-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CAQo7iXv3laIK0eEn2heraipKTxbT9Sh98RbG/zV802o7enyNPOJq/+Wd6OCf1SZ ggPu568wDxcAXTYsQEW5lA== 0000863328-04-000003.txt : 20040227 0000863328-04-000003.hdr.sgml : 20040227 20040227124928 ACCESSION NUMBER: 0000863328-04-000003 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040227 EFFECTIVENESS DATE: 20040227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK JOHN PATRIOT SELECT DIVIDEND TRUST CENTRAL INDEX KEY: 0000863328 IRS NUMBER: 043090916 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06107 FILM NUMBER: 04633815 BUSINESS ADDRESS: STREET 1: 101 HUNTINGTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199-7603 BUSINESS PHONE: 6173751700 MAIL ADDRESS: STREET 1: 101 HUNGTINTON AVENUE CITY: BOSTON STATE: MA ZIP: 02199-7603 FORMER COMPANY: FORMER CONFORMED NAME: PATRIOT SELECT DIVIDEND TRUST DATE OF NAME CHANGE: 19920703 N-CSR 1 patselct.txt JH PATRIOT SELECT DIVIDEND TRUST February 25, 2004 EDGAR United States Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Form N-CSR John Hancock Patriot Select Dividend Trust (the "Registrant") File No. 811-06107 Ladies and Gentlemen: Enclosed herewith for filing pursuant to the Investment Company Act of 1940 and the Securities Exchange Act of 1934 is the Registrant's Form N-CSR filing for the period ending December 31, 2003. If you have any questions or comments regarding this filing, please contact the undersigned at (617) 375-1513. Sincerely, /s/Alfred P. Ouellette Alfred P. Ouellette Senior Attorney and Assistant Secretary ITEM 1. REPORT TO STOCKHOLDERS. JOHN HANCOCK Patriot Select Dividend Trust 12.31.2003 Semiannual Report [A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower, center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."] [A photo of Maureen Ford Goldfarb, Chairman and Chief Executive Officer, flush left next to first paragraph.] WELCOME Table of contents Your fund at a glance page 1 Managers' report page 2 Fund's investments page 6 Financial statements page 9 For your information page 21 Dear Fellow Shareholders, The stock market made a strong recovery in 2003, producing double-digit returns in a broad-based rally. A rebounding economy fueled by historically low interest rates, plus improving corporate earnings and government stimulus in the form of tax cuts were the stimuli for the market's reversal after three down years. As a result, the market, as measured by the Standard & Poor's 500 Index, returned 28.67% in 2003. With technology leading the way, the tech-heavy Nasdaq Composite Index rose 50.77%, while the Dow Jones Industrial Average returned 28.27%. Bonds produced much more modest results, as investors were lured by stocks and interest rates began to rise. The exceptions were high-yield bonds, which posted stock-like returns of 28.97% for the year, as measured by the Lehman Brothers High Yield Index. In other news, we are pleased to inform you that on September 28, 2003, the Boards of Directors of Canada-based Manulife Financial Corporation and Boston-based John Hancock Financial Services, Inc., the parent company of John Hancock Funds, unanimously voted to merge the two companies. Please be assured that the completion of the merger -- anticipated to occur in the first half of 2004 -- will have no effect on your investment in our John Hancock mutual funds. Your fund's adviser and board of trustees will remain the same, as will your relationship with your financial adviser. The merger is subject to customary closing conditions, including receipt of required regulatory approvals and approval by John Hancock stockholders. If you only own shares in a John Hancock mutual fund you are not affected and will not receive a proxy. Additional information on this transaction is available on our Web site: www.jhfunds.com. If you have questions about the merger, you may also call 800-732-5543. Separately, for information about your investments in John Hancock funds, please contact your financial adviser or our Customer Service representatives at 800-225-5291. Sincerely, /S/ MAUREEN FORD GOLDFARB Maureen Ford Goldfarb, Chairman and Chief Executive Officer This commentary reflects the chairman's views as of December 31, 2003. They are subject to change at any time. YOUR FUND AT A GLANCE The Fund seeks to provide high current income, consistent with modest growth of capital, by nor- mally investing at least 80% of its assets in dividend- paying securities. The Fund will nor- mally invest more than 65% of its total assets in securities of companies in the utilities industry. Over the last six months * A dividend tax cut helped buoy demand for preferred and utility common stocks. * The Fund benefited from advantageous security selection among preferred stocks. * A significant stake in utility common stocks also aided performance. [Bar chart with heading "John Hancock Patriot Select Dividend Trust." Under the heading is a note that reads "Fund performance for the six months ended December 31, 2003." The chart is scaled in increments of 2% with 0% at the bottom and 8% at the top. The first bar represents the 7.62% total return for John Hancock Patriot Select Dividend Trust. A note below the chart reads "The total return for the Fund is at net asset value with all distributions reinvested."] Top 10 issuers 4.4% Energy East Corp. 4.4% Baltimore Gas & Electric 4.3% NSTAR 3.7% El Paso Tennessee Pipeline Co. 3.5% Citigroup, Inc. 3.3% Lehman Brothers 3.3% Bear Stearns Companies, Inc. 3.2% Sierra Pacific Power 3.1% CH Energy Group, Inc. 2.9% DTE Energy Co. As a percentage of net assets plus the value of preferred shares on December 31, 2003. 1 BY GREGORY K. PHELPS AND MARK T. MALONEY FOR THE PORTFOLIO MANAGEMENT TEAM MANAGERS' REPORT JOHN HANCOCK Patriot Select Dividend Trust Preferred stocks -- the primary emphasis of John Hancock Patriot Select Dividend Trust -- posted solid returns during the six-month period ended December 31, 2003, fueled in large part by favorable supply and demand conditions. An increasing number of companies that had issued preferred stocks in years when interest rates were higher redeemed those older preferred stocks to take advantage of the lower interest rates that prevailed during much of the period. Those redemptions resulted in a reduced net supply of preferred stocks. At the same time, demand burgeoned as individual and institutional investors increasingly sought out higher-yielding alternatives to most fixed-income securities and common stocks. Demand got an added boost from the passage of President Bush's dividend tax-cut package, which greatly reduced the taxes individuals pay on most stock dividends. A dramatic rise in interest rates and bond yields in the summer months briefly tempered an otherwise favorable backdrop for fixed-income investments, including preferreds. But they quickly regained their footing in the final months of the period when inflation concerns cooled, the Fed rushed to reassure investors that it wasn't poised to raise interest rates any time soon and favorable supply and demand conditions trumped macroeconomic concerns. "Preferred stocks...posted solid returns during the six-month period ended December 31, 2003..." UTILITIES RALLY Utility common stocks -- the Fund's other primary area of focus -- also staged a significant rally during the period. Part of investors' renewed optimism was in reaction to efforts by utilities to reduce debt, improve their financing and shed money-losing unregulated subsidiaries. Like preferreds, utility common stocks also benefited from strong demand in response to dividend tax relief. Utilities traditionally have offered consistently high dividends over the years. 2 [Photos of Greg Phelps and Mark Maloney.] PERFORMANCE For the six months ended December 31, 2003, John Hancock Patriot Select Dividend Trust returned 7.62% at net asset value. By comparison, the average income and preferred stock closed-end fund returned 7.44%, according to Lipper, Inc. In the same six-month period, the Dow Jones Utility Average -- which tracks the performance of 15 electric and natural gas utilities -- returned 8.44%, and the broader stock market, as measured by the Standard & Poor's 500 Index, returned 15.14%. LEADERS AND LAGGARDS Within the preferred-stock category, some of our best performers were those issued by financial services companies. FleetBoston Financial, for example, benefited from the announced purchase of the company by Bank of America, which is expected to result in higher overall credit for Fleet's outstanding preferred stock. Merrill Lynch also performed well, thanks to its strong credit rating compared with its brokerage services group peers and enhanced earnings consistency resulting from what the company termed "a diversity of revenues from multiple asset classes, client segments and geographic regions." Bear Stearns benefited from increased revenues and cost controls, which resulted in substantial improvement in the company's profitability. "Within the preferred-stock category, some of our best performers were those issued by financial services companies." Preferred stocks issued by oil and natural gas companies also posted strong returns during the period. In the post-September 11 era, energy prices stayed high in part because of a so-called "risk premium" for potential attacks both here and abroad. Those high energy prices, in turn, helped boost the fortunes of holdings such as Anadarko Petroleum, Apache, Devon Energy and Nexen. High energy prices also helped some of our utility common stocks, particularly Dominion Resources, which has significant oil and gas operations. It also enjoyed strong results from its regulated electric operations. The common stock of electric utility Alliant Energy also performed well, boosted in large part by investors' enthusiasm over the company's back-to-basics approach. 