John Hancock Funds
Patriot
Select
Dividend
Trust
SEMI-ANNUAL REPORT
December 31, 1996
TRUSTEES
Edward J. Boudreau, Jr.
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 H. 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
New York, New York 10001
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
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:
Most analysts agree that the Social Security system will run out of
money by the year 2030 unless Congress makes some changes. Although it
seems a long way off, the issue is serious enough that at least one
group has already studied the problem, and experts and politicians alike
have weighed in with a slew of prescriptions. Legislative action could
be in the offing in 1997.
The problem stems from demographic and societal changes. The number
of retirees collecting Social Security is growing rapidly, while the
number of workers supporting the system is shrinking. Consider this: in
1950, there were 16 workers paying into the Social Security system for
each retiree collecting benefits. Today, there are three workers for
each retiree and by 2019 there will be two. Starting then, the Social
Security Administration estimates that the amount paid out in Social
Security benefits will start to be greater than the amount collected in
Social Security taxes. Compounding the issue is the fact that people are
retiring earlier and living longer.
The state of the system has already left many people, especially younger
and middle-aged workers, feeling insecure about Social Security. A
recent survey by the Employee Benefits Research Institute (EBRI) found
that 79% of current workers polled had little confidence in the ability
of Social Security to maintain the same level of benefits as those
received by today's retirees. Instead, they said they expect
to use their own savings or employer-sponsored pensions for their
retirement. Yet, remarkably, another EBRI survey revealed that only slightly
more than half of America's current workers are saving money for retirement.
Fewer than half own IRAs or participate in employer-sponsored pension or
savings plans.
No matter how Social Security's problems get solved, one thing is clear.
Americans need to rely on themselves for accumulating the bulk of their
retirement savings. There's no law that says you should have to reduce
your standard of living once you stop working. So we encourage you to
save all that you can now, so you can live the way you'd like to later.
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
Income-producing stocks affected by volatile bond market
The past six months was a volatile period for utility stocks, which
comprised about 68% of the Fund's net assets throughout the past six
month period. The period began on a sour note, due to concerns that the
economy was showing signs of growing at a better-than-expected pace.
Investors worried that a too-healthy economy might force the Federal
Reserve Board to raise interests. Utility stock prices -- which
generally correlate with price movements in the bond market -- fell as
the yield on the benchmark 30-year Treasury bond moved as high as 7.2%
in July, up from 5.95% at the beginning of 1996. But in the fall, full
employment with low inflation and steady growth buoyed bond investors,
as did the shrinking federal budget deficit. From July through the end
of the year, there was a steady descent in bond yields and a steady
increase in bond prices. As a result, utility stocks followed bond
prices higher, ending the period on a high note.
For the six months ended December 31, 1996, John Hancock Patriot Select
Dividend Trust had a total return of 7.04% at net asset value, compared
to 9.10% for the Dow Jones Utilities Index.
A 2 1/4" x 3 3/4" photo of the portfolio management team at bottom
right. Caption reads: "Patriot Select Dividend Trust management team
members: Gregory Phelps (seated) with Beverly Cleathero (left) and Laura
Provost (right)."
"The past six
months was
a volatile
period for
utility
stocks..."
Pie chart entitled "Portfolio Diversification" at top left hand column.
The chart is divided into four sections. Going from top right to left:
Utilities 68%; Financials 19%; Industrials 7%; Oil & Gas 6%. A footnote
below states: "As a percentage of net assets on December 31, 1996."
"Among the
Fund's best
performers
...were
domestic
banks..."
DRD-eligible securities
Throughout the period, we increased the Fund's emphasis on stocks
eligible for the dividends-received deduction (DRD). On December 31,
1996, DRD-eligible securities totaled more than 93% of the Fund's net
assets, up from 85% six months earlier. DRD-eligible securities carry
distinct tax advantages for corporate investors, which keeps them in
demand. In recent years, demand has grown as issuers have redeemed many
existing DRD-eligible securities while avoiding issuing new ones. We
focused on finding DRD-eligible "cushion" preferred and common stocks,
which carry above-average yields. Those cushion investments helped the
Fund's performance during the early months of the period, as they proved
less vulnerable to rising interest rates. When interest rates were
falling, however, cushion preferreds and common stocks had a mixed
impact on the Fund's performance, augmenting yield but limiting price
gains.
