<PAGE> 1
John Hancock Funds
PATRIOT
SELECT
DIVIDEND
TRUST
SEMI - ANNUAL REPORT
DECEMBER 31, 1994
<PAGE> 2
CHAIRMAN'S MESSAGE
TRUSTEES
Edward J. Boudreau, Jr.
Thomas W. L. Cameron
James F. Carlin*
Charles F. Fretz*
Harold R. Hiser, Jr.*
Charles L. Ladner*
Patricia P. McCarter*
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman J. Smith, USMC (Ret.)*
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Andrew F. St. Pierre
President
Anne C. Hodsdon
Executive Vice President
Michael P. DiCarlo
Senior Vice President
Thomas H. Drohan
Senior Vice President and Seretary
James K. Ho
Senior Vice President
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President and Compliance Officer
Susan S. Newton
Vice President and Assistant Secretary
James J. Stokowski
Vice President and Treasurer
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN AND TRANSFER AGENT FOR
COMMON SHAREHOLDERS
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT FOR AUCTION RATE
PREFERRED SHARES
IBJ Schroeder Bank and Trust Company
One State Street Plaza
New York, New York 10004
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
LISTED: NEW YORK STOCK EXCHANGE SYMBOL:DIV.
JOHN HANCOCK CLOSED END FUNDS 1-800-843-0090
DEAR FELLOW SHAREHOLDERS:
With 1995 upon us, New Year's resolutions abound. Dieting and saving money
- -- Americans' long-time favorites -- are sure to top the list once again. And
once again, they'll probably be the most difficult to keep. This year,
however, Congress may give savers an additional incentive to stick to their
guns.
Both the Republicans and Democrats want to revive Individual Retirement
Accounts (IRAs). In an effort to encourage savings, IRAs were made available
to all working Americans in 1981. Anyone with earned income could contribute
up to $2,000 annually. The contributions were fully
tax-deductible, and the earnings weren't taxed until
withdrawal. IRAs became the most successful savings (PHOTO)
program in the U.S., drawing in more than $250 billion
and 13 million new participants by 1985.
Sweeping tax reforms in 1986, however, changed
all that. As it stands now, the full deduction only
applies to individuals who earn less than $25,000,
married couples who earn less than $40,000 and people without
employer-sponsored retirement plans. The result of this congressional
tinkering: the number of IRA contributors declined dramatically, from 16.2
million in 1985 to 4.2 million in 1992.
Legislators are now taking a closer look at expanding the accessibility
of IRAs once again. Several proposals are on the table: (1) the Republicans'
"Contract with American" includes the American Dream Savings Account, a type of
IRA; (2) President Clinton has proposed expanding eligibility by raising income
limits; and (3) several congressional representatives have introduced
legislation to restore the universal availability of a fully tax-deductible
IRA.
We enthusiastically support restoring IRAs to their orignial luster.
Not only will they provide a tax break to middle-income Americans, but they'll
go a long way toward raising the nation's dangerously low personal savings rate
- -- the lowest of any major industrialized country. There's an increasing
awareness that Social Security and pension plans will no longer provide for the
retirement needs of middle-income Americans. Increasing IRA accessibility for
more working individuals and families is one of the most sensible ways to help
Americans take responsibility for their future financial needs. We urge you to
support the expanded IRA by contacting your congressional representative or
senator.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
[A 1 1/4" x 1" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right, next to second paragrpah.]
<PAGE> 3
BY ANDREW F. ST. PIERRE, PRESIDENT AND PORTFOLIO MANAGER
JOHN HANCOCK
PATRIOT SELECT
DIVIDEND TRUST
Utility downturn overdone;
outlook for 1995 is brighter
The utility market's woes are well known. Fears of widespread deregulation,
coupled with higher interest rates, sapped investors enthusiasm for utility
stocks, driving them down, in some cases, as much as 30% from their peak in
September 1993 through the end of April 1994. From there, utilities traded in a
volatile range - rallying briefly as investors hunted for bargains and then
falling back with weakness in the bond market. The group struggled to find a
bottom, eventually ending 1994 around its average lows for the period.
John Hancock Patriot Select Dividend Trust's performance reflected this
choppy market environment, ending the period with a slightly positive return.
For the six months ended December 31, 1994, the Fund had a total return of
1.43% at net asset value. By comparison, the Dow Jones Utility Average posted
a return of 2.46% for the same period.
STAYING DEFENSIVE
How did we manage John Hancock Patriot Select Dividend Trust in this extremely
difficult
"THE UTILITY MARKET'S WOES ARE
WELL KNOWN."
[PHOTO]
ANDREW F. ST. PIERRE, PORTFOLIO MANAGER
[A 2 1/2" x 3 1/2" photo of Andrew F. St. Pierre at bottom right. Caption
reads: "Andrew F. St. Pierre, Portfolio Manager."]
3
<PAGE> 4
John Hancock Funds - Patriot Select Dividend Trust
[GRAPHIC]
[Pie chart with the heading "Portfolio diversification" at top of left hand
column. The chart is divided into five sections. Going from left to right:
Preferred Stock Utilities 25%; Financials 19%; Industrials 13%; Short-term
Investments 3%; and Common Stock Utilities 40%. A footnote below states "As a
percentage of net assets on December 31, 1994."]
