. (18.17%)
United States Treasury,
Bond 08-15-05 0.108 AAA 885 1,150,500
Bond 08-15-17 8.875 AAA 2,645 3,238,062
Bond 05-15-18 9.125 AAA 2,250 2,823,390
Bond 02-15-23 7.125 AAA 6,230 6,423,691
Note 04-15-98 7.875 AAA 1,000 1,039,060
Note 05-15-98 9.000 AAA 7,700 8,180,018
Note 11-30-99 7.750 AAA 4,965 5,241,153
Note 05-15-01 8.000 AAA 1,940 2,096,713
Note 11-15-04 7.875 AAA 130 142,614
------------
30,335,201
------------
Governmental - U.S. Agencies (12.79%)
Federal National Mortgage Association,
15 Yr SF Pass thru Ctf 02-01-08 7.500 AAA 753 765,059
15 Yr SF Pass thru Ctf 01-25-05 8.000 AAA 1,000 1,038,750
30 Yr SF Pass thru Ctf 10-01-23 7.000 AAA 874 851,649
Financing Corp.,
Bond Ser A 02-08-18 9.400 AAA 2,000 2,487,500
Bond Ser B 04-06-18 9.800 AAA 2,000 2,577,500
Government National Mortgage Association,
30 Yr SF Pass thru Ctf 01-15-26 7.000 AAA 741 722,062
30 Yr SF Pass thru Ctf 02-15-24 to 02-15-26 7.500 AAA 1,633 1,629,892
30 Yr SF Pass thru Ctf 09-15-22 to 05-15-23 8.000 AAA 2,265 2,321,236
30 Yr SF Pass thru Ctf 01-15-23 to 12-15-24 8.500 AAA 4,374 4,569,644
30 Yr SF Pass thru Ctf 04-15-21 9.000 AAA 728 776,844
30 Yr SF Pass thru Ctf 11-15-19 to 02-15-25 9.500 AAA 1,784 1,920,796
30 Yr SF Pass thru Ctf 11-15-20 10.000 AAA 582 641,341
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 8.625 AAA 1,000 1,056,880
------------
21,359,153
------------
Healthcare (0.20%)
Dynacare Inc.,
Sr Note 01-15-06 10.750 B+ 325 327,844
------------
Insurance (2.56%)
Equitable Life Assurance Society of The United States (The),
Surplus Note 12-01-05, (R) 6.950 A 550 540,375
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07, (R) 8.200 A2 1,000 1,066,210
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23, (R) 7.625 AA- 1,050 1,028,591
New York Life Insurance Co.,
Surplus Note 12-15-23, (R) 0.075 AA 1,000 947,140
Sun Canada Financial Co.,
Sub Note 12-15-07, (R) 6.625 AA 725 694,717
------------
4,277,033
------------
Leisure & Recreation (0.11%)
Mohegan Tribal Gaming Authority,
Sr Sec Note 11-15-02, (R) 13.500 NR 150 178,500
------------
Medical/Dental (0.43%)
Fisher Scientific International Inc.,
Note 12-15-05 7.125 BBB 750 724,042
------------
Oil & Gas (3.08%)
Ashland Oil, Inc.,
SF Deb 10-15-17 11.125 BBB 1,000 1,113,130
Coastal Corp. (The),
Sr Deb 06-15-06 11.750 BB+ 1,000 1,050,500
Maxus Energy Corp.,
Deb 05-01-13 11.250 BB- 229 237,015
Norsk Hydro, A.S.,
Deb 06-15-23 7.750 A- 1,000 1,024,570
Occidental Petroleum Corp.,
Sr Deb 09-15-09 10.125 BBB 600 731,292
TransTexas Gas Corp.,
Sr Sec Note 06-15-02 11.500 BB- 1,000 985,000
------------
5,141,507
------------
Paper (1.20%)
APP International Finance Co. B.V.,
Gtd Sec Note 10-01-05 11.750 BB 150 145,687
Georgia-Pacific Corp.,
Deb 02-15-18 9.500 BBB- 450 470,799
Repap New Brunswick,
Sr Note 04-15-05 10.625 B+ 175 168,875
S.D. Warren Co.,
Sr Sub Note 12-15-04 12.000 B+ 650 685,750
Stone Consolidated Corp.,
Sr Note 12-15-00 10.250 B+ 500 525,000
------------
1,996,111
------------
Publishing (2.63%)
News America Holdings Inc.,
Deb 08-10-18 0.083 BBB 1,400 1,412,488
Sr Note 10-15-99 9.125 BBB 1,000 1,079,560
Sr Note 12-15-01 12.000 BBB 750 824,063
Time Warner Inc.,
Deb 01-15-13 9.125 BBB- 1,000 1,080,930
------------
4,397,041
------------
Retail (2.08%)
Kroger Co. (The),
Lease Ctf 02-01-09 12.950 BB 1,910 2,101,000
May Department Stores Co.(The),
Deb 06-15-18 10.750 A 254 270,805
Safeway Stores, Inc.,
Lease Ctf 01-15-09 13.500 BBB- 474 521,767
Thrifty Payless Inc.,
Sr Note 04-15-03 11.750 B 500 575,000
------------
3,468,572
------------