3 [Table at top left-hand side of page entitled "Top five industry groups 1." The first listing is Utilities 69%, the second is Broker services 8%, the third Oil & gas 8%, the fourth Finance 6%, and the fifth Banks-United States 5%.] A disappointment during the period was Kansas City-based Aquila, a multinational energy provider that has been trying to regain financial stability after retreating from the wholesale energy-trading markets that caused so many utilities pain in 2002. Despite these problems, we continued to hold onto our stake in Aquila because we believe the company is making significant and positive steps toward reducing its debt, strengthening its balance sheet and putting its energy-trading problems behind it. [Pie chart in middle of page with heading "Portfolio diversification 1." The chart is divided into three sections (from top to left): Preferred stocks 63%, Common stocks 35% and Short-term investments & other 2%.] OUTLOOK In our view, the first half of 2004 likely will continue to favor preferred and utility stocks. First, we believe that both sectors will keep on benefiting from the favorable supply and demand conditions that boosted their prospects over the past six months. Our interest-rate forecast -- which calls for continued low interest rates - -- also should help preferreds because they pay dividends at a fixed rate, like the interest on a bond. As such, they tend to perform best when rates decline or stabilize at relatively low levels, just as bonds do. Although the economy has heated up, we don't think that the Federal Reserve Board will raise interest rates until the current recovery deepens and sustains itself for a longer period of time. Granted, longer-term bond yields could rise as investors worry about the prospects of future inflation, but the expected lack of an interest-rate hike would keep short-term interest rates low, thereby making preferred stocks an attractive alternative to shorter-term, lower-yielding money market and Treasury bond investments. Furthermore, we believe that investors' appetite 4 for preferred stocks and utility common stocks -- many of which benefit from the new lower federal tax on dividends -- could remain strong. In addition to robust demand, utility common stocks appear to have other factors working in their favor. Chief among them are the potential for more stable credit ratings and continued attractive valuations -- albeit higher than at the beginning of 2003 -- relative to the stock market overall. Recent acquisitions of utility companies by deep-pocketed private equity investors may signal that more acquisition activity is in the offing in 2004, a trend that should help boost utilities. [Table at top of page entitled "SCORECARD." The header for the left column is "INVESTMENT" and the header for the right column is "PERIOD'S PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is FleetBoston Financial followed by an up arrow with the phrase "Pending takeover expected to raise credit rating." The second listing is Dominion Resources followed by an up arrow with the phrase "High energy prices help boost profits." The third listing is Aquila followed by a down arrow with the phrase "Lingering problems with energy trading."] "In our view, the first half of 2004 likely will continue to favor preferred and utility stocks." This commentary reflects the views of the portfolio management team through the end of the Fund's period discussed in this report. The team's statements reflect their own opinions. As such, they are in no way guarantees of future events, and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant. The Fund normally will invest more than 65% of its managed assets in securities of companies in the utilities industry. Such an investment concentration makes the Fund more susceptible to factors adversely affecting the utilities industry than a broader diversified fund. Sector investing is subject to greater risks than the market as a whole. 1 As a percentage of the Fund's portfolio on December 31, 2003. 5 FINANCIAL STATEMENTS FUND'S INVESTMENTS Securities owned by the Fund on December 31, 2003 (unaudited) This schedule is divided into three main categories: preferred stocks, common stocks and short-term investments. Preferred and common stocks are further broken down by industry group. Short-term investments, which represent the Fund's cash position, are listed last.
CREDIT ISSUER RATING* SHARES VALUE PREFERRED STOCKS 94.48% $133,760,351 (Cost $132,550,537) Agricultural Operations 2.12% 3,000,000 Ocean Spray Cranberries, Inc., 6.25%, Ser A (R) BBB 40,000 3,000,000 Banks -- United States 7.91% 11,196,990 FleetBoston Financial Corp., 6.75%, Depositary Shares, Ser VI BBB+ 99,000 5,445,990 HSBC USA, Inc., $2.8575 A1 108,000 5,751,000 Broker Services 11.44% 16,203,714 Bear Stearns Companies, Inc., 5.49%, Ser G A3 116,400 5,820,000 Bear Stearns Companies, Inc., 6.15%, Ser E BBB 23,000 1,215,550 Lehman Brothers Holdings, Inc., 5.67%, Depositary Shares, Ser D A3 125,600 6,405,600 Lehman Brothers Holdings, Inc., 5.94%, Ser C BBB+ 13,000 671,450 Merrill Lynch & Co., Inc., 9.00%, Depositary Shares, Ser A A- 77,650 2,091,114 Finance 8.90% 12,606,052 Citigroup, Inc., 6.213%, Ser G Aa3 44,000 2,420,000 Citigroup, Inc., 6.231%, Depositary Shares, Ser H Aa3 92,400 5,057,052 SLM Corp., 6.97%, Ser A BBB+ 92,000 5,129,000 Leasing Companies 0.33% 459,420 AMERCO, 8.50%, Ser A D 18,600 459,420 Media 1.26% 1,777,875 Shaw Communications, Inc., 8.45%, Ser A (Canada) B+ 45,500 1,148,875 Shaw Communications, Inc., 8.50% (Canada) B+ 25,000 629,000 Oil & Gas 11.32% 16,021,639 Anadarko Petroleum Corp., 5.46%, Depositary Shares BBB- 47,700 4,829,625 Apache Corp., 5.68%, Depositary Shares, Ser B BBB 48,174 4,883,639 Devon Energy Corp., 6.49%, Ser A B 53,500 5,523,875 Nexen, Inc., 7.35% (Canada) BBB- 30,000 784,500 Telecommunications 1.03% 1,464,500 Touch America Holdings, Inc., $6.875 BBB- 50,500 1,464,500 See notes to financial statements. 6 FINANCIAL STATEMENTS CREDIT ISSUER RATING* SHARES VALUE Utilities 50.17% $71,030,161 Alabama Power Co., 5.20% BBB+ 225,000 5,985,000 Baltimore Gas & Electric Co., 6.99%, Ser 1995 Baa1 40,000 4,370,000 BGE Capital Trust II, 6.20% BBB 190,000 4,995,100 Boston Edison Co., 4.25% A3 56,815 4,488,385 Coastal Finance I, 8.375% CCC 78,300 1,851,012 El Paso Tennessee Pipeline Co., 8.25%, Ser A CCC 183,500 7,798,750 Energy East Capital Trust I, 8.25% BBB- 147,000 3,964,590 Entergy Gulf States Capital 1, 8.75%, Ser A BB 87,100 2,207,985 Hawaiian Electric Industries Capital Trust I, 8.36% BB+ 50,000 1,302,500 Monongahela Power Co., 7.73%, Ser L CCC+ 50,000 4,650,000 Northern Indiana Public Service Co., 4.22% BB+ 11,251 675,060 Potomac Electric Power Co., $2.28 Ser 1965 Baa3 16,400 688,800 PSEG Funding Trust II, 8.75% BB+ 30,000 843,000 PSI Energy, Inc., 6.875% BBB- 48,000 4,900,800 Public Service Electric & Gas Co., 6.92% BB+ 30,627 3,162,238 Rochester Gas & Electric Co., 4.10%, Ser H Ba1 10,184 611,040 Rochester Gas & Electric Corp., 4.75%, Ser I Ba1 11,986 963,001 Sierra Pacific Power Co., 7.80%, Ser 1 (Class A) CCC+ 205,600 4,677,400 South Carolina Electric & Gas Co., 6.52% Baa1 55,000 5,890,500 Southern Union Co., 7.55% BB+ 155,000 4,143,150 Virginia Electric & Power Co., $6.98 BBB 10,500 1,088,850 Virginia Electric & Power Co., $7.05 BBB 10,000 1,038,000 Wisconsin Public Service Corp., 6.76% A 7,000 735,000 COMMON STOCKS 52.82% $74,787,517 (Cost $78,811,606) Telecommunications 0.00% 1,726 Touch America Holdings, Inc.** 191,800 1,726 Utilities 52.82% 74,785,791 Alliant Energy Corp. 158,000 3,934,200 Ameren Corp. 75,400 3,468,400 Aquila, Inc. 190,000 644,100 CH Energy Group, Inc. 141,550 6,638,695 Cinergy Corp. 16,000 620,960 Consolidated Edison, Inc. 45,000 1,935,450 Dominion Resources, Inc. 46,000 2,936,180 DPL, Inc. 99,000 2,067,120 DTE Energy Co. 155,900 6,142,460 Duke Energy Corp. 70,000 1,431,500 Energy East Corp. 242,000 5,420,800 KeySpan Corp. 161,850 5,956,080 National Fuel Gas Co. 52,150 1,274,546 NiSource, Inc. 97,850 2,146,829 See notes to financial statements. 7 FINANCIAL STATEMENTS ISSUER SHARES VALUE Utilities (continued) Northeast Utilities 201,650 $4,067,281 NSTAR 94,000 4,559,000 OGE Energy Corp. 96,092 2,324,465 Peoples Energy Corp. 41,800 1,757,272 Progress Energy, Inc. 64,000 2,896,640 Progress Energy, Inc.