---------------------------
The latest report from your
Fund's management team
---------------------------
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Income
Securities Trust
JUNE 30, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
-----------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.*
William J. Cosgrove
Douglas M. Costle
Leland O. Erdahl
Richard A. Farrell
Gail D. Fosler
William F. Glavin
Anne C. Hodsdon
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
Richard S. Scipione
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
TRANSFER AGENT and REGISTRAR
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
Listed New York Stock Exchange Symbol: JHS
For Shareholder Assistance
Refer to Page 25
--------------------------------------------------
===============================CHAIRMAN'S MESSAGE===============================
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting ready
to celebrate this historic transition to a new millennium. At John Hancock
Funds, we share the excitement, but we aren't popping the champagne corks just
yet. Rather, we are staying on the course that we set more than two years ago to
ensure that the transition to a new millennium is a smooth one for our
shareholders.
As many already know, the Year 2000 has created more than the prospect of New
Year's festivities of epic proportions. It has also presented the world with a
challenge: making sure that older computers, and any equipment powered by
computer chips, can properly read and process the date "00" as 2000, not 1900.
Much has been written about how the world will weather the change. Some view it
as a non-event, while others see the potential for disruptions. How much
disruption, and for how long, depends on whom you talk to.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an important
issue to be dealt with and we have made it a top priority. Two years ago, John
Hancock Funds put a full-time team of experts on the case and established a
company-wide program to evaluate all computer applications and to modify or
replace those that needed changing.
These modifications and replacements for all mission-critical systems are done
and successfully compliance tested. The rest of 1999 will be spent completing
the few remaining non mission-critical systems, testing with our business
partners and continuing to participate in industry testing. We have also
established additional contingency plans beyond our regular ones to prepare for
any challenges that the Year 2000 might present. In the end, John Hancock will
spend approximately $90-$95 million to ensure we make a successful transition to
the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is featuring
articles with more detailed information on Y2K matters of importance to our
shareholders. I encourage you to read them, or contact one of our Customer
Service Representatives at 1-800-225-5291 for another copy. For your own peace
of mind, we also recommend that you save your 1999 statements, especially those
you receive between October and December, so that you are able to check them
against the first one you receive in 2000. It's a measure of prudence, not
panic. Good record keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although we
cannot make any ironclad assurances, we are confident that the steps we have
taken will provide shareholders with as smooth a transition as possible. Once
that occurs, we will happily raise our glasses to toast the New Year, future
prosperity and our hopes to serve you well into the 2000's.
Sincerely,
/s/Edward J. Boudrea, Jr.
- -------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By James K. Ho, CFA, Portfolio Manager
John Hancock
Income Securities Trust
Late-period jitters caused many bond sectors to give back
---------------------------------------------------------
earlier gains in the last six months
------------------------------------
Positive investor sentiment ushered John Hancock Income Securities Trust into
1999, then stalled out in the final two months of the semiannual period as
inflation fears mounted. Although last year's global credit concerns receded and
investors renewed their interest in yield-enhanced domestic bond sectors - such
as investment-grade corporate bonds, high-yield issues, mortgage-backed and
asset-backed securities - the continued strength of the U.S. economy rekindled
investors' worries about rising interest rates. As a result, the dramatic
rebound within these sectors was fairly short-lived and many bonds gave back
earlier gains.
Throughout the six months ended June 30, 1999, we balanced defensive
strategies with selective opportunism, staying fully invested to meet the
market's challenges head on. Although our efforts enabled the Fund to avoid the
brunt of the recent market-wide downturn, it did not escape unscathed. John
Hancock Income Securities Trust produced a total return of -0.99% at net asset
value, which compared favorably with the -2.42% return at net asset value of the
average open-end corporate debt A-rated fund, according to Lipper, Inc.
Forward thinking helps Fund
As the Fund entered fiscal 1999, we had already begun to initiate strategies
that allowed us to participate in the recovery of several fixed-income sectors
early this spring, while
- --------------------------------------------------------------------------------
[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Income
Securities Trust. Caption below reads "Fund management team members (l-r): "Ben
Matthews, Lee Crockett, Jim Ho, Tony Goodchild and Beverly Cleathero."]
- --------------------------------------------------------------------------------
"...we balanced defensive strategies with selective opportunism..."
3
<PAGE>
================================================================================
John Hancock Funds - Income Securities Trust
"...we sold some of the Fund's U.S. Treasury holdings."
- --------------------------------------------------------------------------------
[Table at top left hand column entitled "Top Five Bond Sectors." The first
listing is U.S. Government & Agencies 30%, the second is Banks & Financials 20%,
the third Utilities 12%, the fourth Media 7% and the fifth Transportation 5%. A
note below the table reads "As a percentage of net assets on June 30, 1999."]
- --------------------------------------------------------------------------------
avoiding the pitfalls of others. Here is what we did:
o Increased corporate bond exposure. Because of last year's rout in the
financial markets, the valuations of investment-grade corporate bonds and
high-yield securities had become historically attractive. Starting in late
December and continuing on through early February, we bolstered the Fund's
position in these issues, believing they were poised for a comeback, given
investors' growing comfort with bonds outside the Treasury market. In
particular, we shifted focus a bit from the higher-quality A-rated bonds to
BBB-rated names, those at the lowest end of the investment-grade spectrum. Our
tack proved advantageous and was one of the main reasons the Fund outperformed
its peers. Our high-yield bond exposure also helped, as their prices held up the
best during the recent downturn.
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Continental
Cablevision followed by an up arrow with the phrase "Upcoming merger with AT&T
and likely credit upgrade." The second listing is Liberty Mutual followed by a
sideways arrow with the phrase "Lackluster operating results." The third listing
is Integrated Health Services followed by a down arrow with the phrase "Company
experiencing financial difficulties." A note below the table reads "See
`Schedule of Investments.' Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
o Trimmed U.S. Treasury weighting. To finance our increased focus on
corporate bonds, we sold some of the Fund's U.S. Treasury holdings. We did so
before the so-called "flight- from-quality" was in full effect, realizing some
profits as a result.
o Pared-down emphasis on mortgages. The Fund started the fiscal year
with significant emphasis on mortgage-backed and asset-backed securities. As
these holdings appreciated, we slightly trimmed the Fund's exposure.
o Shortened duration. Although we typically don't take large bets on
interest-rate moves, we are able to adjust the Fund's sensitivity through a
mathematical measure known as duration. A longer duration typically offers
greater potential for price gains when interest rates decline, and price losses
when rates rise. A shorter duration helps cushion against price declines as a
result of rising rates, but may also inhibit a portfolio from fully
participating in a rally when interest rates decline. Throughout the period, we
kept the Fund's duration relatively short, which helped considerably during the
market's recent turbulence.
