John Hancock Funds
Income
Securities
Trust
SEMI-ANNUAL REPORT
June 30, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Chairman
Dennis S. Aronowitz*
Richard P. Chapman, Jr.*
William J. Cosgrove*
Gail D. Fosler*
Anne C. Hodsdon
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
Susan S. Newton
Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
Thomas H. Connors
Second Vice President and Compliance Officer
James J. Stokowski
Vice President and Treasurer
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02110
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: 1-800-843-0990
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:
Since February, much of the economic news has been good. Employment
levels are at their highest in years. Real wages may have started
growing again after a long stagnant stretch. And a fair share of
Corporate America logged second-quarter earnings that have exceeded
expectations, despite some glaring, headline-making exceptions in the
technology world. So why has the bond market soured this year and the
stock market been on a roller coaster? Isn't good economic news good?
What keeps the market interesting is that the answer is not
straightforward. While a healthy economy helps corporate profits grow,
an economy growing too fast, or the fear that it's heating up, sends
interest rates up out of concern that rising wages and higher prices
could spark inflation. That could prompt the Federal Reserve, which
views inflation as public enemy number one, to slow the economy down.
And the typical way to do that is to raise interest rates. For bonds,
higher interest rates mean lower bond prices, since the two move in
opposite directions. What's more, inflation erodes the value of a
bondholder's fixed income-stream. For stocks, higher interest rates
mean higher borrowing costs, which cut into profits.
Those are just a couple of the more textbook explanations. But there's
another element driving the market and it's far less tangible or
objective. It has to do with perception rather than reality. By taking
the market on a series of dizzying ups and downs lately, investors are
signaling uncertainties and fears, more than anything else. Since the
financial markets look forward, investors seem to be saying that they
are concerned about a number of things -- the specter of inflation,
the direction of interest rates, the upcoming election, the
possibility that markets may have advanced too far without a pullback.
So what should investors take away from it all? Probably the same
thing you've heard before -- that although the markets don't move up
in a straight line, they have historically rewarded patient, long-term
investors. Short-term turmoil is better as a topic of dinner party
conversation, rather than a call to action.
Sincerely,
/S/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By James K. Ho, Portfolio Manager
John Hancock
Income Securities Trust
Bond market declines as economy improves and
Federal Reserve stops cutting interest rates
After a year of record gains, the bond market took a breather during
the first half of 1996. When the period began, market participants
were hopeful that the same forces that drove the bond market to new
heights in 1995 -- moderate growth, low inflation and declining
interest rates -- would carry over into the new year. Early
developments were encouraging. On January 31, 1996, the Federal
Reserve lowered the rate banks charge each other for overnight loans -
- - known as the federal funds rate -- one-quarter percentage point, to
5.25%. It was the third Fed rate cut since July 1995. At the time,
further rate cuts seemed likely.
However, that optimism proved short-lived. In the weeks that followed,
a new pattern emerged from the stream of economic indicators
suggesting that the economy was doing better than expected. Many drew
the same conclusion from Fed Chairman Alan Greenspan's testimony
before Congress in February. Any lingering hopes of further rate cuts
to come were dashed conclusively in early March with the release of
the February employment report, which came in several times stronger
than anticipated, prompting a sharp sell-off in the bond market. The
March employment report was more of the same, leading many market
participants to conclude that the next Fed move would be a rate
increase, possibly before the end of the summer.
A 2 1/4" x 3 1/2" photo of the Income Securities portfolio management
team. Caption reads: "James K. Ho (seated) and members of the Fund
management team."
"... the bond market took
a breather during the first half
of 1996."
Chart with heading "Top Five Bond Sectors" at top left hand column.
Chart lists five sectors: 1) U.S. Government & Agencies; 2) Banks &
Financials; 3) Utilities; 4) Broadcasting/Communications; 5)
Transportation. Footnote below states "As a percentage of net assets on
June 30, 1996."
"...the Fund
gradually
became
more
defensive."
Rates rose accordingly, and bond prices fell. John Hancock Income
Securities Trust made it through the difficult period in better shape
than most of its competitors. The Fund's total return for the six
months that ended June 30, 1996 was -1.28%, at net asset value.
Meanwhile, the average open-end corporate debt A-rated fund had a
total return of -2.32%, according to Lipper Analytical Services.