"WE POSITIONED THE FUND AS
DEFENSIVELY AS POSSIBLE..."
environment? Simply put, we stayed focused on our primary goal of maintaining
the Fund's monthly dividend to provide our shareholders with the steady income
they've come to expect. We did not use any high-risk hedging strategies; there
was no magic that would have allowed us to both deliver the dividend and
maintain the share price.
We positioned the Fund as defensively as possible, given its income
constraints, and held tight during the utility market's rout. To start, we
pared back our utility exposure to the 65% minimum. And within the utility
sector, we shifted more into preferred stock utilities. That's because they
were cheaper than common stock utilities and, therefore, carried less downside
risk. In addition, we upped our stake in "cushion" preferreds. Their
above-average yields cushion their prices against rising interest rates - hence
their name. Finally, we kept the remaining 35% of the Fund in non-utility
stocks, especially in the financial and industrial sectors.
OVERBLOWN PESSIMISM
In our view, the utility industry is still highly-regulated and will continue
to be. Much of the fear and loathing over deregulation is overblown. True,
the National Energy Policy Act (NEPA) of 1992 has opened utilities up to
more competition by introducing the possibility of "retail wheeling" - the
notion that customers will be free to choose their power provider. But it is
not a fait accompli in all instances. Retail wheeling, in its pure form, is a
very complex issue. It is going to take considerable time for each state's
public utility commission to decide if and how to implement it.
In our view, retail wheeling will be an evolutionary process that will
take at least the next five to ten years to unfold. And the impact is likely
to be much smaller than expected. Because utilities are so fundamental to the
way Americans live, we firmly believe that the industry will never be completely
deregulated.
THE FUTURE
We argue that the utility sector has not only discounted the current
competitive environment for these stocks, but also the continued dislocation
of earnings brought about by retail wheeling. If the industry is allowed time
to cope with incipient change - and we believe that it will be - then the bulk
of the utility collapse is behind us.
[GRAPHIC]
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance ... and what's behind the numbers. The first listing is SCE Corp.
followed by an up arrow and the phrase "Deregulation fears overblown." The
second listing is New England Electric followed by an up arrow and the phrase
"Favorable regulatory climate." The third listing is Central Maine Power
followed by a down arrow and the phrase "Weak core business." Footnote below
reads: "See "Schedule of Investments." Investment holdings are subject to
change."]
4
<PAGE> 5
John Hancock Funds - Patriot Select Dividend Trust
[GRAPHIC]
[Bar chart with heading "Fund Performanace" at top of left hand column. Under
the heading is the footnote: "For the six nonths ended December 31, 1994." The
chart is scaled in increments of 1% from bottom to top, with 3% at the top and
0% at the bottom. Within the chart, there are two solid bars. The first
represents the 1.43% total return for John Hancock Patriot Select Dividend
Trust. The second represents the 2.46% total return for the Dow Jones Utility
Average. Footnote below reads: "The total return for John Hancock Patriot
Select Divident Trust is at net asset value with all distributions reinvested.
The Dow Jones Utility Average is an unmanaged index which measures the
performance of the utility industry in the United States."]
After their steep decline, utilities are attractively priced; they have
not been at such low levels since the mid-1970s. The group is sporting an
average yield of about 7% versus less than 2.7% for the Standard & Poor's
500-Stock Index and its average price-to-earnings ratio - a measure of how
much you're paying for earnings power - is roughly 10.5 times earnings versus
approximately 16.5 for the broad stock market.
What's more, with the long-term bond yields having backed up nearly
2.25 percentage points in one year, the market is clearly discounting a return
to high real inflation rates. However, in our view, fear of inflation - more
than inflation itself - is what's driving rates higher. There are no real signs
of inflation on the horizon, despite stronger economic growth. Wage increases
are non-existent, consumer prices are flat and non-inflationary forces (i.e.
cost-cutting and productivity gains) are fueling earnings in many cases. In
addition, the Federal Reserve's dramatic rate hikes this year are likely to
slow economic growth in 1995. Once economic data begins to show the effects of
the Fed's moves - which normally takes nine to 12 months - we're likely to see
inflation worries abate and interest rates start to stabilize.
Given all that, 1995 is likely to be a better year for utilities. In fact,
the stocks have gained ground in recent weeks, but their rally is still
fragile. A jumpy bond market could keep utility shares volatile in the months
ahead. As a result, we'll move cautiously in 1995, gradually increasing our
utility exposure. As always, our main goal will be to minimize price
volatility, while providing shareholders with the steady income they've come to
expect.
"...1995 IS LIKELY TO BE A BETTER
YEAR FOR UTILITIES."
