John Hancock Funds
Patriot
Select
Dividend
Trust
Semi-Annual Report
December 31, 1995
TRUSTEES
Edward J. Boudreau, Jr.
Thomas W. L. Cameron
James F. Carlin*
William H. Cunningham*
Charles F. Fretz*
Harold R. Hiser, Jr.*
Charles L. Ladner*
Leo E. Linbeck, Jr.*
Patricia P. McCarter*
Steven R. Pruchansky*
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 St. Pierre
President
Thomas H. Drohan
Vice President and Secretary
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President and Compliance Officer
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 & Trust Company
225 Frankln Street
Boston, Massachusetts 02110
TRANSFER AGENT FOR AUCTION
MARKET PREFERRED SHARES
Chemical Bank
450 West 33rd Street
New York, NY 10001
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
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
The stock market's record-breaking, whirlwind performance in 1995 will
be a tough act to follow in 1996. In fact, we've already seen greater
market volatility this year, particularly among last year's leaders --
technogy stocks. That's to be expected after a year that saw market
indexes soar, including the Standard & Poor's 500-Stock Index's 37%
advance. While many of the same economic conditions that fostered the
stellar 1995 market are still in place - slow economic growth, muted
inflation and decent corporate earnings - it would be unrealistic to
expect the market to stage a repeat in 1996. The old saying "trees don't
grow to the sky" comes to mind. Shareholders would do well to temper
expectations of investment returns and perhaps revisit their investment
allocations with their financial advisor to determine if rebalancing
their portfolio makes sense.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief
Executive Officer, flush right, next to second paragraph.]
No matter how you scale back your market expectations, you should always
be able to count on consistent customer service performance. At John
Hancock Funds, we never stop working to find ways to sustain and improve
the quality of information and the level of assistance we provide you.
Our commitment to this task is no less than John Hancock's loyalty was
to his fledgling country when he is said to have uttered, "if it does
the public good, burn Boston." We won't go that far, of course, but we
share our namesake's dedication to putting the public before all else.
In our case, that public is you, our shareholders. We take very
seriously the role you have entrusted to us, that of helping you achieve
your financial goals. Part of that will always involve good customer
service. So please do not hesitate to call your Customer Service
Representative at 1-800-225-5291 if you have any questions or need
information. We take pride in helping you with the same spirit that John
Hancock displayed at the dawning of America.
Sincerely,
/S/Edward J. Boudreau
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By Gregory K. Phelps, for the Portfolio Management Team
John Hancock
Patriot Select
Dividend Trust
Moderate growth, low inflation and falling interest rates boost
income-producing stocks; investors flock to electric utilities
[A 2" x 3 1/2" photo of the portfolio management team at bottom
right. Caption reads: "The Patriot Management Team: Laura Provost,
Gregory Phelps and Andrew St. Pierre."]
"...nearly
ideal
investment
conditions
prevailed
during the
second
half..."
Last June, after an unusually strong first half of 1995 for
income-producing stocks, we cautioned investors to lower their
expectations going forward. Happily, nearly ideal investment conditions
prevailed during the second half as well, resulting in another six
months of double-digit returns.
The main factor boosting performance was the continuing decline in
interest rates, brought on by slow growth and low inflation. When the
nation's gross domestic product expanded at an annual rate of only 1.3%
during the second quarter of 1995, some economists began warning of a
possible recession. In July, the Federal Reserve reversed course after a
year of interest-rate increases and shifted into an easing mode, cutting
the interest rate banks charge each other for overnight loans -- called
the federal funds rate -- by one-quarter percentage point. A second
quarter-point reduction followed in December. The decline in rates
sparked a rally in Treasury securities which carried over into
income-producing stocks. Utilities, which made up nearly 70% of the
Fund's net assets during the period, were among the prime beneficiaries.
Utilities got an additional boost from the improved regulatory climate
and from nervous stock-market investors who flocked to utilities late in
the year from more volatile sectors, such as technology. Finally,
utilities and other income-producing stocks eligible for the
dividends-received deduction (DRD), mainly preferred stocks, benefited
from scarcity. DRD-eligible stocks offer distinct tax advantages to
corporate investors. As they've become less common, and therefore more
valuable, they've been top performers. About 90% of the Fund's
investments were eligible for the dividends-received deduction.
