On behalf of everyone at John Hancock Investment Management, I’d like to take this opportunity to welcome
new shareholders and thank existing shareholders for the continued trust you’ve placed in us.
Andrew G. Arnott
This commentary reflects the CEO’s views, which are
subject to change at any time. Investing involves risks, including the potential loss of principal. Diversification does not guarantee a profit or eliminate the risk of a loss. It is not possible to invest directly in an index. For more up-to-date information, please visit our website at jhinvestments.com.
Security Abbreviations and Legend
|
|
|
|
|
ADR
|
|
American Depositary Receipt
|
|
|
|
|
CMT
|
|
Constant Maturity Treasury
|
|
|
|
|
ICE
|
|
Intercontinental Exchange
|
|
|
|
|
IO
|
|
Interest-Only Security - (Interest Tranche of Stripped Mortgage Pool). Rate shown is the annualized yield at the end of the period.
|
|
|
|
|
LIBOR
|
|
London Interbank Offered Rate
|
|
|
|
|
PIK
|
|
Pay-in-Kind Security - Represents a payment-in-kind which may pay
interest in additional par and/or cash. Rates shown are the current rate and most recent payment rate.
|
|
|
|
|
SOFR
|
|
Secured Overnight Financing Rate
|
|
|
|
|
(A)
|
|
All or a portion of this security is on loan as of 10-31-20, and is a
component of the fund’s leverage under the Liquidity Agreement.
|
|
|
|
|
(B)
|
|
All or a portion of this security is pledged as collateral pursuant to the Liquidity Agreement. Total collateral value at 10-31-20 was $103,044,942.
A portion of the securities pledged as collateral were loaned pursuant to the Liquidity Agreement. The value of securities on loan amounted to $44,413,619.
|
|
|
|
|
(C)
|
|
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 $89,746,994 or 48.3% of the fund’s net assets as of 10-31-20.
|
|
|
|
|
(D)
|
|
Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date.
|
|
|
|
|
(E)
|
|
Non-income producing - Issuer is in default.
|
|
|
|
|
(F)
|
|
Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy. Refer to Note 2 to the financial statements.
|
|
|
|
|
(G)
|
|
Variable or floating rate security, the interest rate of which adjusts periodically based on a weighted average of interest rates and prepayments on the underlying pool of assets. The interest rate shown is the current rate as of
period end.
|
|
|
|
|
(H)
|
|
Variable rate obligation. The coupon rate shown represents the rate at period end.
|
|
|
|
|
(I)
|
|
Non-income producing security.
|
|
|
|
|
(J)
|
|
Strike price and/or expiration date not available.
|
At 10-31-20, the aggregate cost of investments for federal
income tax purposes was $266,938,412. Net unrealized appreciation aggregated to $8,744,144, of which $13,613,683 related to gross unrealized appreciation and $4,869,539 related to gross unrealized depreciation.
|
|
|
|
|
|
|
SEE NOTES TO FINANCIAL STATEMENTS
|
|
ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
|
|
31
|
|
|
|
|
|
|
|
STATEMENT OF ASSETS AND LIABILITIES 10-31-20
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Unaffiliated investments, at value (Cost $265,372,572)
|
|
|
$275,682,556
|
|
|
Cash
|
|
|
9,864
|
|
|
Dividends and interest receivable
|
|
|
2,305,076
|
|
|
Receivable for investments sold
|
|
|
239,436
|
|
|
Other assets
|
|
|
22,355
|
|
|
Total assets
|
|
|
278,259,287
|
|
|
Liabilities
|
|
|
|
|
|
Liquidity agreement
|
|
|
91,300,000
|
|
|
Payable for investments purchased
|
|
|
1,002,953
|
|
|
Interest payable
|
|
|
58,685
|
|
|
Payable to affiliates
|
|
|
|
|
|
Accounting and legal services fees
|
|
|
6,776
|
|
|
Trustees’ fees
|
|
|
33
|
|
|
Other liabilities and accrued expenses
|
|
|
116,401
|
|
|
Total liabilities
|
|
|
92,484,848
|
|
|
Net assets
|
|
|
$185,774,439
|
|
|
Net assets consist of
|
|
|
|
|
|
Paid-in capital
|
|
|
$175,067,770
|
|
|
Total distributable earnings (loss)
|
|
|
10,706,669
|
|
|
Net assets
|
|
|
$185,774,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share
|
|
|
|
|
|
Based on 11,646,585 shares of beneficial interest outstanding -
unlimited number of shares authorized with no par value
|
|
|
$15.95
|
|
|
|
|
|
|
|
|
32
|
|
JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
|
|
SEE NOTES TO FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
STATEMENT OF OPERATIONS For the year ended 10-31-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
|
|
|
Interest
|
|
$
|
10,339,539
|
|
|
Dividends
|
|
|
191,011
|
|
|
Less foreign taxes withheld
|
|
|
(6,720
|
)
|
|
Total investment income
|
|
|
10,523,830
|
|
|
Expenses
|
|
|
|
|
|
Investment management fees
|
|
|
1,415,690
|
|
|
Interest expense
|
|
|
1,284,572
|
|
|
Accounting and legal services fees
|
|
|
33,225
|
|
|
Transfer agent fees
|
|
|
71,736
|
|
|
Trustees’ fees
|
|
|
35,110
|
|
|
Custodian fees
|
|
|
32,141
|
|
|
Printing and postage
|
|
|
52,807
|
|
|
Professional fees
|
|
|
66,284
|
|
|
Stock exchange listing fees
|
|
|
23,764
|
|
|
Other
|
|
|
14,185
|
|
|
Total expenses
|
|
|
3,029,514
|
|
|
Less expense reductions
|
|
|
(19,262
|
)
|
|
Net expenses
|
|
|
3,010,252
|
|
|
Net investment income
|
|
|
7,513,578
|
|
|
Realized and unrealized gain (loss)
|
|
|
|
|
|
Net realized gain (loss) on
|
|
|
|
|
|
Unaffiliated investments
|
|
|
4,193,763
|
|
|
|
|
|
4,193,763
|
|
|
Change in net unrealized appreciation (depreciation)
of
|
|
|
|
|
|
Unaffiliated investments
|
|
|
1,456,897
|
|
|
|
|
|
1,456,897
|
|
|
Net realized and unrealized gain
|
|
|
5,650,660
|
|
|
Increase in net assets from operations
|
|
$
|
13,164,238
|
|
|
|
|
|
|
|
|
SEE NOTES TO FINANCIAL STATEMENTS
|
|
ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENTS OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
10-31-20
|
|
|
Year ended
10-31-19
|
|
|
Increase (decrease) in net assets
|
|
|
|
|
|
|
|
|
|
From operations
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
$7,513,578
|
|
|
|
$6,930,063
|
|
|
Net realized gain
|
|
|
4,193,763
|
|
|
|
1,538,151
|
|
|
Change in net unrealized appreciation (depreciation)
|
|
|
1,456,897
|
|
|
|
15,009,317
|
|
|
Increase in net assets resulting from operations
|
|
|
13,164,238
|
|
|
|
23,477,531
|
|
|
Distributions to shareholders
|
|
|
|
|
|
|
|
|
|
From earnings
|
|
|
(8,743,094
|
)
|
|
|
(7,757,792
|
)
|
|
Total distributions
|
|
|
(8,743,094
|
)
|
|
|
(7,757,792
|
)
|
|
Total increase
|
|
|
4,421,144
|
|
|
|
15,719,739
|
|
|
Net assets
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
181,353,295
|
|
|
|
165,633,556
|
|
|
End of year
|
|
$
|
185,774,439
|
|
|
$
|
181,353,295
|
|
|
Share activity
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
11,646,585
|
|
|
|
11,646,585
|
|
|
End of year
|
|
|
11,646,585
|
|
|
|
11,646,585
|
|
|
|
|
|
|
|
|
34
|
|
JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
|
|
SEE NOTES TO FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
STATEMENT OF CASH FLOWS For the year ended 10-31-20
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
Net increase in net assets from operations
|
|
|
$13,164,238
|
|
|
Adjustments to reconcile net increase in net assets from operations
to net cash provided by operating activities:
|
|
|
|
|
|
Long-term investments purchased
|
|
|
(177,010,323
|
)
|
|
Long-term investments sold
|
|
|
177,729,051
|
|
|
Net purchases and sales in short-term investments
|
|
|
937,660
|
|
|
Net amortization of premium (discount)
|
|
|
2,629,590
|
|
|
(Increase) Decrease in assets:
|
|
|
|
|
|
Dividends and interest receivable
|
|
|
(219,817
|
)
|
|
Receivable for investments sold
|
|
|
74,710
|
|
|
Receivable for delayed delivery securities sold
|
|
|
2,093,901
|
|
|
Other assets
|
|
|
(7,387
|
)
|
|
Increase (Decrease) in liabilities:
|
|
|
|
|
|
Payable for investments purchased
|
|
|
(400,587
|
)
|
|
Payable for delayed delivery securities purchased
|
|
|
(4,451,027
|
)
|
|
Interest payable
|
|
|
(136,323
|
)
|
|
Payable to affiliates
|
|
|
(9,261
|
)
|
|
Other liabilities and accrued expenses
|
|
|
8,411
|
|
|
Net change in unrealized (appreciation) depreciation on:
|
|
|
|
|
|
Investments
|
|
|
(1,456,897
|
)
|
|
Net realized (gain) loss on:
|
|
|
|
|
|
Investments
|
|
|
(4,193,763