Strategy review
During the past six months, the Fund gradually became more defensive.
One measure of that was the Fund's average duration, which fell during
the period. Duration measures how much a bond's price will rise or
fall with changes in interest rates. The longer the bond's duration,
the more its price will fluctuate with changes in interest rates. When
interest rates are falling and bond prices are rising, it pays to
lengthen the
Table entitled "Scorecard" at bottom left hand column. The header for
the left column is "Investment"' the header for the right column is
"Recent performance...and what's behind the numbers." The first listing
is "Long Island Lighting Company" followed by a down arrow and the
phrase "Credit downgrade". The second listing is "U.S. Treasuries
Securities" followed by a down arrow and the phrase "Economic growth
puts pressure on interest rates". The third listing is "Northwest
Airlines" followed by an up arrow and the phrase "Secured bonds attract
investors". Footnote below reads: "See '"Schedule of Investments."
Investment holdings are subject to change."
Fund's average duration; when interest rates are rising, it pays to
shorten up. The Fund's average duration was a little over five years
at the beginning of the period. As the economy grew stronger and rates
began to rise, we shortened the Fund's average duration, ending the
period at around 4.7 years. That was shorter than some of our peers,
helping us to outperform them. Other factors in the Fund's favor were
an overweighting compared to the group average in corporate bonds,
which totaled about two-thirds of the Fund's assets. Advantageous
sector and security selection helped too.
Shift to cyclicals as economy improves
Throughout the spring, as the labor market improved and economic
output increased, we de-emphasized Treasury securities in favor of
high-quality corporate bonds and high-yield bonds. High-yield bonds --
also called junk bonds -- totaled about 18% of the Fund's assets at
the end of June. Our focus was on industries whose fortunes are
closely tied to the overall health of the economy, including paper,
steel and air transportation. In the airline sector, we got especially
good performance from a class of securities known as equipment trust
lease certificates--secured loans backed by airplane leases. As a
rule, equipment trust lease certificates carry less credit risk than
ordinary unsecured bonds and therefore have higher credit ratings. At
the same time, they're cheaper because they don't trade as actively.
Top performers in that category included USAir and Northwest Airlines.
We pursued a similar strategy with the Fund's approximately 14% stake
in utility bonds. Among our favorite utilities was an Ohio Edison
secured bond, backed by a power plant. Disappointments included Long
Island Lighting Company, which received an unexpected credit
downgrade.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote "For the six months ended June 30,
1996." The chart is scaled in increments of 1% from top to bottom with
0% at the top and -3% at the bottom. Within the chart, there are two
solid bars. The first represents the -1.28% total return for John
Hancock Income Securities Trust. The second represents the -2.32%
total return for the Average open-end corporate debt A-rated fund.
Footnote below reads: "The total return for John Hancock Income
Securities Trust is at net asset value with all distributions
reinvested. The average open-end corporate debt A-rated fund is tracked
by Lipper Analytical Services."
The total return for John Hancock Income Securities Trust is at net
asset value with all distributions reinvested.1 The average open-end
corporate debt A-rated fund is tracked by Lipper Analytical Services.
The Fund maintained a significant investment in bonds issued by cable
television providers. As part of our larger effort to make the Fund
more defensive, we exchanged long-term cable securities for medium-
term securities. Among the top performers in the sector was
Continental Cablevision, which received a credit upgrade following the
announcement of plans to merge with US West. Nearly 15% of the Fund's
net assets were invested in foreign bonds, mainly banks. European
banks outperformed their U.S. counterparts as the global economic
recovery spread to Europe.
Outlook
Toward the end of the period, most market analysts stopped wondering
if the Fed would raise interest rates; they assumed it would. Instead
the questions became when and by how much. The key variable is the
timing of the rate increase. The sooner the Fed acts, the greater the
chances of bringing inflationary pressures under control, and the
lesser the likelihood of having to keep raising rates indefinitely.
Indeed, if the Fed acts soon enough, we'd view that as an opportunity
to buy longer-term securities and lengthen the Fund's duration. That
would follow from our belief that a rate hike would calm the bond
market's inflation fears and set the stage for bond prices to improve.
If, on the other hand, the Fed delays taking action and lets
inflationary pressures build, the first rate increase may not be the
last. In that case, we'd be wary of extending the Fund prematurely,
and would prefer instead to preserve some flexibility. In any case,
shareholders seeking an idea of what to expect in the coming months
would do better to base their expectations on the modest results of
the past six months, rather than the spectacular results of 1995.