[Chart entitled "Top Sectors" at top left hand column. The chart lists
four sectors: 1) Preferred stock utilities 37% 2) Common stock
utilities 30% 3) Financials 17% 4) Industrials 12%. A footnote below
states "As a percentage of net assets on December 31, 1995."]
"... another
feature we
look for in
preferred stocks ...
is at least
two years
of call
protection."
With that backdrop, John Hancock Patriot Select Dividend Trust produced
competitive results during the period. The Fund's total return for the
six months ended December 31, 1995 was 11.98% at net asset value,
compared to 11.54% for the Dow Jones Utilities Index. Our long-term goal
is to maintain the Fund's current payout while limiting price
volatility. Much of the Fund's yield of late has come from so-called
"cushion preferred" stocks, many of them DRD-eligible, whose high yields
cushion them against sharp price fluctuations. Owning so many cushion
preferreds may have lowered the Fund's total return slightly during the
past six months. On the other hand, they're valuable long-term holdings.
Had we sold them to pursue short-term gains, we might not have been able
to get them back again at reasonable prices.
Table entitled "Scorecard" at bottom of left hand column. The header for
the left hand column is "Investment"; the header for the right column is
"Recent performance .. and what's behind the numbers." The first listing
is "Baltimore Gas & Electric" followed by an up arrow and the phrase "New
Issue with DRD eligibility." The second listing is "Houston Industries"
followed by an up arrow and the phrase "Good growth potential." The third
listing is "Lasmo" followed by a down arrow and the phrase "Yankees
securities lagged." Footnote below reads: "See "Schedule of Investments".
Investment holdings are subject to change."
Utilities advance
In May 1995, California regulators announced they were scaling back the
timetable for implementing the competitive goals they had spelled out in
April 1994. That lifted a cloud that had been hovering over the
electric-utility sector for more than a year. Moreover, it helped spark
a wave of merger activity, which also increased investor interest in
utility stocks. Then in September, as nervous investors began taking
profits on technology stocks, many were attracted to utilities as a
perceived safe haven, further inflating prices. Another feature we look
for in preferred stocks--apart from DRD eligibility--is at least two
years of call protection. A security with call protection can't be
redeemed by the issuer prematurely. That's one of the reasons we
invested last August in a new issue by Baltimore Gas & Electric, a
DRD-eligible preferred stock with a 6.99% yield and 10 years of call
protection. Very few new issues come to market these days with DRD
eligibility; that's probably another reason the $60 million offering
from Baltimore Gas & Electric sold out in ten minutes and provided an
attractive total return through year end. Another top-performing utility
was a common stock, Houston Industries, a diversified electric utility
that recently sold its cable television subsidiary at a profit and is
exploring potential acquisitions in Britain. Finally, we had good luck
with Oklahoma Gas & Electric, a low-cost producer with a stable,
above-average dividend yield.
[Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the six months ended
December 31, 1995." The chart is scaled in increments of 3% from bottom
to top, with 12% at the top and 0% at the bottom. Within the chart,
there are two solid bars. The first represents the 11.98% total return
for John Hancock Patriot Select Dividend Trust. The second represents
the 11.54% total return for 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."]
Other sectors mixed
Investments in banks and other financial companies totaled about 17% of
the Fund's net assets. Our best bank performer was Shawmut National, a
DRD-eligible preferred with five years of remaining call protection and
a 9.35% yield. Shawmut benefited from a credit upgrade following its
merger with Fleet Financial. The balance of the Fund's assets was
divided among oil and gas, paper and automotive stocks. Bowater, a
forest products company, rose on strong earnings and a credit upgrade.
We like the company's long-term prospects and value the security's 8.40%
coupon, DRD eligibility and three remaining years of call protection.
Our least successful investments during the period tended to be
so-called Yankee securities, which are stocks issued by foreign
companies denominated in U.S. dollars. We like them mainly for their
high yields. Lately, though, their performance has lagged, most likely
because they lack DRD eligibility. Many underperforming Yankees that the
Fund owned were oil and gas stocks, such as Lasmo, a British exploration
and production company.