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 Boston Edison followed by an up arrow and the phrase "Improving
balance sheet/strategic alliances." The second listing is Oklahoma Gas &
Electric followed by an up arrow and the phrase "No nuclear
exposure/possible takeover candidate." The third listing is Western
Massachusetts Electric followed by a down arrow and the phrase "Parent
company's problems cast shadow." Footnote below reads: "See "Schedule of
Investments." Investment holdings are subject to change."
Utilities
Utilities totaled 68% of the Fund's net assets at the end of the period,
up slightly from 66% six months earlier due to our additions of DRD-
eligible common stock issued by electric utilities. Because of the fears
of increased competition in the electric utility sector, investors had
beaten down the prices of electric stocks to levels we found to be
cheap. What's more, their dividend yields were very attractive compared
to the preferred stocks of electric utilities. Our view was that the
electric sector had bottomed and had nowhere to go but up. That turned
out to be the case and not only did we enjoy significant price
appreciation from these electric utility common holdings, but we also
added yield to the Fund.
One of our favorite electric utility holdings was Boston Edison. We
nearly doubled our stake in this stock, buying it when it was cheap. We
believe the company is well-positioned to be one of the winners in a
more competitive environment. Not only does Boston Edison have a solid
relationship with state regulators, but it also has an improving balance
sheet and key strategic alliances with telecommunications and natural
gas companies. On a disappointing note, Western Massachusetts Electric
continued to suffer primarily due to the troubles of its parent company,
Northeast Utilities. Despite its parent's problems, we continued to hold
the stock, in part because it offers an attractive yield.
Banks and energy
Among the Fund's best performers during the period were domestic banks,
at about 10% of the Fund's net assets. As we mentioned earlier, the
demand for DRD-eligible stocks has been strong, which helped our bank
holdings. The group received an additional boost in October when the
Federal Reserve Board gave banks more flexibility to issue non-DRD
securities. Up until that point, in order for a bank to issue preferred
stock they had to issue it as DRD-eligible. As a result, there was a
declining supply of newly issued DRD-eligible bank stock resulting in
somewhat of a scarcity. One of our favorites in this area and one of our
best performers was Fleet Financial Group, which carries a yield of
6.75%, is DRD-eligible and has 10 years of call protection (a security
with call protection can't be redeemed by the issuer prematurely).
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, 1996." The chart is scaled in increments of 2% from bottom to top,
with 10% at the top and 0% at the bottom. Within the chart, there are
two solid bars. The first represents the 7.04% total return for John
Hancock Patriot Select Dividend Trust. The second represents the 9.10%
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."
Rising oil and gas prices helped some of our energy holdings, including
Coastal Corp. Earlier this year, the company was put on a credit-upgrade
watch by Standard & Poor's, which helped improved its attractiveness in
the eyes of many investors. During the period we added El Paso Tennessee
Gas, a preferred stock, DRD-eligible, offering a 8.25% yield and
carrying five years of call protection. Like Coastal, we think El Paso
Tennessee Gas has a good chance of getting a credit upgrade.
Outlook
The Fund's performance will be somewhat dependent on the direction of
interest rates. That said, we expect that short-term interest rates will
remain stable over the near term. But in our view, the economy appears
to show signs of heating up and inflationary pressures could build. If
that is the case, the Federal Reserve Board may raise interest rates. In
any case, we do not believe that the market volatility is over. With
uncertainty still looming over the market, the Fund will likely maintain
a defensive posture in the months ahead by emphasizing high-yielding
stocks, both commons and preferreds. Our goal will be to preserve the
Fund's net asset value while maximizing yield.
"...we do not
believe that
the market
volatility is
over."
This commentary reflects the views of the portfolio manager through the
end of the Fund's period discussed in this report. Of course, the
manager's views are subject to change as market and other conditions
warrant.
<TABLE>
<CAPTION>
John Hancock Funds - Patriot Select Dividend Trust
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, 1996. You'll
also find the net asset value and the maximum offering price per share as of
that date.
