N-CSRS 1 a_munisecuritiestrust.htm JOHN HANCOCK MUNICIPAL SECURITIES TRUST a_munisecuritiestrust.htm
UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 
 
FORM N-CSR 
 
CERTIFIED SHAREHOLDER REPORT OF REGISTERED 
MANAGEMENT INVESTMENT COMPANIES 
 
Investment Company Act file number 811- 5968 
 
John Hancock Municipal Securities Trust 
(Exact name of registrant as specified in charter) 
 
601 Congress Street, Boston, Massachusetts 02210 
(Address of principal executive offices) (Zip code) 
 
Michael J. Leary 
Treasurer 
 
601 Congress Street 
 
Boston, Massachusetts 02210 
  
(Name and address of agent for service) 
  
Registrant's telephone number, including area code: 617-663-4490 
 
Date of fiscal year end:  May 31 
 
 
Date of reporting period:  November 30, 2009 

ITEM 1. REPORT TO SHAREHOLDERS.




A look at performance

For the period ended November 30, 2009         
 
  Average annual returns (%)    Cumulative total returns (%)       
  with maximum sales charge (POP)  with maximum sales charge (POP)      SEC 30-day

yield (%) as

of 11-30-09 
        Six       
Class  1-year  5-year  10-year  months  1-year  5-year  10-year 
A  8.54  2.86  4.16  0.51  8.54  15.14  50.27  3.93 
B  7.85  2.69  4.01  –0.14  7.85  14.19  48.23  3.35 
C  11.86  3.03  3.84  3.86  11.86  16.11  45.70  3.39 

Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 4.5% and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The returns for Class C shares have been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC.

The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The net expenses equal the gross expenses and are as follows: Class A — 0.98%, Class B —1.73% and Class C — 1.73%.

The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.

The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on the redemption of fund shares. Please note that a portion of the Fund’s income may be subject to taxes, and some investors may be subject to the Alternative Minimum Tax (AMT). Also note that capital gains are taxable.

The Fund’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.

6  Tax-Free Bond Fund | Semiannual report 


Growth of $10,000

This chart shows what happened to a hypothetical $10,000 investment in the John Hancock Tax-Free Bond Fund Class A shares for the period indicated. For comparison, we’ve shown the same investment in the Barclays Capital Municipal Bond Index.




      With maximum   
Class  Period beginning  Without sales charge  sales charge  Index 
B2  11-30-99  $14,823  $14,823  $17,273 
C2  11-30-99  14,570  14,570  17,273 

Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B and Class C shares, respectively, as of November 30, 2009. The Class C shares investment with maximum sales charge has been adjusted to reflect the elimination of the front-end sales charge effective July 15, 2004. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in the different classes and the fee structure of those classes.

Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.

It is not possible to invest directly in an index. Index figures do not reflect sales charges or direct expenses, which would have resulted in lower values if they did.

1 NAV represents net asset value and POP represents public offering price.

2 No contingent deferred sales charge applicable.

Semiannual report | Tax-Free Bond Fund  7 


Your expenses

These examples are intended to help you understand your ongoing operating expenses.

Understanding fund expenses

As a shareholder of the Fund, you incur two types of costs:

▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.

▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.

We are going to present only your ongoing operating expenses here.

Actual expenses/actual returns

This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on June 1, 2009 with the same investment held until November 30, 2009.

  Account value  Ending value  Expenses paid during 
  on 6-1-09  on 11-30-09  period on 11-30-091 
Class A  $1,000.00  $1,052.50  $5.15 
Class B  1,000.00  1,048.60  8.99 
Class C  1,000.00  1,048.60  8.99 

Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at November 30, 2009, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:


8  Tax-Free Bond Fund | Semiannual report 


Hypothetical example for comparison purposes

This table allows you to compare your fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not your fund’s actual return). It assumes an account value of $1,000.00 on June 1, 2009, with the same investment held until November 30, 2009. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.

  Account value  Ending value  Expenses paid during 
  on 6-1-09  on 11-30-09  period on 11-30-091 
Class A  $1,000.00  $1,020.10  $5.06 
Class B  1,000.00  1,016.30  8.85 
Class C  1,000.00  1,016.30  8.85 

Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.

1 Expenses are equal to the Fund’s annualized expense ratio of 1.00%, 1.75% and 1.75% for Class A, Class B and Class C, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).

Semiannual report | Tax-Free Bond Fund  9 


Portfolio summary

Top 10 Holdings1       
Foothill Eastern Transportation Corridor Agency, 01-01-19, Zero  4.6% 
Alabama Public School & College Authority, 12-01-24, 5.000%  3.3% 
Madera County Certificates of Participation, 03-15-15, 6.500%  3.0% 
Commonwealth of Puerto Rico, 07-01-11, 10.646%  2.2% 
Foothill Eastern Transportation Corridor Agency, 01-01-16, 6.000%  2.1% 
Commonwealth of Massachusetts, 12-01-24, 5.500%  2.0% 
San Joaquin Hills Transportation Corridor Agency, 01-15-17, 5.650%  2.0% 
Triborough Bridge & Tunnel Authority, 11-15-33, 5.000%  2.0% 
San Bernardino County, 08-01-17, 5.500%    1.9% 
Puerto Rico Aqueduct & Sewer Authority, 07-01-11, 10.861%  1.6% 
 
Sector Composition2,3       
General Obligation  6%  Health Care  8% 
Revenue Bonds    Pollution  6% 
Transportation  20%  Development  6% 
Other Revenue  19%  Airport  5% 
Utilities  15%  Miscellaneous  3% 
Education  12%     
 
Quality Composition2       
AAA  22%  BB  5% 
AA  36%  B  1% 
A  19%  Miscellaneous  3% 
BBB  14%     
  

 

1 As a percentage of net assets on November 30, 2009. Excludes cash and cash equivalents.

2 As a percentage of net assets on November 30, 2009.

3 Investments focused in one sector may fluctuate more widely than investments across multiple sectors. Because the Fund may focus on particular sectors, its performance may depend on the performance of those sectors.

10  Tax-Free Bond Fund | Semiannual report 


Fund’s investments

As of 11-30-09 (unaudited)

    Maturity     
  Rate  date  Par value  Value 
 
Corporate Bonds 1.42%        $6,735,193 
(Cost $6,948,200)         
 
Diversified Financial Services 0.77%        3,661,363 
Municipal Mortgage & Equity, LLC,         
 Bond (P)(S)  7.500%  06-30-49  $3,948,200  3,661,363 
 
Thrifts & Mortgage Finance 0.65%        3,073,830 
Charter MAC Equity Issuer Trust,         
 Series A–4-1 (S)  5.750  05-15-15  3,000,000  3,073,830 
 
 
Municipal Bonds 96.81%        $461,313,919 
(Cost $428,084,173)         
 
Alabama 3.73%        17,761,170 
Alabama Public School & College Authority,         
 Capital Improvement  5.000%  12-01-24  15,000,000  15,727,350 
Birmingham Special Care Facilities         
 Financing Authority,Childrens Hospital  6.125  06-01-34  2,000,000  2,033,820 
 
Arizona 3.02%        14,410,600 
Arizona Health Facilities Authority,         
 Vanguard Health Systems, Inc. (H)  8.200  06-01-21  2,150,000  2,150 
Maricopa County Pollution Control Corp.,         
 El Paso Electric Company Project, Series B  7.250  04-01-40  1,000,000  1,115,510 
Phoenix Civic Improvement Corp. District,         
 Civic Plaza, Series B (D)  Zero  07-01-28  1,000,000  899,960 
Pima County Arizona Industrial         
 Development Authority,         
 Tucson Electric Power Company, San Juan,         
 Series A  4.950  10-01-20  1,000,000  1,009,970 
Salt River Project Agricultural Improvement &         
 Power District Electric System,         
 Series A  5.000  01-01-33  7,000,000  7,268,450 
 Series A  5.000  01-01-39  4,000,000  4,114,560 
 
California 19.32%        92,063,547 
Foothill Eastern Transportation         
 Corridor Agency,         
 Capital Appreciation  Zero  01-15-25  5,000,000  1,748,150 
 Capital Appreciation, Series A  Zero  01-01-19  30,000,000  22,044,900 
 Prerefunded, Series A  6.000  01-01-16  10,000,000  10,049,400 
M-S-R Energy Authority, Series B  7.000  11-01-34  2,500,000  2,745,200 
Madera County Certificates of Participation         
 Valley Children’s Hospital (D)  6.500  03-15-15  13,185,000  14,274,213 

See notes to financial statements

Semiannual report | Tax-Free Bond Fund  11 


    Maturity     
  Rate  date  Par value  Value 
California (continued)         
Millbrae Residential Facility Revenue,         
 Magnolia of Millbrae Project, Series A  7.375%  09-01-27  $1,740,000  $1,661,248 
San Bernardino County,         
 Certificates of Participation,         
 Medical Center Project  5.500  08-01-22  2,500,000  2,568,775 
 Medical Center Financing Project (D)  5.500  08-01-17  9,130,000  9,250,516 
San Diego Redevelopment Agency,         
 City Heights, Series A  5.750  09-01-23  25,000  22,225 
San Joaquin Hills Transportation         
 Corridor Agency,         
 Toll Road Revenue  Zero  01-01-14  5,000,000  4,648,850 
 Toll Road Revenue  Zero  01-01-17  4,900,000  3,973,410 
 Toll Road Revenue  Zero  01-01-20  2,000,000  1,392,780 
 Toll Road Revenue, Series A  5.650  01-15-17  10,000,000  9,547,900 
Santa Ana Financing Authority,         
 Police Admin & Holding Facility, Series A (D)  6.250  07-01-19  2,000,000  2,261,340 
State of California,         
 Various Purpose  6.000  11-01-39  2,500,000  2,535,850 
 Various Purpose  5.000  10-01-29  3,500,000  3,338,790 
 
Colorado 3.72%        17,741,407 
City of Colorado Springs, Colorado,         
 Utilities System,         
 Improvement Revenue Bonds, Series 2008C  5.250  11-15-36  5,000,000  4,950,050 
Colorado Springs Utilities Revenue,         
 Series C  5.250  11-15-42  2,825,000  2,927,011 
E-470 Public Highway Authority,         
 Capital Appreciation, Series B  Zero  09-01-34  7,000,000  1,146,250 
 Series B1 (D)  5.500  09-01-24  2,000,000  1,989,820 
Northwest Parkway Public Highway Authority,         
 Prerefunded Series D  7.125  06-15-41  2,885,000  3,219,141 
Public Authority for Colorado Energy,         
 Natural Gas Purchase Revenue  6.250  11-15-28  3,500,000  3,509,135 
 
Connecticut 0.66%        3,142,230 
Connecticut State Health & Educational         
 Facility Authority,         
 Yale University, Series Z3  5.050  07-01-42  3,000,000  3,142,230 
 
District of Columbia 3.59%        17,093,028 
District of Columbia,         
 Tobacco Settlement Financing Corp.  6.500  05-15-33  5,000,000  4,702,800 
Metropolitan Washington DC         
 Airports Authority,         
 Dulles Toll Road, Capital Appreciation, 2nd Sr         
 Lien, B (D)  Zero  10-01-33  6,565,000  1,476,075 
 Dulles Toll Road, Capital Appreciation, 2nd Sr         
 Lien, B (D)  Zero  10-01-35  6,470,000  1,283,519 
 Dulles Toll Road, Capital Appreciation, 2nd Sr         
 Lien, B (D)  Zero  10-01-36  7,250,000  1,343,932 
 Dulles Toll Road, Series A  5.250  10-01-44  2,000,000  2,023,600 
 Dulles Toll Road, Series C (D)  Zero  10-01-41  1,750,000  1,193,202 
 Series C  5.125  10-01-39  5,000,000  5,069,900 

See notes to financial statements

12  Tax-Free Bond Fund | Semiannual report 


    Maturity     
  Rate  date  Par value  Value 
Florida 4.84%        $23,067,583 
Bonnet Creek Resort Community         
 Development District,         
 Special Assessment  7.375%  05-01-34  $1,500,000  1,384,905 
 Special Assessment  7.250  05-01-18  1,000,000  925,800 
Capital Projects Finance Authority,         
 Student Housing Revenue, Series A  7.850  08-15-31  3,500,000  3,784,270 
 Student Housing Revenue, Series G  9.125  10-01-11  800,000  810,600 
Capital Trust Agency,         
 Seminole Tribe Convention, Series A  8.950  10-01-33  3,000,000  3,675,900 
Crossings At Fleming Island Community         
 Development District,         
 Series C  7.100  05-01-30  1,000,000  952,440 
Hernando County, Criminal Justice,         
 Complex Financing (D)  7.650  07-01-16  500,000  621,690 
Miami-Dade County Aviation Revenue,         
 Series A  5.500  10-01-36  3,250,000  3,316,560 
Orange County School Board,         
 Series A (D)  Zero  08-01-13  5,000,000  4,627,700 
Orlando Utilities Commission,         
 Water & Electric Revenue, Series D  6.750  10-01-17  2,200,000  2,646,908 
Stoneybrook West Community         
 Development District,         
 Series A  7.000  05-01-32  310,000  320,810 
 
Georgia 4.96%        23,636,112 
Atlanta Tax Allocation,         
 Eastside Project, Series B  5.600  01-01-30  1,000,000  872,490 
Georgia Municipal Electric Authority,         
 Prerefunded, Series 2005 (D)  6.500  01-01-17  60,000  72,376 
 Prerefunded, Series Z (D)  5.500  01-01-20  150,000  166,069 
 Series C (D)  5.700  01-01-19  5,000,000  5,672,200 
 Series Y (D)  6.500  01-01-17  145,000  171,890 
 Series BB  5.700  01-01-19  1,000,000  1,111,000 
 Series EE (D)  7.250  01-01-24  2,000,000  2,542,500 
 Unrefunded, Series 2005 (D)  6.500  01-01-17  4,635,000  5,385,685 
 Unrefunded, Series Z (D)  5.500  01-01-20  5,690,000  6,550,612 
Monroe County Development Authority,         
 Oglethorpe Power Corp., Series A  6.800  01-01-12  1,000,000  1,091,290 
 
Illinois 5.27%        25,100,800 
Chicago Board of Education,         
 Capital Appreciation, Series A (D)  Zero  12-01-18  5,440,000  3,654,810 
 General Obligation, Series A (D)  5.500  12-01-30  3,650,000  4,011,313 
Chicago Tax Increment Revenue,         
 Pilsen Redevelopment, Series B  6.750  06-01-22  3,000,000  2,955,300 
Illinois Development Finance Authority,         
 Pollution Control Revenue, Edison Project (D)  5.850  01-15-14  3,000,000  3,324,390 
Illinois Finance Authority,         
 Rush-Copley Medical Center, Inc., Series A  7.250  11-01-38  1,500,000  1,658,505 
Kane County Community Unit School District         
 No. 304, Series A (D)  Zero  01-01-17  4,705,000  3,653,903 
Lake County Community Consolidated School         
 District No. 24, General Obligation (D)  Zero  01-01-22  2,440,000  1,311,988 

