John Hancock Funds
Patriot
Select
Dividend
Trust
Annual Report
June 30, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Thomas W.L. Cameron
James F. Carlin*
William H. Cunningham*
Charles F. Fretz*
Harold R. Hiser, Jr.*
Anne C. Hodsdon
Charles L. Ladner*
Leo E. Linbeck, Jr.*
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
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
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
MARKET PREFERRED SHARES
Chemical Bank
450 West 33rd Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Anderson LLP
One International Place
Boston, Massachusetts 02110-2604
Listed: New York Stock Exchange Symbol:DIV
John Hancock Closed-End Funds: 1-800-843-0090
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief
Executive Officer, flush right, next to second paragraph.
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Since February, much of the economic news has been good. Employment
levels are at their highest in years. Real wages may have started
growing again after a long stagnant stretch. And a fair share of
Corporate America logged second-quarter earnings that exceeded
expectations, despite some glaring, headline-making exceptions in
the technology world. So why has the bond market soured this year
and the stock market been on a roller coaster? Isn't good economic
news good?
What keeps the market interesting is that the answer is not
straightforward. While a healthy economy helps corporate profits
grow, an economy growing too fast, or the fear that it's heating up,
sends interest rates up out of concern that rising wages and higher
prices could spark inflation. That could prompt the Federal Reserve,
which views inflation as public enemy number one, to slow the
economy down. And the typical way to do that is to raise interest
rates. For bonds, higher interest rates mean lower bond prices,
since the two move in opposite directions. What's more, inflation
erodes the value of a bondholder's fixed income-stream. For stocks,
higher interest rates mean higher borrowing costs, which cut into
profits.
Those are just a couple of the more textbook explanations. But
there's another element driving the market and it's far less
tangible or objective. It has to do with perception rather than
reality. By taking the market on a series of dizzying ups and downs
lately, investors are signaling uncertainties and fears, more than
anything else. Since the financial markets look forward, investors
seem to be saying that they are concerned about a number of things -
- - the specter of inflation, the direction of interest rates, the
upcoming election, the possibility that markets may have advanced
too far without a pullback.
So what should investors take away from it all? Probably the same
thing you've heard before -- that although the markets don't move up
in a straight line, they have historically rewarded patient, long-
term investors. Short-term turmoil is better as a topic of dinner
party conversation, rather than a call to action.
Sincerely,
/S/ Edward J. Boudreau Jr
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By Gregory K. Phelps, for the Portfolio Management Team
John Hancock
Patriot Select
Dividend Trust
After strong first half, rising interest rates and increased
economic activity undermine income-producing stocks
The story of John Hancock Patriot Select Dividend Trust during the
past 12 months is really two stories: double-digit returns during
the first half of the period, and flat performance during the second
half. Throughout the final six months of 1995, the investment
climate was nearly ideal, thanks to moderate economic growth, low
inflation and falling interest rates. Even the mood in Washington
was positive, with Congress and the White House seemingly headed
toward a balanced budget agreement. Three times between the beginning
of the period and January 31, 1996, the Federal Reserve lowered the
interest rate banks charge each other for overnight loans, known as
the federal funds rate. Utility stocks, which comprised about two-thirds
of the Fund's net assets, benefited further from good news on the
regulatory front increased merger activity and the fact that many
technology investors flocked to utilities last fall to protect
profits earned earlier in the year.
Three factors sparked the second-half reversal: One, the Treasury's
semiannual auction of 30-year bonds in February, which inundated the
market with new supplies, driving interest rates higher; two, a
broad increase in new corporate debt, which further aggravated the
supply imbalance; and three, the infamous February employment
report, the strength of which so surprised analysts that the bond
market suffered its biggest one-day decline in more than five years.
The effect on utility stocks was profound. By mid-year 1996,
electric utilities were the second worst-performing industrial
sector year-to-date. The upshot for the Fund was a performance
number that, while gratifying, failed to build on gains secured at
the halfway mark. During the year that ended June 30, 1996, John
Hancock Patriot Select Dividend Trust had a total return of 12.27%
at net asset value, compared to 9.02% for the Dow Jones Utilities
Index.
