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<SEC-DOCUMENT>0000928816-09-000036.txt : 20090109
<SEC-HEADER>0000928816-09-000036.hdr.sgml : 20090109
<ACCEPTANCE-DATETIME>20090109144804
ACCESSION NUMBER:		0000928816-09-000036
CONFORMED SUBMISSION TYPE:	N-CSR
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20081031
FILED AS OF DATE:		20090109
DATE AS OF CHANGE:		20090109
EFFECTIVENESS DATE:		20090109

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HANCOCK JOHN INCOME SECURITIES TRUST /MA
		CENTRAL INDEX KEY:			0000759866
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-CSR
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-04186
		FILM NUMBER:		09518328

	BUSINESS ADDRESS:	
		STREET 1:		C/O JOHN HANCOCK FUNDS
		STREET 2:		601 CONGRESS STREET
		CITY:			BOSTON
		STATE:			MA
		ZIP:			02210
		BUSINESS PHONE:		617-663-3000

	MAIL ADDRESS:	
		STREET 1:		C/O JOHN HANCOCK FUNDS
		STREET 2:		601 CONGRESS STREET
		CITY:			BOSTON
		STATE:			MA
		ZIP:			02210
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-CSR
<SEQUENCE>1
<FILENAME>a_incomesectrust.htm
<DESCRIPTION>JOHN HANCOCK INCOME SECURITIES TRUST
<TEXT>
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     <TD noWrap align=center colSpan=2><FONT face=sans-serif>UNITED STATES</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><FONT face=sans-serif>SECURITIES AND EXCHANGE COMMISSION</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><FONT face=sans-serif>Washington, D.C. 20549</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><B><FONT face=sans-serif>FORM N-CSR</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><B><FONT face=sans-serif>CERTIFIED SHAREHOLDER REPORT OF REGISTERED</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><B><FONT face=sans-serif>MANAGEMENT INVESTMENT COMPANIES</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><FONT face=sans-serif>Investment Company Act file number </FONT><U><FONT face=sans-serif>811- 4186</FONT></U>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=center colSpan=2>&nbsp;</TD></TR>
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     <TD noWrap align=center colSpan=2><U><FONT face=sans-serif>John Hancock Income Securities Trust</FONT></U>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><FONT face=sans-serif>(Exact name of registrant as specified in charter)</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=center colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><U><FONT face=sans-serif>601 Congress Street, Boston, Massachusetts 02210</FONT></U>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><FONT face=sans-serif>(Address of principal executive offices) (Zip code)</FONT>&nbsp; </TD></TR>
<TR>
     <TD align=center colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD align=center colSpan=2><FONT face=sans-serif>Alfred P. Ouellette</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=center colSpan=2><FONT face=sans-serif>Senior Counsel and Assistant Secretary</FONT> </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><FONT face=sans-serif>601 Congress Street</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><U><FONT face=sans-serif>Boston, Massachusetts 02210</FONT></U>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center colSpan=2><FONT face=sans-serif>(Name and address of agent for service)</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif>Registrant's telephone number, including area code: </FONT><U><FONT face=sans-serif>617-663-4324</FONT></U>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif>Date of fiscal year end:</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>October 31</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif>Date of reporting period:</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>October 31, 2008</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=2>ITEM 1. REPORT TO SHAREHOLDERS.</FONT></P>
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<P align=left><FONT face=serif size=7>Discussion of Fund performance</FONT></P>
<P align=left><FONT face=sans-serif size=2>By MFC Global Investment Management (U.S.), LLC</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>The Fund&#146;s fiscal year-end recently changed from December 31 to October 31. What follows is a discussion of the Fund&#146;s performance for the 10-month period ended October 31, 2008.</FONT></B></P>
<P align=left><FONT face=serif size=2>U.S. bonds were mixed but generally lower in the first 10 months of 2008 amid a deteriorating economic and financial environment. The main driver of bond market performance during the period was a worsening credit crunch and a liquidity crisis that crippled some of the nation&#146;s largest financial companies and exacerbated the U.S. economic downturn. For the 10 months ended October 31, 2008, John Hancock Income Securities Trust produced a total return of &#150;21.36% at net asset value (NAV) and &#150;19.41% at market value. The difference in the Fund&#146;s net asset value (NAV) performance and its market </FONT><FONT face=serif size=2>performance stems from the fact that the market share price is subject to the dynamics of secondary market trading, which could cause it to trade at a discount or premium to the Fund&#146;s NAV share price at any time. By comparison, the average UBS leveraged investment-grade bond closed-end fund returned &#150;19.00% at </FONT><FONT f
ace=serif size=2>NAV and &#150;16.91% at market value, and the Barclays Capital Government/Credit Bond Index returned &#150;3.16% . The Fund&#146;s larger decline compared with the broad bond indexes resulted from its sector weightings, which differed significantly from the indexes. In particular, the portfolio had virtually no exposure to the top-performing Treasury sector, and it had a substantially larger position in declining corporate bonds, especially high-yield securities (which are not represented in the indexes). Within the corporate sector, casino operators such as Greektown Holdings LLC and Fontainebleau Las Vegas Holdings LLC were among the worst performers. Recycling operator Blaze Recycling &amp; Metals was one of the top performance contributors. The portfolio benefited from its exposure to agency-issued mortgage-backed securities and interest-only securities backed by &#147;pay-option&#148; mortgages. In contrast, positions in non-agency mortgage-backed securities detracted. Regarding the Fun
d&#146;s debt, the extremely difficult market conditions and sharp downturn caused the Fund to deleverage (reduce its amount of debt) throughout the period to keep within the assets-to-debt ratio of its loan covenant.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>&#147;U.S. bonds were mixed but</FONT></B><BR>
<B><FONT face=sans-serif size=2>generally lower in the first 10</FONT></B><BR>
<B><FONT face=sans-serif size=2>months of 2008...&#148;</FONT></B></P>
<P align=left><FONT face=sans-serif size=1>This commentary reflects the views of the portfolio managers through the end of the Fund&#146;s period discussed in this report. The managers&#146; statements reflect their own opinions. As such, they are in no way guarantees of future events, and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant.</FONT></P>
<P align=left><FONT face=sans-serif size=1>Past performance is no guarantee of future results.</FONT></P>
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<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>6</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=7>Portfolio summary</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="66%"></TD>
     <TD width="33%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Portfolio diversification</FONT></B><B><SUP><FONT face=sans-serif size=1>1</FONT></SUP></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bonds</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>47%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>U.S. government &amp; agency securities</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>35%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Collateralized mortgage obligations</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>15%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Preferred stocks</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Asset-backed securities</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="22%"></TD>
     <TD width="23%"></TD>
     <TD width="9%"></TD>
     <TD width="23%"></TD>
     <TD width="22%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Sector distribution</FONT></B><B><SUP><FONT face=sans-serif size=1>1</FONT></SUP></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=5>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>U.S. government &amp; agency</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>35%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Telecommunication services</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Mortgage Bonds</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>17%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Materials</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Financials</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>14%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Energy</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Consumer discretionary</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>8%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Consumer staples</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD></TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Industrials</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>5%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Health care</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Utilities</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>5%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Information technology</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR>
     <TD colSpan=5>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Quality distribution</FONT></B><B><SUP><FONT face=sans-serif size=1>1</FONT></SUP></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=5>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>40%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>12%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>8%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>7%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>10%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>18%</FONT>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Short-term investments &amp; other</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD>
     <TD>&nbsp;</TD>
     <TD colSpan=2>
<HR noShade SIZE=1>
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<P align=left><SUP><FONT face=sans-serif size=1>1 </FONT></SUP><FONT face=sans-serif size=1>As a percentage of the Fund's total investments on October 31, 2008.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>7</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<P align=left><FONT face=serif size=7>Fund&#146;s investments</FONT></P>
<P align=left><FONT face=sans-serif size=4>Securities owned by the Fund on 10-31-08</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>This schedule is divided into six main categories: bonds, preferred stocks, tranche loans, U.S. government and agency securities, collateralized mortgage obligations and asset backed securities. Bonds, preferred stocks and tranche loans are further broken down by industry group.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Bonds 67.79%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$82,341,008</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(Cost $112,964,142)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR>
     <TD noWrap align=left>&nbsp;</TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Agricultural Products 0.33%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>398,879</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bunge Ltd. Finance Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>5.350%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$555</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>398,879</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Airlines 1.62%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,968,586</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Continental Airlines, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Pass Thru Ctf Ser 1999-1 Class A</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.545</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-02-19</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>346</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>294,470</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Pass Thru Ctf Ser 2000-2 Class B</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.307</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-02-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>384</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>253,611</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Pass Thru Ctf Ser 2001-1 Class C</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.033</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>106</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>71,927</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Delta Air Lines, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sec Pass Thru Ctf Ser A</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.821</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-10-22</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>743</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>483,128</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Pass Thru Ctf Ser 2002-1</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.417</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-02-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>825</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>594,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Northwest Airlines, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Collateralized Note Ser 2007-1</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.027</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-19</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>445</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>271,450</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Aluminum 0.77%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>933,800</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
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<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>CII Carbon, LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,015</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>933,800</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Auction Dealer 0.22%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>271,400</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Sotheby&#146;s,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>460</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>271,400</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
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     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Auto Parts &amp; Equipment 0.66%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>797,463</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Allison Transmission, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>625,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Tenneco, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.625</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>365</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>172,463</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Automotive Retail 0.06%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>72,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Avis Budget Car Rental LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.625</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>200</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>72,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Brewers 0.33%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>402,125</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Sabmiller PLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-17-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>465</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>402,125</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>8</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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<A name="page_5"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Broadcasting &amp; Cable TV 2.01%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$2,440,376</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Canadian Satellite Radio Holdings, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (G)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12.750%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$979</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>391,600</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Charter Communications Holdings</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>II, LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CAA2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>447</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>270,435</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Comcast Cable Communications</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Holdings, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,095</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,062,250</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Nexstar Broadcasting, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>340</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>197,200</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Time Warner Cable, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-01-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>605</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>518,891</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Casinos &amp; Gaming 4.30%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>5,227,090</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Chukchansi Economic</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Development Authority,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>460</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>243,800</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Downstream Development Authority of</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>the Quapaw Tribe of Oklahoma,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>305,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Fontainebleau Las Vegas Holdings, LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>995</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>134,325</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Greektown Holdings LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (H)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>D</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,015</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>218,225</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Indianapolis Downs Capital LLC,</FONT>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,010</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>505,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Jacobs Entertainment, Inc.,</FONT>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>215,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Little Traverse Bay Bands of</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Odawa Indians,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>326,250</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>MTR Gaming Group, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note Ser B</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>290</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>160,950</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Pinnacle Entertainment, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>625,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Seminole Hard Rock Entertainment,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note (P)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.319</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>330,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Seminole Tribe of Florida,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Bond (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.535</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-01-20</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>650</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>632,255</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Turning Stone Casino Resort Enterprise,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,540</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,216,600</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Waterford Gaming, LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.625</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>333</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>314,685</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Commodity Chemicals 0.32%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>384,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Sterling Chemicals, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sec Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-01-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>400</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>384,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Computer Hardware 0.50%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>601,593</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>International Business Machines Corp.</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>580</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>601,593</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>9</FONT>&nbsp; </TD></TR></TABLE><BR>
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<A name="page_6"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><B><FONT face=sans-serif size=1>Construction &amp; Farm Machinery &amp; Heavy Trucks 0.32%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$395,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Manitowoc Co., Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.125%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>395,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Consumer Finance 1.55%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,888,112</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>CIT Group, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-30-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>255</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>128,054</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-13-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>120</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>62,455</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Ford Motor Credit Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-10-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,920</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,209,925</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>140</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>76,674</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>SLM Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note Ser MTN</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.450</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>605</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>411,004</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Data Processing &amp; Outsourced Services 0.29%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>351,468</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Fiserv, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.800</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-20-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>460</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>351,468</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Department Stores 0.58%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>710,121</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>J.C. Penney Co., Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Debenture</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.650</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>445</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>371,434</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Macy&#146;s Retail Holdings, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>450</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>338,687</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Diversified Banks 2.93%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>3,556,508</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Banco Mercantil del Norte SA,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.862</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-13-21</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Baa1</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>685</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>517,314</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Barclays Bank PLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Bond (6.860% to 6-15-32</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable) (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.860</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-29-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,655</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>925,851</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Chuo Mitsui Trust &amp; Banking Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Note (5.506% to 4-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable) (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.506</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>940</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>613,030</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Natixis SA,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Sub Bond (10.000% to 4-30-18</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable) (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-18-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>420</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>261,652</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Northern Trust Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>225</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>214,803</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Royal Bank of Scotland Group PLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Bond (7.648% to 9-30-31 then</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.648</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-29-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>650</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>358,246</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Bond Ser MTN (7.640% to 9-29-</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>17 then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.640</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-31-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>400</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>191,387</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Wachovia Bank NA,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.850</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>390</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>276,555</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Note Ser BKNT</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.600</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>250</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>197,670</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Diversified Chemicals 2.01%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>2,443,720</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Mosiac Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.625</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-01-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>480</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>419,170</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>NOVA Chemicals Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note Ser MTN</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.400</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-01-09</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,045</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,024,550</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>10</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_7"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><B><FONT face=sans-serif size=1>Diversified Commercial &amp; Professional Services 0.54%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$653,357</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Hutchison Whampoa International Ltd.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>6.500%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-13-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$750</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>653,357</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Diversified Financial Services 2.68%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>3,256,469</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>American General Finance Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note Ser MTN</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.900</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,470</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>531,999</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Erac USA Finance Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>465</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>285,199</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Huntington Capital III,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Jr Sub Bond (6.650% to 5-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.650</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>590</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>238,899</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Nelnet, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Note (7.400% to 9-1-11 then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.400</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-29-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>715</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>360,744</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>NiSource Finance Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.800</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-19</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>440</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>317,733</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>QBE Capital Funding II LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sub Bond (6.797% to 6-1-17</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.797</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>695</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>295,375</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>SMFG Preferred Capital,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond (6.078% to 1-25-17</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.078</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-25-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>590</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>405,625</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Sovereign Capital Trust VI,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.908</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-13-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>480</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>320,718</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>TECO Finance, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.572</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>233</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>180,764</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-01-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>337</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>319,413</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Diversified Metals &amp; Mining 0.32%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>391,728</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Rio Tinto Finance (USA) Ltd.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>505</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>391,728</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Diversified REIT&#146;s 0.45%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>544,986</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>HRPT Properties Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.650</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>285</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>196,753</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>ProLogis,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.625</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>605</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>348,233</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Diversified Support Services 0.39%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>471,265</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Ingersoll-Rand Global Holding Co., Ltd.</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>545</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>471,265</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Drug Retail 0.96%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,165,125</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>CVS Caremark Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Jr Sub Bond (6.302% to 6-1-12</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.302</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>990</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>693,000</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>585</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>472,125</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Electric Utilities 6.22%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>7,557,256</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>AES Eastern Energy LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Pass Thru Ctf Ser 1999-A</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-02-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>958</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,005,710</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Beaver Valley Funding,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sec Lease Obligation Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>680</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>722,357</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>BVPS II Funding Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Collateralized Lease Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.890</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>699</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>693,936</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>11</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_8"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Electric Utilities (continued)</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Commonwealth Edison Co.</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>5.800%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$705</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$578,434</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Constellation Energy Group,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>4.550</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>945</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>727,555</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>FPL Energy National Wind,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.608</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-10-24</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>323</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>261,239</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Indiantown Cogeneration LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>1st Mtg Note Ser A&#150;9</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.260</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-10</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>255</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>261,145</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>IPALCO Enterprises, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.625</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-14-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>325</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>297,375</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Midwest Generation LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.560</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-02-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>330</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>296,772</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Pepco Holdings, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.450</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>565</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>536,521</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>PNPP II Funding Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Debenture</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.120</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-30-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>408</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>413,025</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Texas Competitive Electric Holdings</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Co. LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note Ser A (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>762,500</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sec Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.460</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-01-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>467</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>426,505</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Waterford 3 Funding Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sec Lease Obligation Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.090</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-02-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>563</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>574,182</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Electronic Equipment Manufacturers 0.65%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>795,781</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Thomas &amp; Betts Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>775</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>795,781</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Environmental &amp; Facilities Services 0.12%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>140,250</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Blaze Recycling &amp; Metals, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sec Note (G)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>165</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>140,250</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Food Distributors 0.39%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>475,200</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Independencia International Ltd.