See notes to financial statements

Semiannual report | Tax-Free Bond Fund  13 


    Maturity     
  Rate  date  Par value  Value 
Illinois (continued)         
Round Lake Lakewood Grove Special Service         
 Area No. 1, Prerefunded  6.700%  03-01-33  $1,000,000  $1,169,290 
Will County Community Unit School District         
 No. 365, General Obligation (D)  Zero  11-01-21  5,780,000  3,361,301 
 
Indiana 0.67%        3,214,260 
Indiana Finance Authority,         
 Duke Energy, Series B  6.000  08-01-39  3,000,000  3,214,260 
 
Kentucky 2.10%        10,023,762 
Kentucky Economic Development         
 Finance Authority,         
 Louisville Arena Project, Series A–1 (D)  6.000  12-01-33  1,000,000  1,084,420 
 Prerefunded, Norton Healthcare, Series C (D)  6.100  10-01-21  1,770,000  2,074,582 
 Unrefunded, Norton Healthcare, Series C (D)  6.100  10-01-21  3,230,000  3,377,933 
Kentucky State Property &         
 Buildings Commission, Project No. 93 (D)  5.250  02-01-29  3,250,000  3,486,827 
 
Louisiana 0.53%        2,537,575 
Louisiana Local Government Environmental         
 Facilities, Westlake Chemical Corp. Project  6.750  11-01-32  2,500,000  2,537,575 
 
Massachusetts 4.28%        20,392,216 
Commonwealth of Massachusetts,         
 General Obligation, Series C (D)  5.500  12-01-24  8,000,000  9,677,440 
Massachusetts Bay Transportation Authority,         
 Series A–2  Zero  07-01-26  13,595,000  6,180,151 
Massachusetts Health & Educational         
 Facilities Authority,         
 Civic Investments, Series B  9.200  12-15-31  3,500,000  4,371,955 
 Unrefunded, Partners Healthcare, Series C  5.750  07-01-32  85,000  87,292 
Massachusetts Water Pollution Abatement,         
 Unrefunded, Series A  6.375  02-01-15  75,000  75,378 
 
Michigan 0.23%        1,120,830 
Detroit Water Supply System Revenue,         
 Series B (D)  7.000  07-01-36  1,000,000  1,120,830 
 
Missouri 0.64%        3,051,713 
Fenton Tax Increment Revenue,         
 Gravois Bluffs Improvements  7.000  10-01-21  955,000  1,067,413 
Missouri State Health & Educational         
 Facilities Authority,         
 Children’s Mercy Hospital  5.625  05-15-39  2,000,000  1,984,300 
 
Nebraska 1.33%        6,339,998 
Central Plains Energy Project Revenue,         
 Project No. 1, Series A  5.250  12-01-20  4,970,000  4,908,770 
Omaha Public Power District, Series B  6.200  02-01-17  1,200,000  1,431,228 
 
New Hampshire 0.27%        1,283,650 
New Hampshire Health & Education         
 Facilities Authority, Exeter Project  6.000  10-01-24  1,250,000  1,283,650 

See notes to financial statements

14  Tax-Free Bond Fund | Semiannual report 


    Maturity     
  Rate  date  Par value  Value 
New Jersey 4.63%        $22,053,805 
New Jersey Economic Development Authority,         
 Newark Marriott Hotel  7.000%  10-01-14  $1,000,000  982,380 
New Jersey Health Care Facilities         
 Financing Authority,         
 Care Institute, Inc., Cherry Hill Project  8.000  07-01-27  1,120,000  915,600 
New Jersey State Turnpike Authority,         
 Series E  5.250  01-01-40  2,500,000  2,572,675 
 Series I  5.000  01-01-35  3,750,000  3,752,775 
Tobacco Settlement Financing Corp.,         
 Prerefunded  6.750  06-01-39  5,000,000  5,943,950 
 Prerefunded  6.250  06-01-43  4,000,000  4,686,800 
 Series 1A  4.500  06-01-23  3,575,000  3,199,625 
 
New York 10.89%        51,893,709 
New York City Industrial         
 Development Agency,         
 Terminal One Group Project (P)  5.500  01-01-24  1,500,000  1,509,930 
 World Trade Center Project, Series A  6.250  03-01-15  2,000,000  1,977,620 
New York City Municipal Water         
 Finance Authority,         
 Series 2009-EE  5.250  06-15-40  3,000,000  3,123,540 
 Series F (V)  Zero  06-15-35  700,000  700,000 
 Unrefunded, Series B  6.000  06-15-33  375,000  388,909 
New York City Transitional Finance Authority,         
 Series A  Zero  11-01-29  5,000,000  4,845,950 
 Series S-3  5.375  01-15-34  2,000,000  2,103,680 
 Series S-3  5.250  01-15-39  3,000,000  3,098,640 
 Series S-4  5.500  01-15-39  2,995,000  3,175,539 
New York Liberty Development Corp.,         
 Goldman Sachs Group, Inc.  5.250  10-01-35  3,500,000  3,438,540 
New York State Dormitory Authority,         
 Personal Income Tax, Series A  5.000  02-15-39  2,500,000  2,547,875 
 Prerefunded, Series B  7.500  05-15-11  90,000  92,753 
 State University Facilities, Series A  5.500  05-15-19  1,000,000  1,144,760 
 Unrefunded, Series B  7.500  05-15-11  145,000  158,359 
New York State Housing Finance Agency,         
 Series A  8.000  05-01-11  700,000  746,235 
Port Authority of New York & New Jersey,         
 144th Construction Project  5.000  10-01-29  3,500,000  3,671,045 
 KICA Partners  6.750  10-01-19  8,700,000  7,268,937 
Triborough Bridge & Tunnel Authority,         
 General Purpose  5.000  11-15-33  9,025,000  9,294,577 
Westchester Tobacco Asset         
 Securitization Corp., Capital Appreciation  6.950  07-15-39  2,000,000  2,606,820 
 
Ohio 1.18%        5,624,587 
Buckeye Ohio Tobacco Settlement         
 Financing Authority, Series A–2  5.125  06-01-24  5,380,000  4,557,237 
Ohio Air Quality Development Authority,         
 FirstEnergy Solutions Corp., Series C (P)  7.250  11-01-32  1,000,000  1,067,350 

See notes to financial statements

Semiannual report | Tax-Free Bond Fund  15 


    Maturity     
  Rate  date  Par value  Value 
Oklahoma 0.35%        $1,679,980 
Tulsa Municipal Airport Trust Trustees,         
 AMR Corp., Series A (P)   7.750%  06-01-35  $2,000,000  1,679,980 
 
Oregon 1.38%        6,561,546 
Clackamas County School District No. 12,         
 General Obligation, Series B (D)  Zero  06-15-28  5,630,000  5,484,239 
Western Generation Agency, Wauna         
 Cogeneration Project, Series B  5.000  01-01-14  1,100,000  1,077,307 
 
Pennsylvania 4.20%        19,991,932 
Allegheny County Hospital         
 Development Authority,         
 West Penn Health Systems, Series A  5.000  11-15-28  3,500,000  2,610,650 
Allegheny County Industrial         
 Development Authority,         
 US Steel Corp.  5.500  11-01-16  2,500,000  2,462,500 
Allegheny County Redevelopment Authority,         
 Pittsburgh Mills Project  5.600  07-01-23  1,000,000  835,270 
Carbon County Industrial         
 Development Authority,         
 Panther Creek Partners Project  6.700  05-01-12  4,960,000  4,977,112 
Luzerne County Industrial         
 Development Authority,         
 Amern Water Company  5.500  12-01-39  1,000,000  1,001,600 
Pennsylvania Turnpike Commission,         
 Capital Appreciation, Series C  Zero  12-01-38  4,000,000  788,560 
Philadelphia Authority for Industrial Development,         
 Commerical Development  7.750  12-01-17  3,250,000  3,012,360 
Philadelphia School District,         
 General Obligation, Series E  6.000  09-01-38  4,000,000  4,303,880 
 
Puerto Rico 5.19%        24,740,828 
Commonwealth of Puerto Rico, (D)(P)  10.646  07-01-11  9,600,000  10,687,680 
Puerto Rico Aqueduct & Sewer Authority (D)(P)  10.861  07-01-11  6,500,000  7,630,220 
Puerto Rico Aqueduct & Sewer Authority (D)  6.000  07-01-11  200,000  217,388 
Puerto Rico Public Buildings Authority,         
 Series P  6.750  07-01-36  3,000,000  3,229,980 
Puerto Rico Sales Tax Financing Authority,         
 Capital Appreciation, Series A  Zero  08-01-32  4,000,000  2,975,560 
 
Rhode Island 0.20%        953,213 
Town of Tiverton, Tax Increment Revenue,         
 Mount Hope Bay Village, Series A  6.875  05-01-22  960,000  953,213 
 
South Carolina 2.58%        12,280,412 
Richland County,         
 International Paper Company  6.100  04-01-23  3,325,000  3,315,657 
South Carolina State Public         
 Service Authority,         
 Santee Cooper, Series A  5.500  01-01-38  6,000,000  6,397,080 
 Santee Cooper, Series E  5.000  01-01-40  2,500,000  2,567,675 

See notes to financial statements

16  Tax-Free Bond Fund | Semiannual report 


    Maturity     
  Rate  date  Par value  Value 
South Dakota 1.00%        $4,773,100 
Educational Enhancement Funding Corp.,         
 Tobacco Settlement Pierre, Series B  6.500%  06-01-32  $5,000,000  4,773,100 
 
Texas 3.44%        16,384,643 
Bexar County Health Facilities         
 Development Corp.,         
 Army Retirement Residence Project  6.300  07-01-32  1,000,000  1,135,580 
Brazos River Authority,         
 TXU Energy Company, Series A  7.700  04-01-33  1,500,000  871,170 
Brazos River Authority, Pollution         
 Control Revenue,         
 TXU Energy Company, Series A  8.250  10-01-30  2,000,000  1,225,180 
Houston Independent School District Public         
 Financing Corp.,         
 Cesar Chavez Project, Series A (D)  Zero  09-15-16  900,000  730,503 
Lower Colorado River Authority,         
 Refunding Notes  5.625  05-15-39  4,000,000  4,133,480 
Mission Economic Development Corp.,         
 Allied Waste, Inc., Series A  5.200  04-01-18  1,000,000  976,810 
North Texas Tollway Authority,         
 Series A  6.000  01-01-25  3,000,000  3,199,440 
 Series K-2  6.000  01-01-38  4,000,000  4,112,480 
 
Utah 0.19%        890,553 
Salt Lake City,         
 IHC Hospital Inc., Series A  8.125  05-15-15  760,000  890,553 
 
Washington 0.64%        3,049,000 
State of Washington,         
 General Obligation, Series A  6.750  02-01-15  1,000,000  1,145,830 
Washington Public Power Supply Systems,         
 Nuclear Project No. 1, Series B  7.125  07-01-16  1,500,000  1,903,170 
 
West Virginia 0.67%        3,173,880 
West Virginia State Hospial         
 Finance Authority,         
 Prerefunded, Charleston Medical Center  6.750  09-01-22  2,400,000  2,539,104 
 Unrefunded, Charleston Medical Center  6.750  09-01-22  600,000  634,776 
 
Wisconsin 0.45%        2,142,540 
State of Wisconsin,         
 General Obligation  5.750  05-01-33  2,000,000  2,142,540 
 
Wyoming 0.66%        3,139,710 
Campbell County, Solid Waste Facility,         
 Basin Electric Power Company, Series A  5.750  07-15-39  3,000,000  3,139,710 

See notes to financial statements

Semiannual report | Tax-Free Bond Fund  17 


  Par value  Value 
Short-Term Investments 1.28%    $6,118,000 
(Cost $6,118,000)     
 
Repurchase Agreement 1.28%    6,118,000 
Repurchase Agreement with State Street Corp.     
 dated 11-30-09 at 0.05% to be repurchased     
 at $6,118,008 on 12-1-09, collateralized     
 by $6,245,000 U.S. Treasury Bills, 0.00%     
 due 5-13-10 (valued at $6,241,878,     
 including interest).  $6,118,000  6,118,000 
 
Total investments (Cost $441,150,373)† 99.51%    $474,167,112 
Other assets and liabilities, net 0.49%    $2,355,507 
Total net assets 100.00%    $476,522,619 

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.

(D) Bond is insured by one of these companies:

Insurance coverage  As a % of total investments 
Ambac Financial Group, Inc.    3.58% 
Assured Guaranty Ltd.    2.08% 
Financial Guaranty Insurance Company    2.61% 
Financial Security Assurance, Inc.    2.10% 
National Public Finance Guaranty Insurance Corp.  15.92% 

(H) Non-income producing. Currently, the issuer is in default with respect to interest payments.

(P) Variable rate obligation. The coupon rate shown represents the rate at period end.

(V) Variable rate demand notes are securities whose interest rates are reset periodically at market levels. These securities are often payable on demand and are shown at their current rates as of November 30, 2009.

† At November 30, 2009, the aggregate cost of investment securities for federal income tax purposes was $438,894,763. Net unrealized appreciation aggregated $35,272,349, of which $43,232,790 related to appreciated investment securities and $7,960,441 related to depreciated investment securities.

See notes to financial statements

18  Tax-Free Bond Fund | Semiannual report 


F I N A N C I A L   S T A T E M E N T S

Financial statements

Statement of assets and liabilities 11-30-09 (unaudited)

This Statement of Assets and Liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.

Assets   
Investments, at value (Cost $435,032,373)  $468,049,112 
Repurchase agreements, at value (Cost $6,118,000) (Note 2)  6,118,000 
Total Investments, at value (Cost $441,150,373)  474,167,112 
Cash  882 
Receivable for fund shares sold  543,174 
Interest receivable  7,065,091 
Receivable from affiliates  3,265 
Other receivables and prepaid assets  77,817 
 
Total assets  481,857,341 
 
Liabilities   
Payable for investments purchased  4,681,450 
Payable for fund shares repurchased  21,476 
Distributions payable  489,808 
Payable to affiliates   
 Accounting and legal services fees  1,204 
 Transfer agent fees  34,596 
 Distribution and service fees  26,059 
Other liabilities and accrued expenses  80,129 
 
Total liabilities  5,334,722 
 
Net assets   
Capital paid-in  $468,511,847 
Undistributed net investment income  1,607,927 
Accumulated net realized loss on investments  (26,613,894) 
Net unrealized appreciation on investments  33,016,739 
 
Net assets  $476,522,619 
 
Net asset value per share   
Based on net asset values and shares outstanding — the Fund has an   
 unlimited number of shares authorized with no par value   
Class A ($433,581,794 ÷ 44,230,401 shares)  $9.80 
Class B ($10,134,973 ÷ 1,033,843 shares)1  $9.80 
Class C ($32,805,852 ÷ 3,346,829 shares)1  $9.80 
 
Maximum offering price per share   
Class A (net asset value per share ÷ 95.5%)2  $10.26 

1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.

