---------------------------
The latest report from your
Fund's management team
---------------------------
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Patriot Select
Dividend Trust
DECEMBER 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
-----------------------------------------
TRUSTEES
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Maureen R. Ford
Anne C. Hodsdon
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Operating Officer and
Chief Investment Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
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
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
Listed New York Stock Exchange Symbol: DIV
FOR SHAREHOLDER ASSISTANCE
refer to page 14
---------------------------------------------
====================================CEO CORNER==================================
DEAR FELLOW SHAREHOLDERS:
As "The American Century" drew to a close this past year, the U.S. economy ended
the era on a high note. With robust growth continuing in 1999, our economy stood
poised to enter the history books for producing the longest expansion on record.
The stock market also rang out the century in style. For an unprecedented fifth
straight year, both the Dow Jones Industrial Average and the Standard & Poor's
500 Index produced 20%-plus returns. However, the market's advances were
restricted to a very select group of stocks, primarily in the technology sector.
Many others, including some of the household blue-chip names, languished or lost
ground as the result of investors' seemingly insatiable appetite for tech
stocks.
Bonds struggled through their second-worst year in more than two decades, as the
strength of the U.S. economy and the rebound of many others around the world
provoked inflation fears. Though their outlook from here looks brighter, in many
instances, bond mutual fund investors actually lost a little ground or made only
slight advances in 1999.
- --------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive Officer,
flush right next to third paragraph.]
- --------------------------------------------------------------------------------
While we expect the market to broaden eventually, we also expect more
volatility. More than ever, this type of environment calls for investment
diversification. Since not all parts of your portfolio will perform equally well
all the time, we believe it is important to allocate your assets among different
types of investments and funds that target a variety of market segments. This
strategy, executed under the guidance of a seasoned investment professional,
could provide you with a better chance of both realizing results and weathering
the market's changing conditions.
The market's disappointingly narrow focus has created a widening gap in
investment performance. Keep that in mind as you read the report from your
fund's portfolio management team on the following pages. It's all too easy to
get caught up in the headlines and miss what lies underneath.
Sincerely,
/s/Maureen R. Ford
- ----------------------------------------------------------
MAUREEN R. FORD, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By Gregory K. Phelps, for the Portfolio Management Team
John Hancock Patriot
Select Dividend Trust
Rising interest rates, tax-loss selling spell trouble
-----------------------------------------------------
forpreferreds and utility stocks
--------------------------------
While all major stock indices skyrocketed to new highs in the second half of
1999, their gains were generated almost exclusively by high-flying technology,
Internet and telecommunications stocks. Most other non-technology stocks,
including many of the bluest of blue chips, slumped. Preferred and utility
common stocks were left behind as well last year, but we believe they are poised
to stage a recovery in 2000.
The high, fixed dividends that preferred stocks generally pay make them
quite sensitive to interest-rate changes, so their prices fell significantly as
rates climbed throughout much of 1999. Interest-rate jitters hampered preferred
stocks from the outset of the period because investors were on edge,
anticipating that the Federal Reserve would raise rates again after just having
done so on June 30. Throughout the remainder of the year, continued signs of
strong economic growth fanned fears of inflation, an unwelcome visitor because
it eats into fixed-income returns. As expected, the Fed raised short-term
interest rates two more times for an additional one-half of a percentage point
by November in an effort to stem potential inflation pressures that might result
from strong economic growth.
As if rising interest rates weren't bad enough, preferred stocks faced
two additional short-term challenges. To lock in current interest rates and to
sidestep market-related problems potentially
- --------------------------------------------------------------------------------
[A 3" x 2" photo at bottom right side of page of John Hancock Patriot Select
Dividend Trust. Caption below reads "Fund management team members (l-r):
Sylvester Marquardt, Mark Maloney, Beverly Cleathero and Gregory Phelps."]
- --------------------------------------------------------------------------------
"...[preferred stocks'] prices fell significantly as rates climbed throughout
much of 1999."