5
<PAGE> 6
Financial Statements
John Hancock Funds - Patriot Select Dividend Trust
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Preferred stocks (cost - $112,042,832)..................... $105,412,891
Common stocks (cost - $85,908,181)......................... 78,965,945
Capital securities (cost - $4,375,000)..................... 4,187,500
Bonds (cost - $3,986,562).................................. 3,986,562
Short-term investments (cost - $5,877,000)................. 5,877,000
------------
198,429,898
Cash......................................................... 593
Receivable for investments sold.............................. 819,063
Interest receivable ......................................... 4,683
Dividends receivable ........................................ 1,861,493
Deferred organization expenses - Note A ..................... 12,270
------------
Total Assets......................... 201,128,000
--------------------------------------------------
LIABILITIES:
AMPS dividend payable - Note A .............................. 340,492
Payable for investments purchased ........................... 4,794,912
Payable to John Hancock Advisers, Inc. - Note B ............. 153,696
Accounts payable and accrued expenses ....................... 9,878
------------
Total Liabilities ................... 5,298,978
--------------------------------------------------
NET ASSETS:
Auction Market Preferred Shares Series A (AMPS)
Without par value, unlimited number of shares of
beneficial interest authorized, 700 shares issued,
liquidation preference of $100,000 per share -
Note A .................................................... 70,000,000
------------
Common Shares -
Without par value, unlimited number of shares of
beneficial interest authorized, 9,885,027 shares
issued and outstanding .................................... 138,130,719
Accumulated net realized gain on investments ................ 298,506
Net unrealized depreciation of investments .................. (13,759,677)
Undistributed net investment income ......................... 1,159,474
------------
Net Assets Applicable to
Common Shares ($12.73 per
share based on 9,885,027
shares outstanding).................. 125,829,022
--------------------------------------------------
Net Assets .......................... $195,829,022
==================================================
</TABLE>
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S
BALANCE SHEET ON DECEMBER 31, 1994. YOU'LL ALSO FIND THE
NET ASSET VALUE PER SHARE, FOR EACH COMMON SHARE, AS OF
THAT DATE.
THE STATEMENT OF OPERATIONS SUMMARIZES THE FUND'S
INVESTMENT INCOME EARNED AND EXPENSES INCURRED IN
OPERATING THE FUND. IT ALSO SHOWS NET GAINS AND (LOSSES)
FOR THE PERIOD STATED.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $19,916 and
including $90,000 received from affiliated issuers) ........... $ 8,683,227
Interest ........................................................ 135,967
-----------
8,819,194
-----------
Expenses:
Investment management fee - Note B ............................ 793,260
Administration fee - Note B.................................... 148,736
AMPS and auction fees ......................................... 88,095
Custodian fee ................................................. 28,950
Trustees' fees ................................................ 20,646
Transfer agent fee ............................................ 20,557
Auditing fee .................................................. 23,190
Printing ...................................................... 22,929
Miscellaneous.................................................. 19,659
Organization expense - Note A ................................. 7,520
Legal fees .................................................... 5,511
-----------
Total Expenses ........................... 1,179,053
------------------------------------------------------
Net Investment Income .................... 7,640,141
------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments sold ........................... 563,651
Change in net unrealized appreciation/depreciation of investments (5,062,720)
-----------
Net Realized and Unrealized
Loss on Investments..................... (4,499,069)
----------------------------------------------------
Net Increase in Net Assets
Resulting from Operations .............. $ 3,141,072
====================================================
Distributions to AMPS................... (1,354,171)
----------------------------------------------------
Net Increase in Net Assets Applicable
to Common Shareholders Resulting
from Operations Less AMPS
Distributions .......................... $ 1,786,901
====================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
Financial Statements
John Hancock Funds - Patriot Select Dividend Trust
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
DECEMBER 31, 1994 ENDED
(UNAUDITED) JUNE 30, 1994
----------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ......................... $ 7,640,141 $ 13,236,959
Net realized gain (loss) on investments sold... 563,651 (265,145)
Change in net unrealized
appreciation/depreciation of investments..... (5,062,720) (34,074,576)
----------- ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................... 3,141,072 (21,102,762)
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
AMPS ($1,935 and $3,128 per share,
respectively) - Note A ..................... (1,354,171) (2,189,528)
Common Shares - Note A
Dividends from net investment income
($0.6186 and $1.2973 per share,
respectively)............................... (6,114,544) (12,815,164)