**(l) (Contingent Value Obligation) 20,000 4,400 Puget Energy, Inc. 170,500 4,052,785 Sierra Pacific Resources** 271,500 1,992,810 TECO Energy, Inc. 176,750 2,546,968 Vectren Corp. 30,000 739,500 WPS Resources Corp. 51,000 2,357,730 Xcel Energy, Inc. 169,000 2,869,620 INTEREST PAR VALUE ISSUER, MATURITY DATE RATE (000S OMITTED) SHORT-TERM INVESTMENTS 1.88% $2,664,793 (Cost $2,664,793) Commercial Paper 1.88% ChevronTexaco Corp., Due 01-05-04 0.70% $2,665 $2,664,793 TOTAL INVESTMENTS 149.18% $211,212,661 OTHER ASSETS AND LIABILITIES, NET (49.18%) ($69,630,020) TOTAL NET ASSETS 100.00% $141,582,641 * Credit ratings are unaudited and are rated by Moody's Investors Service. ** Non-income-producing security. (l) This security is valued in good faith under procedures established by the Board of Trustees. (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 $3,000,000 or 2.12% of net assets as of December 31, 2003. Parenthetical disclosure of a foreign country in the security description represents country of a foreign issuer. 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. 8 FINANCIAL STATEMENTS ASSETS AND LIABILITIES December 31, 2003 (unaudited) This Statement of Assets and Liabilities is the Fund's balance sheet. It shows the value of what the Fund owns, is due and owes. You'll also find the net asset value for each common share. ASSETS Investments at value (cost $214,026,936) $211,212,661 Cash 1,003 Dividends receivable 719,208 Other assets 42,677 Total assets 211,975,549 LIABILITIES Payable to affiliates Management fee 156,144 Other 26,818 Other payables and accrued expenses 119,642 Total liabilities 302,604 Auction Market Preferred Shares (AMPS), at value, unlimited number of shares of beneficial interest authorized with no par value, 700 shares issued, liquidation preference of $100,000 per share 70,090,304 NET ASSETS Common shares capital paid-in 142,648,547 Accumulated net realized gain on investments 294,879 Net unrealized depreciation of investments (2,814,275) Accumulated net investment income 1,453,490 Net assets applicable to common shares $141,582,641 NET ASSET VALUE PER COMMON SHARE Based on 9,971,153 shares of beneficial interest outstanding -- unlimited number of shares authorized with no par value $14.20 See notes to financial statements. 9 FINANCIAL STATEMENTS OPERATIONS For the period ended December 31, 2003 (unaudited) 1 This Statement of Operations summarizes the Fund's investment income earned and expenses incurred in oper- ating the Fund. It also shows net gains (losses) for the period stated. INVESTMENT INCOME Dividends $5,948,354 Interest 33,462 Total investment income 5,981,816 EXPENSES Investment management fee 815,468 Administration fee 152,900 AMPS auction fee 96,990 Auditing fee 24,768 Registration and filing fee 23,010 Printing 22,068 Custodian fee 21,722 Transfer agent fee 20,574 Trustees' fee 7,190 Legal fee 1,929 Interest 235 Total expenses 1,186,854 Net investment income 4,794,962 REALIZED AND UNREALIZED GAIN Net realized gain on investments 709,237 Change in net unrealized appreciation (depreciation) of investments 4,895,807 Net realized and unrealized gain 5,605,044 Distributions to AMPS (363,629) Increase in net assets from operations $10,036,377 1 Semiannual period from 7-1-03 through 12-31-03. See notes to financial statements. 10 FINANCIAL STATEMENTS CHANGES IN NET ASSETS These Statements of Changes in Net Assets show how the value of the Fund's net assets has changed during the last two periods. The dif- ference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and any increase due to the sale of common shares. YEAR PERIOD ENDED ENDED 6-30-03 12-31-03 1 INCREASE IN NET ASSETS From operations Net investment income $10,728,574 $4,794,962 Net realized gain (loss) (153,364) 709,237 Change in net unrealized appreciation (depreciation) 856,632 4,895,807 Distributions to AMPS (1,013,193) (363,629) Increase in net assets resulting from operations 10,418,649 10,036,377 Distributions to common shareholders From net investment income (10,716,598) (5,378,608) From Fund share transactions 594,672 341,806 NET ASSETS APPLICABLE TO COMMON SHARES Beginning of period 136,286,343 136,583,066 End of period 2 $136,583,066 $141,582,641 1 Semiannual period from 7-1-03 through 12-31-03. Unaudited. 2 Includes accumulated net investment income of $2,400,765 and $1,453,490, respectively. See notes to financial statements. 11 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS
COMMON SHARES The Financial Highlights show how the Fund's net asset value for a share has changed since the end of the previous period. PERIOD ENDED 6-30-99 6-30-00 6-30-01 6-30-02 6-30-03 12-31-03 1 PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $17.07 $16.00 $13.97 $15.43 $13.77 $13.73 Net investment income 2 1.26 1.27 1.34 1.18 1.08 0.48 Net realized and unrealized gain (loss) on investments (0.80) (1.91) 1.52 (1.61) 0.06 0.57 Distributions to AMPS (0.29) (0.31) (0.32) (0.15) (0.10) (0.04) Total from investment operations 0.17 (0.95) 2.54 (0.58) 1.04 1.01 Less distributions to common shareholders From net investment income (1.24) (1.08) (1.08) (1.08) (1.08) (0.54) Net asset value, end of period $16.00 $13.97 $15.43 $13.77 $13.73 $14.20 Per share market value, end of period $13.81 $12.38 $14.80 $13.69 $14.72 $15.40 Total return at market value 3 (%) (3.56) (2.46) 29.40 (0.45) 16.82 8.86 4 RATIOS AND SUPPLEMENTAL DATA Net assets applicable to common shares, end of period (in millions) $159 $138 $153 $136 $137 $142 Ratio of expenses to average net assets 5 (%) 1.72 1.74 1.77 1.77 1.90 1.78 6 Ratio of net investment income to average net assets 7 (%) 7.51 8.57 8.22 7.99 8.62 7.18 6 Portfolio turnover (%) 30 20 13 15 2 17 SENIOR SECURITIES Total AMPS outstanding (in millions) $70 $70 $70 $70 $70 $70 Involuntary liquidation preference per unit (in thousands) $100 $100 $100 $100 $100 $100 Average market value per unit (in thousands) $100 $100 $100 $100 $100 $100 Asset coverage per unit 8 $329,508 $299,106 $316,086 $290,311 $294,629 $299,078
1 Semiannual period from 7-1-03 through 12-31-03. Unaudited. 2 Based on the average of the shares outstanding. 3 Assumes dividend reinvestment. 4 Not annualized. 5 Ratios calculated on the basis of expenses relative to the average net assets for common shares. Without the exclusion of preferred shares, the ratio of expenses would have been 1.21%, 1.18%, 1.21%, 1.20%, 1.22% and 1.16%, respectively. 6 Annualized. 7 Ratios calculated on the basis of net investment income relative to the average net assets for common shares. Without the exclusion of preferred shares, the ratio of net investment income would have been 5.28%, 5.79%, 5.61%, 5.40%, 5.52% and 4.70%, respectively. 8 Calculated by subtracting the Fund's total liabilities from the Fund's total assets and dividing such amount by the number of AMPS outstanding as of the applicable 1940 Act Evaluation Date, which may differ from the financial reporting date. See notes to financial statements. 12 NOTES TO STATEMENTS 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. The Fund determines the net asset value of the common shares each business day. 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 that is distributed to shareholders. Therefore, no federal income tax provision is required. For federal income tax purposes, the Fund has $386,472 of a capital loss carryforward available, to the extent provided by regulations, to offset future net realized capital gains. To the extent that such carryforward is used by the Fund, no capital gain distributions will be made. The loss carryforward expires as follows: June 30, 2010 -- $116,663 and June 30,2011 -- $269,809. Expenses The majority of the expenses are directly identifiable to an individual fund. Expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration, among other things, the nature and type of expense and the relative sizes of the funds. Discount and premium on securities The Fund accretes discount and amortizes premium from par value on securities from either the date of issue or the date of purchase over the life of the security. Dividends, interest and distributions Dividend income on investment securities is recorded on the ex-dividend date or, in the case of some foreign securities, on the date thereafter when the Fund identifies the dividend. Interest income on investment securities is recorded on the accrual basis. Foreign income may be subject 13 to foreign withholding taxes, which are accrued as applicable. The Fund records distributions to common and preferred shareholders from net investment income and net realized gains on the ex-dividend date. Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital. Use of estimates The preparation of these financial statements, in accordance with accounting principles generally accepted in the United States of America, incorporates estimates made by management in determining the reported amount of assets, liabilities, revenues and expenses of the Fund. Actual results could differ from these estimates. NOTE B Management fee and transactions with affiliates and others The Fund has an investment management contract with John Hancock Advisers, LLC (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial Group, LLC. Under the investment management contract, the Fund pays a monthly management fee to the Adviser at an annual rate of 0.80% of the Fund's average weekly net assets, plus the value attributable to the preferred shares. The Fund has 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 with shareholders. The Fund pays the Adviser a monthly administration fee at an annual rate of 0.15% of the Fund's average weekly net assets, plus the value attributable to the preferred shares. The Fund also paid the Adviser the amount of $404 for certain publishing services, included in the printing fees. Ms. Maureen R. Ford and Mr. John M. DeCiccio 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. The Deferred Compensation Plan investments had no impact on the operations of the Fund. 14 NOTE C Fund share transactions Common shares This listing illustrates the Fund's dividend reinvestments, the reclassification of the Fund's capital accounts and the number of common shares outstanding at the beginning and end of the last two periods, along with the corresponding dollar value.