2 On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced.

See notes to financial statements

Semiannual report | Tax-Free Bond Fund  19 


F I N A N C I A L   S T A T E M E N T S

Statement of operations For the period ended 11-30-09 (unaudited)

This Statement of Operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.

Investment income   
 
Interest  $13,185,976 
 
Expenses   
Investment management fees (Note 4)  1,280,034 
Distribution and service fees (Note 4)  730,532 
Accounting and legal services fees (Note 4)  50,800 
Transfer agent fees (Note 4)  246,482 
Trustees’ fees (Note 5)  21,055 
State registration fees  15,159 
Printing and postage fees  30,681 
Professional fees  49,151 
Custodian fees  40,943 
Registration and filing fees  8,279 
Other  8,484 
 
Total expenses  2,481,600 
Less expense reductions (Note 4)  (17,532) 
 
Net expenses  2,464,068 
 
Net investment income  10,721,908 
 
Realized and unrealized gain (loss)   
 
Net realized gain on investments  1,082,310 
Change in net unrealized appreciation (depreciation) of investments  11,551,293 
 
Net realized and unrealized gain  12,633,603 
 
Increase in net assets from operations  $23,355,511 

See notes to financial statements

20  Tax-Free Bond Fund | Semiannual report 


F I N A N C I A L   S T A T E M E N T S

Statements of changes in net assets

These Statements of Changes in Net Assets show how the value of the Fund’s net assets has changed during the last 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.

  Period     
  ended  Period  Year 
  11-30-091  ended  ended 
  (Unaudited)  5-31-092  8-31-08 
 
Increase (decrease) in net assets       
From operations       
Net investment income  $10,721,908  $15,918,216  $20,403,322 
Net realized gain (loss)  1,082,310  (10,078,446)  (1,960,315) 
Change in net unrealized       
 appreciation (depreciation)  11,551,293  (3,883,768)  (4,001,767) 
 
Increase in net assets resulting       
  from operations  23,355,511  1,956,002  14,441,240 
 
Distributions to shareholders       
From net investment income       
Class A  (9,857,508)  (14,433,986)  (19,028,985) 
Class B  (209,771)  (352,283)  (534,537) 
Class C  (580,292)  (612,034)  (336,964) 
 
Total distributions  (10,647,571)  (15,398,303)  (19,900,486) 
 
From Fund share transactions (Note 6)  13,868,602  20,314,234  (9,106,347) 
 
Total increase (decrease)  26,576,542  6,871,933  (14,565,593) 
 
Net assets       
Beginning of period  449,946,077  443,074,144  457,639,737 
 
End of period  $476,522,619  $449,946,077  $443,074,144 
 
Undistributed net investment income  $1,607,927  $1,533,590  $1,227,578 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

See notes to financial statements

Semiannual report | Tax-Free Bond Fund  21 


Financial highlights

The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.

CLASS A SHARES Period ended  11-30-091  5-31-092  8-31-08  8-31-07  8-31-06  8-31-053  8-31-043 
 
Per share operating performance               
Net asset value, beginning               
 of period  $9.53  $9.82  $9.95  $10.24  $10.41  $10.22  $9.96 
Net investment income4  0.23  0.35  0.45  0.45  0.47  0.48  0.49 
Net realized and unrealized gain               
 (loss) on investments  0.27  (0.30)  (0.13)  (0.29)  (0.18)  0.19  0.26 
Total from investment operations  0.50  0.05  0.32  0.16  0.29  0.67  0.75 
Less distributions               
From net investment income  (0.23)  (0.34)  (0.45)  (0.45)  (0.46)  (0.48)  (0.49) 
Net asset value, end of period  $9.80  $9.53  $9.82  $9.95  $10.24  $10.41  $10.22 
Total return (%)5       5.256,7  0.666  3.257  1.557  2.87  6.72  7.707 
 
Ratios and supplemental data               
Net assets, end of period               
 (in millions)  $434  $411  $417  $434  $459  $487  $492 
Ratios (as a percentage of average               
 net assets):               
 Expenses before reductions  1.018     1.028,9  0.96  0.95  0.96  0.99  0.97 
 Interest and fees10  —  —  0.06  0.08  —  —  — 
 Expenses net of fee waivers  1.008     1.028,9  1.02  1.03  0.96  0.99  0.96 
 Expenses net of fee waivers               
    and credits  1.008     1.028,9  1.02  1.03  0.96  0.99  0.96 
 Net investment income  4.708  5.058  4.53  4.45  4.54  4.71  4.87 
Portfolio turnover (%)  15  36  36  40  54  32  49 
 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

3 Audited by previous independent registered public accounting firm.

4 Based on the average daily shares outstanding.

5 Assumes dividend reinvestment (if applicable).

6 Not annualized.

7 Total returns would have been lower had certain expenses not been reduced during the periods shown.

8 Annualized.

9 Includes the impact of proxy expenses, which amounted to 0.04% of average net assets.

10 Interest expenses and fees are related to the Fund’s investment in inverse floater rate investments. Under accounting rules, the Fund recognizes additional income in an amount equal to these expenses.

See notes to financial statements

22  Tax-Free Bond Fund | Semiannual report 


CLASS B SHARES Period ended  11-30-091  5-31-092  8-31-08  8-31-07  8-31-06  8-31-053  8-31-043 
 
Per share operating performance               
Net asset value, beginning               
 of period  $9.53  $9.82  $9.95  $10.24  $10.41  $10.22  $9.96 
Net investment income4  0.19  0.29  0.38  0.38  0.39  0.41  0.42 
Net realized and unrealized gain               
 (loss) on investments  0.27  (0.29)  (0.14)  (0.30)  (0.18)  0.18  0.26 
Total from investment operations  0.46  —  0.24  0.08  0.21  0.59  0.68 
Less distributions               
From net investment income  (0.19)  (0.29)  (0.37)  (0.37)  (0.38)  (0.40)  (0.42) 
Net asset value, end of period  $9.80  $9.53  $9.82  $9.95  $10.24  $10.41  $10.22 
Total return (%)5  4.866  0.106  2.477  0.807  2.10  5.93  6.897 
 
Ratios and supplemental data               
Net assets, end of period (in millions)  $10  $11  $13  $16  $21  $32  $39 
Ratios (as a percentage of average               
 net assets):               
 Expenses before reductions  1.758     1.778,9  1.71  1.70  1.71  1.74  1.73 
 Interest and fees10  —  —  0.06  0.08  —  —  — 
 Expenses net of fee waivers  1.758     1.778,9  1.77  1.78  1.71  1.74  1.72 
 Expenses net of fee waivers               
    and credits  1.758     1.778,9  1.77  1.78  1.71  1.74  1.72 
 Net investment income  3.948  4.298  3.77  3.69  3.79  3.96  4.11 
Portfolio turnover (%)  15  36  36  40  54  32  49 
 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

3 Audited by previous independent registered public accounting firm.

4 Based on the average daily shares outstanding.

5 Assumes dividend reinvestment (if applicable).

6 Not annualized.

7 Total returns would have been lower had certain expenses not been reduced during the periods shown.

8 Annualized.

9 Includes the impact of proxy expenses, which amounted to 0.04% of average net assets.

10 Interest expenses and fees are related to the Fund’s investment in inverse floater rate investments. Under accounting rules, the Fund recognizes additional income in an amount equal to these expenses.

See notes to financial statements

Semiannual report | Tax-Free Bond Fund  23 


CLASS C SHARES Period ended  11-30-091  5-31-092  8-31-08  8-31-07  8-31-06  8-31-053  8-31-043 
 
Per share operating performance               
Net asset value, beginning               
 of period  $9.53  $9.82  $9.95  $10.24  $10.41  $10.22  $9.96 
Net investment income4  0.19  0.29  0.38  0.37  0.39  0.41  0.42 
Net realized and unrealized gain               
 (loss) on investments  0.27  (0.29)  (0.14)  (0.29)  (0.18)  0.18  0.26 
Total from investment operations  0.46  —  0.24  0.08  0.21  0.59  0.68 
Less distributions               
From net investment income  (0.19)  (0.29)  (0.37)  (0.37)  (0.38)  (0.40)  (0.42) 
Net asset value, end of period  $9.80  $9.53  $9.82  $9.95  $10.24  $10.41  $10.22 
Total return (%)5  4.866  0.106  2.477  0.807  2.10  5.93  6.897 
 
Ratios and supplemental data               
Net assets, end of period (in millions)  $33  $27  $13  $7  $7  $7  $8 
Ratios (as a percentage of average               
 net assets):               
 Expenses before reductions  1.758     1.778,9  1.71  1.70  1.71  1.74  1.72 
 Interest and fees10  —  —  0.06  0.08  —  —  — 
 Expenses net of fee waivers  1.758     1.778,9  1.77  1.78  1.71  1.74  1.71 
 Expenses net of fee waivers               
    and credits  1.758     1.778,9  1.77  1.78  1.71  1.74  1.71 
 Net investment income  3.948  4.318  3.78  3.70  3.79  3.96  4.11 
Portfolio turnover (%)  15  36  36  40  54  32  49 
 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

3 Audited by previous independent registered public accounting firm.

4 Based on the average daily shares outstanding.

5 Assumes dividend reinvestment (if applicable).

6 Not annualized.

7 Total returns would have been lower had certain expenses not been reduced during the periods shown.

8 Annualized.

9 Includes the impact of proxy expenses, which amounted to 0.04% of average net assets.

10 Interest expenses and fees are related to the Fund’s investment in inverse floater rate investments. Under accounting rules, the Fund recognizes additional income in an amount equal to these expenses.

See notes to financial statements

24  Tax-Free Bond Fund | Semiannual report 


Notes to financial statements
(unaudited)

Note 1
Organization

John Hancock Tax-Free Bond Fund (the Fund) is a diversified series of John Hancock Municipal Securities Trust (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek as high a level of interest income exempt from federal income tax as is consistent with preservation of capital.

John Hancock Advisers, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).

The Trustees have authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B and Class C shares. The shares of each class represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission and the Internal Revenue Service. Shareholders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that distribution plan. Class B shares will convert to Class A shares eight years after purchase.

Note 2
Significant accounting policies

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. Events or transactions occurring after period end through the date that the financial statements were issued, January 25, 2010, have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:

Security valuation

Investments are stated at value as of the close of the regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied quotes 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. Securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Debt obligations, where there are no prices available from an independent pricing service, are valued based on bid quotations or evaluated prices, as applicable, obtained from broker dealers or fair valued as described below. Certain short-term debt investments are valued at amortized cost.

Other assets and securities where market quotations are not readily available are valued at fair value as determined in good faith by the Fund’s Pricing Committee in accordance with procedures adopted by the Board of Trustees.

Fair value measurements

The Fund uses 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 and the valuation techniques used are summarized below:

Level 1 — Exchange-traded prices in active markets for identical securities. This technique is used for exchange-traded domestic common

Semiannual report | Tax-Free Bond Fund  25 


and preferred equities, certain foreign equities, warrants and rights.

Level 2 — Prices determined using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these techniques are received from independent pricing vendors and are based on an evaluation of the inputs described. These techniques are used for certain domestic preferred equities, certain foreign equities, unlisted rights and warrants, and fixed income securities.

Level 3 — 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’s Pricing Committee’s own assumptions about the factors that market participants would use in pricing an investment and would be based on the best information available. Securities using this technique are generally thinly traded or privately placed, and may be valued using broker quotes, which may include the use of the brokers’ own judgments about the assumptions that market participants would use.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

At November 30, 2009, total investments for the Fund are Level 2 under the hierarchy discussed above.

Security transactions and related
investment income

Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Discounts/ premiums are accreted/amortized for financial reporting purposes. Non-cash dividends are recorded at the fair market value of the securities received. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. The Fund uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.

Repurchase agreements

The Fund may enter into repurchase agreements. When the Fund enters into a repurchase agreement through its custodian, it receives delivery of securities, the amount of which at the time of purchase and each subsequent business day is required to be maintained at such a level that the market value is generally at least 102% of the repurchase amount. The Fund will take receipt of all securities underlying the repurchase agreements it has entered into until such agreements expire. If the seller defaults, the Fund would suffer a loss to the extent that proceeds from the sale of underlying securities were less than the repurchase amount. The Fund may enter into repurchase agreements maturing within seven days with domestic dealers, banks or other financial institutions deemed to be creditworthy by the Adviser.

Line of credit

The Fund and other affiliated funds have entered into an agreement which enables them to participate in a $150 million unsecured committed line of credit with the Fund’s custodian. The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.08% per annum, payable at the end of each calendar quarter, based on the average daily-unused portion of the line of credit, is charged to each participating fund on a prorated basis based on average net assets. For the six-months ended November 30, 2009, there were no borrowings under the line of credit by the Fund.

26  Tax-Free Bond Fund | Semiannual report 


Pursuant to the custodian agreement, the Fund’s custodian may, in its discretion, advance funds to the Fund to make properly authorized payments. When such payments result in an overdraft, the Fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law to the extent of any overdraft.

Expenses

The majority of expenses are directly identifiable to an individual fund. Trust expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.

Class allocations

Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the appropriate net as set value of the respective classes. Distribution and service fees, if any, and transfer agent fees, for all classes are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rate(s) applicable to each class.

Federal income taxes

The Fund intends to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.

For federal income tax purposes, the Fund has a $20,118,770 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, it will reduce the amount of capital gain distribution to be paid. The loss carryforward expires as follows: May 31, 2011 — $7,431,104, May 31, 2012 — $6,837,618, May 31, 2015 —$257,214, May 31, 2016 — $209,653 and May 31, 2017 — $5,383,181.

As of November 30, 2009, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

Distribution of income and gains

The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. The Fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are paid annually. During the nine-month period ended May 31, 2009, the tax character of distributions paid was as follows: ordinary income $2,249 and tax exempt income $15,396,054. During the year ended August 31, 2008, the tax character of distributions paid was as follows: ordinary income $180,250 and tax exempt income $19,720,236. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class.

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. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.

Note 3
Guarantees and indemnifications

Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would

Semiannual report | Tax-Free Bond Fund  27 


involve future claims that may be made against the Fund that have not yet occurred.

Note 4
Management fee and transactions
with affiliates and others

The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.55% of the first $500,000,000 of the Fund’s average daily net asset value, (b) 0.50% of the next $500,000,000, (c) 0.45% of the next $2,000,000,000 and (d) 0.425% of the Fund’s average daily net asset value in excess of $3,000,000,000. Prior to October 1, 2009, the Fund paid this fee monthly, equivalent, on an annual basis, to the sum of: (a) 0.55% of the first $500,000,000 of the Fund’s average daily net asset value, (b) 0.50% of the next $500,000,000, and (c) 0.45% of the Fund’s average daily net asset value in excess of $1,000,000,000. The Fund has a subadvisory agreement with MFC Global Investment Management (U.S.), LLC, a subsidiary of MFC and an affiliate of the Adviser. The Fund is not responsible for payment of subadvisory fees. The investment management fees incurred for the six-month period ended November 30, 2009, were equivalent to an annual effective rate of 0.55% of the Fund’s average daily net assets.