A 2 1/4" x 3 1/2" photo of the Patriot Management Team. Caption reads
"Beverly Cleathero, Gregory Phelps and Laura Provost".
Income-
producing
stocks reverse
course in the
first half of
1996.
Pie chart with heading "Portfolio Diversification" at top of left hand
column. The chart is divided into five sections. Going from top left to
right: Short-Term Investments & Other 3%; Utilities 67%; Financials 18%;
Oil & Gas 7%; Industrials 5%.
"Utilities
totaled 66%
of the
Fund's net
assets at the
end of the
period..."
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 "Coastal Corp." followed by an up arrow and the phrase "DRD-
eligible/solid earnings growth." The second listing is "Florida Power
and Light " followed by an up arrow and the phrase "DRD-eligible/credit
upgrade." The third listing is "Western Massachusetts Electric" followed
by a down arrow and the phrase "In shadow of Northeast utilities."
Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."
Performance summary
Throughout the period, the Fund profited by emphasizing stocks
eligible for the dividends-received deduction (DRD). On June 30,
1996, DRD-eligible securities totaled more than 85% of the Fund's
net assets. DRD-eligible securities carry distinct tax advantages
for corporate investors, which keeps them in demand. In recent
years, demand has built as issuers have redeemed many existing DRD-
eligible securities while avoiding issuing new ones. A second pillar
of the Fund's investment strategy involved seeking out so-called
"cushion preferred" stocks, which carry above-average yields.
Cushion preferreds had a mixed impact on the Fund's performance
during the first half of the period, augmenting yield but limiting
price gains. During the second half, however, the impact was wholly
positive, as the cushion preferreds proved less vulnerable to the
corrosive effect of rising interest rates.
Utilities
Utilities totaled 66% of the Fund's net assets at the end of the
period, just above the minimum requirement of 65% utilities
established under the Fund's investment guidelines. That's not
unusual for this Fund since under normal market conditions, we can
usually find more attractive yields in other sectors, including
banks and financial stocks. DRD-eligible securities (both commons
and preferreds) and cushion preferreds dominate the Fund's utility
holdings, but lately we've paid attention to a couple of other
categories as well: high-yielding utility common stocks (we call
them "cushion commons") and gas utility stocks, which tend to offer
lower yields than most electric utilities but can provide a higher
total return. An example of a gas utility that has done well for us
since we began adding shares in March is Pacific Enterprises, the
largest gas utility in California. It has higher dividend-growth
potential than most electric utilities, thanks to an aggressive
cost-cutting program and dramatic earnings growth over the last
several quarters. Among the Fund's top performing electric utilities
was Florida Power and Light, a preferred stock, DRD-eligible,
offering a 6.75% yield and carrying seven years of call protection
(a security with call protection can't be redeemed by the issuer
prematurely). Florida Power and Light recently received a credit
upgrade from Moody's, boosting the share price. Among the Fund's
disappointments was Western Massachusetts Electric, a wholly owned
subsidiary of Northeast Utilities. The parent's problems with the
Nuclear Regulatory Commission have harmed the child, resulting in a
credit downgrade. On the plus side, however, it's a DRD-eligible
security with an attractive yield. If it's ever redeemed, we stand
to gain since we bought it at a significant discount to its call
price.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended June 30, 1996."
The chart is scaled in increments of 5% from bottom to top, with 15% at
the top and 0% at the bottom. Within the chart there are two solid bars.
The first represents the 12.27% total return for John Hancock Patriot
Select Dividend Trust. The second represents the 9.02% total return of
the Dow Jones Utility Average. Footnote below reads: "The total return
for John Hancock Patriot Select Dividend 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."