YEAR ENDED 6-30-03 PERIOD ENDED 12-31-03 1 SHARES AMOUNT SHARES AMOUNT Beginning of period 9,899,636 $141,805,115 9,945,720 $142,306,741 Distributions reinvested 46,084 594,672 25,433 341,806 Reclassification of capital accounts -- (93,046) -- -- End of period 9,945,720 $142,306,741 9,971,153 $142,648,547 1 Semiannual period from 7-1-03 through 12-31-03. Unaudited.
Auction Market Preferred Shares Series A The Fund issued 700 shares of Dutch 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 common shares. Dividends on the AMPS, which accrue daily, are cumulative at a rate that was established at the offering of the AMPS and has been reset every 49 days thereafter by an auction. Dividend rates on AMPS ranged from 0.99% to 1.08% during the period ended December 31, 2003. Accrued dividends on AMPS are included in the value of AMPS on the Fund's Statement of Assets and Liabilities. 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, as defined in the Fund's by-laws. 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 shareholders 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 shareholders. NOTE D Investment transactions Purchases and proceeds from sales and maturities of securities, other than short-term securities and obligations of the U.S. government, during the period ended December 31, 2003, aggregated $32,873,830 and $36,132,886, respectively. The cost of investments owned on December 31, 2003, including short-term investments, for federal income tax purposes, was $214,054,822. Gross unrealized appreciation and depreciation of investments aggregated $17,288,262 and $20,130,423, respectively, resulting in net unrealized depreciation of $2,842,161. The difference between book basis and tax basis net unrealized depreciation of investments is attributable primarily to the tax deferral of losses on certain sales of securities. 15 INVESTMENT OBJECTIVE AND POLICY The Fund's investment objective is to provide high current income, consistent with modest growth of capital. The Fund seeks to achieve its investment objective by investing in preferred stocks that, in the opinion of the Adviser, may be undervalued relative to similar securities in the marketplace. The Fund's non-fundamental investment policy, which became effective October 15, 1994, stipulates that 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 that have no rated senior debt outstanding, whose senior debt is considered by the Adviser to be of comparable quality. On November 20, 2001, the Fund's Trustees approved the following investment policy investment restriction change, effective December 15, 2001. Under normal circumstances, the Fund will invest at least 80% of its assets in dividend-paying securities. The "Assets" are defined as net assets and the liquidation preference amount of the AMPS plus borrowings for investment purposes. The Fund will notify shareholders at least 60 days prior to any change in this 80% investment policy. DIVIDEND REINVESTMENT PLAN The Fund offers its shareholders 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 Mellon Investor Services, as Plan Agent for the common shareholders (the "Plan Agent"), 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 a 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, non-participants 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 of 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 after such 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 16 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. 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. 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 will be no brokerage charges with respect to common shares issued directly by the Fund. There are no other charges to participants for reinvesting dividends or capital gain distributions. Participants in the Plan may withdraw from the Plan at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent's Web site at www.melloninvestor.com. Such withdrawal will be effective immediately if received not less than 10 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. The Plan Agent will hold common shares in the account of each Plan participant in non-certificated form in the name of the participant. Proxy material relating to the shareholders' meetings of the Fund will include those shares purchased as well as shares held pursuant to the Plan. The 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 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 by the Plan Agent to purchase shares in the open market, 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 after at least 90 days' written notice to all shareholders of the Fund. All correspondence or additional information concerning the Plan should be directed to the Plan Agent, Mellon Bank, N.A., c/o Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938 (telephone 1-800-852-0218). SHAREHOLDER COMMUNICATION AND ASSISTANCE If you have any questions concerning the Fund, 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 17 or other communications regarding the Fund to the transfer agent at: Mellon Investor Services 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 Telephone 1-800-852-0218 If your shares are held with a brokerage firm, you should contact that firm, bank or other nominee for assistance. SHAREHOLDER MEETINGS In November 2002, the Board of Trustees adopted several amendments to the Fund's by-laws, including provisions relating to the calling of a special meeting and requiring advance notice of shareholder proposals or nominees for Trustee. The advance notice provisions in the by-laws require shareholders to notify the Fund in writing of any proposal which they intend to present at an annual meeting of shareholders, including any nominations for Trustee, between 90 and 120 days prior to the first anniversary of the mailing date of the notice from the prior year's annual meeting of shareholders. The notification must be in the form prescribed by the by-laws. The advance notice provisions provide the Fund and its Trustees with the opportunity to thoughtfully consider and address the matters proposed before the Fund prepares and mails its proxy statement to shareholders. Other amendments set forth the procedures, which must be followed in order for a shareholder to call a special meeting of shareholders. Please contact the Secretary of the Fund for additional information about the advance notice requirements or the other amendments to the by-laws. 18 19 20 FOR YOUR INFORMATION TRUSTEES James F. Carlin William H. Cunningham John M. DeCiccio Ronald R. Dion Maureen Ford Goldfarb Charles L. Ladner* Patti McGill Peterson* Dr. John A. Moore* Steven R. Pruchansky Lt. Gen. Norman H. Smith, USMC (Ret.) John P. Toolan* *Members of the Audit Committee OFFICERS Maureen Ford Goldfarb Chairman, President and Chief Executive Officer Richard A. Brown Senior Vice President and Chief Financial Officer Susan S. Newton Senior Vice President and Secretary William H. King Vice President and Treasurer Thomas H. Connors Vice President and Compliance Officer INVESTMENT ADVISER John Hancock Advisers, LLC 101 Huntington Avenue Boston, Massachusetts 02199-7603 CUSTODIAN The Bank of New York One Wall Street New York, New York 10286 TRANSFER AGENT FOR COMMON SHAREHOLDERS Mellon Investor Services 85 Challenger Road Overpeck Centre Ridgefield Park, New Jersey 07660 TRANSFER AGENT FOR AMPS Deutsche Bank Trust Company Americas 280 Park Avenue New York, New York 10017 LEGAL COUNSEL Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109-1803 STOCK SYMBOL Listed New York Stock Exchange: DIV For shareholder assistance refer to page 17 HOW TO CONTACT US On the Internet www.jhfunds.com By regular mail Mellon Investor Services 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 Customer service representatives 1-800-852-0218 Portfolio commentary 1-800-344-7054 24-hour automated information 1-800-843-0090 TDD Line 1-800-231-5469 The Fund's voting policies and procedures are available without charge, upon request: By phone 1-800-225-5291 On the Fund's Web site www.jhfunds.com/proxy On the SEC's Web site www.sec.gov 21 [A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner. A tag line below reads "JOHN HANCOCK FUNDS."] 