Statement of Assets and Liabilities
December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Preferred stocks (cost - $157,711,275) $164,300,331
Common stocks (cost - $52,534,266) 54,977,829
Short-term investments (cost - $2,410,696) 2,410,696
-------------
221,688,856
Dividends receivable 1,375,069
Other assets 15,455
-------------
Total Assets 223,079,380
- --------------------------------------------------------------------------
Liabilities:
AMPS dividend payable $271,474
Common Share dividend payable 120,277
Payable to John Hancock Advisers, Inc. - Note B 196,062
Federal income tax payable 3,937
Accounts payable and accrued expenses 47,570
-------------
Total Liabilities 639,320
- --------------------------------------------------------------------------
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 2,363,387
Net unrealized appreciation of investments 9,033,771
Undistributed net investment income 2,419,877
-------------
Net Assets Applicable to Common Shares
($15.42 per share based on 9,885,027
shares outstanding) 152,440,060
-------------
Net Assets $222,440,060
==========================================================================
See notes to financial statements.
</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
Six months ended December 31, 1996 (Unaudited)
- --------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding
taxes of $15,833) $8,043,705
Interest 76,675
-------------
8,120,380
-------------
Expenses:
Investment management fee - Note B 881,363
Administration fee - Note B 165,256
AMPS and auction fees 98,652
Custodian fee 30,793
Printing 27,866
Auditing fee 25,367
Transfer agent fee 21,598
Miscellaneous 16,050
Trustees' fees 9,670
Legal fees 3,614
-------------
Total Expenses 1,280,229
- --------------------------------------------------------------------------
Net Investment Income 6,840,151
- --------------------------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold 2,090,694
Change in net unrealized appreciation/depreciation
of investments 2,310,797
-------------
Net Realized and Unrealized
Gain on Investments 4,401,491
- --------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $11,241,642
==========================================================================
Distributions to AMPS (1,418,318)
- --------------------------------------------------------------------------
Net Increase in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less AMPS
Distributions $9,823,324
==========================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31, 1996
1996 (UNAUDITED)
------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $14,838,672 $6,840,151
Net realized gain on investments sold 2,153,915 2,090,694
Change in net unrealized appreciation/
depreciation of investments 3,048,191 2,310,797
------------ ------------
Net Increase in Net Assets Resulting from Operations 20,040,778 11,241,642
------------ ------------
Distributions to Shareholders:
AMPS ($4,278 and $2,026 per share,
respectively) - Note A (2,994,753) (1,418,318)
Common Shares - Note A
Dividends from net investment
income ($1.1329 and $0.6186 per share,
respectively) (11,198,710) (6,114,470)
Distributions from net realized
gain on investments sold ($0.1042
and none per share, respectively) (1,030,173) --
------------ ------------
Total Distributions to Shareholders (15,223,636) (7,532,788)
------------ ------------
Net Assets:
Beginning of period 213,914,064 218,731,206
------------ ------------
End of period (including undistributed
net investment income of $3,112,514 and
$2,419,877, respectively) $218,731,206 $222,440,060
============ ============
* Analysis of Common Shareholder Transactions:
SIX MONTHS ENDED
YEAR ENDED DECEMBER 30, 1996
JUNE 30, 1996 (UNAUDITED)
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
Shares outstanding, beginning of
period 9,885,027 $137,984,373 9,885,027 $138,623,025
Reclassification of net realized
long-term gains retained on
investments sold (net of federal
income taxes of $438,897) -- 815,094 -- --
Reclassification of capital
accounts -- (176,442) -- --
------------ ------------ ------------ ------------
Shares outstanding, end of
period 9,885,027 $138,623,025 9,885,027 $138,623,025
============ ============ ============ ============
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 and foreign currency gains and losses,
distributions paid to shareholders, and any increase or decrease in money
shareholders invested in the Fund. The footnote illustrates the number of Fund
shares sold, reinvested and redeemed during the last two periods, along with the
corresponding dollar value.