Outlook
One possible cloud on the horizon is the outlook for the
dividends-received deduction. In December, during budget negotiations
with Congress, the Clinton administration proposed a reduction in the
corporate tax benefit for DRD-eligible securities. That caused a tremor
in the market and had a small negative impact on the Fund at the end of
the period. We believe chances are slim that the administration's
proposal would ever become law, but we'll be watching developments
closely in the months ahead. Furthermore, we have concerns about the
long-term outlook for electric utilities. Delayed or not, competition is
coming, and with that, increased pressure on dividend growth and
earnings. That doesn't mean we'll abandon utilities, only that we'll
have to be even more selective. On the positive side, moderate economic
growth, low inflation and declining interest rates seem likely to
continue to provide an attractive backdrop for income-producing stocks
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.
Competition
in the
electric
utilities
industry is coming.
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 December 31,
1995. You'll also find the net asset value per share, for each Common
Share, as of that date.
Statement of Assets and Liabilities
December 31, 1995 (Unaudited)
- ---------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Preferred stocks (cost - $139,045,316) $ 145,423,617
Common stocks (cost - $62,828,430) 68,210,854
Capital securities (cost - $2,000,000) 2,180,000
Trust originated preferred securities
(cost - $1,250,000) 1,312,500
Short-term investments (cost - $1,531,134) 1,531,134
----------
218,658,105
Receivable for investments sold 4,418,792
Dividends receivable 1,982,476
Other assets 6,086
----------
Total Assets 225,065,459
--------------------------------------------------------------
Liabilities:
AMPS dividend payable 107,567
Common Share dividend payable 132,804
Payable to John Hancock Advisers, Inc. -- Note B 186,526
Accounts payable and accrued expenses 53,560
----------
Total Liabilities 480,457
--------------------------------------------------------------
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 137,984,373
Accumulated net realized gain on investments 2,651,441
Net unrealized appreciation of investments 12,003,225
Undistributed net investment income 1,945,963
----------
Net Assets Applicable to
Common Shares ($15.64 per
share based on 9,885,027
shares outstanding) 154,585,002
--------------------------------------------------------------
Net Assets $ 224,585,002
==============================================================
</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 for the period stated.
Statement of Operations
Six months ended December 31, 1995 (Unaudited)
- ----------------------------------------------------------------------
<S> <C>
Investment Income
Dividends (net of foreign withholding taxes
of $30,696) $ 8,844,585
Interest 83,764
----------
8,928,349
----------
Expenses:
Investment management fee -- Note B 873,608
Administration fee -- Note B 163,801
AMPS and auction fees 111,393
Custodian fee 34,707
Printing 33,155
Auditing fee 28,234
Transfer agent fee 21,397
Miscellaneous 16,251
Trustees' fees 12,473
Legal fees 5,798
Organization expense -- Note A 1,250
----------
Total Expenses 1,302,067
--------------------------------------------------------------
Net Investment Income 7,626,282
--------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 2,390,369
Change in net unrealized appreciation/depreciation
of investments 8,328,442
----------
Net Realized and Unrealized Gain
on Investments 10,718,811
--------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $18,345,093
==============================================================
Distributions to AMPS ( 1,559,695)
--------------------------------------------------------------
Net Increase in Net Assets
Applicable to Common Shareholders
Resulting from Operations Less
AMPS Distributions $16,785,398
==============================================================
See notes to financial statements.