Distributions from net realized short-term
gain on investments sold (none and
$0.5119 per share, respectively) ----- (5,052,615)
----------- ------------
Total Distributions to Shareholders....... (7,468,715) (20,057,307)
----------- ------------
FROM FUND SHARE TRANSACTIONS
Value of shares issued to common
shareholders in reinvestment of
distributions*.............................. ----- 804,586
----------- ------------
NET ASSETS:
Beginning of period............................ 200,156,665 240,512,148
----------- ------------
End of period (including undistributed net
investment income of $1,159,474
and $988,048, respectively).................... $195,829,022 $200,156,665
============ ============
*ANALYSIS OF COMMON SHAREHOLDER TRANSACTIONS:
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1994
(UNAUDITED) YEAR ENDED JUNE 30, 1994
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Shares outstanding beginning of period..... 9,885,027 $ 138,130,719 9,840,156 $ 137,469,390
Shares issued to common shareholders
for reinvestment of distributions........ ---- ---- ---- 804,586
Reclassification of capital accounts....... ---- ---- ---- (143,257)
--------- ------------- --------- -------------
Shares outstanding end of period........... 9,885,027 $ 138,130,719 9,885,027 $ 138,130,719
========= ============= ========= =============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S
NET ASSETS HAVE CHANGED SINCE THE END OF THE PREVIOUS PERIOD. THE DIFFERENCE
REFLECTS EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES, DISTRIBUTIONS
PAID TO SHAREHOLDERS, AND ANY INCREASE DUE TO REINVESTMENT OF DISTRIBUTIONS. THE
FOOTNOTE ILLUSTRATES ANY RECLASSIFICATIONS OF SHARE CAPTIAL AMOUNTS, THE NUMBER
OF COMMON SHARES OUTSTANDING AT THE BEGINNING OF THE PERIOD, REINVESTED AND
OUTSTANDING AT THE END OF THE PERIOD, FOR THE LAST TWO PERIODS, ALONG WITH THE
CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
Financial Statements
John Hancock Funds - Patriot Select Dividend Trust
FINANCIAL STATEMENTS
Selected data for a Common Share outstanding throughout the periods indicated,
investment returns, key ratios and supplemental data are listed as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1994 -------------------------------------------------------
(UNAUDITED) 1994 1993 1992(a) 1991*
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
COMMON SHARES
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........... $ 13.17 $ 17.33 $ 15.78 $ 14.08 $ 13.86(b)
------------ ------------ ------------ ------------ ------------
Net Investment Income.......................... 0.77 1.34 1.31 1.45 1.25
Net Realized and Unrealized Gain (Loss)
on Investments................................ (0.45) (3.47) 2.11 2.16 0.62
------------ ------------ ------------ ------------ ------------
Total from Investment Operations........... 0.32 (2.13) 3.42 3.61 1.87
------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends to AMPS Shareholders............... (0.14) (0.22) (0.22) (0.26) (0.28)
Dividends to Common Shareholders from
Net Investment Income....................... (0.62) (1.30) (1.08) (1.09) (0.85)
Distributions to Common Shareholders from
Net Realized Short-term Gain on Investments -- (0.51) (0.57) (0.56) (0.39)
------------ ------------ ------------ ------------ ------------
Total Distributions........................ (0.76) (2.03) (1.87) (1.91) (1.52)
------------ ------------ ------------ ------------ ------------
AMPS Underwriting Discount..................... -- -- -- -- (0.13)
------------ ------------ ------------ ------------ ------------
Net Asset Value, End of Period................. $ 12.73 $ 13.17 $ 17.33 $ 15.78 $ 14.08
============ ============ ============ ============ ============
Per Share Market Value, End of Period.......... $ 11.625 $ 12.750 $ 18.250 $ 16.875 $ 15.000
Total Investment Return at Market Value........ (4.20%) (21.60%) 19.14% 25.01% 9.08%
RATIOS AND SUPPLEMENTAL DATA
Net Assets Applicable to Common Shares,
End of Period................................ $125,829,022 $130,156,665 $170,512,148 $153,274,968 $135,781,333
Ratio of Expenses to Average Net Assets**..... 1.20%(c) 1.30% 1.52% 1.42% 1.39%(c)
Ratio of Net Investment Income to
Average Net Assets**........................ 7.75(c) 5.83% 5.50% 6.75% 7.16%(c)
Portfolio Turnover Rate........................ 41% 39% 53% 85% 209%
SENIOR SECURITIES
Total AMPS Outstanding......................... $ 70,000,000 $ 70,000,000 $ 70,000,000 $ 70,000,000 $ 70,000,000
Asset Coverage per Unit (d).................... $ 278,154 $ 285,137 $ 339,312 $ 316,361 $ 290,817
Involuntary Liquidation Preference
per Unit (e)................................. $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000
Approximate Market Value per Unit (e).......... $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000
</TABLE>
* For the period July 31, 1990 (commencement of operations) to June 30,
1991.
** Ratios calculated on the basis of expenses and net investment income
applicable to both the common and preferred shares relative to the
average net assets for both common and preferred shares.
(a) Prior to the assumption of the advisory contract on May 6, 1992 by
John Hancock Advisers, Inc., the Fund was advised by Patriot Advisers,
Inc.
(b) Initial capitalization, net of offering expenses.
(c) On an annualized basis.
(d) Calculated by subtracting the Fund's total liabilities (not including
the AMPS) from the Fund's total assets and dividing such amount by the
number of AMPS outstanding as of the applicable 1940 Act Evaluation
Date.