Financials and industrials
Elsewhere in the Fund, our focus has been on foreign and domestic
banks, about 12% of the Fund's assets, and oil and gas exploration
companies, about 7%. Banks are one of the last category of issuers
still coming out with DRD-eligible securities, though they, too,
have cut back in recent years. We did especially well during the
period with a 6.75%, DRD-eligible security with ten years of call
protection from Fleet Financial Group. Fleet has strengthened its
credit rating in recent months as a result of mergers with Shawmut
National and NatWest. Coastal Corp., an oil and gas exploration and
refining company, has profited lately from rising energy prices and
increased exploration activity. We added to the Fund's existing
stake in Coastal Corp. shortly before it was put on a credit-upgrade
watch by Standard & Poor's. Besides an attractive yield, DRD
eligibility and good call protection, Coastal Corp. turned in solid
earnings growth in 1995 and should benefit in the months ahead from
the decision to sell its coal assets to pay down debt.
Outlook
The Fund will likely maintain a defensive posture in the months
ahead by emphasizing high-yielding stocks, both commons and
preferreds, and looking for opportunities outside the utilities
sector. As the economy improves, inflationary pressures are
building, increasing the possibility of a Fed rate increase before
the November elections. We therefore have a modest set of goals
going forward: to preserve the Fund's net asset value while
maximizing yield.
"The Fund
will likely
maintain a
defensive
posture in
the months
ahead..."
-------------------------------------------------------------------
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. Of
course, the team's views are subject to change as market and other
conditions warrant.
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Select Dividend Trust
<TABLE>
<CAPTION>
The Statement of Assets and Liabilities is the Fund's balance sheet
and shows the value of what the Fund owns, is due and owes on June
30, 1996. You'll also find the net asset value for each common
share.
Statement of Assets and Liabilities
June 30, 1996
- ---------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value -- Note C:
Preferred stocks (cost - $143,291,959) $ 144,739,790
Common stocks (cost - $60,098,235) 65,262,226
Capital Securities (cost - $2,000,000) 2,110,000
Trust originated preferred securities
(cost - $1,250,000) 1,250,000
Short-term investments (cost - $2,740,865) 2,740,865
-------------
216,102,881
Cash 1,238
Receivable for investments sold 9,468,356
Dividends receivable 1,663,162
Other assets 15,271
-------------
Total Assets 227,250,908
- ---------------------------------------------------------------------------------------------
Liabilities:
AMPS dividend payable 358,610
Common Share dividend payable 126,254
Payable for investments purchased 7,345,000
Payable to John Hancock Advisers, Inc. - Note B 183,960
Federal income tax payable - Note A 438,897
Accounts payable and accrued expenses 66,981
-------------
Total Liabilities 8,519,702
- ---------------------------------------------------------------------------------------------
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 138,623,025
Accumulated net realized gain on investments 272,693
Net unrealized appreciation of investments 6,722,974
Undistributed net investment income 3,112,514
-------------
Net Assets Applicable to Common Shares
($15.05 per share based on 9,885,027
shares outstanding) 148,731,206
-------------
Net Assets $ 218,731,206
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
The 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.
Statement of Operations
Year ended June 30, 1996
- ---------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes of $67,256) $17,421,055
Interest 157,552
------------
17,578,607
------------
Expenses:
Investment management fee - Note B 1,747,110
Administration fee - Note B 327,583
AMPS and auction fees 202,792
Custodian fee 62,924
Transfer agent fee 37,775
Trustees' fees 36,558
Auditing fee 51,400
Legal fees 3,495
Printing 56,446
Miscellaneous 36,160
Federal excise tax 176,442
Organization expense - Note A 1,250
------------
Total Expenses 2,739,935
- ---------------------------------------------------------------------------------------------
Net Investment Income 14,838,672
- ---------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold (net of Federal
income taxes of $438,897 on long-term capital gains
retained) - Note A 2,153,915
Change in net unrealized appreciation/depreciation
of investments 3,048,191
------------
Net Realized and Unrealized Gain
on Investments 5,202,106
- ---------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $20,040,778