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Bond (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-31-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>420,000</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>120</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>55,200</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Gas Utilities 0.29%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>350,480</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Southern Union Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Jr Sub Note, Ser A (7.200% to 11-1-11</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.200</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-66</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>565</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>350,480</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Health Care Distributors 0.29%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>353,152</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Covidien International Finance SA,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>405</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>353,152</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Health Care Facilities 0.48%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>582,063</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Community Health Systems, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>695</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>582,063</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Health Care Services 1.17%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,418,618</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Humana, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.150</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>755</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>573,618</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Sun Healthcare Group, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>845,000</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%">&nbsp;</TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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<A name="page_9"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Household Products 0.21%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$257,075</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Yankee Candle Co., Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.500%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$455</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>257,075</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Housewares &amp; Specialties 0.13%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>156,250</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Vitro SA de CV,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>156,250</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Industrial Conglomerates 0.72%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>879,436</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Grupo Kuo SAB de CV,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-17-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>975</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>663,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Tyco Electronics Group SA,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.550</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>260</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>216,436</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Integrated Oil &amp; Gas 0.78%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>943,825</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Petro-Canada,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Debenture</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-21</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>943,825</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Integrated Telecommunication Services 3.81%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>4,631,432</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>AT&amp;T Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.400</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>495</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>396,133</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bellsouth Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Debenture</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.300</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>869</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>847,306</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Cincinnati Bell, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,025</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>740,562</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Qwest Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-01-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>445</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>386,038</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Sprint Capital Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>402,500</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.900</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-01-19</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>705,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Telecom Italia Capital,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.721</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-04-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>765</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>520,569</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Verizon Communications, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.900</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-15-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>405</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>338,799</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>West Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>630</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>294,525</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Investment Banking &amp; Brokerage 5.12%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>6,219,087</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bear Stearns Cos., Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>941,408</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Citigroup, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Bond (8.400% to 4-30-18</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.400</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-29-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>770</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>535,227</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-05-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>260</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>215,534</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,790</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,533,466</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Goldman Sachs Group, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>760</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>630,691</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>JPMorgan Chase &amp; Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Note Ser 1 (7.900% to 4-30-18</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.900</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-31-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>655</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>530,838</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Merrill Lynch &amp; Co., Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Jr Sub Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-14-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>495</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>406,990</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>13</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_10"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Investment Banking &amp; Brokerage (continued)</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Mizuho Financial Group, Ltd.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sub Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>8.375%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-29-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Aa3</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$750</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$643,117</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Morgan Stanley Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>781,816</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>IT Consulting &amp; Other Services 0.32%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>389,867</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>NCR Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-09</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>390</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>389,867</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Life &amp; Health Insurance 0.34%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>417,891</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Lincoln National Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Bond (6.050% to 4-20-17</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.050</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-20-67</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>250</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>115,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Symetra Financial Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Bond (8.300% to 10-1-17</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable) (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.300</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>440</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>302,891</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Marine 0.96%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,163,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>CMA CGM SA,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>700</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>343,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Navios Maritime Holdings, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>820,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Metal &amp; Glass Containers 0.60%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>727,243</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Commercial Metals Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.350</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>310</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>259,743</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Owens-Brockway Glass Container, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>467,500</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Movies &amp; Entertainment 0.50%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>612,302</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Cinemark, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Sr Disc Note (Zero to 3-15-09 then</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>9.750%)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Zero</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>245</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>205,800</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Rogers Cable, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Sec Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>455</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>406,502</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Multi-Line Insurance 1.16%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,412,928</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Genworth Financial, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2>&nbsp;<FONT face=sans-serif size=1>Jr Sub Note (6.150% to 11-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.150</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-66</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>430</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>100,553</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Horace Mann Educators Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.850</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>395</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>408,631</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Liberty Mutual Group,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Bond (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>885</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>556,059</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Bond (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.800</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>705</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>347,685</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Multi-Media 0.71%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>860,585</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>News America Holdings, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-20-24</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,020</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>860,585</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Multi-Utilities 0.42%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>506,728</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>CalEnergy Co., Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.480</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-15-28</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>550</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>506,728</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_11"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Office Services &amp; Supplies 0.41%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$492,234</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Xerox Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>6.750%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$670</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>492,234</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Oil &amp; Gas Drilling 0.36%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>434,037</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Allis-Chalmers Energy, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>335</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>201,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Delek &amp; Avner-Yam Tethys Ltd.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.326</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>231</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>233,037</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Oil &amp; Gas Exploration &amp; Production 0.47%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>570,967</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>McMoRan Exploration Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>340</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>260,100</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Petro-Canada,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.050</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>400</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>310,867</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Oil &amp; Gas Refining &amp; Marketing 0.31%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>380,550</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Enterprise Products Operating LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Jr Sub Note (7.034% to 1-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.034</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-68</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>590</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>380,550</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Oil &amp; Gas Storage &amp; Transportation 3.11%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>3,779,994</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Kinder Morgan Energy Partners LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Bond</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-32</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>195</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>151,585</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Markwest Energy Partners LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note Ser B</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>545</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>400,575</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>NGPL PipeCo LLC,</FONT>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.119</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,580</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,288,586</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>ONEOK Partners LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.150</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-01-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>705</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>569,499</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Plains All American Pipeline LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-01-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>345</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>255,279</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>TEPPCO Partners LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Jr Sub Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-67</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>695</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>478,470</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Williams Partners LP,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>800</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>636,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Packaged Foods &amp; Meats 1.05%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,279,928</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>General Mills, Inc.</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.200</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-17-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>155</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>134,197</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Kraft Foods, Inc.</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>770</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>659,731</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Minerva Overseas Ltd.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,080</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>486,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
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     <TD noWrap align=right></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Paper Packaging 0.89%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,081,625</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Graphic Packaging International, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>445</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>371,575</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Smurfit-Stone Container Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-01-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>510,000</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>245</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>120,050</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>U.S. Corrugated, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>160</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>80,000</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>15</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_12"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Paper Products 1.03%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$1,246,773</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>International Paper Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>7.950%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$505</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>409,001</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Plum Creek Timber Co., Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>365</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>307,772</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Verso Paper Holdings LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note Ser B</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-01-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>530,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Property &amp; Casualty Insurance 0.80%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>969,332</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Ohio Casualty Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.300</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>750</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>772,810</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Progressive Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Jr Sub Debenture (6.700% to 6-1-17</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.700</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>330</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>196,522</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Publishing 0.74%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>894,843</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Idearc, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,055</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>146,381</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>New York Times Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>4.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-15-10</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>650</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>527,037</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>R.H. Donnelley Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Disc Note Ser A&#150;1</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>200</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>46,000</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>495</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>106,425</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Disc Note Ser A&#150;2</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>300</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>69,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Real Estate Management &amp; Development 1.36%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,651,905</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Health Care Realty Trust, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-01-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>175</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>179,866</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Health Care REIT, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.200</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>505</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>398,714</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Post Apartment Homes,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.125</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-12-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>870</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>859,575</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Ventas Realty LP/Capital Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.625</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>250</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>213,750</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Regional Banks 0.71%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>865,835</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Capital One Financial Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-15-17</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>865,835</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Semiconductors 0.37%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>445,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Freescale Semiconductor, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>445,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
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     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Soft Drinks 0.69%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>832,674</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Coca Cola Enterprises, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-03-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>410</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>415,944</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Pepsico, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.900</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-01-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>395</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>416,730</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
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     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Specialized Finance 2.57%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>3,125,587</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>American Express Credit Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note Ser C</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.300</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-20-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>670</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>591,385</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Astoria Depositor Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Pass Thru Ctf Ser B (G)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.144</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-01-21</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>810,937</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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<A name="page_13"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Specialized Finance (continued)</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR>
     <TD colSpan=6>
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<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bosphorous Financial Services,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sec Floating Rate Note (P)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>4.604%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Baa2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$438</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$423,242</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Drummond Co., Inc.,</FONT>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.375</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>290</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>198,650</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>ESI Tractebel Acquisition Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sec Bond Ser B</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.990</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-30-11</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>746</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>686,320</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Graftech Finance, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>41</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>39,053</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>USB Realty Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Perpetual Bond (6.091% to 1-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>then variable)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.091</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-22-49</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>800</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>376,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Specialty Chemicals 0.89%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,079,200</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>American Pacific Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>590</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>519,200</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Momentive Performance,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.750</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-01-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>560,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Tobacco 1.00%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,211,562</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Alliance One International, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>175</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>147,875</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Gtd Sr Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-15-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>245</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>188,650</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Reynolds American, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Sec Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.250</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-13</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>875,037</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Wireless Telecommunication Services 1.50%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,823,342</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Crown Castle Towers LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
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<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond Ser 2005-1A Class D (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.612</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-15-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Baa2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,340</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,218,542</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Digicel Group Ltd.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sr Note (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.875</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-15</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Caa1</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,080</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>604,800</FONT>&nbsp; </TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="71%"></TD>
     <TD vAlign=bottom width="6%"><B><FONT face=sans-serif size=1>Credit</FONT></B></TD>
     <TD vAlign=bottom align=right width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><FONT style="WIDTH: 27pt; TEXT-ALIGN: right"><B><FONT face=sans-serif size=1>Shares</FONT></B></FONT></TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Preferred stocks 3.04%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$3,693,550</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(Cost $5,106,105)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Agricultural Products 0.90%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,093,750</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Ocean Spray Cranberries, Inc., Ser A (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT style="WIDTH: 27pt; TEXT-ALIGN: right" face=sans-serif size=1>12,500</FONT></TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,093,750</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Investment Banking &amp; Brokerage 0.45%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>545,850</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Merrill Lynch &amp; Co., Inc., 8.625%, Ser MER</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT style="WIDTH: 27pt; TEXT-ALIGN: right" face=sans-serif size=1>26,575</FONT></TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>545,850</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Real Estate Investment Trusts 0.56%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>684,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Public Storage REIT, Inc., 6.50%, Depositary</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Shares, Ser W</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT style="WIDTH: 27pt; TEXT-ALIGN: right" face=sans-serif size=1>40,000</FONT></TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>684,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Real Estate Management &amp; Development 0.63%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>763,950</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Apartment Investment &amp; Management Co.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>8.00%, Ser T</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT style="WIDTH: 27pt; TEXT-ALIGN: right" face=sans-serif size=1>55,000</FONT></TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>763,950</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Wireless Telecommunication Services 0.50%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>606,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Telephone &amp; Data Systems, Inc., 7.60%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT style="WIDTH: 27pt; TEXT-ALIGN: right" face=sans-serif size=1>40,000</FONT></TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>606,000</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>17</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_14"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD align=right width="10%"><B><FONT face=sans-serif size=1>Par value</FONT></B></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description, maturity date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Tranche loans 0.29%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$350,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(Cost $495,000)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Hotels, Resorts &amp; Cruise Lines 0.29%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>350,000</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>East Valley Tourist Development Authority,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Tranche (Facility LN5501750) 8-6-12</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$500</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>350,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right>&nbsp; </TD>
     <TD noWrap align=left><STRONG><FONT face=sans-serif size=1>Interest</FONT></STRONG><FONT face=sans-serif size=1>&nbsp;</FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>U.S. government &amp; agency securities 50.61%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$61,477,393</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(Cost $62,571,361)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>U.S. Government Agency 50.61%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>61,477,393</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Federal Home Loan Mortgage Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11.250%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-01-16</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$12</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>13,095</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-01-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,731</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,727,854</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-01-33</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,440</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,407,941</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Federal National Mortgage Assn.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>15 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-01-12</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,226</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-01-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>13,286</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>13,294,325</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-01-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>7,919</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>7,921,371</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-01-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,958</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,915,013</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-01-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,759</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,677,150</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-01-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,118</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,026,036</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-01-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,803</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,695,591</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-01-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,433</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,334,246</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-01-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,196</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,102,629</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-01-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>10,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>9,776,562</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Note</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-30-25</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,720</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,668,849</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Government National Mortgage Assn.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-20</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,840</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-15-21</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>4,550</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>30 Yr Pass Thru Ctf</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>9.