(e) Plus accumulated and unpaid dividends.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
Financial Statements
John Hancock Funds - Patriot Select Dividend Trust
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994 (UNAUDITED)
- ----------------------------------------------------------------------------------
NUMBER OF
ISSUER, DESCRIPTION SHARES MARKET VALUE
- ------------------- --------- ------------
<S> <C> <C>
PREFERRED STOCKS
AUTO/TRUCK (1.92%)
General Motors Corp., Depositary Shares,
9.12%, Ser G ........................... 150,000 $ 3,750,000
-----------
Banks _ Foreign (0.91%)
Banesto Holdings Ltd., 10.50%, Gtd Ser A,
(Guernsey) (R) ......................... 32,205 805,125
Barclays Bank PLC, 11.50%, Ser D,
American Depositary Receipts ("ADR")
(United Kingdom) ..................... 10,000 281,250
Santander Overseas Bank, Inc., 8.70%,
Ser B (Puerto Rico) .................... 31,400 702,575
-----------
1,788,950
-----------
BANKS - U.S. (8.55%)
Bank of Boston Corp., 8.60%,
Depositary Shares, Ser E................ 84,886 1,994,821
Bank of Boston Corp., 7.875%, Ser F ...... 51,300 1,141,425
BankAmerica Corp., 9.625%, Ser F.......... 50,000 1,281,250
Chase Manhattan Corp. (The), 9.76%,
Ser H .................................. 22,000 577,500
Chemical Banking Corp., Adjustable Rate
Preferred ("ARP"), Ser L ............... 20,000 1,700,000
Citicorp, ARP, Ser 18 .................... 10,000 213,750
First Fidelity Bancorporation, 10.64%,
Depositary Shares, Ser F ............... 60,000 1,567,500
First Interstate Bancorp., 9.875%,
Depositary Shares, Ser F ............... 150,000* 3,825,000
LaSalle National Corp., 8.75%, Ser K (R).. 62,000 3,022,500
Mellon Bank Corp., 9.60%, Ser I .......... 54,800* 1,411,100
-----------
16,734,846
-----------
COMPUTER SERVICES (1.05%)
Comdisco Inc., 8.75%, Ser A .............. 30,900 718,425
International Business Machines Corp.,
7.50%, Depositary Shares, Ser A ........ 60,000 1,327,500
-----------
2,045,925
-----------
FINANCIAL SERVICES (4.88%)
Ahmanson, H. F. & Co., 9.60%, Depositary
Shares, Ser B .......................... 85,000* 2,156,875
Ahmanson, H. F. & Co., 8.40%, Depositary
Shares, Ser C .......................... 60,000 1,402,500
Grand Metro Delaware Co., 9.42%,
Gtd Ser A ............................ 65,000* 1,657,500
</TABLE>
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED
BY THE FUND ON DECEMBER 31, 1994. IT'S DIVIDED INTO FIVE MAIN CATEGORIES:
PREFERRED STOCKS, COMMON STOCKS, CAPITAL SECURITIES, BONDS AND SHORT-TERM
INVESTMENTS. THE STOCKS AND CAPITAL SECURITIES ARE FURTHER BROKEN DOWN BY
INDUSTRY GROUPS. UNDER EACH INDUSTRY GROUP IS A LIST OF THE STOCKS OWNED BY THE
FUND. SHORT-TERM INVESTMENTS, WHICH REPRESENT THE FUND'S "CASH" POSITION, ARE
LISTED LAST.
<TABLE>
<CAPTION>
NUMBER OF
ISSUER, DESCRIPTION SHARES MARKET VALUE
- ------------------- --------- ------------
<S> <C> <C>
FINANCIAL SERVICES (continued)
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A ............... 30,000* $ 765,000
Salomon Inc., 8.08%, Depositary
Shares, Ser D .......................... 50,000 1,062,500
SunAmerica Inc., 9.25%, Ser B ............ 100,000 2,512,500
----------
9,556,875
----------
INSURANCE (2.16%)
American Life Holding Co., $2.16 ......... 40,000 825,000
Progressive Corp., 9.375%, Ser A ......... 62,000 1,581,000
Provident Life and Accident Insurance
Co. of America, 8.10%, Depositary
Shares ................................. 81,500 1,813,375
----------
4,219,375
----------
LEASING (0.63%)
AMERCO, 8.50%, Ser A ..................... 65,000 1,235,000
----------
OIL & GAS (5.80%)
Elf Overseas Ltd., 8.50%, Gtd Ser A
(Cayman Islands) ....................... 150,000 3,543,750
ENSERCH Corp., ARP, Ser F ................ 25,000 525,000
Enterprise Oil PLC,10.50%, Ser A,
ADR (United Kingdom) ................... 24,500 542,062
Lasmo PLC, 10.00%, Ser A, ADR (United
Kingdom) ............................... 138,000 2,777,250
Phillips Gas Co., 9.32%, Ser A ........... 88,000 2,244,000
Washington Natural Gas Co., 8.50%,
Ser III ................................ 76,000* 1,729,000
----------
11,361,062
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
Financial Statements
John Hancock Funds - Patriot Select Dividend Trust
<TABLE>
<CAPTION>
NUMBER OF
ISSUER, DESCRIPTION SHARES MARKET VALUE
- ------------------- --------- ------------
<S> <C> <C>
PAPER (1.97%)
Boise Cascade Corp., 9.40%, Ser F........ 100,000 $ 2,425,000
Bowater Inc., 8.40%, Depositary
Shares, Ser C.......................... 64,000* 1,432,000
------------
3,857,000
------------
PUBLISHING (0.52%)
Newscorp Overseas Ltd., 8.625%, Ser A
(Cayman Islands)....................... 50,000 1,018,750
------------
UTILITIES (25.46%)
