August 25, 2004
EDGAR
United States Securities and
Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form N-CSR
John Hancock Income Securities Trust (the "Registrant")
File Nos. 811-4186
Ladies and Gentlemen:
Enclosed herewith for filing pursuant to the Investment Company Act of
1940 and the Securities Exchange Act of 1934 is the Registrant's Form
N-CSR filing for the period ending June 30, 2004.
If you have any questions or comments regarding this filing, please
contact the undersigned at (617) 375-1513.
Sincerely,
/s/Alfred P. Ouellette
Alfred Ouellette
Attorney and Assistant Secretary
ITEM 1. REPORT TO SHAREHOLDERS.
JOHN HANCOCK
Income Securities Trust
6.30.2004
Semiannual Report
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of James A. Shepherdson, Chairman President and Chief Executive
Officer, flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 17
For your information
page 33
To Our Shareholders,
I am pleased to be writing to you as Chairman, President and Chief
Executive Officer of John Hancock Funds, LLC.
As you may know, John Hancock Financial Services, Inc. -- the parent
company of John Hancock Funds -- was acquired by Manulife Financial
Corporation on April 28, 2004. Although this change has no impact on the
mutual funds you have invested in, it did bring with it some changes in
the executive-level management of John Hancock Funds. Specifically,
Maureen Ford Goldfarb has decided to step down as Chairman, President
and Chief Executive Officer of John Hancock Funds, LLC in order to
pursue personal interests, and I was named her replacement. Since her
appointment in January 2000, Maureen has provided John Hancock Funds
with strong leadership and steady guidance through several years of
extremely turbulent market and industry conditions.
Additionally, on May 12, 2004, your fund's Board of Trustees appointed
me to the roles of Trustee, President and Chief Executive Officer of
your fund. On June 15, 2004, the board also appointed Charles L. Ladner
as independent Chairman of the Board of Trustees, a position previously
held by Ms. Goldfarb. This appointment came just in advance of new SEC
regulations requiring all mutual funds to have independent chairmen.
As to our backgrounds, I have been in the investment business for over
25 years, most recently as President of Retirement Services at John
Hancock Financial Services. My responsibilities included developing and
directing the sale of John Hancock's variable and fixed annuity products
through a diverse distribution network of banks and broker-dealers --
including wirehouses, regional brokerage houses and financial planners.
Mr. Ladner has served as an independent member of John Hancock Funds'
Board of Trustees since 1992 and formerly held the position of Senior
Vice President and Chief Financial Officer of UGI Corporation, a public
utility holding company in Valley Forge, PA, until his retirement in
1998. He brings a wealth of knowledge, experience and leadership and we
are delighted to have him serve as Chairman.
Although there has been change in executive-level management, the one
thing that never wavers is John Hancock Funds' commitment to placing the
needs of our shareholders above all else. We are all dedicated to the
task of working with you and your financial advisor to help you reach
your long-term financial goals.
Sincerely,
/S/ JAMES A. SHEPHERDSON
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of June 30, 2004. They are
subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks a
high level of cur-
rent income
consistent with
prudent invest-
ment risk by
investing at least
80% of its assets
in a diversified
portfolio of
income securities.
Over the last six months
* Bonds posted mixed results as interest rates rose.
* Lower-quality corporate bonds and mortgage-backed securities posted
positive results, while Treasury bonds declined.
* The Fund reduced its overall risk profile during the period.
[Bar chart with heading "John Hancock Income Securities Trust." Under the
heading is a note that reads "Fund performance for the six months ended
June 30, 2004." The chart is scaled in increments of 1% with -1% at the
bottom and 1% at the top. The bar represents the -0.75% total return for
the Fund. A note below the chart reads "The total return for the Fund is at
net asset value with all distributions reinvested."]
Top 10 issuers
19.9% Federal National Mortgage Assn.
5.2% U.S. Treasury
3.1% Federal Home Loan Mortgage Corp.
1.2% General Motors Acceptance Corp.
1.0% Financing Corp.
1.0% Midland Funding Corp. II
0.9% NOVA Chemicals Corp.
0.8% Sprint Capital Corp.
0.8% Banc of America Mortgage Securities, Inc.
0.8% Office Depot, Inc.
As a percentage of net assets plus value of preferred shares on June 30, 2004.
1
BY BARRY H. EVANS, CFA, AND JEFFREY N. GIVEN, CFA, PORTFOLIO MANAGERS
MANAGERS'
REPORT
JOHN HANCOCK
Income Securities Trust
Rising interest rates dampened bond market performance during the first
six months of 2004. The robust economic recovery that blossomed in 2003
continued to gain momentum in the first half of 2004. The only missing
piece in the economic puzzle was job growth, which continued to
disappoint in the first quarter of the year. However, an upturn in the
employment numbers finally materialized in the last few months of the
period. The rebound in job growth, coupled with rising commodity prices
(particularly oil), led the Federal Reserve to raise short-term interest
rates on the final day of the period. The Fed's first rate hike in more
than four years increased the federal funds rate target from a 46-year
low of 1% to 1.25%.
"Rising interest rates
dampened bond
market performance dur
ing the first six months
of 2004."
The bond market rallied early in the year as job growth remained weak,
but the employment rebound in the latter part of the period sent yields
sharply higher, causing bonds to give up their earlier gains. Short-term
bond yields increased the most, reflecting expectations of more Fed rate
hikes later in the year. Despite the negative impact of rising interest
rates, bonds managed to tread water during the period -- the broad
Lehman Brothers U.S. Aggregate Index returned 0.15%.
Lower-quality corporate bonds and mortgage-backed securities, which are
among the highest-yielding segments of the bond market, were the best
performers during the period. Investment-grade corporate bonds and
Treasury securities posted modestly negative returns.
FUND PERFORMANCE
For the six months ended June 30, 2004, John Hancock Income Securities
Trust produced a total return of -0.75% at net asset value. The average
closed-end BBB-rated corporate debt fund returned 0.11% according to
Lipper, Inc., while the Lehman Brothers Government/Credit Bond Index
returned -0.19%. We
1
[Photos of Barry Evans and Jeff Given flush right at top of page.]
attribute our underperformance to the weak performance of a few select
corporate credits, and to insufficient weightings in both the high yield
and mortgage bond sectors.
CORPORATE BONDS BOOST RESULTS
Corporate bonds made up more than half of the portfolio during the
six-month period. The vast majority of the portfolio's corporate bonds
were lower-quality issues, which include below-investment-grade
securities and bonds rated BBB, the lowest investment-grade rating.
These securities were the best performers in the bond market during the
period.
Within the portfolio, the top performers included two lower-rated
credits, PDVSA Finance and XM Satellite Radio. PDVSA, the finance arm of
the state-run Venezuelan oil company, made a cash tender offer for its
bonds at a price above face value, and the bonds rallied in response. At
XM Satellite Radio, subscriber growth for the company's commercial-
free satellite radio service has been very strong, both in vehicles and
in homes. The nascent development of satellite radio is reminiscent of
the early days of cable television.
During the six-month period, we trimmed the portfolio's cable and media
bond holdings. These segments of the market had performed very well over
the past couple of years, so we reduced our exposure by taking some
profits in selected names, such as Clear Channel Communications and
Liberty Media. We increased the portfolio's exposure to finance-related
bonds, which offered attractive values. Recent additions to the
portfolio included insurance firm Liberty Mutual and Japanese banking
conglomerate Mizuho Finance.
"Mortgage-backed securi-
ties, which made up about
a quarter of the portfolio
during the period, also per
formed well."
MORTGAGES PAY OFF
Mortgage-backed securities, which made up about a quarter of the
portfolio during the period, also performed well. Mortgage-backed bonds
lagged the other sectors of the bond market in the first quarter of the
year as falling interest rates led to a brief mortgage refinancing wave.
However, when interest rates rose
3
[Table at top left-hand side of page entitled "Top five industry groups 1."