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-25</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>12</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>14,045</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Small Business Administration CMBS Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond Ser 2005-1A Class D (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.219</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Baa2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>225</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>206,028</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond Ser 2005-1A Class E (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.706</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Baa3</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>200</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>150,000</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond Ser 2006-1A Class H (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.389</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Ba3</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>365</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>339,079</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond Ser 2006-1A Class J (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.825</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B1</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>220</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>195,963</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_15"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Collateralized mortgage obligations 22.63%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$27,482,038</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(Cost $41,908,827)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Collateralized Mortgage Obligations 22.63%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>27,482,038</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>American Home Mortgage Assets,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-6</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class XP IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2.941%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-25-46</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$13,369</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>451,218</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-5</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class XP IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>3.420</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-25-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>9,620</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>553,122</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>American Home Mortgage</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Investment Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-1</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class GIOP IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2.078</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-25-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>8,010</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>443,074</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>American Tower Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-1A</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class D (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.957</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-15-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>865</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>722,174</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Banc of America Commercial</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mortgage, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-6 Class A4</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>(P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.353</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-10-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>300</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>240,888</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Banc of America Funding Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-B</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 6A1</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.886</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-20-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>947</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>815,178</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-D</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 6B2</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.942</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-20-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,824</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>618,511</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bear Stearns Adjustable Rate</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mortgage Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-1</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B2 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.306</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>03-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>808</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>435,581</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bear Stearns Alt-A Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-3</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B2 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.440</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>553</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>188,795</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-4</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 3B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.256</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,522</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>145,597</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bear Stearns Commercial Mortgage</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Securities, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-PW14</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class D (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.412</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-11-38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>655</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>306,613</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Citigroup Mortgage Loan Trust, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-10</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 1A5A (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.839</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>711</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>476,592</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-5</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 2A3</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>434</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>381,056</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Citigroup/Deutsche Bank Commercial</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mortgage Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-CD1</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class C (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.225</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-15-44</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>295</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>189,623</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>ContiMortgage Home Equity Loan Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 1995-2</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class A&#150;5</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.100</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-15-25</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>64</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>53,723</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>19</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_16"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><B><FONT face=sans-serif size=1>Collateralized Mortgage Obligations (continued)</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Countrywide Alternative Loan Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-59</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 2X IO</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>3.188%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-20-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$10,419</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$312,561</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-0A12</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class X IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2.759</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-20-46</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>17,279</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>718,169</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-11CB</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 3A1</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A3</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,785</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,680,846</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Crown Castle Towers LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-1A</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class G (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.795</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-15-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Ba2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,615,694</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>DB Master Finance LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-1-M1 (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.285</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-20-31</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>340</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>246,415</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Dominos Pizza Master Issuer LLC,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-1-M1 (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>7.629</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-25-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,000</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>615,000</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>DSLA Mortgage Loan Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-AR5</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class X2 IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.151</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-19-45</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>26,116</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>718,200</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>First Horizon Alternative</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mortgage Securities,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2004-AA5</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.214</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-25-34</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>419</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>243,041</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-AA2</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.139</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,543</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>120,464</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>GSR Mortgage Loan Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2004-9</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1 (G)(P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>4.526</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-25-34</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>859</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>672,515</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-4F</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 6A1</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,582</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,698,954</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>HarborView Mortgage Loan Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-8</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 1X IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>1.781</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-19-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>7,247</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>98,515</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-3</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class ES IO (G)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.350</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-19-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>23,231</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>163,343</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-4</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class ES IO (G)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.350</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-19-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>23,293</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>171,058</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-6</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class ES IO (G)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.343</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-19-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>16,464</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>115,764</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Harborview NIM Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-9A</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class N2 (G)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>8.350</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-19-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB&#150;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>323</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>64,627</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Indymac Index Mortgage Loan Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2004-AR13</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.296</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>333</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>167,606</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-AR18</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 1X IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2.730</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>14,976</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>345,937</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-AR18</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 2X IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2.446</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>15,064</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>122,015</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-AR5</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.463</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>442</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>176,144</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-AR19</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 1B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.335</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>B</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>452</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>40,728</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>20</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_17"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="47%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="6%"></TD>
     <TD width="10%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><B><FONT face=sans-serif size=1>Collateralized Mortgage Obligations (continued)</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>JPMorgan Chase Commercial Mortgage</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Security Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-LDP4</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>5.129%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-15-42</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Aa2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$2,035</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$1,188,399</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>JPMorgan Mortgage Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-S3</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 2A2</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>01-25-21</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>768</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>688,827</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Luminent Mortgage Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-1</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class X IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>1.743</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>22,194</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>443,887</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Merrill Lynch Mortgage Investors Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-AF1</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class MF1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.150</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-25-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,203</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>328,896</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>MLCC Mortgage Investors, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-3</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class M1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.935</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-25-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>420</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>298,756</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-3</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class M2 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.935</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-25-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>155</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>121,893</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-3</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class M3 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.935</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>09-25-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BBB</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>105</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>72,465</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Morgan Stanley Capital I,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-HQ7</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class A4 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.208</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>11-14-42</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>840</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>686,185</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2006-IQ12</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class E (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.538</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-43</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>640</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>301,932</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Provident Funding Mortgage Loan Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-1</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>4.819</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>05-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>414</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>326,425</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Residential Accredit Loans, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-QA12</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class NB5 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.957</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,117</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,130,606</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Washington Mutual, Inc.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-6</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 1CB</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.500</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AAA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>445</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>317,168</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2005-AR4</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>4.668</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-25-35</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AA</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,510</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>987,020</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-0A4</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class XPPP IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.834</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>04-25-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Aaa</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>19,239</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>204,410</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-0A5</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 1XPP IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.873</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>08-07-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Aaa</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>44,471</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>472,509</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-0A5</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 2XPP IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.813</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>06-25-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Aaa</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>51,264</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>472,592</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-0A6</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class 1XPP IO</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>0.803</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>07-25-47</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Aaa</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>25,888</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>258,883</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Mtg Pass Thru Ctf Ser 2007-1</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Class B1 (P)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.198</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-25-37</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>CCC</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>567</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>51,844</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>21</FONT>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

<!--$$/page=-->
<A name="page_18"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="36%"></TD>
     <TD align=left width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="11%"></TD>
     <TD width="11%"></TD>
     <TD width="15%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maturity</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Credit</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Par value</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Issuer, description</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rate</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>date</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>rating (A)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(000)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Value</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Asset backed securities 1.26%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$1,528,805</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(Cost $1,601,352)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Asset Backed Securities 1.26%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,528,805</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>American Honda Finance Corp.,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Tranche Tr 00606 (S)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>7.625%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>10-01-18</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>A+</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$655</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>620,326</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Global Signal Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond Ser 2004-2A Class D (P)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>5.093</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>12-15-14</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Baa2</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>495</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>472,611</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Global Signal Trust,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Sub Bond Ser 2006-1 Class E (P)(S)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>6.495</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>02-15-36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Baa3</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>460</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>435,868</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><B><FONT face=sans-serif size=1>Total investments (Cost $224,646,787)</FONT></B><FONT face=sans-serif size=1>&#134; </FONT><B><FONT face=sans-serif size=1>145.62%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$176,872,794</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Other assets and liabilities, net (45.62%)</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>($55,409,633)</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total net assets 100.00%</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$121,463,161</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=6>
<HR noShade SIZE=1>
</TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>The percentage shown for each investment category is the total value of that category as a percentage of the net assets applicable to common shareholders.</FONT></P>
<P align=left><FONT face=sans-serif size=1>IO Interest only (carries notional principal amount) </FONT></P>
<P align=left><FONT face=sans-serif size=1>MTN Medium-Term Note </FONT></P>
<P align=left><FONT face=sans-serif size=1>REIT Real Estate Investment Trust</FONT></P>
<P align=left><FONT face=sans-serif size=1>(A) Credit ratings are unaudited and are rated by Moody&#146;s Investors Service where Standard &amp; Poor&#146;s ratings are not available unless indicated otherwise.</FONT></P>
<P align=left><FONT face=sans-serif size=1>(G) Security rated internally by John Hancock Advisers, LLC.</FONT></P>
<P align=left><FONT face=sans-serif size=1>(H) Non-income-producing issuer filed for protection under the Federal Bankruptcy Code or is in default of interest payment.</FONT></P>
<P align=left><FONT face=sans-serif size=1>(P) Variable rate obligation.The coupon rate shown represents the rate at period end.</FONT></P>
<P align=left><FONT face=sans-serif size=1>(S) 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 $29,052,282 or 23.92% of the net assets of the Fund as of October 31, 2008.</FONT></P>
<P align=left><FONT face=sans-serif size=1>&#134; At October 31, 2008, the aggregate cost of investment securities for federal income tax purposes was $225,157,474. Net unrealized depreciation aggregated $48,284,680, of which $1,774,859 related to appreciated investment securities and $50,059,539 related to depreciated investment securities.</FONT></P>
<P align=left><FONT face=sans-serif size=1>The Fund had the following interest rate swap contract open on October 31, 2008:</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="16%"></TD>
     <TD width="16%"></TD>
     <TD width="16%"></TD>
     <TD width="16%"></TD>
     <TD width="16%"></TD>
     <TD width="16%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>NOTIONAL</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>PAYMENTS MADE</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>PAYMENTS RECEIVED</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>TERMINATION</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>UNREALIZED</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>AMOUNT</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BY FUND</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>BY FUND</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>DATE</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>COUNTERPARTY</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>DEPRECIATION</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=6>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>$29,000,000</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>4.6875% (a)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>3-month LIBOR</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Sep 2010</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Bank of America</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>($1,126,261)</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(a) Fixed rate</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>22</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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<A name="page_19"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<P align=left><FONT face=serif size=7>Financial statements</FONT></P>
<P align=left><FONT face=sans-serif size=4>Statement of assets and liabilities </FONT><FONT face=sans-serif size=2>10-31-08</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>This Statement of Assets and Liabilities is the Fund&#146;s balance sheet. It shows the value of what the Fund owns, is due and owes. You&#146;ll also find the net asset value per share.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="79%"></TD>
     <TD width="20%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Assets</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Investments at value (Cost $224,646,787)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$176,872,794</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Cash</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>932,920</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Receivable for investments sold</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>732,845</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Interest receivable</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,415,852</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Prepaid RCA administration fees (Note 9)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>73,693</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Receivable from affiliates</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>15,854</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total assets</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>182,043,958</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Liabilities</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Payable for investments purchased</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,237,570</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Revolving credit agreement payable (Note 9)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>58,000,000</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Unrealized depreciation of swap contracts (Note 2)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,126,261</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Interest payable (Note 9)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>22,316</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Payable to affiliates</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Management fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>93,318</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Other</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>14,203</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Other payables and accrued expenses</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>87,129</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total liabilities</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>60,580,797</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net assets</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Capital paid-in</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>180,822,039</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Accumulated net realized loss on investments and swap contracts</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(11,175,855)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net unrealized depreciation of investments and swap contracts</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(48,900,254)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Accumulated net investment income</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>717,231</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;&nbsp; </TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net assets applicable to common shares</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$121,463,161</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net asset value per share</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Based on 11,386,709 shares of beneficial interest outstanding &#151; unlimited</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>number of shares authorized with no par value</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$10.67</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>23</FONT>&nbsp; </TD></TR></TABLE><BR>
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<A name="page_20"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<P align=left><FONT face=sans-serif size=4>Statement of operations </FONT><FONT face=sans-serif size=2>For the period ended 10-31-08</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>These Statements of Operations summarize the Fund&#146;s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) and distributions paid to APS shareholders for the periods stated.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="75%"></TD>
     <TD width="12%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Year</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Period</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>ended</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>ended</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-07</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>10-31-08</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Investment income</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Interest</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$16,532,465</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$14,356,802</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Dividends</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>498,284</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>241,703</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Securities lending</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>51,615</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>19,929</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income from affiliated issuers</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>18,757</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total investment income</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>17,082,364</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>14,637,191</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Expenses</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Investment management fees (Note 5)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,370,150</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,063,345</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Accounting and legal services fees (Note 5)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>29,674</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>23,541</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Transfer agent fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>107,135</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>96,738</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Interest expense (Note 9)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>960,075</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>APS auction fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>236,593</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>114,061</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Professional fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>41,401</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>296,642</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Printing fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>66,590</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>60,354</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Custodian fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>63,555</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>56,359</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Registration and filing fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>25,768</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>28,695</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Trustees&#146; fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>11,061</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>36,431</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Miscellaneous</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>20,733</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>20,106</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total expenses</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1,972,660</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>2,756,347</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net investment income</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>15,109,704</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>11,880,844</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>&nbsp;</TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Realized and unrealized gain (loss)</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net realized gain (loss) on</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Investments</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>($455,947)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$305,689</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Financial futures contracts</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1,604,911)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Swap contracts</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>418,072</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(832,486)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(1,642,786)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(526,797)</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Change in net unrealized appreciation (depreciation) of</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Investments</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(4,914,876)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(43,696,095)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Financial futures contracts</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(245,154)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Swap contracts</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(911,104)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(215,157)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(6,071,134)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(43,911,252)</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net realized and unrealized loss</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(7,713,920)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(44,438,049)</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Distributions to APS</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(4,740,155)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1,747,235)</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Increase (decrease) in net assets from operations</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$2,655,629</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>($34,304,440)</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<P align=left><SUP><FONT face=sans-serif size=1>1 </FONT></SUP><FONT face=sans-serif size=1>For the ten month period ended October 31, 2008, the Fund changed its fiscal year end from December 31 to October 31.</FONT></P>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>24</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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<A name="page_21"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<P align=left><FONT face=sans-serif size=4>Statements of changes in net assets</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>These Statements of Changes in Net Assets show how the value of the Fund&#146;s net assets has changed during the last three periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="63%"></TD>
     <TD width="12%"></TD>
     <TD width="12%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Year</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Year</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Period</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>ended</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>ended</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>ended</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-06</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-07</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>10-31-08</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<B><FONT face=sans-serif size=1>Increase (decrease) in net assets</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>From operations</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net investment income</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$14,120,827</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$15,109,704</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$11,880,844</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net realized loss</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(2,401,780)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1,642,786)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(526,797)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Change in net unrealized appreciation</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>(depreciation)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,048,384</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(6,071,134)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(43,911,252)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Distributions to APS</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(4,255,519)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(4,740,155)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1,747,235)</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Increase (decrease) in net assets</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<B><FONT face=sans-serif size=1>resulting from operations</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>9,511,912</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>2,655,629</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(34,304,440)</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Distributions to common shareholders</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>From net investment income</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(10,412,003)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(10,400,867)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(9,560,908)</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>From Fund share transactions (Note 6)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>932,358</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>889,931</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>515,172</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total increase (decrease)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>32,267</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(6,855,307)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(43,350,176)</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=4>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net assets</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=4>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Beginning of period</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>171,636,377</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>171,668,644</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>164,813,337</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>End of period</FONT></B><SUP><FONT face=sans-serif size=1>2</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$171,668,644</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$164,813,337</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$121,463,161</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<P align=left><SUP><FONT face=sans-serif size=1>1 </FONT></SUP><FONT face=sans-serif size=1>For the ten month period ended October 31, 2008, the Fund changed its fiscal year end from December 31 to October 31.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>2 </FONT></SUP><FONT face=sans-serif size=1>Includes accumulated (distributions in excess) net investment income of ($13,222), $276,098 and $717,231, respectively.</FONT></P>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>25</FONT>&nbsp; </TD></TR></TABLE><BR>