</TABLE>
John Hancock Funds - Patriot Select Dividend Trust
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1995 JUNE 30,
(UNAUDITED) 1995
----------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
From Operations:
Net investment income $ 7,626,282 $ 16,050,827
Net realized gain on investments sold 2,390,369 526,217
Change in net unrealized appreciation/depreciation
of investments 8,328,442 12,371,740
----------- -----------
Net Increase in Net Assets Resulting from Operations 18,345,093 28,948,784
----------- -----------
Distributions to Shareholders:
AMPS ($2,228 and $4,232 per share,
respectively) -- Note A (1,559,695) (2,962,344)
Common Shares -- Note A
Dividends from net investment income
($0.6186 and $1.2372 per share, respectively) (6,114,460) (12,229,041)
----------- -----------
Total Distributions to Shareholders (7,674,155) (15,191,385)
----------- -----------
Net Assets:
Beginning of period 213,914,064 200,156,665
----------- -----------
End of period (including undistributed
net investment income
of $1,945,963 and $1,993,836, respectively) $224,585,002 $213,914,064
=========== ===========
<CAPTION>
<S> <C> <C> <C> <C>
*Analysis of Fund Share Transactions:
SIX MONTHS ENDED
DECEMBER 31, 1995 YEAR ENDED
(UNAUDITED) JUNE 30, 1995
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Shares outstanding, beginning of period 9,885,027 $137,984,373 9,885,027 $138,130,719
Reclassification of Capital Accounts -- -- -- (146,346)
--------- ----------- --------- -----------
Shares outstanding, end of period 9,885,027 $137,984,373 9,885,027 $137,984,373
========= =========== ========= ===========
The Statement of Changes in Net Assets shows how the value of the Fund's
net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment gains and
losses and distributions paid to shareholders. The footnote illustrates
any reclassifications of capital amounts, the number of Common Shares
outstanding at the beginning and end of the period, for the last two
periods, along with the corresponding dollar value.
See notes to financial statements
</TABLE>
<TABLE>
John Hancock Funds - Patriot Select Dividend Trust
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
the period indicated, investment returns, key ratios and supplemental
data are as follows:
- -----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 1995 YEAR ENDED JUNE 30,
(UNAUDITED) 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 14.56 $ 13.17 $ 17.33
-------- -------- --------
Net Investment Income 0.77 1.62 1.34
Net Realized and Unrealized Gain (Loss) on Investments 1.09 1.31 ( 3.47)
-------- -------- --------
Total from Investment Operations 1.86 2.93 ( 2.13)
-------- -------- --------
Less Distributions:
Dividends to AMPS Shareholders ( 0.16) ( 0.30) ( 0.22)
Dividends to Common Shareholders
from Net Investment Income ( 0.62) ( 1.24) ( 1.30)
Distributions to Common Shareholders from Net Realized
Short-Term Gain on Investments -- -- ( 0.51)
-------- -------- --------
Total Distributions ( 0.78) ( 1.54) ( 2.03)
-------- -------- --------
AMPS Underwriting Discount -- -- --
-------- -------- --------
Net Asset Value, End of Period $ 15.64 $ 14.56 $ 13.17
======== ======== ========
Per Share Market Value, End of Period $ 14.250 $ 13.875 $ 12.750
Total Investment Return at Market Value 7.20% 19.73% (21.60%)
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000's omitted) $154,585 $143,914 $130,157
Ratio of Expenses to Average Net Assets** 1.19%(c) 1.29% 1.30%
Ratio of Net Investment Income to Average Net Assets** 6.98%(c) 7.96% 5.83%
Portfolio Turnover Rate 21% 107% 39%
Senior Securities
Total AMPS Outstanding (000'S omitted) $ 70,000 $ 70,000 $ 70,000
Asset Coverage per Unit (d) $318,031 $305,754 $285,137
Involuntary Liquidation Preference per Unit (e) $100,000 $100,000 $100,000
Approximate Market Value per Unit (e) $100,000 $100,000 $100,000
- ----------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
1993 1992(a) 1991*
-------- -------- --------
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 15.78 $ 14.08 $ 13.86(b)
-------- -------- --------
Net Investment Income 1.31 1.45 1.25
Net Realized and Unrealized Gain (Loss) on Investments 2.11 2.16 0.62
-------- -------- --------
Total from Investment Operations 3.42 3.61 1.87
-------- -------- --------
Less Distributions:
Dividends to AMPS Shareholders ( 0.22) ( 0.26) ( 0.28)
Dividends to Common Shareholders
from Net Investment Income ( 1.08) ( 1.09) ( 0.85)
Distributions to Common Shareholders from Net Realized
Short-Term Gain on Investments ( 0.57) ( 0.56) ( 0.39)
-------- -------- --------
Total Distributions ( 1.87) ( 1.91) ( 1.52)
-------- -------- --------
AMPS Underwriting Discount -- -- ( 0.13)
-------- -------- --------
Net Asset Value, End of Period $ 17.33 $ 15.78 $ 14.08
======== ======== ========
Per Share Market Value, End of Period $18.250 $ 16.875 $ 15.000
Total Investment Return at Market Value 19.14% 25.01% 9.08%
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000's omitted) $170,512 $153,275 $135,781
Ratio of Expenses to Average Net Assets** 1.52% 1.42% 1.39%(c)
Ratio of Net Investment Income to Average Net Assets** 5.50% 6.75% 7.16%(c)
Portfolio Turnover Rate 53% 85% 209%
Senior Securities
Total AMPS Outstanding (000'S omitted) $ 70,000 $ 70,000 $ 70,000
Asset Coverage per Unit (d) $339,312 $316,361 $290,817
Involuntary Liquidation Preference per Unit (e) $100,000 $100,000 $100,000
Approximate Market Value per Unit (e) $100,000 $100,000 $100,000
* 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.