Emerging markets de-emphasized
Although emerging-market bonds rallied impressively in the early months of the
period, we stayed, for the most part, clear of these issues. We believed the
risks were too great. As it turned out, emerging-market debt backtracked to
1998's price levels as the period progressed. The uncertain future of those
markets and their general lack of liquidity revived investors' concerns.
Pockets of emphasis
While the Fund remains broadly diversified within the corporate bond sector, we
have maintained pockets of emphasis in utility, media,
4
<PAGE>
================================================================================
John Hancock Funds - Income Securities Trust
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended June 30, 1999." The chart
is scaled in increments of .5% with -2.5% at the bottom and 0% at the top. The
first bar represents the -0.99% total return for John Hancock Income Securities
Trust. The second bar represents the -2.42% total return for Average open-end
corporate debt A-rated fund. A note below the chart 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, Inc."]
- --------------------------------------------------------------------------------
financial holdings and telecommunications, owning both investment-grade and
high-yield issues.
o Utilities - The fairly recent deregulation of the utility industry,
the steady demand for its product and its yield potential make this sub-sector a
perennial favorite. Several holdings have performed well for the Fund, including
CalEnergy, Niagara Mohawk Power Corp. and Northeast Utilities, which was
recently upgraded to investment-grade status as it successfully completed the
nuclear decommissioning of the Millstone Three power plant.
o Telecommunications - Despite some recent growing pains, many of the
Fund's telecom holdings represent dynamic opportunity. Global Crossing Holdings,
NEXTLINK Communications, Nextel Communications and Qwest Communications
International are among several holdings that have been noteworthy performers.
o Media - With the rapid advances in technology, many media companies
have the wherewithal to evolve with the times. Continental Cablevision, which
was recently acquired by AT&T, CSC Holdings, Adelphia Communications and TCI
Communications are several Fund holdings worthy of mention.
o Finance - Within the financial arena, we focused on higher-grade
issues such as Merrill Lynch, Household Finance and BankBoston.
New REIT, oil, gas and paper holdings
One subtle, timely shift we made over the period was our increased emphasis on
three sectors - real estate investment trusts (REITs), energy and paper, all of
whose valuations had become extremely attractive by the time the fiscal year
began. Given the economy's strength, we believed there was room for improvement,
which did, in fact, take place near the period's end. Occidental Petroleum,
Union Pacific, Packaging Corp. of America and ProLogis Trust were several
holdings that contributed to performance.
Research and selectivity are keys
We are keeping a watchful eye on upcoming economic reports and what they might
portend for fixed-income markets in the months ahead. Given the possibility of
further market weakness, we shall keep the portfolio's duration relatively
short. Despite the correction, we are confident that our extensive research
capabilities and heightened selectivity within the corporate arena shall serve
to benefit the Fund once the current uncertainties subside.
- --------------------------------------------------------------------------------
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.
"We are keeping a watchful eye on upcoming economic reports..."
5
<PAGE>
==============================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, 1999. You'll also
find the net asset value per share as of that date.
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Publicly traded bonds (cost - $162,316,195)................... $161,103,989
Preferred stocks and warrants (cost - $290,866) .............. 349,030
Joint repurchase agreement (cost - $5,968,000) ............... 5,968,000
Corporate savings account .................................... 322
--------------
167,421,341
Receivable for investments sold ............................... 2,507,625
Interest receivable ........................................... 3,043,381
Other assets .................................................. 12,519
--------------
Total Assets ............................ 172,984,866
--------------------------------------------------------
Liabilities:
Payable for investments purchased ............................. 3,325,232
Dividend payable .............................................. 340,344
Payable for futures variation margin - Note A ................. 4,362
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ...................................... 274,694
Accounts payable and accrued expenses ......................... 71,683
-------------
Total Liabilities ....................... 4,016,315
--------------------------------------------------------
Net Assets:
Capital paid-in ............................................... 171,293,278
Accumulated net realized loss on investments and
financial futures contracts .................................. (1,221,344)
Net unrealized depreciation of investments .................... (1,154,042)
Undistributed net investment income ........................... 50,659
-------------
Net Assets .............................. $168,968,551
========================================================
Net Asset Value Per Share:
(Based on 10,649,203 shares of beneficial
interest outstanding - 30 million shares
authorized with no par value) ................................ $15.87
=============================================================================
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Interest ...................................................... $6,528,688
-------------
Expenses:
Investment management fee - Note B ........................... 522,787
Transfer agent fee - Note B .................................. 52,865
Custodian fee ................................................ 33,417
Printing ..................................................... 29,010
Auditing fee ................................................. 20,209
Accounting and legal services fee - Note B ................... 12,313
New York Stock Exchange fee .................................. 11,957
Trustees' fees ............................................... 4,313
Miscellaneous ................................................ 2,956
Legal fees ................................................... 1,192
-------------
Total Expenses .......................... 691,019
--------------------------------------------------------
Net Investment Income ................... 5,837,669
--------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts:
Net realized loss on investments sold ........................ (619,035)
Net realized gain on financial futures contracts ............. 59,060
Change in net unrealized appreciation/depreciation
of investments .............................................. (7,605,481)
Change in net unrealized appreciation/depreciation
of financial futures contracts .............................. 326
-------------
Net Realized and Unrealized
Loss on Investments and
Financial Futures Contracts ............. (8,165,130)
--------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ............... ($2,327,461)
========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1999
1998 (UNAUDITED)
------------------- --------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ............................................................... $11,989,010 $5,837,669
Net realized loss on investments sold and financial futures contracts ............... (138,946) (559,975)
Change in net unrealized appreciation/depreciation of investments and
financial futures contracts ....................................................... 1,146,993 (7,605,155)
--------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations .................... 12,997,057 (2,327,461)
--------------- --------------
Distributions to Shareholders:
Dividends from net investment income ($1.1350 and $0.5475 per share, respectively) .. (11,996,781) (5,824,089)
--------------- --------------
From Fund Share Transactions - Net : *
(Market value of shares issued in reinvestment of distributions) .................... 1,839,203 340,239
--------------- --------------
Net Assets:
Beginning of period ................................................................. 173,940,383 176,779,862
--------------- --------------
End of period (including undistributed net investment income
of $37,079 and $50,659, respectively) .............................................. $176,779,862 $168,968,551
=============== ==============
* Analysis of Fund Share Transactions:
Shares outstanding, beginning of period ............................................. 10,511,835 10,626,882
Shares issued to shareholders in reinvestment of distributions ...................... 115,047 22,321
--------------- --------------
Shares outstanding, end of period ................................................... 10,626,882 10,649,203
=============== ==============
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.