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<A name="page_22"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<P align=left><FONT face=sans-serif size=4>Statement of cash flows </FONT><FONT face=sans-serif size=2>10-31-08</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>This statement of cash flows shows cash flow from operating and financing activities for the period stated.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="78%"></TD>
     <TD width="21%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>For the</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>ten month</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>period ended</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>10-31-08</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Cash flows from operating activities</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net decrease in net assets from operations</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>($34,304,440)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Distributions to preferred shareholders</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,747,235</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net decrease in net assets from operations excluding</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<B><FONT face=sans-serif size=1>distributions to preferred shareholders</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(32,557,205)</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Adjustments to reconcile net decrease in net assets from operations to net</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>&nbsp;&nbsp; cash provided by operating activities:</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Investments purchased</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(913,293,694)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Investments sold</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>941,215,126</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Decrease in short term investments</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2,663,229</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net amortization of premium (discount)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,915,590</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Decrease in dividends reinvested receivable</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>224,327</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Increase in dividends and interest receivable</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(596,678)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Decrease in receivable from affiliates</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>3,681</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Increase in payable for investments purchased</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1,237,570</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Increase in receivable for investments sold</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(729,455)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Increase in prepaid arrangement fees</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(73,693)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Increase in unrealized depreciation of swap contracts</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>215,157</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Decrease in payable upon return of securities loaned</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(2,663,229)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Decrease in payable to affiliates</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(255,114)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Increase in interest payable</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>22,316</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Decrease in accrued expenses</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(42,983)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net change in unrealized (appreciation) depreciation on investments</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>43,696,095</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net realized (gain) loss on investments</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(305,689)</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net cash provided by operating activities</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$42,675,351</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Cash flows from financing activities</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Repayment of Auction Preferred Shares</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>($89,000,000)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Cash distributions paid to preferred shareholders</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1,808,462)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Borrowings from revolving credit agreement payable</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>74,000,000</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Repayments of revolving credit agreement payable</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(16,000,000)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Cash distributions to common shareholders net of investments</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(9,045,736)</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net cash used in financing activities</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>($41,854,198)</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net increase in cash</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$821,153</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Cash at beginning of period</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$111,767</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Cash at end of period</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$932,920</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Supplemental disclosure of cash flow information</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Cash paid for interest</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$937,759</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Noncash financing activities not included herein consist of</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>&nbsp;&nbsp;&nbsp;reinvestment of distributions</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>515,172</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>26</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<HR align=center width="100%" noShade SIZE=2>

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<A name="page_23"></A>
<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp; </FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<P align=left><FONT face=sans-serif size=4>Financial highlights</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>The Financial Highlights show how the Fund&#146;s net asset value for a share has changed since the end of the previous period.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="14%"></TD>
     <TD width="14%"></TD>
     <TD width="14%"></TD>
     <TD width="14%"></TD>
     <TD width="14%"></TD>
     <TD width="14%"></TD>
     <TD align=right width="14%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>COMMON SHARES</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR>
     <TD colSpan=7>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Period ended</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-03</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-04</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-05</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-06</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-07</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>10-31-08</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD></TR>
<TR>
     <TD colSpan=7></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Per share operating performance</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=7>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net asset value, beginning of year</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$16.31</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$16.53</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$16.19</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$15.30</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$15.22</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$14.53</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net investment income</FONT><SUP><FONT face=sans-serif size=1>2</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>0.93</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.22</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.20</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.26</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.34</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.05</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net realized and unrealized gain</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>(loss) on investments</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>0.63</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.25)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.81)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.03)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.69)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(3.92)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Distribution to APS</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Series A and B</FONT><SUP><FONT face=sans-serif size=1>3</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.02)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.12)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.25)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.38)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.42)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.15)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total from investment operations</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1.54</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>0.85</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>0.14</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>0.85</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>0.23</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(3.02)</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><B><FONT face=sans-serif size=1>Less distributions to common shareholders</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>From net investment income</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.96)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1.19)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1.03)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.93)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.92)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.84)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>From net realized gain</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.26)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total distributions</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(1.22)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(1.19)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(1.03)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(0.93)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(0.92)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(0.84)</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Capital charges</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Offering costs and underwriting</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>discounts related to APS</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(0.10)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Net asset value, end of year</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$16.53</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$16.19</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$15.30</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$15.22</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$14.53</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$10.67</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Per share market value, end of year</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$15.39</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$15.68</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$13.68</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$14.75</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$12.85</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>$9.67</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total return at net asset value (%)</FONT></B><SUP><FONT face=sans-serif size=1>4</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>9.57</FONT></B><SUP><FONT face=sans-serif size=1>5</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>5.70</FONT></B><SUP><FONT face=sans-serif size=1>5</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1.36</FONT></B><SUP><FONT face=sans-serif size=1>5</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>6.24</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>1.97</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(21.36)</FONT></B><SUP><FONT face=sans-serif size=1>6</FONT></SUP>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Total return at market value (%)</FONT></B><SUP><FONT face=sans-serif size=1>4</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>13.49</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>9.95</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(6.42)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>15.15</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(6.94)</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>(19.41)</FONT></B><SUP><FONT face=sans-serif size=1>6</FONT></SUP>&nbsp; </TD></TR>
<TR>
     <TD colSpan=7></TD></TR>
<TR>
     <TD colSpan=7>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Ratios and supplemental data</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=7>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net assets applicable to common</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>shares, end of year (in millions)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$183</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$180</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$172</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$172</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$165</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$121</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Ratios (as a percentage of average</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>net assets):</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Expenses (excluding</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>&nbsp;&nbsp;&nbsp; interest expense)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>0.87</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.14</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.16</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.17</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.16</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.41</FONT><SUP><FONT face=sans-serif size=1>7</FONT></SUP>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Interest expense (Note 9)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>0.76</FONT><SUP><FONT face=sans-serif size=1>7</FONT></SUP>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Expenses (including</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>&nbsp;&nbsp; interest expense)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>0.87</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.14</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.16</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.17</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>1.16</FONT><SUP><FONT face=sans-serif size=1>8</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2.17</FONT><SUP><FONT face=sans-serif size=1>7</FONT></SUP>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>Net investment income</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>5.58</FONT><SUP><FONT face=sans-serif size=1>9</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>7.44</FONT><SUP><FONT face=sans-serif size=1>9</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>7.62</FONT><SUP><FONT face=sans-serif size=1>9</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>8.30</FONT><SUP><FONT face=sans-serif size=1>9</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>8.87</FONT><SUP><FONT face=sans-serif size=1>9</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>9.37</FONT><SUP><FONT face=sans-serif size=1>7</FONT></SUP>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Portfolio turnover (%)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>273</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>135</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>148</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>94</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>54</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>40</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
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<TR>
     <TD width="95%"></TD>
     <TD width="4%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>27</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=sans-serif size=2>F I N A N C I A L&nbsp;&nbsp;</FONT><FONT face=sans-serif size=2>S T A T E M E N T S</FONT></P>
<P align=left><FONT face=sans-serif size=4>Financial highlights</FONT></P>
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<TR>
     <TD width="14%"></TD>
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     <TD width="14%"></TD>
     <TD width="14%"></TD>
     <TD width="14%"></TD>
     <TD width="14%"></TD>
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<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>COMMON SHARES</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=7>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Period ended</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-03</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-04</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-05</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-06</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>12-31-07</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>10-31-08</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD></TR>
<TR>
     <TD colSpan=7></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Senior securities</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=7>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Total value of APS outstanding</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>(in millions)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$90</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$90</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$90</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$90</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$90</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Involuntary liquidation preference</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>per unit (in thousands)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Average market value per unit</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>(in thousands)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$25</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Asset coverage per unit</FONT><SUP><FONT face=sans-serif size=1>10</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$75,402</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$75,049</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$72,470</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$73,375</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$71,228</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT><SUP><FONT face=sans-serif size=1>11</FONT></SUP>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Total debt outstanding end of period</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp;<FONT face=sans-serif size=1>(in millions) (Note 9)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$58</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Asset coverage per $1,000 of APS</FONT><SUP><FONT face=sans-serif size=1>12</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$3,047</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$3,027</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$2,928</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$2,928</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$2,851</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Asset coverage per $1,000 of debt</FONT><SUP><FONT face=sans-serif size=1>13</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$3,094</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><SUP><FONT face=sans-serif size=1>1 </FONT></SUP><FONT face=sans-serif size=1>For the ten month period ended October 31, 2008, the Fund changed its fiscal year end from December 31 to October 31.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>2 </FONT></SUP><FONT face=sans-serif size=1>Based on the average of the shares outstanding. </FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>3 </FONT></SUP><FONT face=sans-serif size=1>APS Series A and B were issued on 11-4-03.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>4 </FONT></SUP><FONT face=sans-serif size=1>Total return based on net asset value reflects changes in the Fund&#146;s net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that dividend and capital gain distributions, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund&#146;s shares traded during the period.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>5 </FONT></SUP><FONT face=sans-serif size=1>Unaudited.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>6 </FONT></SUP><FONT face=sans-serif size=1>Not annualized. </FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>7 </FONT></SUP><FONT face=sans-serif size=1>Annualized.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>8 </FONT></SUP><FONT face=sans-serif size=1>Ratios calculated on the basis of expenses relative to the average net assets of common shares. Without the exclusion of preferred shares, the annualized ratio of expenses would have been 0.81%, 0.76%,</FONT><FONT face=sans-serif size=1>0.77%, 0.77%, and 0.76% for the periods ended 12-31-03, 12-31-04, 12-31,05, 12-31-06 and 12-31-07, respectively. </FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>9 </FONT></SUP><FONT face=sans-serif size=1>Ratios calculated on the basis of net investment income relative to the average net assets of common shares. Without the exclusion of preferred shares, the annualized ratio of net investment income would have been 5.19%, 4.99%, 5.06%, 5.45%, and 5.82% for the periods ended 12-31-03, 12-31-04, 12-31-05, 12-31-06 and 12-31-07, respectively.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>10 </FONT></SUP><FONT face=sans-serif size=1>Calculated by subtracting the Fund&#146;s total liabilities from the Fund&#146;s total assets and dividing that amount by the number of APS outstanding, as of the applicable 1940 Act Evaluation Date, which may differ from the financial reporting date.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>11 </FONT></SUP><FONT face=sans-serif size=1>In May 2008, the Fund entered into a Revolving Credit Agreement with a third-party commercial bank in order to refinance the APS. The redemption of all APS was completed on June 12, 2008.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>12 </FONT></SUP><FONT face=sans-serif size=1>Asset coverage equals the total net assets plus APS divided by the APS of the Fund outstanding at period end (Note 9).</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>13 </FONT></SUP><FONT face=sans-serif size=1>Asset coverage equals the total net assets plus borrowings divided by the borrowing of the Fund outstanding at period end (Note 9).</FONT></P>
<P align=left><FONT face=sans-serif size=1>See notes to financial statements</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif size=2>28</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=sans-serif size=4>Notes to financial statements</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 1 <BR>
Organization</FONT></B></P>
<P align=left><FONT face=serif size=2>John Hancock Income Securities Trust (the Fund) is a closed-end diversified investment management company registered under the Investment Company Act of 1940, as amended (the 1940 Act).</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 2<BR>
</FONT></B><B><FONT face=sans-serif size=2>Significant accounting policies</FONT></B></P>
<P align=left><FONT face=serif size=2>The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Fund:</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Security valuation</FONT></B></P>
<P align=left><FONT face=serif size=2>The net asset value of the Fund is determined daily as of the close of the New York Stock Exchange (NYSE), normally at 4:00 </FONT><FONT face=serif size=1>P.M.</FONT><FONT face=serif size=2>, Eastern Time. Short-term debt investments that have a remaining maturity of 60 days or less are valued at amortized cost, and thereafter assume a constant amortization to maturity of any discount or premium, which approximates market value. Investments in John Hancock Cash Investment Trust (JHCIT), an affiliate of John Hancock Advisers, LLC (the Adviser), a wholly owned subsidiary of John Hancock Financial Services, Inc., a subsidiary of Manulife Financial Corporation (MFC), are valued at their net asset value each business day. All other securities held by the Fund are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) as of the close of business on the principal securities exchange (domestic or foreign) on wh
ich they trade or, lacking any sales, at the closing bid price. Securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the </FONT><FONT face=serif size=2>securities at the close of trading. Securities for which there are no such quotations, principally debt securities, are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, which take 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.</FONT></P>
<P align=left><FONT face=serif size=2>Other portfolio securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by the Trust&#146;s Pricing Committee in accordance with procedures adopted by the Board of Trustees. Generally, trading in non-U.S. securities is substantially completed each day at various times prior to the close of trading on the NYSE. The values of such securities used in computing the net asset value of the Fund&#146;s shares are generally determined as of such times. Occasionally, significant events that affect the values of such securities may occur between the times at which such values are generally determined and the close of the NYSE. Upon such an occurrence, these securities will be valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. Debt securities whose prices cannot be provided by an independent pricing s
ervice are valued at prices provided by broker-dealers.</FONT></P>
<P align=left><FONT face=serif size=2>Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer&#146;s assets, general economic conditions, interest rates, investor perceptions and market liquidity.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund adopted Statement of Financial Accounting Standards No. 157 (FAS 157), </FONT><I><FONT face=serif size=2>Fair Value Measurements</FONT></I><FONT face=serif size=2>, effective with</FONT></P>
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     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>29</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=2>the beginning of the Fund&#146;s fiscal year. FAS 157 established a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:</FONT></P>
<P align=left><FONT face=serif size=2>Level 1 &#150; Quoted prices in active markets for identical securities.</FONT></P>
<P align=left><FONT face=serif size=2>Level 2 &#150; Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.</FONT></P>
<P align=left><FONT face=serif size=2>Level 3 &#150; Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable, such as when there is little or no market activity for an investment, unobservable inputs may be used. Unobservable inputs reflect the Fund&#146;s own assumptions about the factors that market participants would use in pricing an investment and would be based on the best information available.</FONT></P>
<P align=left><FONT face=serif size=2>The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.</FONT></P>
<P align=left><FONT face=serif size=2>The following is a summary of the inputs used to value the Fund&#146;s net assets as of October 31, 2008:</FONT></P>
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     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>INVESTMENTS IN</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>OTHER FINANCIAL</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>VALUATION INPUTS</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>SECURITIES</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>INSTRUMENTS*</FONT>&nbsp; </TD></TR>
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     <TD colSpan=3>
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     <TD noWrap align=left><FONT face=sans-serif size=1>Level 1 &#151; Quoted Prices</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$2,599,801</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Level 2 &#151; Other Significant Observable Inputs</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>164,691,795</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>($1,126,261)</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Level 3 &#151; Significant Unobservable Inputs</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>9,581,198</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Total</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$176,872,794</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>($1,126,261)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1></FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><FONT face=sans-serif size=1>*Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such</FONT><FONT face=sans-serif size=1>&nbsp; </FONT><FONT face=sans-serif size=1>as futures, forwards and swap contracts</FONT><FONT face=sans-serif size=1>,&nbsp;<FONT face="Times New Roman" size=3>&nbsp; </FONT></FONT><BR>
<FONT face=sans-serif size=1>which are valued at the unrealized appreciation/depreciation on the instrument.</FONT><BR>
<P align=left><FONT face=serif size=2>The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="33%"></TD>
     <TD width="33%"></TD>
     <TD width="33%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>INVESTMENTS IN</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>OTHER FINANCIAL</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>SECURITIES</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>INSTRUMENTS</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Balance as of December 31, 2007</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$30,869,350</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$&#151;</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Accrued discounts/premiums</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Realized gain (loss)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(687,713)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Change in unrealized appreciation (depreciation)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(1,172,827)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Net purchases (sales)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(4,061,356)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Transfers in and/or out of Level 3</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>(15,366,256)</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>&#151;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Balance as of October 31, 2008</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$9,581,198</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$&#151;</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><B><FONT face=sans-serif size=1>Investment transactions</FONT></B></P>
<P align=left><FONT face=serif size=2>Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Discounts/premiums are accreted/amortized </FONT><FONT face=serif size=2>for financial reporting purposes. Realized gains and losses from investment transactions are recorded on an identified cost basis.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Expenses</FONT></B></P>
<P align=left><FONT face=serif size=2>The majority of expenses are directly identifiable to an individual fund. Fund expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>30</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=2>other things, the nature and type of expense and the relative size of the funds. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Overdrafts</FONT></B></P>
<P align=left><FONT face=serif size=2>Pursuant to the custodian agreement, the 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 together with interest due thereon. The Custodian has a lien, security interest or security entitlement in any Fund property, to the maximum extent permitted by law to the extent of any overdraft.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Securities lending</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund may lend portfolio securities from time to time in order to earn additional income. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of securities and to participate in any changes in their value. On the settlement date of the loan, the Fund receives cash collateral against the loaned securities and maintains the cash collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required cash collateral is delivered to the Fund on the next business day. Cash collateral received is invested in the JHCIT. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining acce
ss to the collateral. The Fund may receive compensation for lending its securities either in the form of fees, guarantees, and/or by retaining a portion of interest on the investment of any cash received as collateral.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund has entered into an agreement with Morgan Stanley &amp; Co., Inc. and MS Securities Services, Inc. (collectively, Morgan Stanley) which permits the Fund to lend securities to Morgan Stanley on a principal basis. Morgan Stanley is the primary borrower of securities </FONT><FONT face=serif size=2>of the Fund. The risk of having one primary borrower of Fund securities (as opposed to several borrowers in an agency relationship) is that should Morgan Stanley fail financially, all securities lent may be affected by the failure and by any delays in recovery of the securities (or loss of rights in the collateral).</FONT></P>
<P align=left><FONT face=serif size=2>Effective June 2008, due to the terms of the revolving credit agreement and collateral requirements, the Fund no longer participates in the security lending program.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Futures</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund may purchase and sell financial futures contracts and options on those contracts. The Fund invests in contracts based on financial instruments such as U.S. Treasury Bonds or Notes or on securities indices such as the Standard &amp; Poor&#146;s 500 Index, in order to hedge against a decline in the value of securities owned by the Fund.</FONT></P>
<P align=left><FONT face=serif size=2>Initial margin deposits required upon entering into futures contracts are satisfied by the delivery of specific securities or cash as collateral to the broker (the Fund&#146;s agent in acquiring the futures position). If the position is closed out by an opposite position prior to the settlement date of the futures contract, a final determination of variation margin is made, cash is required to be paid to or released by the broker and the Fund realizes a gain or loss.</FONT></P>
<P align=left><FONT face=serif size=2>When the Fund sells a futures contract based on a financial instrument, the Fund becomes obligated to deliver that kind of instrument at an agreed upon date for a specified price. The Fund realizes a gain or loss depending on whether the price of an offsetting purchase is less or more than the price of the initial sale or on whether the price of an offsetting sale is more or less than the price of the initial purchase. The Fund could be exposed to risks if it could not close out futures positions because of an illiquid secondary market or the inability of counterparties to meet the terms of their contracts. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund had no open financial futures contracts on October 31, 2008.</FONT></P>
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     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>31</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><B><FONT face=sans-serif size=1>Swap contracts</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund may enter into swap transactions in order to hedge the value of the Fund&#146;s portfolio against interest rate fluctuations or to enhance the Fund&#146;s income or to manage the Fund&#146;s exposure to credit or market risk. A swap is an exchange of cash payments between the Fund and another party. Net cash payments are exchanged at specified intervals and are recorded as a realized gain or loss in the Statements of Operations. Cash payments may include upfront cash payments made by or to the fund. The upfront payments are amortized or accreted for financial reporting purposes, with the unamortized/unaccreted portion included in values recorded on the Statements of Assets and Liabilities. The value of the swap is adjusted daily and the change in value, including accruals of periodic amounts of interest to be paid or received, is recorded as swap contracts at value in Statements of Assets and Liabilities and as unrealized appreciation or depreciation in the Stat
ements of Operations. A liquidation payment received or made upon early termination is recorded as a realized gain or loss in the Statements of Operations. Upfront payments made and/or received by the Fund are recorded as an asset and/or liability on the Statements of Assets and Liabilities and are recorded as a realized gain or loss on the termination date. Swap contracts are subject to risks related to the counterparty&#146;s ability to perform under the contract, and may decline in value if the counterparty&#146;s creditworthiness deteriorates. The risks may arise from unanticipated movement in interest rates. The Fund may also suffer losses if it is unable to terminate outstanding swap contracts or reduce its exposure through offsetting transactions.</FONT></P>
<P align=left><FONT face=serif size=2>Interest rate swaps represent an agreement between two counterparties to exchange cash flows based on the difference in the two interest rates, applied to the notional principal amount for a specified period. The payment flows are usually netted against each other, with the difference being paid by one party to the other. The Fund settles accrued net receivable or payable under the swap contracts on a periodic basis.</FONT></P>
<P align=left><FONT face=serif size=2>Credit default swaps involve the exchange of a fixed rate premium for protection against the loss in value of an underlying debt instrument in the event of a defined credit event (such as payment default or bankruptcy). Under the terms of the swap, one party acts as a &#147;guarantor&#148; receiving a periodic payment that is a fixed percentage applied to a notional principal amount. In return the party agrees to purchase the notional amount of the underlying instrument, at par, if a credit event occurs during the term of the swap. The Fund may enter into credit default swaps in which either it or its counterparty act as guarantors. By acting as the guarantor of a swap, the Fund assumes the market and credit risk of the underlying instrument including liquidity and loss of value.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Stripped securities</FONT></B></P>
<P align=left><FONT face=serif size=2>Stripped mortgage backed securities are financial instruments that derive their value from other instruments so that one class receives all of the principal from the underlying mortgage assets PO (principal only), while the other class receives the interest cash flows IO (interest only). Both the PO and IO investments represents an interest in the cash flows of an underlying stripped mortgaged backed security. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to fully recoup its initial investment in an interest only security. The market value of these securities can be extremely volatile in response to changes in interest rates. Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligation.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Statement of cash flows</FONT></B></P>