</TABLE>
<TABLE>
John Hancock Funds - Patriot Select Dividend Trust
<CAPTION>
The Schedule of Investments is complete list of all securities owned by
the Fund on December 31, 1995. 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 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.
Schedule of Investments
December 31, 1995 (Unaudited)
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------
PREFERRED STOCKS
<S> <C> <C>
Auto/Truck (2.61%)
Ford Motor Company, 8.25%, Depositary
Shares, Ser B 60,000 $ 1,665,000
General Motors Corp., 9.12%,
Depositary Shares, Ser G 150,000 4,200,000
-----------
5,865,000
-----------
Banks - Foreign (0.38%)
Santander Overseas Bank, Inc., 10.64%,
Ser A (Puerto Rico) 31,700 855,900
-----------
Banks - U.S. (10.63%)
Ahmanson, H.F. & Co., 9.60%,
Depositary Shares, Ser B 105,065 2,705,424
Bank of Boston Corp., 8.60%,
Depositary Shares, Ser E 144,886 3,767,036
BankAmericorp., 8.375%, Ser K 50,000 * 1,293,750
Chase Manhattan Corp., 9.76%, Ser H 27,700 772,137
Chase Manhattan Corp., 10.84%, Ser I 42,000 1,275,750
Citicorp, 7.75%, Depositary Shares, Ser 22 32,500 845,000
First Fidelity Bancorporation, 10.64%,
Depositary Shares, Ser F 60,000 1,552,500
First Interstate Bancorp., 9.875%,
Depositary Shares, Ser F 95,000 2,458,125
Fleet Financial Group, Inc., 9.35%,
Depositary Shares (formerly Shawmut
National Corp.) 165,000 4,496,250
LaSalle National Corp., 8.75%, Ser K (R) 62,000 3,286,000
Mellon Bank Corp., 9.60%, Ser I 54,800 1,417,950
-----------
23,869,922
-----------
Conglomerate/Diversified (0.33%)
Grand Metropolitan Delaware 9.42%,
Gtd Ser A 25,000 731,250
-----------
Financial Services (0.94%)
Merril Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A 30,000 858,750
Salomon Inc., 8.08%, Depositary Shares,
Ser D 50,000 1,250,000
-----------
2,108,750
-----------
Insurance (3.27%)
American Life Holding Co., $2.16 40,000 $ 940,000
Progressive Corp., 9.375%, Ser A 62,000 1,581,000
Provident Companies, Inc., 8.10%, Depositary
Shares (formerly Provident Life and
Accident Insurance Co. of America) 41,500 1,079,000
SunAmerica Inc., 9.25%, Ser B 100,000 2,600,000
Travelers Group, Inc., 9.25%,
Depositary Shares, Ser D 44,000 1,149,500
-----------
7,349,500
-----------
Leasing (0.69%)
AMERCO, 8.50%, Ser A 65,000 1,560,000
-----------
Oil & Gas (6.31%)
Coastal Corp., $2.125, Ser H 120,000 3,075,000
Elf Overseas Ltd,. 8.50%, Gtd Ser A
(Cayman Islands) 150,000 3,993,750
ENSERCH Corp., Adjustable Rate Preferred
("ARP"), Ser F 25,000 528,125
Enterprise Oil PLC, 10.50%, Ser A ,
American Depositary Receipts (ADR)
(United Kingdom) 24,500 646,187
Lasmo PLC, 10.00%, Ser A, ADR
(United Kingdon) 138,000 3,329,250
Phillips Gas Co., 9.32%, Ser A 98,000 2,597,000
-----------
14,169,312
-----------
Paper (2.42%)
Boise Cascade Corp., 9.40%, Ser F 90,000 2,362,500
Bowater Inc., 8.40%, Depositary Shares,
Ser C 120,000 3,075,000
-----------
5,437,500
-----------
Utilities (37.17%)
Appalachian Power Co., 7.40% 10,870 $ 1,103,305
Baltimore Gas & Electric Co., 7.78%,
Ser 1973 16,515 1,676,273
Baltimore Gas & Electric Co., 6.99% 30,000* 3,135,000
Boston Edison Co., 4.25% 25,657* 1,539,420