Most
analysts
assume the
Fed will
raise interest
rates.
- -----------------------------------------------------------
This commentary reflects the views of the portfolio manager
through the end of the Fund's period discussed in this report.
Of course, the manager's views are subject to change as market
and other conditions warrant.
1 Lipper Analytical Services, Inc.
FINANCIAL STATEMENTS
John Hancock Funds - Income Securities Trust
The Statement of Assets and Liabilities is the Fund's balance sheet
and shows the value of what the Fund owns, is due and owes on June 30,
1996. You'll also find the net asset value per share as of that date.
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value -- Note C:
Publicly traded bonds (cost -- $158,879,145) $ 157,967,549
Joint repurchase agreement (cost -- $4,622,000) 4,622,000
Corporate savings account 449
-------------
162,589,998
Receivable for investments sold 2,803,188
Interest receivable 3,077,102
Other assets 6,025
-------------
Total Assets 168,476,313
- ----------------------------------------------------------------------------------------------------
Liabilities:
Payable for variation margin 67,219
Payable for investments purchased 3,022,611
Payable to John Hancock Advisers, Inc.
and affiliates -- Note B 258,907
Accounts payable and accrued expenses 31,595
-------------
Total Liabilities 3,380,332
- ----------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 167,055,985
Accumulated net realized loss on investments
and financial futures contracts (910,081)
Net unrealized depreciation of investments
and financial futures contracts (1,030,157)
Distributions in excess of net investment income (19,766)
-------------
Net Assets 165,095,981
====================================================================================================
Net Asset Value Per Share:
(based on 10,375,436 shares of beneficial
interest outstanding -- 30 million shares
authorized with no par value) $ 15.91
====================================================================================================
See notes to financial statements.
</TABLE>
The Statement of Operations summarizes the Fund's investment income
earned and expenses incurred in operating the Fund. It also shows net
gains (losses) for the period stated.
<TABLE>
<CAPTION>
Statement of Operations
Six months ended June 30, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest $ 6,942,208
-----------
Expenses:
Investment management fee -- Note B 514,134
Transfer agent fee 55,951
Printing 37,755
Custodian fee 24,816
Auditing fee 19,525
Financial services fee -- Note B 15,477
New York Stock Exchange fee 11,301
Trustees' fees 7,580
Legal fees 1,860
Miscellaneous 35
-----------
Total Expenses 688,434
- ----------------------------------------------------------------------------------------------------
Net Investment Income 6,253,774
- ----------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments and
Financial Futures Contracts
Net realized loss on investments sold (339,458)
Net realized gain on financial futures contracts 3,547
Change in net unrealized appreciation/depreciation
of investments (7,980,996)
Change in net unrealized appreciation/depreciation
of financial futures contracts (119,156)
-----------
Net Realized and Unrealized Loss
on Investments and Financial
Futures Contracts (8,436,063)
- ----------------------------------------------------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ($ 2,182,289)
====================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
John Hancock Funds - Income Securities Trust