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:
SIX MONTHS
YEAR ENDED JUNE 30, ENDED
------------------------------------------------------------ DECEMBER 31, 1996
1992(a) 1993 1994 1995 1996 (UNAUDITED)
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period $14.08 $15.78 $17.33 $13.17 $14.56 $15.05
-------- -------- -------- -------- -------- --------
Net Investment Income 1.45 1.31 1.34 1.62 1.50 0.69
Net Realized and Unrealized Gain
(Loss) on Investments 2.16 2.11 (3.47) 1.31 0.53 0.44
-------- -------- -------- -------- -------- --------
Total from Investment Operations 3.61 3.42 (2.13) 2.93 2.03 1.13
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to AMPS Shareholders (0.26) (0.22) (0.22) (0.30) (0.30) (0.14)
Distributions to Common Shareholders
from Net Investment Income (1.09) (1.08) (1.30) (1.24) (1.13) (0.62)
Distributions to Common Shareholders
from Net Realized
Short-Term Gain on Investments (0.56) (0.57) (0.51) -- (0.11) --
-------- -------- -------- -------- -------- --------
Total Distributions (1.09) (1.87) (2.03) (1.54) (1.54) (0.76)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $15.78 $17.33 $13.17 $14.56 $15.05 $15.42
======== ======== ======== ======== ======== ========
Per Share Market Value, End of Period $16.875 $18.250 $12.750 $13.875 $14.250 $14.125
Total Investment Return at Market Value 25.01% 19.14% (21.60%) 19.73% 11.83% 3.43%(e)
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000's omitted) $153,275 $170,512 $130,157 $143,914 $148,731 $152,440
Ratio of Expenses to Average Net Assets* 1.42% 1.52% 1.30% 1.29% 1.25% 1.16%(d)
Ratio of Net Investment Income to
Average Net Assets* 6.75% 5.50% 5.83% 7.96% 6.79% 6.21%(d)
Portfolio Turnover Rate 85% 53% 39% 107% 49% 17%
Senior Securities
Total AMPS Outstanding (000's
omitted) $70,000 $70,000 $70,000 $70,000 $70,000 $70,000
Asset Coverage per Unit (b) $316,361 $339,312 $285,137 $305,754 $306,112 $314,104
Involuntary Liquidation Preference
per Unit (c) $100,000 $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 $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.
(d) On an annualized basis.
(e) Not annualized.
The Financial Highlights summarizes the impact of the following factors on a single
share for each 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
December 31, 1996 (Unaudited)
The Schedule of Investments is a complete list of all securities owned by the Patriot
Select Dividend Fund on December 31, 1996. It's divided into three main categories:
preferred stocks, common stocks and short-term investments. The stocks are further broken
down by industry group. Short-term investments, which represent the Fund's "cash" position,
are listed last.
- ---------------------------------------------------------------------------------------
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- --------- ------
<S> <C> <C> <C>
PREFERRED STOCKS
Auto/Truck (3.26%)
Ford Motor Company, 8.25%,
Depositary Shares, Ser B 60,000 $1,672,500
General Motors Corp., 9.12%,
Depositary Shares, Ser G 150,000 4,331,250
General Motors Corp., 9.125%,
Depositary Shares, Ser B 44,600 1,243,225
------------
7,246,975
------------
Banks - Foreign (0.67%)
Australia and New Zealand Banking
Group Ltd., 9.125% (Australia) 55,000 1,491,875
------------
Banks - U.S. (9.88%)
Ahmanson, H. F. & Co., 8.40%,
Depositary Shares, Ser C 35,000 910,000
Bank of Boston Corp., 8.60%,
Depositary Shares, Ser E 144,886 3,712,704
Chase Manhattan Corp., 9.08%, Ser D 80,000 2,020,000
Chase Manhattan Corp., 9.76%, Ser B 27,700 782,525
Chase Manhattan Corp., 10.84%, Ser C 42,000 1,260,000
Fleet Financial Group, Inc.,
6.75%, Ser VI 119,000 6,083,875
Fleet Financial Group, Inc., 9.35%,
Depositary Shares 165,000 4,640,625
Wells Fargo & Co., 9.00%,
Depositary Shares, Ser G 100,000 2,562,500
------------
21,972,229
------------
Conglomerate/Diversified (0.31%)
Grand Metropolitan Delaware, 9.42%
Gtd Ser A 25,000 700,000
------------
Equipment Leasing (1.18%)
AMERCO, 8.50%, Ser A 65,000 1,600,625
Capita Preferred Trust, 9.06% 40,000 1,030,000
------------
2,630,625
------------
Financial Services (3.60%)
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A 40,000 1,170,000
Salomon Inc., 8.08%, Depositary Shares,
Ser D 50,000 1,231,250
Salomon Inc., 8.40%, Depositary Shares,
Ser E 60,000 1,492,500
Source One Mortgage Services Corp.,
8.42%, Ser A 110,000 2,832,500
Southern Union Financing, 9.48%,
Ser 5/17/25 50,000 1,287,500
------------
8,013,750
------------
Insurance (2.66%)
American Life Holding Co., $2.16 40,000 1,035,000
Provident Companies, Inc., 8.10%,
Depositary Shares 41,500 1,068,625
Travelers Group, Inc., 9.25%,
Depositary Shares, Ser D 149,000 3,818,125
------------
5,921,750
------------
Oil & Gas (7.04%)
Coastal Corp., $2.125, Ser H 174,125 4,461,953
El Paso Tennessee Pipeline Co.