|
)
|
|
Net cash provided by operating activities
|
|
|
$8,752,176
|
|
|
Cash flows provided by (used in) financing
activities
|
|
|
|
|
|
Distributions to shareholders
|
|
|
$(8,743,094
|
)
|
|
Net cash used in financing activities
|
|
|
$(8,743,094
|
)
|
|
Net increase in cash
|
|
|
$9,082
|
|
|
Cash at beginning of year
|
|
|
$782
|
|
|
Cash at end of year
|
|
|
$9,864
|
|
|
Supplemental disclosure of cash flow
information:
|
|
|
|
|
|
Cash paid for interest
|
|
|
$(1,420,895
|
)
|
|
|
|
|
|
|
|
SEE NOTES TO FINANCIAL STATEMENTS
|
|
ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended
|
|
10-31-20
|
|
|
10-31-19
|
|
|
10-31-18
|
|
|
10-31-17
|
|
|
10-31-16
|
|
|
Per share operating performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
15.57
|
|
|
$
|
14.22
|
|
|
$
|
15.57
|
|
|
$
|
15.49
|
|
|
$
|
15.14
|
|
|
Net investment
income1
|
|
|
0.65
|
|
|
|
0.60
|
|
|
|
0.66
|
|
|
|
0.75
|
|
|
|
0.79
|
|
|
Net realized and unrealized gain (loss) on investments
|
|
|
0.48
|
|
|
|
1.42
|
|
|
|
(1.27
|
)
|
|
|
0.14
|
|
|
|
0.41
|
|
|
Total from investment operations
|
|
|
1.13
|
|
|
|
2.02
|
|
|
|
(0.61
|
)
|
|
|
0.89
|
|
|
|
1.20
|
|
|
Less distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From net investment income
|
|
|
(0.75
|
)
|
|
|
(0.67
|
)
|
|
|
(0.74
|
)
|
|
|
(0.81
|
)
|
|
|
(0.85
|
)
|
|
Net asset value, end of period
|
|
$
|
15.95
|
|
|
$
|
15.57
|
|
|
$
|
14.22
|
|
|
$
|
15.57
|
|
|
$
|
15.49
|
|
|
Per share market value, end of period
|
|
$
|
15.44
|
|
|
$
|
14.58
|
|
|
$
|
13.14
|
|
|
$
|
14.81
|
|
|
$
|
14.26
|
|
|
Total return at net asset value (%)2,3
|
|
|
7.78
|
|
|
|
14.84
|
|
|
|
(3.76
|
)
|
|
|
6.28
|
|
|
|
8.52
|
|
|
Total return at market value (%)2
|
|
|
11.42
|
|
|
|
16.37
|
|
|
|
(6.50
|
)
|
|
|
9.82
|
|
|
|
9.20
|
|
|
Ratios and supplemental data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (in millions)
|
|
$
|
186
|
|
|
$
|
181
|
|
|
$
|
166
|
|
|
$
|
181
|
|
|
$
|
180
|
|
|
Ratios (as a percentage of average net assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses before reductions
|
|
|
1.67
|
|
|
|
2.55
|
|
|
|
2.34
|
|
|
|
1.82
|
|
|
|
1.58
|
|
|
Expenses including reductions4
|
|
|
1.66
|
|
|
|
2.54
|
|
|
|
2.32
|
|
|
|
1.81
|
|
|
|
1.57
|
|
|
Net investment income
|
|
|
4.15
|
|
|
|
3.99
|
|
|
|
4.44
|
|
|
|
4.87
|
|
|
|
5.24
|
|
|
Portfolio turnover (%)
|
|
|
66
|
|
|
|
50
|
|
|
|
68
|
|
|
|
47
|
|
|
|
43
|
|
|
Senior securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt outstanding end of period (in millions)
|
|
$
|
91
|
|
|
$
|
91
|
|
|
$
|
91
|
|
|
$
|
91
|
|
|
$
|
91
|
|
|
Asset coverage per $1,000 of debt5
|
|
$
|
3,035
|
|
|
$
|
2,986
|
|
|
$
|
2,814
|
|
|
$
|
2,987
|
|
|
$
|
2,977
|
|
|
1
|
Based on average daily shares outstanding.
|
|
2
|
Total return based on net asset value reflects changes in the fund’s net asset value during each period. Total return
based on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested.
|
|
3
|
Total returns would have been lower had certain expenses not been reduced during the applicable periods.
|
|
4
|
Expenses including reductions excluding interest expense were 0.95%, 0.98%, 1.01%, 0.99% and 1.02% for the periods ended 10-31-20, 10-31-19,
10-31-18, 10-31-17 and
10-31-16, respectively.
|
|
5
|
Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end
(Note 7). As debt outstanding changes, the level of invested assets may change accordingly. Asset coverage ratio provides a measure of leverage.
|
|
|
|
|
|
|
|
36
|
|
JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
|
|
SEE NOTES TO FINANCIAL STATEMENTS
|
|
|
|
Notes to financial statements
|
Note 1 — Organization
John Hancock Income Securities Trust (the fund) is a closed-end management investment company organized as a Massachusetts
business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act).
Note 2 — Significant accounting
policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US
GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment
company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date
that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M.,
Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled
close of the NYSE pursuant to the fund’s Valuation Policies and Procedures.
In order to value the securities, the fund uses the following valuation techniques:
Debt obligations are typically valued based on evaluated prices provided by an independent pricing vendor. Independent pricing vendors utilize matrix pricing, which takes into account factors such as
institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, as well as broker supplied prices. Equity
securities, including exchange-traded or closed-end funds, are typically valued at the last sale price or official closing price on the exchange or principal market
where the security trades. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or
market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the
fund’s Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that
would have been used had a ready market for such securities existed.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as
inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities, including registered investment companies. Level 2 includes securities valued
using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing
vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund’s own
assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or
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ANNUAL REPORT
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37
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methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result
in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the fund’s
investments as of October 31, 2020, by major security category or type:
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|
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|
|
|
|
|
|
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|
Total
value at
10-31-20
|
|
|
Level 1
quoted
price
|
|
|
Level 2
significant
observable
inputs
|
|
|
Level 3
significant
unobservable
inputs
|
|
|
Investments in securities:
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency obligations
|
|
$
|
33,622,555
|
|
|
|
—
|
|
|
$
|
33,622,555
|
|
|
|
—
|
|
|
Foreign government obligations
|
|
|
1,398,847
|
|
|
|
—
|
|
|
|
1,398,847
|
|
|
|
—
|
|
|
Corporate bonds
|
|
|
203,537,280
|
|
|
|
—
|
|
|
|
203,537,280
|
|
|
|
—
|
|
|
Municipal bonds
|
|
|
759,241
|
|
|
|
—
|
|
|
|
759,241
|
|
|
|
—
|
|
|
Collateralized mortgage obligations
|
|
|
15,286,292
|
|
|
|
—
|
|
|
|
15,286,292
|
|
|
|
—
|
|
|
Asset backed securities
|
|
|
16,146,088
|
|
|
|
—
|
|
|
|
16,146,088
|
|
|
|
—
|
|
|
Common stocks
|
|
|
247,383
|
|
|
$
|
247,383
|
|
|
|
—
|
|
|
|
—
|
|
|
Preferred securities
|
|
|
1,969,251
|
|
|
|
1,456,751
|
|
|
|
512,500
|
|
|
|
—
|
|
|
Warrants
|
|
|
18,619
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
18,619
|
|
|
Short-term investments
|
|
|
2,697,000
|
|
|
|
—
|
|
|
|
2,697,000
|
|
|
|
—
|
|
|
Total investments in securities
|
|
$
|
275,682,556
|
|
|
$
|
1,704,134
|
|
|
$
|
273,959,803
|
|
|
$
|
18,619
|
|
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it
receives collateral that is held in a segregated account by the fund’s custodian, or for tri-party repurchase agreements, collateral is held at a third-party custodian bank in a segregated account for the
benefit of the fund. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the
principal amount of the repurchase agreement plus any accrued interest. Collateral received by the fund for repurchase agreements is disclosed in the Fund’s investments as part of the caption related to the repurchase agreement.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively,
MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, assets and liabilities resulting from repurchase
agreements are not offset in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may
have insufficient assets to pay claims resulting from close-out of the transactions.