<P align=left><FONT face=serif size=2>The cash amount shown in the Statement of cash flows of a Fund is the amount included in the Fund&#146;s Statement of Assets and Liabilities and represents the cash on hand at its custodian and does not include any short-term investments.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Federal income taxes</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund qualifies as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code</FONT></P>
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<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>32</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=2>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.</FONT></P>
<P align=left><FONT face=serif size=2>For federal income tax purposes, the Fund has $10,665,168 of a capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, no capital gain distributions will be made. The loss carryforwards expire as follows: October 31, 2012 &#151; $2,123,466, October 31, 2013 &#151; $2,443,482, October 31, 2014 &#151;$3,342,775, October 31, 2015 &#151; $1,351,797 and October 31, 2016 &#151; $1,403,648.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund is subject to the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, </FONT><I><FONT face=serif size=2>Accounting for Uncertainty in Income Taxes</FONT></I><FONT face=serif size=2>, an interpretation of FASB Statement 109 (FIN 48). FIN 48 prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not have a material impact on the Fund's financial statements. Each of the Fund&#146;s federal tax returns for the prior three years remain subject to examination by the Internal Revenue Service.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>New accounting pronouncement</FONT></B></P>
<P align=left><FONT face=serif size=2>In March 2008, FASB No. 161 (FAS 161), </FONT><I><FONT face=serif size=2>Disclosures about Derivative Instruments and Hedging Activities</FONT></I><FONT face=serif size=2>, an amendment of FASB Statement No. 133 (FAS 133), was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 amends and expands the disclosure requirements of FAS 133 in order to provide financial statement users an understanding of a company&#146;s use of derivative instruments, how derivative instruments are accounted for under FAS 133 and related interpretations and how these instruments affect a company&#146;s financial position, performance, and cash flows. FAS 161 requires companies to disclose information detailing the objectives and strategies for using derivative instruments, the level of derivative activity entered into by the company, and any credit risk-related contingent features of the agreements. Management is currently evaluating the </F
ONT><FONT face=serif size=2>adoption of FAS 161 on the Fund&#146;s financial statement disclosures.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Distribution of income and gains</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. Capital gains distributions, if any, are distributed annually. During the year ended December 31, 2006, the tax character of distributions was as follows: ordinary income $14,667,522. During the year ended December 31, 2007, the tax character of distributions paid was as follows: ordinary income $15,141,022. During the period ended October 31, 2008, the tax character of distributions paid was as follows: ordinary income $11,308,143.</FONT></P>
<P align=left><FONT face=serif size=2>As of October 31, 2008, the components of distributable earnings on a tax basis included $725,558 of undistributed ordinary income.</FONT></P>
<P align=left><FONT face=serif size=2>Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund&#146;s financial statements as a return of capital.</FONT></P>
<P align=left><FONT face=serif size=2>Capital accounts within 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 will reverse in a subsequent period. Permanent book-tax differences are primarily attributable to derivative transactions and amortization and accretion on debt securities.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 3</FONT></B><BR>
<B><FONT face=sans-serif size=2>Risks and uncertainties</FONT></B></P>
<P align=left><B><FONT face=sans-serif size=1>Mortgage security risk</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund may invest a portion of its assets in issuers and/or securities of issuers that hold mortgage securities, including subprime mortgage securities. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market&#146;s perception of the issuers and changes in interest rates. Decreases in interest rates may</FONT></P>
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<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>33</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=2>cause prepayments on underlying mortgages to an IO security to accelerate resulting in a lower than anticipated yield and increases the risk of loss on the IO investment.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Fixed income risk</FONT></B></P>
<P align=left><FONT face=serif size=2>Fixed income securities are subject to credit and interest rate risk and involve some risk of default in connection with principal and interest payments.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Derivatives and counterparty risk</FONT></B></P>
<P align=left><FONT face=serif size=2>The use of derivative instruments may involve risks different from, or potentially greater than, the risks associated with investing directly in securities. Specifically, derivative instruments exposes a fund to the risk that the counterparty to an over-the-counter (OTC) derivatives contract will be unable or unwilling to make timely settlement payments or otherwise to honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction. If the counterparty defaults, the fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that, in the event of default, the fund will succeed in enforcing them.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Concentration risk</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund may concentrate investments in a particular industry, sector of the economy or invest in a limited number of companies. Accordingly, the concentration may make the Fund&#146;s value more volatile and investment values may rise and fall more rapidly. In addition, a fund with a concentration is particularly susceptible to the impact of market, economic, regulatory and other factors affecting the specific concentration.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Leverage utilization risk</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund utilizes leverage to increase assets available for investment. See Note 7 for risks associated with the utilization of leverage.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 4<BR>
</FONT></B><B><FONT face=sans-serif size=2>Guarantees and indemnifications</FONT></B></P>
<P align=left><FONT face=serif size=2>Under the Fund&#146;s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, </FONT><FONT face=serif size=2>the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund&#146;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.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 5<BR>
</FONT></B><B><FONT face=sans-serif size=2>Management fee and transactions with <BR>
affiliates and others</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a quarterly management fee to the Adviser, equivalent on an annual basis, to the sum of (a) 0.650% of the first $150,000,000 of the Fund&#146;s average weekly net asset value and the value attributable to the Auction Preferred Shares or committed facility agreement (collectively, managed assets), (b) 0.375% of the next $50,000,000, (c) 0.350% of the next $100,000,000 and (d) 0.300% of the Fund&#146;s average weekly managed assets in excess of $300,000,000. The effective management fee rate is 0.549% of the Fund's average managed assets for the period ended October 31, 2008. The Fund has a subadvisory agreement with MFC Global Investment Management (U.S.), LLC, a subsidiary of John Hancock Financial Services, Inc. The Fund is not responsible for payment of subadvisory fees.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund has an agreement with the Adviser and affiliates to perform necessary tax, accounting, compliance, legal and other administrative services for the Fund. The compensation for the year amounted to $23,541 with an effective rate of 0.01% of the Fund&#146;s average weekly or managed assets.</FONT></P>
<P align=left><FONT face=serif size=2>Mr. James R. Boyle is Chairman of the Adviser, as well as affiliated Trustee of the Fund, and is compensated by the Adviser and/ or its affiliates. The compensation of unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect to defer, for tax purposes, their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments into other John Hancock funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund&#146;s deferred compensation liability</FONT></P>
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<P align=left><FONT face=serif size=2>are recorded on the Fund&#146;s books as an other asset. The deferred compensation liability and the related other asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund is listed for trading on the NYSE and has filed with the NYSE its chief executive officer certification regarding compliance with the NYSE&#146;s listing standards. The Fund also files with the Securities and Exchange Commission (SEC) the certification of its chief executive officer and chief financial officer required by Section 302 of the Sarbanes-Oxley Act.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 6</FONT></B><BR>
<B><FONT face=sans-serif size=2>Fund share transactions</FONT></B></P>
<P align=left><B><FONT face=sans-serif size=1>Common shares</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund is authorized to issue an unlimited number of common shares with no par value. Transactions in common shares for the years ended December 31, 2006 and December 31, 2007, and the period ended October 31, 2008 are as follows:</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="17%"></TD>
     <TD width="15%"></TD>
     <TD width="15%"></TD>
     <TD width="12%"></TD>
     <TD width="13%"></TD>
     <TD width="12%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right colSpan=2><B><FONT face=sans-serif size=1>Year ended 12-31-06</FONT></B>&nbsp; </TD>
     <TD noWrap align=right colSpan=2><B><FONT face=sans-serif size=1>Year ended 12-31-07</FONT></B>&nbsp; </TD>
     <TD noWrap align=right colSpan=2><B><FONT face=sans-serif size=1>Period ended 10-31-08</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Shares</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Amount</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Shares</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Amount</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Shares</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Amount</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center><FONT face=sans-serif size=1>Distributions</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center><FONT face=sans-serif size=1>reinvested</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>66,816</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>932,358</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>64,325</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>889,931</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>40,345</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>515,172</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><SUP><FONT face=sans-serif size=1>1</FONT></SUP><FONT face=sans-serif size=1>For the ten month period ended October 31, 2008, the Fund changed its fiscal year end from December 31 to October 31.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 7</FONT></B><BR>
<B><FONT face=sans-serif size=2>Leverage</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund utilizes a Revolving Credit Agreement (RCA) to increase its assets available for investment. In prior fiscal periods, the Fund used Auctioned Preferred Shares (APS) for leverage. When the Fund leverages its assets, common shareholders pay all fees associated with and have the potential to benefit from leverage. Consequently, the Fund and the Adviser may have differing interests in determining whether to leverage the Fund&#146;s assets. Leverage creates risks which may adversely affect the return for the holders of common shares, including:</FONT></P>
<P align=left><FONT face=serif size=2>&#149; the likelihood of greater volatility of net asset </FONT><FONT face=serif size=2>value and market price of common shares</FONT></P>
<P align=left><FONT face=serif size=2>&#149; fluctuations in the interest rate paid for the </FONT><FONT face=serif size=2>use of the credit RCA</FONT></P>
<P align=left><FONT face=serif size=2>&#149; increased operating costs,which may reduce </FONT><FONT face=serif size=2>the Fund&#146;s total return to the holders of common shares</FONT></P>
<P align=left><FONT face=serif size=2>&#149; the potential for a decline in the value of an </FONT><FONT face=serif size=2>investment acquired through leverage, while the Fund&#146;s obligations under such leverage remains fixed</FONT></P>
<P align=left><FONT face=serif size=2>&#149; the fund is more likely to have to sell </FONT><FONT face=serif size=2>securities in a volatile market in order to meet asset coverage or other debt compliance requirements</FONT></P>
<P align=left><FONT face=serif size=2>To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund&#146;s return will be greater than if leverage had not been used, conversely, return would be lower if the cost of the leverage exceeds the income or capital appreciation derived.</FONT></P>
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     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>35</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=2>Effective May 2, 2008, the Fund&#146;s Trustees approved a plan whereby a third party commercial bank has agreed to provide a revolving credit agreement that will enable a refinanc-ing of the Fund&#146;s APS. The facility was used to redeem the outstanding APS and allowed </FONT><FONT face=serif size=2>the Fund to change its form of leverage from APS to debt. The redemption of all series was completed on June 12, 2008. Below is a comparison of the leverage methods utilized by the Fund:</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="27%"></TD>
     <TD width="33%"></TD>
     <TD width="38%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>APS</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>RCA</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Required Asset Coverage</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>200%</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>300%</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Maximum Leverage</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>$90 million</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>$77 million</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Amount</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Costs Associated</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Dividends paid to preferred</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Interest expense (overnight Eurodollar</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>with Leverage</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>shareholders (maximum rate</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>plus 0.95%), or elect to convert</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>equals the overnight commercial</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>the interest rate to an alternative</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>paper rate plus 1.25%)</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>rate, which is the greater of the</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>prime rate in effect on such day or</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>the Federal Funds rate in effect</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>on such day plus 0.50%</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>APS auction fees</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Arrangement fee *</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Auction agent expenses</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Facility fees (0.20% and $38,500</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>per annum).</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Preferred share transfer</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>agent expenses</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>*Administration fee is $124,768 amortized over the first year of the RCA.</FONT></P>
<P align=left><FONT face=serif size=2>APS auction fees and auction agent expenses and interest expense and arrangement fees are included in APS auction fees and interest expense, respectively, in the Statement of Operations. See notes 8 and 9 for further details of the APS and RCA, respectively.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 8<BR>
</FONT></B><B><FONT face=sans-serif size=2>Auction preferred shares</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund issued a total of 3,560 Auction Preferred Shares: 1,780 shares of Series A Auction Preferred Shares and 1,780 shares of Series B Auction Preferred Shares (collectively, the Preferred Shares or APS) on November 4, 2003, in a public offering. The total offering costs of $188,388 and the total underwriting discount of $890,000 has been charged to capital paid-in of common shares during the years ended December 31, 2003 and December 31, 2004.</FONT></P>
<P align=left><FONT face=serif size=2>Dividend rates on APS Series A ranged from 3.394% to 5.55% and Series B from 3.404% to 5.60% during the period from January 1, 2008 to June 18, 2008.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 9<BR>
</FONT></B><B><FONT face=sans-serif size=2>Revolving credit agreement</FONT></B></P>
<P align=left><FONT face=serif size=2>Effective June 5, 2008, the Fund entered into a RCA with a third party commercial bank that allows it to borrow up to an initial limit of $77 million and to invest the borrowings in accordance with its investment practices. Borrowings under the RCA are secured by all the assets of the Fund. Interest is charged at annualized Eurodollar rate plus 0.95% and is payable monthly. In addition, the Fund may elect to convert the interest rate to an alternative rate, which is the greater of the prime rate in effect on such day or the Federal Funds rate in effect on such day plus 0.50% .</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif size=2>36</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=2>Under the terms of the RCA, the Fund also pays an administration fee of $38,500 in each year of the agreement and facility fees of 0.20% per annum on the unused portion of the facility. In addition, the Fund incurred $86,268 of legal fees associated with the execution of the RCA. The administration fees and the legal fees are amortized during the first year of the agreement. Administration, facility and legal fees expensed for the period ended October 31, 2008 amounted to $15,568, $15,453 and $35,349, respectively, and are included in interest expense in the Statement of Operations. As of October 31, 2008, the Fund had borrowings of $58,000,000 at an interest rate 4.16875% and is reflected in the revolving credit agreement on the Statement of Asset and Liabilities. For the period from June 5, 2008 to October 31, 2008, the average borrowings under the RCA and the effective average interest rate (annualized) were $58,706,081 and 4.0443%, respectively. The maturity date of 
the RCA is June 3, 2009. However, the maturity date may be extended up to 364 days by giving written notice to the lender of not more than 150 days and not less 60 days of the maturity date. Also, the RCA may be in default and result in immediate termination if certain asset coverage requirements or minimum net asset amounts are not met. Finally, the Fund may terminate the agreement with one business day&#146;s notice.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 10<BR>
</FONT></B><B><FONT face=sans-serif size=2>Purchase and sale of securities</FONT></B></P>
<P align=left><FONT face=serif size=2>Purchases and proceeds from sales or maturities of securities, other than short-term securities and obligations of the U.S. government, during the period ended October 31, 2008, aggregated $89,338,777 and $115,001,001, respectively. Purchases and proceeds from sales or maturities of obligations of the U.S. government aggregated $1,935,392 and $1,928,409, respectively, during the period ended October 31, 2008.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Note 11<BR>
</FONT></B><B><FONT face=sans-serif size=2>Change in fiscal year end</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund&#146;s fiscal year end has changed to October 31, 2008.</FONT></P>
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     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>37</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=sans-serif size=4>Auditors&#146; report</FONT><BR>
<BR>
<B><FONT face=sans-serif size=1>Report of Independent Registered Public Accounting Firm</FONT></B></P>
<P align=left><B><FONT face=sans-serif size=1>To the Board of Trustees and Shareholders of John Hancock Income Securities Trust:</FONT></B></P>
<P align=left><FONT face=serif size=2>In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of John Hancock Income Securities Trust (the Fund) at October 31, 2008, and the results of its operations, the changes in its net assets, its cash flows and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as &#147;financial statements&#148;) are the responsibility of the Fund&#146;s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (U
nited States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of October 31, 2008 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where securities purchased had not been received, provide a reasonable basis for our opinion.</FONT></P>
<P align=left><FONT face=serif size=2>PricewaterhouseCoopers LLP</FONT><BR>
<FONT face=serif size=2>Boston, Massachusetts</FONT><BR>
<FONT face=serif size=2>December 22, 2008</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif size=2>38</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=sans-serif size=4>Tax information</FONT><BR>
<BR>
<B><FONT face=sans-serif size=1>Unaudited</FONT></B></P>
<P align=left><FONT face=serif size=2>For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable period ended October 31, 2008.</FONT></P>
<P align=left><FONT face=serif size=2>With respect to the ordinary dividends paid by the Fund for the fiscal period ended October 31, 2008, 2.06% of the dividends qualifies for the corporate dividends-received deduction.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund hereby designates 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. This amount will be reflected on Form 1099-DIV for the calendar year 2008.</FONT></P>
<P align=left><FONT face=serif size=2>Shareholders will be mailed a 2008 U.S. Treasury Department Form 1099-DIV in January 2009. This will reflect the total of all distributions that are taxable for calendar year 2008.</FONT></P>
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     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>39</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><B><FONT face=sans-serif size=2>Investment objective and policy</FONT></B></P>
<P align=left><FONT face=serif size=2>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 NYSE. The Fund&#146;s investment objective is to generate a high level of current income consistent with prudent investment risk. The Fund invests in a diversified portfolio of freely marketable debt securities and may invest an amount not exceeding 20% of its assets in income-producing preferred and common stock. Under normal circumstances, the Fund will invest at least 80% of net assets in income securities. Income securities will consist of the following: (i) marketable corporate debt securities, (ii) governmental obligations and (iii) cash and commercial paper. &#147;Net assets&#148; is defined as net assets plus borrowings for investment purposes. The Fund will notify shareholders at least 60 days prior to any change in this 80% investment policy.</FONT></P>
<P align=left><FONT face=serif size=2>It is contemplated that at least 75% of the value of the Fund&#146;s total assets will be represented by debt securities, which have at the time of purchase a rating within the four highest grades as determined by Moody&#146;s Investors Service, Inc. or Standard &amp; Poor&#146;s Corporation. The Fund intends to engage in short-term trading and may invest in repurchase agreements.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Bylaws and Declaration of Trust</FONT></B></P>
<P align=left><FONT face=serif size=2>In November 2002, the Board of Trustees adopted several amendments to the Fund&#146;s bylaws, including provisions relating to the calling of a special meeting and requiring advance notice of shareholder proposals or nominees for Trustee. The advance notice provisions in the bylaws require shareholders to notify the Fund in writing of any proposal which they intend to present at an annual meeting of shareholders, including any nominations for Trustee, between 90 and 120 days prior to the first anniversary of the mailing date of the notice from the prior year&#146;s annual meeting of shareholders. The notification must be in the form prescribed by the bylaws. The advance notice provisions provide the Fund and its Trustees with the opportunity to thoughtfully consider and address the matters proposed before the Fund prepares and mails its proxy statement to shareholders. Other </FONT><FONT face=serif size=2>amendments set forth the procedures that must be followed in order
 for a shareholder to call a special meeting of shareholders. Please contact the Secretary of the Fund for additional information about the advance notice requirements or the other amendments to the bylaws.</FONT></P>
<P align=left><FONT face=serif size=2>On August 21, 2003, shareholders approved the amendment of the Fund&#146;s bylaws effective August 26, 2003, to provide for the issuance of preferred shares. Effective March 9, 2004, the Trustees approved additional changes to conform with the Fund&#146;s maximum dividend rate on the preferred shares with the rate used by other John Hancock funds.</FONT></P>
<P align=left><FONT face=serif size=2>On September 14, 2004, the Trustees approved an amendment to the Fund&#146;s bylaws increasing the maximum applicable dividend rate ceiling on the preferred shares to conform with the modern calculation methodology used by the industry and other John Hancock funds.</FONT></P>
<P align=left><FONT face=serif size=2>On March 31, 2008, the shareholders approved an amendment to the Fund&#146;s Declaration of Trust to permit the Fund&#146;s Board of Trustees to delegate the authority to declare dividends to a Dividend Committee consisting of officers, employees or agents of the Fund.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Financial futures contracts and options</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund may buy and sell financial futures contracts and options on futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. The Fund&#146;s ability to hedge successfully will depend on the Adviser&#146;s ability to predict accurately the future direction of interest rate changes and other market factors. There is no assurance that a liquid market for futures and options will always exist. In addition, the Fund could be prevented from opening, or realizing the benefits of closing out a futures or options position because of position limits or limits on daily price fluctuations imposed by an exchange.</FONT></P>
<P align=left><FONT face=serif size=2>The Fund will not engage in transactions in futures contracts and options on futures for speculation, but only for hedging or other permissible risk management purposes. All of the Fund&#146;s futures contracts and options on futures will be traded on a U.S. commodity exchange</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif size=2>40</FONT>&nbsp; </TD>
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<P align=left><FONT face=serif size=2>or board of trade. The Fund will not engage in a transaction in futures or options on futures if, immediately thereafter, the sum of initial margin deposits on existing positions and premiums paid for options on futures would exceed 5% of the Fund&#146;s total assets.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Dividends and distributions</FONT></B></P>
<P align=left><FONT face=serif size=2>During the period ended October 31, 2008, dividends from net investment income totaling $0.8411 per share were paid to shareholders. The dates of payments and the amounts per share are as follows:</FONT></P>
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     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>INCOME</FONT>&nbsp; </TD>
     <TD noWrap align=right></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>PAYMENT DATE</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>DIVIDEND</FONT>&nbsp; </TD>
     <TD noWrap align=right></TD></TR>
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     <TD colSpan=2>
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</TD>
     <TD></TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif size=1>March 31, 2008</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>$0.2551</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif size=1>June 30, 2008</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>0.2875</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif size=1>September 30, 2008</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>0.2985</FONT>&nbsp; </TD>
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<P align=left><B><FONT face=sans-serif size=2>Dividend reinvestment plan</FONT></B></P>
<P align=left><FONT face=serif size=2>The Fund offers its common shareholders a Dividend Reinvestment Plan (the Plan), which offers the opportunity to earn compounded yields. Any holder of common shares of record of the Fund may elect to participate in the Plan and receive the Fund&#146;s common shares in lieu of all or a portion of the cash dividends. The Plan is available to all common shareholders without charge. Mellon Investor Services (the Plan Agent) will act as agent for participating shareholders.</FONT></P>
<P align=left><FONT face=serif size=2>Shareholders may join the Plan by notifying the Plan Agent by telephone, in writing or by visiting the Plan Agent&#146;s Web site at www. melloninvestor.com showing an election to reinvest all or a portion of dividend payments. If received in proper form by the Plan Agent prior to the record date for a dividend, the election will be effective with respect to all dividends paid after such record date. Shareholders whose shares are held in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan.</FONT></P>
<P align=left><FONT face=serif size=2>The Board of Trustees of the Fund has authorized the Dividend Committee to declare dividends from net investment income payable in cash or, in the case of shareholders participating in the Plan, partially or entirely in the Fund&#146;s common shares. The number of shares to be issued for the benefit of each shareholder </FONT><FONT face=serif size=2>will be determined by dividing the amount of the cash dividend, otherwise payable to such shareholder on shares included under the Plan, by the per share net asset value of the common shares on the date for payment of the dividend, unless the net asset value per share on the payment date is less than 95% of the market price per share on that date, in which event the number of shares to be issued to a shareholder will be determined by dividing the amount of the cash dividend payable to such shareholder, by 95% of the market price per share of the common shares on the payment date. The market price of the common shares on a par
ticular date shall be the mean between the highest and lowest sales price on the NYSE on that date. Net asset value will be determined in accordance with the established procedures of the Fund. However, if as of such payment date the market price of the common shares is lower than such net asset value per share, the number of shares to be issued will be determined on the basis of such market price. Fractional shares, carried out to four decimal places, will be credited to the shareholder&#146;s account. Such fractional shares will be entitled to future dividends.</FONT></P>
<P align=left><FONT face=serif size=2>The shares issued to participating shareholders, including fractional shares, will be held by the Plan Agent in the name of the participant. A confirmation will be sent to each shareholder promptly, normally within five to seven days, after the payment date of the dividend. The confirmation will show the total number of shares held by such shareholder before and after the dividend, the amount of the most recent cash dividend that the shareholder has elected to reinvest and the number of shares acquired with such dividend.</FONT></P>
<P align=left><FONT face=serif size=2>Participation in the Plan may be terminated at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent&#146;s Web site, and such termination will be effective immediately. However, notice of termination must be received prior to the record date of any distribution to be effective for that distribution. Upon termination, certificates will be issued representing the number of full shares of common shares held by the Plan Agent.</FONT></P>
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<P align=left><FONT face=serif size=2>A shareholder will receive a cash payment for any fractional share held.</FONT></P>
<P align=left><FONT face=serif size=2>The reinvestment of dividends will not relieve participants of any federal, state or local income tax, which may be due with respect to such dividend. Dividends reinvested in common shares will be treated on your federal income tax return as though you had received a dividend in cash in an amount equal to the fair market value of the shares received, as determined by the prices for common shares of the Fund on the NYSE as of the dividend payment date. Distributions from the Fund&#146;s long-term capital gains will be processed as noted above for those electing to reinvest in common shares and will be taxable to you as long-term capital gains. The confirmation referred to above will contain all the information you will require for determining the cost basis of shares acquired and should be retained for that purpose. At year end, each account will be supplied with detailed information necessary to determine total tax liability for the calendar year. All correspondence or a
dditional </FONT><FONT face=serif size=2>information concerning the Plan should be directed to the Plan Agent, Mellon Bank, N.A., c/o Mellon Investor Services, .O. Box 3338, South Hackensack, New Jersey 07606-1938 (Telephone: 1-800-852-0218).</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Shareholder communication and assistance</FONT></B></P>
<P align=left><FONT face=serif size=2>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:</FONT></P>
<P align=left><FONT face=sans-serif size=1><B>Mellon Investor Services</B></FONT><BR>
<FONT face=sans-serif size=1><B>Newport Office Center VII</B></FONT><BR>
<FONT face=sans-serif size=1><B>480 Washington Boulevard</B></FONT><BR>
<FONT face=sans-serif size=1><B>Jersey City, NJ 07310</B></FONT><BR>
<FONT face=sans-serif size=1><B>Telephone: 1-800-852-0218</B></FONT></P>
<P align=left><FONT face=serif size=2>If your shares are held with a brokerage firm, you should contact that firm, bank or other nominee for assistance.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Shareholder meeting </FONT></B><FONT face=sans-serif size=2>(unaudited)</FONT></P>
<P align=left><FONT face=serif size=2>On March 31, 2008, the Annual Meeting of the Fund was held to elect seven Trustees. Proxies covering 10,295,799 common and preferred shares of beneficial interest were voted at the meeting. The common shareholders elected the following Trustees to serve until their respective successors are duly elected and qualified, with the votes tabulated as follows:</FONT></P>
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     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>WITHHELD</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>FOR</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>AUTHORITY</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=serif size=2>James R. Boyle</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>10,084,237</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>208,625</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>James F. Carlin</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>10,098,559</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>194,303</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=serif size=2>William H. Cunningham</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>10,074,343</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>218,519</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=serif size=2>Charles L. Ladner</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>10,096,759</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>196,103</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=serif size=2>Steven R. Pruchansky</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>10,076,953</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>215,909</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=serif size=2>The preferred shareholders elected Patti McGill Peterson and John A. Moore as Trustees of the Fund until their successors are duly elected and qualified, with the votes tabulated as follows: 2,883 FOR and 54 WITHHELD.</FONT></P>
<P align=left><FONT face=serif size=2>The proposal to amend the Declaration of Trust to permit the Fund&#146;s Board to delegate authority to declare dividends to a Dividend Committee was voted as follows: 5,719,600 FOR, 207,356 AGAINST and 173,110 ABSTAIN.</FONT></P>
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<P align=left><B><FONT face=sans-serif size=2>Board Consideration of and</FONT></B><BR>
<B><FONT face=sans-serif size=2>Continuation of Investment Advisory</FONT></B><BR>
<B><FONT face=sans-serif size=2>Agreement and Subadvisory</FONT></B><BR>
<B><FONT face=sans-serif size=2>Agreement: John Hancock Income</FONT></B><BR>
<B><FONT face=sans-serif size=2>Securities Trust</FONT></B></P>
<P align=left><FONT face=serif size=2>The Investment Company Act of 1940 (the 1940 Act) requires the Board of Trustees (the Board) of John Hancock Income Securities Trust (the Fund), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not &#147;interested persons&#148; of the Fund, as defined in the 1940 Act (the Independent Trustees), annually to meet in person to review and consider the continuation of: (i) the investment advisory agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Adviser) and (ii) the investment subadvisory agreement (the Subadvisory Agreement) with MFC Global Investment Management (U.S.), LLC (the Subadviser). The Advisory Agreement and the Subadvisory Agreement are collectively referred to as the Advisory Agreements.</FONT></P>
<P align=left><FONT face=serif size=2>At meetings held on May 5&#150;6 and June 9&#150;10, 2008, the Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and Subadviser and the continuation of the Advisory Agreements. During such meetings, the Board&#146;s Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel.</FONT></P>
<P align=left><FONT face=serif size=2>In evaluating the Advisory Agreements, the Board, including the Contracts/Operations Committee and its Independent Trustees, reviewed a broad range of information requested for this purpose. This information included:</FONT></P>
<P align=left><FONT face=serif size=2>(i) the investment performance of the Fund relative to a category of relevant funds (the Category) and a peer group of comparable funds (the Peer Group). </FONT><FONT face=serif size=2>The funds within each Category and Peer Group were selected by Morningstar Inc. (Morningstar), an independent provider of investment company data. Data covered a range of periods ended December 31, 2007,</FONT></P>
<P align=left><FONT face=serif size=2>(ii) advisory and other fees incurred by, and the expense ratios of, the Fund relative to a Category and a Peer Group,</FONT></P>
<P align=left><FONT face=serif size=2>(iii) the advisory fees of comparable portfolios of other clients of the Adviser and the Subadviser,</FONT></P>
<P align=left><FONT face=serif size=2>(iv) the Adviser&#146;s financial results and condition, including its and certain of its affiliates&#146; profitability from services performed for the Fund,</FONT></P>
<P align=left><FONT face=serif size=2>(v) breakpoints in the Fund&#146;s and the Peer Group&#146;s fees, and information about economies of scale,</FONT></P>
<P align=left><FONT face=serif size=2>(vi) the Adviser&#146;s and Subadviser&#146;s record of compliance with applicable laws and regulations, with the Fund&#146;s investment policies and restrictions, and with the applicable Code of Ethics, and the structure and responsibilities of the Adviser&#146;s and Subadviser&#146;s compliance department,</FONT></P>
<P align=left><FONT face=serif size=2>(vii) the background and experience of senior management and investment professionals, and</FONT></P>
<P align=left><FONT face=serif size=2>(viii) the nature, cost and character of advisory and non-investment management services provided by the Adviser and its affiliates and by the Subadviser.</FONT></P>