1-800-852-0218 1-800-843-0090 EASI-Line 1-800-231-5469 (TDD) - ------------- PRESORTED STANDARD U. S. POSTAGE PAID MIS - ------------- P30SA 12/03 2/04 ITEM 2. CODE OF ETHICS. As of the end of the period, December 31, 2003, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the "Senior Financial Officers"). A copy of the code of ethics is filed as an exhibit to this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Charles L. Ladner is the audit committee financial expert and is "independent", pursuant to general instructions on Form N-CSR Item 3. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable at this time. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. See attached Exhibit "Proxy Voting Policies and Procedures". ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Code of Ethics for Senior Financial Officers is attached. (a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference. (c)(1) Proxy Voting Policies and Procedures are attached. (d)(1) Contact person at the registrant SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By: - ------------------------------ Maureen Ford Goldfarb Chairman, President and Chief Executive Officer Date: February 11, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: - ------------------------------- Maureen Ford Goldfarb Chairman, President and Chief Executive Officer Date: February 11, 2004 By: - ----------------------- Richard A. Brown Senior Vice President and Chief Financial Officer Date: February 11, 2004 EX-99.CERT 3 certification.txt CERTIFICATION CERTIFICATION I, Maureen Ford Goldfarb, certify that 1. I have reviewed this report on Form N-CSR of the John Hancock Patriot Select Dividend Trust (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 - ------------------------- Maureen Ford Goldfarb Chairman, President and Chief Executive Officer CERTIFICATION I, Richard A. Brown, certify that 1. I have reviewed this report on Form N-CSR of the John Hancock Patriot Select Dividend Trust (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2004 - ------------------------- Richard A. Brown Senior Vice President and Chief Financial Officer EX-99.906 CERT 4 certification906.txt CERTIFICATION 906 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the attached Report of John Hancock Patriot Select Dividend Trust (the "registrant") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify that, to the best of such officer's knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. - ----------------------- Maureen Ford Goldfarb Chairman, President and Chief Executive Officer Dated: February 11, 2004 - ----------------------- Richard A. Brown Senior Vice President and Chief Financial Officer Dated: February 11, 2004 A signed original of this written statement, required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.CODE ETH 5 codeofethics.txt CODE OF ETHICS [J1]JOHN HANCOCK FUNDS CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS General Principles The Trustees of the registered investment companies (the "Funds" or each a "Fund") managed by John Hancock Advisers, LLC (the "Adviser") have adopted this code of ethics (this "Code") setting forth standards of ethics for the Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the "Senior Financial Officers") of each Fund. All Senior Financial Officers are charged with the duty to maintain the standards set forth below. No Code can address every situation that a Senior Financial Officer might face. As a guiding principle, Senior Financial Officers should strive to implement the spirit as well as the letter of applicable laws, rules and regulations, and to provide the type of clear and complete disclosure and information that Fund shareholders have a right to expect. Honest and Ethical Conduct Each Senior Financial Officer owes a duty to each Fund to act with integrity and honesty in the conduct of his or her duties and responsibilities. Each Senior Financial Officer shall comply with all applicable laws and accounting standards, while adhering to a high standard of business ethics. Avoidance of Conflicts of Interest Senior Financial Officers shall avoid any actual or apparent conflict of interest, direct or indirect, between personal and professional relationships. A Senior Financial Officer should not engage in personal, business or professional relationships or dealings which would impair his or her independence of judgment or adversely affect the performance of his or her duties in the best interests of each Fund and its shareholders. Any relationship or dealing that would present a conflict for a Senior Financial Officer could also present a conflict if it is related to a member of his or her immediate family. Disclosure Senior Financial Officers have a supervisory role with respect to the financial information included in reports filed with regulatory agencies and public disclosures by each Fund, and therefore have particular responsibilities in connection with those communications. * Each Senior Financial Officer shall familiarize himself or herself with the disclosure requirements applicable to each Fund, as well as the business and financial operations of each Fund. * Each Senior Financial Officer shall ensure that reasonable steps are taken within his or her areas of responsibility to promote full, fair, accurate, timely and understandable disclosure in all regulatory filings, as well as when communicating with each Fund's shareholders or the general public, in accordance with applicable law. * No Senior Financial Officer shall violate his or her responsibility to a Fund by knowingly and willfully misrepresenting, or causing others to misrepresent, facts about a Fund to others, including a Fund's independent auditors, governmental regulators or self-regulatory organizations. Compliance with Applicable Law It is each Fund's policy to comply with all applicable laws and governmental rules and regulations. It is the personal responsibility of each Senior Financial Officer to take reasonable steps to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters. Compliance Procedures All Senior Financial Officers are responsible for ensuring that their own conduct complies with this Code. If a Senior Financial Officer is aware of any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest or which might be viewed as potentially affecting his or her performance of Fund responsibilities, the Senior Financial Officer shall notify the Fund's Chief Legal Officer of this transaction or relationship. In addition, any Senior Financial Officer who becomes aware of any existing or potential violation of this Code shall notify the Chief Legal Officer promptly, who shall conduct an appropriate investigation. The Chief Legal Officer shall report any violation of this Code to the Audit Committee of the Fund. If a Senior Financial Officer believes that his or her responsibilities as an officer or employee of the Adviser are likely to materially compromise his or her objectivity or ability to perform the duties of his or her role as an officer of the Funds, he or she should consult with the Adviser's Chief Legal Officer, the Fund's Chief Legal Officer or outside counsel, or counsel to the independent Trustees of the Funds. Under appropriate circumstances, a Senior Financial Officer should also consider whether to present the matter to the Trustees of the Funds or a committee thereof. Anyone who violates the provisions of this Code, fails to report a known violation or refuses to cooperate in the investigation of any potential violation will be subject to disciplinary action, up to and including dismissal. Subject to applicable law, the Audit Committee may waive provisions of this Code. Other Policies and Procedures This Code does not supplant or supercede any other Fund, John Hancock Advisers, LLC or John Hancock Funds, LLC policy or procedure currently in effect or adopted in the future relating to conflicts of interest or business practices. Those policies and procedures are separate requirements applying to the Funds, John Hancock Advisers, LLC or John Hancock Funds, LLC associates generally, including Senior Financial Officers among others, and are not part of this Code. The Trustees of the Funds recognize that the Senior Financial Officers are also officers or employees of the Adviser. Furthermore, the Trustees of the Funds recognize that, subject to the Adviser's fiduciary duties to the Funds, the Senior Financial Officers will in the normal course of their duties (whether formally for the Funds or for the adviser, or for both) be involved in establishing policies and implementing decisions that will have different