=============================================================================================
Distributions to AMPS (2,994,753)
- ---------------------------------------------------------------------------------------------
Net Increase in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less AMPS
Distributions $17,046,025
=============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $ 14,838,672 $ 16,050,827
Net realized gain on investments sold 2,153,915 526,217
Change in net unrealized appreciation/
depreciation of investments 3,048,191 12,371,740
------------ ------------
Net Increase in Net Assets Resulting from
Operations 20,040,778 28,948,784
------------ ------------
Distributions to Shareholders:
AMPS ($4,278 and $4,232 per share, respectively)
- - Note A (2,994,753) (2,962,344)
Common Shares - Note A
Dividends from net investment income ($1.1329 and
$1.2371 per share, respectively) (11,198,710) (12,229,041)
Distributions from net realized gain on
investments sold (0.1042 and zero per
share, respectively) (1,030,173) --
------------ ------------
Total Distributions to Shareholders (15,223,636) (15,191,385)
------------ ------------
Net Assets:
Beginning of period 213,914,064 200,156,665
------------ ------------
End of period (including undistributed net
investment income of $3,112,514 and
$1,993,836, respectively) $218,731,206 $213,914,064
============ ============
<CAPTION>
* Analysis of Common Shareholder
Transactions:
YEAR ENDED JUNE 30,
-----------------------------------------------------------
1996 1995
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period 9,885,027 $137,984,373 9,885,027 $138,130,719
Reclassification of net realized long-term
gains retained on investments sold (net of
federal income taxes of $438,897) - Note A -- 815,094 -- --
Reclassification of capital accounts - Note D -- (176,442) -- (146,346)
---------- ------------ --------- ------------
Shares outstanding, end of period 9,885,027 $138,623,025 9,885,027 $137,984,373
========== ============ ========= ============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the period indicated, investment returns, key
ratios, and supplemental data are listed as follows:
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992(a)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 14.56 $ 13.17 $ 17.33 $ 15.78 $ 14.08
-------- -------- -------- -------- ---------
Net Investment Income 1.50 1.62 1.34 1.31 1.45
Net Realized and Unrealized Gain (Loss) on Investments 0.53 1.31 (3.47) 2.11 2.16
-------- -------- -------- -------- ---------
Total from Investment Operations 2.03 2.93 (2.13) 3.42 3.61
-------- -------- -------- -------- ---------
Less Distributions:
Dividends to AMPS Shareholder (0.30) (0.30) (0.22) (0.22) (0.26)
Distributions to Common Shareholders from Net
Investment Income (1.13) (1.24) (1.30) (1.08) (1.09)
Distributions to Common Shareholders
from Net Realized Short-Term
Gain on Investments (0.11) -- (0.51) (0.57) (0.56)
-------- -------- -------- -------- ---------
Total Distributions (1.54) (1.54) (2.03) (1.87) (1.09)
-------- -------- -------- -------- ---------
Net Asset Value, End of Period $ 15.05 $ 14.56 $ 13.17 $ 17.33 $ 15.78
======== ======== ======== ======== =========
Per Share Market Value, End of Period $ 14.250 $ 13.875 $ 12.750 $ 18.250 $ 16.875
Total Investment Return at Market Value 11.83% 19.73% (21.60%) 19.14% 25.01%
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000's omitted) $148,731 $143,914 $130,157 $170,512 $153,275
Ratio of Expenses to Average Net Assets* 1.25% 1.29% 1.30% 1.52% 1.42%
Ratio of Net Investment Income to Average Net Assets* 6.79% 7.96% 5.83% 5.50% 6.75%
Portfolio Turnover Rate 49% 107% 39% 53% 85%
Senior Securities
Total AMPS Outstanding (000's omitted) $ 70,000 $ 70,000 $ 70,000 $ 70,000 $ 70,000
Asset Coverage per Unit (b) $306,112 $305,754 $285,137 $339,312 $316,361
Involuntary Liquidation Preference per Unit (c) $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (c) $100,000 $100,000 $100,000 $100,000 $100,000
* 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) 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.
(c) Plus accumulated and unpaid dividends.
The Financial Highlights summarizes the impact of the following factors on a single share for the period indicated: net
investment income, gains (losses), dividends and total investment return of the Fund. It shows how the Fund's net asset
value for a share has changed since the end of the previous period. Additionally, important relationships between some items
presented in the financial statements are expressed in ratio form.
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Patriot Select Dividend Trust on June 30,
1996.