3
<PAGE>
================================================================================
John Hancock Funds - Patriot Select Dividend Trust
"We found a number of compelling values among non-DRD-eligible preferred
stocks..."
- --------------------------------------------------------------------------------
[Pie chart at top left hand column with heading "Portfolio Diversification." The
chart is divided into five sections (from top to left): Short-Term Investments &
Other 2%, Industrials 8%, Financials 24%, Utility Common Stocks 30% and Utility
Preferred Stocks 36%. A note below the chart reads "As a percentage of net
assets on December 31, 1999."]
- --------------------------------------------------------------------------------
resulting from the Y2K bug, corporations issued near-record levels of debt and
preferred stock in the summer and early fall. Expanding supply added more
pressure to the already-strained preferred-stock market. Later in the period,
preferreds unsuccessfully battled an unprecedented deluge of "tax-loss selling,"
marked by investors selling poor performers at a loss to offset capital gains
incurred elsewhere in their portfolios.
Utility common stocks - which made up about 30% of the Fund's net
assets at the end of the period - also were weak. Like preferreds, they came
under pressure from rising interest rates and tax-loss selling. The dwindling
supply of utility common stocks that has resulted from industry consolidation
and stock repurchases did little to ease the pain.
- --------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is
Non-DRD-eligible preferreds followed by a down arrow with the phrase "Hard hit
by tax-loss selling." The second listing is Utility common stocks followed by a
down arrow with the phrase "Tech-loving investors avoid sector." The third
listing is Eastern Enterprises followed by an up arrow with the phrase "Acquired
by KeySpan." A note below the table reads "See `Schedule of Investments.'
Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
Performance review
The poor performance of preferred and utility stocks resulted in disappointing
returns for John Hancock Patriot Select Dividend Trust. For the six months ended
December 31, 1999, the Fund had a total return of -6.98%, at net asset value.
For the same period, the Dow Jones Utilities Average - which tracks
theperformance of 15 electric and natural gas companies - returned -8.91%.
The vast majority of our preferred stock holdings performed in line
with their peers, which meant they lost significant ground during the period. As
we mentioned earlier, preferreds' problems stemmed from rising rates and a
supply glut, rather than from fundamental issues with the underlying companies.
Given the strength of the economy, most of the Fund's holdings continued to post
positive financial results. That said, the negative investment backdrop
overwhelmed the companies' strong fundamentals.
Stalwart holdings
There were a few exceptions on the upside. Among our utility common holdings,
NSTAR, the parent company of Boston Edison, performed reasonably well. The
company has partnered with RCN to build out a fiber-optics network. Of all the
unregulated operations electric utilities are pursuing to boost earnings growth,
we think fiber optics offers the biggest potential. That helps explain why we
favor companies such as NSTAR, Potomac Electric Power, TDS and Montana Power.
The ongoing merger and acquisition activity in the utilities industry helped
power our holdings in Eastern Enterprises, which was acquired by KeySpan Corp.
4
<PAGE>
================================================================================
John Hancock Funds - Patriot Select Dividend Trust
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended December 31, 1999." The
chart is scaled in increments of 2% with -10% at the bottom and 0% at the top.
The first bar represents the -6.98% total return for John Hancock Patriot Select
Dividend Trust. The second bar represents the -8.91% total return for Dow Jones
Utility Average. A note below the chart 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 that measures
the performance of the utility industry in the United States."]
- --------------------------------------------------------------------------------
Financials
Expected merger and acquisition activity, coupled with their relatively high
yields, are the main reasons why we continued to hold onto some preferreds in
the financial sector, specifically Lehman Brothers and Bear Stearns. With the
repeal of the Glass-Steagall Act - which once prevented banks, insurers and
brokers from merging - we believe the stage is set for some of our financial
services holdings to be merged or acquired.
New opportunities
We found a number of compelling values among non-DRD-eligible preferred stocks,
which were the main object of the wave of indiscriminate tax-loss selling.