Steel (0.88%)
UCAR Global Enterprises Inc.,
Sr Sub Note 01-15-05 12.000 B+ 400 460,000
Weirton Steel Corp.,
Sr Note 03-01-98 11.500 B 300 310,500
Sr Note 10-15-99 10.875 B 310 316,975
Sr Note 06-01-05 10.750 B 400 380,000
------------
1,467,475
------------
Telecommunications (0.99%)
360 Degree Communications Co.,
Sr Note 03-01-03 7.125 BBB- 550 538,312
British Telecom Finance Inc.,
Gtd Deb 02-15-19 9.625 AAA 1,000 1,115,630
------------
1,653,942
------------
Tobacco (0.62%)
RJR Nabisco, Inc.,
Note 12-01-02 8.625 BBB- 900 894,240
Note 09-15-03 7.625 BBB- 150 139,387
------------
1,033,627
------------
Transportation (4.04%)
NWA Inc.,
Note 08-01-96 8.625 B 2,265 2,265,000
Rail Car Trust No. 1992-1,
Trust Note 06-01-04 7.750 AAA 1,677 1,759,705
Scandinavian Airlines System,
Bond 07-20-99 0.091 A3 700 754,250
Sea-Land Service, Inc.,
Sec Bond Ser A 01-02-11 10.600 BBB+ 1,000 1,062,770
USAir 1990-A Pass Through Trusts,
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 B+ 903 907,107
------------
6,748,832
------------
Utilities (14.35%)
BVPS II Funding Corp.,
Collateralized Lease Bond 12-01-07 8.330 BB+ 850 821,874
CE Casecnan Water & Energy Co., Inc.,
Sr Sec Note Ser A 11-15-05, (R) 11.450 BB 500 496,250
Chugach Electric Association, Inc.,
1st Mtg 1991 Ser A 03-15-22 9.140 A 2,000 2,242,740
Cleveland Electric Illuminating Co.,
1st Mtg Ser 2005-B 05-15-05 9.500 BB 1,250 1,259,125
CTC Mansfield Funding Corp.,
Sec Lease Oblig 09-30-16 11.125 B+ 1,900 1,979,762
E.I.P. Refunding Corp.,
Sec Fac Bond 10-01-12 10.250 B+ 739 783,547
First PV Funding Corp.,
Lease Oblig Ser 1986 A 01-15-14 10.300 B+ 300 315,000
Lease Oblig Ser 1986 B 01-15-16 10.150 B+ 1,500 1,567,500
GG1B Funding Corp.,
Sec Lease Oblig 01-15-11 7.430 BBB- 887 839,819
GTE Corp.,
Deb 11-15-17 10.300 BBB+ 500 553,395
Deb 11-01-20 10.250 BBB+ 1,500 1,731,465
Hydro-Quebec (Gtd by Province of Quebec),
Deb 02-01-03 7.375 A+ 750 767,708
Deb Ser HS 02-01-21 9.400 A+ 750 879,323
Iberdrola International B.V.,
Gtd Note 10-01-02 7.500 AA- 2,000 2,090,000
Long Island Lighting Co.,
Deb 03-15-03 7.050 BB+ 750 708,098
Gen Ref Mtg 05-01-21 9.750 BBB- 250 256,760
Gen Ref Mtg 07-01-24 9.625 BBB- 750 764,558
Louisiana Power & Light Co.,
Sec Lease Oblig Bond Ser B 01-02-17 10.670 BBB- 1,350 1,451,952
Midland Funding Corp. I,
Sr Sec Lease Oblig Ser C 07-23-02 10.330 BB- 1,281 1,349,543
Midland Funding Corp. II,
Deb 07-23-05 0.118 B- 175 184,693
Phillipine Long Distance Telephone Co.,
Note 08-01-05 9.875 BB 255 263,925
System Energy Resources, Inc.,
1st Mtg 09-01-96 10.500 BBB- 1,100 1,119,745
Sec Lease Oblig 01-15-14 8.200 BBB- 500 468,502
Tenaga Nasional Berhad,
Note 06-15-04, (R) 7.875 A+ 1,000 1,052,680
------------
23,947,964
------------
TOTAL PUBLICLY TRADED BONDS
(COST $160,785,423) ( 96.87%) $161,702,881
------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.37%)
Investment in a joint repurchase agreement transaction
with Lehman Brothers, Inc., Dated 03-29-96, due 04-01-96
(secured by U.S. Treasury Bonds, 7.250% thru 8.875%,
due 05-15-16 thru 08-15-19, and U.S. Treasury Note, 6.500%
due 05-15-97) - Note A 5.450 618 $ 618,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 6
------------
TOTAL SHORT-TERM INVESTMENT ( 0.37%) $ 618,006
------------
TOTAL INVESTMENTS ( 97.24%) $162,320,887
========== ============
NOTES TO THE SCHEDULE OF INVESTMENTS
(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. Rule144A securities amounted
to $12,619,406 as of March 31, 1996. See Note A of the Notes to Financial Statements for valuation policy.