Mortgage and asset backed
securities. The fund may invest in mortgage-related securities, such as mortgage-backed securities, and other asset-backed securities, which are debt obligations
that represent interests in pools of mortgages or other income-bearing assets, such as consumer loans or receivables. Such securities often involve risks that are different from the risks associated with investing in other types of debt securities. Mortgage-backed and other asset-backed securities are subject to changes in the payment patterns of borrowers of the underlying debt. When interest rates fall, borrowers are
more likely to refinance or prepay their debt before its stated maturity. This may result in the fund having to reinvest the proceeds in lower yielding securities, effectively reducing the fund’s income. Conversely, if interest rates rise and
borrowers repay their debt more slowly
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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than expected, the time in which the mortgage-backed and other asset-backed securities are paid off could be
extended, reducing the fund’s cash available for reinvestment in higher yielding securities. The timely payment of principal and interest of certain mortgage-related securities is guaranteed with the full faith and credit of the U.S.
Government. Pools created and guaranteed by non-governmental issuers, including government-sponsored corporations (e.g. FNMA), may be supported by various forms of insurance or guarantees, but there can be no
assurance that private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. The fund is also subject to risks associated with securities with contractual cash flows including asset-backed and mortgage related securities such as collateralized mortgage obligations, mortgage pass-through securities and commercial mortgage-backed securities. The
value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate value, pre-payments, delinquencies and/or defaults, and may be adversely affected
by shifts in the market’s perception of the issuers and changes in interest rates.
Security transactions and related investment income. Investment
security transactions are accounted for on a trade date plus one basis for daily NAV calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income
includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping
current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on the ex-date, except for dividends of certain foreign
securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Distributions received on securities that represent a tax return of capital and/or capital gain, if any, are recorded as
a reduction of cost of investments and/or as a realized gain, if amounts are estimable. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Real estate investment trusts. The fund may invest in real estate investment trusts (REITs). Distributions from REITs may be recorded as income and subsequently
characterized by the REIT at the end of the fiscal year as a reduction of cost of investments and/or as a realized gain. As a result, the fund will estimate the components of distributions from these securities. Such estimates are revised when the
actual components of the distributions are known.
Foreign taxes. The fund may be subject to withholding tax on income, capital gains or repatriations imposed
by certain countries, a portion of which may be recoverable. Foreign taxes are accrued based upon the fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Taxes are accrued based on gains
realized by the fund as a result of certain foreign security sales. In certain circumstances, estimated taxes are accrued based on unrealized appreciation of such securities. Investment income is recorded net of foreign withholding taxes.
Overdrafts. Pursuant to the custodian agreement, the fund’s custodian may, in its discretion, advance funds to the fund to make properly authorized payments.
When such payments result in an overdraft, the fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian may have a lien, security interest or security entitlement in any
fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
Expenses. Within the John
Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into
consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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ANNUAL REPORT
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39
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Statement of cash flows. A Statement of cash flows is presented when a fund has a significant amount of borrowing
during the period, based on the average total borrowing in relation to total assets, or when a certain percentage of the fund’s investments is classified as Level 3 in the fair value hierarchy. Information on financial transactions that
have been settled through the receipt and disbursement of cash is presented in the Statement of cash flows. The cash amount shown in the Statement of cash flows is the amount included in the fund’s Statement of assets and liabilities and
represents the cash on hand at the fund’s custodian and does not include any short-term investments or collateral on derivative contracts, if any.
Change in
accounting principle. Accounting Standards Update (ASU) 2017-08, Premium Amortization on Purchased Callable Debt Securities, shortens the premium amortization period for purchased non contingently
callable debt securities and is effective for public companies with fiscal years beginning after December 15, 2018. Adoption of the ASU did not have a material impact to the fund.
Federal income taxes. The fund intends to continue to qualify 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.
As of October 31, 2020, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal
tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to
shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends quarterly. Capital gain distributions, if any, are typically
distributed annually.
The tax character of distributions for the years ended October 31, 2020 and 2019 was as follows:
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|
|
October 31, 2020
|
|
|
October 31, 2019
|
|
|
Ordinary income
|
|
|
$8,743,094
|
|
|
|
$7,757,792
|
|
As of October 31, 2020, the
components of distributable earnings on a tax basis consisted of $1,962,525 of undistributed ordinary income.
Such distributions and distributable earnings, on a
tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in the fund’s financial statements as a return of capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no
impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily
attributable to amortization and accretion on debt securities.
Note 3 — Guarantees and indemnifications
Under the fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to
the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund’s maximum exposure under these arrangements is unknown, as this would involve
future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Investment Management LLC (the Advisor) serves as investment advisor for the fund. The Advisor is an indirect, principally owned subsidiary of Manulife
Financial Corporation (MFC).
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40
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a
daily management fee to the Advisor equivalent on an annual basis to the sum of (a) 0.650% of the first $150 million of the fund’s average daily managed assets (net assets plus borrowings under the Liquidity Agreement (see Note 7), (b)
0.375% of the next $50 million of the fund’s average daily managed assets, (c) 0.350% of the next $100 million of the fund’s average daily managed assets and (d) 0.300% of the fund’s average daily managed assets in excess of
$300 million. The Advisor has a subadvisory agreement with Manulife Investment Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex,
including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in
proportion to the daily net assets of each fund. During the year ended October 31, 2020, this waiver amounted to 0.01% of the fund’s average daily net assets. This arrangement expires on July 31, 2022, unless renewed by mutual agreement of the
fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
The expense reductions described above amounted to
$19,262 for the year ended October 31, 2020.
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended October 31, 2020, were equivalent
to a net annual effective rate of 0.51% of the fund’s average daily managed net assets.
Accounting and legal services. Pursuant to a service agreement,
the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, compliance, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to
shareholders and regulatory reports, among other services. These accounting and legal services fees incurred, for the year ended October 31, 2020, amounted to an annual rate of 0.01% of the fund’s average daily managed net assets.
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. These Trustees receive from the fund and the other
John Hancock closed-end funds an annual retainer. In addition, Trustee out-of-pocket expenses are allocated to each fund based on
its net assets relative to other funds within the John Hancock group of funds complex.
Note 5 — Fund share transactions
On March 12, 2015, the Board of Trustees approved a share repurchase plan, which is subsequently reviewed by the Board of Trustees each year in December.
Under the current share repurchase plan, the fund may purchase in the open market, between January 1, 2020 and December 31, 2020, up to 10% of its outstanding common shares as of December 31, 2019. The current share repurchase plan will remain in
effect between January 1, 2020 and December 31, 2020.
During the years ended October 31, 2020 and 2019, the fund had no activities under the repurchase program.
Shares repurchased and corresponding dollar amounts, if any, are included on the Statements of changes in net assets.
Note 6 —
Leverage risk
The fund utilizes a Liquidity Agreement (LA) to increase its assets available for investment. When the fund leverages its assets,
shareholders bear the expenses associated with the LA and have potential to benefit or be disadvantaged from the use of leverage. The Advisor’s fee is also increased in dollar terms from the use of leverage. Consequently, the fund and the
Advisor may have differing interests in determining whether to leverage
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ANNUAL REPORT
| JOHN HANCOCK INCOME SECURITIES TRUST
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41
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the fund’s assets. Leverage creates risks that may adversely affect the return for the holders of shares, including:
• the likelihood of greater volatility of NAV and market price of shares;
•
fluctuations in the interest rate paid for the use of the LA;
• increased operating costs, which may reduce the fund’s total return;
• the potential for a decline in the value of an investment acquired through leverage, while the fund’s obligations under such leverage remains fixed; and
• the fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements.