Generally speaking, we prefer to concentrate on preferred stocks eligible for
the dividends received deduction (DRD), which offer distinct advantages to
corporate investors, and as such, remain in fairly constant demand.
But recently, some non-DRD-eligible preferreds that are callable - or redeemable
by their issuers in the next six to 12 months - were priced so cheaply and
offered such high yields that we felt they were too good to pass up. We
concentrated on those that sold at a significant discount to their par value and
offered almost unprecedented amounts of yield as a result. These holdings offer
the potential to see their prices appreciate to their par value if they are
called.
Outlook
As always, the fate of preferred stocks and utility common stocks largely will
be determined by the interest-rate backdrop. Our view is that the Federal
Reserve could hike rates again early on, which may result in continued
volatility for the preferred and utility sectors in the short term. But beyond
that, we're hopeful that previous interest-rate hikes will have their intended
effect of slowing the economy later in the year and providing a better
interest-rate environment.
Investors appear to have already factored much higher interest rates
than we believe will transpire into the prices of preferred and utility stocks.
So from that perspective alone, we think preferreds and utility common stocks
are attractively valued. Add to that the abatement of tax-loss selling and
oversupply, and we believe the makings of better performance lie 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.
"...we believe the makings of better performance lie ahead."
5
<PAGE>
==============================FINANCIAL STATEMENTS==============================
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, 1999. You'll
also find the net asset value per share as of that date.
Statement of Assets and Liabilities
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Preferred stocks (cost - $149,850,359)....................... $145,484,683
Common stocks (cost - $63,170,520) .......................... 64,018,079
Short-term investments (cost - $770,561) .................... 770,561
--------------
210,273,323
Dividends receivable ......................................... 1,098,519
Other assets ................................................. 35,285
--------------
Total Assets ................ 211,407,127
--------------------------------------------
Liabilities:
AMPS dividend payable ........................................ 29,171
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ..................................... 206,669
Accounts payable and accrued expenses ........................ 58,781
--------------
Total Liabilities ........... 294,621
--------------------------------------------
Net Assets:
Auction Market Preferred Shares Stock
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 ..................... 141,881,450
Accumulated net realized gain on investments ................. 1,007,698
Net unrealized depreciation of investments ................... (3,515,779)
Undistributed net investment income .......................... 1,739,137
--------------
Net Assets applicable to Common Shares:
($14.28 per share based on 9,885,027
shares outstanding) .......................................... 141,112,506
--------------
Net Assets .................. $211,112,506
============================================
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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends .................................................... $7,475,492
Interest ..................................................... 44,795
--------------
7,520,287
--------------
Expenses:
Investment management fee - Note B .......................... 890,689
Administration fee - Note B ................................. 167,004
AMPS and auction fees ....................................... 99,121
Custodian fee ............................................... 34,946
Printing and postage ........................................ 27,489
Auditing fee ................................................ 26,263
Transfer agent fee .......................................... 23,871
Miscellaneous ............................................... 15,921
Trustees' fees .............................................. 7,818
Legal fees .................................................. 1,221
--------------
Total Expenses .............. 1,294,343
--------------------------------------------
Net Investment Income ....... 6,225,944
--------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold ........................ 598,824
Change in net unrealized appreciation/depreciation
of investments .............................................. (17,132,959)
--------------
Net Realized and Unrealized
Loss on Investments ......... (16,534,135)
--------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ... (10,308,191)
============================================
Distribution to AMPS
Shareholders ................ (1,441,242)
--------------------------------------------
Net Decrease in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less AMPS
Distributions ............... ($11,749,433)
============================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Select Dividend Trust
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1999
JUNE 30, 1999 (UNAUDITED)
------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ...................................................................... $12,408,063 $6,225,944