Pursuant to the Advisory Agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of the Fund, including the preparation of all tax returns, annual, semiannual and periodic reports to shareholders and the preparation of all regulatory reports. These expenses are allocated based on the relative share of net assets of each class at the time the expense was incurred. The accounting and legal services fees incurred for the six-month period ended November 30, 2009, were equivalent to an annual effective rate of 0.02% of the Fund’s average daily net assets.

The Fund has a Distribution Agreement with the Distributor. The Fund has adopted Distribution Plans with respect to Class A, Class B and Class C shares, pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for the services it provides as distributor of shares of the Fund. Accordingly, Class A and B shares make daily payments and Class C shares make monthly payments to the Distributor at an annual rate not to exceed 0.25%, 1.00% and 1.00% of average daily net asset value of Class A, Class B and Class C shares, respectively. A maximum of 0.25% of such payments may be service fees, as defined by the Conduct Rules of the Financial Industry Regulatory Authority. Under the Conduct Rules, curtailment of a portion of the Fund’s Rule 12b-1 payments could occur under certain circumstances.

Class A shares are assessed up-front sales charges. During the six-month period ended November 30, 2009, the Distributor received net up-front sales charges of $328,117 with regard to sales of Class A shares. Of this amount, $40,566 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $246,029 was paid as sales commissions to unrelated broker-dealers and $41,522 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a related broker-dealer. Signator Investors is an affiliate of the Adviser.

Class B shares that are redeemed within six years of purchase are subject to a contingent deferred sales charge (CDSC) at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a CDSC at a rate of 1.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from the CDSCs are paid to the Distributor and are used in whole or in part to defray its expenses for providing distribution-related services to the Fund in connection with the sale of Class B and Class C shares. During the six-month period ended November 30, 2009, CDSCs received by the

28  Tax-Free Bond Fund | Semiannual report 


Distributor amounted to $6,049 and $6,983 for Class B and Class C shares, respectively.

The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an indirect subsidiary of MFC. The transfer agent fees are made up of three components:

• The Fund pays a monthly transfer agent fee at an annual rate of 0.01% for all classes based on each class’s average daily net assets.

• All classes of the Fund pay a monthly fee based on an annual rate of $17.50 per shareholder account.

• In addition, Signature Services is reimbursed for certain out-of-pocket expenses.

Signature Services has voluntarily agreed to waive certain transfer agent expenses. The amount of this waiver for the six-month period ended November 30, 2009 was $5,446.

Certain investor accounts that maintain small balances are charged an annual small accounts fee. Amounts related to these fees are credited to the Fund and netted against transfer agent expenses. For the six-month period ended November 30, 2009, these fees totaled $12,086.

Class level expenses for the six-month period ended November 30, 2009 were as follows:

  Distribution and  Transfer 
Share class  service fees  agent fees 
Class A  $528,207  $225,626 
Class B  53,660  5,863 
Class C  148,665  14,993 
Total  $730,532  $246,482 

Note 5
Trustees’ fees

The compensation of independent Trustees is borne by the Fund. The independent Trustees may elect to defer, for tax purposes, their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments into other John Hancock funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund’s deferred compensation liability are recorded on the Fund’s books as an other asset. The deferred compensation liability and the related other asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund.

Note 6
Fund share transactions

This listing illustrates the number of Fund shares sold, reinvested and repurchased during the six-month period ended November 30, 2009, the nine-month period ended May 31, 2009, and the year ended August 31, 2008, along with the corresponding dollar value.

  Period ended 11-30-091  Period ended 5-31-092  Year ended 8-31-08 
  Shares  Amount  Shares  Amount  Shares  Amount 
Class A shares             
Sold  2,892,504  $27,999,824  4,449,118  $41,649,296  2,871,529  $28,467,107 
Distributions             
reinvested  736,257  7,150,846  1,145,256  10,610,551  1,419,271  14,057,101 
Repurchased  (2,531,212)  (24,425,251) (4,879,213)  (44,933,709) (5,517,877)  (54,881,160) 
Net increase             
(decrease)  1,097,549  $10,725,419  715,161  $7,326,138  (1,227,077) ($12,356,952) 
Class B shares             
Sold  128,865  $1,236,830  316,450  $2,954,933  169,785  $1,690,375 
Distributions             
reinvested  13,532  131,260  23,296  215,750  34,446  341,308 
Repurchased  (307,845)  (2,946,437)  (448,484)  (4,147,111)  (500,005)  (4,984,103) 
 
Net decrease  (165,448)  ($1,578,347)  (108,738)  ($976,428)  (295,774)  ($2,952,420) 

Semiannual report | Tax-Free Bond Fund  29 


  Period ended 11-30-091  Period ended 5-31-092  Year ended 8-31-08 
  Shares  Amount  Shares  Amount  Shares  Amount 
Class C shares             
Sold  887,338  $8,597,376  1,787,141  $16,684,166  733,348  $7,224,800 
Distributions             
reinvested  25,204  245,062  34,007  314,984  22,661  224,610 
Repurchased  (426,971)  (4,120,908)  (332,690)  (3,034,626)  (126,097)  (1,246,385) 
Net increase  485,571  $4,721,530  1,488,458  $13,964,524  629,912  $6,203,025 
Net increase             
(decrease)  1,417,672  $13,868,602  2,094,881  $20,314,234  (892,939)  ($9,106,347) 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

Note 7
Purchase and sale of securities

Purchases and proceeds from sales or maturities of securities during the six-month period ended November 30, 2009, aggregated $77,291,389 and $68,232,000, respectively. These amounts include purchases and sales of variable rate demand notes, which amounted to $3,600,000 and $2,100,000, respectively. Other short-term securities are excluded from these amounts.

30  Tax-Free Bond Fund | Semiannual report 


Board Consideration of and
Continuation of Investment Advisory
Agreement and Subadvisory Agreement

The Investment Company Act of 1940 (the 1940 Act) requires the Board of Trustees (the Board) of John Hancock Municipal Securities Trust (the Trust), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not “interested persons” of the Trust, as defined in the 1940 Act (the Independent Trustees), annually to meet in person to review and consider the continuation of existing advisory and subadvisory agreements. At meetings held on May 6–7 and June 8–9, 2009, the Board considered the renewal 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) for the John Hancock Tax-Free Bond Fund (the Fund).

The Advisory Agreement and the Subadvisory Agreement are collectively referred to as the Advisory Agreements. 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’s Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel.

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. 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’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 key factors considered by the Board and the conclusions reached are described below.

Nature, extent and quality of services

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. It considered the background and experience of senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Subadviser responsible for the daily investment activities of the Fund. The Board considered the Subadviser’s history and experience with the Fund. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadviser’s compliance department. In addition, the Board took into account the administrative and other non-advisory services provided to the Fund by the Adviser and its affiliates.

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 supported renewal of the Advisory Agreements.

Fund performance

The Board considered the performance results for the Fund over various time periods ended December 31, 2008. The Board also considered these results in comparison to the performance of a category of relevant funds (the Category), a peer group of comparable funds (the Peer Group) and a benchmark index. The funds within each Category and Peer Group were selected by Morningstar Inc. (Morningstar), an independent provider of

Semiannual report | Tax-Free Bond Fund  31 


investment company data. The Board reviewed the methodology used by Morningstar to select the funds in the Category and the Peer Group. The Board also considered updated performance information at its May and June 2009 meetings. Performance and other information may be quite different as of the date of this shareholders report.

The Board viewed favorably that for all periods under review the Fund’s performance was higher than the performance of its Category and Peer Group medians. The Board noted that for all periods under review the Fund’s performance was lower than the performance of its benchmark, the Barclays Capital Municipal Bond Index.

Investment advisory fee and subadvisory fee
rates and expenses

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 inline with the median rates of the Category and Peer Group.

The Board received and considered expense information regarding the Fund’s various components, including advisory fees, distribution and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, and other miscellaneous fees (e.g., 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’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 Peer Group and Category 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’s Net Expense Ratio was higher than the Category median but not appreciably higher than the Peer Group median. The Board also noted that the Fund’s Gross Expense Ratio was equal to the Peer Group median and was inline with the Category median.

The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Fund’s overall performance and expense results supported the re-approval of the Advisory Agreements.

The Board also received information about the investment subadvisory fee rate (the Subadvisory Agreement Rate) payable by the Adviser to the Subadviser for investment subadvisory services. The Board concluded that the Subadvisory Agreement Rate was fair and equitable, based on its consideration of the factors described here.

Profitability

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’s profitability to that of other similar investment advisers whose profitability 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.

Economies of scale

The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Fund’s ability to appropriately benefit from economies of scale under the Fund’s fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s and Subadviser’s costs are not specific to individual Funds, but rather are incurred across a variety of products and services. To ensure that any economies are reasonably

32  Tax-Free Bond Fund | Semiannual report 


shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the Advisory Agreement Rate.

Information about services to other clients

The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate and the Subadvisory Agreement Rate were not unreasonable, taking into account fee rates offered to others by the Adviser and Subadviser, respectively, after giving effect to differences in services.

Other benefits to the Adviser

The Board received information regarding potential “fall-out” 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).

Other factors and broader review

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 senior investment officers at various times throughout the year.

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.

August 30–September 1, 2009 Meeting

At a meeting held on August 30–September 1, 2009, the Board, including the Independent Trustees, considered and approved an amended Advisory Agreement Rate and Subadvisory Agreement Rate that included modified breakpoints. This consideration and approval followed a series of discussions with the Adviser and a review of an additional report prepared by the Adviser at the request of the Independent Trustees following the earlier Board meetings. The requested report compared the Fund’s breakpoints to its Peer Group at various hypothetical asset levels. The Independent Trustees noted that the report was prepared at their request to facilitate a more comprehensive review of the reasonableness of each fund’s breakpoints relative to its Peer Group and asset level. With the modified breakpoints, the Advisory Agreement Rates and Subadvisory Agreement Rates are the same as or lower than those under the previously approved Agreements at various asset levels. After review and consideration of the report, the Board, including a majority of the Independent Trustees, approved the amended Advisory Agreement Rate and Subadvisory Agreement Rate.

Semiannual report | Tax-Free Bond Fund  33 


More information

Trustees
Patti McGill Peterson, Chairperson
James R. Boyle†
James F. Carlin
William H. Cunningham
Deborah C. Jackson*
Charles L. Ladner
Stanley Martin*
Dr. John A. Moore
Steven R. Pruchansky††
Gregory A. Russo
John G. Vrysen†

Officers
Keith F. Hartstein
President and Chief Executive Officer

Andrew G. Arnott‡
Chief Operating Officer

Thomas M. Kinzler
Secretary and Chief Legal Officer

Francis V. Knox, Jr.
Chief Compliance Officer

Charles A. Rizzo
Chief Financial Officer

Michael J. Leary
Treasurer

Investment adviser
John Hancock Advisers, LLC

Subadviser
MFC Global Investment
Management (U.S.), LLC

Principal distributor
John Hancock Funds, LLC

Custodian
State Street Bank and Trust Company

Transfer agent
John Hancock Signature Services, Inc.

Legal counsel
K&L Gates LLP

The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.

* Member of the Audit Committee
††  Member of the Audit Committee effective 9-1-09
† Non-Independent Trustee
‡ Effective 9-1-09

The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.

The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.

We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.

You can also contact us:     
1-800-225-5291  Regular mail:  Express mail: 
jhfunds.com  John Hancock Signature Services, Inc.  John Hancock Signature Services, Inc. 
  P.O. Box 55913  Mutual Fund Image Operations 
  Boston, MA 02205-5913  30 Dan Road 
    Canton, MA 02021 

34  Tax-Free Bond Fund | Semiannual report 



1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com

Now available: electronic delivery
www.jhfunds.com/edelivery

This report is for the information of the shareholders of John Hancock Tax-Free Bond Fund.  520SA 11/09 
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.  1/10 




A look at performance

For the period ended November 30, 2009           
 
  Average annual returns (%)  Cumulative total returns (%)    SEC 30-

day yield

(%) as of

11-30-09 
  with maximum sales charge (POP)  with maximum sales charge (POP)   
        Six       
Class  1-year  5-year  10-year  months  1-year  5-year  10-year 
A  13.91  2.76  3.86  2.97  13.91  14.59  46.05  4.59 
B  13.47  2.59  3.73  2.41  13.47  13.66  44.24  4.05 
C  17.47  2.93  3.57  6.41  17.47  15.52  41.97  4.05 

Performance figures assume all distributions are reinvested. Public offering price (POP) figures reflect maximum sales charges on Class A shares of 4.5% and the applicable contingent deferred sales charge (CDSC) on Class B shares and Class C shares. The returns for Class C shares have been adjusted to reflect the elimination of the front-end sales charge, effective July 15, 2004. The Class B shares’ CDSC declines annually between years 1 to 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge will be assessed after the sixth year. Class C shares held for less than one year are subject to a 1% CDSC.

The expense ratios of the Fund, both net (including any fee waivers or expense limitations) and gross (excluding any fee waivers or expense limitations), are set forth according to the most recent publicly available prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. The net expenses equal the gross expenses and are as follows: Class A — 1.11%, Class B — 1.86% and Class C — 1.86%.

The returns reflect past results and should not be considered indicative of future performance. The return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Due to market volatility, the Fund’s current performance may be higher or lower than the performance shown. For current to the most recent month end performance data, please call 1–800–225–5291 or visit the Fund’s Web site at www.jhfunds.com.

The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder may pay on fund distributions or on the redemption of fund shares. Please note that a portion of the Fund’s income may be subject to taxes, and some investors may be subject to the Alternative Minimum Tax (AMT). Also note that capital gains are taxable.

The Fund’s performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.

6  High Yield Municipal Bond Fund | Semiannual report 

2


Growth of $10,000

This chart shows what happened to a hypothetical $10,000 investment in John Hancock High Yield Municipal Bond Fund Class A shares for the period indicated. For comparison, we’ve shown the same investment in the Barclays Capital Municipal Bond Index.



      With maximum   
Class  Period beginning  Without sales charge  sales charge  Index 
B2  11-30-99  $14,424  $14,424  $17,273 
C2  11-30-99  14,197  14,197  17,273 

Assuming all distributions were reinvested for the period indicated, the table above shows the value of a $10,000 investment in the Fund’s Class B and Class C shares, respectively, as of November 30, 2009. The Class C shares investment with maximum sales charge has been adjusted to reflect the elimination of the front-end sales charge, effective July 15, 2004. Performance of the classes will vary based on the difference in sales charges paid by shareholders investing in the different classes and the fee structure of those classes.

Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market.

It is not possible to invest directly in an index. Index figures do not reflect sales charges or direct expenses, which would have resulted in lower values if they did.

1 NAV represents net asset value and POP represents public offering price.

2 No contingent deferred sales charge applicable.

Semiannual report | High Yield Municipal Bond Fund  7 


Your expenses

These examples are intended to help you understand your ongoing operating expenses.

Understanding fund expenses

As a shareholder of the Fund, you incur two types of costs:

▪ Transaction costs which include sales charges (loads) on purchases or redemptions (varies by share class), minimum account fee charge, etc.

▪ Ongoing operating expenses including management fees, distribution and service fees (if applicable), and other fund expenses.

We are going to present only your ongoing operating expenses here.

Actual expenses/actual returns

This example is intended to provide information about your fund’s actual ongoing operating expenses, and is based on your fund’s actual return. It assumes an account value of $1,000.00 on June 1, 2009 with the same investment held until November 30, 2009.

  Account value  Ending value  Expenses paid during 
  on 6-1-09  on 11-30-09  period ended 11-30-091 
Class A  $1,000.00  $1,078.20  $5.37 
Class B  1,000.00  1,074.10  9.26 
Class C  1,000.00  1,074.10  9.26 

Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at November 30, 2009, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table above. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:


8  High Yield Municipal Bond Fund | Semiannual report 


Hypothetical example for comparison purposes

This table allows you to compare your fund’s ongoing operating expenses with those of any other fund. It provides an example of the Fund’s hypothetical account values and hypothetical expenses based on each class’s actual expense ratio and an assumed 5% annualized return before expenses (which is not your fund’s actual return). It assumes an account value of $1,000.00 on June 1, 2009, with the same investment held until November 30, 2009. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses.

  Account value  Ending value  Expenses paid during 
  on 6-1-09  on 11-30-09  period ended 11-30-091 
Class A  $1,000.00  $1,019.90  $5.22 
Class B  1,000.00  1,016.10  9.00 
Class C  1,000.00  1,016.10  9.00 

Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the prospectus for details regarding transaction costs.

1 Expenses are equal to the Fund’s annualized expense ratio of 1.03%, 1.78% and 1.78% for Class A, Class B and Class C shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).

Semiannual report | High Yield Municipal Bond Fund  9 


Portfolio summary

Top 10 Holdings1       
Atlanta Water & Waste Water Revenue, 11-01-19, 5.000%  4.3% 
Foothill Eastern Transportation Corridor Agency, 01-01-18, Zero  2.6% 
Golden State Tobacco Securitization Corp., 06-01-27, 4.500%  2.1% 
North Texas Tollway Authority, 01-01-38, 5.750%    1.9% 
Texas Municipal Gas Acquisition & Supply Corp., 12-15-26, 6.250%  1.5% 
Tennessee Energy Acquisition Corp., 02-01-25, 5.000%  1.4% 
New York Liberty Development Corp., 10-01-35, 5.250%  1.4% 
Buckeye Ohio Tobacco Settlement Financing Authority, 06-01-24, 5.125%  1.4% 
Pennsylvania Turnpike Commission, 12-01-38, Zero  1.3% 
North Texas Tollway Authority, 01-01-39, 6.250%    1.3% 
Sector Composition2,3       
General Obligation Bonds  3%  Power  7% 
Revenue Bonds    Airport  6% 
Other Revenue  23%  Water & Sewer  5% 
Development  15%  Education  5% 
Pollution  12%  Utilities  1% 
Health Care  11%  Tobacco  1% 
Transportation  10%  Short-Term Investments & Other  1% 
Quality Composition2       
AAA  9%  BB  7% 
AA  5%  B  4% 
A  40%  CCC  1% 
BBB  34%     
  

 

1 As a percentage of net assets on November 30, 2009. Excludes cash and cash equivalents.

2 As a percentage of net assets on November 30, 2009.

3 Investments focused in one sector may fluctuate more widely than investments across multiple sectors. Because the Fund may focus on particular sectors, its performance may depend on the performance of those sectors.

10  High Yield Municipal Bond Fund | Semiannual report 


Fund’s investments

As of 11-30-09 (unaudited)

    Maturity     
  Rate  date  Par value  Value 
Corporate Bonds 0.43%        $1,034,300 
(Cost $1,000,000)         
 
Thrifts & Mortgage Finance 0.43%        1,034,300 
Charter MAC Equity Centerline Equity Issuer         
 Trust (S)  6.000%  05-15-19  $1,000,000  1,034,300 
 
Municipal Bonds 98.07%        $237,120,974 
(Cost $225,711,249)         
 
Alabama 2.40%        5,798,540 
Birmingham Special Care Facilities         
 Financing Authority,         
 Childrens Hospital  6.125  06-01-34  2,000,000  2,033,820 
Courtland Industrial Development Board,         
 International Paper Company Project,         
 Series A AMT  5.200  06-01-25  2,000,000  1,762,800 
Selma Industrial Development Board,         
 International Paper Company Project,         
 Series A  6.250  11-01-33  2,000,000  2,001,920 
 
Arizona 3.27%        7,896,000 
Maricopa County Industrial         
 Development Authority,         
 Catholic Healthcare West, Series A  6.000  07-01-39  3,000,000  3,101,400 
Maricopa County Pollution Control Corp.,         
 Arizona Public Service Company, Series A  6.000  05-01-29  1,500,000  1,563,570 
 El Paso Electric Company Project, Series B  7.250  04-01-40  2,000,000  2,231,020 
 Palo Verde Public Service, Series A  6.250  01-01-38  1,000,000  1,000,010 
 
California 10.76%        26,013,015 
California Pollution Control         
 Financing Authority,         
 Browning-Ferris Industries, Inc. AMT  6.750  09-01-19  1,000,000  1,002,230 
California State Public Works Board,         
 California State University, Series D  6.250  04-01-34  1,000,000  1,023,310 
California Statewide Communities         
 Development Authority,         
 Thomas Jefferson School, Series A  7.250  10-01-38  1,000,000  1,006,000 
Foothill Eastern Transportation         
 Corridor Agency,         
 Capital Appreciation  Zero  01-15-36  4,000,000  629,440 
 Capital Appreciation, Series A  Zero  01-01-18  7,950,000  6,169,676 
Golden State Tobacco Securitization Corp.,         
 Series A–1  4.500  06-01-27  5,935,000  5,099,588 

See notes to financial statements

Semiannual report | High Yield Municipal Bond Fund  11 


    Maturity     
  Rate  date  Par value  Value 
California (continued)         
M-S-R Energy Authority,         
 Series A  6.500%  11-01-39  $1,500,000  $1,550,385 
 Series B  7.000  11-01-34  1,500,000  1,647,120 
Millbrae Residential Facility Revenue,         
 Magnolia of Millbrae Project, Series A  7.375  09-01-27  995,000  949,966 
San Bernardino County,         
 Medical Center Financing Project (D)  5.500  08-01-17  2,500,000  2,533,000 
Southern California Public Power Authority,         
 Natural Gas Project No: 1, Series A  5.250  11-01-26  1,500,000  1,480,080 
State of California,         
 General Obligation  6.000  11-01-39  1,000,000  1,014,340 
 General Obligation  5.000  10-01-29  2,000,000  1,907,880 
 
Colorado 2.71%        6,557,555 
Colorado Health Facilities Authority,         
 Christian Living Community Project, Series A  9.000  01-01-34  750,000  806,168 
 Christian Living Community Project, Series A  5.750  01-01-26  1,000,000  862,230 
E-470 Public Highway Authority, Series B  Zero  09-01-35  15,700,000  2,382,632 
Public Authority for Colorado Energy,         
 Natural Gas Purchase Revenue  6.250  11-15-28  2,500,000  2,506,525 
 
District of Columbia 1.08%        2,615,936 
Metropolitan Washington DC         
 Airports Authority,         
 Dulles Toll Road, Series B  Zero  10-01-39  4,600,000  570,446 
 Dulles Toll Road, Series C (D)  Zero  10-01-41  3,000,000  2,045,490 
 
Florida 10.37%        25,065,402 
Bonnet Creek Resort Community         
 Development District,         
 Special Assessment  7.375  05-01-34  1,055,000  974,050 
 Special Assessment  7.250  05-01-18  1,445,000  1,337,781 
Capital Projects Finance Authority,         
 Student Housing Revenue, Series A  7.850  08-15-31  2,000,000  2,162,440 
 Student Housing Revenue, Series G  9.125  10-01-11  875,000  886,594 
Capital Region Community         
 Development District,         
 Series A  7.000  05-01-39  1,250,000  1,169,125 
Capital Trust Agency,         
 Seminole Tribe Convention, Series A (S)  8.950  10-01-33  1,000,000  1,225,300 
Crossings at Fleming Island Community         
 Development District, Series C  7.100  05-01-30  1,000,000  952,440 
Heritage Harbour North Community         
 Development District,         
 Special Assessment  6.375  05-01-38  1,245,000  939,676 
Live Oak Community Development District         
 No: 1, Series A  6.300  05-01-34  1,000,000  1,008,740 
Miami Beach Health Facilities Authority,         
 Mt. Sinai Medical Center, Series A  6.125  11-15-11  390,000  390,094 
Miami-Dade County Aviation Revenue,         
 Miami International Airport,         
 Series A  5.500  10-01-36  2,000,000  2,040,960 
 Series A AMT (D)  5.000  10-01-38  2,000,000  1,779,580 

See notes to financial statements

12  High Yield Municipal Bond Fund | Semiannual report 


    Maturity     
  Rate  date  Par value  Value 
Florida (continued)         
Orlando Urban Community         
 Development District,         
 Special Assessment  6.250%  05-01-34  $1,000,000  $805,270 
 Special Assessment  6.000  05-01-20  640,000  549,798 
Pensacola Airport Revenue  6.000  10-01-28  2,000,000  2,088,980 
Poinciana Community Development District,         
 Series A  7.125  05-01-31  1,200,000  1,200,072 
Seminole Indian Tribe of Florida,         
 Series A (S)  5.250  10-01-27  1,000,000  895,270 
South Kendall Community         
 Development District,         
 Series A  5.900  05-01-35  945,000  833,424 
Tolomato Community         
 Development District,         
 Special Assessment  6.650  05-01-40  1,000,000  781,080 
 Special Assessment  6.450  05-01-23  1,000,000  834,150 
Village Community Development District,         
 No: 5, Series A  6.500  05-01-33  1,415,000  1,451,932 
 No: 8, Special Assessment  6.375  05-01-38  900,000  758,646 
 
Georgia 7.04%        17,016,543 
Atlanta Tax Allocation,         
 Eastside Project, Series B  5.600  01-01-30  1,500,000  1,308,735 
Atlanta Water & Waste Water Revenue (D)  5.000  11-01-19  10,000,000  10,482,300 
Atlanta Water & Waste Water Revenue,         
 Series A  6.000  11-01-28  1,000,000  1,058,160 
Gainesville & Hall County         
 Development Authority,         
 Acts Retirement, Series A–2  6.625  11-15-39  1,100,000  1,148,433 
Marietta Development Authority,         
 Life University, Inc. Project  7.000  06-15-30  1,500,000  1,395,360 
Municipal Electric Authority of Georgia,         
 Series D  5.500  01-01-26  1,500,000  1,623,555 
 
Guam 0.85%        2,050,300 
Guam Government,         
 General Obligation, Series A  7.000  11-15-39  2,000,000  2,050,300 
 
Hawaii 0.44%        1,055,760 
Hawaii State Department of Budget & Finance,         
 Series A  9.000  11-15-44  1,000,000  1,055,760 
Illinois 2.13%        5,153,620 
Chicago Tax Increment Revenue,         
 Pilsen Redevelopment, Series B  6.750  06-01-22  2,000,000  1,970,200 
Illinois Development Finance Authority,         
 Pollution Control Revenue, Series C1  5.950  08-15-26  1,000,000  972,080 
Illinois Finance Authority,         
 Rush-Copley Medical Center, Inc., Series A  7.250  11-01-38  2,000,000  2,211,340 
 
Indiana 1.87%        4,517,937 
Indiana Finance Authority,         
 Duke Energy, Series B  6.000  08-01-39  1,000,000  1,071,420 
 Duke Energy, Series C  4.950  10-01-40  3,000,000  2,860,410 
St. Joseph County, Holy Cross Village         
 Notre Dame Project,         
 Series A  6.000  05-15-26  230,000  201,020 
 Series A  6.000  05-15-38  475,000  385,087 

See notes to financial statements

Semiannual report | High Yield Municipal Bond Fund  13 


    Maturity     
  Rate  date  Par value  Value 
Iowa 0.50%        $1,209,473 
Altoona Urban Renewal Tax         
 Increment Revenue,         
 Annual Appropriation  6.000%  06-01-34  $1,000,000  1,002,640 
Iowa Finance Authority,         
 Care Initiatives Project  9.250  07-01-25  180,000  206,833 
 
Kentucky 0.44%        1,052,660 
Owen County Kentucky Waterworks         
 System Revenue,         
 American Water Company Project, Series A  6.250  06-01-39  1,000,000  1,052,660 
 
Louisiana 1.74%        4,207,010 
Louisiana Local Government         
 Environmental Facilities,         
 Westlake Chemical Corp. Project  6.750  11-01-32  2,000,000  2,030,060 
St. John Baptist Parish Revenue,         
 Marathon Oil Corp., Series A  5.125  06-01-37  2,500,000  2,176,950 
 
Maryland 1.99%        4,802,570 
Baltimore County,         
 East Baltimore Resh Project, Series A  7.000  09-01-38  1,000,000  947,940 
Maryland Economic Development Corp.,         
 Potomac Electric Power Company  6.200  09-01-22  2,000,000  2,269,420 
Prince Georges County,         
 National Harbor Project  5.200  07-01-34  1,000,000  826,390 
 Victoria Falls Project  5.250  07-01-35  1,000,000  758,820 
 
Massachusetts 3.31%        8,015,950 
Massachusetts Development         
 Finance Agency,         
 Dominion Energy Brayton Point AMT  5.000  02-01-36  1,000,000  871,100 
 Ogden Haverhill Project, Series B AMT  5.500  12-01-19  1,700,000  1,560,090 
Massachusetts Health & Educational         
 Facilities Authority,         
 Caregroup, Series E-1  5.125  07-01-33  1,000,000  910,200 
 Civic Investments, Series B  9.200  12-15-31  2,500,000  3,122,825 
Massachusetts State College         
 Building Authority, Series A  5.500  05-01-49  1,500,000  1,551,735 
 
Michigan 0.89%        2,156,310 
Michigan Strategic Fund Ltd.,         
 Detroit Education  5.625  07-01-20  1,000,000  1,094,760 
 Dow Chemical, Series A–1 AMT  6.750  12-01-28  1,000,000  1,061,550 
 