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $ 6,253,774 $ 12,885,602
Net realized gain (loss) on investments sold and financial futures contracts (335,911) 312,164
Change in net unrealized appreciation/depreciation of investments and
financial futures contracts (8,100,152) 16,511,944
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations (2,182,289) 29,709,710
------------- -------------
Distributions to Shareholders:
Dividends from net investment income ($0.6100 and $1.2550 per share,
respectively) (6,303,303) (12,862,006)
------------- -------------
From Fund Share Transactions:
(Market value of shares issued to shareholders in reinvestment of
distributions) 849,241 1,768,167
------------- -------------
Net Assets:
Beginning of period 172,732,332 154,116,461
------------- -------------
End of period (including distributions in excess and undistributed
net investment income of
($19,766) and $29,763, respectively) $165,095,981 $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 56,038 114,135
------------- -------------
Shares outstanding, end of period 10,375,436 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>
John Hancock Funds - Income Securities Trust
<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:
- --------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED) YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 16.74 $ 15.10 $ 15.10 $ 16.97 $ 16.31 $ 16.25 $ 15.19
------- ------- ------- ------- ------- ------- -------
Net Investment Income 0.61 0.63 1.26 1.28 1.31 1.37 1.44
Net Realized and Unrealized Gain
(Loss) on Investments and
Financial Futures Contracts (0.83) 1.21 1.64 (1.79) 0.80 0.07 1.08
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations (0.22) 1.84 2.90 (0.51) 2.11 1.44 2.52
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income (0.61) (0.63) (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 (0.61) (0.63) (1.26) (1.36) (1.45) (1.38) (1.46)
------- ------- -------- ------- ------- ------- -------
Net Asset Value, End of Period $ 15.91 $ 16.31 $ 16.74 $ 15.10 $ 16.97 $ 16.31 $ 16.25
======= ======= ======== ======= ======= ======= =======
Per Share Market Value, End of Period $ 14.88 $ 16.00 $ 15.75 $ 13.75 $ 16.50 $ 16.75 $ 17.00
Total Investment Return at Market Value (1.71%) 21.15%(a) 24.11% (8.70%) 7.22% 7.16% 23.25%
Ratios and Supplemental Data
Net Assets, End of Period (000's omitted) $165,096 $167,359 $172,732 $154,116 $170,988 $162,468 $159,990
Ratio of Expenses to Average Net Assets 0.82%* 0.89%* 0.84% 0.87% 0.84% 0.81% 0.74%
Ratio of Net Investment Income to
Average Net Assets 7.47%* 8.03%* 7.77% 8.03% 7.67% 8.46% 9.28%
Portfolio Turnover Rate 56% 38% 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: 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>
John Hancock Funds - Income Securities Trust
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Income Securities Trust on June 30, 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 $ 579,535
--------------
Banks (12.86%)
Abbey National First Capital B.V.,
Sub Note 10-15-04 8.200 AA- 1,000 1,056,430
ABN Amro Bank N.V. -- Chicago Branch,
Global Bond 05-31-05 7.250 AA- 1,000 498,470
African Development Bank,
Sub Note 12-15-03 9.750 AA 1,000 1,152,380
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 9.750 AA- 900 1,023,750
Den Danske Bank Aktieselskab,
Sub Note 06-15-05, (R) 7.250 BBB+ 1,000 988,960
First Nationwide Bank,
Sr Note 04-15-03 12.500 B 750 781,875
International Bank For Reconstruction and Development,
30 Yr Bond 07-15-17 9.250 AAA 4,000 4,787,880