8.25%, Ser A 135,000 6,901,875
Enterprise Oil PLC, 10.50%, Ser A,
American Depository Receipts ("ADR")
(United Kingdom) 24,500 637,000
Lasmo PLC, 10.00%, Ser A, ADR
(United Kingdom) 42,000 1,081,500
Phillips Gas Co., 9.32%, Ser A 98,000 2,572,500
------------
15,654,828
------------
Paper (2.58%)
Boise Cascade Corp., 9.40%, Ser F 103,000 2,652,250
Bowater Inc., 8.40%, Depositary Shares,
Ser C 120,000 3,090,000
------------
5,742,250
------------
Utilities (42.68%)
Baltimore Gas & Electric Co., 6.70%,
Ser 1993 10,000 1,030,000
Baltimore Gas & Electric Co., 6.99%,
Ser 1995 40,000 4,225,000
Baltimore Gas & Electric Co., 7.78%,
Ser 1973 16,515 1,668,015
Boston Edison Co., 4.25% 39,314 2,275,298
Central Maine Power, 7.999%, Ser A 10,000 975,000
Central Maine Power, 8.875% (R) 9,600 950,400
Columbus Southern Power Co., 8.375%,
Ser A 60,000 1,507,500
Commonwealth Edison Co., $8.38 42,750 4,253,625
Commonwealth Edison Co., $8.40, Ser A 25,110 2,511,000
Detroit Edison Co., 7.75% 60,000 1,515,000
Entergy Gulf States, Inc., $8.52 45,500 4,424,875
Entergy Gulf States, Inc., $9.96 9,800 1,000,825
Entergy Gulf States, Inc., Adjustable
Rate Preferred, Depositary Shares,
Ser B 28,002 1,358,097
Florida Power & Light Co., 6.75%, Ser U 25,000 2,593,750
GTE Florida, Inc., $8.16 25,000 2,575,000
GTE North, Inc., $7.60, Ser IND 10,000 1,000,000
Houston Lighting & Power Co., $8.12 21,700 2,216,113
Jersey Central Power & Light Co., 7.52%
Ser K 6,500 674,375
Massachusetts Electric Co., 6.84% 89,000 2,158,250
Massachusetts Electric Co., 6.99% 13,500 1,414,125
MCN Michigan Co., Limited Partnership,
9.375%, Ser A 50,000 1,343,750
Monongahela Power Co., $7.73, Ser L 44,000 4,796,000
Montana Power Co., $6.875 33,500 3,492,375
Narragansett Electric Co., 6.95% 17,950 935,644
PECO Energy Co., $7.48 19,200 2,032,800
PSI Energy, Inc., 6.875% 122,000 3,095,750
PSI Energy, Inc., 7.44% 48,000 5,052,000
Public Service Electric & Gas Co., 6.80% 25,060 2,437,085
Public Service Electric & Gas Co., 6.92% 14,000 1,468,250
Puget Sound Power & Light Co., 7.875% 48,797 1,244,323
Sierra Pacific Power Capital, 8.60% 30,000 787,500
Sierra Pacific Power Co., 7.80%,
Ser 1, Class A 183,600 4,934,250
Southern California Gas Co., 7.75% 42,786 1,074,998
Texas Utilities Electric Co., $1.805,
Depositary Shares, Ser B 53,581 1,352,920
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A 128,000 3,296,000
Texas Utilities Electric Co., $2.05,
Depositary Shares 33,500 845,875
Texas Utilities Electric Co., $7.24 9,500 947,625
Texas Utilities Electric Co., $7.98 29,200 3,153,600
Utilicorp Capital, 8.875%, Ser A 70,000 1,828,750
Virginia Electric & Power Co., $6.98 10,500 1,114,312
Virginia Electric & Power Co., $7.05 10,000 1,063,750
Washington Natural Gas Co.,
7.45%, Ser II 165,140 4,211,070
Washington Natural Gas Co.,
8.50%, Ser III 89,330 2,311,414
Western Massachusetts Electric Co.,
7.72%, Ser B 22,247 1,779,760
------------
94,926,049
------------
TOTAL PREFERRED STOCKS
(Cost $157,711,275) (73.86%) $164,300,331
------- ------------
COMMON STOCKS
Finance (0.05%)
Echelon International Corp. 6,949 108,578
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Utilities (24.67%)
Allegheny Power System, Inc. 36,000 1,093,500
American Electric Power Co., Inc. 21,000 863,625
Boston Edison Co. 90,000 2,418,750
Consolidated Edison Co. of NY, Inc. 79,000 2,310,750
Delmarva Power & Light Co. 95,000 1,935,625
DPL, Inc. 200,000 4,900,000
Florida Progress Corp. 104,250 3,362,063
Hawaiian Electric Industries, Inc. 19,400 700,825
Houston Industries, Inc. 195,800 4,429,975
IES Industries, Inc. 100,000 2,987,500
IPALCO Enterprises, Inc. 75,000 2,043,750
MidAmerican Energy Co. 327,600 5,200,650
Montana Power Co. 75,000 1,603,125
Nevada Power Co. 50,000 1,025,000
New England Electric System 97,000 3,382,875
Oklahoma Gas & Electric Co. 80,000 3,340,000
Pacific Enterprises 65,000 1,974,375
PECO Energy Co. 35,000 883,750