Net realized gain on investments sold ...................................................... 2,038,353 598,824
Change in net unrealized appreciation/depreciation of investments .......................... (9,897,925) (17,132,959)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ........................... 4,548,491 (10,308,191)
------------- -------------
Distributions to Shareholders:
AMPS ($4,121 and $2,059 per share, respectively) - Note A .................................. (2,885,045) (1,441,242)
Common Shares - Note A
Dividends from net investment income ($1.1264 and $0.5400 per share, respectively) ........ (11,134,302) (5,337,228)
Distribution in excess of net investment income ($0.1107 and none per share, respectively) (1,094,209) -
------------- -------------
Total Distributions to Shareholders ...................................................... (15,113,556) (6,778,470)
------------- -------------
Net Assets:
Beginning of period ........................................................................ 238,764,232 228,199,167
------------- -------------
End of period (including undistributed net investment income of $2,291,663 and
$1,739,137, respectively) ................................................................. $228,199,167 $211,112,506
============= =============
Analysis of Common Shareholder Transactions:
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, 1999
JUNE 30, 1999 (UNAUDITED)
------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ---------------
Shares outstanding, beginning of period.......................... 9,885,027 $140,538,208 9,885,027 $141,881,450
Reclassification of net realized long-term gains retained on
investments sold
(net of federal income taxes of $798,703 and none, respectively) - 1,483,305 - -
Reclassification of capital accounts ............................ - (140,063) - -
---------- ------------- ----------- ---------------
Shares outstanding, end of period ............................... 9,885,027 $141,881,450 9,885,027 $141,881,450
========== ============= =========== ===============
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 reclassification of capital
amounts and the number of 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.
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Select Dividend Trust
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each
period indicated, investment returns, key ratios and supplemental data are
listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, SIX MONTHS ENDED
----------------------------------------------- DECEMBER 31, 1999
1995 1996 1997 1998 1999 (UNAUDITED)
------- ------- -------- -------- --------- -----------------
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period ........................... $13.17 $14.56 $15.05 $15.60 $17.07 $16.00
-------- -------- -------- -------- -------- --------
Net Investment Income .......................................... 1.62 1.50 1.42 1.38 1.26 0.63
Net Realized and Unrealized Gain (Loss) on Investments ......... 1.31 0.53 0.65 1.62 (0.80) (1.66)
-------- -------- -------- -------- -------- --------
Total from Investment Operations .............................. 2.93 2.03 2.07 3.00 0.46 (1.03)
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to AMPS Shareholders ................................. (0.30) (0.30) (0.28) (0.29) (0.29) (0.15)
Distributions to Common Shareholders from Net Investment Income (1.24) (1.13) (1.24) (1.24) (1.13) (0.54)
Distributions to Common Shareholders
in Excess of Net Investment Income ............................ - - - - (0.11) -
Distributions to Common Shareholders
from Net Realized Short-Term Gain on Investments .............. - (0.11) - - - -
-------- -------- -------- -------- -------- --------
Total Distributions ........................................... (1.54) (1.54) (1.52) (1.53) (1.53) (0.69)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ................................. $14.56 $15.05 $15.60 $17.07 $16.00 $14.28
======== ======== ======== ======== ======== ========
Per Share Market Value, End of Period .......................... $13.875 $14.250 $14.313 $15.500 $13.813 $11.625
Total Investment Return at Market Value ..................... 19.73% 11.83% 9.38% 17.26% (3.56%) (12.28%)(5)
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000s omitted) .................................. $143,914 $148,731 $154,214 $168,764 $158,199 $141,113
Ratio of Expenses to Average Net Assets (1) .................... 1.96% 1.85% 1.81% 1.68% 1.72% 1.70%(6)
Ratio of Net Investment Income to Average Net Assets (2) ....... 12.20% 10.00% 9.33% 8.38% 7.51% 8.16%(6)
Portfolio Turnover Rate ........................................ 107% 49% 47% 41% 30% 8%
Senior Securities
Total AMPS Outstanding (000s omitted) .......................... $70,000 $70,000 $70,000 $70,000 $70,000 $70,000
Asset Coverage per Unit (3) .................................... $305,754 $306,112 $318,281 $338,876 $329,508 $298,465
Involuntary Liquidation Preference per Unit (4) ................ $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (4) .......................... $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
(1) Ratios calculated on the basis of expenses applicable to the common shares
relative to the average net assets of common shares. Without the exclusion of
preferred shares, the ratio of expenses would have been 1.29%, 1.25%, 1.24%,
1.18%, 1.21% and 1.16%, respectively.