CL & P Capital, 9.30%, Ser A 35,000 949,375
Central Maine Power, 7.999%, Ser A 10,000 970,000
Central Maine Power, 8.875% (R) 16,000 1,576,000
Columbus Southern Power Co., 8.375%,
Ser A 40,000* 1,045,000
Commonwealth Edison Co., $8.38 20,720 2,040,920
Commonwealth Edison Co., $8.40, Ser A 15,000* 1,507,500
Consolidated Edison Co. of NY, Inc.,
5.75%, Ser E 57,600 4,953,600
Detroit Edison Co., 7.68% 7,060 695,410
Detroit Edison Co., 7.75% 60,000 1,545,000
Florida Power Corp., 7.76% 30,460 3,099,305
GTE Florida, Inc., $8.16 25,000 2,556,250
GTE North, Inc., $7.60, Ser IND 10,000 1,010,000
Georgia Power Co., $7.80 11,780 1,178,000
Gulf States Utilities Co., $8.52 45,500 4,459,000
Gulf States Utilities Co., $9.96 9,800 1,004,500
Gulf States Utilities Co., ARP, Depositary
Shares, Ser B 30,120 1,445,760
Houston Lighting & Power Co., $8.12 21,700 2,224,250
Jersey Central Power & Light Co., 7.52%
Ser K 6,500 679,250
Massachusetts Electric Co., 6.99% 13,500 1,404,000
MCN Michigan Co., Limited Partnership,
9.375%, Ser A 50,000 1,375,000
Monongahela Power Co., $7.73, Ser L 44,000 4,807,000
Narragansett Electric Co., 6.95% 17,950 915,450
PacifiCorp, 8.375%, Ser A 40,000 1,045,000
PECO Energy Co., $7.48 14,200* 1,476,800
PSI Energy, Inc., 7.44% 122,000 3,065,250
Public Service Electric & Gas Co. 6.80% 25,060 2,468,410
Public Service Electric & Gas Co., 6.92% 14,000 1,407,000
Public Service Electric & Gas Co., 7.40% 49,208 4,760,874
Puget Sound Power & Light Co., 7.875% 41,447* 1,067,260
Sierra Pacific Power Co., 7.80%,
Ser 1, Class A 183,600 4,704,750
Southern California Gas Co., 7.75% 37,025* 930,253
Tampa Electric Co., 7.44%, Ser F 13,550 1,368,550
Texas Utilities Electric Co., $7.24 9,500 954,750
Texas Utilities Electric Co., $7.50 80,000 2,080,000
Texas Utilities Electric Co., $7.98 29,200 3,102,500
Texas Utilities Electric Co., $8.20 25,000 662,500
Utilicorp Capital, 8.875%, Ser A 70,000 1,837,500
Washington Natural Gas Co., 8.50%, Ser III 63,930 1,646,197
Western Massachusetts Electric Co., 7.72%,
Ser B 19,747 2,004,321
-----------
83,476,483
-----------
TOTAL PREFERRED STOCKS
(Cost $139,045,316) (64.75%) 145,423,617
-------- -----------
COMMON STOCKS
Utilities (30.37%)
Allegheny Power System, Inc. 36,000 1,030,500
American Electric Power Co., Inc. 156,000 6,318,000
Boston Edison Co. 175,000 5,162,500
CINergy Corp. 97,000 2,970,625
Consolidated Edison Co. of NY, Inc. 44,000 1,408,000
DPL, Inc. 200,000 4,950,000
Delmarva Power & Light Co. 92,500 2,104,375
Dominion Resources, Inc. of VA 131,500 5,424,375
Florida Progress Corp. 104,250 3,687,844
Houston Industries, Inc. 240,800 5,839,400
Idaho Power Co. 45,000 1,350,000
New England Electric System 82,000 3,249,250
Northeast Utilities 90,000 2,193,750
Oklahoma Gas & Electric Co. 60,000 2,580,000
PECO Energy Co. 76,000 2,289,500
Potomac Electric Power Co. 164,300 4,312,875
Public Service Enterprise Group, Inc. 71,084 2,176,947
Puget Sound Power & Light Co. 140,500 3,266,625
Scana Corp. 37,200 1,064,850
Southern Co. 50,000 1,231,250
Southwestern Public Service Co. 67,000 2,194,250
Texas Utilities Co. 67,500 2,775,938
Washington Water Power Co. 36,000 630,000
-----------
TOTAL COMMON STOCKS