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------------------ JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
---------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ..................... $16.97 $15.10 $16.74 $16.20 $16.55 $16.64
--------- --------- --------- --------- --------- ---------
Net Investment Income .................................... 1.28 1.26 1.22 1.20 1.14 0.55
Net Realized and Unrealized Gain (Loss) on Investments
and Financial Futures Contracts ......................... (1.79) 1.64 (0.54) 0.35 0.09 (0.77)
--------- --------- --------- --------- --------- ---------
Total from Investment Operations ....................... (0.51) 2.90 0.68 1.55 1.23 (0.22)
--------- --------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment Income ..................... (1.28) (1.26) (1.22) (1.20) (1.14) (0.55)
Distributions from Net Realized Gain on Investments Sold
and Financial Futures Contracts ......................... (0.08) - - - - -
--------- --------- --------- --------- --------- ---------
Total Distributions .................................... (1.36) (1.26) (1.22) (1.20) (1.14) (0.55)
--------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period ........................... $15.10 $16.74 $16.20 $16.55 $16.64 $15.87
========= ========= ========= ========= ========= =========
Per Share Market Value, End of Period .................... $13.750 $15.750 $14.875 $16.750 $15.875 $13.875
Total Investment Return at Market Value (1) .............. (8.70%) 24.11% 2.34% 21.57% 1.75% (9.27%)(2)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) ................. $154,116 $172,732 $168,961 $173,940 $176,780 $168,969
Ratio of Expenses to Average Net Assets .................. 0.87% 0.84% 0.84% 0.84% 0.81% 0.80%(3)
Ratio of Net Investment Income to Average Net Assets ..... 8.03% 7.77% 7.50% 7.34% 6.79% 6.76%(3)
Portfolio Turnover Rate .................................. 82% 105% 117% 143% 240% 96%
(1) Assumes dividend reinvestment.
(2) Not annualized.
(3) Annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
distributions and total investment return of the Fund. It shows how the Fund's
net asset value for a share has changed since the end of the previous period. It
also shows the total investment return for each period based on the market value
of Fund shares. Additionally, important relationships between some items
presented in the financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
Schedule of Investments
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by Income
Securities Trust on June 30, 1999. It's divided into three main categories:
publicly traded bonds, preferred stocks and warrants, and short-term
investments. The bonds are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
PUBLICLY TRADED BONDS
Aerospace (0.38%)
Jet Equipment Trust,
Equipment Trust Cert Ser 95B2 08-15-14 (R)......... 10.910% BBB- $550 $649,990
----------
Automobile/Trucks (0.91%)
Chrysler Financial Co. LLC,
Medium Term Note Ser S 11-15-01 .................. 5.690 A+ 515 508,089
ERAC USA Finance Co.,
Note 02-15-05 (R) ................................ 6.625 BBB+ 720 696,737
United Rentals, Inc.,
Note 04-01-09 (R) ................................ 9.000 BB- 345 338,100
----------
1,542,926
----------
Banks (7.37%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04 (Y) ............ 8.200 AA- 1,000 1,057,090
African Development Bank,
Sub Note (Supranational) 12-15-03 (Y) ............. 9.750 AA- 1,000 1,136,040
Banc One Corp.,
Sub Deb 10-15-26 ................................. 7.625 A 510 510,688
Bank of Boston,
Sub Note 12-01-05 ................................ 6.625 BBB+ 455 444,922
Bank of New York,
Cap Security 12-01-26 (R) ........................ 7.780 A- 595 581,012
Barclays North American Capital Corp.,
Gtd Cap Note 05-15-21 ............................ 9.750 AA- 900 976,401
First Union National Bank,
Sub Note 12-01-28 ................................ 6.500 A 500 433,965
National Westminster Bank Plc - New York Branch,
Sub Note 05-01-01 ................................ 9.450 AA- 1,250 1,320,400
NB Capital Trust IV,
Gtd Cap Security 04-15-27 ........................ 8.250 A- 335 341,221
Scotland International Finance No. 2 B.V.,
Gtd Sub Note (United Kingdom) 01-27-04 (R) (Y) .... 8.800 A 2,000 2,152,640
Gtd Sub Note (United Kingdom) 11-01-06 (R) (Y) .... 8.850 A+ 750 820,312
Security Pacific Corp.,
Medium Term Sub Note 04-26-01 .................... 10.500 A 1,500 1,606,365
Sub Note 11-15-00 ................................ 11.500 A 1,000 1,069,790
----------
12,450,846
----------
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Beverages (0.27%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 ....................... 8.750% B+ $460 $451,950
----------
Broker Services (0.27%)
Merrill Lynch & Co., Inc.,
Note 11-15-18 .................................... 6.875 AA- 490 459,532
----------
Building (0.42%)
Oakwood Homes Corp.,
Sr Note 03-01-04 ................................. 7.875 BBB- 295 286,427
Owens Corning,
Note 03-15-09 .................................... 7.000 BBB- 455 428,856
----------
715,283
----------
Chemicals (0.71%)
Akzo Nobel, Inc.,
Note 11-15-03 (R) ................................ 6.000 A 325 315,250
Equistar Chemicals, L.P.,
Sr Note 02-15-04 (R) ............................. 8.500 BBB- 440 440,000
Monsanto Co.,
Deb 12-01-28 (R) ................................. 6.600 A 500 450,300
----------
1,205,550
----------
Computers (0.93%)
Ceridian Corp.,
Sr Note 06-01-04 (R) ............................. 7.250 BBB 425 425,358
Primark Corp.,
Sr Sub Note 12-15-08 ............................. 9.250 B+ 365 346,750
PSINet, Inc.,
Sr Note 11-01-08 ................................. 11.500 B- 325 341,250
Verio, Inc.,
Sr Note 04-01-05 ................................. 10.375 B- 450 454,500
----------
1,567,858
----------
Cosmetics & Personal Care (0.43%)
Johnson & Johnson,
Deb 11-15-23 ..................................... 6.730 AAA 750 731,707
----------
Energy (0.90%)
AES Corp.,
Sr Sub Note 07-15-06 ............................. 10.250 B+ 695 715,850
CalEnergy Co., Inc.,
Sr Bond 09-15-28 ................................. 8.480 BBB- 325 346,834
P & L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 ....................... 9.625 B 455 452,725
----------
1,515,409
----------
Finance (3.97%)
Bombardier Capital, Inc.,