The first listing is Government--U.S. agencies 24%, the second is
Utilities 6%, the third is Telecommunications 6%, the fourth is
Government--U.S. 5% and the fifth is Finance 5%.]
later in the period, refinancing activity dropped off, allowing
mortgage-backed securities to hold their value better than most other
types of bonds.
TAKING SOME RISK OFF THE TABLE
We made no major changes to the portfolio during the period, but given
the rising interest rate environment, we made some modest adjustments to
reduce the portfolio's overall risk profile. For example, we reduced the
interest rate sensitivity of the portfolio to limit the negative impact
of higher rates. We also trimmed our exposure to preferred stocks --
which occupy the lower rungs of the capital structure -- and moved the
proceeds into Treasury bonds and mortgage-backed securities.
Although the credit quality of the portfolio remained roughly the same
throughout the period, we shortened the average maturity of the
portfolio's lower-quality corporate bond holdings. This helped lower the
degree of credit risk in the portfolio without changing its overall
credit quality.
[Pie chart at middle of page with heading "Portfolio diversification 1."
The chart is divided into five sections (from top to left): Corporate bonds
63%, U.S. government & agency bonds 24%, Preferred stocks 7%, Short-term
investments & other 5% and Foreign government bonds 1%.]
OUTLOOK
Economic growth has been moderating recently but remains quite strong
overall, and the inflation rate has picked up in the last six months.
Consequently, we expect the Fed to continue raising short-term interest
rates in the coming months, although it is likely to do so at a gradual
pace. As of June 30, the futures market was projecting a federal funds
rate target of 2.25% -- 2.50% by the end of 2004. This backdrop suggests
that bond yields will rise in the second half of 2004, but we think the
4
[Table at top of page entitled "SCORECARD." The header for the left column
is "INVESTMENT" and the header for the right column is "PERIOD'S
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is Corn
Products International followed by an up arrow with the phrase "Higher
earnings and reduced debt stoked expectations for a credit upgrade." The
second listing is Mizuho Finance followed by an up arrow with the phrase
"Benefited from growth in China and the strengthening Japanese bank
industry." The third listing is Golden State Tobacco followed by a down
arrow with the phrase "Adverse legal rulings hurt tobacco-revenue bonds."]
bond market has already priced in the effects of a strong economy and
several Fed rate hikes, so we believe yields will remain in a somewhat
narrow range.
In the portfolio, we continue to favor corporate bonds, with a focus on
lower-rated issues. The economy's strength should provide a further lift
to corporate earnings and help companies repair their balance sheets.
Lower-quality corporate bonds should benefit the most from the improving
credit environment. We also intend to maintain our meaningful position
in mortgage-backed securities, which should benefit from less
refinancing activity and a relatively stable interest rate environment.
"...we expect the Fed to
continue raising short-
term interest rates
in the coming months..."
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. The managers'
statements reflect their own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
1 As a percentage of the Fund's portfolio on June 30, 2004
5
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
June 30, 2004
(unaudited)
This schedule is divided into three main categories: publicly traded
bonds, preferred stocks and short-term investments. Publicly traded
bonds and preferred stocks are further broken down by industry group.
Short-term investments, which represent the Fund's cash position, are
listed last.
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
PUBLICLY TRADED BONDS 133.27% $232,696,255
(Cost $231,957,238)
Aerospace 0.67% 1,175,753
Jet Equipment Trust,
Equipment Trust Ctf Ser 95B2 08-15-14 (B) (l) (R) 10.910% D $550 2,750
Raytheon Co.,
Note 03-01-10 8.300 BBB- 1,000 1,173,003
Agricultural Operations 0.71% 1,231,826
Bunge Limited Finance Corp.,
Gtd Note 12-15-08 4.375 BBB 1,250 1,231,826
Automobiles/Trucks 0.61% 1,070,410
American Axle & Manufacturing, Inc.,
Sr Note 02-11-14 5.250 BBB 500 479,947
Ford Motor Co.,
Deb 02-15-47 9.980 BBB- 500 590,463
Banks -- Foreign 3.58% 6,254,764
Barclays Bank Plc,
Perpetual Bond (6.860% to 0 6-15-32
then variable) (United Kingdom) 06-15-49 (R) 6.860 Aa3 1,600 1,653,824
HSBC Capital Funding LP,
Gtd Bond, Step Coupon (4.610% to 06-27-13
then variable) (Channel Islands) 12-29-49 (R) 4.610 A- 1,000 906,539
Mizuho Financial Group Cayman Ltd.,
Gtd Note (Cayman Islands) 12-29-49 8.375 Baa1 750 772,500
Rabobank Capital Fund II,
Perpetual Bond (5.260% to 12-31-13
then variable) 12-31-49 (R) 5.260 AA 1,500 1,451,524
Royal Bank of Scotland Group Plc,
Perpetual Bond (7.648% to 09-30-31
then variable) (United Kingdom) 08-31-49 7.648 A 650 729,785
Woori Bank,
Sub Note (5.750% to 03-13-09 then variable)
(South Korea) 03-13-14 (R) 5.750 BBB- 750 740,592
See notes to
financial statements.
6
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Banks -- United States 1.39% $2,422,791
Bank of New York,
Cap Security 12-01-26 (R) 7.780% A- $650 694,273
Capital One Bank,
Sub Note 06-13-13 6.500 BB+ 750 773,311
Wachovia Corp.,
Sub Note 02-15-14 4.875 A- 1,000 955,207
Beverages 0.61% 1,070,000
Panamerican Beverages, Inc.,
Sr Note (Panama) 07-01-09 7.250 BBB 1,000 1,070,000
Broker Services 0.79% 1,383,932
Morgan Stanley,
Sub Note 04-01-14 4.750 A 1,500 1,383,932
Building 1.72% 3,009,091
KB Home,
Sr Note 02-01-14 5.750 BB+ 1,000 920,000
Pulte Homes Inc.,
Note 02-15-13 6.250 BBB- 1,000 1,021,505
Toll Brothers, Inc.,
Gtd Sr Note 11-15-12 6.875 BBB- 1,000 1,067,586
Chemicals 2.76% 4,821,007
NOVA Chemicals Corp.,
Note (Canada) 09-15-05 7.000 BB+ 1,000 1,032,500
Sr Note (Canada) 05-15-06 7.000 BB+ 1,280 1,337,600
Potash Corp. of Saskatchewan, Inc.,
Note (Canada) 05-31-11 7.750 BBB+ 1,000 1,146,378
RPM International, Inc.,
Bond 12-15-13 (R) 6.250 BBB 1,300 1,304,529
Computers 0.24% 426,588
NCR Corp.,
Note 06-15-09 7.125 BBB- 390 426,588
Containers 1.42% 2,475,940
Owens-Brockway Glass Container, Inc.,
Gtd Sr Note 05-15-13 8.250 B 500 516,250
Sealed Air Corp.,
Sr Note 04-15-08 (R) 5.375 BBB 1,895 1,959,690
Diversified Operations 2.91% 5,073,629
Brascan Corp.,
Note (Canada) 03-01-10 5.750 A- 1,750 1,799,847
Glencore Funding LLC,
Gtd Note 04-15-14 (R) 6.000 BBB 1,000 927,540
See notes to
financial statements.