(Cost $62,828,430) (30.37%) 68,210,854
-------- -----------
CAPITAL SECURITIES
Banks - Foreign (0.97%)
Australia and New Zealand Banking
Group Ltd., 9.125%
(Australia) 80,000 2,180,000
-----------
TOTAL CAPITAL SECURITIES
(Cost $2,000,000) (0.97%) 2,180,000
-------- -----------
TRUST ORIGINATED PREFERRED SECURITIES
Oil & Gas (0.59%)
Southern Union Financing, 9.48%
Ser 5/17/25 50,000 $ 1,312,500
-------- -----------
TOTAL TRUST ORIGINATED
PREFERRED SECURITIES
(Cost $1,250,000) (0.59%) 1,312,500
-------- -----------
INTEREST PAR VALUE
RATE (OOO'S OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Commercial Paper (0.68%)
Prudential Funding Corp.
01-02-96 5.65% 1,531 1,531,134
-----------
TOTAL SHORT-TERM INVESTMENTS (0.68%) 1,531,134
-----------
TOTAL INVESTMENTS (97.36%) $218,658,105
======== ===========
* Securities, other than short-term investments, newly added to the
portfolio during the period ended December 31, 1995.
(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 $4,862,000 as of
December 31, 1995.
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
(UNAUDITED)
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 OF 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 and to distribute all of its taxable
income, including any net realized gain on investments, to its
shareholders.
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, 1995, 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.
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 4.24% to 4.61% during the period
ended December 31, 1995.
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.
Each unaffiliated Trustee is entitled, as compensation for his or her
services, to an annual fee plus remuneration for attendance at various
meetings.
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. 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 will make investments into other John Hancock funds, as applicable,
to cover its liability with regard to the deferred compensation.
Investments to cover the Fund's deferred compensation liability will be
recorded on the Fund's books as an other asset. The deferred
compensation liability and the investment to cover the liability will be
marked to market on a periodic basis to reflect income earned by the
investment.
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, 1995, aggregated $43,831,157 and
$44,304,111, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended December 31, 1995.
The cost of investments owned at December 31, 1995 (including the
short-term investments) for Federal income tax purposes was
$207,476,575. Gross unrealized appreciation and depreciation of
investments aggregated $13,239,715 and $2,058,185, respectively,
resulting in net unrealized appreciation of $11,181,530.
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.
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).
A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants 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:
John Hancock Funds
"A Global Investment Management Firm."
101 Huntington Avenue, Boston MA 02119-7603
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