Landeskreditbank Baden -- Wurttemberg,
Sub Note 02-01-23 7.625 AAA 1,500 1,522,035
Midland American Capital Corp.,
Gtd Note 11-15-03 12.750 A 1,500 1,694,520
National Westminster Bank PLC -- New York Branch,
Sub Note 05-01-01 9.450 AA- 1,250 1,379,200
Scotland International Finance No. 2 B.V.
Sub Gtd Note 01-27-04, (R) 8.800 A+ 2,000 2,161,560
Sub Gtd Note 11-01-06, (R) 8.850 A+ 750 826,466
Security Pacific Corp.,
Medium Term Sub Note 04-26-01 10.500 A- 1,500 1,716,420
Sub Note 11-15-00 11.500 A- 1,000 1,165,050
Westdeutsche Landesbank Girozentrale -- New York Branch,
Sub Note 06-15-05 6.750 AA+ 500 483,785
--------------
21,238,781
--------------
Broadcasting (5.96%)
Cablevision Systems Corp.,
Sr Sub Deb 05-15-06 9.875 B $ 650 $ 627,250
Century Communications Corp.,
Sr Sub Deb 10-15-03 11.875 B+ 850 903,125
Continental Cablevision, Inc.,
Sr Note 05-15-06, (R) 8.300 BB+ 625 646,225
Sr Sub Deb 06-01-07 11.000 BB- 1,210 1,358,225
Jones Intercable, Inc.,
Sr Sub Deb 07-15-04 11.500 B+ 1,000 1,087,500
Le Groupe Videotron Ltee,
Sr Note 02-15-05 10.625 BB+ 250 261,250
Rogers Cablesystems Ltd.,
Sr Sec Second Priority Note 03-15-05 10.000 BB+ 900 886,500
SFX Broadcasting, Inc.,
Sr Sub Note 05-15-06, (R) 10.750 B- 400 396,500
TeleWest PLC,
Sr Deb 10-01-06 9.625 BB 350 342,125
TKR Cable I, Inc.,
Sr Deb 10-30-07 10.500 BBB- 2,000 2,192,500
Viacom Inc.,
Sr Note 06-01-05 7.750 BB+ 575 560,637
Sub Deb 07-07-06 8.000 BB- 625 571,875
--------------
9,833,712
--------------
Commercial Real Estate (0.30%)
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BBB- 500 498,300
--------------
Containers (0.37%)
Riverwood International Corp.,
Sr Sub Note 04-01-08 10.875 B 625 615,625
--------------
Cosmetics & Toiletries (0.42%)
Johnson & Johnson,
Deb 11-15-23 6.730 AAA 750 690,713
--------------
Finance (10.25%)
AAMES Mortgage Trust,
Pass Thru Ctf Ser 1996-B 06-27-24 7.625 AAA 625 630,859
Banc One Credit Card Master Trust,
Class A Asset Backed Ctf Ser 1994-B 12-15-99 7.550 AAA 1,000 1,017,500
CIT Group Holdings, Inc. (The),
Medium Term Sr Sub Cap Note 03-15-01 9.250 A 1,000 1,091,000
Conseco, Inc.,
Sr Note 12-15-04 10.500 BBB- 600 686,130
CS First Boston,
Sub Note 05-15-06, (R) 7.750 A3 1,000 1,006,700
Finance (continued)
Fairfax Financial Holdings, Ltd.,
Note 04-15-26 8.300 BBB+ 470 463,777
Greentree Financial Corp.,
Ctf Home Improv Ln Ser 1995-D CI M-2 09-15-25 6.950 AAA 650 634,560
Ctf Home Improv Ln Ser 1996-C CI A-4 06-15-26 7.800 AAA 750 759,140
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-A5 12-25-03 6.290 AAA 720 688,950
Imexsa Export Trust No. 96-1,
Sr Export Ctf 05-31-03, (R) 10.125 BB+ 313 314,174
MBNA Master Credit Card Trust,
Asset Backed Ctf, Ser 1995-D 06-15-00 6.050 AAA 1,585 1,548,830
Merrill Lynch Mortgage Investors, Inc.,
Sr/Sub Pass Thru Ctf Ser 1992, Class B (Sub) 04-15-12 8.500 AA 424 433,023
Money Store Trust, (The),
Asset Backed Ctf, Ser 1996-B 05-15-02 7.350 AAA 500 505,000
Polysindo International Finance Co., B.V.,
Gtd Sec Note 06-15-06 11.375 BB- 450 459,000
Santander Financial Issuances Ltd.,
Sub Gtd Note 04-15-05 7.875 A+ 1,000 1,028,940
Showboat Marina Finance Corp.,
1st Mtg Note 03-15-03, (R) 13.500 B 500 542,500
Standard Credit Card Master Trust I,
Class A Credit Card Part Ctf Ser 1993-2 10-07-04 5.950 AAA 1,335 1,253,231
Class A Credit Card Part Ctf Ser 1994-2 04-07-08 7.250 AAA 1,000 999,680
Class A Credit Card Part Ctf Ser 1995-2 01-07-00 8.625 AAA 1,250 1,265,225
Class A Credit Card Part Ctf Ser 1995-9 10-07-07 6.550 AAA 500 476,560
UCFC Home Equity Loan,
Pass Thru Ctf Ser 1996-B1 11-15-27 8.200 AAA 600 611,715