Minnesota 0.39%        946,540 
North Oak Senior Housing Revenue,         
 Presbyterian Homes North Oaks  6.000  10-01-27  1,000,000  946,540 
 
Mississippi 0.41%        989,030 
Mississippi Business Finance Corp.,         
 System Energy Resources, Inc.  5.875  04-01-22  1,000,000  989,030 
 
Missouri 0.78%        1,880,228 
Missouri Joint Municipal Electric         
 Utility Commission,         
 Iatan 2 Project, Series A  6.000  01-01-39  1,000,000  1,041,860 
St. Louis Airport Revenue  6.625  07-01-34  800,000  838,368 

See notes to financial statements

14  High Yield Municipal Bond Fund | Semiannual report 


    Maturity     
  Rate  date  Par value  Value 
Nevada 1.48%        $3,576,830 
Clark County Nevada Industrial         
 Development Revenue,         
 Nevada Power Company, Series A AMT  5.600%  10-01-30  $3,000,000  2,725,620 
Sparks Tourism Improvement District No: 1,         
 Series A (S)  6.750  06-15-28  1,000,000  851,210 
 
New Hampshire 1.04%        2,512,685 
New Hampshire Business         
 Finance Authority,         
 Public Service Company, Series B AMT (D)  4.750  05-01-21  1,500,000  1,435,005 
 United Illuminating Company, Series A AMT  6.875  12-01-29  1,000,000  1,077,680 
 
New Jersey 3.95%        9,546,596 
New Jersey Economic         
 Development Authority,         
 Continental Airlines, Inc. AMT  6.625  09-15-12  2,460,000  2,400,296 
 Continental Airlines, Inc. AMT  6.250  09-15-29  1,000,000  827,420 
New Jersey Health Care Facilities         
 Financing Authority,         
 Care Institute, Inc., Cherry Hill Project  8.000  07-01-27  1,250,000  1,021,875 
 St. Peters University Hospital, Series A  6.875  07-01-30  1,000,000  1,002,900 
New Jersey State Educational         
 Facilities Authority,         
 University of Medicine and Dentistry  7.500  12-01-32  1,000,000  1,122,080 
Tobacco Settlement Financing Corp.,         
 Prerefunded  6.250  06-01-43  1,000,000  1,171,700 
 Series 1A  4.500  06-01-23  2,235,000  2,000,325 
 
New York 5.37%        12,989,142 
Long Island Power Authority,         
 Series A  5.750  04-01-39  2,500,000  2,668,700 
 Series C (D)  5.250  09-01-29  1,475,000  1,612,559 
New York City Industrial         
 Development Agency,         
 American Airlines-JFK Airport AMT  7.500  08-01-16  2,000,000  1,923,880 
 World Trade Center Project, Series A  6.250  03-01-15  1,500,000  1,483,215 
New York City Municipal Water         
 Finance Authority,         
 Series F (V)  0.210  06-15-35  400,000  400,000 
New York Liberty Development Corp.,         
 Goldman Sachs Group, Inc.  5.250  10-01-35  3,500,000  3,438,540 
New York State Dormitory Authority,         
 Long Island Jewish Medical Center  5.500  05-01-37  1,000,000  998,540 
Port Authority of New York & New Jersey,         
 KICA Partners AMT  6.750  10-01-19  555,000  463,708 
 
North Carolina 0.91%        2,211,420 
North Carolina Eastern Municipal         
 Power Agency,         
 Series A  5.500  01-01-26  1,000,000  1,053,270 
 Series C  6.750  01-01-24  1,000,000  1,158,150 
 
Ohio 3.20%        7,737,041 
Buckeye Ohio Tobacco Settlement         
 Financing Authority,         
 Series A–2  5.125  06-01-24  3,905,000  3,307,808 
Cleveland Ohio Airport Revenue,         
 Continental Airlines, Inc. Project AMT  5.375  09-15-27  1,510,000  1,114,108 

See notes to financial statements

Semiannual report | High Yield Municipal Bond Fund  15 


    Maturity     
  Rate  date  Par value  Value 
Ohio (continued)         
Hickory Chase Community Authority,         
 Hickory Chase Project  7.000%  12-01-38  $1,000,000  $651,940 
Ohio Air Quality Development Authority,         
 FirstEnergy Solutions Corp., Series A  5.750  06-01-33  1,500,000  1,595,835 
 FirstEnergy Solutions Corp., Series C AMT  7.250  11-01-32  1,000,000  1,067,350 
 
Oklahoma 1.57%        3,802,732 
Oklahoma Municipal Power Authority,         
 Series A  6.000  01-01-38  1,685,000  1,821,451 
Tulsa Municipal Airport Trust Trustees,         
 American Airlines Project  6.250  06-01-20  1,375,000  1,141,291 
 AMR Corp., Series A AMT  7.750  06-01-35  1,000,000  839,990 
 
Oregon 0.64%        1,555,289 
Western Generation Agency, Wauna         
 Cogeneration Project,         
 Series B AMT  5.000  01-01-14  1,105,000  1,082,204 
 Series B AMT  5.000  01-01-16  500,000  473,085 
 
Pennsylvania 4.47%        10,800,465 
Allegheny County Hospital         
 Development Authority,         
 West Penn Health Systems, Series A  5.000  11-15-28  1,000,000  745,900 
Allegheny County Industrial         
 Development Authority,         
 US Steel Corp.  6.875  05-01-30  1,000,000  1,012,530 
 US Steel Corp.  5.500  11-01-16  1,000,000  985,000 
Cumberland County Municipal Authority,         
 Diakon Lutheran  6.375  01-01-39  1,500,000  1,469,775 
Pennsylvania Economic Development         
 Financing Authority,         
 Allegheny Energy Supply Company  7.000  07-15-39  2,500,000  2,668,300 
Pennsylvania Turnpike Commission,         
 Capital Appreciation, Series C  Zero  12-01-38  4,000,000  788,560 
 Capital Appreciation, Series E  Zero  12-01-38  5,000,000  3,130,400 
 
Puerto Rico 4.43%        10,720,858 
Commonwealth of Puerto Rico,         
 Series B  6.500  07-01-37  2,000,000  2,088,260 
Puerto Rico Aqueduct & Sewer Authority,         
 Series A  6.000  07-01-38  1,000,000  1,004,590 
 Series A  Zero  07-01-24  1,500,000  1,455,720 
Puerto Rico Electric Power Authority,         
 Series TT  5.000  07-01-32  1,250,000  1,155,988 
Puerto Rico Sales Tax Financing Authority,         
 Capital Appreciation, Series A  Zero  08-01-32  3,000,000  2,231,670 
 Series A  5.750  08-01-37  2,000,000  2,023,480 
Puerto Rico Sales Tax Financing Corp.,         
 Capital Appreciation, Series A (D)  Zero  08-01-41  5,000,000  761,150 
 
Rhode Island 0.22%        533,966 
Tobacco Settlement Financing Corp.,         
 Series A  6.000  06-01-23  200,000  201,334 
Town of Tiverton, Tax Increment Revenue,         
 Mount Hope Bay Village, Series A  6.875  05-01-22  335,000  332,632 

See notes to financial statements

16  High Yield Municipal Bond Fund | Semiannual report 


    Maturity     
  Rate  date  Par value  Value 
South Carolina 0.46%        $1,117,026 
Lancaster County,         
 Edenmoor Improvements District, Series A  5.750%  12-01-37  $985,000  392,040 
Tobacco Settlement Revenue         
 Management Authority  5.000  06-01-18  725,000  724,986 
 
Tennessee 1.91%        4,618,138 
Johnson City Health & Educational Facilities,         
 Mountain States Health Alliance, Series A  7.500  07-01-33  1,000,000  1,135,400 
Tennessee Energy Acquisition Corp.,         
 Series C  5.000  02-01-25  3,720,000  3,482,738 
 
Texas 12.20%        29,489,182 
Bexar County Health Facilities         
 Development Corp.,         
 Army Retirement Residence Project  6.300  07-01-32  150,000  170,337 
Brazos Harbor Industrial Development Corp.,         
 Dow Chemical Project AMT  5.900  05-01-38  1,500,000  1,452,495 
Brazos River Authority,         
 TXU Energy Company, Series A AMT  7.700  04-01-33  3,500,000  2,032,730 
Guadalupe-Blanco River Authority,         
 E.I. Dupont De Nemours Project AMT  6.400  04-01-26  1,000,000  1,000,590 
Gulf Coast Industrial Development Authority,         
 CITGO Petroleum Corp. AMT  8.000  04-01-28  2,100,000  2,115,288 
Gulf Coast Waste Disposal Authority,         
 International Paper Company, Series A AMT  6.100  08-01-24  1,500,000  1,486,950 
Harris County Health Facilities         
 Development Corp.,         
 Memorial Hermann Healthcare, Series B  7.250  12-01-35  1,000,000  1,112,440 
Matagorda County Navigation District,         
 Central Power & Light Project, Series A  6.300  11-01-29  1,000,000  1,071,370 
Metro Health Facilities Development Corp.,         
 Wilson N. Jones Memorial Hospital  7.250  01-01-31  1,000,000  939,510 
Mission Economic Development Corp.,         
 Allied Waste, Inc., Series A AMT  5.200  04-01-18  1,500,000  1,465,215 
 Waste Management, Inc. AMT  6.000  08-01-20  975,000  1,031,667 
North Texas Tollway Authority,         
 Series A  6.250  01-01-39  3,000,000  3,135,030 
 Series C  5.250  01-01-44  1,500,000  1,422,615 
 Series F  5.750  01-01-38  4,500,000  4,519,935 
 Series K-2  6.000  01-01-38  1,000,000  1,028,120 
Tarrant County Cultural Education Facilities         
 Finance Corp.,         
 Air Force Retirement Facility  6.375  11-15-44  2,000,000  1,950,220 
Texas Municipal Gas Acquisition &         
 Supply Corp.,         
 Series D  6.250  12-15-26  3,500,000  3,554,670 
 
Virgin Islands 0.43%        1,046,760 
Virgin Islands Public Finance Authority,         
 Series A  6.750  10-01-37  1,000,000  1,046,760 
 
Virginia 0.94%        2,267,760 
Washington County Industrial         
 Development Authority,         
 Blue Ridge Medical Corp., Series C  7.750  07-01-38  2,000,000  2,267,760 

See notes to financial statements

Semiannual report | High Yield Municipal Bond Fund  17 


    Maturity     
  Rate  date  Par value  Value 
Washington 0.43%        $1,040,220 
Washington Health Care Facilities Authority,         
 Swedish Health Services, Series A  6.500%  11-15-33  $1,000,000  1,040,220 
 
Wisconsin 0.31%        760,545 
Wisconsin Health & Educational         
 Facilities Authority,         
 St. John’s Community, Inc., Series A  7.625  09-15-39  750,000  760,545 
 
Wyoming 0.74%        1,793,940 
Sweetwater County,         
 FMC Corp. AMT  5.600  12-01-35  2,000,000  1,793,940 
 
      Par value  Value 
Short-Term Investments 0.95%        $2,301,000 
(Cost $2,301,000)         
 
Repurchase Agreement 0.95%         
Repurchase Agreement with State Street Corp. dated 11-30-09       
 at 0.05% to be repurchased at $2,301,003 on 12-1-09,       
 collateralized by $2,350,000 U.S. Treasury Bill, 0.00%       
 due 5-13-10 (valued at $2,348,825 including interest)    $2,301,000  2,301,000 
Total investments (Cost $229,012,249)† 99.45%      $240,456,274 
Other assets and liabilities, net 0.55%        $1,328,626 
Total net assets 100.00%        $241,784,900 

The percentage shown for each investment category is the total value of that category as a percentage of the net assets of the Fund.

AMT Interest earned from these securities may be considered a tax preference item for purpose of the Federal Alternative Minimum Tax.

(D) Bond is insured by one of these companies:

Insurance coverage  As a % of total investments 
Assured Guaranty Ltd.    0.85% 
CIFG Holding Ltd.    1.41% 
Financial Security Assurance, Inc.    4.36% 
National Public Finance Guarantee Insurance Company  1.97% 

(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.

(V) Variable rate demand notes are securities whose interest rates are reset periodically at market levels. These securities are often payable on demand and are shown at their current rates as of November 30, 2009.

† At November 30, 2009, the aggregate cost of investment securities for federal income tax purposes was $227,935,550. Net unrealized appreciation aggregated $12,520,724, of which $17,711,029 related to appreciated investment securities and $5,190,305 related to depreciated investment securities.

See notes to financial statements

18  High Yield Municipal Bond Fund | Semiannual report 


F I N A N C I A L   S T A T E M E N T S

Financial statements

Statement of assets and liabilities 11-30-09 (unaudited)

This Statement of Assets and Liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value and the maximum offering price per share.

Assets   
Investments, at value (Cost $229,012,249)  $240,456,274 
Cash  461 
Receivable for fund shares sold  637,984 
Interest receivable  3,612,441 
Other receivables and prepaid assets  44,466 
 
Total assets  244,751,626 
Liabilities   
Payable for investments purchased  2,465,995 
Payable for fund shares repurchased  84,332 
Distributions payable  337,608 
Payable to affiliates   
 Accounting and legal services fees  2,539 
 Transfer agent fees  1,519 
 Distribution and service fees  40,099 
 Trustees’ fees  1,278 
Other liabilities and accrued expenses  33,356 
 
Total liabilities  2,966,726 
 
Net assets   
Capital paid-in  $247,030,911 
Undistributed net investment income  209,734 
Accumulated net realized loss on investments  (16,899,770) 
Net unrealized appreciation on investments  11,444,025 
 
Net assets  $241,784,900 
 
Net asset value per share   
Based on net asset values and shares outstanding — the Fund has an   
 unlimited number of shares authorized with no par value   
Class A ($182,508,245 ÷ 23,362,043 shares)  $7.81 
Class B ($8,886,389 ÷ 1,137,572 shares)1  $7.81 
Class C ($50,390,266 ÷ 6,450,743 shares)1  $7.81 
Maximum offering price per share   
Class A (net asset value per share ÷ 95.5%)2  $8.18 

1 Redemption price is equal to net asset value less any applicable contingent deferred sales charge.

2 On single retail sales of less than $100,000. On sales of $100,000 or more and on group sales the offering price is reduced.

See notes to financial statements

Semiannual report | High Yield Municipal Bond Fund  19 


F I N A N C I A L   S T A T E M E N T S

Statement of operations For the period ended 11-30-09 (unaudited)

This Statement of Operations summarizes the Fund’s investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated.