(2) Ratios calculated on the basis of net investment income applicable to common
shares relative to the average net assets of common shares. Without the
exclusion of preferred shares, the ratio of net investment income would have
been 7.96%, 6.79%, 6.36%, 5.86%, 5.28% and 5.58%, respectively.
(3) 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.
(4) Plus accumulated and unpaid dividends.
(5) Not annualized.
(6) Annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
distributions 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.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Select Dividend Trust
Schedule of Investments
DEcember 31, 1999
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Patriot Select Dividend Trust on December 31, 1999. 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.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
PREFERRED STOCKS
Agricultural Operations (1.67%)
Ocean Spray Cranberries, Inc., 6.25%,
Ser A (R) ................................. 40,000 $3,535,000
----------
Automobile/Trucks (2.07%)
General Motors Corp., 9.12%,
Depositary Shares, Ser G .................. 170,000 4,377,500
----------
Banks - Foreign (0.65%)
Australia and New Zealand Banking Group
Ltd., 9.125% (Australia) .................. 55,000 1,371,562
----------
Banks - United States (7.07%)
ABN AMRO North America, Inc., 6.59%,
Ser H (R) ................................. 1,000 923,750
Chase Manhattan Corp., 10.84%,
Ser C ..................................... 77,300 2,106,425
FleetBoston Financial Corp., 6.75%,
Ser VI .................................... 119,000 5,831,000
FleetBoston Financial Corp., 9.35%,
Depositary Shares ......................... 165,000 4,114,687
Republic New York Corp., $2.8575 ........... 45,000 1,957,500
----------
14,933,362
----------
Broker Services (8.02%)
Bear Stearns Companies, Inc., 5.49%,
Ser G ..................................... 116,400 4,423,200
Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D .................. 143,689 5,891,249
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A .................. 107,650 3,182,403
Morgan Stanley Group, Inc., 7.75%,
Depositary Shares ......................... 66,000 3,432,000
----------
16,928,852
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Diversified Operations (0.31%)
Grand Metropolitan Delaware, L.P.,
9.42%, Gtd Ser A .......................... 25,000 $651,562
----------
Finance (7.04%)
Citigroup, Inc., 6.213%, Ser G ............. 44,000 1,892,000
Citigroup, Inc., 6.231%,
Depositary Shares, Ser H .................. 92,400 4,273,500
Citigroup, Inc., 8.40%,
Depositary Shares, Ser K .................. 165,000 4,269,375
SI Financing Trust I, 9.50%, Gtd Pfd Sec
& Purchase Contract ....................... 41,700 1,063,350
SLM Holding Corp., 6.97% ................... 70,000 3,363,500
----------
14,861,725
----------
Leasing Companies (1.27%)
AMERCO, 8.50%,
Ser A ..................................... 105,000 2,677,500
----------
Oil & Gas (4.57%)
Anadarko Petroleum Corp., 5.46%,
Depositary Shares ......................... 5,000 391,250
Apache Corp., 5.68%,
Depositary Shares, Ser B .................. 30,924 2,568,517
Devon Energy Corp., 6.49%, Ser A ........... 51,000 4,525,026
Lasmo America Ltd., 8.15% (R) ............. 20,000 2,152,580
----------
9,637,373
----------
Utilities (36.24%)
Alabama Power Co., 5.20% ................... 225,000 4,528,125
Baltimore Gas & Electric Co., 6.70%,
Ser 1993 .................................. 10,000 1,042,130
Baltimore Gas & Electric Co., 6.99%,
Ser 1995 .................................. 40,000 4,210,200
Boston Edison Co., 4.25% ................... 42,366 2,713,458
El Paso Tennessee Pipeline Co., 8.25%,
Ser A ..................................... 183,500 9,633,750
Entergy Gulf States Capital 1, 8.75%,
Ser A ..................................... 87,100 1,818,212
Florida Power & Light Co., 6.75%,
Ser U ..................................... 25,000 2,618,600
FPC Capital I, 7.10%, Ser A ................ 53,000 1,103,062
Hawaiian Electric Industries Capital Trust I,
8.36% ..................................... 50,000 1,053,125
Indianapolis Power & Light Co., 5.65% ...... 15,000 1,299,450