effects on the Adviser and the Funds. The Trustees of the Funds recognize that the participation of the Senior Financial Officers in such activities is inherent in the contract relationship between the Funds and the Adviser, and is consistent with the expectation of the Trustees of the performance by the Senior Financial Officers of their duties as officers of the Funds. Each Senior Financial Officer recognizes that, as an officer of a Fund, he or she has a duty to act in the best interests of the Fund and its shareholders. Date: May 20, 2003 Compliance 2003/compliance procedures/code of ethics for financial officer 4-03 [J1] 3 1 EX-99 6 auditpolicy.txt AUDIT POLICY John Hancock Funds Approval of Audit, Audit-Related, Tax and Other Services Policy Statement December 2003 Table of Contents ----------------- Approval of Audit, Audit-Related, Tax and Other Services Provided by the Independent Auditor Section I - Policy Purpose and Applicability Section II - Policy Summary Section III - Policy Detail John Hancock Funds Approval of Audit, Audit-Related, Tax and Other Services Provided by the Independent Auditor Section I - Policy Purpose and Applicability John Hancock Funds recognize the importance of maintaining the independence of our outside auditors. We believe that maintaining independence is a shared responsibility involving management, the audit committee and the independent auditors. The Funds recognize that the independent audit firm: 1) possesses knowledge of the Funds, 2) is able to incorporate certain services into the scope of its audit, thereby avoiding redundant work, cost and disruption of Fund personnel and processes, and 3) has expertise that has value to the Funds. As a result, there are situations where it is desirable to utilize the audit firm for services in addition to the annual audit. Consequently, this policy, which is intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and procedures to be followed by the Funds when retaining the independent audit firm to perform audit, audit-related tax and other services under those circumstances, while also maintaining independence. Approval of a service in accordance with these policies for a Fund shall also constitute approval for any other Fund whose pre-approval is required pursuant to Rule 210.2-01(c)(7)(ii). In addition to the procedures set forth in this policy, any non-audit services that may be provided consistently with Rule 210.2-01 may be approved by the Audit Committee itself and any pre-approval that may be waived in accordance with Rule 210.2-01(c)(7)(i)(C) is hereby waived. John Hancock Funds Approval of Audit, Audit-Related, Tax and Other Services Provided by the Independent Auditor Section II - Policy Summary Four categories of services have been defined by the Funds within the policy to provide a consistent, efficient and practical framework for assessment, decision-making, approval and reporting. Following is a summary of the key provisions of the policy (see Section III for the Policy Detail): I. Audit Services - specified services directly related to performing the independent audit of the Funds. o Consistent with current practice, management will submit to the Audit Committee for pre-approval the scope and estimated fees associated with the current year audit at the appropriate Audit Committee meeting. II. Audit-Related Services - specified services that are related extensions of audit services and are logically performed by the auditors. o Individual project/services included on the pre-approved list (see Section III) are pre-approved in an amount per year/per Fund up to $50,000. o Additional services exceeding the specified pre-approved limits, or adding service types to the pre-approved list, require specific Audit Committee approval. III. Tax Services - specified services related to tax matters. Using PwC & D&T for these matters creates efficiencies, minimizes disruption, or preserves confidentiality. o Individual project/service included on the pre-approved list are pre-approved in an amount per year/per Fund up to $50,000 for individual projects. o Additional services exceeding the specified pre-approved limits, or adding service types to the pre-approved list, requires specific Audit Committee approval. IV. Other Services - (a) "Synergistic": specified services for which utilizing PwC and D&T creates efficiencies, minimizes disruption, or preserves confidentiality, or (b) "Unique Qualifications": specified services for which management has determined that PwC and D&T possesses unique or superior qualifications to provide these services. o Individual project/service included on the pre-approved list) are pre-approved in an amount per year/per Fund up to $10,000 for individual projects. o Additional services exceeding the specified pre-approved limits, or adding service types to the pre-approved list, requires specific Audit Committee approval. "Restricted" Non-Audit Services - includes nine specific restricted services identified in Rule 210.2-01(c)(4). o These services may not be performed by PwC and D&T, with the exception of the certain services (see prohibited services on page 7) that may be permitted if they would not be subject to audit at the Fund's level by the firm providing the service. John Hancock Funds Approval of Audit, Audit-Related, Tax and Other Services Provided by the Independent Auditor Section III - Policy Detail
- ------------------------------------------------------------------------------------------------------------------------------------ Service Service Category Specific Pre-Approved Audit Committee Audit Committee Category Description Service Subcategories Approval Policy Reporting Policy - ------------------------------------------------------------------------------------------------------------------------------------ I. Audit Services Services that are directly o Accounting research o "One-time" pre-approval o A summary of all such related to performing the assistance (e.g. new for the audit period for services and related independent audit of the products, securities, all pre-approved fees reported at each Funds and investment specific service regularly scheduled strategies) subcategories Audit Committee meeting. o SEC consultation, registration statements, and reporting o Tax accrual related matters (e.g. review of tax qualifications and distributions) o Implementation of new accounting standards o Compliance letters (e.g. rating agency letters) o Regulatory reviews and assistance regarding financial matters o Semi-annual reviews (if requested) o Comfort letters for closed end offerings - ------------------------------------------------------------------------------------------------------------------------------------ II. Audit-Related Services which are not o AICPA attest and o "One-time" pre-approval o A summary of all such Services prohibited under Rule agreed-upon procedures for the fund fiscal year services and related 210.2-01(C)(4) (the (e.g. fund mergers, within a specified fees (including "Rule")and are related liquidation procedures dollar limit of $50,000 comparison to specified extensions of the audit and related comfort for all pre-approved dollar limits) reported services support the letters and review of specific service at each regularly audit, or use the preferred Shares' Basic subcategories scheduled Audit knowledge/expertise gained Maintenance Report) Committee meeting. from the audit procedures o Specific approval is as a foundation to o Technology control needed to exceed the complete the project. In assessments pre-approved dollar most cases, if the limit for these services Audit-Related Services are o Financial reporting (see general Audit not performed by the Audit control assessments Committee approval firm, the scope of the policy below for details Audit Services would o Enterprise security on obtaining specific likely increase. The architecture assessment approvals) Services are typically well-defined and governed o Attestation related to o Specific approval is by accounting professional compliance under needed to utilize PwC & standards (AICPA, SEC, (AIMR-PPS) standards. D&T for Audit-Related etc.) Services not denoted as "pre-approved" to the left, or to add a specific service subcategory as "pre-approved" - ------------------------------------------------------------------------------------------------------------------------------------
Section III - Policy Detail, continued