<P align=left><FONT face=serif size=2>The Independent Trustees considered the legal advice of independent legal counsel and relied on their own business judgment in determining the factors to be considered in evaluating the materials that were presented to them and the weight to be given to each such factor. The Board&#146;s review and conclusions were based on a comprehensive consideration of all information presented to the Board and not the result of any single controlling factor. The Board principally considered data on performance and other information provided by Morningstar as of December 31, 2007. The Board also considered updated performance information provided to it by the Adviser or Subadviser at its May and June 2008 meetings. Performance and other information may be quite different as of the date of this shareholders report. The key factors considered by the Board and the conclusions reached are described below.</FONT></P>
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<P align=left><B><FONT face=sans-serif size=1>Nature, extent and quality of services</FONT></B></P>
<P align=left><FONT face=serif size=2>The Board considered the ability of the Adviser and the Subadviser, based on their resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory, and supervisory personnel. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and Subadviser. The Board considered the Adviser&#146;s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs and compliance records of the Adviser and Subadviser. In addition, the Board took into account the administrative and other non-advisory services provided to the Fund by the Adviser and its affiliates.</FONT></P>
<P align=left><FONT face=serif size=2>Based on the above factors, together with those referenced below, the Board concluded that, within the context of its full deliberations, the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser and Subadviser were sufficient to supported renewal of the Advisory Agreements.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Fund performance</FONT></B></P>
<P align=left><FONT face=serif size=2>The Board considered the performance results for the Fund over various time periods ended December 31, 2007. The Board also considered these results in comparison to the performance of the Category, as well as the Fund&#146;s Peer Group and benchmark index. The Board reviewed with representatives of Morningstar the methodology used by Morningstar to select the funds in the Category and the Peer Group. The Board noted the imperfect comparability of the Peer Group.</FONT></P>
<P align=left><FONT face=serif size=2>The Board noted that Fund&#146;s performance during the 1-year period was lower than the performance of the Category median, and was in line with the performance of the Peer Group median. The Board noted that the Fund&#146;s performance was lower than the performance of the Category and Peer Group medians during the 3-, 5- and 10-year periods. The Board also noted that the Fund&#146;s performance was lower than the performance of its benchmark index, the Lehman Brothers Government/ Credit Bond Index, during 1- and 3-year periods, but was higher than the benchmark </FONT><FONT face=serif size=2>index&#146;s performance during the 5- and 10-year periods. The Adviser explained that the Fund&#146;s Peer Group contained primarily unleveraged closed-end funds, which impacted the Fund&#146;s comparative performance results.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Investment advisory fee and subadvisory fee rates and expenses</FONT></B></P>
<P align=left><FONT face=serif size=2>The Board reviewed and considered the contractual investment advisory fee rate payable by the Fund to the Adviser for investment advisory services (the Advisory Agreement Rate). The Board received and considered information comparing the Advisory Agreement Rate with the advisory fees for the Category and Peer Group. The Board noted that the Advisory Agreement Rate was higher than the median rate of the Peer Group and in line with the median rate of the Category.</FONT></P>
<P align=left><FONT face=serif size=2>The Board received and considered expense information regarding the Fund&#146;s various components, including advisory fees, and other non-advisory fees, including transfer agent fees, custodian fees, and other miscellaneous fees (</FONT><I><FONT face=serif size=2>e.g.</FONT></I><FONT face=serif size=2>, fees for accounting and legal services). The Board considered comparisons of these expenses to the Peer Group median. The Board also received and considered expense information regarding the Fund&#146;s total operating expense ratio (Expense Ratio). The Board noted that, unlike the Fund, several funds in the Peer Group employed fee waivers or reimbursements. The Board received and considered information comparing the Expense Ratio of the Fund to that of the Category and Peer Group medians before the application of fee waivers and reimbursements (Gross Expense Ratio) and after the application of such waivers and reimbursement (Net Expense Ratio). The Board noted that the 
Fund&#146;s Gross Expense Ratio was higher than the median rate of the Peer Group and lower than the median rate of the Category. The Board also noted that the Fund&#146;s Net Expense Ratio was higher than the median rate of the Peer Group and in line with the median rate of the Category.</FONT></P>
<P align=left><FONT face=serif size=2>The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. The Adviser noted that most of the funds in the Peer Group were unleveraged, which contributed to the results. Based on the above-referenced considerations</FONT></P>
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<P align=left><FONT face=serif size=2>and other factors, the Board concluded that the Fund&#146;s overall expense results and performance supported the re-approval of the Advisory Agreements.</FONT></P>
<P align=left><FONT face=serif size=2>The Board also received information about the investment subadvisory fee rate (the Subadvisory Agreement Rate) payable by the Adviser to the Subadviser for investment sub-advisory services. The Board concluded that the Subadvisory Agreement Rate was fair and equitable, based on its consideration of the factors described here.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Profitability</FONT></B></P>
<P align=left><FONT face=serif size=2>The Board received and considered a detailed profitability analysis of the Adviser based on the Advisory Agreements, as well as on other relationships between the Fund and the Adviser and its affiliates, including the Subadviser. The Board also considered a comparison of the Adviser&#146;s profitability to that of other similar investment advisers whose profit-ability information is publicly available. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits reported by the Adviser were not unreasonable.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Economies of scale</FONT></B></P>
<P align=left><FONT face=serif size=2>The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Fund&#146;s ability to appropriately benefit from economies of scale under the Fund&#146;s fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board&#146;s understanding that most of the Adviser&#146;s and Subadviser&#146;s costs are not specific to individual Funds, but rather are incurred across a variety of products and services.</FONT></P>
<P align=left><FONT face=serif size=2>The Board noted that the Advisory Agreements offered breakpoints. However, the Board considered the limited relevance of economies of scale in the context of a closed-end fund that, unlike an open-end fund, does not continuously offer its shares. The Board noted that the Fund, as a closed-end investment company, was not expected to increase materially in size and that its assets would grow (if at all) through </FONT><FONT face=serif size=2>the investment performance of the Fund. Therefore, the Board did not consider potential economies of scale as a principal factor in assessing the fees payable under the Advisory Agreements, but concluded that the fees were fair and equitable based on relevant factors.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Other benefits to the Adviser</FONT></B></P>
<P align=left><FONT face=serif size=2>The Board received information regarding potential &#147;fall-out&#148; or ancillary benefits received by the Adviser and its affiliates, including the Subadviser, as a result of their relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser and Subadviser with the Fund and benefits potentially derived from an increase in business as a result of their relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates).</FONT></P>
<P align=left><FONT face=serif size=2>The Board also considered the effectiveness of the Adviser&#146;s, Subadviser&#146;s and Fund&#146;s policies and procedures for complying with the requirements of the federal securities laws, including those relating to best execution of portfolio transactions and brokerage allocation.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Other factors and broader review</FONT></B></P>
<P align=left><FONT face=serif size=2>As discussed above, the Board reviewed detailed materials received from the Adviser and Subadviser as part of the annual re-approval process. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of the Adviser and Subadviser at least quarterly, which include, among other things, fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year.</FONT></P>
<P align=left><FONT face=serif size=2>After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreements.</FONT></P>
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<P align=left><B><FONT face=sans-serif size=2>Information about the portfolio managers</FONT></B></P>
<P align=left><B><FONT face=sans-serif size=1>Management Biographies and Fund ownership</FONT></B></P>
<P align=left><FONT face=serif size=2>Below is an alphabetical list of the portfolio managers who share joint responsibility for the day-to-day investment management of the Fund. It provides a brief summary of their business careers over the past five years and their range of beneficial share ownership in the Fund as of October 31, 2008.</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Barry H. Evans, CFA</FONT></B><BR>
<FONT face=serif size=2>President, Chief Fixed Income Officer and Chief Operating Officer, MFC Global Investment</FONT><BR>
<FONT face=serif size=2>Management (U.S.), LLC since 2005</FONT><BR>
<FONT face=serif size=2>Senior Vice President, John Hancock Advisers LLC (1986&#150;2005)</FONT><BR>
<FONT face=serif size=2>Began business career in 1986</FONT><BR>
<FONT face=serif size=2>Joined fund team in 2002</FONT><BR>
<FONT face=serif size=2>Fund ownership &#151; $10,001&#150;$50,000</FONT><BR>
<BR>
<B><FONT face=sans-serif size=1>Jeffrey N. Given, CFA</FONT></B><BR>
<FONT face=serif size=2>Vice President, MFC Global Investment Management (U.S.), LLC since 2005</FONT><BR>
<FONT face=serif size=2>Second Vice President, John Hancock Advisers LLC (1993&#150;2005)</FONT><BR>
<FONT face=serif size=2>Began business career in 1993</FONT><BR>
<FONT face=serif size=2>Joined fund team in 1999</FONT><BR>
<FONT face=serif size=2>Fund ownership &#151; $1&#150;$10,000</FONT><BR>
<BR>
<B><FONT face=sans-serif size=1>Howard C. Greene, CFA</FONT></B><BR>
<FONT face=serif size=2>Senior Vice President, MFC Global Investment Management (U.S.), LLC since 2005</FONT><BR>
<FONT face=serif size=2>Senior Vice President, John Hancock Advisers LLC (2002&#150;2005)</FONT><BR>
<FONT face=serif size=2>Vice President at Sun Life Financial Services Company of Canada (1987&#150;2002)</FONT><BR>
<FONT face=serif size=2>Began business career in 1979</FONT><BR>
<FONT face=serif size=2>Joined fund team in 2005</FONT><BR>
<FONT face=serif size=2>Fund ownership &#151; None</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>Other Accounts the Portfolio Managers are Managing</FONT></B></P>
<P align=left><FONT face=serif size=2>The table below indicates for each portfolio manager information about the accounts over which the portfolio manager has day-to-day investment responsibility. All information on the number of accounts and total assets in the table is as of October 31, 2008. For purposes of the table, &#147;Other Pooled Investment Vehicles&#148; may include investment partnerships and group trusts, and &#147;Other Accounts&#148; may include separate accounts for institutions or individuals, insurance company general or separate accounts, pension funds and other similar institutional accounts.</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif size=1>P O R T F O L I O&nbsp;&nbsp; M A N A G E R</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>O T H E R&nbsp; &nbsp;A C C O U N T S&nbsp;&nbsp; M A N A G E D&nbsp;&nbsp; B Y&nbsp;&nbsp; T H E&nbsp;&nbsp; P O R T F O L I O&nbsp; &nbsp;M A N A G E R S</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Barry H. Evans, CFA</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Investment Companies: 5 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=center></TD>
     <TD align=left><FONT face=serif size=2>approximately $2.6 billion.</FONT><FONT face=serif size=2>&nbsp;&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Pooled Investment Vehicles: None</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Accounts: 90 accounts with assets of</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=center></TD>
     <TD align=left><FONT face=serif size=2>approximately $2.1 billion.</FONT><FONT face=serif size=2>&nbsp;&nbsp;</FONT></TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Jeffrey N. Given, CFA</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Investment Companies: 7 accounts with assets of</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=center></TD>
     <TD align=left><FONT face=serif size=2>approximately $4.5 billion.</FONT><FONT face=serif size=2>&nbsp;&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Pooled Investment Vehicles: 2 accounts with assets of</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=center></TD>
     <TD align=left><FONT face=serif size=2>approximately $82 million.</FONT><FONT face=serif size=2>&nbsp;&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Accounts: 17 accounts with assets of</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=center>&nbsp;</TD>
     <TD align=left><FONT size=2><FONT face=serif>appr</FONT><FONT face=serif>oximately $3.6 billion.</FONT></FONT><FONT face=serif size=2>&nbsp;</FONT></TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>46</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="50%"></TD>
     <TD width="50%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Howard C. Greene, CFA</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Investment Companies: 3 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=center>&nbsp;</TD>
     <TD align=left><FONT face=serif size=2>approximately $1.2 billion.</FONT><FONT face=serif size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Pooled Investment Vehicles: 2 accounts with assets of</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=center></TD>
     <TD align=left><FONT face=serif size=2>approximately $82 million.</FONT><FONT face=serif size=2>&nbsp;&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=serif size=2>Other Accounts: 17 accounts with assets of</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=center></TD>
     <TD align=left><FONT face=serif size=2>approximately $3.6 billion.</FONT><FONT face=serif size=2>&nbsp;&nbsp;</FONT></TD></TR></TABLE><BR>
<P align=left><FONT face=serif size=2>Neither the Adviser or the Subadviser receives a fee based upon the investment performance of any of the accounts included under &#147;Other Accounts Managed by the Portfolio Managers&#148; in the table above.</FONT></P>
<P align=left><FONT face=serif size=2>When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one account over another. For the reasons outlined below, the Fund does not believe that any material conflicts are likely to arise out of a portfolio manager&#146;s responsibility for the management of the Fund as well as one or more other accounts. The Adviser and the Subadviser have adopted procedures, overseen by the Chief Compliance Officer, that are intended to monitor compliance with the policies referred to in the following paragraphs.</FONT></P>
<UL>
<LI>
<P align=left><FONT face=serif size=2>The Subadviser has policies that require a portfolio manager to allocate investment opportuni</FONT><FONT face=serif size=2>-</FONT> <FONT face=serif size=2>ties in an equitable manner and generally to allocate such investments proportionately among all</FONT> <FONT face=serif size=2>accounts with similar investment objectives.</FONT></P>
<LI>
<P align=left><FONT face=serif size=2>When a portfolio manager intends to trade the same security for more than one account, the poli</FONT><FONT face=serif size=2>-</FONT> <FONT face=serif size=2>cies of the Subadviser generally require that such trades for the individual accounts are aggregated</FONT> <FONT face=serif size=2>so each account receives the same price. Where not possible or may not result in the best possible</FONT> <FONT face=serif size=2>price, the Subadviser will place the order in a manner intended to result in as favorable a price as</FONT> <FONT face=serif size=2>possible for such client.</FONT></P>
<LI>
<P align=left><FONT face=serif size=2>The investment performance on specific accounts is not a factor in determining the portfolio</FONT> <FONT face=serif size=2>manager&#146;s compensation. See &#147;Compensation of Portfolio Managers&#148; below. Neither the Adviser</FONT> <FONT face=serif size=2>nor the Subadviser receives a performance-based fee with respect to other accounts managed by</FONT> <FONT face=serif size=2>the Fund&#146;s portfolio managers.</FONT></P>
<LI>
<P align=left><FONT face=serif size=2>The Subadviser imposes certain trading restrictions and reporting requirements for accounts in</FONT> <FONT face=serif size=2>which a portfolio manager or certain family members have a personal interest in order to confirm</FONT> <FONT face=serif size=2>that such accounts are not favored over other accounts.</FONT></P>
<LI>
<P align=left><FONT face=serif size=2>The Subadviser seeks to avoid portfolio manager assignments with potentially conflicting situa</FONT><FONT face=serif size=2>tions. However, where a portfolio manager is responsible for accounts with differing investment</FONT> <FONT face=serif size=2>objectives and policies, it is possible that the portfolio manager will conclude that it is in the best</FONT> <FONT face=serif size=2>interest of one account to sell a portfolio security while another account continues to hold or</FONT> <FONT face=serif size=2>increase the holding in such security.</FONT></P>
</LI></UL>
<P align=left><B><FONT face=sans-serif size=1>Compensation of Portfolio Managers</FONT></B></P>
<P align=left><FONT face=serif size=2>The Subadviser has adopted a system of compensation for portfolio managers and others involved in the investment process that is applied consistently among investment professionals. At the Subadviser, the structure of compensation of investment professionals is currently comprised of the following basic components: fixed base salary, and an annual investment bonus plan, as well as customary benefits that are offered generally to all full-time employees of the Subadviser. </FONT><FONT face=serif size=2>A limited number of senior investment professionals, who serve as officers of both the Subadviser and its parent company, may also receive options or restricted stock grants of common shares of Manulife Financial.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>47</FONT>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=2>Only investment professionals are eligible to participate in the Investment Bonus Plan on an annual basis. While the amount of any bonus is discretionary, the following factors are generally used in determining bonuses: 1) The investment performance of all accounts managed by the investment professional over one-, three- and five-year periods are considered. The pre-tax performance of each account is measured relative to an appropriate peer group benchmark. 2) The profitability of the Subadviser and its parent company are also considered in determining bonus awards, with greater emphasis placed upon the profitability of the Adviser. 3) The more intangible contributions of an investment professional to the Subadviser&#146;s business, including the investment professional&#146;s support of sales activities, new fund/strategy idea generation, professional growth and development, and management, where applicable, are evaluating in determining the amount of any bonus award.</
FONT></P>
<P align=left><FONT face=serif size=2>While the profitability of the Subadviser and the investment performance of the accounts that the investment professionals maintain are factors in determining an investment professional&#146;s overall compensation, the investment professional&#146;s compensation is not linked directly to the net asset value of any fund.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%"></TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>48</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=7>Trustees and Officers</FONT></P>
<P align=left><B><FONT face=sans-serif size=1>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.</FONT></B></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="75%"></TD>
     <TD width="12%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Independent Trustees</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Name, Year of Birth</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Number of</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><I><FONT face=sans-serif size=1>Position(s) held with Fund</FONT></I></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Trustee</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>John Hancock</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Principal occupation(s) and other</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>of Fund</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>funds overseen</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>directorships during past 5 years</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>since</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>by Trustee</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>James F. Carlin, </FONT></B><FONT face=sans-serif size=1>Born: 1940</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2005</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Chairman (since December 2007); Director and Treasurer, Alpha Analytical Laboratories, Inc. (chemical</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>analysis) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance Agency, Inc. (since 1995);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Part Owner and Vice President, Mone Lawrence Carlin Insurance Agency, Inc. (until 2005); Chairman</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>and Chief Executive Officer, Carlin Consolidated, Inc. (management/investments) (since 1987); Trustee,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Massachusetts Health and Education Tax Exempt Trust (1993&#150;2003).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>William H. Cunningham, </FONT></B><FONT face=sans-serif size=1>Born: 1944</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2005</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Professor, University of Texas at Austin (since 1971); former Chancellor, University of Texas System and</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>former President, University of Texas at Austin (until 2001); Chairman and Chief Executive Officer, IBT</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Technologies (until 2001); Director of the following: Hicks Acquisition Company I, Inc. (since 2007);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Hire.com (until 2004), STC Broadcasting, Inc. and Sunrise Television Corp. (until 2001), Symtx, Inc.</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>(electronic manufacturing) (since 2001), Adorno/Rogers Technology, Inc. (until 2004), Pinnacle Foods</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Corporation (until 2003), rateGenius (until 2003), Lincoln National Corporation (insurance) (since</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>2006), Jefferson-Pilot Corporation (diversified life insurance company) (until 2006), New Century</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Equity Holdings (formerly Billing Concepts) (until 2001), eCertain (until 2001), ClassMap.com (until</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>2001), Agile Ventures (until 2001), AskRed.com (until 2001), Southwest Airlines (since 2000), Introgen</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>(manufacturer of biopharmaceuticals) (since 2000) and Viasystems Group, Inc. (electronic manufacturer)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>(until 2003); Advisory Director, Interactive Bridge, Inc. (college fundraising) (until 2001); Advisory</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Director, Q Investments (until 2003); Advisory Director, JPMorgan Chase Bank (formerly Texas Commerce</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Bank&#150;Austin), LIN Television (until 2008), WilTel Communications (until 2003) and Hayes Lemmerz</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>International, Inc. (diversified automotive parts supply company) (since 2003).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Deborah C. Jackson,</FONT></B><SUP><FONT face=sans-serif size=1>4 </FONT></SUP><FONT face=sans-serif size=1>Born: 1952</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2008</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Chief Executive Officer, American Red Cross of Massachusetts Bay (since 2002); Board of Directors of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>2001); Board of Directors of American Student Association Corp. (since 1996); Board of Directors of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Boston Stock Exchange (2002&#150;2008); Board of Directors of Harvard Pilgrim Healthcare (since 2007).</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Charles L. Ladner,</FONT></B><SUP><FONT face=sans-serif size=1>2 </FONT></SUP><FONT face=sans-serif size=1>Born: 1938</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2004</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Chairman and Trustee, Dunwoody Village, Inc. (retirement services) (until 2003); Senior Vice President</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); Vice</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>President and Director, AmeriGas, Inc. (retired 1998); Director, AmeriGas Partners, L.P. (gas distribution)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>(until 1997); Director, EnergyNorth, Inc. (until 1997); Director, Parks and History Association (until 2005).</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Stanley Martin,</FONT></B><SUP><FONT face=sans-serif size=1>2,4 </FONT></SUP><FONT face=sans-serif size=1>Born: 1947</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2008</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Senior Vice President/Audit Executive, Federal Home Loan Mortgage Corporation (2004&#150;2006);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Executive Vice President/Consultant, HSBC Bank USA (2000&#150;2003); Chief Financial Officer/Executive</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Vice President, Republic New York Corporation and Republic National Bank of New York (1998&#150;2000);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Partner, KPMG LLP (1971&#150;1998).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>49</FONT>&nbsp; </TD></TR></TABLE><BR>
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<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="75%"></TD>
     <TD width="12%"></TD>
     <TD width="12%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Independent Trustees </FONT></B><FONT face=sans-serif size=1>(continued)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Name, Year of Birth</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Number of</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><I><FONT face=sans-serif size=1>Position(s) held with Fund</FONT></I></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Trustee</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>John Hancock</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Principal occupation(s) and other</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>of Fund</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>funds overseen</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>directorships during past 5 years</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>since</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>by Trustee</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Dr. John A. Moore,</FONT></B><SUP><FONT face=sans-serif size=1>2 </FONT></SUP><FONT face=sans-serif size=1>Born: 1939</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>1996</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>President and Chief Executive Officer, Institute for Evaluating Health Risks (nonprofit institution)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>(until 2001); Senior Scientist, Sciences International (health research) (until 2003); Former Assistant</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Administrator and Deputy Administrator, Environmental Protection Agency; Principal, Hollyhouse</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>(consulting) (since 2000); Director, CIIT Center for Health Science Research (nonprofit research)</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(until 2007).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Patti McGill Peterson,</FONT></B><SUP><FONT face=sans-serif size=1>2 </FONT></SUP><FONT face=sans-serif size=1>Born: 1943</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>1996</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Principal, PMP Globalinc (consulting) (since 2007); Senior Associate, Institute for Higher Education Policy</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>(since 2007); Executive Director, CIES (international education agency) (until 2007); Vice President,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Institute of International Education (until 2007); Senior Fellow, Cornell University Institute of Public</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Affairs, Cornell University (until 1998); Former President Wells College, St. Lawrence University and the</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Association of Colleges and Universities of the State of New York. Director of the following: Niagara</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Mohawk Power Corporation (until 2003); Security Mutual Life (insurance) (until 1997); ONBANK (until</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>1993). Trustee of the following: Board of Visitors, The University of Wisconsin, Madison (since 2007);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Ford Foundation, International Fellowships Program (until 2007); UNCF, International Development</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Partnerships (until 2005); Roth Endowment (since 2002); Council for International Educational Exchange</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>(since 2003).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Steven R. Pruchansky, </FONT></B><FONT face=sans-serif size=1>Born: 1944</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2005</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>50</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>and President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>American Bank (since 2008); Managing Director, JonJames, LLC (real estate) (since 2000); Director, First</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Signature Bank &amp; Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Building Corp. (until 1991).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Gregory A. Russo,</FONT></B><SUP><FONT face=sans-serif size=1>2,4 </FONT></SUP><FONT face=sans-serif size=1>Born: 1949</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2008</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>22</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Vice Chairman, Risk &amp; Regulatory Matters, KPMG LLP (KPMG) (2002&#150;2006); Vice Chairman, Industrial</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Markets, KPMG (1998&#150;2002).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Non-Independent Trustees</FONT></B><SUP><FONT face=sans-serif size=1>3</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Name, Year of Birth</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Number of</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><I><FONT face=sans-serif size=1>Position(s) held with Fund</FONT></I></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Trustee</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>John Hancock</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Principal occupation(s) and other</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>of Fund</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>funds overseen</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>directorships during past 5 years</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>since</FONT></B><SUP><FONT face=sans-serif size=1>1</FONT></SUP>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>by Trustee</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>James R. Boyle, </FONT></B><FONT face=sans-serif size=1>Born: 1959</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>2005</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>267</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=3>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Executive Vice President, Manulife Financial Corporation (since 1999); Director and President, John</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Hancock Variable Life Insurance Company (since 2007); Director and Executive Vice President, John</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Hancock Life Insurance Company (since 2004); Chairman and Director, John Hancock Advisers, LLC (the</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Adviser), John Hancock Funds, LLC (John Hancock Funds) and The Berkeley Financial Group, LLC (The</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Berkeley Group) (holding company) (since 2005); Chairman and Director, John Hancock Investment</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=3><FONT face=sans-serif size=1>Management Services, LLC (since 2006); Senior Vice President, The Manufacturers Life Insurance</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Company (U.S.A.) (until 2004).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="4%">&nbsp;</TD>
     <TD width="95%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>50</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<TR>
     <TD width="93%"></TD>
     <TD width="6%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Principal officers who are not Trustees</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Name, Year of Birth</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><I><FONT face=sans-serif size=1>Position(s) held with Fund</FONT></I></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Officer</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Principal occupation(s) and other</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>of Fund</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>directorships during past 5 years</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>since</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Keith F. Hartstein, </FONT></B><FONT face=sans-serif size=1>Born: 1956</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2005</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=sans-serif size=1>President and Chief Executive Officer</FONT></I>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Senior Vice President, Manulife Financial Corporation (since 2004); Director, President and Chief</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Executive Officer, the Adviser, The Berkeley Group and John Hancock Funds, LLC (since 2005); Director,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>MFC Global Investment Management (U.S.), LLC (MFC Global (U.S.)) (since 2005); Chairman and</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Director, John Hancock Signature Services, Inc. (since 2005); Director, President and Chief Executive</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Officer, John Hancock Investment Management Services, LLC (since 2006); President and Chief Executive</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Officer, John Hancock Funds, John Hancock Funds II, John Hancock Funds III and John Hancock Trust</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>(since 2005); Director, Chairman and President, NM Capital Management, Inc. (since 2005); Member</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>and former Chairman, Investment Company Institute Sales Force Marketing Committee (since 2003);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Director, President and Chief Executive Officer, MFC Global (U.S.) (2005&#150;2006); Executive Vice President,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>John Hancock Funds, LLC (until 2005).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Thomas M. Kinzler, </FONT></B><FONT face=sans-serif size=1>Born: 1955</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2006</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=sans-serif size=1>Secretary and Chief Legal Officer</FONT></I>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Vice President and Counsel, John Hancock Life Insurance Company (U.S.A.) (since 2006); Secretary and</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Chief Legal Officer, John Hancock Funds, John Hancock Funds II and John Hancock Trust (since 2006);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Vice President and Associate General Counsel, Massachusetts Mutual Life Insurance Company (1999&#150;</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>2006); Secretary and Chief Legal Counsel, MML Series Investment Fund (2000&#150;2006); Secretary and</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Chief Legal Counsel, MassMutual Institutional Funds (2000&#150;2004); Secretary and Chief Legal Counsel,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>MassMutual Select Funds and MassMutual Premier Funds (2004&#150;2006).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Francis V. Knox, Jr., </FONT></B><FONT face=sans-serif size=1>Born: 1947</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2005</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=sans-serif size=1>Chief Compliance Officer</FONT></I>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Vice President and Chief Compliance Officer, John Hancock Investment Management Services, LLC,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>the Adviser and MFC Global (U.S.) (since 2005); Chief Compliance Officer, John Hancock Funds, John</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Hancock Funds II, John Hancock Funds III and John Hancock Trust (since 2005); Vice President and</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Assistant Treasurer, Fidelity Group of Funds (until 2004); Vice President and Ethics &amp; Compliance Officer,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Fidelity Investments (until 2001).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Charles A. Rizzo, </FONT></B><FONT face=sans-serif size=1>Born: 1957</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2007</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=sans-serif size=1>Chief Financial Officer</FONT></I>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Chief Financial Officer, John Hancock Funds, John Hancock Funds II, John Hancock Funds III and John</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Hancock Trust (since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (registered</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>investment companies) (2005&#150;2007); Vice President, Goldman Sachs (2005&#150;2007); Managing Director</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>and Treasurer of Scudder Funds, Deutsche Asset Management (2003&#150;2005); Director, Tax and Financial</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Reporting, Deutsche Asset Management (2002&#150;2003); Vice President and Treasurer, Deutsche Global</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Fund Services (1999&#150;2002).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Gordon M. Shone, </FONT></B><FONT face=sans-serif size=1>Born: 1956</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2006</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
<HR noShade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=sans-serif size=1>Treasurer</FONT></I>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Senior Vice President, John Hancock Life Insurance Company (U.S.A.) (since 2001); Treasurer, John</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Hancock Funds (since 2006), John Hancock Funds II, John Hancock Funds III and John Hancock Trust</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>(since 2005); Vice President and Chief Financial Officer, John Hancock Trust (2003&#150;2005); Vice President,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>John Hancock Investment Management Services, LLC, John Hancock Advisers, LLC (since 2006) and The</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Manufacturers Life Insurance Company (U.S.A.) (1998&#150;2000).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>51</FONT>&nbsp; </TD></TR></TABLE><BR>