To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the fund’s return
will be greater than if leverage had not been used; conversely, returns would be lower if the cost of the leverage exceeds the income or capital appreciation derived. The use of securities lending to obtain leverage in the fund’s investments
may subject the fund to greater risk of loss than would reinvestment of collateral in short term highly rated investments.
In addition to the risks created by the
fund’s use of leverage, the fund is subject to the risk that it would be unable to timely, or at all, obtain replacement financing if the LA is terminated. Were this to happen, the fund would be required to
de-leverage, selling securities at a potentially inopportune time and incurring tax consequences. Further, the fund’s ability to generate income from the use of leverage would be adversely affected.
Note 7 — Liquidity Agreement
The fund has
entered into a Liquidity Agreement (LA) with State Street Bank and Trust Company (SSB) that allows it to borrow or otherwise access up to $91.3 million (maximum facility amount) through a line of credit, securities lending and reverse
repurchase agreements. The amounts outstanding at October 31, 2020 are shown in the Statement of assets and liabilities as the Liquidity agreement.
The fund pledges
its assets as collateral to secure obligations under the LA. The fund retains the risks and rewards of the ownership of assets pledged to secure obligations under the LA and makes these assets available for securities lending and reverse repurchase
transactions with SSB acting as the fund’s authorized agent for these transactions. All transactions initiated through SSB are required to be secured with cash collateral received from the securities borrower (the Borrower) or cash is received
from the reverse repurchase agreement (Reverse Repo) counterparties. Securities lending transactions will be secured with cash collateral in amounts at least equal to 100% of the market value of the securities utilized in these transactions. Cash
received by SSB from securities lending or Reverse Repo transactions is credited against the amounts borrowed under the line of credit.
Upon return of securities by
the Borrower or Reverse Repo counterparty, SSB will return the cash collateral to the Borrower or proceeds from the Reverse Repo, as applicable, which will eliminate the credit against the line of credit and will cause the drawdowns under the line
of credit to increase by the amounts returned. Income earned on the loaned securities is retained by SSB, and any interest due on the reverse repurchase agreements is paid by SSB.
SSB has indemnified the fund for certain losses that may arise if the Borrower or a Reverse Repo Counterparty fails to return securities when due. With respect to
securities lending transactions, upon a default of the securities borrower, SSB uses the collateral received from the Borrower to purchase replacement securities of the same issue, type, class and series. If the value of the collateral is less than
the purchase cost of replacement securities, SSB is responsible for satisfying the shortfall but only to the extent that the shortfall is not due to any of the fund’s losses on the reinvested cash collateral. Although the risk of the loss of
the securities is mitigated by receiving collateral from the Borrower or proceeds from the Reverse Repo counterparty and through SSB indemnification, the fund could experience a delay in recovering securities or could experience a lower than
expected return if the Borrower or Reverse Repo counterparty fails to return the securities on a timely basis.
Interest charged is at the rate of one month LIBOR
(London Interbank Offered Rate) plus 0.600% and is payable
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42
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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monthly on the aggregate balance of the drawdowns outstanding under the LA. As of October 31, 2020, the fund had an aggregate balance of $91,300,000 at an interest rate of 0.74%, which is
reflected in the Liquidity agreement on the Statement of assets and liabilities. During the year ended October 31, 2020, the average balance of the LA and the effective average interest rate were $91,300,000 and 1.41%, respectively.
The fund may terminate the LA with 60 days’ notice. If certain asset coverage and collateral requirements, or other covenants are not met, the LA could be deemed in
default and result in termination. Absent a default or facility termination event, SSB is required to provide the fund with 360 days’ notice prior to terminating the LA.
Due to the anticipated discontinuation of LIBOR, as discussed in Note 8, the LA may be amended to remove LIBOR as the reference rate for interest and to replace LIBOR
with an alternative reference rate for interest mutually agreed upon by the fund and SSB. However, there remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate and the potential effect of a transition
away from LIBOR on the fund and/or the LA cannot yet be fully determined.
Note 8 — LIBOR Discontinuation Risk
The LA utilizes LIBOR as the reference or benchmark rate for interest rate calculations. LIBOR is a measure of the average interest rate at which major global banks can
borrow from one another. Following allegations of rate manipulation and concerns regarding its thin liquidity, in July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will stop encouraging banks to provide the
quotations needed to sustain LIBOR after 2021. This event will likely cause LIBOR to cease to be published. Before then, it is expected that market participants such as the fund and SSB will transition to the use of different reference or benchmark
rates. However, although regulators have suggested alternative rates, there is currently no definitive information regarding the future utilization of LIBOR or of any replacement rate.
It is uncertain what impact the discontinuation of LIBOR will have on the use of LIBOR as a reference rate in the LA. It is expected that market participants will amend
financial instruments referencing LIBOR, such as the LA, to include fallback provisions and other measures that contemplate the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor
the viability of such measures is known. In addition, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus multiple
alternative reference rates in new or existing financial instruments and products has not been determined. As market participants transition away from LIBOR, LIBOR’s usefulness may deteriorate, which could occur prior to the end of 2021. The
transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. LIBOR’s deterioration may adversely affect the liquidity and/or market value of securities that use LIBOR
as a benchmark interest rate. The use of an alternative reference rate, or the transition process to an alternative reference rate, may result in increases to the interest paid by the fund pursuant to the LA and, therefore, may adversely affect the
fund’s performance.
Note 9 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments and U.S. Treasury obligations, amounted to $160,165,985 and $155,565,872, respectively, for the year
ended October 31, 2020. Purchases and sales of U.S. Treasury obligations aggregated $16,844,338 and $22,163,179, respectively, for the year ended October 31, 2020.
Note 10 — Coronavirus (COVID-19) pandemic
The novel
COVID-19 disease has resulted in significant disruptions to global business activity. A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading
suspensions and closures, and affect fund performance.
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ANNUAL REPORT
| JOHN HANCOCK INCOME SECURITIES TRUST
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43
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Note 11 — New accounting pronouncement
In March 2020, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU), ASU 2020-04, which
provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the LIBOR and other IBOR-based reference rates as of the end of 2021. The
temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through
December 31, 2022. Management is currently evaluating the potential impact of ASU 2020-04 to the financial statements.
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44
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
|
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
John Hancock Income Securities Trust
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund’s investments, of John Hancock Income Securities Trust (the
“Fund”) as of October 31, 2020, the related statements of operations and cash flows for the year ended October 31, 2020, the statements of changes in net assets for each of the two years in the period ended October 31, 2020, including the
related notes, and the financial highlights for each of the five years in the period ended October 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Fund as of October 31, 2020, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2020 and the
financial highlights for each of the five years in the period ended October 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of
the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our
procedures included confirmation of securities owned as of October 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our
audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
December 10, 2020
We have served as the auditor of one or more investment companies in the John Hancock group of funds since 1988.
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ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
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45
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Tax information (Unaudited)
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For federal income tax purposes, the following information is furnished with respect to the distributions of the fund,
if any, paid during its taxable year ended October 31, 2020.
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate
dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and
Growth Tax Relief Reconciliation Act of 2003.
The fund reports the maximum amount allowable of its Section 199A dividends as defined in Proposed Treasury
Regulation §1.199A-3(d).
Eligible
shareholders will be mailed a 2020 Form 1099-DIV in early 2021. This will reflect the tax character of all distributions paid in calendar year 2020.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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ADDITIONAL INFORMATION
Unaudited
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 NYSE). The
fund’s investment objective is to generate a high level of current income consistent with prudent investment risk. There can be no assurance that the fund will achieve its investment objective. The fund utilizes a liquidity agreement to
increase its assets available for investments.
Under normal circumstances, the fund invests at least 80% of its net assets (plus borrowings for investment purposes)
in income securities, consisting of the following: (i) marketable corporate debt securities, (ii) governmental obligations and (iii) cash and commercial paper. The fund will notify shareholders at least 60 days prior to any change in
this 80% investment policy. The fund may invest up to 20% of its total assets in income-producing preferred securities and common stocks.