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Select Dividend Trust
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Utilities (continued)
Massachusetts Electric Co., 6.99% .......... 13,500 $1,437,750
Monongahela Power Co., 7.73%, Ser L ........ 44,000 4,705,976
Montana Power Co., $6.875 .................. 36,500 3,867,358
PSI Energy, Inc., 6.875% ................... 48,000 5,057,232
Public Service Electric & Gas Co., 6.92% ... 14,625 1,537,424
Puget Sound Energy, Inc., 7.45%, Ser II .... 165,140 4,293,640
Sierra Pacific Power Capital I, 8.60% ...... 30,000 708,750
Sierra Pacific Power Co., 7.80%,
Ser 1 (Class A) ........................... 183,600 4,918,093
South Carolina Electric & Gas Co.,
6.52% ..................................... 50,000 5,075,000
Southern Union Financing I, 9.48% .......... 59,000 1,460,250
TDS Capital Trust I, 8.50% ................. 142,800 3,034,500
TDS Capital Trust II, 8.04% ................ 54,400 1,081,200
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A .................. 102,000 2,575,500
Texas Utilities Electric Co., $7.98 ........ 29,200 2,989,350
UtiliCorp Capital, L.P., 8.875%, Ser A ..... 70,000 1,588,125
Virginia Electric & Power Co., $6.98 ....... 10,500 1,105,167
Virginia Electric & Power Co., $7.05 ....... 10,000 1,054,820
----------
76,510,247
----------
TOTAL PREFERRED STOCKS
(Cost $149,850,359) (68.91%) 145,484,683
----------- -------------
COMMON STOCKS
Utilities (30.32%)
Alliant Energy Corp. ....................... 158,000 4,345,000
Ameren Corp. ............................... 30,000 982,500
CH Energy Group, Inc. ...................... 97,800 3,227,400
CMP Group, Inc. ............................ 36,250 999,141
Conectiv, Inc. (Class A) ................... 33,350 987,994
Consolidated Edison, Inc. .................. 55,000 1,897,500
Dominion Resources, Inc. ................... 46,000 1,805,500
DPL, Inc. .................................. 237,000 4,103,062
DTE Energy Co. ............................. 89,900 2,820,612
Duke Energy Corp. .......................... 22,500 1,127,812
Eastern Enterprises ........................ 55,400 3,182,037
Florida Progress Corp. ..................... 20,000 846,250
Hawaiian Electric Industries, Inc. ......... 28,900 834,487
Kansas City Power & Light Co. .............. 40,000 882,500
KeySpan Corp. .............................. 50,000 1,159,375
Kinder Morgan, Inc. ........................ 25,500 514,781
LG&E Energy Corp. .......................... 56,150 979,116
Montana Power Co. .......................... 176,800 6,375,850
New England Electric System ................ 87,950 4,551,413
Northern States Power Co. .................. 55,000 1,072,500
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Utilities (continued)
NSTAR ...................................... 70,000 $2,835,000
OGE Energy Corp. ........................... 85,000 1,615,000
Potomac Electric Power Co. ................. 92,800 2,128,600
Puget Sound Energy, Inc. ................... 170,500 3,303,438
Reliant Energy, Inc. ....................... 94,700 2,166,263
Sempra Energy .............................. 31,000 538,625
Sierra Pacific Resources ................... 75,000 1,298,438
Southern Co. ............................... 15,000 352,500
TECO Energy, Inc. .......................... 142,750 2,649,797
UtiliCorp United, Inc. ..................... 105,000 2,040,938
Western Resources, Inc. .................... 84,700 1,439,900
WPS Resources Corp. ........................ 38,000 954,750
----------
TOTAL COMMON STOCKS
(Cost $63,170,520) (30.32%) 64,018,079
----------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ---------------
SHORT-TERM INVESTMENTS
Commercial Paper (0.37%)
Chevron USA, Inc.,
Due 01-03-00 ..................... 3.50% $771 770,561
------------
TOTAL SHORT-TERM INVESTMENTS (0.37%) 770,561
--------- ------------
TOTAL INVESTMENTS (99.60%) 210,273,323
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.40%) 839,183
--------- ------------
TOTAL NET ASSETS (100.00%) $211,112,506
========= ============
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $6,611,330 or 3.13% of net assets as of December 31,
1999.