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     <TD width="93%"></TD>
     <TD width="6%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Principal officers who are not Trustees </FONT></B><FONT face=sans-serif size=1>(continued)</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Name, Year of Birth</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><I><FONT face=sans-serif size=1>Position(s) held with Fund</FONT></I></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Officer</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Principal occupation(s) and other</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>of Fund</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>directorships during past 5 years</FONT></B>&nbsp; </TD>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>since</FONT></B>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>John G. Vrysen, </FONT></B><FONT face=sans-serif size=1>Born: 1955</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=1>2005</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left colSpan=2>
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</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=sans-serif size=1>Chief Operating Officer</FONT></I>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Senior Vice President, Manulife Financial Corporation (since 2006); Senior Vice President, John Hancock</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Life Insurance Company (since 2004); Director, Executive Vice President and Chief Operating Officer,</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>the Adviser, The Berkeley Group and John Hancock Funds, LLC (since 2007); Director, Executive Vice</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>President and Chief Operating Officer, John Hancock Investment Management Services, LLC (since</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>2007); Chief Operating Officer, John Hancock Funds, John Hancock Funds II, John Hancock Funds III</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>and John Hancock Trust (since 2007); Director, Executive Vice President and Chief Financial Officer,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>the Adviser, The Berkeley Group and John Hancock Funds, LLC (2005&#150;2007); Director, Executive Vice</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>President and Chief Financial Officer, John Hancock Investment Management Services, LLC (2005&#150;2007);</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Executive Vice President and Chief Financial Officer, MFC Global (U.S.) (2005&#150;2007); Director, John</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left colSpan=2><FONT face=sans-serif size=1>Hancock Signature Services, Inc. (since 2005); Chief Financial Officer, John Hancock Funds, John Hancock</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Funds II, John Hancock Funds III and John Hancock Trust (2005&#150;2007); Vice President and General</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Manager, John Hancock Fixed Annuities, U.S. Wealth Management (2004&#150;2005); Vice President,</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Operations, Manulife Wood Logan (2000&#150;2004).</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805.</FONT></P>
<P align=left><FONT face=sans-serif size=1>The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available without charge, upon request, by calling 1-800-225-5291.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>1 </FONT></SUP><FONT face=sans-serif size=1>Each Trustee serves until resignation, retirement age or until his or her successor is elected. </FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>2 </FONT></SUP><FONT face=sans-serif size=1>Member of Audit and Compliance Committee.</FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>3 </FONT></SUP><FONT face=sans-serif size=1>Non-Independent Trustee holds positions with the Fund&#146;s investment adviser, underwriter and certain other affiliates. </FONT></P>
<P align=left><SUP><FONT face=sans-serif size=1>4 </FONT></SUP><FONT face=sans-serif size=1>Mr. Martin and Mr. Russo were appointed by the Board as Trustees on September 8, 2008 and Ms. Jackson was appointed effective October 1, 2008.</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif size=2>52</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>Income Securities Trust | </FONT><B><FONT face=sans-serif size=1>Annual report</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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<P align=left><FONT face=serif size=7>More information</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="46%"></TD>
     <TD width="53%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Trustees</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Investment adviser</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>James F. Carlin, </FONT><I><FONT face=serif size=2>Chairman</FONT></I><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>John Hancock Advisers, LLC</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>James R. Boyle&#134;</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>William H. Cunningham</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Subadviser</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Deborah C. Jackson</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>MFC Global Investment</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Charles L. Ladner*</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>&nbsp;&nbsp; Management (U.S.), LLC</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left><FONT face=serif size=2>Stanley Martin*</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Dr. John A. Moore*</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Custodian</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Patti McGill Peterson*</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>The Bank of New York Mellon</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Steven R. Pruchansky</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Gregory A. Russo*</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Transfer agent for common shareholders</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=Arial size=1><FONT face=sans-serif>*Members of the Audit Com</FONT><FONT face=sans-serif>mittee&nbsp; </FONT></FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>Mellon Investor Services</FONT>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left><FONT face=sans-serif size=1>&#134;Non-Independent Trustee&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1></FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Legal counsel</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><STRONG><FONT face=sans-serif size=1>Officers</FONT></STRONG><FONT face=sans-serif size=1>&nbsp;</FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>K&amp;L Gates LLP</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2><FONT face=serif size=2>Keith F. Hartstein</FONT><FONT face=serif size=2>&nbsp; </FONT></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><EM><FONT size=2><FONT face=serif>Preside</FONT><FONT face=serif>nt and Chief Executive Officer</FONT></FONT></EM><FONT face=serif size=2>&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Independent registered</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>public accounting firm</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Thomas M. Kinzler</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>PricewaterhouseCoopers LLP</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><EM><FONT face=serif size=2>Secretary and Chief Legal Officer</FONT></EM><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Stock symbol</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Francis V. Knox, Jr.</FONT><FONT face=serif size=2>&nbsp;&nbsp;&nbsp; </FONT></TD>
     <TD noWrap align=left><FONT face=serif size=2>Listed New York Stock Exchange: JHS</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><EM><FONT face=serif size=2>Chief Compliance Officer</FONT></EM><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>For shareholder assistance</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Charles A. Rizzo</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>refer to page 41</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=serif size=2>Chief Financial Officer</FONT></I><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left><FONT face=serif size=2>&nbsp;</FONT></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>Gordon M. Shone</FONT><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=serif size=2>Treasurer</FONT></I><FONT face=serif size=2>&nbsp; </FONT></TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=serif size=2>John G. Vrysen</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><I><FONT face=serif size=2>Chief Operating Officer</FONT></I>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>Additional information about your fund is available without charge in several ways. As required by the SEC, you can access proxy voting information and quarterly portfolio information on your fund. The </FONT><B><FONT face=sans-serif size=1>proxy voting information </FONT></B><FONT face=sans-serif size=1>includes a description of proxy voting policies, procedures and information regarding how the fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30. The </FONT><B><FONT face=sans-serif size=1>quarterly portfolio information </FONT></B><FONT face=sans-serif size=1>that includes a complete list of the fund&#146;s holdings for the first and third quarters of the fund&#146;s fiscal period is filed on Form N-Q. You have access to this information:</FONT></P>
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     <TD width="35%"></TD>
     <TD width="33%"></TD></TR>
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     <TD noWrap align=left><B><FONT face=sans-serif size=1>By phone</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>On the fund&#146;s Website</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>At the SEC</FONT></B>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>1-800-852-0218</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>www.jhfunds.com</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>www.sec.gov</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>1-800-SEC-0330</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>SEC Public Reference Room</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
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</TD></TR>
<TR>
     <TD colSpan=3>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>You can also contact us:</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD noWrap align=left>&nbsp;</TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><B><FONT face=sans-serif size=1>Regular mail:</FONT></B>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Mellon Investor Services</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Newport Office Center VII</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>480 Washington Boulevard</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>Jersey City, NJ 07310</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=1>Month-end portfolio holdings are available at www.jhfunds.com.</FONT></P>
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     <TD width="95%"></TD>
     <TD width="4%">&nbsp;</TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=right><B><FONT face=sans-serif size=1>Annual report </FONT></B><FONT face=sans-serif size=1>| Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=right><FONT face=sans-serif size=2>53</FONT>&nbsp; </TD></TR></TABLE><BR>
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<IMG src="incomesecuritiestrustx50x1.jpg" border=0>
</P>
<BR>
<P align=left><FONT face=sans-serif size=1>1-800-852-0218</FONT><BR>
<FONT face=sans-serif size=1>1-800-231-5469 TDD</FONT><BR>
<FONT face=sans-serif size=1>1-800-843-0090 EASI-Line</FONT><BR>
<FONT face=sans-serif size=1>www.</FONT><FONT face=sans-serif size=1>jhfunds.</FONT><FONT face=sans-serif size=1>com</FONT><FONT face=sans-serif size=1></FONT></P>
<P align=left><FONT face=sans-serif size=2>PRESORTED</FONT><BR>
<FONT face=sans-serif size=2>STANDARD</FONT><BR>
<FONT face=sans-serif size=2>U.S. </FONT><FONT face=sans-serif size=2>POSTAGE</FONT><BR>
<FONT face=sans-serif size=2>PAID</FONT><BR>
<FONT face=sans-serif size=2>MIS</FONT></P>
<P align=left><FONT face=sans-serif size=1>P600A 10/08</FONT><BR>
<FONT face=sans-serif size=1>12/08</FONT></P>
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<P align=left><FONT face=sans-serif size=2>ITEM 2. CODE OF ETHICS.</FONT></P>
<P align=left><FONT face=sans-serif size=2>As of the end of the period, October 31, 2008, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the &#147;Senior Financial Officers&#148;). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.</FONT></P>
<P align=left><FONT face=sans-serif size=2>Charles L. Ladner is the audit committee financial expert and is &#147;independent&#148;, pursuant to general instructions on Form N-CSR Item 3.</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(a) Audit Fees<BR>
</FONT><FONT face=sans-serif size=2>The aggregate fees billed for professional services rendered by the principal accountant(s) for the audit of the registrant&#146;s annual financial statements or services that are normally provided by the accountant(s) in connection with statutory and regulatory filings or engagements amounted to $44,920 for the fiscal period ended October 31, 2008 (the registrant changed the fiscal year end to October 31) and $26,250 for the fiscal year ended December 31, 2007. These fees were billed to the registrant and were approved by the registrant&#146;s audit committee.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(b) Audit-Related Services<BR>
</FONT><FONT face=sans-serif size=2>Audit-related fees amounted to $18,645 for the fiscal period ended October 31, 2008 and $0 for the fiscal year ended December 31, 2007 billed to the registrant or to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant ("control affiliates").</FONT></P>
<P align=left><FONT face=sans-serif size=2>(c) Tax Fees<BR>
</FONT><FONT face=sans-serif size=2>The aggregate fees billed for professional services rendered by the principal accountant(s) for the tax compliance, tax advice and tax planning (&#147;tax fees&#148;) amounted to $3,500 for the fiscal period ended October 31, 2008 and $3,500 for the fiscal year ended December 31, 2007. The nature of the services comprising the tax fees was the review of the registrant&#146;s income tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant&#146;s audit committee. There were no tax fees billed to the control affiliates.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(d) All Other Fees<BR>
</FONT><FONT face=sans-serif size=2>The all other fees billed to the registrant for products and services provided by the principal accountant were $0 for the fiscal period ended October 31, 2008 and $3,000 for the fiscal year ended December 31, 2007. There were no other fees during the fiscal period ended October 31, 2008 and the fiscal year ended December 31, 2007 billed to control affiliates for products and services provided by the principal accountant. The nature of the services comprising the all other fees was related to the principal accountant&#146;s report on the registrant&#146;s Eligible Asset Coverage. These fees were approved by the registrant&#146;s audit committee.</FONT></P>
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<P align=left><FONT face=sans-serif size=2>(e)(1) Audit Committee Pre-Approval Policies and Procedures:</FONT></P>
<P align=left><FONT face=sans-serif size=2>The trust&#146;s Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the &#147;Auditor&#148;) relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.</FONT></P>
<P align=left><FONT face=sans-serif size=2>The trust&#146;s Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee&#146;s consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per instance/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per instance/per fund are subject to specific pre-approval by the Audit Committee.</FONT></P>
<P align=left><FONT face=sans-serif size=2>All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:</FONT></P>
<P align=left><FONT face=sans-serif size=2>Audit-Related Fees, Tax Fees and All Other Fees:<BR>
</FONT><FONT face=sans-serif size=2>There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(f) According to the registrant&#146;s principal accountant, for the fiscal period ended October 31, 2008, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(g) The aggregate non-audit fees billed by the registrant's accountant(s) for services rendered to the registrant and rendered to the registrant's control affiliates for each of the last two fiscal years of the registrant were $4,591,272 for the fiscal period ended October 31, 2008, and $1,553,823 for the fiscal year ended December 31, 2007.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(h) The audit committee of the registrant has considered the non-audit services provided by the registrant&#146;s principal accountant(s) to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant(s)' independence.</FONT></P>
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<P align=left><FONT face=sans-serif size=2>ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.</FONT></P>
<P align=left><FONT face=sans-serif size=2>The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:</FONT></P>
<P align=left><FONT face=sans-serif size=2>Dr. John A. Moore - Chairman</FONT><BR>
<FONT face=sans-serif size=2>Charles L. Ladner</FONT><BR>
<FONT face=sans-serif size=2>Patti McGill Peterson</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 6. SCHEDULE OF INVESTMENTS.</FONT></P>
<P align=left><FONT face=sans-serif size=2>Not applicable.</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.</FONT></P>
<P align=left><FONT face=sans-serif size=2>See attached exhibit "Proxy Voting and Procedures".</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Information about the portfolio managers</FONT></B></P>
<P align=left><B><FONT face=sans-serif size=2>Management Biographies and Fund ownership<BR>
</FONT></B><FONT face=sans-serif size=2>Below is an alphabetical list of the portfolio managers who share joint responsibility for the day-to-day investment management of the Fund. It provides a brief summary of their business careers over the past five years and their range of beneficial share ownership in the Fund as of October 31, 2008.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Barry H. Evans, CFA</FONT></B><BR>
<FONT face=sans-serif size=2>President, Chief Fixed Income Officer and Chief Operating Officer, MFC Global Investment</FONT><BR>
<FONT face=sans-serif size=2>Management (U.S.), LLC since 2005</FONT><BR>
<FONT face=sans-serif size=2>Senior Vice President, John Hancock Advisers LLC (1986&#150;2005)</FONT><BR>
<FONT face=sans-serif size=2>Began business career in 1986</FONT><BR>
<FONT face=sans-serif size=2>Joined fund team in 2002</FONT><BR>
<FONT face=sans-serif size=2>Fund ownership &#151; $10,001&#150;$50,000</FONT><BR>
<BR>
<B><FONT face=sans-serif size=2>Jeffrey N. Given, CFA</FONT></B><BR>
<FONT face=sans-serif size=2>Vice President, MFC Global Investment Management (U.S.), LLC since 2005</FONT><BR>
<FONT face=sans-serif size=2>Second Vice President, John Hancock Advisers LLC (1993&#150;2005)</FONT><BR>
<FONT face=sans-serif size=2>Began business career in 1993</FONT><BR>
<FONT face=sans-serif size=2>Joined fund team in 1999</FONT></P>
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<P align=left><FONT face=sans-serif size=2>Fund ownership &#151; $1&#150;$10,000</FONT><BR>
<BR>
<B><FONT face=sans-serif size=2>Howard C. Greene, CFA</FONT></B><BR>
<FONT face=sans-serif size=2>Senior Vice President, MFC Global Investment Management (U.S.), LLC since 2005</FONT><BR>
<FONT face=sans-serif size=2>Senior Vice President, John Hancock Advisers LLC (2002&#150;2005)</FONT><BR>
<FONT face=sans-serif size=2>Vice President at Sun Life Financial Services Company of Canada (1987&#150;2002)</FONT><BR>
<FONT face=sans-serif size=2>Began business career in 1979</FONT><BR>
<FONT face=sans-serif size=2>Joined fund team in 2005</FONT><BR>
<FONT face=sans-serif size=2>Fund ownership &#151; None</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Other Accounts the Portfolio Managers are Managing<BR>
</FONT></B><FONT face=sans-serif size=2>The table below indicates for each portfolio manager information about the accounts over which the portfolio manager has day-to-day investment responsibility. All information on the number of accounts and total assets in the table is as of October 31, 2008. For purposes of the table, &#147;Other Pooled Investment Vehicles&#148; may include investment partnerships and group trusts, and &#147;Other Accounts&#148; may include separate accounts for institutions or individuals, insurance company general or separate accounts, pension funds and other similar institutional accounts.</FONT></P>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="30%"></TD>
     <TD width="69%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=1>PORTFOLIO MANAGER</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=1>OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>Barry H. Evans, CFA</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Investment Companies: 5 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $2.6 billion.</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Pooled Investment Vehicles: None</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Accounts: 90 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $2.1 billion.</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>Jeffrey N. Given, CFA</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Investment Companies: 7 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $4.5 billion.</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Pooled Investment Vehicles: 2 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $82 million.</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Accounts: 17 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $3.6 billion.</FONT>&nbsp; </TD></TR>
<TR>
     <TD colSpan=2>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>Howard C. Greene, CFA</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Investment Companies: 3 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $1.2 billion.</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Pooled Investment Vehicles: 2 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $82 million.</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>Other Accounts: 17 accounts with assets of</FONT>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=left>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif size=2>approximately $3.6 billion.</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=2>Neither the Adviser or the Subadviser receives a fee based upon the investment performance of any of the accounts included under &#147;Other Accounts Managed by the Portfolio Managers&#148; in the table above.</FONT></P>
<P align=left><FONT face=sans-serif size=2>When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one account over another. For the reasons outlined below, the Fund does not believe that any material conflicts are likely to arise out of a</FONT></P>
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<P align=left><FONT face=sans-serif size=2>portfolio manager&#146;s responsibility for the management of the Fund as well as one or more other accounts. The Adviser and the Subadviser have adopted procedures, overseen by the Chief Compliance Officer, that are intended to monitor compliance with the policies referred to in the following paragraphs.</FONT></P>
<P align=left><FONT face=sans-serif size=2>&#149; The Subadviser has policies that require a portfolio manager to allocate investment opportunities in an equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives.</FONT></P>
<P align=left><FONT face=sans-serif size=2>&#149; When a portfolio manager intends to trade the same security for more than one account, the policies of the Subadviser generally require that such trades for the individual accounts are aggregated so each account receives the same price. Where not possible or may not result in the best possible price, the Subadviser will place the order in a manner intended to result in as favorable a price as possible for such client.</FONT></P>
<P align=left><FONT face=sans-serif size=2>&#149; The investment performance on specific accounts is not a factor in determining the portfolio manager&#146;s compensation. See &#147;Compensation of Portfolio Managers&#148; below. Neither the Adviser nor the Subadviser receives a performance-based fee with respect to other accounts managed by the Fund&#146;s portfolio managers.</FONT></P>
<P align=left><FONT face=sans-serif size=2>&#149; The Subadviser imposes certain trading restrictions and reporting requirements for accounts in which a portfolio manager or certain family members have a personal interest in order to confirm that such accounts are not favored over other accounts.</FONT></P>
<P align=left><FONT face=sans-serif size=2>&#149; The Subadviser seeks to avoid portfolio manager assignments with potentially conflicting situations. However, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one account to sell a portfolio security while another account continues to hold or increase the holding in such security.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Compensation of Portfolio Managers<BR>
</FONT></B><FONT face=sans-serif size=2>The Subadviser has adopted a system of compensation for portfolio managers and others involved in the investment process that is applied consistently among investment professionals. At the Subadviser, the structure of compensation of investment professionals is currently comprised of the following basic components: fixed base salary, and an annual investment bonus plan, as well as customary benefits that are offered generally to all full-time employees of the Subadviser. A limited number of senior investment professionals, who serve as officers of both the Subadviser and its parent company, may also receive options or restricted stock grants of common shares of Manulife Financial.</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.</FONT></P>
<P align=left><FONT face=sans-serif size=2>Not applicable.</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</FONT></P>
<P align=left><FONT face=sans-serif size=2>There were no material changes to previously disclosed John Hancock Funds &#150; Governance Committee Charter.</FONT></P>
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<P align=left><FONT face=sans-serif size=2>ITEM 11. CONTROLS AND PROCEDURES.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.</FONT></P>
<P align=left><FONT face=sans-serif size=2>ITEM 12. EXHIBITS.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(a)(1) Code of Ethics for Senior Financial Officers is attached.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(c)(1) Proxy Voting Policies and Procedures are attached.</FONT></P>
<P align=left><FONT face=sans-serif size=2>(c)(2) Submission of Matters to a Vote of Security Holders is attached. See attached "John Hancock Funds - Governance Committee Charter".</FONT></P>
<P align=left><FONT face=sans-serif size=2>(c)(3) Contact person at the registrant.</FONT></P>
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     <TD noWrap align=center><FONT face=sans-serif size=2>SIGNATURES</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=2>Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</FONT></P>
<P align=left><FONT face=sans-serif size=2>John Hancock Income Securities Trust</FONT><BR>
<BR>
<FONT face=sans-serif size=2>By: /s/ Keith F. Hartstein</FONT><BR>
<FONT face=sans-serif size=2>-------------------------------------</FONT><BR>
<FONT face=sans-serif size=2>Keith F. Hartstein</FONT><BR>
<FONT face=sans-serif size=2>President and Chief Executive Officer</FONT><BR>
<BR>
<FONT face=sans-serif size=2>Date: December 16, 2008</FONT></P>
<P align=left><FONT face=sans-serif size=2>Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.</FONT></P>
<P align=left><FONT face=sans-serif size=2>By: /s/ Keith F. Hartstein</FONT><BR>
<FONT face=sans-serif size=2>-------------------------------------</FONT><BR>
<FONT face=sans-serif size=2>Keith F. Hartstein</FONT><BR>
<FONT face=sans-serif size=2>President and Chief Executive Officer</FONT><BR>
<BR>
<FONT face=sans-serif size=2>Date: December 16, 2008</FONT><BR>
<BR>
<FONT face=sans-serif size=2>By: /s/ Charles A. Rizzo</FONT><BR>
<FONT face=sans-serif size=2>-------------------------------------</FONT><BR>
<FONT face=sans-serif size=2>Charles A. Rizzo</FONT><BR>
<FONT face=sans-serif size=2>Chief Financial Officer</FONT><BR>
<BR>
<FONT face=sans-serif size=2>Date: December 16, 2008</FONT></P>
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<DESCRIPTION>CERTIFICATION
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<P align="left">
<B><U><FONT size=2 face="sans-serif">CERTIFICATION</FONT></U></B></P>
<P align="left">
<FONT size=2 face="sans-serif">I, Keith F. Hartstein, certify that:</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">1. I have reviewed this report on Form N-CSR of the John Hancock Income Securities Trust (the &#147;registrant&#148;);</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within
90 days prior to the filing date of this report based on such evaluation; and</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize, and report financial information; and</FONT></P>

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<FONT size=2 face="sans-serif">(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">By: /s/ Keith F. Hartstein</FONT><BR>
<FONT size=2 face="sans-serif">-------------------------------------</FONT><BR>
<FONT size=2 face="sans-serif">Keith F. Hartstein</FONT><BR>
<FONT size=2 face="sans-serif">President and Chief Executive Officer</FONT><BR>
<BR>
<FONT size=2 face="sans-serif">Date: December 16, 2008</FONT></P>

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<P align="left">
<B><U><FONT size=2 face="sans-serif">CERTIFICATION</FONT></U></B></P>
<P align="left">
<FONT size=2 face="sans-serif">I, Charles A. Rizzo, certify that:</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">1. I have reviewed this report on Form N-CSR of the John Hancock Income Securities Trust (the &#147;registrant&#148;);</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net
assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal
control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within
90 days prior to the filing date of this report based on such evaluation; and</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize, and report financial information; and</FONT></P>

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<FONT size=2 face="sans-serif">(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.</FONT></P>
<P align="left">
<FONT size=2 face="sans-serif">By: /s/ Charles A. Rizzo</FONT><BR>
<FONT size=2 face="sans-serif">-------------------------------------</FONT><BR>
<FONT size=2 face="sans-serif">Charles A. Rizzo</FONT><BR>
<FONT size=2 face="sans-serif">Chief Financial Officer</FONT><BR>
<BR>
<FONT size=2 face="sans-serif">Date: December 16, 2008</FONT></P>

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<TYPE>EX-99.906 CERT
<SEQUENCE>3
<FILENAME>c_incomesecuritiestrustxnnos.htm
<DESCRIPTION>CERTIFICATION 906
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<P align=center><B><FONT face=sans-serif size=2>Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of <BR>
the Sarbanes-Oxley Act of 2002</FONT></B></P>
<P align=left><FONT face=sans-serif size=2>In connection with the attached Report of John Hancock Income Securities Trust (the &#147;registrant&#148;) on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify that, to the best of such officer's knowledge:</FONT></P>
<P align=left><FONT face=sans-serif size=2>1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</FONT></P>
<P align=left><FONT face=sans-serif size=2>2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report.</FONT></P>
<P align=left><FONT face=sans-serif size=2>/s/ Keith F. Hartstein</FONT><BR>
<FONT face=sans-serif size=2>-------------------------------------</FONT><BR>
<FONT face=sans-serif size=2>Keith F. Hartstein</FONT><BR>
<FONT face=sans-serif size=2>President and Chief Executive Officer</FONT><BR>
<BR>
<FONT face=sans-serif size=2>Dated: December 16, 2008</FONT><BR>
<BR>
<FONT face=sans-serif size=2>/s/ Charles A. Rizzo</FONT><BR>
<FONT face=sans-serif size=2>-------------------------------------</FONT><BR>
<FONT face=sans-serif size=2>Charles A. Rizzo</FONT><BR>
<FONT face=sans-serif size=2>Chief Financial Officer</FONT><BR>
<BR>
<FONT face=sans-serif size=2>Dated: December 16, 2008</FONT></P>
<P align=left><FONT face=sans-serif size=2>A signed original of this written statement, required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.</FONT></P>
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<DOCUMENT>
<TYPE>EX-99.CODE ETH
<SEQUENCE>4
<FILENAME>d_codeofethics110508.htm
<DESCRIPTION>CODE OF ETHICS
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     <TD align=center><B><FONT face=sans-serif>J</FONT></B><B><FONT face=sans-serif size=2>OHN </FONT></B><B><FONT face=sans-serif>H</FONT></B><B><FONT face=sans-serif size=2>ANCOCK </FONT></B><B><FONT face=sans-serif>T</FONT></B><B><FONT face=sans-serif size=2>RUST</FONT></B> </TD></TR>
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     <TD align=center><B><FONT face=sans-serif>J</FONT></B><B><FONT face=sans-serif size=2>OHN </FONT></B><B><FONT face=sans-serif>H</FONT></B><B><FONT face=sans-serif size=2>ANCOCK </FONT></B><B><FONT face=sans-serif>F</FONT></B><B><FONT face=sans-serif size=2>UNDS</FONT></B> </TD></TR>
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     <TD align=center><B><FONT face=sans-serif>J</FONT></B><B><FONT face=sans-serif size=2>OHN </FONT></B><B><FONT face=sans-serif>H</FONT></B><B><FONT face=sans-serif size=2>ANCOCK </FONT></B><B><FONT face=sans-serif>F</FONT></B><B><FONT face=sans-serif size=2>UNDS </FONT></B><B><FONT face=sans-serif>II</FONT></B> </TD></TR>
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     <TD align=center><B><FONT face=sans-serif>J</FONT></B><B><FONT face=sans-serif size=2>OHN </FONT></B><B><FONT face=sans-serif>H</FONT></B><B><FONT face=sans-serif size=2>ANCOCK </FONT></B><B><FONT face=sans-serif>F</FONT></B><B><FONT face=sans-serif size=2>UNDS </FONT></B><B><FONT face=sans-serif>III</FONT></B> </TD></TR>
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     <TD align=center><B><U><FONT face=sans-serif>S</FONT></U></B><B><U><FONT face=sans-serif size=2>ARBANES</FONT></U></B><B><U><FONT face=sans-serif>-O</FONT></U></B><B><U><FONT face=sans-serif size=2>XLEY </FONT></U></B><B><U><FONT face=sans-serif>C</FONT></U></B><B><U><FONT face=sans-serif size=2>ODE OF </FONT></U></B><B><U><FONT face=sans-serif>E</FONT></U></B><B><U><FONT face=sans-serif size=2>THICS</FONT></U></B> </TD></TR>
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     <TD align=center><B><U><FONT face=sans-serif size=2>FOR</FONT></U></B> </TD></TR>
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     <TD noWrap align=center><B><U><FONT face=sans-serif>P</FONT></U></B><B><U><FONT face=sans-serif size=2>RINCIPAL </FONT></U></B><B><U><FONT face=sans-serif>E</FONT></U></B><B><U><FONT face=sans-serif size=2>XECUTIVE </FONT></U></B><B><U><FONT face=sans-serif>&amp; P</FONT></U></B><B><U><FONT face=sans-serif size=2>RINCIPAL </FONT></U></B><B><U><FONT face=sans-serif>F</FONT></U></B><B><U><FONT face=sans-serif size=2>INANCIAL </FONT></U></B><B><U><FONT face=sans-serif>O</FONT></U></B><B><U><FONT face=sans-serif size=2>FFICERS</FONT></U></B>&nbsp; </TD></TR></TABLE><BR>
<P align=left><B><FONT face=sans-serif>I. Covered Officers/Purpose of the Code</FONT></B></P>
<P align=left><FONT face=sans-serif>This code of ethics (this &#147;Code&#148;) for John Hancock Trust, John Hancock Funds</FONT><SUP><FONT face=sans-serif>1 </FONT></SUP><FONT face=sans-serif>, John Hancock Funds II and John Hancock Funds III, each a registered management investment company under the Investment Company Act of 1940, as amended (&#147;1940 Act&#148;), which may issue shares in separate and distinct series (each investment company and series thereunder to be hereinafter referred to as a &#147;Fund&#148;), applies to each Fund&#146;s Principal Executive Officer (&#147;President&#148;) and Principal Financial Officer (&#147;Chief Financial Officer&#148;) (the &#147;Registrant&#146;s Executive Officers&#148; or &#147;Executive Officers&#148; as set forth in </FONT><U><FONT face=sans-serif>Exhibit A</FONT></U><FONT face=sans-serif>) for the purpose of promoting:</FONT></P>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>honest and ethical conduct, including the ethical handling of actual or apparent conflicts</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
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     <TD noWrap align=left><FONT face=sans-serif>of interest between personal and professional relationships;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>full, fair, accurate, timely and understandable disclosure in reports and documents that</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>the Fund files with, or submits to, the Securities and Exchange Commission (&#147;SEC&#148;)</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>and in other public communications made by the Fund;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>compliance with applicable laws and governmental rules and regulations;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>the prompt internal reporting of violations of the Code to an appropriate person or</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>persons identified in the Code; and</FONT>&nbsp; </TD></TR>
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     <TD></TD>
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     <TD noWrap align=left><FONT face=sans-serif>accountability for adherence to the Code.</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><SUP><FONT face=sans-serif size=2>1 </FONT></SUP><FONT face=sans-serif size=2>John Hancock Funds includes the following trusts: John Hancock Bank and Thrift Opportunity Fund; John Hancock Bond Trust; John Hancock California Tax-Free Income Fund; John Hancock Capital Series; John Hancock Current Interest; John Hancock Equity Trust; John Hancock Income Securities Trust; John Hancock Investment Trust; John Hancock Investment Trust II; John Hancock Investment Trust III; John Hancock Investors Trust; John Hancock Municipal Securities Trust; John Hancock Patriot Premium Dividend Fund II; Trust; John Hancock Preferred Income Fund; John Hancock Preferred Income Fund II; John Hancock Preferred Income Fund III; John Hancock Series Trust; John Hancock Sovereign Bond Fund; John Hancock Strategic Series; John Hancock Tax-Exempt Series Fund; John Hancock World Fund; John Hancock Tax-Advantaged Dividend Income Fund and John Hancock Tax-Advantaged Global Shareholder Yield Fund.</FONT></P>
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<P align=left><FONT face=sans-serif>Each of the Registrant&#146;s Executive Officers should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.</FONT></P>
<P align=left><B><FONT face=sans-serif>II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest Overview</FONT></B></P>
<P align=left><FONT face=sans-serif>A &#147;conflict of interest&#148; occurs when an Executive Officer&#146;s private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Registrant&#146;s Executive Officers, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between the Executive Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the &#147;Investment Company Act&#148;) and the Investment Advisers Act of 1940, as amended (the &#147;Investment Advisers Act&#148;). For example, Executive Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as &#147;affiliated persons&#148; of the Fund. Each of the Registrant&#146;s Executive Officers is a
n officer or employee of the investment adviser or a service provider (&#147;Service Provider&#148;) to the Fund. The Fund&#146;s, the investment adviser&#146;s and the Service Provider&#146;s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.</FONT></P>
<P align=left><FONT face=sans-serif>Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Fund and the investment adviser and the Service Provider of which the Executive Officers are also officers or employees. As a result, this Code recognizes that the Registrant&#146;s Executive Officers will, in the normal course of their duties (whether formally for the Fund, for the investment adviser or for the Service Provider), be involved in establishing policies and implementing decisions which will have different effects on the investment adviser, the Service Provider and the Fund. The participation of the Executive Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and the Service Provider and is consistent with the performance by the Executive Officers of their duties as officers of the Fund. Thus, if such participation is performed in confor