It's divided into five main categories: preferred stocks, common stocks, capital securities, trust originated preferred
securities and short-term investments. The stocks, capital securities and trust originated preferred securities are
further
broken down by industry group. 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.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ---------- ----------
<S> <C> <C>
PREFERRED STOCKS
Auto/Truck (2.64%)
Ford Motor Company, 8.25%,
Depositary Shares, Ser B 60,000 $ 1,620,000
General Motors Corp., 9.12%,
Depositary Shares, Ser G 150,000 4,162,500
------------
5,782,500
------------
Banks - Foreign (0.38%)
Santander Overseas Bank, Inc., 10.64%,
Ser A (Puerto Rico) 31,700 840,050
-----------
Banks - U.S. (10.99%)
Ahmanson, H. F. & Co., 8.40%,
Depositary Shares, Ser C 35,000 905,625
Bank of Boston Corp., 8.60%,
Depositary Shares, Ser E 144,886 3,712,704
Chase Manhattan Corp., 9.08%, Ser D 80,000 2,050,000
Chase Manhattan Corp., 9.76%, Ser B 27,700 765,212
Chase Manhattan Corp., 10.84%, Ser C 42,000 1,249,500
First Union Corp., 10.64%,
Depositary Shares, Ser F (formerly
First Fidelity Bancorporation) 60,000 1,500,000
Fleet Financial Group, Inc., 6.75%, Ser VI 119,000 5,459,125
Fleet Financial Group, Inc., 9.35%,
Depositary Shares (formerly
Shawmut National Corp.) 165,000 4,455,000
Mellon Bank Corp., 9.60%, Ser I 54,800 1,397,400
Wells Fargo & Co., 9.00%,
Depositary Shares, Ser G 100,000 2,550,000
------------
24,044,566
------------
Conglomerate/Diversified (0.31%)
Grand Metropolitan Delaware, 9.42%
Gtd Ser A 25,000 684,375
------------
Financial Services (2.76%)
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A 30,000 843,750
Salomon Inc., 8.08%, Depositary Shares,
Ser D 50,000 1,193,750
Salomon Inc., 8.40%, Depositary Shares,
Ser E 50,000 1,231,250
Source One Mortgage Services Corp.,
8.42%, Ser A 110,000 2,777,500
------------
6,046,250
------------
Insurance (2.62%)
American Life Holding Co., $2.16 40,000 840,000
Provident Companies, Inc., 8.10%,
Depositary Shares (formerly Provident
Life and Accident Insurance Co.
of America) 41,500 1,058,250
Travelers Group, Inc., 9.25%,
Depositary Shares, Ser D 149,000 3,836,750
------------
5,735,000
------------
Leasing (0.69%)
AMERCO, 8.50%, Ser A 65,000 1,519,375
------------
Oil & Gas (6.78%)
Coastal Corp., $2.125, Ser H 174,125 4,396,656
Elf Overseas Ltd., 8.50%, Gtd Ser A
(Cayman Islands) 150,000 3,787,500
Enterprise Oil PLC, 10.50%, Ser A
American Depository Receipts ("ADR")
(United Kingdom) 24,500 621,688
Lasmo PLC, 10.00%, Ser A, ADR
(United Kingdom) 138,000 3,450,000
Phillips Gas Co., 9.32%, Ser A 98,000 2,572,500
------------
14,828,344
------------
Paper (2.45%)
Boise Cascade Corp., 9.40%, Ser F 90,000 2,328,750
Bowater Inc., 8.40%, Depositary Shares,
Ser C 120,000 3,030,000
------------
5,358,750
------------
Utilities (36.53%)
Appalachian Power Co., 7.40% 10,870 1,097,870
Baltimore Gas & Electric Co., 6.70%,
Ser 1993 10,000 954,400
Baltimore Gas & Electric Co., 6.99%,
Ser 1995 40,000 3,940,000
Baltimore Gas & Electric Co., 7.78%,
Ser 1973 16,515 1,668,015
Boston Edison Co., 4.25% 26,137 1,437,535
CL & P Capital, 9.30%, Ser A 35,000 861,875
Central Maine Power, 7.999%, Ser A 10,000 937,500
Central Maine Power, 8.875% (R) 9,600 936,000
Columbus Southern Power Co., 8.375%,
Ser A 60,000 1,447,500
Commonwealth Edison Co., $8.38 25,420 2,503,870
Commonwealth Edison Co., $8.40, Ser A 25,110 2,482,751