Dividends and distributions
During the year ended
October 31, 2020, distributions from net investment income totaling $0.7507 per share were paid to shareholders. The dates of payments and the amounts per share were as follows:
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Payment Date
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Income Distributions
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12/31/2019
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$ 0.2197
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3/31/2020
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0.1401
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6/30/2020
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0.2050
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9/30/2020
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0.1859
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Total
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$0.7507
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Dividend reinvestment plan
The fund’s Dividend Reinvestment Plan (the Plan) provides that distributions of dividends and capital gains are automatically reinvested in common shares of the fund
by Computershare Trust Company, N.A. (the Plan Agent). Every shareholder holding at least one full share of the fund is entitled to participate in the Plan. In addition, every shareholder who became a shareholder of the fund after June 30, 2011, and
holds at least one full share of the fund will be automatically enrolled in the Plan. Shareholders may withdraw from the Plan at any time and shareholders who do not participate in the Plan will receive all distributions in cash.
If the fund declares a dividend or distribution payable either in cash or in common shares of the fund and the market price of shares on the payment date for the
distribution or dividend equals or exceeds the fund’s net asset value per share (NAV), the fund will issue common shares to participants at a value equal to the higher of NAV or 95% of the market price. The number of additional shares to be
credited to each participant’s account will be determined by dividing the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If the market price is lower than NAV, or if dividends or distributions are
payable only in cash, then participants will receive shares purchased by the Plan Agent on participants’ behalf on the NYSE or otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed its purchases, the
average per share purchase price may exceed NAV, resulting in fewer shares being acquired than if the fund had issued new shares.
There are no brokerage charges
with respect to common shares issued directly by the fund. However, whenever shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently $0.05 per share
purchased or sold. Brokerage trading fees will be deducted from amounts to be invested.
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ANNUAL REPORT | JOHN
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The reinvestment of dividends and net capital gains distributions does not relieve participants of any income tax that
may be payable on such dividends or distributions.
Shareholders participating in the Plan may buy additional shares of the fund through the Plan at any time in
amounts of at least $50 per investment, up to a maximum of $10,000, with a total calendar year limit of $100,000. Shareholders will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. Purchases of additional
shares of the fund will be made on the open market. Shareholders who elect to utilize monthly electronic fund transfers to buy additional shares of the fund will be charged a $2 transaction fee plus $0.05 per share brokerage trading fee for each
automatic purchase. Shareholders can also sell fund shares held in the Plan account at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor. The Plan Agent will
mail a check (less applicable brokerage trading fees) on settlement date. Pursuant to regulatory changes, effective September 5, 2017, the settlement date is changed from three business days after the shares have been sold to two business days after
the shares have been sold. If shareholders choose to sell shares through their stockbroker, they will need to request that the Plan Agent electronically transfer those shares to their stockbroker through the Direct Registration System.
Shareholders participating in the Plan may withdraw from the Plan at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s
website at www.computershare.com/investor. Such termination will be effective immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on the first
trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. If shareholders withdraw from the Plan, their shares will be credited to their account; or, if they wish, the Plan Agent
will sell their full and fractional shares and send the shareholders the proceeds, less a transaction fee of $5 and less brokerage trading fees of $0.05 per share. If a shareholder does not maintain at least one whole share of common stock in the
Plan account, the Plan Agent may terminate such shareholder’s participation in the Plan after written notice. Upon termination, shareholders will be sent a check for the cash value of any fractional share in the Plan account, less any
applicable broker commissions and taxes.
Shareholders who hold at least one full share of the fund may join the Plan by notifying the Plan Agent by telephone, in
writing or by visiting the Plan Agent’s website at www.computershare.com/investor. If received in proper form by the Plan Agent before the record date of a dividend, the election will be effective with respect to all dividends paid after such
record date. If shareholders wish to participate in the Plan and their shares are held in the name of a brokerage firm, bank or other nominee, shareholders should contact their nominee to see if it will participate in the Plan. If shareholders wish
to participate in the Plan, but their brokerage firm, bank or other nominee is unable to participate on their behalf, they will need to request that their shares be re-registered in their own name, or they
will not be able to participate. The Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by shareholders as representing the total amount registered in their name and held for their account by their
nominee.
Experience under the Plan may indicate that changes are desirable. Accordingly, the fund and the Plan Agent reserve the right to amend or terminate the
Plan. Participants generally will receive written notice at least 90 days before the effective date of any amendment. In the case of termination, participants will receive written notice at least 90 days before the record date for the payment of any
dividend or distribution by the fund.
Effective November 1, 2013, the Plan was revised to provide that Computershare Trust Company, N.A. no longer provides mail
loss insurance coverage when shareholders mail their certificates to the fund’s administrator.
All correspondence or requests for additional information about
the Plan should be directed to Computershare Trust Company, N.A., at the address stated below, or by calling 800-852-0218, 201-680-6578 (For International Telephone Inquiries) and 800-952-9245 (For the Hearing Impaired (TDD)).
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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:
Regular Mail:
Computershare
P.O. Box 505000
Louisville,KY 40233
Registered or Overnight Mail:
Computershare
462 South 4th Street, Suite 1600
Louisville,KY 40202
If your shares are held with a brokerage firm, you should
contact that firm, bank or other nominee for assistance.
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ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
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Continuation of Investment Advisory and Subadvisory Agreements
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Income Securities Trust (the fund) of the Advisory Agreement (the Advisory
Agreement) with John Hancock Investment Management LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Manulife Investment Management (US) LLC (the Subadvisor). The Advisory Agreement and Subadvisory Agreement are
collectively referred to as the Agreements. Prior to the June 23-25, 2020 telephonic1 meeting at which the Agreements were approved, the Board also
discussed and considered information regarding the proposed continuation of the Agreements at a telephonic meeting held on May 26-27, 2020.
Approval of Advisory and Subadvisory Agreements
At telephonic meetings held on June 23-25, 2020, the Board, including the Trustees who are not parties to any Agreement or
considered to be interested persons of the fund under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the fund and the
Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory
Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an
independent third-party provider of fund data, performance information for an applicable benchmark index; and other pertinent information, such as the market premium and discount information, and, with respect to the Subadvisor, comparative
performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their
respective Agreements, as well as information regarding the Advisor’s revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement
and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board noted that the evaluation process with respect to the
Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board (including its various committees) at prior meetings with respect to the services
provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The information
received and considered by the Board in connection with the May and June meetings and throughout the year was both written and oral. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The
Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor’s affiliates. The Board considered the Advisory Agreement and the Subadvisory Agreement separately in the course
of its review. In doing so, the Board noted the respective roles of the Advisor and Subadvisor in providing services to the fund.
1
On March 25, 2020, as a result of health and safety measures put in place to combat the global COVID-19 pandemic, the Securities and Exchange Commission issued an exemptive order (the “Order”)
pursuant to Sections 6(c) and 38(a) of the Investment Company Act of 1940, as amended (the “1940 Act”), that temporarily exempts registered investment management companies from the in-person voting
requirements under the 1940 Act, subject to certain requirements, including that votes taken pursuant to the Order are ratified at the next in-person meeting. The Board determined that reliance on the Order
was necessary or appropriate due to the circumstances related to current or potential effects of COVID-19 and therefore, the Board’s May and June meetings were held telephonically in reliance on the
Order.
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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Throughout the process, the Board asked questions of and requested additional information from management. The Board is
assisted by counsel for the fund and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the
legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were
present.
Approval of Advisory Agreement
In
approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends
prevailing generally in the economy, the securities markets, and the industry) and did not treat any single factor as determinative, and each Trustee may have attributed different weights to different factors. The Board’s conclusions may be
based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board’s ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of
services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor’s compliance and
regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the fund’s Chief Compliance Officer (CCO) regarding the fund’s compliance policies and procedures established
pursuant to Rule 38a-1 under the 1940 Act. The Board observed that the scope of services provided by the Advisor, and of the undertakings required of the Advisor in connection with those services, including
maintaining and monitoring its own and the fund’s compliance programs, risk management programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The
Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and
coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers. The Board also considered the significant risks assumed by the Advisor
in connection with the services provided to the fund including entrepreneurial risk in sponsoring new funds and ongoing risks including investment, operational, enterprise, litigation, regulatory and compliance risk with respect to all funds.
The Board also considered the differences between the Advisor’s services to the fund and the services it provides to other clients that are not closed-end funds, including, for example, the differences in services related to the regulatory and legal obligations of closed-end funds.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor’s
management and the quality of the performance of the Advisor’s duties, through Board meetings, discussions and reports during the preceding year and through each Trustee’s experience as a Trustee of the fund and of the other funds in the
John Hancock group of funds complex (the John Hancock Fund Complex).