Note 01-15-02 (R) ................................ 6.000 BBB+ 520 508,820
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Finance (continued)
CIT Group Holdings, Inc.,
Deb 03-15-01 ..................................... 9.250% A $1,000 $1,048,290
Note 10-15-01 .................................... 5.500 A+ 630 619,227
Constitution Capital Trust I,
Gtd Cap Security 04-15-27 (R) .................... 9.150 BBB 420 422,575
FINOVA Capital Corp.,
Note 11-01-02 .................................... 6.250 A- 470 463,044
Ford Motor Credit Co.,
Note 04-28-03 .................................... 6.125 A 630 621,142
General Motors Acceptance Corp.,
Note 12-01-01 .................................... 6.375 A 630 629,811
Household Finance Corp.,
Note 11-01-02 .................................... 5.875 A 785 764,354
Note 02-01-09 .................................... 5.875 A 370 336,160
Marlin Water Trust & Marlin Water Capital Corp.,
Sr Sec Note 12-15-01 (R) ......................... 7.090 BBB 625 626,562
Merrill Lynch Mortgage Investors, Inc.,
Sub Bond Ser 1992-B Class B 04-15-12 ............. 8.500 Aaa 245 246,088
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A 06-15-04 (R) ............ 8.400 BBB- 457 422,559
----------
6,708,632
----------
Food (0.18%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 ............................. 11.875 B 300 309,000
----------
Government - Foreign (1.18%)
Nova Scotia, Province of,
Deb (Canada) 04-01-22 (Y) ......................... 8.750 A- 750 884,415
Ontario, Province of,
Bond (Canada) 06-04-02 (Y) ........................ 7.750 AA- 500 520,690
Saskatchewan, Province of,
Bond (Canada) 12-15-20 (Y) ........................ 9.375 A 480 597,038
----------
2,002,143
----------
Government - U.S. (19.75%)
United States Treasury,
Bond 08-15-05 .................................... 10.750 Aaa 885 1,100,161
Bond 08-15-17 .................................... 8.875 Aaa 3,855 4,924,762
Bond 05-15-18 .................................... 9.125 Aaa 2,250 2,949,255
Bond 02-15-23 .................................... 7.125 Aaa 9,485 10,512,036
Note 05-15-01 .................................... 8.000 Aaa 278 290,076
Note 05-15-02 .................................... 7.500 Aaa 2,646 2,775,813
Note 08-15-03 .................................... 5.750 Aaa 2,750 2,751,705
Note 02-15-05 .................................... 7.500 Aaa 2,450 2,637,572
Note 07-15-06 .................................... 7.000 Aaa 5,124 5,427,443
----------
33,368,823
----------
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Government - U.S. Agencies (9.77%)
Federal Home Loan Mortgage Corp.,
20 Yr Pass Thru Ctf 01-01-16 ..................... 11.250% AAA $273 $298,611
Federal National Mortgage Assn.,
15 Yr SF Pass Thru Ctf 02-01-08 .................. 7.500 AAA 164 167,368
15 Yr SF Pass Thru Ctf 09-01-10 .................. 7.000 AAA 566 568,118
15 Yr SF Pass Thru Ctf 09-01-12 .................. 7.000 AAA 156 156,274
15 Yr SF Pass Thru Ctf 12-01-12 .................. 6.500 AAA 1,134 1,117,713
30 Yr Pass Thru Ctf 11-01-28 ..................... 6.500 AAA 290 280,757
30 Yr SF Pass Thru Ctf 10-01-23 .................. 7.000 AAA 523 518,072
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 ..... 6.940 AAA 358 362,919
Financing Corp.,
Bond 02-08-18 .................................... 9.400 AAA 2,000 2,591,240
Government National Mortgage Assn.,
30 Yr SF Pass Thru Ctf 07-15-28 to 04-15-29 ....... 6.500 AAA 2,586 2,487,167
30 Yr SF Pass Thru Ctf 02-15-28 to 04-15-29 ....... 7.000 AAA 3,387 3,342,141
30 Yr SF Pass Thru Ctf 02-15-24 to 07-22-29 + ..... 7.500 AAA 2,333 2,356,428
30 Yr SF Pass Thru Ctf 08-15-26 ................... 8.000 AAA 291 299,405
30 Yr SF Pass Thru Ctf 04-15-21 ................... 9.000 AAA 232 246,899
30 Yr SF Pass Thru Ctf 11-15-19 to 02-15-25 ....... 9.500 AAA 459 492,463
30 Yr SF Pass Thru Ctf 11-15-20 ................... 10.000 AAA 144 153,933
Tennessee Valley Authority,
Power Bonds 1989 Ser G 11-15-29 .................. 8.625 AAA 1,000 1,067,010
----------
16,506,518
----------
Insurance (3.64%)
Conseco, Inc.,
Note 06-15-05 .................................... 6.800 BBB 230 217,217
Equitable Life Assurance Society of the United States,
Surplus Note 12-01-05 (R) ........................ 6.950 A 550 548,944
Fairfax Financial Holdings Ltd.,
Note (Canada) 04-15-26 (Y) ........................ 8.300 BBB+ 425 408,038
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R) ........................ 8.200 A+ 475 505,723
Surplus Note 10-15-26 (R) ........................ 7.875 A+ 165 163,886
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) ........................ 7.625 AA 1,145 1,181,067
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) ........................ 7.500 AA- 1,500 1,461,465
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) ........................ 6.625 AA 725 697,812
URC Holdings Corp.,
Sr Note 06-30-06 (R) ............................. 7.875 A- 640 650,746
Willis Corroon Corp.,
Sr Sub Note 02-01-09 (R) ......................... 9.000 B+ 320 309,200
----------
6,144,098
----------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Leisure (2.15%)
Harrah's Operating Co., Inc.,
Sr Note 01-15-09 ................................. 7.500% BBB- $445 $431,267
Sr Sub Note 12-15-05 ............................. 7.875 BB+ 170 164,050
HMH Properties, Inc.,
Sr Note Ser A 08-01-05 ........................... 7.875 BB 280 263,900
Marvel Enterprises, Inc.,
Sr Note 06-15-09 (R) ............................. 12.000 NR 435 449,137
Premier Parks, Inc.,
Sr Note 06-15-07 ................................. 9.750 B- 250 252,500
SC International Services, Inc.,
Sr Sub Note Ser B 09-01-07 ....................... 9.250 B 300 309,000
SFX Entertainment, Inc.,
Sr Sub Note 12-01-08 ............................. 9.125 B- 510 494,700
Sun International Hotels Ltd.,
Sr Sub Note (Bahamas) 03-15-07 (Y) ............... 9.000 B+ 230 230,000
Sr Sub Note (Bahamas) 12-15-07 (Y) ............... 8.625 B+ 260 254,800
Trump Hotels & Casino Resorts Funding, Inc./Holdings, L.P.,
Sr Note 06-15-05 ................................. 15.500 B- 550 561,000
Waterford Gaming LLC,
Sr Note 03-15-10 (R) ............................. 9.500 B+ 220 220,000
----------
3,630,354
----------
Manufacturing (0.03%)
Globe Manufacturing Corp.,
Sr Sub Note Ser B 08-01-08 ....................... 10.000 B- 68 51,000