Detroit Edison Co., 7.75% 60,000 1,515,000
Entergy Gulf States, Inc., $8.52
(formerly Gulf States Utilities Co.) 45,500 4,322,500
Entergy Gulf States, Inc., $9.96
(formerly Gulf States Utilities Co.) 9,800 994,700
Entergy Gulf States, Inc., Adjustable
Rate Preferred, Depositary Shares,
Ser B (formerly Gulf States Utilities Co.) 28,002 1,319,594
Florida Power & Light Co., 6.75%, Ser U 25,000 2,400,000
GTE Florida, Inc., $8.16 25,000 2,575,000
GTE North, Inc., $7.60, Ser IND 10,000 1,005,000
Georgia Power Co., $7.80 11,780 1,183,890
Houston Lighting & Power Co., $8.12 21,700 2,221,537
Jersey Central Power & Light Co., 7.52%
Ser K 6,500 659,750
Massachusetts Electric Co., 6.84% 89,000 2,091,500
Massachusetts Electric Co., 6.99% 13,500 1,329,750
MCN Michigan Co., Limited Partnership,
9.375%, Ser A 50,000 1,306,250
Monongahela Power Co., $7.73, Ser L 44,000 4,466,000
Montana Power Co., $6.875 8,500 803,250
Narragansett Electric Co., 6.95% 17,950 852,625
PacifiCorp, 8.375%, Ser A 40,000 990,000
PacifiCorp Capital, 8.25% 60,000 1,485,000
PECO Energy Co., $7.48 14,200 1,427,100
PSI Energy, Inc., 7.44% 122,000 3,126,250
Public Service Electric & Gas Co., 6.80% 25,060 2,292,990
Public Service Electric & Gas Co., 6.92% 14,000 1,372,000
Puget Sound Power & Light Co., 7.875% 48,797 1,250,423
Sierra Pacific Power Co., 7.80%,
Ser 1, Class A 183,600 4,773,600
Southern California Gas Co., 7.75% 42,786 1,074,998
Texas Utilities Electric Co., $7.24 9,500 890,625
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A 80,000 2,020,000
Texas Utilities Electric Co., $7.98 29,200 2,985,700
Texas Utilities Electric Co., $2.05,
Depositary Shares 26,300 677,225
Utilicorp Capital, 8.875%, Ser A 70,000 1,776,250
Virginia Electric & Power Co., $6.98 10,500 1,039,500
Virginia Electric & Power Co., $7.05 10,000 1,005,000
Washington Natural Gas Co.,
7.45%, Ser II 32,795 787,080
Washington Natural Gas Co.,8.50%, Ser III 69,430 1,744,429
Western Massachusetts Electric Co.,
7.72%, Ser B 22,247 1,868,748
------------
79,900,580
------------
TOTAL PREFERRED STOCKS
(Cost $143,291,959) (66.17%) 144,739,790
COMMON STOCKS
Utilities (29.84%)
Allegheny Power System, Inc. 36,000 1,111,500
American Electric Power Co., Inc. 156,000 6,649,500
Brooklyn Union Gas Co. 55,000 1,498,750
CINergy Corp. 97,000 3,104,000
Consolidated Edison Co. of NY, Inc. 29,000 848,250
DPL, Inc. 200,000 4,875,000
Dominion Resources, Inc. of VA 104,500 4,180,000
Florida Progress Corp. 104,250 3,622,688
Hawaiian Electric Industries, Inc. 19,400 688,700
Houston Industries, Inc. 240,800 5,929,700
IES Industries, Inc. 100,000 2,987,500
IPALCO Enterprises, Inc. 75,000 1,968,750
MidAmerican Energy Co. 102,600 1,769,850
Montana Power Co. 75,000 1,668,750
New England Electric System 97,000 3,528,375
Oklahoma Gas & Electric Co. 80,000 3,170,000
PECO Energy Co. 60,000 1,560,000
Pacific Enterprises 65,000 1,925,625
Potomac Electric Power Co. 164,300 4,353,950
Puget Sound Power & Light Co. 195,500 4,740,875
Scana Corp. 37,200 1,046,250
Southwestern Public Service Co. 77,700 2,534,963
UtiliCorp United, Inc. 30,000 828,750
Washington Water Power Co. 36,000 670,500
------------
TOTAL COMMON STOCKS
(Cost $60,098,235) (29.84%) 65,262,226
----- ------------
CAPITAL SECURITIES
Banks - Foreign (0.96%)
Australia and New Zealand Banking
Group Ltd., 9.125% (Australia) 80,000 $ 2,110,000
------------
TOTAL CAPITAL SECURITIES
(Cost $2,000,000) (0.96%) 2,110,000
----- ------------