URC Holdings Corp.,
Sr Note 06-30-06, (R) 7.875 A- 500 507,110
--------------
16,923,604
--------------
Glass Products (0.49%)
Owens-Illinois, Inc.,
Sr Deb 12-01-03 11.000 BB 750 806,250
--------------
Gold Mining & Processing (1.14%)
Magma Copper Co.,
Sr Sub Note 12-15-01 12.000 BB+ 1,750 1,887,935
--------------
Governmental -- Foreign (1.77%)
Nova Scotia, Province of,
Deb 04-01-22 8.750 A- 750 834,788
Governmental -- Foreign
Ontario, Province of,
Bond 06-04-02 7.750 AA- 500 521,770
Deb 05-01-11 15.125 AA- 325
Deb 08-31-12 15.250 AA- 350 402,791
Quebec, Province of,
Deb 10-01-13 13.000 A+ 500 582,430
Saskatchewan, Province of,
Deb 12-15-20 9.375 BBB+ 480 571,709
--------------
2,913,488
--------------
Governmental -- U.S. (16.50%)
United States Treasury,
Bond 08-15-05 10.750 AAA 885 1,123,534
Bond 08-15-17 8.875 AAA 3,820 4,586,368
Bond 05-15-18 9.125 AAA 2,250 2,769,255
Bond 02-15-23 7.125 AAA 5,450 5,508,751
Note 04-15-98 7.875 AAA 1,000 1,029,530
Note 05-15-98 9.000 AAA 5,925 6,224,035
Note 11-30-99 7.750 AAA 3,340 3,477,775
Note 05-15-01 8.000 AAA 885 940,861
Note 02-15-05 7.500 AAA 1,510 1,588,565
--------------
27,248,674
--------------
Governmental -- U.S. Agencies (10.89%)
Federal Home Loan Mortgage Corp.,
30 Yr SF Pass thru Ctf 01-01-16 11.250 AAA 677 754,318
Federal National Mortgage Association,
15 Yr SF Pass thru Ctf 02-01-08 7.500 AAA 679 683,711
15 Yr SF Pass thru Ctf 01-25-05 8.000 AAA 1,000 1,040,000
30 Yr SF Pass thru Ctf 10-01-23 7.000 AAA 853 823,959
Financing Corp.,
Bond Ser A 02-08-18 9.400 AAA 2,000 2,437,820
Government National Mortgage Association,
30 Yr SF Pass thru Ctf 01-15-26 7.000 AAA 739 708,655
30 Yr SF Pass thru Ctf 02-15-24 to 02-15-26 7.500 AAA 2,735 2,698,447
30 Yr SF Pass thru Ctf 09-15-22 to 05-15-23 8.000 AAA 2,165 2,191,825
30 Yr SF Pass thru Ctf 01-15-23 to 12-15-24 8.500 AAA 2,405 2,475,495
30 Yr SF Pass thru Ctf 04-15-21 9.000 AAA 694 730,402
30 Yr SF Pass thru Ctf 11-15-19 to 02-15-25 9.500 AAA 1,687 1,804,101
30 Yr SF Pass thru Ctf 11-15-20 10.000 AAA 525 572,300
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 8.625 AAA 1,000 1,062,820
--------------
17,983,853
--------------
Healthcare (0.49%)
Dynacare Inc.,
Sr Note 01-15-06 10.750 B+ 450 451,125
Smith Food & Drug Centers, Inc.,
Sr Sub Note 05-15-07 11.250 B- 350 351,750
--------------
802,875
--------------
Insurance (2.98%)
Equitable Life Assurance Society of The United States (The),
Surplus Note 12-01-05, (R) 6.950 A 550 526,625
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07, (R) 8.200 A2 1,000 1,045,840
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23, (R) 7.625 AA- 1,050 1,014,594
New York Life Insurance Co.,
Surplus Note 12-15-23, (R) 7.500 AA 1,780 1,661,203
Sun Canada Financial Co.,
Sub Note 12-15-07, (R) 6.625 AA 725 678,470
--------------
4,926,732
--------------
Leisure & Recreation (0.11%)
Mohegan Tribal Gaming Authority,
Sr Sec Note 11-15-02, (R) 13.500 NR 150 188,250
-------------
Medical/Dental (0.52%)
Fisher Scientific International, Inc.,
Note 12-15-05 7.125 BBB 900 855,945
-------------
Oil & Gas (2.50%)
Ashland Oil, Inc.,
SF Deb 10-15-17 11.125 BBB 1,000 1,101,400
Maxus Energy Corp.,
Deb 05-01-13 11.250 BB- 229 234,153
Norsk Hydro, A.S.,
Deb 06-15-23 7.750 A- 1,000 1,001,520
Occidental Petroleum Corp.,
Sr Deb 09-15-09 10.125 BBB 600 720,792
TransTexas Gas Corp.,
Sr Sec Note 06-15-02 11.500 BB- 1,000 1,069,625
-------------
4,127,490
-------------
Paper (1.53%)
APP International Finance Co. B.V.,
Gtd Sec Note 10-01-05 11.750 BB 445 456,125
Georgia-Pacific Corp.,