----------
Media (6.66%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 ........................... 9.250 B+ 550 556,875
Sr Note Ser B 07-15-03 ........................... 8.125 B 265 257,050
Century Communications Corp.,
Sr Note 08-15-00 ................................. 9.500 BB- 280 285,600
Comcast Cellular Holdings, Inc.,
Sr Note Ser B 05-01-07 ........................... 9.500 BBB- 920 1,025,800
Continental Cablevision, Inc.,
Sr Note 05-15-06 ................................. 8.300 BBB 435 462,140
CSC Holdings, Inc.,
Sr Note 07-15-08 ................................. 7.250 BB+ 335 319,155
Sr Sub Deb 05-15-16 .............................. 10.500 BB- 320 368,000
Falcon Holdings Group L.P./Falcon Funding Corp.,
Sr Deb Ser B 04-15-10 ............................ 8.375 B 315 311,063
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 (R) ......................... 8.625 B+ 275 258,500
Sr Sub Note Ser B 10-01-09 ....................... 8.750 B+ 276 269,790
Liberty Media Group,
Note 07-15-29 (R) + ............................... 8.500 BBB- 570 568,444
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 ........................... 8.500 B+ 325 312,000
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Media (continued)
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 .............................. 8.250% BBB- $552 $568,864
Rogers Cablesystems Ltd.,
Sr Note Ser B (Canada) 03-15-05 (Y) ............... 10.000 BB+ 800 856,000
Sr Sec 2nd Priority Note (Canada) 08-01-02 (Y) .... 9.625 BB+ 300 314,250
SFX Broadcasting, Inc.,
Sr Sub Note Ser B 05-15-06 ....................... 10.750 B- 330 358,875
TCI Communications, Inc.,
Sr Deb 02-15-26 .................................. 7.875 AA- 500 526,920
Time Warner, Inc.,
Deb 01-15-13 ..................................... 9.125 BBB 539 610,180
Deb 05-15-29 ..................................... 6.625 BBB 490 432,278
TKR Cable I, Inc.,
Sr Deb 10-30-07 .................................. 10.500 AA- 1,955 2,083,404
TV Guide, Inc.,
Sr Sub Note 03-01-09 (R) ......................... 8.125 B+ 545 516,387
----------
11,261,575
----------
Medical (1.44%)
Dynacare, Inc.,
Sr Note Ser B (Canada) 01-15-06 (R) (Y) ........... 10.750 B+ 280 282,800
Sr Note (Canada) 01-15-06 (Y) ..................... 10.750 B+ 275 277,750
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08 ............ 7.875 B+ 405 376,650
Guidant Corp.,
Note 02-15-06 .................................... 6.150 A- 420 393,750
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 ............................. 10.750 B+ 360 410,400
Sr Sub Note 07-01-09 (R) + ....................... 9.875 B+ 385 390,775
Sola International, Inc.,
Note 03-15-08 .................................... 6.875 BBB- 140 122,637
Watson Pharmaceuticals, Inc.,
Sr Note 05-15-08 ................................. 7.125 BBB- 190 181,450
----------
2,436,212
----------
Metal (0.62%)
Golden Northwest Aluminium, Inc.,
1st Mtg Note 12-15-06 ............................ 12.000 BB- 280 289,100
National Steel Corp.,
1st Mtg Bond Ser D 03-01-09 (R) .................. 9.875 NR 290 295,800
Rohm & Haas Co.,
Deb 07-15-29 (R) ................................. 7.850 A- 455 454,668
----------
1,039,568
----------
Mortgage Banking (3.69%)
Citibank Credit Card Master Trust I,
Pass Thru Ctf Ser 1997-7 Class A 08-15-02 ........ 6.350 AAA 1,010 1,016,868
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 ...... 8.100 AAA 425 435,625
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Mortgage Banking (continued)
Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mtg Pass Thru
Ctf Ser 1998-C1 Class A-1A 12-17-07 .............. 6.260% AAA $629 $618,624
Deutsche Mortgage & Asset Receiving Corp.,
Commercial Mtg Pass Thru
Ctf Ser 1998-C1 Class C 03-15-08 ................ 6.861 A2 415 396,374
First Union-Lehman Brothers-Bank of America,
Pass Thru Ctf Ser 1998-C2 Class A-1 06-18-07 ..... 6.280 AAA 482 475,622
FirstPlus Home Loan Trust,
Pass Thru Ctf Ser 1998-4 Class A-5 01-01-01 ...... 6.380 AAA 730 712,406
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C2 Class A-3 11-15-07 ..... 6.566 Aaa 705 684,731
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-1 Class A-5 12-25-13 ...... 6.290 AAA 720 720,468
Salomon Brothers Mortgage Securities VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2 Class A-2 07-25-24 6.750 Aaa 454 452,014
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1996-D1 Class A6 02-15-25 ...... 7.180 AAA 710 716,212
----------
6,228,944
----------
Oil & Gas (2.50%)
Burlington Resources, Inc.,
Deb 03-01-29 ..................................... 7.375 A- 500 493,650
Camuzzi Gas Pampeana S.A.,
Bond (Argentina) 12-15-01 (Y) ..................... 9.250 BBB- 145 142,100
CMS Panhandle Holding Co.,
Sr Note 07-15-29 (R) ............................. 7.000 BBB- 325 297,375
Conoco, Inc.,
Note 04-15-29 .................................... 6.950 A- 490 458,748
El Paso Energy Corp.,
Sr Note 05-15-09 ................................. 6.750 BBB- 390 372,450
Occidental Petroleum Corp.,
Sr Deb 09-15-09 .................................. 10.125 BBB 600 697,824
PEMEX Finance Ltd.,
Note (Cayman Islands) 02-15-08 (R) (Y) ............ 6.550 AAA 465 448,725
Petroleos Mexicanos,
Gtd Sr Note (Mexico) 12-02-08 (R) (Y) ............. 9.375 BB 210 205,800
Petroleum Geo-Services,
Sr Note (Norway) 03-30-08 (Y) ..................... 6.625 BBB 480 451,838
Triton Energy Ltd.,
Sr Note 04-15-02 ................................. 8.750 B+ 515 504,700
Valero Energy Corp.,
Note 03-15-06 .................................... 7.375 BBB- 150 145,821
----------
4,219,031
----------
Paper & Paper Products (0.94%)
Fort James Corp.,
Sr Note 09-15-02 ................................. 6.500 BBB- 470 470,141
Packaging Corp. of America,
Sr Sub Note 04-01-09 (R) ......................... 9.625 B 350 355,250
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Paper & Paper Products (continued)
S.D. Warren Co.,
Sr Sub Note Ser B 12-15-04 ....................... 12.000% B+ $707 $754,722
----------
1,580,113
----------
Real Estate Investment Trust (1.40%)
American Health Properties, Inc.,
Note 01-15-07 .................................... 7.500 BBB- 410 357,110
Cabot Industrial Properties, L.P.,
Note 05-01-04 .................................... 7.125 BBB- 380 370,234
Camden Property Trust,