* Credit ratings are rated by Moody's Investor Services or John Hancock Advisers, Inc. where Standard and Poors ratings
are not available.
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.
</TABLE>
Notes to Financial Statements
John Hancock Funds - Income Securities Trust
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock Income Securities Trust (the "Fund") is a closed-end
investment management company registered under the Investment Company
Act of 1940. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or, at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The
Berkeley Financial Group, may participate in a joint repurchase
agreement transaction. Aggregate cash balances are invested in one or
more repurchase agreements, whose underlying securities are obligations
of the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investment, to its
shareholders. Therefore, no federal income tax provision is required.
Additionally, net capital losses of $509,987 attributable to security
transactions occurring after October 31, 1995 are treated as arising on
the first day (January 1, 1996) of the Fund's next taxable year.
DIVIDENDS, INTEREST AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on
investment securities is recorded on the accrual basis.
The Fund records all dividends and distributions to shareholders from
net investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with federal income tax
regulations, which may differ from generally accepted accounting
principles.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues, and expenses of the Fund.
DISCOUNT ON SECURITIES The Fund accretes original issue discount from
par value on securities purchased from either the date of issue or the
date of purchase over the life of the security, as required by the
Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS At the time the Fund enters into a financial
futures contract, 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. Subsequent payments, known as "variation margin",
to and from the broker are made on a daily basis as the market price of
the financial futures contract fluctuates. Daily variation margin
adjustments, arising from this "mark to market", are re-
corded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks
of entering into futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities.
For Federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of futures
transactions.
At March 31, 1996, open positions in financial futures contracts were as
follows:
OPEN UNREALIZED
EXPIRATION CONTRACTS POSITION APPRECIATION
- ---------- --------- -------- ------------
JUNE, 1996 38 U.S. TREASURY NOTE SHORT $18,031
=======
At March 31, 1996, the Fund has deposited in a segregated account
$30,000 par value of U.S. Treasury Bond, 9.125%, 05-15-18 and $25,000
par value of U.S. Treasury Bond, 10.75%, 08-15-05, to
cover margin requirements on open financial futures contracts.
NOTE B --
MANAGEMENT FEE AND
ADMINISTRATIVE SERVICES
Under the present investment management contract, the Fund pays a
quarterly management fee to the Adviser, for a continuous investment
program, equivalent on an annual basis, to the sum of (a) 0.650% of the
first $150,000,000 of the Fund's average weekly net asset value, (b)
0.375% of the next $50,000,000, (c) 0.350% of the next $100,000,000 and
(d) 0.300% of the Fund's average weekly net asset value in excess of
$300,000,000.
In the event normal operating expenses of the Fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceeds 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.
Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione 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. Effective with the fees paid for 1995, 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 will make investments in other John Hancock Funds, as
applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be
recorded on the Fund's books as an other asset. The deferred
compensation liability and the investment to cover the liability are
marked to market on a periodic basis to reflect income earned by the
investment and income earned by the investment is recorded on the Fund's
books. At March 31, 1996, the Fund's deferred compensation had an
unrealized appreciation of $595.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than
obligation of the U.S. government and its agencies and short-term
securities, during the period ended March 31, 1996 aggregated
$12,321,529 and $12,553,694, respectively. Purchases and proceeds from
sales of obligations of the U.S. government and its agencies aggregated
$32,115,759 and $30,123,613, respectively.
The cost of investments owned at March 31, 1996 (excluding the corporate
savings account) for Federal income tax purposes was $161,411,302. Gross
unrealized appreciation and depreciation
of investments at March 31, 1996 aggregated $4,013,162 and $3,103,583,
respectively, resulting in net unrealized appreciation of $909,579.
INVESTMENT OBJECTIVE AND POLICY
John Hancock Income Securities Trust is a closed-end diversified
investment management company, shares of which were initially offered to
the public on February 14, 1973 and are publicly traded on the New York
Stock Exchange. Its investment objective is to generate a high level of
current income consistent with prudent investment risk. The Fund invests
in a diversified portfolio of freely marketable debt securities and may
invest an amount not exceeding 20% of its assets in income-producing
preferred and common stock. The Fund intends to engage in short-term
trading, may issue a single class of senior securities not to exceed
33 1/3% of its net assets at market value, may borrow from banks as a
temporary measure for emergency purposes in amounts not to exceed 5% of
the total assets at cost and may lend its portfolio securities. 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 Automatic Dividend Reinvestment Plan.