7
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Diversified Operations (continued)
Hutchison Whampoa International Ltd.,
Gtd Note (U.S. Virgin Islands) 02-13-13 (R) 6.500% A- $750 $750,571
Tyco International Group S.A.,
Gtd Note (Luxembourg) 10-15-11 6.375 BBB 1,500 1,595,671
Electronics 1.65% 2,880,615
AMETEK, Inc.,
Sr Note 07-15-08 7.200 BBB 1,500 1,620,360
Jabil Circuit, Inc.,
Sr Note 07-15-10 5.875 BB+ 1,220 1,260,255
Finance 7.63% 13,312,579
Capital One Financial Corp.,
Note 11-15-13 6.250 BB+ 1,000 1,010,737
Citigroup, Inc.,
Sub Note 10-31-33 6.000 A+ 560 535,442
Credit-Based Asset Servicing & Securitization,
Pass Thru Ctf Ser 2004-CB4 Class A3
05-25-35*** 4.632 AAA 1,000 999,400
Duke Capital LLC,
Sr Note 10-01-19 8.000 BBB- 750 837,844
Ford Motor Credit Co.,
Note 10-28-09 7.375 BBB- 1,625 1,734,242
General Motors Acceptance Corp.,
Note 03-02-11 7.250 BBB 3,000 3,148,599
Household Finance Corp.,
Note 05-15-11 6.750 A 1,390 1,518,995
Humpuss Funding Corp.,
Note 12-15-09 (R) 7.720 B2 232 206,241
MBNA Master Credit Card Trust,
Sub Bond Ser 1998-E Class C 09-15-10 (R) 6.600 BBB 1,000 1,068,743
PDVSA Finance Ltd.,
Note (Cayman Islands) 11-16-12 8.500 B+ 565 587,600
PPL Capital Funding,
Gtd Note 03-01-09 (R) 4.330 BBB- 1,000 967,997
St. George Funding Co.,
Perpetual Bond (8.485% to 06-30-17
then variable) (Australia) 12-31-49 (R) 8.485 Baa1 615 696,739
Food 0.53% 924,762
Corn Products International, Inc.,
Sr Note 08-15-09 8.450 BBB- 835 924,762
Furniture 0.60% 1,051,086
Steelcase, Inc.,
Sr Note 11-15-06 6.375 BBB- 1,020 1,051,086
See notes to
financial statements.
8
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Government -- Foreign 0.88% $1,539,720
Colombia, Republic of,
Note (Colombia) 01-23-12 10.000% BB $750 776,250
United Mexican States,
Global Medium Term Note Ser A
(Mexico) 01-16-13 6.375 BBB- 765 763,470
Government -- U.S. 7.83% 13,669,904
United States Treasury,
Bond 08-15-17+ 8.875 AAA 1,215 1,664,882
Bond 05-15-18+ 9.125 AAA 495 694,895
Bond 02-15-31+ 5.375 AAA 2,365 2,385,233
Note 08-15-09+ 6.000 AAA 3,345 3,675,710
Note 05-15-14+ 4.750 AAA 5,195 5,249,184
Government -- U.S. Agencies 36.21% 63,221,380
Federal Home Loan Mortgage Corp.,
20 Yr Pass Thru Ctf 01-01-16 11.250 AAA 52 57,002
30 Yr Pass Thru Ctf 04-01-33 5.500 AAA 5,017 5,010,039
CMO REMIC 2563-PA 03-15-31 4.250 AAA 1,015 982,203
Note 07-15-09 4.250 AAA 2,000 1,995,250
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 02-01-08 7.500 AAA 6 6,153
15 Yr Pass Thru Ctf 09-01-10 to 04-01-17 7.000 AAA 2,037 2,164,442
30 Yr Pass Thru Ctf 04-01-33 5.500 AAA 1,244 1,243,738
30 Yr Pass Thru Ctf 10-01-33 to 01-01-34 6.000 AAA 39,435 40,306,560
30 Yr Pass Thru Ctf 02-01-34 7.000 AAA 1,547 1,632,498
30 Yr Pass Thru Ctf 07-01-34*** 6.500 AAA 3,880 4,038,839
CMO REMIC 2003-16-PD 10-25-16 5.000 AAA 1,340 1,330,758
CMO REMIC 2003-17-QT 08-25-27 5.000 AAA 1,675 1,647,116
Financing Corp.,
Bond 02-08-18 9.400 AAA 2,000 2,757,434
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 11-15-19 to 02-15-25 9.500 AAA 33 37,080
30 Yr Pass Thru Ctf 11-15-20 10.000 AAA 11 12,268
Insurance 2.70% 4,715,133
Assurant, Inc.,
Note 02-15-14 5.625 BBB+ 510 500,717
Liberty Mutual Group,
Note 03-15-14 (R) 5.750 BBB 750 723,786
Mantis Reef Ltd.,
Note (Australia) 11-14-08 (R) 4.692 A- 1,000 987,673
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 485 570,762
See notes to
financial statements.
9
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Insurance (continued)
Ohio Casualty Corp.,
Note 06-15-14 7.300% BB $750 $751,589
QBE Insurance Group Ltd.,
Bond (Australia) 07-01-23 (R) 5.647 BBB 1,000 951,291
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 AA- 210 229,315
Leisure 3.07% 5,362,821
Brunswick Corp.,
Note 06-01-11 5.000 BBB+ 1,000 1,001,600
Chukchansi Economic Development Auth.,
Sr Note 06-15-09 (R) 14.500 Caa1** 500 620,000
Harrah's Operating Co., Inc.,
Gtd Sr Note 07-01-10 (R) 5.500 BBB- 1,130 1,135,659
Gtd Sr Sub Note 12-15-05 7.875 BB+ 745 786,906
Hyatt Equities LLC,
Note 06-15-07 (R) 6.875 BBB 1,060 1,126,968
Waterford Gaming LLC,
Sr Note 09-15-12 (R) 8.625 B+ 651 691,688
Machinery 1.14% 1,985,955
Kennametal, Inc.,
Sr Note 06-15-12 7.200 BBB 1,405 1,485,955
Manitowoc Co., Inc., (The),
Sr Note 11-01-13 7.125 B+ 500 500,000
Media 5.30% 9,258,249
British Sky Broadcasting Group Plc,
Sr Note (United Kingdom) 07-15-09 8.200 BBB- 945 1,088,801
Comcast Cable Communications, Inc.,
Note 11-15-08 6.200 BBB 1,020 1,086,660
Continental Cablevision, Inc.,
Deb 08-01-13 9.500 BBB 660 732,593
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 275 287,031
Grupo Televisa S.A.,
Note (Mexico) 09-13-11 8.000 BBB- 1,855 2,003,400
Innova S. de R.L.,
Sr Note (Mexico) 04-01-07 12.875 B+ 39 39,204
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 540 642,230
Rogers Cablesystems Ltd.,
Sr Note Ser B (Canada) 03-15-05 10.000 BBB- 445 461,925
TCI Communications, Inc.,
Sr Deb 02-01-12 9.800 BBB 860 1,078,184
See notes to
financial statements.
10
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Media (continued)
Time Warner, Inc.,
Deb 01-15-13 9.125% BBB+ $1,114 $1,358,073
XM Satellite Radio, Inc.,
Sr Sec Note, Step Coupon (Zero to 12-31-05
then 14.000%) 12-31-09 (A) Zero CCC+ 509 480,148
Medical 3.36% 5,874,416
HCA, Inc.,
Note 11-06-08 5.250 BBB- 1,000 993,815
Note 09-01-10 8.750 BBB- 900 1,027,677
Medco Health Solutions, Inc.,
Sr Note 08-15-13 7.250 BBB 1,550 1,659,605
Schering-Plough Corp.,
Sr Note 12-01-33 6.500 A- 750 745,655
Wyeth,
Note 03-15-13 5.500 A 1,500 1,447,664
Mortgage Banking 7.01% 12,245,981
Ameriquest Mortgage Securities, Inc.,
Pass Thru Ctf Ser 2003-IA1 Class A4 11-25-33 4.965 AAA 2,000 1,986,034
Banc of America Mortgage Securities, Inc.,
Mtg Pass Thru Ctf Ser 2004-D
Class 2A1 05-25-34 3.647 AAA 2,168 2,094,006
Bear Stearns Commercial Mortgage
Securities, Inc.,
CMO Sub Bond Ser 2004-ESA
Class C 05-14-16 (R) 4.937 AA 1,000 1,003,437
Centex Home Equity Loan Trust,
Home Equity Loan Asset-Backed Ctf
Ser 2004-A Class AF4 08-25-32 4.510 AAA 2,000 1,932,025
ContiMortgage Home Equity Loan Trust,
Home Equity Pass Thru Ctf Ser 1995-2
Class A5 08-15-25 8.100 AAA 262 261,747
Deutsche Mortgage & Asset Receiving Corp.,
Commercial Mtg Pass Thru Ctf Ser 1998-C1
Class C 06-15-31 6.861 A2 415 445,398
DLJ Mortgage Acceptance Corp.,
Commercial Mortgage Pass Thru Ctf
Ser 1996-CF1 Class B1 03-13-28 (R) 8.530 A 1,535 1,671,515
Global Signal Trust,
Sub Bond Ser 2004-1A Class D 01-15-34 (R) 5.098 BBB 2,000 1,923,397
LB-UBS Commercial Mortgage Trust,
Commercial Mortgage Pass Thru Ctf
Ser 2003-C3 Class A4 05-15-32 4.166 AAA 1,000 928,422
See notes to
financial statements.