Note 04-15-04 .................................... 7.000 BBB 420 410,857
Liberty Property L.P.,
Medium Term Note 06-05-02 ........................ 6.600 BBB- 355 344,350
ProLogis Trust,
Note 04-15-04 .................................... 6.700 BBB+ 390 378,300
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 .................................... 7.300 BBB- 500 495,745
----------
2,356,596
----------
Retail (1.30%)
Great Atlantic & Pacific Tea Co., Inc. (The),
Note 04-15-07 .................................... 7.750 BBB- 530 513,204
Meyer (Fred), Inc.,
Note 03-01-08 .................................... 7.450 BBB- 810 817,168
Pathmark Stores, Inc.,
Sub Note 06-15-02 ................................ 11.625 CCC+ 580 591,600
Safeway, Inc.,
Note 11-15-01 .................................... 5.875 BBB 280 275,352
----------
2,197,324
----------
Telecommunications (6.00%)
AXIA, Inc.,
Sr Sub Note 07-15-08 ............................. 10.750 B- 190 187,150
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon (10.125%, 05-01-04)
(Canada) 05-01-09 (A) (Y) ....................... Zero NR 370 210,900
Electric Lightwave, Inc.,
Note 05-15-04 (R) ................................ 6.050 AA- 225 218,531
Global Crossing Holdings Ltd.,
Sr Note 05-15-08 ................................. 9.625 BB 350 378,000
GTE North, Inc.,
Deb Ser H 11-15-08 ............................... 5.650 AA- 645 593,781
Hermes Europe Railtel BV,
Sr Note (Netherlands) 08-15-07 (Y) ................ 11.500 B 275 288,063
Sr Note (Netherlands) 01-15-09 (Y) ................ 10.375 B 165 167,063
Intermedia Communications, Inc.,
Sr Note Ser B 06-01-08 ........................... 8.600 B 70 64,400
LCI International, Inc.,
Sr Note 06-15-07 ................................. 7.250 BB+ 425 417,312
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Telecommunications (continued)
Lenfest Communications,
Sr Sub Note 06-15-06 ............................. 10.500% BB- $630 $724,500
McLeodUSA, Inc.,
Sr Note 11-01-08 ................................. 9.500 B+ 355 356,775
Sr Note 02-15-09 (R) ............................. 8.125 B+ 320 297,600
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 ........................... 10.000 B 530 544,575
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 (Y) ..................... 12.000 B 280 325,850
National Communications Corp.,
Sr Note 10-01-08 (R) ............................. 11.500 B- 425 465,375
Nextel Communications, Inc.,
Sr Disc Note 08-15-04 ............................. 9.750 B- 302 306,530
Sr Disc Note, Step Coupon (9.95%, 02-15-03)
02-15-08 (A) ................................... Zero B- 235 162,150
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 ................................. 10.750 B 365 375,038
Orange Plc,
Sr Note (United Kingdom) 08-01-08 (Y) ............. 8.000 BB- 425 402,688
Pegasus Communications Corp.,
Sr Note Ser B 10-15-05 ........................... 9.625 B- 175 171,500
Qwest Communications International, Inc.,
Sr Note Ser B 11-01-08 ........................... 7.250 BB+ 445 429,425
RCN Corp.,
Sr Note 10-15-07 ................................. 10.000 NR 255 256,275
Sprint Capital Corp.,
Note 05-01-19 .................................... 6.900 BBB+ 490 453,730
Viatel, Inc.,
Sr Note 04-15-08 ................................. 11.250 NR 450 456,750
WorldCom, Inc.,
Note 08-15-01 .................................... 6.125 A- 715 712,741
Note 08-15-28 .................................... 6.950 BBB+ 725 687,264
Worldwide Fiber, Inc.,
Sr Note (Canada) 12-15-05 (R) (Y) ................. 12.500 B- 485 487,425
----------
10,141,391
----------
Textile (0.34%)
Tropical Sportswear International Corp.,
Sr Sub Note Ser A 06-15-08 ....................... 11.000 B- 150 155,625
WestPoint Stevens, Inc.,
Sr Note 06-15-05 ................................. 7.875 BB 425 415,437
----------
571,062
----------
Transportation (5.19%)
America West Airlines,
Pass Thru Ctf Ser B 01-02-08 ..................... 6.930 A- 435 422,793
Continental Airlines,
Pass Thru Ctf Ser 1996-C 10-15-13 ................ 9.500 BBB+ 465 494,110
Pass Thru Ctf Ser 1999-1A 02-02-19 ............... 6.545 AA+ 630 593,775
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Transportation (continued)
Continental Airlines, Inc.,
Sr Note 12-15-05 ................................. 8.000% BB- $450 $439,875
Fine Air Services, Inc.,
Sr Sub Note 06-01-08 ............................. 9.875 B 440 396,000
Humpuss Funding Corp.,
Gtd Note (Indonesia) 12-15-09 (R) (Y) ............. 7.720 B3 491 335,568
Northwest Airlines, Inc.,
Note 03-15-04 .................................... 8.375 BB 525 505,292
Northwest Airlines 1996-1 Pass Thru Trusts,
Pass Thru Ctf Ser 1996-1C 01-02-05 ............... 10.150 BBB- 273 275,506
Pass Thru Ctf Ser 1996-1D 01-02-15 ............... 8.970 BBB- 381 381,490
NWA Trust,
Sr Note Ser A 12-21-12 ........................... 9.250 AA 571 618,472
Railcar Trust No. 1992-1,
Pass Thru Ser 1992-1 Class A 06-01-04 ............ 7.750 AAA 1,189 1,225,644
Scandinavian Airlines System,
Deb (Sweden) 07-20-99 (Y) ......................... 9.125 A3 700 701,750
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1 03-19-05 ............... 11.200 BB 853 916,470
Ucar Global Enterprises, Inc.,
Sr Sub Note Ser B 01-15-05 ....................... 12.000 B 720 763,200
Union Pacific Corp.,
Deb 02-01-29 ..................................... 6.625 BBB- 490 429,691
Wisconsin Central Transportation Corp.,
Note 04-15-08 .................................... 6.625 BBB- 290 276,950
----------
8,776,586
----------
Utilities (12.00%)
AES Eastern Energy,
Pass Thru Ctf 07-02-17 (R) ....................... 9.000 BBB- 410 397,331
Beaver Valley Funding Corp.,
Sec Lease Oblig Bond 06-01-17 .................... 9.000 BB- 588 629,160
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 ............... 8.890 BB- 700 755,125
Calpine Corp.,
Sr Note 05-15-06 ................................. 10.500 BB 465 497,550
Sr Note 04-15-09 ................................. 7.750 BB 415 394,250
CE Casecnan Water & Energy Co., Inc.,
Sr Note Ser A (Philippine Islands) 11-15-05 (Y) ... 11.450 BB+ 400 356,000
Chugach Electric Association, Inc.,
1st Mtg 1991 Ser A 03-15-22 ...................... 9.140 A 2,000 2,276,980
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 ........................... 9.500 BB+ 1,205 1,274,287
CMS Energy Corp.,