FINANCIAL FUTURES CONTRACTS
The Fund may buy and sell financial futures contracts and options on
futures contracts to hedge against the effects of fluctuations in
interest rates and other market conditions. The Fund's ability to hedge
successfully will depend on the Adviser's ability to predict accurately
the future direction of interest rate changes and other market factors.
There is no assurance that a liquid market for futures and options will
always exist. In addition, the Fund could be prevented from opening, or
realizing the benefits of closing out, a futures or options position
because of position limits or limits on daily price fluctuations imposed
by an exchange.
The Fund will not engage in transactions in futures contracts and
options on futures for speculation, but only for hedging or other
permissible risk management purposes. All of the Fund's futures
contracts and options on futures will be traded on a U.S. commodity
exchange or board of trade. The Fund will not engage in a transaction in
futures or options on futures if, immediately thereafter, the sum of
initial margin deposits on existing positions and premiums paid for
options on futures would exceed 5% of the Fund's total assets.
DIVIDEND REINVESTMENT PLAN
John Hancock Income Securities Trust offers shareholders the opportunity
to elect to receive shares of the Fund's Common Shares in lieu of cash
dividends. The Plan is available to all shareholders without charge.
Any shareholder of record of John Hancock Income Securities Trust
("Income Securities") may elect to participate in the Automatic Dividend
Reinvestment Plan (the "Plan") and receive shares of Income Securities'
Common Shares in lieu of all or a portion of the cash dividends.
Shareholders may join the Plan by filling out and mailing an
authorization card showing an election to reinvest all or a portion of
dividend payments. If received in proper form by State Street Bank and
Trust Company, P.O. Box 8209, Boston, Massachusetts 02266-8209 (the
"Agent Bank") not later than seven business days before the record date
for a dividend, the election will be effective with respect to all
dividends paid after such record date. Shareholders whose shares are
held in the name of a broker or nominee should contact the broker, bank,
or nominee to participate in the Plan.
Participation in the Plan may be terminated at any time by
written notice to the Agent Bank and such termination will be effective
immediately. However, notice of termination must be received seven days
prior to the record date of any distribution to be effective for that
distribution. Upon termination, certificates will be issued representing
the number of full shares of Common Shares held by the Agent Bank. A
shareholder will receive a cash payment for any fractional share held.
The Agent Bank will act as agent for participating shareholders. The
Board of Trustees of Income Securities will declare dividends from net
investment income payable in cash or, in the case of shareholders
participating in the Plan, partially or entirely in Income Securities'
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 Income Securities. However, if as of such payment date the
market price of the Common Shares is lower than such net asset value per
share, the number of shares to be issued will be determined on the basis
of such market price. Fractional shares, carried out to three decimal
places, will be credited to your account. Such fractional shares will be
entitled to future dividends.
The shares issued to participating shareholders, including fractional
shares, will be held by the Agent Bank in the name of the participant. A
confirmation will be sent to each shareholder promptly, normally within
seven days, after the payment date of the dividend. The confirmation
will show the total number of shares held by such shareholder before and
after the dividend, the amount of the most recent cash dividend which
the shareholder has elected to reinvest and the number of shares
acquired with such dividend.
The reinvestment of dividends does not in any way relieve participating
shareholders of any Federal, state or local income tax which may be due
with respect to such dividend. Dividends reinvested in shares will be
treated on your Federal income tax return as though you had received a
dividend in cash in an amount equal to the fair market value of the
shares received, as determined by the prices for shares of the Fund on
the New York Stock Exchange as of the dividend payment date.
Distributions from the Fund's long-term capital gains will be processed
as noted above for those electing to reinvest in shares and will be
taxable to you as long-term capital gains. The confirmation referred to
above will contain all the information you will require for determining
the cost basis of shares acquired and should be retained for that
purpose. At year end, each account will be supplied with detailed
information necessary to determine total tax liability for the calendar
year.
Additional information may be obtained from the Customer Service
Department, John Hancock Income Securities Trust,
101 Huntington Avenue, Boston, Massachusetts 02199-7603,
1 (800) 843-0090.
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the page. A box sectioned in quadrants with a triangle in upper left,
a circle in upper right, a cube in lower left and a diamond in lower
right.
John Hancock Funds
A Global Investment Management Firm
101 HUNTINGTON AVENUE, BOSTON MA 02119-7603
Bulk Rate
U.S. Postage
PAID
S. Hackensack NJ
Permit No. 750
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Printed on Recycled Paper P60Q1 3/96
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