- ------------------------------------------------------------------------------------------------------------------------------------ Service Service Category Specific Pre-Approved Audit Committee Audit Committee Category Description Service Subcategories Approval Policy Reporting Policy - ------------------------------------------------------------------------------------------------------------------------------------ III. Tax Services Services which are not o Tax planning and support o "One-time" pre-approval o A summary of all such prohibited by the Rule, if for the fund fiscal year services and related fund management determines o Tax controversy within a specified fees (including that utilizing PwC and D&T assistance dollar limit of $50,000 comparison to specified to provide these services for individual projects dollar limits) reported creates significant o Tax compliance, tax at each regularly synergy in the form of returns, excise tax o Specific approval is scheduled Audit efficiency, minimized returns and support needed to exceed the Committee meeting disruption, or the ability pre-approved dollar to maintain a desired o Tax opinions limits for these level of confidentiality. services (see general o Tax research assistance Audit Committee approval (e.g. new products, policy below for details securities and on obtaining specific investment strategies) approvals) o Withholding tax filing o Specific approval is needed to utilize PwC & D&T for tax services not denoted as pre-approved to the left, or to add a specific service subcategory as "pre-approved" - ------------------------------------------------------------------------------------------------------------------------------------
Section III - Policy Detail, continued
- ------------------------------------------------------------------------------------------------------------------------------------ Service Service Category Specific Pre-Approved Audit Committee Audit Committee Category Description Service Subcategories Approval Policy Reporting Policy - ------------------------------------------------------------------------------------------------------------------------------------ IV. Other Services Services which are not o Business Risk Management o "One-time" pre-approval o A summary of all such prohibited by the Rule, if support for the fund fiscal year services and related a. Synergistic, Fund management determines within a specified fees (including unique that utilizing PwC or D&T o Other control and dollar limit ($10,000 comparison to specified qualifications to provide these services regulatory compliance for individual projects dollar limits) reported creates significant projects for all pre-approved at each regularly synergy in the form of specific service scheduled Audit efficiency, minimized subcategories Committee meeting disruption, the ability to maintain a desired level o Specific approval is of confidentiality, or needed to exceed the where PwC or D&T posses pre-approved dollar unique or superior limits for these qualifications to provide services (see general these services, resulting Audit Committee approval in superior value and policy below for details results for the Fund. on obtaining specific approvals) o Specific approval is needed to utilize PwC or D&T for "Synergistic" or "Unique Qualifications" Other Services not denoted as pre-approved to the left, or to add a specific service subcategory as "pre-approved" - ------------------------------------------------------------------------------------------------------------------------------------
Section III - Policy Detail, continued
- ------------------------------------------------------------------------------------------------------------------------------------ Service Service Category Specific Prohibited Audit Committee Audit Committee Category Description Service Subcategories Approval Policy Reporting Policy - ------------------------------------------------------------------------------------------------------------------------------------ Prohibited Services which result in 1. Bookkeeping or other o These services are not o A summary of all Services the auditors losing services related to the to be performed with the services and related independence status under accounting records or exception of the (*) fees reported at each the Rule. financial statements of services (see regularly scheduled the audit client* subcategories 1 through Audit Committee meeting 5 on the left), that may will serve as continual 2. Financial information be permitted if they confirmation that has systems design and would not be subject to not provided any implementation* audit procedures at the restricted services. audit client (as defined 3. Appraisal or valuation in Rule 2-01(f)(4)) services, fairness* level by the firm opinions, or providing the service. contribution-in-kind reports 4. Actuarial services (i.e., setting actuarial reserves versus actuarial audit work)* 5. Internal audit outsourcing services* 6. Management functions or human resources 7. Broker or dealer, investment advisor, or investment banking services 8. Legal services and expert services unrelated to the audit 9. Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- General Audit Committee Approval Policy: o Management will continue to evaluate all individual projects on a monthly basis, and all individual projects greater than $50,000 are evaluated and approved by the Fund's CFO prior to the engagement letter being signed and the project starting o For all projects, management and PwC and D&T will each make an assessment to determine that any proposed projects will not impair independence. o Potential services will be classified into the four non-restricted service categories and the "Approval of Audit, Audit-Related, Tax and Other Services" Policy above will be applied. Any services outside the specific pre-approved service subcategories set forth above must be specifically approved by the Audit Committee. o At each regularly scheduled Audit Committee meeting, the Audit Committee shall review a report summarizing the services by service category, including fees, provided by the Audit firm as set forth in the above policy. - -------------------------------------------------------------------------------- EX-99 7 proxyvotingpolicies.txt PROXY VOTING POLICY John Hancock Advisers, LLC Sovereign Asset Management Corporation Proxy Voting Guidelines We believe in placing our clients' interests first. Before we invest in a particular stock or bond, our team of portfolio managers and research analysts look closely at the company by examining its earnings history, its management team and its place in the market. Once we invest, we monitor all our clients' holdings, to ensure that they maintain their potential to produce results for investors. As part of our active investment management strategy, we keep a close eye on each company we invest in. Routinely, companies issue proxies by which they ask investors like us to vote for or against a change, such as a new management team, a new business procedure or an acquisition. We base our decisions on how to vote these proxies with the goal of maximizing the value of our clients' investments. Currently, John Hancock Advisers, LLC ("JHA") and Sovereign Asset Management Corporation ("Sovereign") manage open-end funds, closed-end funds and portfolios for institutions and high-net-worth investors. Occasionally, we utilize the expertise of an outside asset manager by means of a subadvisory agreement. In all cases, JHA or Sovereign makes the final decision as to how to vote our clients' proxies. There is one exception, however, and that pertains to our international accounts. The investment management team for international investments votes the proxies for the accounts they manage. Unless voting is specifically retained by the named fiduciary of the client, JHA and Sovereign will vote proxies for ERISA clients. In order to ensure a consistent, balanced approach across all our investment teams, we have established a proxy oversight group comprised of associates from our investment, operations and legal teams. The group has developed a set of policies and procedures that detail the standards for how JHA and Sovereign vote proxies. The guidelines of JHA have been approved and adopted by each fund client's board of trustees who have voted to delegate proxy voting authority to their investment adviser, JHA. JHA and Sovereign's other clients have granted us the authority to vote proxies in our advisory contracts or comparable documents. JHA and Sovereign have hired a third party proxy voting service which has been instructed to vote all proxies in accordance with our established guidelines except as otherwise instructed. In evaluating proxy issues, our proxy oversight group may consider information from many sources, including the portfolio manager, management of a company presenting a proposal, shareholder groups, and independent proxy research services. Proxies for securities on loan through securities lending programs will generally not be voted, however a decision may be made to recall a security for voting purposes if the issue is material. Below are the guidelines we adhere to when voting proxies. Please keep in mind that these are purely guidelines. Our actual votes will be driven by the particular circumstances of each proxy. From time to time votes may ultimately be cast on a case-by-case basis, taking into consideration relevant facts and circumstances at the time of the vote. Decisions on these matters (case-by-case, abstention, recall) will normally be made by a portfolio manager under the supervision of the chief