Deb 02-15-18 9.500 BBB- 450 470,682
Repap New Brunswick,
Sr Note 04-15-05 10.625 B+ 425 399,500
Paper
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+ 500 515,625
-------------
2,527,682
-------------
Publishing (2.24%)
News America Holdings, Inc.,
Deb 08-10-18 8.250 BBB 500 492,465
Sr Note 10-15-99 9.125 BBB 1,000 1,064,310
Sr Note 12-15-01 12.000 BBB 750 813,555
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB- 1,275 1,331,585
-------------
3,701,915
-------------
Retail (1.76%)
Kroger Co. (The),
Lease Ctf 02-01-09 12.950 BB 1,910 2,110,550
May Department Stores Co. (The),
Deb 06-15-18 10.750 A 254 266,250
Safeway Stores, Inc.,
Lease Ctf 01-15-09 13.500 BBB- 474 524,138
-------------
2,900,938
-------------
Steel (1.29%)
NS Group, Inc.,
Sr Sec Note 07-15-03 13.500 B- 315 305,550
Republic Engineered Steel Corp.,
1st Mtg Note 12-15-01 9.875 B 475 441,750
UCAR Global Enterprises Inc.,
Sr Sub Note 01-15-05 12.000 B+ 400 454,000
Weirton Steel Corp.,
Sr Note 03-01-98 11.500 B 385 404,250
Sr Note 10-15-99 10.875 B 265 276,925
Sr Note 07-01-04 11.375 B 250 245,220
-------------
2,127,695
-------------
Telecommunications (1.32%)
British Telecom Finance Inc.,
Gtd Deb 02-15-19 9.625 AAA 1,000 1,102,020
Lenfest Communications, Inc.,
Sr Sub Note 06-15-06, (R) 10.500 BB- 475 479,750
TCI Communications, Inc.,
Deb 08-01-15 8.750 BBB- 600 589,728
-------------
2,171,498
-------------
Tobacco (0.64%)
RJR Nabisco, Inc.,
Note 12-01-02 8.625 BBB- 900 912,591
Note 09-15-03 7.625 BBB- 150 142,917
-------------
1,055,508
-------------
Transportation (4.54%)
Northwest Airlines Corp.,
Pass Thru Ctf Ser 1996-1 01-02-05 10.150 BB+ 400 414,000
Pass Thru Ctf Ser 1996-1 01-02-15 8.970 BB+ 400 417,600
NWA Inc.,
Note 08-01-96 8.625 B 2,265 2,265,000
Rail Car Trust No. 1992-1,
Trust Note Ser 92-1 06-01-04 7.750 AAA 1,640 1,691,491
Scandinavian Airlines System,
Bond 07-20-99 9.125 A3 700 742,875
Sea-Land Service, Inc.,
Sec Bond Ser A 01-02-11 10.600 BBB+ 1,000 1,063,970
USAir 1990-A Pass Through Trusts,
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 B+ 903 900,338
-------------
7,495,274
-------------
Utilities (14.46%)
AES Corp.,
Sr Sub Note 07-15-06 10.250 B+ 450 451,688
Calpine Corp.,
Sr Note 05-15-06, (R) 10.500 B 765 766,913
CE Casecnan Water & Energy Co., Inc.,
Sr Sec Note Ser A 11-15-05, (R) 11.450 BB 500 507,500
Chugach Electric Association, Inc.,
1st Mtg 1991 Ser A 03-15-22 9.140 A 2,000 2,221,260
Cleveland Electric Illuminating Co.,
1st Mtg Ser 2005-B 05-15-05 9.500 BB 900 887,274
CTC Mansfield Funding Corp.,
Sec Lease Oblig 09-30-16 11.125 B+ 1,900 1,947,728
E.I.P. Refunding Corp.,
Sec Fac Bond 10-01-12 10.250 B+ 739 771,006
Empresa Electrica,
Yankee Dollar Note 05-01-03 7.300 BBB+ 525 522,690
First PV Funding Corp.,
Lease Oblig Ser 1986 A 01-15-14 10.300 B+ 300 318,000
Lease Oblig Ser 1986 B 01-15-16 10.150 B+ 1,500 1,578,750
GG1B Funding Corp.,
Sec Lease Oblig 01-15-11 7.430 BBB- 887 844,200
Utilities
GTE Corp.,
Deb 11-15-17 10.300 BBB+ 500 547,750
Deb 11-01-20 10.250 BBB+ 1,500 1,703,820
Hydro-Quebec (Gtd By Province of Quebec),
Deb 02-01-03 7.375 A+ 750 759,518
Deb Ser HS 02-01-21 9.400 A+ 750 985,218
Iberdrola International B.V.,
Gtd Note 10-01-02 7.500 AA- 2,000 2,025,000
Long Island Lighting Co.,
Deb 03-15-03 7.050 BB+ 750 678,210
Gen Ref Mtg 05-01-21 9.750 BBB- 450 462,303
Gen Ref Mtg 07-01-24 9.625 BBB- 750 768,848
Louisiana Power & Light Co.,
Sec Lease Oblig Bond Ser B 01-02-17 10.670 BBB- 1,350 1,444,850
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 11.750 B- 175 182,805
System Energy Resources, Inc.