In the course of their deliberations regarding the Advisory Agreement, the Board considered,
among other things:
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(a)
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the skills and competency with which the Advisor has in the past managed the fund’s affairs and its subadvisory
relationship, the Advisor’s oversight and monitoring of the Subadvisor’s investment performance and compliance programs, such as the Subadvisor’s compliance with fund policies and objectives, review of brokerage matters, including
with respect to trade allocation and best execution and the Advisor’s timeliness in responding to performance issues;
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(b)
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the background, qualifications and skills of the Advisor’s personnel;
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ANNUAL REPORT | JOHN
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(c)
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the Advisor’s compliance policies and procedures and its responsiveness to regulatory changes and fund industry
developments;
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(d)
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the Advisor’s administrative capabilities, including its ability to supervise the other service providers for the
fund, as well as the Advisor’s oversight of any securities lending activity, its monitoring of class action litigation and collection of class action settlements on behalf of the fund, and bringing loss recovery actions on behalf of the fund;
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(e)
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the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of
services to the fund;
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(f)
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the Advisor’s initiatives intended to improve various aspects of the fund’s operations and investor experience
with the fund; and
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(g)
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the Advisor’s reputation and experience in serving as an investment advisor to the fund and the benefit to
shareholders of investing in funds that are part of a family of funds offering a variety of investments.
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The Board concluded that the Advisor may
reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment
performance. In considering the fund’s performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund’s performance results. In connection with the consideration of the Advisory
Agreement, the Board:
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(a)
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reviewed information prepared by management regarding the fund’s performance;
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(b)
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considered the comparative performance of an applicable benchmark index;
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(c)
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considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party
provider of fund data;
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(d)
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took into account the Advisor’s analysis of the fund’s performance; and
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(e)
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considered the fund’s share performance and premium/discount information.
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The Board noted that while it found the data provided by the independent third-party generally useful it recognized its limitations, including in particular that the
data may vary depending on the end date selected and the results of the performance comparisons may vary depending on the selection of the peer group. The Board noted that, based on its net asset value, the fund outperformed its benchmark index for
the one-, three-, five- and ten-year periods ended December 31, 2019. The Board also reviewed comparisons of the fund’s performance to the peer group, but noted the
limited size of the peer group. The Board took into account management’s discussion of the fund’s performance, including the favorable performance relative to the benchmark index for the one-,
three-, five- and ten-year periods. The Board concluded that the fund’s performance has generally been in line with or outperformed the fund’s benchmark index.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of fund data, including, among other data,
the fund’s contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund in light of the nature, extent and
quality of the management and advisory and subadvisory services provided by the Advisor and the Subadvisor. The Board considered the fund’s ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as
the fund’s ranking within a broader group of funds. In comparing the fund’s contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs.
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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The Board also took into account the impact of leverage on fund expenses. The Board took into account the management fee
structure, including that management fees for the fund were based on the fund’s total managed assets, which are attributable to common stock and borrowings. The Board noted that net management fees and net total expenses for the fund are higher
than the peer group median.
The Board took into account management’s discussion of the fund’s expenses. The Board also took into account management’s
discussion with respect to the overall management fee and the fees of the Subadvisor, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee, in each case in light of the services rendered for those
amounts and the risks undertaken by the Advisor. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had agreed to implement an overall fee waiver across the complex, including the
fund, which is discussed further below. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule
that reduces management fees as assets increase. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the
John Hancock Fund Complex) having similar investment mandates, if any. The Board considered any differences between the Advisor’s and Subadvisor’s services to the fund and the services they provide to other comparable clients or funds. The
Board concluded that the advisory fee paid with respect to the fund is reasonable in light of the nature, extent and quality of the services provided to the fund under the Advisory Agreement.
Profitability/Fall out benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates
(including the Subadvisor) from the Advisor’s relationship with the fund, the Board:
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(a)
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reviewed financial information of the Advisor;
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(b)
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reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its
affiliates with respect to the fund;
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(c)
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received and reviewed profitability information with respect to the John Hancock Fund Complex as a whole and with respect
to the fund;
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(d)
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received information with respect to the Advisor’s allocation methodologies used in preparing the profitability data
and considered that the advisor hired an independent third-party consultant to provide an analysis of the Advisor’s allocation methodologies;
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(e)
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considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an
administrative services agreement;
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(f)
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noted that the fund’s Subadvisor is an affiliate of the Advisor;
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(g)
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noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund;
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(h)
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noted that the subadvisory fees for the fund are paid by the Advisor;
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(i)
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considered the Advisor’s ongoing costs and expenditures necessary to improve services, meet new regulatory and
compliance requirements, and adapt to other challenges impacting the fund industry; and
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(j)
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considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services
it provides to the fund and the risks that it assumes as Advisor, including entrepreneurial, operational, reputational, litigation and regulatory risk.
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Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship
with the fund was reasonable and not excessive.
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Economies of scale. In considering the extent to which the fund may realize any economies of scale and
whether fee levels reflect these economies of scale for the benefit of the fund shareholders, the Board noted that the fund has a limited ability to increase its assets as a closed-end fund. The Board took
into account management’s discussions of the current advisory fee structure, and, as noted above, the services the Advisor provides in performing its functions under the Advisory Agreement and in supervising the Subadvisor.
The Board also considered potential economies of scale that may be realized by the fund as part of the John Hancock Fund Complex. Among them, the Board noted that the
Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios). This waiver is based upon aggregate net assets
of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. The Board reviewed the fund’s advisory fee
structure and concluded that: (i) the fund’s fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of
scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management’s discussion of the fund’s advisory fee
structure. The Board also considered the Advisor’s overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the fund. The Board determined that the
management fee structure for the fund was reasonable.
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
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(1)
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information relating to the Subadvisor’s business, including current subadvisory services to the fund (and other
funds in the John Hancock Fund Complex);
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(2)
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the historical and current performance of the fund and comparative performance information relating to an applicable
benchmark index and comparable funds; and
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(3)
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the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information
prepared by an independent third party provider of fund data.
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Nature, extent, and quality of services. With respect to the services
provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor’s Form ADV, as well as took into account information presented throughout the past year. The Board considered the
Subadvisor’s current level of staffing and its overall resources, as well as received information relating to the Subadvisor’s compensation program. The Board reviewed the Subadvisor’s history and investment experience, as well as
information regarding the qualifications, background, and responsibilities of the Subadvisor’s investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor’s compliance
program and any disciplinary history. The Board also considered the Subadvisor’s risk assessment and monitoring process. The Board reviewed the Subadvisor’s regulatory history, including whether it was involved in any regulatory actions or
investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding
investment processes and organizational and staffing matters. The Board also noted that the fund’s CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the
same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor’s investment process and philosophy. The Board took into account that the Subadvisor’s responsibilities include the
development and maintenance of an investment program for the fund that is consistent with the fund’s investment objective, the selection of investment securities and the placement of
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orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with
respect to the Subadvisor’s brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In
considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The
Board also received information and took into account any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In
addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor’s relationship with the fund, such as the opportunity to provide advisory services to additional funds in
the John Hancock Fund Complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that,
in turn, the Advisor pays subadvisory fees to the Subadvisor. As noted above, the Board also considered the fund’s subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the
report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the
subadvisory fee paid by the Advisor to the Subadvisor with respect to the fund and compared them to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund’s performance as compared to the fund’s peer group median and the benchmark index
and noted that the Board reviews information about the fund’s performance results at its regularly scheduled meetings. The Board noted the Advisor’s expertise and resources in monitoring the performance, investment style and risk-adjusted
performance of the Subadvisor. The Board was mindful of the Advisor’s focus on the Subadvisor’s performance. The Board also noted the Subadvisor’s long-term performance record for similar accounts, as applicable.
The Board’s decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
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(1)
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the Subadvisor has extensive experience and demonstrated skills as a manager;
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(2)
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the fund’s performance, based on net asset value, has generally been in line with or outperformed the fund’s
benchmark index;
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(3)
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the subadvisory fees are reasonable in relation to the level and quality of services being provided under the Subadvisory
Agreement; and
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(4)
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the subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund in order to permit
shareholders to benefit from economies of scale if the fund grows.
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* * *
Based on the Board’s evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent
Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory
Agreement and Subadvisory Agreement for an additional one-year period.