11
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Oil & Gas 3.49% $6,100,015
Alberta Energy Co. Ltd.,
Note (Canada) 09-15-30 8.125% A- $725 870,737
Key Energy Group, Inc.,
Conv Sub Note 09-15-04+ 5.000 B 335 333,744
Magellan Midstream Partners, L.P.,
Note 06-01-14 6.450 BBB 500 502,246
Occidental Petroleum Corp.,
Sr Deb 09-15-09 10.125 BBB+ 1,160 1,440,483
Pemex Project Funding Master Trust,
Gtd Note 10-13-10 9.125 BBB- 1,115 1,276,675
TEPPCO Partners, L.P.,
Gtd Sr Note 02-15-12 7.625 BBB 1,500 1,676,130
Paper & Paper Products 4.36% 7,614,848
Abitibi-Consolidated Co.,
Gtd Sr Note (Canada) 12-15-06 6.950 BB 2,000 2,049,742
Boise Cascade Corp.,
Sr Note 11-01-10 6.500 BB 1,085 1,103,988
Corporacion Durango S.A. de C.V.,
Sr Note (Mexico) 07-15-09 (B) (R) 13.750 D** 500 250,000
International Paper Co.,
Note 10-30-12 5.850 BBB 2,000 2,031,368
MDP Acquisitions Plc,
Sr Note (Ireland) 10-01-12 9.625 B 750 821,250
Stone Container Corp.,
Sr Note 02-01-11 9.750 B 285 313,500
Sr Note 07-01-12 8.375 B 1,000 1,045,000
Real Estate Investment Trust 2.06% 3,587,228
Healthcare Realty Trust, Inc.,
Sr Note 05-01-11 8.125 BBB- 175 201,201
Meditrust,
Note 08-15-07 7.000 BB- 1,710 1,748,475
ProLogis Trust,
Sr Note 07-15-06 7.050 BBB+ 510 550,682
Spieker Properties L.P.,
Note 12-01-06 7.125 BBB+ 1,000 1,086,870
Real Estate Operations 0.33% 568,507
Socgen Real Estate Co. LLC,
Perpetual Bond Ser A (7.640% to 09-30-07
then variable) 12-31-49 (R) 7.640 A 515 568,507
See notes to
financial statements.
12
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Retail 3.12% $5,437,932
Delhaize America, Inc.,
Gtd Note 04-15-11 8.125% BB+ $1,500 1,637,296
Gap, Inc. (The),
Note 12-15-08+ 10.550 BB+ 515 623,150
Office Depot, Inc.,
Note 08-15-13 6.250 BBB- 2,000 2,059,986
Penney J.C. Corp., Inc.,
Note 03-01-10 8.000 BB+ 1,000 1,117,500
Revenue Bonds 0.52% 908,636
Golden State Tobacco Securitization Corp.,
Rev Ser 2003-A-1 06-01-39 6.750 BBB 1,020 908,636
Telecommunications 9.78% 17,068,183
America Movil S.A. de C.V.,
Gtd Note (Mexico) 03-01-14 (R) 5.500 BBB- 765 704,709
AT&T Corp.,
Sr Note 11-15-11 7.300 BBB 2,000 2,053,448
AT&T Wireless Services, Inc.,
Note 05-01-12 8.125 BBB 1,525 1,763,130
Corning, Inc.,
Note 03-01-09 6.300 BB+ 240 244,399
Note 04-04-25 8.300 BB+ 1,000 1,040,922
Deutsche Telekom International Finance B.V.,
Bond (Coupon rate step up/down on rating)
(Netherlands) 06-15-10 8.000 BBB+ 1,005 1,174,401
France Telecom S.A.,
Note (France) 03-01-11 8.750 BBB+ 1,150 1,332,644
Mobile Telesystems Finance S.A.,
Gtd Sr Note (Luxembourg) 01-30-08 (R) 9.750 BB- 400 412,000
Nextel Communications, Inc.,
Sr Note 08-01-15 7.375 BB 500 505,000
Qwest Capital Funding, Inc.,
Gtd Note 08-15-06+ 7.750 B 1,000 990,000
Sprint Capital Corp.,
Gtd Sr Note 01-30-11 7.625 BBB- 1,000 1,105,489
Note 05-01-19 6.900 BBB- 1,000 1,005,956
Telecom Italia Capital,
Gtd Class B Note (Luxembourg) 11-15-13 (R) 5.250 BBB+ 1,500 1,451,769
Telefonos de Mexico S.A. de C.V.,
Note (Mexico) 11-19-08 4.500 BBB- 1,750 1,698,812
Telus Corp.,
Note (Canada) 06-01-11 8.000 BBB 1,395 1,585,504
Tobacco 0.88% 1,527,484
Altria Group, Inc.,
Note 11-04-13 7.000 BBB 1,500 1,527,484
See notes to
financial statements.
13
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Transportation 3.00% $5,245,469
American Airlines, Inc.,
Pass Thru Ctf Ser 2001-2 10-01-11 7.858% A- $1,000 994,804
CNF, Inc.,
Sr Deb 05-01-34 (R) 6.700 BBB- 560 545,150
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 A- 1,591 1,489,033
CSX Corp.,
Sr Note 11-01-09 4.875 BBB 2,000 2,010,488
Northwest Airlines Corp.,
Pass Thru Ctf Ser 1996-1C 01-02-05 10.150 B- 32 20,218
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 B- 286 185,776
Utilities 9.58% 16,727,277
AES Eastern Energy L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17 9.000 BB+ 400 429,931
Beaver Valley Funding Corp.,
Sec Lease Obligation Bond 06-01-17 9.000 BB+ 513 579,331
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB+ 700 783,153
CalEnergy Co., Inc.,
Sr Bond 09-15-28 8.480 BBB- 550 661,530
CenterPoint Energy, Inc.,
Sr Note Ser B 09-01-10 7.250 BBB- 500 531,759
El Paso Electric Co.,
1st Mtg Ser E 05-01-11 9.400 BBB- 1,000 1,135,819
Empresa Electrica Guacolda S.A.,
Sec Sr Note (Chile) 04-30-13 (R) 8.625 BBB- 900 933,947
HQI Transelect Chile S.A.,
Sr Note (Chile) 04-15-11 7.875 A- 1,230 1,388,251
IPALCO Enterprises, Inc.,
Sr Sec Note 11-14-11 7.625 BB- 325 352,625
Korea Gas Corp.,
Sr Unsub Note (South Korea) 11-26-10 (R) 4.750 A- 1,000 964,744
Midland Funding Corp. II,
Deb Ser B 07-23-06 13.250 BB- 2,225 2,558,750
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico) 11-15-09 (R) 9.625 BBB- 514 587,613
NorAm Energy Corp.,
Deb 02-01-08 6.500 BBB 525 555,364
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB+ 495 569,141
Salton Sea Funding Corp.,
Sr Sec Note Ser C 05-30-10 7.840 BB+ 913 951,117
System Energy Resources, Inc.,
Sec Bond 01-15-14 (R) 5.129 BBB- 500 491,490
See notes to
financial statements.