Investment income   
 
Interest  $6,720,890 
 
Expenses   
Investment management fees (Note 4)  604,866 
Distribution and service fees (Note 4)  461,690 
Accounting and legal services fees (Note 4)  16,448 
Transfer agent fees (Note 4)  98,402 
Trustees’ fees (Note 5)  8,504 
State registration fees  19,747 
Printing and postage fees  19,679 
Professional fees  34,258 
Custodian fees  24,703 
Registration and filing fees  12,909 
Other  3,793 
 
Total expenses  1,304,999 
Less expense reductions (Note 4)  (13,308) 
 
Net expenses  1,291,691 
 
Net investment income  5,429,199 
 
Realized and unrealized gain (loss)   
Net realized loss on investments  (764,045) 
Change in net unrealized appreciation (depreciation) of investments  10,964,678 
 
Net realized and unrealized gain  10,200,633 
 
Increase in net assets from operations  $15,629,832 

See notes to financial statements

20  High Yield Municipal Bond Fund | Semiannual report 


F I N A N C I A L   S T A T E M E N T S

Statements of changes in net assets

These Statements of Changes in Net Assets show how the value of the Fund’s net assets has changed during the last 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.

  Period  Period  Year 
  ended  ended  ended 
  11-30-091  5-31-092  8-31-08 
 
Increase (decrease) in net assets       
 
From operations       
Net investment income  $5,429,199  $5,711,727  $4,765,634 
Net realized loss  (764,045)  (5,100,008)  (2,343,261) 
Change in net unrealized       
 appreciation (depreciation)  10,964,678  (1,063,863)  (1,963,817) 
Increase (decrease) in net assets resulting       
 from operations  15,629,832  (452,144)  458,556 
Distributions to shareholders       
From net investment income       
Class A  (4,083,427)  (4,087,284)  (3,699,573) 
Class B  (189,001)  (261,655)  (387,707) 
Class C  (931,329)  (824,023)  (626,760) 
Total distributions  (5,203,757)  (5,172,962)  (4,714,040) 
From Fund share transactions (Note 6)  49,453,486  62,887,615  38,375,589 
Total increase  59,879,561  57,262,509  34,120,105 
 
Net assets       
Beginning of period  181,905,339  124,642,830  90,522,725 
End of period  $241,784,900  $181,905,339  $124,642,830 
Undistributed (distributions in excess of)       
 net investment income  $209,734  ($15,708)  ($4,074) 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

See notes to financial statements

Semiannual report | High Yield Municipal Bond Fund  21 


Financial highlights

The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.

CLASS A SHARES Period ended  11-30-091  5-31-092  8-31-08  8-31-07  8-31-06  8-31-053 8-31-043 
 
Per share operating performance               
Net asset value, beginning               
 of period  $7.43  $7.99  $8.33  $8.68  $8.62  $8.27  $8.14 
Net investment income4  0.20  0.32  0.41  0.41  0.42  0.43  0.47 
Net realized and unrealized gain               
 (loss) on investments  0.38  (0.58)  (0.34)  (0.35)  0.05  0.35  0.12 
Total from investment operations  0.58  (0.26)  0.07  0.06  0.47  0.78  0.59 
Less distributions               
From net investment income  (0.20)  (0.30)  (0.41)  (0.41)  (0.41)  (0.43)  (0.46) 
Net asset value, end of period  $7.81  $7.43  $7.99  $8.33  $8.68  $8.62  $8.27 
Total return (%)5  7.826  (3.04)6  0.817  0.607  5.617  9.64  7.417 
 
Ratios and supplemental data               
Net assets, end of period (in millions)  $183  $139  $94  $71  $72  $72  $69 
Ratios (as a percentage of average               
 net assets):               
 Expenses before reductions  1.048  1.158,9  1.09  1.13  1.09  1.14  1.10 
 Interest and fees10  —  —  0.16  0.20  —  —  — 
 Expenses net of fee waivers  1.038  1.158,9  1.25  1.33  1.09  1.14  1.09 
 Expenses net of fee waivers               
    and credits  1.038  1.158,9  1.25  1.33  1.09  1.14  1.09 
 Net investment income  5.288  6.078  4.85  4.77  4.71  5.09  5.67 
Portfolio turnover (%)  7  49  75  63  52  65  57 
 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

3 Audited by previous independent registered public accounting firm.

4 Based on the average daily shares outstanding.

5 Assumes dividend reinvestment (if applicable).

6 Not annualized.

7 Total returns would have been lower had certain expenses not been reduced during the periods shown.

8 Annualized.

9 Includes the impact of proxy fees, which amounted to 0.04% of average net assets.

10 Interest expenses and fees are related to the Fund’s investment in inverse floater rate investments. Under accounting rules, the Fund recognizes additional income in an amount equal to these expenses.

See notes to financial statements

22  High Yield Municipal Bond Fund | Semiannual report 


CLASS B SHARES Period ended  11-30-091  5-31-092  8-31-08  8-31-07  8-31-06  8-31-053 8-31-043 
 
Per share operating performance               
Net asset value, beginning               
 of period  $7.43  $7.99  $8.33  $8.68  $8.62  $8.27  $8.14 
Net investment income4  0.18  0.28  0.35  0.35  0.36  0.37  0.41 
Net realized and unrealized gain               
 (loss) on investments  0.37  (0.58)  (0.34)  (0.36)  0.04  0.35  0.12 
Total from investment operations  0.55  (0.30)  0.01  (0.01)  0.40  0.72  0.53 
Less distributions               
From net investment income  (0.17)  (0.26)  (0.35)  (0.34)  (0.34)  (0.37)  (0.40) 
Net asset value, end of period  $7.81  $7.43  $7.99  $8.33  $8.68  $8.62  $8.27 
Total return (%)5  7.416  (3.59)6  0.067  (0.15)7  4.837  8.84  6.627 
 
Ratios and supplemental data               
Net assets, end of period (in millions)  $9  $8  $8  $11  $16  $24  $31 
Ratios (as a percentage of average               
 net assets):               
 Expenses before reductions  1.798  1.908,9  1.84  1.88  1.84  1.87  1.84 
 Interest and fees10  —  —  0.16  0.20  —  —  — 
 Expenses net of fee waivers  1.788  1.908,9  2.00  2.08  1.84  1.87  1.83 
 Expenses net of fee waivers               
    and credits  1.788  1.908,9  2.00  2.08  1.84  1.87  1.83 
 Net investment income  4.548  5.348  4.09  4.05  4.11  4.35  4.93 
Portfolio turnover (%)  7  49  75  63  52  65  57 
 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

3 Audited by previous independent registered public accounting firm.

4 Based on the average daily shares outstanding.

5 Assumes dividend reinvestment (if applicable).

6 Not annualized.

7 Total returns would have been lower had certain expenses not been reduced during the periods shown.

8 Annualized.

9 Includes the impact of proxy fees, which amounted to 0.04% of average net assets.

10 Interest expenses and fees are related to the Fund’s investment in inverse floater rate investments. Under accounting rules, the Fund recognizes additional income in an amount equal to these expenses.

See notes to financial statements

Semiannual report | High Yield Municipal Bond Fund  23 


CLASS C SHARES Period ended  11-30-091  5-31-092  8-31-08  8-31-07  8-31-06  8-31-053 8-31-043 
 
Per share operating performance               
Net asset value, beginning               
 of period  $7.43  $7.99  $8.33  $8.68  $8.62  $8.27  $8.14 
Net investment income4  0.18  0.28  0.34  0.34  0.35  0.36  0.40 
Net realized and unrealized gain               
 (loss) on investments  0.37  (0.58)  (0.33)  (0.35)  0.05  0.36  0.13 
Total from investment operations  0.55  (0.30)  0.01  (0.01)  0.40  0.72  0.53 
Less distributions               
From net investment income  (0.17)  (0.26)  (0.35)  (0.34)  (0.34)  (0.37)  (0.40) 
Net asset value, end of period  $7.81  $7.43  $7.99  $8.33  $8.68  $8.62  $8.27 
Total return (%)5  7.416  (3.59)6  0.067  (0.15)7  4.837  8.82  6.617 
 
Ratios and supplemental data               
Net assets, end of period (in millions)  $50  $35  $23  $9  $9  $8  $8 
Ratios (as a percentage of average               
 net assets):               
 Expenses before reductions  1.798  1.908,9  1.84  1.88  1.84  1.89  1.84 
 Interest and fees10  —  —  0.16  0.20  —  —  — 
 Expenses net of fee waivers  1.788  1.908,9  2.00  2.08  1.84  1.89  1.83 
 Expenses net of fee waivers               
    and credits  1.788  1.908,9  2.00  2.08  1.84  1.89  1.83 
 Net investment income  4.518  5.298  4.11  4.02  4.09  4.33  4.88 
Portfolio turnover (%)  7  49  75  63  52  65  57 
 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

3 Audited by previous independent registered public accounting firm.

4 Based on the average daily shares outstanding.

5 Assumes dividend reinvestment (if applicable).

6 Not annualized.

7 Total returns would have been lower had certain expenses not been reduced during the periods shown.

8 Annualized.

9 Includes the impact of proxy fees, which amounted to 0.04% of average net assets.

10 Interest expenses and fees are related to the Fund’s investment in inverse floater rate investments. Under accounting rules, the Fund recognizes additional income in an amount equal to these expenses.

See notes to financial statements

24  High Yield Municipal Bond Fund | Semiannual report 


Notes to financial statements
(unaudited)

Note 1
Organization

John Hancock High Yield Municipal Bond Fund (the Fund) is a non-diversified series of John Hancock Municipal Securities Trust (the Trust), an open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The investment objective of the Fund is to seek a high level of current income that is largely exempt from federal income tax, consistent with the preservation of capital.

John Hancock Advisers, LLC (the Adviser) serves as investment adviser for the Fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Adviser, serves as principal underwriter of the Fund. The Adviser and the Distributor are indirect wholly owned subsidiaries of Manulife Financial Corporation (MFC).

The Trustees have authorized the issuance of multiple classes of shares of the Fund, designated as Class A, Class B and Class C shares. The shares of each class represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, except that certain expenses, subject to the approval of the Trustees, may be applied differently to each class of shares in accordance with current regulations of the Securities and Exchange Commission and the Internal Revenue Service. Shareholders of a class that bears distribution and service expenses under the terms of a distribution plan have exclusive voting rights to that distribution plan. Class B shares will convert to Class A shares eight years after purchase.

Note 2
Significant accounting policies

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. Events or transactions occurring after period end through the date that the financial statements were issued, January 25, 2010, have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:

Security valuation

Investments are stated at value as of the close of the regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied quotes 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. Securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Debt obligations, where there are no prices available from an independent pricing service, are valued based on bid quotations or evaluated prices, as applicable, obtained from broker-dealers or fair valued as described below. Certain short-term debt investments are valued at amortized cost.

Other assets and securities where market quotations are not readily available are valued at fair value as determined in good faith by the Fund’s Pricing Committee in accordance with procedures adopted by the Board of Trustees.

Fair value measurements

The Fund uses 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 and the valuation techniques used are summarized below:

Semiannual report | High Yield Municipal Bond Fund  25 


Level 1 — Exchange-traded prices in active markets for identical securities. This technique is used for exchange-traded domestic common and preferred equities, certain foreign equities, warrants and rights.

Level 2 — Prices determined using significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these techniques are received from independent pricing vendors and are based on an evaluation of the inputs described. These techniques are used for certain domestic preferred equities, certain foreign equities, unlisted rights and warrants, and fixed income securities.

Level 3 — 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’s Pricing Committee’s own assumptions about the factors that market participants would use in pricing an investment and would be based on the best information available. Securities using this technique are generally thinly traded or privately placed, and may be valued using broker quotes, which may include the use of the brokers’ own judgments about the assumptions that market participants would use.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

At November 30, 2009, total investments for the Fund are Level 2 under the hierarchy discussed above.

Security transactions and related
investment income

Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Discounts/premiums are accreted/amortized for financial reporting purposes. Non-cash dividends are recorded at the fair market value of the securities received. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful. The Fund uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.

Repurchase agreements

The Fund may enter into repurchase agreements. When the Fund enters into a repurchase agreement through its custodian, it receives delivery of securities, the amount of which at the time of purchase and each subsequent business day is required to be maintained at such a level that the market value is generally at least 102% of the repurchase amount. The Fund will take receipt of all securities underlying the repurchase agreements it has entered into until such agreements expire. If the seller defaults, the Fund would suffer a loss to the extent that proceeds from the sale of underlying securities were less than the repurchase amount. The Fund may enter into repurchase agreements maturing within seven days with domestic dealers, banks or other financial institutions deemed to be creditworthy by the Adviser.

Line of credit

The Fund and other affiliated funds have entered into an agreement which enables them to participate in a $150 million unsecured committed line of credit with the Fund’s custodian. The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.08% per annum, payable at the end of each calendar quarter, based on the average daily-unused portion of the line of credit, is charged to each participating fund on a prorated basis based on average net assets. For the six-months

26  High Yield Municipal Bond Fund | Semiannual report 


ended November 30, 2009, there were no borrowings under the line of credit by the Fund.

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, including any costs or expenses associated with the overdraft. The custodian has a lien, security interest or security entitlement in any Fund property that is not segregated, to the maximum extent permitted by law to the extent of any overdraft.

Expenses

The majority of expenses are directly identifiable to an individual fund. Trust expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative size of the funds. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.

Class allocations

Income, common expenses and realized and unrealized gains (losses) are determined at the fund level and allocated daily to each class of shares based on the appropriate net asset value of the respective classes. Distribution and service fees, if any, and transfer agent fees, for all classes are calculated daily at the class level based on the appropriate net asset value of each class and the specific expense rate(s) applicable to each class.

Federal income taxes

The Fund intends to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.

For federal income tax purposes, the Fund has a $13,356,451 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, it will reduce the amount of capital gain distribution to be paid. The loss carryforward expires as follows: May 31, 2010 — $1,227,272, May 31, 2011 — $2,540,698, May 31, 2012 — $2,816,241, May 31, 2013 — $1,681,342, May 31, 2014 — $119,574, May 31, 2015 —  $1,176,656, May 31, 2016 — $502,278 and May 31, 2017 — $3,292,390.

As of May 31, 2009, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.

Distribution of income and gains

The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. The Fund generally declares dividends daily and pays them monthly. Capital gain distributions, if any, are paid annually. During the nine-month period ended May 31, 2009, the tax character of distributions paid was as follows: ordinary income $40,454 and tax exempt income $5,132,508. During the year ended August 31, 2008, the tax character of distributions paid was as follows: ordinary income $85,708 and tax exempt income $4,648,369. Distributions paid by the Fund with respect to each class of shares are calculated in the same manner, at the same time and are in the same amount, except for the effect of expenses that may be applied differently to each class.

Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.

Note 3
Guarantees and indemnifications

Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund.

Semiannual report | High Yield Municipal Bond Fund  27 


Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred.