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ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
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55
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This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by
the Trustees manage the day-to-day operations of the fund and execute policies formulated by the Trustees.
Independent Trustees
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Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
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Trustee
of the
Trust
since1
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Number of John
Hancock funds
overseen by
Trustee
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Hassell H. McClellan, Born: 1945
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2012
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196
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Trustee and Chairperson of the Board
Director/Trustee, Virtus Funds (since 2008); Director, The Barnes Group (since 2010); Associate Professor, The Wallace E. Carroll School of Management, Boston College
(retired 2013). Trustee (since 2005) and Chairperson of the Board (since 2017) of various trusts within the John Hancock Fund Complex.
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Charles L. Bardelis,2 Born: 1941
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2012
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196
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Trustee
Director, Island Commuter Corp. (marine
transport). Trustee, John Hancock Collateral Trust (since 2014), Trustee of various trusts within the John Hancock Fund Complex (since 1988).
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James R. Boyle, Born: 1959
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2015
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196
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Trustee
Chief Executive Officer, Foresters
Financial (since 2018); Chairman and Chief Executive Officer, Zillion Group, Inc. (formerly HealthFleet, Inc.) (healthcare) (2014-2018); Executive Vice President and Chief Executive Officer, U.S. Life Insurance Division of Genworth Financial, Inc.
(insurance) (January 2014–July 2014); Senior Executive Vice President, Manulife Financial, President and Chief Executive Officer, John Hancock (1999–2012); Chairman and Director, John Hancock Investment Management LLC, John Hancock
Investment Management Distributors LLC, and John Hancock Variable Trust Advisers LLC (2005–2010). Trustee of various trusts within the John Hancock Fund Complex (2005–2014 and since 2015).
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Peter S.
Burgess,2 Born: 1942
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2012
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196
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Trustee
Consultant (financial, accounting, and
auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln Educational Services Corporation (since 2004); Director, Symetra Financial Corporation
(2010–2016); Director, PMA Capital Corporation (2004–2010). Trustee of various trusts within the John Hancock Fund Complex (since 2005).
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William H. Cunningham, Born: 1944
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2005
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196
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Trustee
Professor, University of Texas, Austin,
Texas (since 1971); former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines
(since 2000); former Director, LIN Television (2009–2014). Trustee of various trusts within the John Hancock Fund Complex (since 1986).
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Grace K. Fey, Born: 1946
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2012
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196
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Trustee
Chief Executive Officer, Grace Fey
Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company (1988–2007); Director, Fiduciary Trust (since 2009). Trustee of various trusts within the John Hancock Fund Complex (since 2008).
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56
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
|
Independent Trustees (continued)
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Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
|
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Trustee
of the
Trust
since1
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Number of John
Hancock funds
overseen by
Trustee
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Deborah C. Jackson, Born: 1952
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2008
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196
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Trustee
President, Cambridge College,
Cambridge, Massachusetts (since 2011); Board of Directors, Massachusetts
Women’s Forum (since 2018); Board of Directors, National Association of Corporate
Directors/New England (since
2015); Board of Directors, Association of Independent Colleges and Universities of Massachusetts (2014-2017); Chief Executive Officer,
American Red Cross of Massachusetts Bay (2002–2011); Board of Directors of Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors of American Student Assistance
Corporation (1996–2009); Board of Directors of Boston Stock Exchange (2002–2008); Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). Trustee of various trusts within the John Hancock Fund Complex
(since 2008).
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James M.
Oates,2 Born: 1946
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2012
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196
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Trustee
Managing Director, Wydown Group
(financial consulting firm) (since 1994); Chairman and Director, Emerson Investment Management, Inc. (2000-2015); Independent Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services company) (1997–2011);
Director, Stifel Financial (since 1996); Director, Investor Financial Services Corporation (1995–2007); Director, Connecticut River Bancorp (1998-2014); Director/Trustee, Virtus Funds (since 1988). Trustee (since 2004) and Chairperson of the
Board (2005-2016) of various trusts within the John Hancock Fund Complex.
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Steven R. Pruchansky, Born: 1944
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2005
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196
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|
Trustee and Vice Chairperson of the Board
Managing Director, Pru Realty (since 2017); Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2014); Director and President, Greenscapes
of Southwest Florida, Inc. (2000-2014); Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Partner, Right Funding, LLC (2014-2017); Director, First Signature Bank &
Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991). Trustee (since 1992), Chairperson of the Board (2011–2012), and Vice Chairperson of the Board (since 2012) of various trusts
within the John Hancock Fund Complex.
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Frances G.
Rathke,2,* Born: 1960
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2020
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196
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Trustee
Director, Northern New England Energy
Corporation (since 2017); Director, Audit Committee Chair and Compensation Committee Member, Green Mountain Power Corporation (since 2016); Director, Treasurer and Finance & Audit Committee Chair, Flynn Center for Performing Arts (since
2016); Director, Audit Committee Chair and Compensation Committee Member, Planet Fitness (since 2016); Director, Citizen Cider, Inc. (high-end hard cider and hard seltzer company) (since 2016); Chief Financial
Officer and Treasurer, Keurig Green Mountain, Inc. (2003-retired 2015); Independent Financial Consultant, Frances Rathke Consulting (strategic and financial consulting services) (2001-2003); Chief Financial Officer and Secretary, Ben &
Jerry’s Homemade, Inc. (1989-2000, including prior positions); Senior Manager, Coopers & Lybrand, LLC (independent public accounting firm) (1982-1989). Trustee of various trusts within the John Hancock Fund Complex (since 2020).
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ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
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57
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Independent Trustees (continued)
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Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
|
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Trustee
of the
Trust
since1
|
|
|
Number of John
Hancock funds
overseen by
Trustee
|
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|
|
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Gregory A. Russo, Born: 1949
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2008
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196
|
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Trustee
Director and Audit Committee Chairman
(2012-2020), and Member, Audit Committee and Finance Committee (2011-2020), NCH Healthcare System, Inc. (holding company for multi-entity healthcare system); Director and Member (2012-2018) and Finance Committee Chairman (2014-2018), The Moorings,
Inc. (nonprofit continuing care community); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial Markets, KPMG (1998–2002); Chairman and Treasurer,Westchester County, New York, Chamber
of Commerce (1986–1992); Director, Treasurer, and Chairman of Audit and Finance Committees, Putnam Hospital Center (1989–1995); Director and Chairman of Fundraising Campaign, United Way of Westchester and Putnam Counties, New York
(1990–1995). Trustee of various trusts within the John Hancock Fund Complex (since 2008).
Non-Independent Trustees3
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|
|
|
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Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
|
|
Trustee
of the
Trust
since1
|
|
|
Number of John
Hancock funds
overseen by
Trustee
|
|
|
|
|
|
|
|
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|
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Andrew G. Arnott, Born: 1971
|
|
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2017
|
|
|
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196
|
|
President and Non-Independent Trustee
Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (since 2018); Executive Vice President, John Hancock Financial Services
(since 2009, including prior positions); Director and Executive Vice President, John Hancock Investment Management LLC (since 2005, including prior positions); Director and Executive Vice President, John Hancock Variable Trust Advisers LLC (since
2006, including prior positions); President, John Hancock Investment Management Distributors LLC (since 2004, including prior positions); President of various trusts within the John Hancock Fund Complex (since 2007, including prior positions).
Trustee of various trusts within the John Hancock Fund Complex (since 2017).
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Marianne Harrison, Born: 1963
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|
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2018
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|
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196
|
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Non-Independent Trustee
President and CEO, John Hancock (since 2017); President and CEO, Manulife Canadian Division (2013–2017); Member, Board of Directors, CAE Inc. (since 2019); Member,
Board of Directors,MA Competitive Partnership Board (since 2018); Member, Board of Directors, American Council of Life Insurers (ACLI) (since 2018); Member, Board of Directors, Communitech, an industry-led
innovation center that fosters technology companies in Canada (2017-2019); Member, Board of Directors, Manulife Assurance Canada (2015-2017); Board Member, St. Mary’s General Hospital Foundation (2014-2017); Member, Board of Directors, Manulife Bank of Canada (2013- 2017); Member, Standing Committee of the Canadian Life & Health Assurance Association (2013-2017); Member, Board of Directors, John
Hancock USA, John Hancock Life & Health, John Hancock New York (2012–2013). Trustee of various trusts within the John Hancock Fund Complex (since 2018).