1st Mtg 09-01-96 10.500 BBB- 1,100 1,108,250
Sec Lease Oblig 01-15-14 8.200 BBB- 500 463,370
Tenaga Nasional Berhad,
Note 06-15-04, (R) 7.875 A+ 550 568,783
-------------
23,865,277
-------------
TOTAL PUBLICLY TRADED BONDS
(COST $158,879,145) (95.68%) 157,967,549
===== =============
<CAPTION>
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.80%)
<S> <C> <C> <C>
Investment in a joint repurchase agreement transaction with
Toronto Dominion Bank, Ltd., Dated 06-28-96, due 07-01-96
(secured by U.S. Treasury Bills, 5.38% through 5.69%,
due 12-12-96 through 06-26-97 andU.S. Treasury Bonds, 7.250%
through 7.500%, due 05-15-16 through 11-15-16, and
U.S. Treasury Notes, 4.375% through 7.750%, due 08-15-96
through 01-31-00) -- Note A 5.500% $4,622 $ 4,622,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.75% 4.75 449
------------
TOTAL SHORT-TERM INVESTMENTS (2.80%) 4,622,449
---- ------------
TOTAL INVESTMENTS (98.48%) $162,589,998
===== ============
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
$15,407,658 as of June 30, 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 Poor's 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 recorded by the Fund as unrealized gains or losses. When
the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may
be an illiquid market and/or that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. For Federal income tax purposes, the amount, character and
timing of the Fund's gains and/or losses can be affected as a result
of futures transactions. At June 30, 1996, open positions in financial
futures contracts were as follows:
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- ---------- ---------------- ---------- ------------
SEPT. 1996 76 U.S. TREASURY NOTE SHORT ($119,156)
------------
At June 30, 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.
On March 26, 1996, the Board of Directors approved retroactively to
January 1, 1996, an agreement with the Adviser to perform necessary
tax and financial management services for the Funds. The compensation
for 1996 is estimated to be at an annual rate of 0.01875% of the
average net assets of each Fund.
Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione and Ms. Anne
C. Hodsdon 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 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. At June 30, 1996, the Fund's investment to cover the
deferred compensation had 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 June 30, 1996 aggregated $44,403,461 and
$46,721,683, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies aggregated
$44,613,358 and $42,9970189, respectively.
The cost of investments owned at June 30, 1996 (excluding the
corporate savings account) for Federal income tax purposes was
$163,501,145. Gross unrealized appreciation and depreciation of
investments at June 30, 1996 aggregated $2,957,830 and $3,869,426,
respectively, resulting in net unrealized depreciation of $911,596.
SUPPLEMENTAL INFORMATION
John Hancock Funds - Income Securities Trust
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.
On March 5, 1996, the Board of Trustees voted to allow the Fund to
purchase restricted securities, including those eligible for resale to
"qualified institutional buyers" pursuant to Rule 144A under the
Securities Act of 1933 (the "Securities Act"). The Trustees will
carefully monitor the Fund's investments in these securities, focusing
on certain factors, including valuation, liquidity and availability of
information. Subject to market conditions, Fund management intends to
limit all illiquid securities held by the Fund to no more than 15% of
the Fund's net assets.
NOTES
John Hancock Funds - Income Securities Trust
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - Income Securities Trust
[THIS PAGE INTENTIONALLY LEFT BLANK]
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
S. Hackensack, NJ
Permit No. 750
A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."
P60SA 6/96
8/96