Note 4
Management fee and transactions with
affiliates and others

The Fund has an investment management contract with the Adviser. Under the investment management contract, the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, to the sum of: (a) 0.625% of the first $75,000,000 of the Fund’s average daily net asset value, (b) 0.5625% of the next $75,000,000, (c) 0.50% of the next $1,850,000,000, (d) 0.48% of the next $2,000,000,000 and (e) 0.45% of the Fund’s average daily net asset value in excess of $4,000,000,000. Prior to October 1, 2009, the Fund paid this fee monthly, equivalent, on an annual basis, to the sum of: (a) 0.625% of the first $75,000,000 of the Fund’s average daily net asset value, (b) 0.5625% of the next $75,000,000, and (c) 0.50% of the Fund’s average daily net asset value in excess of $150,000,000. The Fund has a subadvisory agreement with MFC Global Investment Management (U.S.), LLC, a subsidiary of MFC and an affiliate of the Adviser. The Fund is not responsible for payment of subadvisory fees. The investment management fees incurred for the six-month period ended November 30, 2009, were equivalent to an annual effective rate of 0.57% of the Fund’s average daily net assets.

Pursuant to the Advisory Agreement, the Fund reimburses the Adviser for all expenses associated with providing the administrative, financial, legal, accounting and recordkeeping services of the Fund, including the preparation of all tax returns, annual, semiannual and periodic reports to shareholders and the preparation of all regulatory reports. These expenses are allocated based on the relative share of net assets of each class at the time the expense was incurred. The accounting and legal services fees incurred for the six-month period ended November 30, 2009, were equivalent to an annual effective rate of 0.02% of the Fund’s average daily net assets.

The Fund has a Distribution Agreement with the Distributor. The Fund has adopted Distribution Plans with respect to Class A, Class B and Class C shares, pursuant to Rule 12b-1 under the 1940 Act, to pay the Distributor for the services it provides as distributor of shares of the Fund. Accordingly, Class A shares and Class B shares make daily payments and Class C shares make monthly payments to the Distributor at an annual rate not to exceed 0.25%, 1.00% and 1.00% of average daily net asset value of Class A, Class B and Class C shares, respectively. A maximum of 0.25% of such payments may be service fees, as defined by the Conduct Rules of the Financial Industry Regulatory Authority. Under the Conduct Rules, curtailment of a portion of the Fund’s Rule 12b-1 payments could occur under certain circumstances.

Class A shares are assessed up-front sales charges. During the six-month period ended November 30, 2009, the Distributor received net up-front sales charges of $458,528 with regard to sales of Class A shares. Of this amount, $56,906 was retained and used for printing prospectuses, advertising, sales literature and other purposes, $397,131 was paid as sales commissions to unrelated broker-dealers and $4,491 was paid as sales commissions to sales personnel of Signator Investors, Inc. (Signator Investors), a related broker-dealer. Signator Investors is an affiliate of the Adviser.

Class B shares that are redeemed within six years of purchase are subject to a contingent deferred sales charge (CDSC) at declining rates, beginning at 5.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Class C shares that are redeemed within one year of purchase are subject to a CDSC at a rate of 1.00% of the lesser of the current market value at the time of redemption or the original purchase cost of the shares being redeemed. Proceeds from the CDSCs are paid to the Distributor and are used in whole or in part to defray its expenses for providing distribution-related services to the Fund in connection with the

28  High Yield Municipal Bond Fund | Semiannual report 


sale of Class B and Class C shares. During the six-month period ended November 30, 2009, CDSCs received by the Distributor amounted to $11,461 and $8,094 for Class B and Class C shares, respectively.

The Fund has a transfer agent agreement with John Hancock Signature Services, Inc. (Signature Services), an indirect subsidiary of MFC. The transfer agent fees are made up of three components:

• The Fund pays a monthly transfer agent fee at an annual rate of 0.01% for all Classes based on each class’s average daily net assets.

• All classes of the Fund pay a monthly fee based on an annual rate of $17.50 per shareholder account.

• In addition, Signature Services is reimbursed for certain out-of-pocket expenses.

Signature Services has voluntarily agreed to waive certain transfer agent expenses. The amount of this waiver for the six-month period ended November 30, 2009 was $12,066.

Certain investor accounts that maintain small balances are charged an annual small accounts fee. Amounts related to these fees are credited to the Fund and netted against transfer agent expenses. For the six-month period ended November 30, 2009, these fees totaled $1,242.

Class level expenses for the six-month period ended November 30, 2009 were as follows:

  Distribution  Transfer 
Share class  and service fees  agent fees 
Class A  $201,558  $74,424 
Class B  43,610  4,132 
Class C  216,522  19,846 
Total  $461,690  $98,402 

Note 5
Trustees’ fees

The compensation of independent Trustees is borne by the Fund. The independent Trustees may elect to defer, for tax purposes, their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments into other John Hancock funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund’s deferred compensation liability are recorded on the Fund’s books as an other asset. The deferred compensation liability and the related other asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund.

Semiannual report | High Yield Municipal Bond Fund  29 


Note 6
Fund share transactions

This listing illustrates the number of Fund shares sold, reinvested and repurchased during the six-month period ended November 30, 2009, the nine-month period ended May 31, 2009 and the year ended August 31, 2008, along with the corresponding dollar value.

  Period ended 11-30-091  Period ended 5-31-092  Year ended 8-31-08 
  Shares  Amount  Shares  Amount  Shares  Amount 
Class A shares             
Sold  7,459,062  $57,088,171  10,137,109  $71,928,971  4,915,022  $39,839,099 
Distributions             
reinvested  337,934  2,596,239  380,106  2,686,707  250,989  2,041,557 
   
Repurchased  (3,097,665)  (23,675,133)  (3,589,611) (25,647,418)  (1,894,507)  (15,471,342) 
 
Net increase  4,699,331  $36,009,277  6,927,604  $48,968,260  3,271,504  $26,409,314 
 
Class B shares             
Sold  196,201  $1,491,493  317,921  $2,263,883  211,312  $1,716,618 
Distributions             
reinvested  12,090  92,651  17,646  124,577  21,935  179,122 
Repurchased  (171,378)  (1,313,898)  (283,524)  (2,014,533)  (458,316)  (3,769,732) 
 
Net increase             
(decrease)  36,913  $270,246  52,043  $373,927  (225,069)  ($1,873,992) 
 
Class C shares             
Sold  2,198,588  $16,753,712  2,814,002  $19,992,868  2,153,756  $17,641,134 
Distributions             
reinvested  65,268  501,840  68,219  481,885  41,481  336,595 
   
Repurchased  (533,126)  (4,081,589)  (982,496)  (6,929,325)  (502,921)  (4,137,462) 
 
Net increase  1,730,730  $13,173,963  1,899,725  $13,545,428  1,692,316  $13,840,267 
Net increase  6,466,974  $49,453,486  8,879,372  $62,887,615  4,738,751  $38,375,589 

1 Semiannual period from 6-1-09 to 11-30-09. Unaudited.

2 For the nine month period ended May 31, 2009. The Fund changed its fiscal year end from August 31 to May 31.

Note 7
Purchase and sale of securities

Purchases and proceeds from sales or maturities of securities during the six-month period ended November 30, 2009, aggregated $69,622,880 and $23,328,525, respectively. These amounts include purchases and sales of variable rate demand notes, which amounted to $6,140,000 and $7,640,000, respectively. Other short-term securities are excluded from these amounts.

30  High Yield Municipal Bond Fund | Semiannual report 


Board Consideration of and
Continuation of Investment
Advisory Agreement and
Subadvisory Agreement

The Investment Company Act of 1940 (the 1940 Act) requires the Board of Trustees (the Board) of John Hancock Municipal Securities Trust (the Trust), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not “interested persons” of the Trust, as defined in the 1940 Act (the Independent Trustees), annually to meet in person to review and consider the continuation of existing advisory and subadvisory agreements. At meetings held on May 6–7 and June 8–9, 2009, the Board considered the renewal 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) for the John Hancock High Yield Municipal Bond Fund (the Fund).

The Advisory Agreement and the Subadvisory Agreement are collectively referred to as the Advisory Agreements. 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’s Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel.

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. 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’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 key factors considered by the Board and the conclusions reached are described below.

Nature, extent and quality of services

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. It considered the background and experience of senior management and investment professionals responsible for managing the Fund. The Board considered the investment philosophy, research and investment decision-making processes of the Adviser and the Subadviser responsible for the daily investment activities of the Fund. The Board considered the Subadviser’s history and experience with the Fund. The Board considered the Adviser’s execution of its oversight responsibilities. The Board further considered the culture of compliance, resources dedicated to compliance, compliance programs, record of compliance with applicable laws and regulation, with the Fund’s investment policies and restrictions and with the applicable Code of Ethics, and the responsibilities of the Adviser’s and Subadviser’s compliance department. In addition, the Board took into account the administrative and other non-advisory services provided to the Fund by the Adviser and its affiliates.

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 supported renewal of the Advisory Agreements.

Fund performance

The Board considered the performance results for the Fund over various time periods ended December 31, 2008. The Board also considered these results in comparison to the performance of a category of relevant funds (the Category), a peer group of comparable funds (the Peer Group) and a benchmark

Semiannual report | High Yield Municipal Bond Fund  31 


index. The funds within each Category and Peer Group were selected by Morningstar Inc. (Morningstar), an independent provider of investment company data. The Board reviewed the methodology used by Morningstar to select the funds in the Category and the Peer Group. The Board also considered updated performance information at its May and June 2009 meetings. Performance and other information may be quite different as of the date of this shareholders report.

The Board viewed favorably that the Fund’s performance for all the periods under review was higher than the performance of the Category and Peer Group medians. The Board noted that the Fund’s performance for all the periods under review was lower than the performance of its benchmark index, the Barclays Capital Municipal Bond Index, as was the performance of the Category and Peer Group medians.

Investment advisory fee and subadvisory fee
rates and expenses

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 inline with the median rates of the Category and Peer Group.

The Board received and considered expense information regarding the Fund’s various components, including advisory fees, distribution and fees other than advisory and distribution fees, including transfer agent fees, custodian fees, and other miscellaneous fees (e.g., 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’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 Peer Group and Category 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’s Gross Expense Ratio and Net Expense Ratio were higher than the Peer Group and Category medians.

The Adviser also discussed the Morningstar data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Fund’s overall performance and expense results supported the re-approval of the Advisory Agreements.

The Board also received information about the investment subadvisory fee rate (the Subadvisory Agreement Rate) payable by the Adviser to the Subadviser for investment subadvisory services. The Board concluded that the Subadvisory Agreement Rate was fair and equitable, based on its consideration of the factors described here.

Profitability

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’s profitability to that of other similar investment advisers whose profitability 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.

Economies of scale

The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Fund’s ability to appropriately benefit from economies of scale under the Fund’s fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of the Adviser’s and Subadviser’s costs are not specific to individual Funds, but rather are incurred across a variety of products and services. To

32  High Yield Municipal Bond Fund | Semiannual report 


ensure that any economies are reasonably shared with the Fund as its assets increase, the Adviser and the Board agreed to continue the existing breakpoints to the Advisory Agreement Rate.

Information about services to other clients

The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser and Subadviser to their other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate and the Subadvisory Agreement Rate were not unreasonable, taking into account fee rates offered to others by the Adviser and Subadviser, respectively, after giving effect to differences in services.

Other benefits to the Adviser

The Board received information regarding potential “fall-out” 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).

Other factors and broader review

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 senior investment officers at various times throughout the year.

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.

August 30–September 1, 2009 Meeting

At a meeting held on August 30–September 1, 2009, the Board, including the Independent Trustees, considered and approved an amended Advisory Agreement Rate and Subadvisory Agreement Rate that included modified breakpoints. This consideration and approval followed a series of discussions with the Adviser and a review of an additional report prepared by the Adviser at the request of the Independent Trustees following the earlier Board meetings. The requested report compared the Fund’s breakpoints to its Peer Group at various hypothetical asset levels. The Independent Trustees noted that the report was prepared at their request to facilitate a more comprehensive review of the reasonableness of each fund’s breakpoints relative to its Peer Group and asset level. With the modified breakpoints, the Advisory Agreement Rates and Subadvisory Agreement Rates are the same as or lower than those under the previously approved Agreements at various asset levels. After review and consideration of the report, the Board, including a majority of the Independent Trustees, approved the amended Advisory Agreement Rate and Subadvisory Agreement Rate.

Semiannual report | High Yield Municipal Bond Fund  33 


More information

Trustees
Patti McGill Peterson, Chairperson
James R. Boyle†
James F. Carlin
William H. Cunningham
Deborah C. Jackson*
Charles L. Ladner
Stanley Martin*
Dr. John A. Moore
Steven R. Pruchansky††
Gregory A. Russo
John G. Vrysen†

Officers
Keith F. Hartstein
President and Chief Executive Officer

Andrew G. Arnott‡
Chief Operating Officer

Thomas M. Kinzler
Secretary and Chief Legal Officer

Francis V. Knox, Jr.
Chief Compliance Officer

Charles A. Rizzo
Chief Financial Officer

Michael J. Leary
Treasurer

Investment adviser
John Hancock Advisers, LLC

Subadviser
MFC Global Investment
Management (U.S.), LLC

Principal distributor
John Hancock Funds, LLC

Custodian
State Street Bank and Trust Company

Transfer agent
John Hancock Signature Services, Inc.

Legal counsel
K&L Gates LLP

The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.

* Member of the Audit Committee
†† Member of the Audit Committee effective 9-1-09
† Non-Independent Trustee
‡ Effective 9-1-09

The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.

The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.

We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-225-5291.

You can also contact us:     
1-800-225-5291  Regular mail:  Express mail: 
jhfunds.com  John Hancock Signature Services, Inc.  John Hancock Signature Services, Inc. 
  P.O. Box 55913  Mutual Fund Image Operations 
  Boston, MA 02205-5913  30 Dan Road 
    Canton, MA 02021 

34  High Yield Municipal Bond Fund | Semiannual report 



1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com

Now available: electronic delivery
www.jhfunds.com/edelivery

This report is for the information of the shareholders of John Hancock High Yield Municipal Bond Fund.  590SA 11/09 
It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.  1/10 


ITEM 2. CODE OF ETHICS.

Not applicable at this time.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable at this time.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable at this time.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable at this time.

ITEM 6. SCHEDULE OF INVESTMENTS.

(a) Not applicable.
(b) Not applicable.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 11. CONTROLS AND PROCEDURES.

(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

ITEM 12. EXHIBITS.


(a) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.

(c)(1) Contact person at the registrant.


SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

John Hancock Municipal Securities Trust

By:   /s/ Keith F. Hartstein 
   ------------------------------ 
   Keith F. Hartstein 
   President and Chief Executive Officer 
 
 
Date:   January 25, 2010 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:   /s/ Keith F. Hartstein 
   ------------------------------- 
   Keith F. Hartstein 
   President and Chief Executive Officer 
 
 
Date:  January 25, 2010 
 
 
By:   /s/ Charles A. Rizzo 
   -------------------------------- 
   Charles A. Rizzo 
   Chief Financial Officer 
 
 
Date:   January 25, 2010