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58
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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Principal officers who are not Trustees
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|
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|
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Name, year of birth
Position(s) held with fund
Principal occupation(s)
during past 5 years
|
|
Officer
of the
Trust
since
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|
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Charles A. Rizzo, Born: 1957
|
|
|
2007
|
|
Chief Financial Officer
Vice President, John
Hancock Financial Services (since 2008); Senior Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2008); Chief Financial Officer of various trusts within the John Hancock Fund Complex (since
2007).
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Salvatore Schiavone, Born: 1965
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|
|
2010
|
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Treasurer
Assistant Vice President, John
Hancock Financial Services (since 2007); Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2007); Treasurer of various trusts within the John Hancock Fund Complex (since 2007, including prior
positions).
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Christopher (Kit) Sechler, Born: 1973
|
|
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2018
|
|
Chief Legal Officer and Secretary
Vice
President and Deputy Chief Counsel, John Hancock Investments (since 2015); Assistant Vice President and Senior Counsel (2009–2015), John Hancock Investments; Chief Legal Officer and Secretary of various trusts within the John Hancock Fund
Complex (since 2018); Assistant Secretary of John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2009).
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Trevor Swanberg, Born: 1979
|
|
|
2020
|
|
Chief Compliance Officer
Chief Compliance
Officer, various trusts within the John Hancock Fund Complex, John Hancock Investment Management LLC, and John Hancock Variable Trust Advisers LLC (since 2020); Deputy Chief Compliance Officer, various trusts within the John Hancock Fund Complex
(2018–2020); Deputy Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (2019–2020); Assistant Chief Compliance Officer, various trusts within the John Hancock Fund Complex
(2016–2018); Assistant Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (2016–2019); Vice President, State Street Global Advisors (2015–2016).
The business address for all Trustees and Officers is 200 Berkeley Street, Boston, Massachusetts 02116-5023.
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1
|
Each Trustee holds office until his or her successor is elected and qualified, or until the Trustee’s death,
retirement, resignation, or removal. Mr. Boyle has served as Trustee at various times prior to the date listed in the table.
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2
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Member of the Audit Committee.
|
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3
|
The Trustee is a Non-Independent Trustee due to current or former positions with
the Advisor and certain affiliates.
|
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*
|
Appointed as Independent Trustee effective as of September 15, 2020.
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|
ANNUAL REPORT | JOHN
HANCOCK INCOME SECURITIES TRUST
|
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59
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Trustees
Hassell H. McClellan, Chairperson
Steven R. Pruchansky, Vice Chairperson
Andrew G. Arnott†
Charles L. Bardelis*
James R. Boyle
Peter S. Burgess*
William H. Cunningham
Grace K. Fey
Marianne Harrison†
Deborah C. Jackson
James M. Oates*
Frances G. Rathke
1,*
Gregory A. Russo
Officers
Andrew G. Arnott
President
Charles A. Rizzo
Chief Financial Officer
Salvatore Schiavone
Treasurer
Christopher (Kit) Sechler
Secretary and Chief Legal Officer
Trevor Swanberg2
Chief Compliance Officer
Investment advisor
John Hancock Investment Management LLC
Subadvisor
Manulife Investment Management (US) LLC
Portfolio Managers
Jeffrey N. Given, CFA
Howard C. Greene, CFA
Custodian
State Street Bank and Trust Company
Transfer agent
Computershare Shareowner Services, LLC
Legal
counsel
K&L Gates LLP
Independent
registered public accounting firm
PricewaterhouseCoopers LLP
Stock symbol
Listed New York Stock Exchange: JHS
* Member of the Audit Committee
† Non-Independent
Trustee
1 Appointed as Independent Trustee effective as of September 15, 2020
2 Effective July 31, 2020
The
fund’s proxy voting policies and procedures, as well as the fund proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on
our website.
All of the fund’s holdings as of the end of the third month of every fiscal quarter are filed with the SEC on Form N-PORT within 60 days of the end
of the fiscal quarter. The fund’s Form N-PORT filings are available on our website and the SEC’s website, sec.gov.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-852-0218.
The report is certified under the Sarbanes-Oxley Act, which requires closed-end funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.
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You can also contact us:
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800-852-0218
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Regular mail:
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Express mail:
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jhinvestments.com
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Computershare
|
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Computershare
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P.O. Box 505000
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462 South 4th Street, Suite 1600
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Louisville, KY 40233
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Louisville, KY 40202
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60
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JOHN HANCOCK INCOME SECURITIES TRUST | ANNUAL REPORT
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John Hancock family of
funds
|
DOMESTIC EQUITY FUNDS
Blue Chip Growth
Classic Value
Disciplined Value
Disciplined Value Mid Cap
Equity Income
Financial Industries
Fundamental All Cap Core
Fundamental Large Cap Core
New Opportunities
Regional Bank
Small Cap Core
Small Cap Growth
Small Cap Value
U.S. Global Leaders Growth
U.S. Growth
GLOBAL AND INTERNATIONAL EQUITY FUNDS
Disciplined Value International
Emerging Markets
Emerging Markets Equity
Fundamental Global Franchise
Global Equity
Global Shareholder Yield
Global Thematic Opportunities
International Dynamic Growth
International Growth
International Small Company
INCOME FUNDS
Bond
California Tax-Free Income
Emerging Markets Debt
Floating Rate Income
Government Income
High Yield
High Yield Municipal Bond
Income
Investment Grade Bond
Money Market
Short Duration Bond
Short Duration Credit Opportunities
Strategic Income Opportunities
Tax-Free Bond
ALTERNATIVE AND SPECIALTY FUNDS
Absolute Return Currency
Alternative Asset Allocation
Alternative Risk Premia
Diversified Macro
Infrastructure
Multi-Asset Absolute Return
Real Estate Securities
Seaport Long/Short
A fund’s investment objectives, risks,
charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investment Management
at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION
Balanced
Multi-Asset High Income
Multi-Index Lifetime Portfolios
Multi-Index Preservation Portfolios
Multimanager Lifestyle Portfolios
Multimanager Lifetime Portfolios
Retirement Income 2040
EXCHANGE-TRADED FUNDS
John Hancock Multifactor Consumer Discretionary ETF
John Hancock Multifactor Consumer
Staples ETF
John Hancock Multifactor Developed International ETF
John Hancock
Multifactor Emerging Markets ETF
John Hancock Multifactor Energy ETF
John Hancock
Multifactor Financials ETF
John Hancock Multifactor Healthcare ETF
John Hancock
Multifactor Industrials ETF
John Hancock Multifactor Large Cap ETF
John Hancock
Multifactor Materials ETF
John Hancock Multifactor Media and Communications ETF
John Hancock Multifactor Mid Cap ETF
John Hancock Multifactor Small Cap ETF
John Hancock Multifactor Technology ETF
John Hancock Multifactor Utilities ETF
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS
ESG All Cap Core
ESG Core Bond
ESG International Equity
ESG Large Cap Core
CLOSED-END FUNDS
Financial Opportunities
Hedged Equity & Income
Income Securities
Trust Investors Trust
Preferred Income
Preferred Income II
Preferred Income III
Premium Dividend
Tax-Advantaged Dividend
Income
Tax-Advantaged Global Shareholder Yield
John Hancock Multifactor ETF shares are bought
and sold at market price (not NAV), and are not individually redeemed from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are
distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP. Foreside is not affiliated with John Hancock Investment Management Distributors LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the John Hancock Dimensional indexes. Dimensional Fund
Advisors LP does not sponsor, endorse, or sell, and makes no representation as to the advisability of investing in, John Hancock Multifactor ETFs.
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John Hancock Investment Management
A trusted brand
John Hancock Investment Management is a premier asset
manager with a heritage of financial stewardship dating back to 1862. Helping our shareholders pursue their financial goals is at the core of everything we do. It’s why we support the role of professional financial advice and operate with the
highest standards of conduct and integrity.
A better way to invest
We
serve investors globally through a unique multimanager approach: We search the world to find proven portfolio teams with specialized expertise for every strategy we offer, then we apply robust investment oversight to ensure they continue to meet our
uncompromising standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set of investments backed by some of the world’s
best managers, along with strong risk-adjusted returns across asset classes.
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John Hancock Investment Management Distributors LLC ◾ Member FINRA, SIPC 200 Berkeley Street ◾ Boston, MA 02116-5010 ◾ 800-225-5291 ◾ jhinvestments.com
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A company of
Manulife Investment Management
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P6A 10/20
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MF1399348
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12/2020
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