Sr Note Ser B 01-15-04 (R) ....................... 6.750 NR 400 379,268
Sr Note 01-15-09 ................................. 7.500 BB 590 542,800
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
PAR VALUE
INTEREST CREDIT (000s MARKET
ISSUER, DESCRIPTION RATE RATING* OMITTED) VALUE
- ------------------- ---- ------- ------- -----
<S> <C> <C> <C> <C>
Utilities (continued)
Connecticut Light & Power Co.,
1st Ref Mtg Ser C 06-01-02 ....................... 7.750% BBB- $215 $220,040
Note 06-05-03 (R) ................................ 8.590 NR 275 275,358
East Coast Power, LLC,
Sec Note 03-31-12 (R) ............................ 7.066 BBB- 525 480,867
EIP Funding-PNM,
Sec Fac Bond 10-01-12 ............................ 10.250 BB- 692 769,269
GG1B Funding Corp.,
Deb 01-15-11 ..................................... 7.430 BBB- 414 403,482
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 (Y) .................... 9.400 A+ 735 901,125
Gtd Bond (Canada) 01-15-22 (Y) .................... 8.400 A+ 340 379,987
Gtd Deb Ser IF (Canada) 02-01-03 (Y) .............. 7.375 A+ 750 770,700
Iberdrola International B.V.,
Note (Spain) 10-01-02 (Y) ......................... 7.500 AA- 2,000 2,065,140
Long Island Lighting Co.,
Deb 03-15-23 ..................................... 8.200 A- 640 667,200
Midland Cogeneration Venture L.P.,
Sec Deb Ser C-91 07-23-02 ........................ 10.330 BBB- 750 790,910
Midland Funding Corp. II,
Deb Ser A 07-23-05 ............................... 11.750 BB 575 655,500
Deb Ser B 07-23-06 ............................... 13.250 BB 225 268,958
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico) 11-15-09 (R) (Y) ............. 9.625 BB 155 131,750
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 ............................ 8.770 BBB- 775 809,580
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 ........................... 9.050 BB- 415 426,670
Northeast Utilities,
Note Ser A 12-01-06 .............................. 8.580 BB- 114 112,932
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A Class A-6 03-01-09 ...... 6.050 AAA 500 478,905
PNPP II Funding Corp.,
Deb 05-30-16 ..................................... 9.120 BB- 435 473,062
System Energy Resources, Inc.,
1st Mtg Bond 08-01-01 ............................ 7.710 BBB- 615 622,687
U.S. West Capital Funding, Inc.,
Deb 07-15-28 ..................................... 6.875 A- 165 150,794
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 ............... 8.090 BBB- 921 926,301
----------
20,283,968
----------
TOTAL PUBLICLY TRADED BONDS
(Cost $162,316,195) (95.34%) 161,103,989
-------- -----------
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Income Securities Trust
NUMBER OF MARKET
SHARES OR WARRANTS VALUE
------------------ -------------
<S> <C> <C>
PREFERRED STOCKS AND WARRANTS
CSC Holdings, Inc., 11.750%, Ser H, Preferred Stock ................... 920 $102,580
MetroNet Communications Corp., Warrant (Canada) (R) (Y)** ............. 530 55,650
Packaging Corp. of America, 12.375%, Preferred Stock (R) ............. 1,800 190,800
----------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $290,866) (0.21%) 349,030
------- ----------
INTEREST PAR VALUE
RATE (000S OMITTED)
--------- ---------------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.53%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. - Dated
06-30-99, due 07-01-99 (Secured by U.S.
Treasury Bonds 9.875% due 11-15-15 and
11.250% due 02-15-15) - Note A .............................. 4.800% $5,968 5,968,000
----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily Interest Savings Account
Current Rate 4.00% ........................................... 322
-----------
TOTAL SHORT-TERM INVESTMENTS (3.53%) 5,968,322
-------- -----------
TOTAL INVESTMENTS (99.08%) 167,421,341
-------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.92%) 1,547,210
-------- -----------
TOTAL NET ASSETS (100.00%) $168,968,551
======== ============
</TABLE>
(A) Cash interest will be paid on this obligation at the stated rate beginning
on the stated date.
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $22,828,242 or 13.51% of the Fund's net assets as of
June 30, 1999.
(Y) Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer; however, security is U.S. dollar
denominated.
+ A portion of these securities having an aggregate value of $1,605,222 or
0.95% of the Fund's net assets, have been purchased as a forward
commitments; that is, the Fund has agreed on trade date to take delivery of
and make payment for such securities on a delayed basis subsequent to the
date of this schedule. The purchase price and interest rate of such
securities are fixed at trade date, although the Fund does not earn any
interest on such securities until settlement date. The Fund has instructed
its Custodian Bank to segregate assets with a current value at least equal
to the amount of the forward commitment. Accordingly, the market value of
$1,646,602 of United States Treasury Bond, 9.125%, 05-15-18 has been
segregated to cover the forward commitment.
* Credit ratings are unaudited and rated by Standard & Poor's where available,
or Moody's Investors Service or John Hancock Advisers, Inc. where Standard &
Poor's ratings are not available.
** Non-income producing security.
NR = Not Rated
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.
20
<PAGE>
===========================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,
Inc., may participate in a joint repurchase agreement transaction. Aggregate
cash balances are invested in one or more repurchase agreements whose underlying
securities are obligations of the U.S. government and/or its agencies. The
Fund's custodian bank receives delivery of the underlying securities for the
joint account on the Fund's behalf. The Adviser is responsible for ensuring that
the agreement is fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, the Fund has $68,423 of capital loss carryforwards
available, to the extent provided by regulations, to offset future net realized
capital gains. If such carryforwards are used by the Fund, no capital gains
distributions will be made. The carryforward expires as follows: December 31,
2004 - $32,498 and December 31, 2005 - $35,925.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Interest income on investment securities
is recorded on the accrual basis.