mity with the provisions of the Investment Company Act and the Investment Advisers Act, it will be deemed to have been handled ethically. In addition, it is recognized by the Fund&#146;s Board of Trustees/Directors (the &#147;Board&#148;) that the Executive Officers may also be officers or employees of one or more other investment companies covered by other Codes.</FONT></P>
<P align=left><FONT face=sans-serif>Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but the Registrant&#146;s Executive Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of an Executive Officer should not be placed improperly before the interest of the Fund.</FONT></P>
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     <TD noWrap align=center><FONT face=sans-serif>*</FONT>&nbsp; </TD>
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<P align=left><FONT face=sans-serif>Each Covered Officer must:</FONT></P>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>not use his/her personal influence or personal relationships improperly to influence</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
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     <TD noWrap align=left><FONT face=sans-serif>investment decisions or financial reporting by the Fund whereby the Executive Officer</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>would benefit personally to the detriment of the Fund;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>not cause the Fund to take action, or fail to take action, for the individual personal</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>benefit of the Executive Officer rather than for the benefit of the Fund; and</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>not use material non-public knowledge of portfolio transactions made or contemplated</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>for the Fund to trade personally or cause others to trade personally in contemplation of</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>the market effect of such transactions.</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif>Additionally, conflicts of interest may arise in other situations, the propriety of which may be discussed, if material, with the Fund&#146;s Chief Compliance Officer (&#147;CCO&#148;). Examples of these include:</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif>service as a director/trustee on the board of any public or private company;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>the receipt of any non-nominal gifts;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>the receipt of any entertainment from any company with which the Fund has current or</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
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     <TD noWrap align=left><FONT face=sans-serif>prospective business dealings unless such entertainment is business-related, reasonable</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
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     <TD noWrap align=left><FONT face=sans-serif>in cost, appropriate as to time and place, and not so frequent as to raise any question of</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>impropriety (or other formulation as the Fund already uses in another code of conduct);</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>any ownership interest in, or any consulting or employment relationship with, any of</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>the Fund&#146;s service providers, other than its investment adviser, any sub-adviser,</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>principal underwriter, administrator or any affiliated person thereof; and</FONT>&nbsp; </TD></TR>
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     <TD>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>a direct or indirect financial interest in commissions, transaction charges or spreads paid</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>by the Fund for effecting portfolio transactions or for selling or redeeming shares other</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>than an interest arising from the Executive Officer&#146;s employment, such as compensation</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>or equity ownership.</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><B><FONT face=sans-serif>III. Disclosure &amp; Compliance</FONT></B></P>
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     <TD noWrap align=left><FONT face=sans-serif>Each Executive Officer should familiarize himself or herself with the disclosure</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>requirements generally applicable to the Fund;</FONT>&nbsp; </TD></TR>
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     <TD></TD>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>Each Executive Officer should not knowingly misrepresent, or cause others to</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>misrepresent, facts about the Fund to others, whether within or outside the Fund,</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>including to the Fund&#146;s directors and auditors, and to governmental regulators and self-</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>regulatory organizations;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658;</FONT></TD>
     <TD noWrap align=left><FONT face=sans-serif>Each Executive Officer should, to the extent appropriate within his/her area of</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>responsibility, consult with other officers and employees of the Fund and the Fund&#146;s</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left></TD>
     <TD noWrap align=left><FONT face=sans-serif>adviser or any sub-adviser with the goal of promoting full, fair, accurate, timely and</FONT>&nbsp; </TD></TR></TABLE><BR>
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     <TD noWrap align=left><FONT face=sans-serif>understandable disclosure in the reports and documents the Fund files with, or submits</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>to, the SEC and in other public communications made by the Fund; and</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>It is the responsibility of each Executive Officer to promote compliance with the</FONT>&nbsp; </TD></TR>
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<P align=left><B><FONT face=sans-serif>IV. Reporting &amp; Accountability</FONT></B></P>
<P align=left><FONT face=sans-serif>Each Executive Officer must:</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif>upon adoption of the Code (or thereafter as applicable, upon becoming an Executive</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>Officer), affirm in writing to the Fund&#146;s CCO that he/she has received, read, and</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>understands the Code;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>annually thereafter affirm to the Fund&#146;s CCO that he/she has complied with the</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>requirements of the Code;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>not retaliate against any employee or Executive Officer or their affiliated persons for</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>reports of potential violations that are made in good faith;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>notify the Fund&#146;s CCO promptly if he/she knows of any violation of this Code (Note:</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>failure to do so is itself a violation of this Code); and</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>report at least annually any change in his/her affiliations from the prior year.</FONT>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif>The Fund&#146;s CCO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by the Principal Executive Officer will be considered by the Fund&#146;s Board or the Compliance Committee thereof (the &#147;Committee&#148;).</FONT></P>
<P align=left><FONT face=sans-serif>The Fund will follow these procedures in investigating and enforcing this Code:</FONT></P>
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     <TD noWrap align=left><FONT face=sans-serif>the Fund&#146;s CCO will take all appropriate action to investigate any potential violations</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>reported to him/her;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>if, after such investigation, the CCO believes that no violation has occurred, the CCO is</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>not required to take any further action;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>any matter that the CCO believes is a violation will be reported to the Board or, if</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>applicable, Compliance Committee;</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>if the Board or, if applicable, Compliance Committee concurs that a violation has</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>occurred, the Board, either upon its determination of a violation or upon</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>recommendation of the Compliance Committee, if applicable, will consider appropriate</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>action, which may include review of, and appropriate modifications to, applicable</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>policies and procedures; notification to appropriate personnel of the Service Provider or</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>the investment adviser or its board; or a recommendation to dismiss the Registrant&#146;s</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>Executive Officer;</FONT>&nbsp; </TD></TR></TABLE><BR>
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     <TD noWrap align=left><FONT face=sans-serif>the Board, or if applicable the Compliance Committee, will be responsible for granting</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>waivers, as appropriate; and</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif>any changes to or waivers of this Code will, to the extent required, be disclosed as</FONT>&nbsp; </TD></TR>
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<P align=left><B><FONT face=sans-serif>V. Other Policies &amp; Procedures</FONT></B></P>
<P align=left><FONT face=sans-serif>This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Fund, the Fund&#146;s adviser, any sub-adviser, principal underwriter or other service providers govern or purport to govern the behavior or activities of the Registrant&#146;s Executive Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Fund&#146;s and its investment adviser&#146;s codes of ethics under Rule 204A-1 under the Investment Advisers Act and Rule 17j-1 under the Investment Company Act, respectively, are separate requirements applying to the Registrant&#146;s Executive Officers and others, and are not part of this Code.</FONT></P>
<P align=left><B><FONT face=sans-serif>VI. Amendments</FONT></B></P>
<P align=left><FONT face=sans-serif>Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Fund&#146;s Board, including a majority of independent directors.</FONT></P>
<P align=left><B><FONT face=sans-serif>VII. Confidentiality</FONT></B></P>
<P align=left><FONT face=sans-serif>All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Fund&#146;s Board and its counsel, the investment adviser and the relevant Service Providers.</FONT></P>
<P align=left><B><FONT face=sans-serif>VIII. Internal Use</FONT></B></P>
<P align=left><FONT face=sans-serif>The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of the Fund, as to any fact, circumstance, or legal conclusion.</FONT></P>
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     <TD align=center><B><U><FONT face=sans-serif>Exhibit A</FONT></U></B> </TD></TR>
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     <TD noWrap align=center><B><FONT face=sans-serif>Persons Covered by this Code of Ethics</FONT></B>&nbsp; </TD></TR>
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     <TD align=center><B><FONT face=sans-serif>(As of June 2007)</FONT></B> </TD></TR></TABLE><BR>
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     <TD noWrap align=left><B><FONT face=sans-serif>John Hancock Trust</FONT></B>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif><FONT face=Arial size=1>&#9658;</FONT> </FONT><FONT face=sans-serif>Principal Executive Officer and President &#150; Keith Hartstein</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=Arial><FONT size=1>&#9658;</FONT> </FONT><FONT face=sans-serif>Principal Financial Officer and Chief Financial Officer &#150; Charles Rizzo</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><B><FONT face=sans-serif>John Hancock Funds</FONT></B>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif><FONT face=Arial size=1>&#9658;</FONT> </FONT><FONT face=sans-serif>Principal Executive Officer and President &#150; Keith Hartstein</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif><FONT face=Arial size=1>&#9658;</FONT> </FONT><FONT face=sans-serif>Principal Financial Officer and Chief Financial Officer &#150; Charles Rizzo</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><B><FONT face=sans-serif>John Hancock Funds II</FONT></B>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif><FONT face=Arial size=1>&#9658;</FONT> </FONT><FONT face=sans-serif>Principal Executive Officer and President &#150; Keith Hartstein</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=Arial size=1>&#9658; </FONT><FONT face=sans-serif>Principal Financial Officer and Chief Financial Officer &#150; Charles Rizzo</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><B><FONT face=sans-serif>John Hancock Funds III</FONT></B>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif><FONT face=Arial size=1>&#9658;</FONT> </FONT><FONT face=sans-serif>Principal Executive Officer and President &#150; Keith Hartstein</FONT>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif><FONT face=Arial size=1>&#9658;</FONT> </FONT><FONT face=sans-serif>Principal Financial Officer and Chief Financial Officer &#150; Charles Rizzo</FONT>&nbsp; </TD></TR></TABLE><BR>
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<TYPE>EX-99
<SEQUENCE>5
<FILENAME>e_govecommcharter120908.htm
<DESCRIPTION>GOVERNANCE COMMITTEE CHARTER
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     <TD align=center><B><FONT face=sans-serif size=2>JOHN HANCOCK FUNDS</FONT></B> </TD></TR>
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     <TD noWrap align=center><B><FONT face=sans-serif size=2>NOMINATING, GOVERNANCE AND ADMINISTRATION COMMITTEE CHARTER</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<P align=left><FONT face=sans-serif size=2>A. </FONT><U><FONT face=sans-serif size=2>Composition</FONT></U><FONT face=sans-serif size=2>. The Nominating, Governance and Administration Committee (the &#147;Committee&#148;) shall be composed entirely of Trustees who are &#147;independent&#148; as defined in the rules of the New York Stock Exchange (&#147;NYSE&#148;) or any other exchange, as applicable, and are not &#147;interested persons&#148; as defined in the Investment Company Act of 1940 of any of the funds, or of any fund&#146;s investment adviser or principal underwriter (the &#147;Independent Trustees&#148;) who are designated for membership from time to time by the Board of Trustees. The Chairman of the Board shall be a member of the Committee.</FONT></P>
<P align=left><FONT face=sans-serif size=2>B. </FONT><U><FONT face=sans-serif size=2>Overview</FONT></U><FONT face=sans-serif size=2>. The overall charter of the Committee is to make determinations and recommendations to the Board on issues related to the composition and operation of the Board and corporate governance matters applicable to the Independent Trustees, as well as issues related to complex-wide matters and practices designed to facilitate uniformity and administration of the Board's oversight of the funds, and to discharge such additional duties, responsibilities and functions as are delegated to it from time to time.</FONT></P>
<P align=left><FONT face=sans-serif size=2>C. </FONT><U><FONT face=sans-serif size=2>Specific Responsibilities</FONT></U><FONT face=sans-serif size=2>. The Committee shall have the following duties and powers, to be exercised at such times and in such manner as the Committee shall deem necessary or appropriate:</FONT></P>
<P align=left><FONT face=sans-serif size=2>1. To consider and determine nominations of individuals to serve as Trustees.</FONT></P>
<P align=left><FONT face=sans-serif size=2>2. To consider, as it deems necessary or appropriate, the criteria for persons to fill existing or newly created Trustee vacancies. The Committee shall use the criteria and principles set forth in Annex A to guide its Trustee selection process.</FONT></P>
<P align=left><FONT face=sans-serif size=2>3. To consider and determine the amount of compensation to be paid by the funds to the Independent Trustees, including incremental amounts, if any, payable to Committee Chairmen, and to address compensation-related matters. The Chairman of the Board has been granted the authority to approve special compensation to Independent Trustees in recognition of any significant amount of additional time and service to the funds required of them, subject to ratification of any such special compensation by the Committee at the next regular meeting of the Committee.</FONT></P>
<P align=left><FONT face=sans-serif size=2>4. To consider and determine the duties and compensation of the Chairman of the Board.</FONT></P>
<P align=left><FONT face=sans-serif size=2>5. To consider and recommend changes to the Board regarding the size, structure, and composition of the Board.</FONT></P>
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<P align=left><FONT face=sans-serif size=2>6. To evaluate, from time to time, and determine changes to the retirement policies for the Independent Trustees, as appropriate.</FONT></P>
<P align=left><FONT face=sans-serif size=2>7. To develop and recommend to the Board, if deemed desirable, guidelines for corporate governance (&#147;Corporate Governance Guidelines&#148;) for the funds that take into account the rules of the NYSE and any applicable law or regulation, and to periodically review and assess the Corporate Governance Guidelines and recommend any proposed changes to the Board for approval.</FONT></P>
<P align=left><FONT face=sans-serif size=2>8. To monitor all expenditures and practices of the Board or the Committees or the Independent Trustees not otherwise incurred and/or monitored by a particular Committee, including, but not limited to: D&amp;O insurance and fidelity bond coverage and costs; association dues, including Investment Company Institute membership dues; meeting expenditures and policies relating to reimbursement of travel expenses and expenses associated with offsite meetings; expenses and policies associated with Trustee attendance at educational or informational conferences; and publication expenses.</FONT></P>
<P align=left><FONT face=sans-serif size=2>9. To consider, evaluate and make recommendations and necessary findings regarding independent legal counsel and any other advisers, experts or consultants, that may be engaged by the Board of Trustees, by the Trustees who are not &#147;interested persons&#148; as defined in the Investment Company Act of 1940 of any of the funds or any fund&#146;s investment adviser or principal underwriter, or by the Committee, from time to time, other than as may be engaged directly by another Committee.</FONT></P>
<P align=left><FONT face=sans-serif size=2>10. To periodically review the Board&#146;s committee structure and the charters of the Board&#146;s committees, and recommend to the Board of Trustees changes to the committee structure and charters as it deems appropriate.</FONT></P>
<P align=left><FONT face=sans-serif size=2>11. To coordinate and administer an annual self-evaluation of the Board, which will include, at a minimum, a review of its effectiveness in overseeing the number of funds in the fund complex and the effectiveness of its committee structure.</FONT></P>
<P align=left><FONT face=sans-serif size=2>12. To report its activities to Board of Trustees and to make such recommendations with respect to the matters described above and other matters as the Committee may deem necessary or appropriate.</FONT></P>
<P align=left><FONT face=sans-serif size=2>D. </FONT><U><FONT face=sans-serif size=2>Additional Responsibilities</FONT></U><FONT face=sans-serif size=2>. The Committee will also perform other tasks assigned to it from time to time by the Chairman of the Board or by the Board of Trustees, and will report findings and recommendations to the Board of Trustees, as appropriate.</FONT></P>
<P align=left><FONT face=sans-serif size=2>E. </FONT><U><FONT face=sans-serif size=2>Governance</FONT></U><FONT face=sans-serif size=2>. One member of the Committee shall be appointed as chair. The chair shall be responsible for leadership of the Committee, including scheduling meetings or</FONT></P>
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<P align=left><FONT face=sans-serif size=2>reviewing and approving the schedule for them, preparing agendas or reviewing and approving them before meetings, and making reports to the Board of Trustees, as appropriate.</FONT></P>
<P align=left><FONT face=sans-serif size=2>F. </FONT><U><FONT face=sans-serif size=2>Miscellaneous</FONT></U><FONT face=sans-serif size=2>. The Committee shall meet as often as it deems appropriate, with or without management, as circumstances require. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to retain special counsel and other advisers, experts or consultants, at the funds&#146; expense, as it determines necessary to carry out its duties. The Committee shall have direct access to such officers of and service providers to the funds as it deems desirable.</FONT></P>
<P align=left><FONT face=sans-serif size=2>G. </FONT><U><FONT face=sans-serif size=2>Evaluation</FONT></U><FONT face=sans-serif size=2>. At least annually, the Committee shall evaluate its own performance, including whether the Committee is meeting frequently enough to discharge its responsibilities appropriately.</FONT></P>
<P align=left><FONT face=sans-serif size=2>H. </FONT><U><FONT face=sans-serif size=2>Review</FONT></U><FONT face=sans-serif size=2>. The Committee shall review this Charter periodically and recommend such changes to the Board of Trustees as it deems desirable.</FONT></P>
<P align=left><FONT face=sans-serif size=2>Last revised: December 9, 2008</FONT></P>
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<P align=left><FONT face=sans-serif size=2>ANNEX A</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>General Criteria</FONT></B></P>
<P align=left><FONT face=sans-serif size=2>1. Nominees should have a reputation for integrity, honesty and adherence to high ethical standards.</FONT></P>
<P align=left><FONT face=sans-serif size=2>2. Nominees should have demonstrated business acumen, experience and ability to exercise sound judgments in matters that relate to the current and long-term objectives of the funds and should be willing and able to contribute positively to the decision-making process of the funds.</FONT></P>
<P align=left><FONT face=sans-serif size=2>3. Nominees should have a commitment to understand the funds, and the responsibilities of a trustee/director of an investment company and to regularly attend and participate in meetings of the Board and its committees.</FONT></P>
<P align=left><FONT face=sans-serif size=2>4. Nominees should have the ability to understand the sometimes conflicting interests of the various constituencies of the funds, including shareholders and the management company, and to act in the interests of all shareholders.</FONT></P>
<P align=left><FONT face=sans-serif size=2>5. Nominees should not have, nor appear to have, a conflict of interest that would impair their ability to represent the interests of all the shareholders and to fulfill the responsibilities of a director/trustee.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Application of Criteria to Existing Trustees</FONT></B></P>
<P align=left><FONT face=sans-serif size=2>The renomination of existing Trustees should not be viewed as automatic, but should be based on continuing qualification under the criteria set forth above. In addition, the Nominating, Governance and Administration Committee (the &#147;Committee&#148;) shall consider the existing Trustee&#146;s performance on the Board and any committee.</FONT></P>
<P align=left><B><FONT face=sans-serif size=2>Review of Shareholder Nominations</FONT></B></P>
<P align=left><FONT face=sans-serif size=2>Any shareholder nomination must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934 in order to be considered by the Committee. In evaluating a nominee recommended by a shareholder, the Committee, in addition to the criteria discussed above, may consider the objectives of the shareholder in submitting that nomination and whether such objectives are consistent with the interests of all shareholders. If the Board determines to include a shareholder&#146;s candidate among the slate of its designated nominees, the candidate&#146;s name will be placed on the funds&#146; proxy card. If the Board determines not to include such candidate among its designated nominees, and the shareholder has satisfied the requirements of Rule 14a-8, the shareholder&#146;s candidate will be</FONT></P>
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<P align=left><FONT face=sans-serif size=2>treated as a nominee of the shareholder who originally nominated the candidate. In that case, the candidate will not be named on the proxy card distributed with the funds&#146; proxy statement.</FONT></P>
<P align=left><FONT face=sans-serif size=2>As long as an existing Independent Trustee continues, in the opinion of the Committee, to satisfy the criteria listed above, the Committee generally would favor the re-nomination of an existing Trustee rather than a new candidate. Consequently, while the Committee will consider nominees recommended by shareholders to serve as trustees, the Committee may only act upon such recommendations if there is a vacancy on the Board, or the Committee determines that the selection of a new or additional Trustee is in the best interests of the fund. In the event that a vacancy arises or a change in Board membership is determined to be advisable, the Committee will, in addition to any shareholder recommendations, consider candidates identified by other means, including candidates proposed by members of the Committee. The Committee may retain a consultant to assist the Committee in a search for a qualified candidate.</FONT></P>
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<DESCRIPTION>PROXY VOTING POLICIES
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     <TD align=center><B><FONT face=sans-serif>JOHN HANCOCK FUNDS</FONT></B> </TD></TR>
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     <TD noWrap align=center><B><FONT face=sans-serif>PROXY VOTING POLICIES AND PROCEDURES</FONT></B>&nbsp; </TD></TR></TABLE><BR>
<P align=left><B><FONT face=sans-serif>POLICY:</FONT></B></P>
<P align=left><B><FONT face=sans-serif>General</FONT></B></P>
<P align=left><FONT face=sans-serif>The Board of Trustees (the &#147;Board&#148;) of each registered investment company in the John Hancock family of funds listed on Schedule A (collectively, the &#147;Trust&#148;), including a majority of the Trustees who are not &#147;interested persons&#148; (as defined in the Investment Company Act of 1940, as amended (the &#147;1940 Act&#148;)) of the Trust (the &#147;Independent Trustees&#148;), adopts these proxy voting policies and procedures.</FONT></P>
<P align=left><FONT face=sans-serif>Each fund of the Trust or any other registered investment company (or series thereof) (each, a &#147;fund&#148;) is required to disclose its proxy voting policies and procedures in its registration statement and, pursuant to Rule 30b1-4 under the 1940 Act, file annually with the Securities and Exchange Commission and make available to shareholders its actual proxy voting record. In this regard, the Trust Policy is set forth below.</FONT></P>
<P align=left><B><FONT face=sans-serif>Delegation of Proxy Voting Responsibilities</FONT></B></P>
<P align=left><FONT face=sans-serif>It is the policy of the Trust to delegate the responsibility for voting proxies relating to portfolio securities held by a fund to the fund&#146;s investment adviser (&#147;adviser&#148;) or, if the fund&#146;s adviser has delegated portfolio management responsibilities to one or more investment subadviser(s), to the fund&#146;s subadviser(s), subject to the Board&#146;s continued oversight. The subadviser for each fund shall vote all proxies relating to securities held by each fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each subadviser in conformance with Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (the &#147;Advisers Act&#148;).</FONT></P>
<P align=left><FONT face=sans-serif>Except as noted below under Material Conflicts of Interest, the Trust Policy with respect to a fund shall incorporate that adopted by the fund&#146;s subadviser with respect to voting proxies held by its clients (the &#147;Subadviser Policy&#148;). Each Subadviser Policy, as it may be amended from time to time, is hereby incorporated by reference into the Trust Policy. Each subadviser to a fund is directed to comply with these policies and procedures in voting proxies relating to portfolio securities held by a fund, subject to oversight by the fund&#146;s adviser and by the Board. Each adviser to a fund retains the responsibility, and is directed, to oversee each subadviser&#146;s compliance with these policies and procedures, and to adopt and implement such additional policies and procedures as it deems necessary or appropriate to discharge its oversight responsibility. Additionally, the Trust&#146;s Chief Compliance Officer (&#147;CCO&#148;) shall conduct such monitoring
 and supervisory activities as the CCO or the Board deems necessary or appropriate in order to appropriately discharge the CCO&#146;s role in overseeing the subadvisers&#146; compliance with these policies and procedures.</FONT></P>
<P align=left><FONT face=sans-serif>The delegation by the Board of the authority to vote proxies relating to portfolio securities of the funds is entirely voluntary and may be revoked by the Board, in whole or in part, at any time.</FONT></P>
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<P align=left><B><FONT face=sans-serif>Voting Proxies of Underlying Funds of a Fund of Funds</FONT></B></P>
<P align=left><FONT face=sans-serif>With respect to voting proxies relating to the securities of an underlying fund held by the Trust&#146;s fund of funds in reliance on any one of Sections 12(d)(1)(E), (F) or (G) of the Investment Company Act of 1940, as amended, or to the extent disclosed in the Trust&#146;s registration statement, the subadviser for the fund of funds, or the Trust, will vote proxies in the same proportion as the vote of all other holders of such underlying fund securities, unless the Trust elects to seek voting instructions from the shareholders of the fund of funds, in which case the subadviser, or the Trust, will vote proxies in the same proportion as the instructions timely received from shareholders of the Trust&#146;s fund of funds.</FONT></P>
<P align=left><B><FONT face=sans-serif>Material Conflicts of Interest</FONT></B></P>
<P align=left><FONT face=sans-serif>If: (1) a subadviser to a fund becomes aware that a vote presents a material conflict between the interests of: (a) shareholders of the fund; and (b) the fund&#146;s adviser, subadviser, principal underwriter, or any of their affiliated persons, and (2) the subadviser does not propose to vote on the particular issue in the manner prescribed by its Subadviser Policy or the material conflict of interest procedures set forth in its Subadviser Policy are otherwise triggered, then the subadviser will follow the material conflict of interest procedures set forth in its Subadviser Policy when voting such proxies.</FONT></P>
<P align=left><FONT face=sans-serif>If a Subadviser Policy provides that in the case of a material conflict of interest between fund shareholders and another party, the subadviser will ask the Board to provide voting instructions, the subadviser shall vote the proxies, in its discretion, as recommended by an independent third party, in the manner prescribed by its Subadviser Policy or abstain from voting the proxies.</FONT></P>
<P align=left><B><FONT face=sans-serif>Securities Lending Program</FONT></B></P>
<P align=left><FONT face=sans-serif>Certain of the funds participate in a securities lending program with the Trust through an agent lender. When a fund&#146;s securities are out on loan, they are transferred into the borrower&#146;s name and are voted by the borrower, in its discretion. Where a subadviser determines, however, that a proxy vote (or other shareholder action) is materially important to the client&#146;s account, the subadviser should request that the agent recall the security prior to the record date to allow the subadviser to vote the securities.</FONT></P>
<P align=left><B><FONT face=sans-serif>Disclosure of Proxy Voting Policies and Procedures in the Trust&#146;s Statement of Additional Information (&#147;SAI&#148;)</FONT></B></P>
<P align=left><FONT face=sans-serif>The Trust shall include in its SAI a summary of the Trust Policy and of the Subadviser Policy included therein. (In lieu of including a summary of these policies and procedures, the Trust may include each full Trust Policy and Subadviser Policy in the SAI.)</FONT></P>
<P align=left><B><FONT face=sans-serif>Disclosure of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder Reports</FONT></B></P>
<P align=left><FONT face=sans-serif>The Trust shall disclose in its annual and semi-annual shareholder reports that a description of the Trust Policy, including the Subadviser Policy, and the Trust&#146;s proxy voting record for the most recent 12 months ended June 30 are available on the Securities and Exchange Commission&#146;s (&#147;SEC&#148;) website, and without charge, upon request, by calling a specified toll-free telephone</FONT></P>
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<P align=left><FONT face=sans-serif>number. The Trust will send these documents within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery.</FONT></P>
<P align=left><B><FONT face=sans-serif>Filing of Proxy Voting Record on Form N-PX</FONT></B></P>
<P align=left><FONT face=sans-serif>The Trust will annually file its complete proxy voting record with the SEC on Form N-PX. The Form N-PX shall be filed for the twelve months ended June 30 no later than August 31 of that year.</FONT></P>
<P align=left><B><FONT face=sans-serif>PROCEDURES:</FONT></B></P>
<P align=left><B><FONT face=sans-serif>Review of Subadvisers&#146; Proxy Voting</FONT></B></P>
<P align=left><FONT face=sans-serif>The Trust has delegated proxy voting authority with respect to fund portfolio securities in accordance with the Trust Policy, as set forth above.</FONT></P>
<P align=left><FONT face=sans-serif>Consistent with this delegation, each subadviser is responsible for the following:</FONT></P>
<P align=left><FONT face=sans-serif>1) Implementing written policies and procedures, in compliance with Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the subadviser votes portfolio securities in the best interest of shareholders of the Trust.</FONT></P>
<P align=left><FONT face=sans-serif>2) Providing the adviser with a copy and description of the Subadviser Policy prior to being approved by the Board as a subadviser, accompanied by a certification that represents that the Subadviser Policy has been adopted in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, providing the adviser with notice of any amendment or revision to that Subadviser Policy or with a description thereof. The adviser is required to report all material changes to a Subadviser Policy quarterly to the Board. The CCO&#146;s annual written compliance report to the Board will contain a summary of the material changes to each Subadviser Policy during the period covered by the report.</FONT></P>
<P align=left><FONT face=sans-serif>3) Providing the adviser with a quarterly certification indicating that the subadviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the Subadviser Policy. If the subadviser voted any proxies in a manner inconsistent with the Subadviser Policy, the subadviser will provide the adviser with a report detailing the exceptions.</FONT></P>
<P align=left><B><FONT face=sans-serif>Adviser Responsibilities</FONT></B></P>
<P align=left><FONT face=sans-serif>The Trust has retained a proxy voting service to coordinate, collect, and maintain all proxy-related information, and to prepare and file the Trust&#146;s reports on Form N-PX with the SEC.</FONT></P>
<P align=left><FONT face=sans-serif>The adviser, in accordance with its general oversight responsibilities, will periodically review the voting records maintained by the proxy voting service in accordance with the following procedures:</FONT></P>
<P align=left><FONT face=sans-serif>1) Receive a file with the proxy voting information directly from each subadviser on a quarterly basis.</FONT></P>
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<P align=left><FONT face=sans-serif>2) Select a sample of proxy votes from the files submitted by the subadvisers and compare them against the proxy voting service files for accuracy of the votes.</FONT></P>
<P align=left><FONT face=sans-serif>3) Deliver instructions to shareholders on how to access proxy voting information via the Trust&#146;s semi-annual and annual shareholder reports.</FONT></P>
<P align=left><B><FONT face=sans-serif>Proxy Voting Service Responsibilities</FONT></B></P>
<P align=left><B><FONT face=sans-serif>Aggregation of Votes:</FONT></B></P>
<P align=left><FONT face=sans-serif>The proxy voting service</FONT><FONT face=sans-serif>&#146;s proxy disclosure system will collect fund-specific and/or account-level voting records, including votes cast by multiple subadvisers or third party voting services.</FONT></P>
<P align=left><B><FONT face=sans-serif>Reporting:</FONT></B></P>
<P align=left><FONT face=sans-serif>The proxy voting service</FONT><FONT face=sans-serif>&#146;s proxy disclosure system will provide the following reporting features:</FONT></P>
<P align=left><FONT face=sans-serif>1) multiple report export options;</FONT></P>
<P align=left><FONT face=sans-serif>2) report customization by fund-account, portfolio manager, security, etc.; and</FONT></P>
<P align=left><FONT face=sans-serif>3) account details available for vote auditing.</FONT></P>
<P align=left><B><FONT face=sans-serif>Form N-PX Preparation and Filing:</FONT></B></P>
<P align=left><FONT face=sans-serif>The adviser will be responsible for oversight and completion of the filing of the Trust&#146;s reports on Form N-PX with the SEC. The proxy voting service </FONT><FONT face=sans-serif>will prepare the EDGAR version of Form N-PX and will submit it to the adviser for review and approval prior to filing with the SEC</FONT><FONT face=sans-serif>. The proxy voting service will file Form N-PX for each twelve-month period ending on June 30. The filing must be submitted to the SEC on or before August 31 of each year.</FONT></P>
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     <TD noWrap align=center><B><FONT face=sans-serif>PROXY VOTING POLICIES AND PROCEDURES</FONT></B>&nbsp; </TD></TR></TABLE><BR>
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     <TD noWrap align=left><B><FONT face=sans-serif size=2>Adopted:</FONT></B>&nbsp; </TD>
     <TD noWrap align=left><B><FONT face=sans-serif size=2>Amended:</FONT></B>&nbsp; </TD></TR>
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     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Trust</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>September 28, 2007</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Funds III</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Preferred Income Fund II</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Preferred Income Fund III</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Patriot Premium Dividend Fund II</FONT>&nbsp; </TD>
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     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Bank &amp; Thrift Opportunity Fund</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
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<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Income Securities Trust</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
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<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Investors Trust</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
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<TR vAlign=bottom>
     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Tax-Advantaged Dividend Income Fund</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
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     <TD colSpan=3>
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     <TD noWrap align=left><FONT face=sans-serif size=2>John Hancock Tax-Advantaged Global Shareholder Yield Fund</FONT>&nbsp; </TD>
     <TD noWrap align=left><FONT face=sans-serif>September 11, 2007</FONT>&nbsp; </TD>
     <TD noWrap align=left>&nbsp; </TD></TR>
<TR>
     <TD colSpan=3>
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<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR>
     <TD width="100%"></TD></TR>
<TR vAlign=bottom>
     <TD noWrap align=center><FONT face=sans-serif>-5-</FONT>&nbsp; </TD></TR></TABLE><BR>
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