14
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
Utilities (continued)
TransAlta Corp.,
Note (Canada) 12-15-13 5.750% BBB- $2,000 $1,980,284
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond 01-02-17 8.090 BBB- 1,154 1,272,428
Waste Disposal Service & Equip. 0.83% 1,452,344
Allied Waste North America, Inc.,
Gtd Sr Sub Note Ser B 08-01-09 10.000 B+ 1,375 1,452,344
CREDIT
ISSUER, DESCRIPTION RATING* SHARES VALUE
PREFERRED STOCKS 10.87% $18,973,562
(Cost $19,498,139)
Automobiles / Trucks 0.81% 1,408,000
Delphi Trust I, 8.25% Baa3 55,000 1,408,000
Banks 3.37% 5,888,432
Abbey National Plc, 7.375%, (United Kingdom) A- 41,300 1,058,932
BAC Capital Trust III, 7.00% A- 40,000 1,014,400
Bank One Capital Trust VI, 7.20% A- 55,000 1,400,850
Fleet Capital Trust VII, 7.20% A- 55,000 1,394,250
USB Capital IV, 7.35% A- 40,000 1,020,000
Finance 1.30% 2,271,800
Citigroup Capital VII, 7.125% A 40,000 1,016,800
Merrill Lynch Preferred Capital Trust III, 7.00% A- 50,000 1,255,000
Media 0.58% 1,010,800
Viacom, Inc., 7.25% A- 40,000 1,010,800
Real Estate Investment Trust 2.18% 3,811,850
Apartment Investment & Management Co., 8.00%, Ser T B+ 55,000 1,326,600
Health Care Property Investors, Inc., 7.10%, Ser F BBB 50,000 1,212,000
ProLogis Trust, 6.75%, Ser F BBB 55,000 1,273,250
Telecommunications 0.58% 1,002,800
Telephone & Data Systems, Inc., 7.60%, Ser A A- 40,000 1,002,800
Utilities 2.05% 3,579,880
Ameren Corp., 9.75%, Conv BBB+ 20,000 529,800
Dominion Resources, Inc., 9.50%, Conv BBB+ 7,950 432,480
DTE Energy Co., 8.75%, Conv BBB 20,000 502,000
KeySpan Corp., 8.75%, Conv A3 20,000 1,034,000
PSEG Funding Trust II, 8.75% BB+ 40,000 1,081,600
See notes to
financial statements.
15
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION, INTEREST CREDIT PAR VALUE
MATURITY DATE RATE RATING* (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 5.49% $9,588,000
(Cost $9,588,000)
Government -- U.S. Agencies 5.44%
Federal Home Loan Bank, Disc Note 07-01-04 Zero AAA $9,500 9,500,000
Joint Repurchase Agreement 0.05%
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. -- Dated
06-30-04, due 07-01-04 (Secured by U.S.
Treasury Inflation Indexed Bonds, 3.625%
due 04-15-28 and 3.375% due 04-15-32, and
U.S. Treasury Inflation Indexed Note, 2.000%
due 01-15-14) 1.300% 88 88,000
TOTAL INVESTMENTS 149.63% $261,257,817
OTHER ASSETS AND LIABILITIES, NET (49.63%) ($86,655,397)
TOTAL NET ASSETS 100.00% $174,602,420
+ All or a portion of this security is on loan as of June 30, 2004.
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service, unless indicated otherwise.
** Security rated internally by John Hancock Advisers, LLC.
*** All or a portion of these securities, having an aggregate value of
$5,038,239 or 2.89% of the Fund's net assets, have been purchased as
forward commitments; that is, the Fund has agreed on trade date to take
delivery of and to 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 commitments.
Accordingly, the market value of $5,146,213 of Federal National Mortgage
Assn., 6.000%, 12-01-33 has been segregated to cover the forward
commitments.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(B) Non-income-producing issuer, filed for protection under the Federal
Bankruptcy code or is in default of interest payment.
(l) This security is fair valued in good faith under procedures
established by the Board of Trustees.
(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 $31,876,972 or 18.26% of
the Fund's net assets as of June 30, 2004.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, the
security is U.S.-dollar-denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
16
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
June 30, 2004
(unaudited)
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of what
the Fund owns, is
due and owes.
You'll also find
the net asset
value for each
common share.
ASSETS
Investments at value (cost $261,043,377)
including $18,084,771 of securities loaned $261,257,817
Cash segregated for futures contacts 480,000
Receivable for investments sold 4,990,743
Dividends and interest receivable 3,068,547
Other assets 15,480
Total assets 269,812,587
LIABILITIES
Due to custodian 13,419
Payable for investments purchased 5,416,059
Payable for futures variation margin 284,375
Payable to affiliates
Management fees 342,431
Other 7,581
Other payable and accrued expenses 135,266
Total liabilities 6,199,131
Auction Preferred Shares (APS) Series A, at value,
unlimited number of shares of beneficial interest
authorized with no par value, 1,780 shares issued,
liquidation preference of $25,000 per share 44,505,518
APS Series B, at value, unlimited number of shares of
beneficial interest authorized with no par value,
1,780 shares issued, liquidation preference of
$25,000 per share 44,505,518
NET ASSETS
Common shares capital paid-in 175,846,613
Accumulated net realized loss on investments (556,747)
Net unrealized depreciation of investments (341,917)
Distributions in excess of net investment income (345,529)
Net assets $174,602,420
NET ASSET VALUE PER COMMON SHARE
Based on 11,078,144 common shares outstanding --
30 million shares authorized with no par value $15.76
See notes to
financial statements.
17
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
June 30, 2004
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat
ing the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $641) $6,793,057
Dividends 1,120,155
Securities lending 14,840
Total investment income 7,928,052
EXPENSES
Investment management fees 692,174
APS auction fees 121,637
Transfer agent fees 52,886
Printing 41,731
Accounting and legal services fees 36,609
Custodian fees 32,856
Professional fees 22,652
Registration and filing fees 11,922
Trustees' fees 7,409
Miscellaneous 6,494
Interest 1,800
Securities lending fees 364
Total expenses 1,028,534
Net investment income 6,899,518
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
Investments 26,263
Financial futures contracts 412,303
Change in net unrealized appreciation (depreciation) of
Investments (7,847,886)
Financial futures contracts (585,856)
Net realized and unrealized loss (7,995,176)
Distributions to APS Series A (255,664)
Distributions to APS Series B (259,473)
Decrease in net assets from operations ($1,610,795)
1 Semiannual period from 1-1-04 through 6-30-04.
See notes to
financial statements.
18
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in
Net Assets show
how the value
of the Fund's
net assets has
changed during
the last two
periods. The dif
ference reflects
earnings less
expenses, any
investment gains
and losses,
distributions to
shareholders, if
any, and any
increase due to
reinvestment of
distributions.
YEAR PERIOD
ENDED ENDED
12-31-03 6-30-04 1
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income $10,219,224 $6,899,518
Net realized gain 4,029,289 438,566
Change in net unrealized
appreciation (depreciation) 2,963,709 (8,433,742)
Distributions to APS Series A and B 2 (170,668) (515,137)
Increase (decrease) in net assets
resulting from operations 17,041,554 (1,610,795)
Distributions to common shareholders
From net investment income (10,500,286) (6,861,816)
From net realized gains (2,903,395) --
(13,403,681) (6,861,816)
From Fund share transactions 504,097 344,829
NET ASSETS
Beginning of period 178,588,232 182,730,202
End of period 3 $182,730,202 174,602,420
1 Semiannual period from 1-1-04 through 6-30-04. Unaudited.
2 APS Series A and B were issued on 11-4-03.
3 Includes accumulated (distribution in excess of) net investment income of
$131,906 and ($345,529), respectively.
See notes to
financial statements.