Arizona Public Service Co., ARP, Ser Q .. 30,000** 2,250,000
Central Maine Power, 8.875% (R) ......... 16,000 1,344,000
Central Maine Power, Ser A .............. 10,000 820,000
Cincinnati Gas & Electric Co., 7.44% .... 12,000 1,012,500
Columbus Southern Power Co., 9.50%,
02/01/15 Ser .......................... 10,000* 1,067,500
Commonwealth Edison Co., $8.38 .......... 20,000 1,760,000
Consolidated Edison Co. of NY, Inc.,
5.75%, Ser E .......................... 57,600 3,837,600
Detroit Edison Co. (The), 7.68% ......... 5,500 473,000
Detroit Edison Co. (The), 7.75% ......... 107,800 2,317,700
Duke Power Co., 7.85%, Ser S ............ 5,000 472,150
Florida Power & Light Co., 7.28%, Ser F.. 25,236 2,226,825
Florida Power & Light Co., 7.40%, Ser G.. 25,000 2,229,000
Florida Power Corp., 7.76% .............. 30,460 2,822,119
GTE Florida, Inc., $8.16 ................ 25,000 2,462,500
GTE North, Inc., $7.60, Ser IND ......... 12,000 1,119,000
Gulf States Utilities Co., $8.52 ........ 45,500* 4,077,937
Gulf States Utilities Co., $9.96 ........ 9,800* 980,000
Gulf States Utilities Co., 8.85%, Ser B.. 32,440* 1,557,120
Houston Lighting & Power Co., $7.52 ..... 6,966 608,062
Houston Lighting & Power Co., $8.12 ..... 21,700 2,022,006
MCN Michigan Co., Limited Partnership,
9.375%, Ser A ......................... 25,000* 631,250
New York State Electric & Gas Co., 8.95%,
01/01/16 Ser .......................... 40,000* 1,020,000
Public Service Electric & Gas Co., 7.40%. 49,208 4,231,888
Public Service Electric & Gas Co.,
9.375%, Ser A ......................... 30,000* 768,750
Southern California Edison Co., 7.58% ... 25,000 2,093,750
Tampa Electric Co., 7.44%, Ser F ........ 12,000 1,091,280
Texas Utilities Electric Co., $7.24 ..... 9,500 772,065
Texas Utilities Electric Co., $7.50 ..... 25,000 518,750
Texas Utilities Electric Co., $7.98 ..... 26,000 2,293,720
Texas Utilities Electric Co., $8.20 ..... 25,000 562,500
Virginia Electric & Power Co., $7.20 .... 4,759 402,136
------------
49,845,108
TOTAL PREFERRED STOCKS ------------
(Cost $112,042,832) (53.83%) 105,412,891
------- ------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
ISSUER, DESCRIPTION SHARES MARKET VALUE
- ------------------- --------- ------------
<S> <C> <C>
COMMON STOCKS
UTILITIES (40.34%)
Allegheny Power System, Inc.............. 36,000 $ 783,000
American Electric Power Co., Inc......... 156,000 5,128,500
Boston Edison Co......................... 150,000 3,581,250
Carolina Power & Light Co................ 30,000* 798,750
CINergy Corp. (formerly Cincinnati Gas &
Electric Co.).......................... 97,000 2,267,375
Consolidated Edison Co. of NY, Inc....... 235,000 6,051,250
DPL, Inc................................. 393,000 8,056,500
Detroit Edison Co........................ 40,000* 1,045,000
Dominion Resources, Inc. of VA .......... 161,800 5,784,350
Entergy Corp............................. 37,450 819,219
Florida Progress Corp.................... 104,250 3,127,500
Houston Industries, Inc.................. 85,400 3,042,375
Idaho Power Co........................... 45,000 1,057,500
New England Electric System ............. 82,000 2,634,250
Pacific Gas and Electric Co.............. 199,500 4,862,812
PECO Energy Co........................... 150,000 3,675,000
Public Service Co. of CO ................ 150,000 4,406,250
Public Service Enterprise Group, Inc..... 187,084 4,957,726
Puget Sound Power & Light Co............. 140,500 2,827,563
Scana Corp............................... 18,600 783,525
SCEcorp.................................. 186,000 2,720,250
Southern Co.............................. 285,000 5,700,000
Texas Utilities Co....................... 137,500 4,400,000
Unicom Corp.............................. 19,000* 456,000
------------
TOTAL COMMON STOCKS
(Cost $85,908,181) (40.32%) 78,965,945
------- ------------
CAPITAL SECURITIES
BANKS - FOREIGN (2.14%)
A/S Eksportfinans, 8.70% Capital
Securities (Norway) ................... 75,000 1,762,500
Australia and New Zealand Banking
Group Ltd., 9.125%, Capital
Securities (Australia) ................ 100,000 2,425,000
------------
TOTAL CAPITAL SECURITIES
(Cost $4,375,000) (2.14%) 4,187,500
------- ------------
</TABLE>
10
<PAGE> 11
Financial Statements
John Hancock Funds Patriot Select Dividend Trust
<TABLE>
<CAPTION>
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000'S OMITTED) MARKET VALUE
- ------------------- -------- --------------- ------------
<S> <C> <C> <C>
BONDS
U.S. GOVERNMENT OBLIGATIONS (2.03%)
United States Treasury, Note,
12-31-96........................... 7.50% 4,000* $ 3,986,562
TOTAL BONDS
(Cost $3,986,562) (2.03%) 3,986,562
------- ------------
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER (3.00%)
Exxon Asset Management Co.