Parenthetical disclosure of a foreign country in the security description
represents country of a 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
=========================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 diversified
closed-end 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 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, 1999, which has no effect on the Fund's net assets,
net investment income or net realized gains.
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 has been reset
every 49 days thereafter by an auction. Dividend rates ranged from 3.82% to
5.00% during the period ended December 31, 1999.
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, Inc., for a continuous investment
program equivalent, on an annual basis, to the sum of 0.80% of the Fund's
average weekly net assets.
11
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - Patriot Select Dividend Trust
The Fund has entered into an administrative agreement with the Adviser
under which the Adviser oversees the custodial, auditing, valuation, accounting,
legal, stock transfer and dividend disbursing services and maintains Fund
communications services with the shareholders. The Adviser receives a monthly
administration fee equivalent, on an annual basis, to the sum of 0.15% 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. Stephen L. Brown, Ms. Maureen R. Ford, 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. 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.
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, 1999, aggregated $20,504,681 and $17,660,673, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended December 31, 1999.
The cost of investments owned at December 31, 1999 (including the
short-term investments) for federal income tax purposes was $213,938,415. Gross
unrealized appreciation and depreciation of investments aggregated $11,545,604
and $15,210,696, respectively, resulting in net unrealized depreciation of
$3,665,092.
12
<PAGE>
================================================================================
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.
The Fund's non-fundamental investment policy, with respect to the
quality of ratings of its portfolio investments, was changed by a vote of the
Fund's Trustees on September 13, 1994. The new policy, which became effective
October 15, 1994, stipulates that the preferred stocks and debt obligations in
which the Fund will invest will be rated investment grade (at least "BBB" by S&P
or "Baa" by Moody's) at the time of investment or will be preferred stocks of
issuers of investment grade senior debt, some of which may have speculative
characteristics, or, if not rated, will be of comparable quality as determined
by the Adviser. The Fund will invest in common stocks of issuers whose senior
debt is rated investment grade or, in the case of issuers who have no rated
senior debt outstanding, whose senior debt is considered by the Adviser to be of
comparable quality.
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 participants' accounts. Such purchases will be
made promptly after the payable date for such a 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 to 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
13
<PAGE>
================================================================================
John Hancock Funds - Patriot Select Dividend Trust
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).
YEAR 2000 COMPLIANCE
The Adviser and the Fund's service providers have taken steps to address any
year 2000-related computer problems. However, there is some risk that these
problems could disrupt the Fund's operations or financial markets generally.
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning John Hancock Patriot Select Dividend Trust,
we will be pleased to assist you. If you hold shares in your own name and not
with a brokerage firm, please address all notices, correspondence, questions or
other communications regarding the Fund to the transfer agent at:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 426-5523
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
14
<PAGE>
======================================NOTES=====================================
John Hancock Funds - Patriot Select Dividend Trust
15
<PAGE>
================================================================================
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