investment officer and the proxy oversight group. We may abstain from voting a proxy if we conclude that the effect on our clients' economic interests or the value of the portfolio holding is indeterminable or insignificant. Proxy Voting Guidelines Board of Directors We believe good corporate governance evolves from an independent board. We support the election of uncontested director nominees, but will withhold our vote for any nominee attending less than 75% of the board and committee meetings during the previous fiscal year. Contested elections will be considered on a case by case basis by the proxy oversight group, taking into account the nominee's qualifications. We will support management's ability to set the size of the board of directors and to fill vacancies without shareholder approval but will not support a board that has fewer than 3 directors or allows for the removal of a director without cause. We will support declassification of a board and block efforts to adopt a classified board structure. This structure typically divides the board into classes with each class serving a staggered term. In addition, we support proposals for board indemnification and limitation of director liability, as long as they are consistent with corporate law and shareholders' interests. We believe that this is necessary to attract qualified board members. Selection of Auditors We believe an independent audit committee can best determine an auditor's qualifications. We will vote for management proposals to ratify the board's selection of auditors, and for proposals to increase the independence of audit committees. Capitalization We will vote for a proposal to increase or decrease authorized common or preferred stock and the issuance of common stock, but will vote against a proposal to issue or convert preferred or multiple classes of stock if the board has unlimited rights to set the terms and conditions of the shares, or if the shares have voting rights inferior or superior to those of other shareholders. In addition, we will support a management proposal to: create or restore preemptive rights; approve a stock repurchase program; approve a stock split or reverse stock split; and, approve the issuance or exercise of stock warrants Acquisitions, mergers and corporate restructuring Proposals to merge with or acquire another company will be voted on a case-by-case basis, as will proposals for recapitalization, restructuring, leveraged buyout, sale of assets, bankruptcy or liquidation. We will vote against a reincorporation proposal if it would reduce shareholder rights. We will vote against a management proposal to ratify or adopt a poison pill or to establish a supermajority voting provision to approve a merger or other business combination. We would however support a management proposal to opt out of a state takeover statutory provision, to spin-off certain operations or divisions and to establish a fair price provision. Corporate Structure and Shareholder Rights In general, we support proposals that foster good corporate governance procedures and that provide shareholders with voting power equal to their equity interest in the company. To preserve shareholder rights, we will vote against a management proposal to restrict shareholders' right to: call a special meeting and to eliminate a shareholders' right to act by written consent. In addition, we will not support a management proposal to adopt a supermajority vote requirement to change certain by-law or charter provisions or a non-technical amendment to by-laws or a charter that reduces shareholder rights. Equity-based compensation Equity-based compensation is designed to attract, retain and motivate talented executives and independent directors, but should not be so significant as to materially dilute shareholders' interests. We will vote against the adoption or amendment of a stock option plan if the: * plan dilution is more than 10% of outstanding common stock, * plan allows for non-qualified options to be priced at less than 85% of the fair market value on the grant date, * company allows or has allowed the re-pricing or replacement of underwater options in the past fiscal year (or the exchange of underwater options). With respect to the adoption or amendment of employee stock purchase plans or a stock award plan, we will vote against management if: * the plan allows stock to be purchased at less than 85% of fair market value; * this plan dilutes outstanding common equity greater than 10% * all stock purchase plans, including the proposed plan, exceed 15% of outstanding common equity. Other Business For routine business matters which are the subject of many proxy related questions, we will vote with management proposals to: * change the company name; * approve other business; * adjourn meetings; * make technical amendments to the by-laws or charters; * approve financial statements; * approve an employment agreement or contract. Shareholder Proposals Shareholders are permitted per SEC regulations to submit proposals for inclusion in a company's proxy statement. We will generally vote against shareholder proposals and in accordance with the recommendation of management except as follows where we will vote for proposals: * calling for shareholder ratification of auditors; * calling for auditors to attend annual meetings; * seeking to increase board independence; * requiring minimum stock ownership by directors; * seeking to create a nominating committee or to increase the independence of the nominating committee; * seeking to increase the independence of the audit committee. Corporate and social policy issues We believe that "ordinary business matters" are primarily the responsibility of management and should be approved solely by the corporation's board of directors. Proposals in this category, initiated primarily by shareholders, typically request that the company disclose or amend certain business practices. We generally vote against business practice proposals and abstain on social policy issues, though we may make exceptions in certain instances where we believe a proposal has substantial economic implications. John Hancock Advisers, LLC Sovereign Asset Management Corporation Proxy Voting Procedures The role of the proxy voting service John Hancock Advisers, LLC ("JHA") and Sovereign Asset Management Corporation ("Sovereign") have hired a proxy voting service to assist with the voting of client proxies. The proxy service coordinates with client custodians to ensure that proxies are received for securities held in client accounts and acted on in a timely manner. The proxy service votes all proxies received in accordance with the proxy voting guidelines established and adopted by JHA and Sovereign. When it is unclear how to apply a particular proxy voting guideline or when a particular proposal is not covered by the guidelines, the proxy voting service will contact the proxy oversight group coordinator for a resolution. The role of the proxy oversight group and coordinator The coordinator will interact directly with the proxy voting service to resolve any issues the proxy voting service brings to the attention of JHA or Sovereign. When a question arises regarding how a proxy should be voted the coordinator contacts the firm's investment professionals and the proxy oversight group for a resolution. In addition the coordinator ensures that the proxy voting service receives responses in a timely manner. Also, the coordinator is responsible for identifying whether, when a voting issue arises, there is a potential conflict of interest situation and then escalating the issue to the firm's Executive Committee. For securities out on loan as part of a securities lending program, if a decision is made to vote a proxy, the coordinator will manage the return/recall of the securities so the proxy can be voted. The role of mutual fund trustees The boards of trustees of our mutual fund clients have reviewed and adopted the proxy voting guidelines of the funds' investment adviser, JHA. The trustees will periodically review the proxy voting guidelines and suggest changes they deem advisable. Conflicts of interest Conflicts of interest are resolved in the best interest of clients. With respect to potential conflicts of interest, proxies will be voted in accordance with JHA's or Sovereign's predetermined policies. If application of the predetermined policy is unclear or does not address a particular proposal, a special internal review by the JHA Executive Committee or Sovereign Executive Committee will determine the vote. After voting, a report will be made to the client (in the case of an investment company, to the fund's board of trustees), if requested. An example of a conflict of interest created with respect to a proxy solicitation is when JHA or Sovereign must vote the proxies of companies that they provide investment advice to or are currently seeking to provide investment advice to, such as to pension plans. S:\Corporate Secretary\PROXY\2003 Proxy Voting Policy Summary.doc -----END PRIVACY-ENHANCED MESSAGE-----