01-03-95.......................... 5.44% 273 273,000
Prudential Funding Corp.
01-03-95.......................... 5.45 5,458 5,458,000
General Electric Credit Corp.
01-04-95.......................... 5.75 146 146,000
------------
TOTAL SHORT-TERM INVESTMENTS (3.00%) 5,877,000
------- ------------
TOTAL INVESTMENTS (101.36%) $198,429,898
======= ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended December 31, 1994.
** Denotes an affiliated company in which the Fund has ownership of at least
5% of the voting securities. Transactions with companies which are
affiliates amounted to $2,250,000 or 1.15%, in total, of the Fund's net
asset value and is as follows:
<TABLE>
<CAPTION>
AFFILIATE DIVIDEND INCOME
--------- ---------------
<S> <C>
Arizona Public Service Co., ARP, Ser Q..................... $ 90,000
===============
</TABLE>
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
See Note A of the Notes to Financial Statements for valuation policy. Rule
144A securities amounted to $5,171,625 as of December 31, 1994.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer, however, security is U. S. dollar
denominated.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
Notes to Financial Statements
John Hancock Funds - Patriot Select Dividend Trust
NOTE A -
ACCOUNTING POLICIES
Patriot Select Dividend Trust (the "Fund") is a closed-end, diversified
management investment company, registered under the Investment Company Act
of 1940. Significant accounting policies of the Fund are as follows:
VALUATION 0F INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent pricing
services or, at fair value as determined in good faith in accordance with
procedures approved by the Trustees. Short-term debt investments maturing
within 60 days are valued at amortized cost which approximates market value.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of
the Internal Revenue Code that are applicable to regulated investment
companies. It will not be subject to Federal income tax on taxable earnings
which are distributed to shareholders. For Federal income tax purposes, the
Fund has $263,286 of a capital loss carryforward available, to the extent
provided by regulations, to offset future net realized capital gains. To the
extent that such carryforward is used by the Fund, no capital gain
distributions will be made. The carryforward expires June 30, 2002. Expired
capital loss carryforwards are reclassified to capital paid-in, in the year of
expiration.
DIVIDENDS, DISTRIBUTIONS AND INTEREST Dividend income on investment
securities is recorded on the ex-dividend date. Interest income on investment
securities is recorded on the accrual basis. The Fund records all dividends and
distributions to shareholders from net investment income and realized gains on
the ex-dividend date. Such distributions are determined in conformity with
income tax regulations.
DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged ratably to
the Fund's operations over a five-year period that began with the commencement
of the investment operation of the Fund.
AUCTION MARKET PREFERRED SHARES SERIES A (AMPS) The Fund issued 700 shares of
Auction Market Preferred Shares Series A (AMPS) on August 30, 1990 in a
public offering. The underwriting discount was recorded as a reduction of the
capital of the Common Shares. Dividends on the AMPS, which accrue daily, are
cumulative at a rate which was established at the offering of the AMPS and have
been reset every 49 days thereafter by an auction. Dividend rates ranged from
3.45% to 4.49% during the period ended December 31, 1994. The AMPS are
redeemable at the option of the Fund, at a redemption price equal to $100,000
per share, plus accumulated and unpaid dividends on any dividend payment date.
The AMPS are also subject to mandatory redemption at a redemption price
equal to $100,000 per share, plus accumulated and unpaid dividends, if the
Fund is in default on its asset coverage requirements with respect to the
AMPS. If the dividends on the AMPS shall remain unpaid in an amount equal to
two full years' dividends, the holders of the AMPS as a class have the right to
elect a majority of the Board of Trustees. In general, the holders of the AMPS
and the Common Shares have equal voting rights of one vote per share, except
that the holders of the AMPS, as a class, vote to elect two members of the
Board of Trustees, and separate class votes are required on certain matters
that affect the respective interests of the AMPS and Common Shares. The AMPS
have a liquidation preference of $100,000 per share, plus accumulated and
unpaid dividends. The Fund is required to maintain certain asset coverage with
respect to the AMPS, as defined in the Fund's By-Laws.
NOTE B -
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, for a continuous investment program
equivalent, on an annual basis, to the sum of .80 of 1% of the Fund's average
weekly net asset value.
12
<PAGE> 13
Notes to Financial Statements
John Hancock Funds - Patriot Select Dividend Trust
The Fund has entered into an administrative agreement with the Adviser
under which the Adviser oversees the custodial, auditing, valuation,
accounting, legal, stock transfer and dividend disbursing services and
maintains Fund communications services with the shareholders. The Adviser
receives a monthly administration fee equivalent, on an annual basis, to the
sum of .15 of 1% of the Fund's average weekly net asset value.
Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione are directors
and/or officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the Fund.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of
the U.S. government and its agencies and short-term securities, during the
period ended December 31, 1994, aggregated $75,467,612 and $81,480,929,
respectively. Purchases and proceeds from sales of obligations of the U.S.
government and its agencies, during the period ended December 31, 1994,
aggregated $3,986,562 and none, respectively.