TRUST ORIGINATED PREFERRED SECURITIES
Oil & Gas (0.57%)
Southern Union Financing, 9.48%,
Ser 5/17/25 50,000 1,250,000
------------
TOTAL TRUST ORIGINATED
PREFERRED SECURITIES
(Cost $1,250,000) (0.57%) 1,250,000
----- ------------
<CAPTION>
INTEREST PAR VALUE MARKET
RATE (000'S OMITTED VALUE
--------- --------------- ---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Commercial Paper (1.25%)
Prudential Funding Corp.
07-01-96 5.42% 2,741 2,740,865
------------
TOTAL SHORT-TERM INVESTMENTS (1.25%) 2,740,865
----- ------------
TOTAL INVESTMENTS (98.80%) $216,102,881
===== ============
(R) The 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 $936,000 as of June 30, 1996.
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.
</TABLE>
Notes to financial statements
John Hancock Funds - Patriot Select Dividend Trust
NOTE A --
ACCOUNTING POLICIES
John Hancock 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 SS
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 qualifies as a "regulated investment
company" by complying with the applicable provisions of the Internal
Revenue Code and will not be subject to Federal income tax on
taxable income which is distributed to shareholders.
The Fund has chosen to retain, and pay the applicable Federal income
tax on, its net long-term capital gains for its fiscal year ended
June 30, 1996. Shareholders will be informed of their proportionate
share of the undistributed net long-term capital gains and the tax
paid on their share of such gains via IRS Form 2439, which will be
mailed within sixty days of the Fund's fiscal year end. Shareholders
are required to include income reported to them on IRS Form 2439 in
their taxable income as long-term capital gain; tax paid on their
behalf as reported on IRS Form 2439 may be credited against any
resulting Federal income tax liability. Information reported to
shareholders on IRS Form 2439 will not be reported on IRS Form 1099-
DIV, the form usually used to report the Fund's taxable income to
its shareholders.
In addition to the above, shareholders are entitled to increase the
adjusted tax basis of their shares in the Fund, by the excess of
capital gains included in their income over their share of the tax
paid by the Fund on such gains, as reported on IRS Form 2439.
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 federal
income tax regulations. Due to permanent book/tax differences in
accounting for certain transactions, this has the potential for
treating certain distributions as return of capital as opposed to
distributions of net investment income or realized capital gains.
The Fund has adjusted for the cumulative effect of such permanent
book/tax differences through June 30, 1996, which has no effect on
the Fund's net assets, net investment income or net realized gains.
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.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles
incorporates estimates made by management in determining the
reported amounts of assets, liabilities, revenues, and expenses 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 3.89% to 4.61% during the period ended June 30, 1996.
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
assets.
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 assets.
Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione and Ms. Anne
C. Hodsdon are directors and/or officers of the Adviser and/or its
affiliates, as well as Trustees of the Fund.