Potomac Electric Power Co. 39,300 1,011,975
Puget Sound Power & Light Co. 215,500 5,172,000
Southwestern Public Service Co. 77,700 2,748,638
UtiliCorp United, Inc. 30,000 810,000
Washington Water Power Co. 36,000 670,500
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54,869,251
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TOTAL COMMON STOCKS
(Cost $52,534,266) (24.72%) $54,977,829
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<CAPTION>
INTEREST PAR VALUE MARKET
RATE (000's OMITTED) VALUE
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<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
Commercial Paper (1.08%)
Prudential Funding Corp.
1/2/97 6.25% $2,411 2,410,696
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TOTAL SHORT-TERM INVESTMENTS (1.08%) 2,410,696
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TOTAL INVESTMENTS (99.66%) $221,688,856
======= ============
(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. Rule 144A securities amounted to $950,400 as of
December 31, 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
(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 0F INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services or, at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund 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.
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. Actual results
could differ from these estimates.
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 3.85% to 3.99% during the period
ended December 31, 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.
Each unaffiliated Trustee is entitled, as compensation for his or her
services, to an annual fee plus remuneration for attendance at various
meetings.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. 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 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
December 31, 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 December 31, 1996, aggregated $38,034,665 and
$36,520,013, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended December 31, 1996.
The cost of investments owned at December 31, 1996 (including the short-
term investments) for Federal income tax purposes was $212,656,237.
Gross unrealized appreciation and depreciation of investments aggregated
$10,290,255 and $1,257,636, respectively, resulting in net unrealized
appreciation of $9,032,619.
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).
SHAREHOLDER MEETING
On March 7, 1996, the Annual Meeting of John Hancock Patriot Select
Dividend Trust (the "Fund") was held to elect five Trustees and to
ratify the action of the Trustees in selecting independent auditors for
the Fund.
The common shareholders elected the following Trustees to serve until
their respective successors are duly elected and qualified, with votes
tabulated as follows:
WITHHELD
NAME OF TRUSTEE FOR AUTHORITY
- ---------------------------- ------------------ ----------------
James F. Carlin 7,718,682 114,889
William H. Cunningham 7,715,943 177,628
Charles F. Fretz 7,715,564 118,007
John P. Toolan 7,714,586 118,985
The preferred shareholders elected Harold R. Hiser, Jr. to serve until
his successor is duly and qualified, with the votes tabulated as
follows: 627 FOR and 0 WITHHELD AUTHORITY.
The shareholders also ratified the Trustees' selection of Arthur
Andersen, LLP as the Fund's independent auditors for the Fund for the
fiscal year ending June 30, 1996, with the votes tabulated as follows:
7,677,078 FOR, 29,158 AGAINST and 127,962 ABSTAINING.
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: "A Global Investment Management Firm."
JOHN HANCOCK FUNDS
A Global Investment Management Firm
101 Huntington Avenue, Boston, MA 02199-7603
Bulk Rate
U.S. Postage
PAID
S. Hackensack, NJ
Permit No. 750
A recycled logo in lower left hand corner with the caption " Printed on
Recycled Paper." P30SA 12/96
2/97