19
FINANCIAL HIGHLIGHTS
FINANCIAL
HIGHLIGHTS
COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
PERIOD ENDED 12-31-99 1 12-31-00 1 12-31-01 1,2 12-31-02 1 12-31-03 6-30-04 3
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $16.64 $15.37 $15.89 $16.06 $16.31 $16.53
Net investment income 4 1.10 1.07 1.00 0.89 0.93 0.62
Net realized and unrealized
gain (loss) on investments (1.27) 0.52 0.19 0.28 0.63 (0.72)
Distributions to APS Series A and B 5 -- -- -- -- (0.02) (0.05)
Total from
investment operations (0.17) 1.59 1.19 1.17 1.54 (0.15)
Less distributions
to common shareholders
From net investment income (1.10) (1.07) (1.02) (0.92) (0.96) (0.62)
From net realized gains -- -- -- -- (0.26) --
(1.10) (1.07) (1.02) (0.92) (1.22) (0.62)
Capital charges
Offering costs and underwriting
discounts related to APS -- -- -- -- (0.10) --
Net asset value, end of period $15.37 $15.89 $16.06 $16.31 $16.53 $15.76
Per share market value,
end of period $12.69 $14.44 $14.65 $14.66 $15.39 $14.57
Total return at market value 6 (%) (13.42) 23.06 8.69 6.42 13.49 (1.45) 7
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shares,
end of period (in millions) $165 $172 $175 $179 $183 $175
Ratio of expenses
to average net assets 8 (%) 0.80 0.84 0.80 0.84 0.87 1.14 9
Ratio of net investment income
to average net assets 10 (%) 6.88 6.89 6.17 5.56 5.58 7.62 9
Portfolio turnover (%) 184 248 299 371 273 61
SENIOR SECURITIES
Total APS Series A outstanding
(in millions) -- -- -- -- $45 $45
Total APS Series B outstanding
(in millions) -- -- -- -- $45 $45
Involuntary liquidation preference
APS Series A per unit (in thousands) -- -- -- -- $25 $25
Involuntary liquidation preference
APS Series B per unit (in thousands) -- -- -- -- $25 $25
Average market value per unit
(in thousands) -- -- -- -- $25 $25
Asset coverage per unit 11 -- -- -- -- $75,402 $73,235
See notes to
financial statements.
20
FINANCIAL HIGHLIGHTS
Notes to Financial Highlights
1 Audited by previous auditor.
2 As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment
Companies, as revised, relating to the amortization of premiums and
accretion of discounts on debt securities. The effect of this change on
per share amounts for the year ended December 31, 2001, was to decrease
net investment income per share by $0.02, increase net realized and
unrealized gain per share by $0.02 and, had the Fund not made these
changes to amortization and accretion, the ratio of net investment
income to average net assets would have been 6.30%. Per share ratios
and supplemental data for periods prior to January 1, 2001, have not
been restated to reflect this change in presentation.
3 Semiannual period from 1-1-04 through 6-30-04. Unaudited.
4 Based on the average of the shares outstanding.
5 APS Series A and B were issued on 11-4-03.
6 Assumes dividend reinvestment.
7 Not annualized.
8 Ratios calculated on the basis of expenses relative to the average
net assets of common shares. Without the exclusion of preferred shares,
the annualized ratio of expenses during the year or period ended
December 31, 2003 and June 30, 2004, would have been 0.81% and 0.76%,
respectively.
9 Annualized.
10 Ratios calculated on the basis of net investment income relative to
the average net assets of common shares. Without the exclusion of
preferred shares, the annualized ratio of net investment income during
the year or period ended December 31, 2003 and June 30, 2004, would
have been 5.19% and 5.12%, respectively.
11 Calculated by subtracting the Fund's total liabilities from the
Fund's total assets and dividing that amount by the number of APS
outstanding as of the applicable 1940 Act Evaluation Date, which may
differ from the financial reporting date.
See notes to
financial statements.
21
NOTES TO
STATEMENTS
Unaudited
NOTE A
Accounting policies
John Hancock Income Securities Trust (the "Fund") is a closed-end
diversified management investment company registered under the
Investment Company Act of 1940.
Significant accounting policies
of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60
days are valued at amortized cost, which approximates market value. The
Fund determines the net asset value of common shares each business day.
Joint repurchase agreement
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with other registered investment companies
having a management contract with John Hancock Advisers, LLC (the
"Adviser"), a wholly owned subsidiary of John Hancock Financial
Services, Inc., may participate in a joint repurchase agreement
transaction. Aggregate cash balances are invested in one or more large
repurchase agreements, whose underlying securities are obligations of
the U.S. government and/or its agencies. The Fund's custodian bank
receives delivery of the underlying securities for the joint account on
the Fund's behalf. The Adviser is responsible for ensuring that the
agreement is fully collateralized at all times.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis. Some securities may be
purchased on a "when-issued" or "forward commitment" basis, which means
that the securities will be delivered to the Fund at a future date,
usually beyond the customary settlement date.
Discount and premium on securities
The Fund accretes discount and amortizes premium from par value on
securities from either the date of issue or the date of purchase over
the life of the security.
Expenses
The majority of expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund are
allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and
the relative sizes of the funds.
Options
The Fund may enter into option contracts. Listed options will be valued
at the last quoted sales
22
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 will be included in the Fund's
Statement of Assets and Liabilities as an asset and corresponding
liability. The amount of the liability will be subsequently marked to
market to reflect the current market value of the written option.
The Fund may use option contracts to manage its exposure to the price
volatility of financial instruments. Writing puts and buying calls will
tend to increase the Fund's exposure to the underlying instrument, and
buying puts and writing calls will tend to decrease the Fund's exposure
to the underlying instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited
to the premium initially paid for the option. In all other cases, the
face (or "notional") amount of each contract at value will reflect the
maximum exposure of the Fund in these contracts, but the actual exposure
will be limited to the change in value of the contract over the period
the contract remains open.
Risks may also arise if counterparties do not perform under the
contract's terms ("credit risk") or if the Fund is unable to offset a
contract with a counterparty on a timely basis ("liquidity risk").
Exchange-traded options have minimal credit risk as the exchanges act as
counterparties to each transaction, and only present liquidity risk in
highly unusual market conditions. To minimize credit and liquidity risks
in over-the-counter option contracts, the Fund continuously monitors the
creditworthiness of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Fund's
Statement of Assets and Liabilities. The Fund had no written options
transactions during the period ended June 30, 2004.
Securities lending
The Fund may lend securities to certain qualified brokers who pay the
Fund negotiated lender fees. The loans are collateralized at all times
with cash or securities with a market value at least equal to the market
value of the securities on loan. As with other extensions of credit, the
Fund may bear the risk of delay of the loaned securities in recovery or
even loss of rights in the collateral, should the borrower of the
securities fail financially. At June 30, 2004, the Fund loaned
securities having a market value of $18,084,771 collateralized by
securities in the amount of $18,512,813. Securities lending expenses are
paid by the Fund to the Adviser.
Financial futures contracts
The Fund may buy and sell financial futures contracts. Buying futures
tends to increase the Fund's exposure to the underlying instrument.
Selling futures tends to decrease the Fund's exposure to the underlying
instrument or hedge other Fund's instruments. At the time the Fund
enters into 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 on which it trades. Subsequent
payments to and from the broker, known as "variation margin," are made
on a daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments arising from this "mark
to market" are
23
recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks
of entering into financial futures contracts include the possibility
that there may be an illiquid market and/or that a change in the value
of the contracts may not correlate with changes in the value of the
underlying securities. In addition, the Fund could be prevented from
opening or realizing the benefits of closing out financial futures
positions because of position limits or limits on daily price
fluctuation imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of financial
futures contracts. On June 30, 2004, the Fund had deposited $480,000
in a segregated account to cover margin requirements on open financial
futures contracts.