Each unaffiliated Trustee is entitled, as compensation for his or
her services, to an annual fee plus remuneration for attendance at
various meetings. The compensation of unaffiliated Trustees is borne
by the Fund. Effective with the fees paid for 1995, the unaffiliated
Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the
deferred compensation. Investments to cover the Fund's deferred
compensation liability are recorded on the Fund's books as an other
asset. The deferred compensation liability and the related other
asset are always equal and are marked to market on a periodic basis
to reflect any income earned by the investment as well as any
unrealized gains or losses. At June 30, 1996, the Fund's investment
to cover the deferred compensation liability had unrealized
appreciation of $1,152.
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 June 30, 1996, aggregated
$106,917,435 and $106,076,385, respectively. There were no purchases
or sales of obligations of the U.S. government and its agencies
during the period ended June 30, 1996.
The cost of investments owned at June 30, 1996 (including the short-
term investments) for Federal income tax purposes was $209,903,549.
Gross unrealized appreciation and depreciation of investments
aggregated $8,278,750 and $2,079,418, respectively, resulting in net
unrealized appreciation of $6,199,332.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with Statement of Position 93-2, the Fund has recorded
several reclassifications in the capital accounts. These
reclassifications have no impact on the net asset value of the Fund
and are designed generally to present undistributed net investment
income or accumulated net realized gains and losses on a tax basis,
which is considered to be more informative to the shareholder. As of
June 30, 1996, the Fund has reclassified $176,442 of Federal excise
taxes from undistributed net investment income and $815,094 from
accumulated net realized gain on investments to common shares
capital. In addition, the Fund has reclassified $297,027 from
accumulated net realized gain on investments to undistributed net
investment income.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
John Hancock Patriot Select Dividend Trust
We have audited the accompanying statements of assets and
liabilities of John Hancock Patriot Select Dividend Trust (the
Fund), including the schedule of investments, as of June 30, 1996,
the related statement of operations for the year then ended, and the
statement of changes in net assets and the financial highlights for
the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining , on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned
as of June 30, 1996 by correspondence with the custodian. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of John Hancock Patriot Select Dividend Trust as
of June 30, 1996, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights
for the periods presented in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
August 9, 1996
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is
furnished with respect to the taxable distributions of the Fund
during its fiscal year ended June 30, 1996.
The Board of Trustees of the Fund declared dividends on the Common
Shares from undistributed net investment income amounting to $1.13
per share, and $0.11 per share from net realized short-term capital
gains from investment transactions for the year ended June 30, 1996.
Distributions for fiscal year 1996 to DARTS Series A and B and
common shareholders are 98.08% qualified for the dividends received
deduction. Shareholders will be mailed a 1996 U.S. Treasury
Department Form 1099-DIV in January 1997 representing their
proportionate share.
Shareholders will be informed of their proportionate share of the
undistributed net long-term capital gains and the tax paid on their
share of such gains via IRS Form 2439, which will be mailed within
sixty days of the Fund's fiscal year end. Shareholders are required
to include income reported to them on IRS Form 2439 in their taxable
income as long-term capital gain; tax paid on their behalf as
reported on IRS Form 2439 may be credited against any resulting
Federal income tax liability. Information reported to shareholders
on IRS Form 2439 will not be reported on IRS Form 1099-DIV, the form
usually used to report the Fund's taxable income to its
shareholders.
In addition to the above, shareholders are entitled to increase the
adjusted tax basis of their shares in the Fund, by the excess of
capital gains included in their income over their share of the tax
paid by the Fund on such gains, as reported on IRS Form 2439.
Please refer to the section entitled Federal Income Taxes included
in Note A of the Notes to Financial Statements in this Report, for
additional tax related information.
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.
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).
NOTES
John Hancock Funds - Patriot Select Dividend Trust
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NOTES
John Hancock Funds - Patriot Select Dividend Trust
[THIS PAGE INTENTIONALLY LEFT BLANK]
NOTES
John Hancock Funds - Patriot Select Dividend Trust
[THIS PAGE INTENTIONALLY LEFT BLANK]
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page. A box sectioned in quadrants with a triangle in upper left, a
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right. A tag line below reads "A Global Investment Management Firm."
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A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."
P300A 6/96
8/96