The Fund records all dividends and distributions to shareholders from
net investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with federal income tax regulations,
which may differ from generally accepted accounting principles.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
DISCOUNT ON SECURITIES The Fund accretes original issue discount from par value
on securities purchased from either the date of issue or the date of purchase
over the life of the security, as required by the Internal Revenue Code.
FINANCIAL FUTURES CONTRACTS The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. Buying futures tends to increase the Fund's exposure to
the underlying instrument. Selling futures tends to decrease the Fund's exposure
to the underlying instrument or hedge other Fund instruments. At the time the
Fund enters into a financial futures contract, it will be required to deposit
with its custodian a specified amount of cash or U.S. government securities,
known as "initial margin," equal to a certain percentage of the value of the
financial future 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, 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.
21
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - Income Securities Trust
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange.
For federal income tax purposes, the amount, character and timing of
the Fund's gains and/or losses can be affected as a result of futures
transactions.
At June 30, 1999, there were no open positions in financial futures
contracts.
OPTIONS Listed options are valued at the last quoted sales price on the
exchange on which they are primarily traded. Over-the-counter options are valued
at the mean between the last bid and asked prices. Upon the writing of a call or
put option, an amount equal to the premium received by the Fund is included in
the Statement of Assets and Liabilities as an asset and corresponding liability.
The amount of the liability is subsequently marked to market to reflect the
current market value of the written option.
The Fund may use option contracts to manage its exposure to the stock
market. Writing puts and buying calls tend to increase the Fund's exposure to
the underlying instrument and buying puts and writing calls tend to decrease the
Fund's exposure to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited
to the premium initially paid for the option. In all other cases, the face (or
"notional") amount of each contract at value reflects the maximum exposure of
the Fund in these contracts, but the actual exposure will be limited to the
change in value of the contract over the period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms ("credit risk"), or if the Fund is unable to offset a contract
with a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options have minimal credit risk as the exchanges act as counterparties to each
transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit risk and liquidity risks in over-the-counter
option contracts, the Fund will continuously monitor the creditworthiness of all
its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's period-end
Statement of Assets and Liabilities.
There were no written option transactions for the period ended June 30,
1999.
NOTE B -
MANAGEMENT FEE AND ADMINISTRATIVE SERVICES
Under the present investment management contract, the Fund pays a quarterly
management fee to the Adviser, for a continuous investment program, equivalent
on an annual basis, to the sum of (a) 0.650% of the first $150,000,000 of the
Fund's average weekly net asset value, (b) 0.375% of the next $50,000,000, (c)
0.350% of the next $100,000,000 and (d) 0.300% of the Fund's average weekly net
asset value in excess of $300,000,000.
In the event normal operating expenses of the Fund, exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, exceed 1.5% of the
first $30,000,000 of the Fund's average weekly net asset value and 1.0% of the
Fund's average weekly net asset value in excess of $30,000,000, the fee payable
to the Adviser will be reduced to the extent of such excess and the Adviser will
make additional arrangements necessary to eliminate any remaining excess
expenses.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the period was
at an annual rate of less than 0.02% of the average net assets of the Fund.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon
and Mr. Richard S. Scipione are trustees and/or officers of the Adviser and/or
its affiliates, as well as Trustees of the Fund. The compensation of
unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect
to defer for tax purposes their receipt of this compensation under the John
Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments
into other John Hancock funds, as applicable, to cover its liability for the
deferred compensation.
22
<PAGE>
===========================NOTES TO FINANCIAL STATEMENTS========================
John Hancock Funds - Income Securities Trust
Investments to cover the Fund's deferred compensation liability are recorded on
the Fund's books as an other asset. The deferred compensation liability and the
related other asset are always equal and are marked to market on a periodic
basis to reflect any income earned by the investment as well as any unrealized
gains or losses. The investment had no impact on the operations of the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended June 30, 1999 aggregated $82,189,506 and $80,399,702, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies aggregated $75,497,887 and $78,807,915, respectively.
The cost of investments owned at June 30, 1999 (excluding the corporate
savings account) for federal income tax purposes was $168,791,934. Gross
unrealized appreciation and depreciation of investments at June 30, 1999
aggregated $2,775,785 and $4,146,700, respectively, resulting in net unrealized
depreciation of $1,370,915.
23
<PAGE>
================================================================================
John Hancock Funds - Income Securities Trust
DIVIDENDS AND DISTRIBUTIONS
During 1999, dividends from net investment income totaling $0.5475 per share
were paid to shareholders. The dates of payment and the amounts per share are as
follows:
INCOME
PAYMENT DATE DIVIDEND
- ------------ --------
March 30, 1999 $0.2725
June 30, 1999 0.2750
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 331/3% 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
24
<PAGE>
================================================================================
John Hancock Funds - Income Securities Trust
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.
All correspondence or additional information concerning the plan should
be directed to the Plan Agent, State Street Bank and Trust Company, at P.O. Box
8209, Boston, Massachusetts 02266-8209, (telephone 1-800-426-5523).
YEAR 2000 COMPLIANCE
The Adviser and the Fund's service providers are taking steps to address any
year 2000-related computer problems. However, there is some risk that these
problems could disrupt the Fund's operations or financial markets generally.
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning the John Hancock Income Securities Trust,
we will be pleased to assist you. If you hold shares in your own name and not
with a brokerage firm, please address all notices, correspondence, questions or
other communications regarding the Fund to the transfer agent at:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 426-5523
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
25
<PAGE>
================================================================================
John Hancock Funds - Income Securities Trust
SHAREHOLDER MEETING
On March 18, 1999, the Annual Meeting of John Hancock Income Securities Trust
was held.
The shareholders elected the following Trustees with the votes as
indicated:
NAME OF TRUSTEE FOR WITHHELD
- --------------- --- --------
Dennis S. Aronowitz 7,965,470 128,617
Edward J. Boudreau, Jr. 7,958,228 135,859
Stephen L. Brown 7,967,585 126,503
Richard P. Chapman, Jr. 7,952,989 141,099
William J. Cosgrove 7,967,077 127,010
Douglas M. Costle 7,967,568 126,519
Leland O. Erdahl 7,968,038 126,050
Richard A. Farrell 7,955,554 138,534
Gail D. Fosler 7,963,878 130,209
William F. Glavin 7,954,800 139,288
Anne C. Hodsdon 7,956,963 137,124
Dr. John A. Moore 7,956,674 128,414
Patti McGill Peterson 7,952,936 141,151
John W. Pratt 7,968,000 126,087
Richard S. Scipione 7,964,763 129,325
The shareholders also ratified the Trustees' Selection of Ernst & Young
LLP as auditors for the fiscal year ending December 31, 1999, with the votes
tabulated as follows: 7,975,687 FOR, 28,498 AGAINST and 99,902 ABSTAINING.
26
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Income Securities Trust
27
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