The Fund had the following financial futures contracts open on
June 30, 2004:
NUMBER OF
OPEN CONTRACTS CONTRACTS POSITION EXPIRATION DEPRECIATION
US TBond 100 Short SEPT 04 ($195,231)
US TBond 50 Short SEPT 04 (103,475)
U.S. 10YR TNote 200 Short SEPT 04 (257,651)
($556,357)
Federal income taxes
The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income that is distributed to
shareholders. Therefore, no federal income tax provision is required.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. The Fund may place a debt
obligation on non-accrual status and reduce related interest income by
ceasing current accruals and writing off interest receivables when the
collection of interest has become doubtful. Foreign income may be
subject to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment
income and net realized gains on the ex-dividend date. Such
distributions, on a tax basis, are determined in conformity with income
tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Distributions in excess of tax
basis earnings and profits, if any, are reported in the Fund's financial
statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
NOTE B
Management fee and
transactions with
affiliates and others
The Fund has an investment management contract with the Adviser. Under
the investment management
24
contract, the Fund pays a quarterly management fee to the Adviser,
equivalent, on an annual basis, to the sum of: (a) 0.65% of the first
$150,000,000 of the Fund's average daily net asset value and the value
attributable to the Auction Preferred Shares (collectively, "managed
assets"), (b) 0.375% of the next $50,000,000, (c) 0.350% of the next
$100,000,000 and (d) 0.300% of the Fund's average daily managed assets
in excess of $300,000,000.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the
period amounted to $36,609. The Fund also paid the Adviser the amount of
$600 for certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is the director and/or officer of the Adviser
and/or its affiliates, as well as Trustee of the Fund. The compensation
of unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees
may elect to defer, for tax purposes, their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The
Fund makes investments into other John Hancock funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover
the Fund's deferred compensation liability are recorded on the Fund's
books as an other asset. The deferred compensation liability and the
related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investments, as well
as any unrealized gains or losses. The Deferred Compensation Plan
investments had no impact on the operations of the Fund.
NOTE C
Fund share transactions
Common shares
This listing illustrates the Fund common shares distributions
reinvested, offering costs and underwriting discount charged to capital
paid-in, reclassification of the capital accounts and the number of
common shares outstanding at the beginning and end of the last two
periods, along with the corresponding dollar value.
YEAR ENDED 12-31-03 PERIOD ENDED 6-30-04 1
SHARES AMOUNT SHARES AMOUNT
Beginning of period 10,952,182 $175,212,973 11,056,746 $175,501,784
Distributions reinvested 104,564 1,602,997 21,398 344,829
Offering costs and
underwriting discount
related to Auction
Preferred Shares -- (1,098,900) -- --
Reclassification of
capital accounts -- (215,286) -- --
End of period 11,056,746 $175,501,784 11,078,144 $175,846,613
1 Semiannual period from 1-1-04 through 6-30-04. Unaudited.
25
Auction preferred shares
The Fund issued a total of 3,560 Auction Preferred Shares: 1,780 shares
of Series A Auction Preferred Shares and 1,780 shares of Series B Auction
Preferred Shares (collectively, the "Preferred Shares" or "APS") on
November 4, 2003, in a public offering. The offering costs of $208,900
and the underwriting discount of $890,000 has been charged to capital
paid-in of common shares.
Dividends on the APS, which accrue daily, are cumulative at a rate that
was established at the offering of the APS and has been reset every 7
days thereafter by an auction. Dividend rates on APS Series A ranged
from 1.00% to 1.35% and Series B from 1.04% to 1.50% during the period
ended June 30, 2004. Accrued dividends on APS are included in the value
of APS on the Fund's Statement of Assets and Liabilities.
The APS are redeemable at the option of the Fund, at a redemption price
equal to $25,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The APS are also subject to mandatory redemption
at a redemption price equal to $25,000 per share, plus accumulated and
unpaid dividends, if the Fund is in default on its asset coverage
requirements with respect to the APS as defined in the Fund's by-laws.
If the dividends on the APS shall remain unpaid in an amount equal to
two full years' dividends, the holders of the APS, as a class, have the
right to elect a majority of the Board of Trustees. In general, the
holders of the APS and the common shareholders have equal voting rights
of one vote per share, except that the holders of the APS, as a class,
vote to elect two members of the Board of Trustees, and separate class
votes are required on certain matters that affect the respective
interests of the APS and common shareholders.
NOTE D
Investment
transactions
Purchases and proceeds from sales or maturities of securities, other
than short-term securities and obligations of the U.S. government,
during the period ended June 30, 2004, aggregated $138,811,804 and
$144,655,014 respectively. Purchases and proceeds from maturities of
obligations of U.S. government aggregated $22,189,104 and $22,677,139,
respectively, during the period ended June 30, 2004.
The cost of investments owned on June 30, 2004, including short-term
investments, for federal income tax purposes, was $261,877,419. Gross
unrealized appreciation and depreciation of investments aggregated
$4,498,456 and $5,118,058, respectively, resulting in net unrealized
depreciation of $619,602. The difference between book basis and tax
basis net unrealized depreciation of investments is attributable
primarily to the tax deferral of losses on certain sales of securities
and amortization of premiums and accretion of discounts on debt
securities.
26
INVESTMENT
OBJECTIVE
AND POLICY
The Fund is a closed-end diversified management investment company, common
shares of which were initially offered to the public on February 14, 1973,
and are publicly traded on the New York Stock Exchange. The Fund's
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. Under normal circumstances, the Fund will invest at least 80% of
net assets in income securities. Income securities will consist of the
following: (i) marketable corporate debt securities, (ii) governmental
obligations and (iii) cash and commercial paper. "Net assets" is defined
as net assets plus borrowings for investment purposes. The Fund will
notify shareholders at least 60 days prior to any change in this 80%
investment policy.
It is contemplated that at least 75% of the value of the Fund's total
assets will be represented by debt securities, which have at the time of
purchase a rating within the four highest grades as determined by
Moody's Investors Service, Inc., or Standard & Poor's Corporation. The
Fund intends to engage in short-term trading and may invest in
repurchase agreements. The Fund may issue a single class of senior
securities not to exceed 331/3% of its net assets at market value and
may borrow from banks as a temporary measure for emergency purposes in
amounts not to exceed 5% of the total assets at cost. The Fund may lend
portfolio securities not to exceed 331/3% of total assets.
BY-LAWS
In November 2002, the Board of Trustees adopted several amendments to
the Fund's by-laws, including provisions relating to the calling of a
special meeting and requiring advance notice of shareholder proposals or
nominees for Trustee. The advance notice provisions in the by-laws
require shareholders to notify the Fund in writing of any proposal which
they intend to present at an annual meeting of shareholders, including
any nominations for Trustee, between 90 and 120 days prior to the first
anniversary of the mailing date of the notice from the prior year's
annual meeting of shareholders. The notification must be in the form
prescribed by the by-laws. The advance notice provisions provide the
Fund and its Trustees with the opportunity to thoughtfully consider and
address the matters proposed before the Fund prepares and mails its
proxy statement to shareholders. Other amendments set forth the
procedures, which must be followed in order for a shareholder to call a
special meeting of shareholders. Please contact the Secretary of the
Fund for additional information about the advance notice requirements or
the other amendments to the by-laws.
On August 21, 2003, shareholders approved the amendment of the Fund's
by-laws effective August 26, 2003, to provide for the issuance of
preferred shares. Effective March 9, 2004, the Trustees approved
additional changes to conform the Fund's maximum dividend rate on the
preferred shares with the rate used by other John Hancock funds.
FINANCIAL FUTURES
CONTRACTS
AND OPTIONS
The Fund may buy and sell financial futures contracts and options on
futures contracts to hedge against the effects of fluctuations in
interest rates and other market conditions. The Fund's ability to hedge
successfully will depend on the Adviser's ability to predict accurately
the future direction of interest rate changes and other market factors.
There is no assurance that a liquid market for futures and options will
always exist. In
27
addition, the Fund could be prevented from opening, or realizing the
benefits of closing out, a futures or options position because of
position limits or limits on daily price fluctuations imposed by an
exchange.
The Fund will not engage in transactions in futures contracts and
options on futures for speculation, but only for hedging or other
permissible risk management purposes. All of the Fund's futures
contracts and options on futures will be traded on a U.S. commodity
exchange or board of trade. The Fund will not engage in a transaction in
futures or options on futures if, immediately thereafter, the sum of
initial margin deposits on existing positions and premiums paid for
options on futures would exceed 5% of the Fund's total assets.