The cost of investments owned at December 31, 1994 for Federal income
tax purposes was $212,244,027. Gross unrealized appreciation and depreciation
of investments aggregated $2,652,526 and $16,466,655, respectively, resulting
in net unrealized depreciation of $13,814,129 for Federal income tax purposes.
13
<PAGE> 14
John Hancock Funds - Patriot Select Dividend Trust
INVESTMENT OBJECTIVE AND POLICY
The Fund's investment objective is to provide high current income, consistent
with modest growth of capital for holders of its common shares. The Fund will
pursue its objective by investing in a diversified portfolio of
dividend-paying preferred and common equity securities.
DIVIDEND REINVESTMENT PLAN
The Fund provides shareholders with a Dividend Reinvestment Plan ("the Plan")
which offers the opportunity to earn compounded yields. Each holder of common
shares will automatically have all distributions of dividends and capital gains
reinvested by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts, 02210, as agent for the common shareholders unless an election
is made to receive cash. Holders of Common Shares who elect not to
participate in the Plan will receive all distributions in cash, paid by
check, mailed directly to the shareholder of record (or if the Common Shares
are held in street or other nominee name then to the nominee) by the Plan
Agent, as dividend disbursing agent. Shareholders whose shares are held in
the name of a broker or nominee should contact the broker or nominee to
determine whether and how they may participate in the Plan.
If the Fund declares a dividend payable either in Common Shares or in cash,
nonparticipants will receive cash and participants in the Plan will receive the
equivalent in Common Shares. If the market price of the Common Shares on the
payment date for the dividend is equal to or exceeds their net asset value as
determined on the payment date, participants will be issued Common Shares (out
of authorized but unissued shares) at a value equal to the higher of net asset
value or 95% of the market price. If the net asset value exceeds the market
price of the Common Shares at such time, or if the Board of Trustees
declares a dividend payable only in cash, the Plan Agent will, as agent for
Plan participants, buy shares in the open market, on the New York Stock
Exchange or elsewhere, for the participant's accounts. Such purchases will be
made promptly after the payable date for such dividend and, in any event,
prior to the next ex-dividend date, except where necessary to comply with
federal securities laws. If, before the Plan Agent has completed its purchases,
the market price exceeds the net asset value of the Common Shares, the
average per share purchase price paid by the Plan Agent may exceed the net
asset value of the Common Shares, resulting in the acquisition of fewer shares
than if the dividend had been paid in shares issued by the Fund.
Participants in the Plan may withdraw from the Plan upon written notice
to the Plan Agent. Such withdrawal will be effective immediately if received
not less than ten days prior to a dividend record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant
withdraws from the Plan or upon termination of the Plan as provided below,
certificates for whole Common Shares credited to his or her account under the
Plan will be issued and a cash payment will be made for any fraction of a Share
credited to such account.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the accounts,
including information needed by the shareholders for personal and tax records.
Common shares in the account of each Plan participant will be held by the Plan
Agent in non-certificated form in the name of the participant. Proxy material
relating the shareholder's meetings of the Fund will include those shares
purchased as well as shares held pursuant to the Plan.
There will be no brokerage charges with respect to Common Shares issued
directly by the Fund. However, each participant will pay a pro rata share
of brokerage commissions incurred with respect to the Plan Agent's open
market purchases in connection with the reinvestment of dividends and
distributions. In each case, the cost per share of the shares purchased for
each participant's account will be the average cost, including brokerage
commissions, of any shares purchased on the open market plus the cost of any
shares issued by the Fund. There are no other charges to participants for
reinvesting dividends or capital gain distributions, except for certain
brokerage commissions, as described above.
14
<PAGE> 15
John Hancock Funds - Patriot Select Dividend Trust
The automatic reinvestment of dividends and distributions will not
relieve participants of any federal income tax that may be payable or required
to be withheld on such dividends or distributions. Participants under the Plan
will receive tax information annually. The amount of dividend to be reported
on Form 1099-DIV should be (1) in the case of shares issued by the Fund, the
fair market value of such shares on the dividend payment date and (2) in the
case of shares purchased by the Plan agent in the open market, the amount of
cash used to purchase them (including the amount of cash allocated to brokerage
commissions paid on such purchases).
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of
the change sent to all shareholders of the Fund at least 90 days before the
record date for the dividend or distribution. The Plan may be amended or
terminated by the Plan Agent at least 90 days after written notice to all
shareholders of the Fund. All correspondence or additional information
concerning the Plan should be directed to the Plan Agent, State Street Bank
and Trust Company, at P.O. Box 8209, Boston, Massachusetts 02266-8209
(telephone 1-800-426-5523).
15
<PAGE> 16
[LOGO] JOHN HANCOCK FUNDS
A GLOBAL INVESTMENT MANAGEMENT FIRM
101 Huntington Avenue Boston, MA 02199-7603
Back Cover
[A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page.
A box sectioned in quandrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A Global Investment Management Firm."]
[A recycled logo in lower left hand corner with the caption "Printed on
Recycled Paper."]