DIVIDENDS AND
DISTRIBUTIONS
The Fund pays quarterly dividends from net investment income and intends
to distribute any available net realized capital gains annually. All
distributions are paid in cash unless the shareholder elects to
participate in the Dividend Reinvestment Plan.
During the period ended June 30, 2004, the Fund paid to shareholders
dividends from net investment income totaling $0.62 per share. The dates
of payment and the amounts per share are as follows:
INCOME
PAYMENT DATE DIVIDEND
-------------------------------
March 31, 2004 $0.31
June 30, 2004 0.31
DIVIDEND
REINVESTMENT PLAN
The Fund offers its common shareholders a Dividend Reinvestment Plan
(the "Plan"), which offers the opportunity to earn compounded yields.
Any holder of common shares of record of the Fund may elect to
participate in the Plan and receive the Fund's common shares in lieu of
all or a portion of the cash dividends. The Plan is available to all
common shareholders without charge. Mellon Investor Services (the "Plan
Agent") will act as agent for participating shareholders.
Shareholders may join the Plan by notifying the Plan Agent by telephone,
in writing or by visiting the Plan Agent's Web site at
www.melloninvestor.com showing an election to reinvest all or a portion
of dividend payments. If received in proper form by the Plan Agent prior
to the record date for a dividend, the election will be effective with
respect to all dividends paid after such record date. Shareholders whose
shares are held in the name of a broker or nominee should contact the
broker or nominee to determine whether and how they may participate in
the Plan.
The Board of Trustees of the Fund will declare dividends from net
investment income payable in cash or, in the case of shareholders
participating in the Plan, partially or entirely in the Fund's common
shares. The number of shares to be issued for the benefit of each
shareholder will be determined by dividing the amount of the cash
dividend otherwise payable to such shareholder on shares included under
the Plan, by the per share net asset value of the common shares on the
date for payment of the dividend, unless the net asset value per share
on the payment date is less than 95% of the market price per share on
that date, in which event the number of shares to be issued to a
shareholder will be determined by dividing the amount of the cash
dividend payable to such shareholder by 95% of the market price per
share of the common shares on the payment date. The market price of the
common shares on a particular date shall be the mean between the highest
and lowest sales price on the New York Stock Exchange on that date. Net
asset value will be determined in accordance with the established
procedures of the Fund. However, if as of such payment date the market
price of the common shares is lower than such net asset value per share,
the number of shares to be issued will be determined on the basis
28
of such market price. Fractional shares, carried out to four decimal
places, will be credited to the shareholder's account. Such fractional
shares will be entitled to future dividends.
The shares issued to participating shareholders, including fractional
shares, will be held by the Plan Agent in the name of the participant. A
confirmation will be sent to each shareholder promptly, normally within
five to 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 that the shareholder has elected to reinvest and the
number of shares acquired with such dividend.
Participation in the Plan may be terminated at any time by contacting
the Plan Agent by telephone, in writing or by visiting the Plan Agent's
Web site, and such termination will be effective immediately. However,
notice of termination must be received prior to the record date of any
distribution to be effective for that distribution. Upon termination,
certificates will be issued representing the number of full shares of
common shares held by the Plan Agent. A shareholder will receive a cash
payment for any fractional share held.
The reinvestment of dividends will not relieve participants of any
federal, state or local income tax, which may be due with respect to
such dividend. Dividends reinvested in common shares will be treated on
your federal income tax return as though you had received a dividend in
cash in an amount equal to the fair market value of the shares received,
as determined by the prices for shares of the Fund on the New York Stock
Exchange as of the dividend payment date. Distributions from the Fund's
long-term capital gains will be processed as noted above for those
electing to reinvest in common shares and will be taxable to you as
long-term capital gains. The confirmation referred to above will contain
all the information you will require for determining the cost basis of
shares acquired and should be retained for that purpose. At year end,
each account will be supplied with detailed information necessary to
determine total tax liability for the calendar year.
All correspondence or additional information concerning the Plan should
be directed to the Plan Agent, Mellon Bank, N.A., c/o Mellon Investor
Services, P.O. Box 3338, South Hackensack, New Jersey 07606-1938
(telephone 1-800-852-0218).
SHAREHOLDER
COMMUNICATION
AND ASSISTANCE
If you have any questions concerning the Fund, we will be pleased to
assist you. If you hold shares in your own name and not with a brokerage
firm, please address all notices, correspondence, questions or other
communications regarding the Fund to the transfer agent at:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Telephone: 1-800-852-0218
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
29
SHAREHOLDER MEETING
On March 18, 2004, the Annual Meeting of the Fund was held to elect
eight Trustees and to ratify the actions of the Trustees in selecting
independent auditors for the Fund.
Proxies covering 9,690,800 shares of beneficial interest were voted at
the meeting.
The common shareholders elected the following Trustees to serve until
their respective successors are duly elected and qualified, (there were
no current nominees for election by the preferred shareholders), with
the votes tabulated as follows:
WITHHELD
FOR AUTHORITY
--------------------------------------------------------------
Dennis S. Aronowitz 9,517,213 170,044
Richard P. Chapman, Jr. 9,529,269 157,988
William J. Cosgrove 9,526,425 160,832
Richard A. Farrell 9,533,594 153,663
William F. Glavin 9,442,578 244,679
Maureen Ford Goldfarb 9,523,397 163,860
Patti McGill Peterson 9,449,460 237,797
John W. Pratt 9,527,108 160,149
The shareholders also ratified the Trustees' selection of
PricewaterhouseCoopers LLP as the Fund's independent auditors for the
fiscal year ending December 31, 2004, with the votes tabulated as
follows: 9,470,514 FOR, 126,126 AGAINST and 94,160 ABSTAINING.
30
31
32
FOR YOUR
INFORMATION
TRUSTEES
Charles L. Ladner, Chairman*
Dennis S. Aronowitz
Richard P. Chapman, Jr.
William J. Cosgrove
Richard A. Farrell
William F. Glavin*
Dr. John A. Moore*
Patti McGill Peterson*
John W. Pratt
James A. Shepherdson
*Members of the Audit Committee
OFFICERS
James A. Shepherdson
President and Chief Executive Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President and Secretary
William H. King
Vice President and Treasurer
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT AND REGISTRAR
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
TRANSFER AGENT FOR APS
Deutsche Bank Trust
Company Americas
280 Park Avenue
New York, New York 10017
LEGAL COUNSEL
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
STOCK SYMBOL
Listed New York Stock Exchange:
JHS
For shareholder assistance refer to page 30
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Customer service representatives 1-800-852-0218
Portfolio commentary 1-800-344-7054
24-hour automated information 1-800-843-0090
TDD Line 1-800-231-5469
The Fund's proxy voting policies and procedures are available without charge,
upon request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
33
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-852-0218
1-800-843-0090
1-800-231-5469 (TDD)
www.jhfunds.com
---------------
PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
---------------
P60SA 6/04
8/04
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The registrant has adopted procedures by which shareholders may
recommend nominees to the registrant's Board of Trustees. A copy of the
procedures is filed as an exhibit to this Form N-CSR. See attached
"John Hancock Funds - Administration Committee Charter".
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal executive officer and principal financial
officer have concluded that those disclosure controls and procedures
provide reasonable assurance that the material information required to be
disclosed by the registrant on this report is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal half-year (the registrant's second fiscal half-year in the case of
an annual report) that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Separate certifications for the registrant's principal executive
officer and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company
Act of 1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive
officer and principal financial officer, as required by 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
and Rule 30a-2(b) under the Investment Company Act of 1940, are attached.
The certifications furnished pursuant to this paragraph are not deemed to
be "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, or otherwise subject to the liability of that section. Such
certifications are not deemed to be incorporated by reference into any
filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Registrant specifically incorporates
them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See
attached "John Hancock Funds - Administration Committee Charter".
(c)(2) Contact person at the registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Income Securities Trust
By:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: August 25, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By:
-------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: August 25, 2004
By:
-----------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: August 25, 2004