-----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, BdDiz88mrYbJnzfq9v4onJ4+ypjHTte9IYk+9YP2LKhI5k+yu4BwUPIkuIyctY2/ L0cyx0tlaDy3zk5VDmFrag== 0000928816-05-000271.txt : 20050225 0000928816-05-000271.hdr.sgml : 20050225 20050225125408 ACCESSION NUMBER: 0000928816-05-000271 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050225 DATE AS OF CHANGE: 20050225 EFFECTIVENESS DATE: 20050225 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: 05639995 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 patriot1.txt JOHN HANCOCK PATRIOT SELECT DIVIDEND TRUST UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6107 John Hancock Patriot Select Dividend Trust (Exact name of registrant as specified in charter) 101 Huntington Avenue, Boston, Massachusetts 02199 (Address of principal executive offices) (Zip code) Susan S. Newton, Secretary 101 Huntington Avenue Boston, Massachusetts 02199 (Name and address of agent for service) Registrant's telephone number, including area code: 617-375-1702 Date of fiscal year end: June 30 Date of reporting period: December 31, 2004 ITEM 1. REPORT TO SHAREHOLDERS. JOHN HANCOCK Patriot Select Dividend Trust 12.31.2004 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 James A. Shepherdson, Chief Executive Officer, flush left next to first paragraph.] CEO CORNER Table of contents Your fund at a glance page 1 Managers' report page 2 Fund's investments page 6 Financial statements page 10 For more information page 21 Dear Fellow Shareholders, The stock market advanced for the second straight year, largely on the wings of a strong post-election rally that produced solid returns for the major indexes in 2004. For much of the year, the market was fairly dull, moving mostly sideways as investors worried about higher interest rates, sky-rocketing oil prices, the tight presidential election and the war in Iraq. With the election over and oil prices moderating, investors felt more confident, and the broad Standard & Poor's 500 Index wound up returning 10.88% for the year. The Dow Jones Industrial Average returned 5.40% and a late and strong rally in technology stocks helped the Nasdaq Composite Index move from a negative stance in October to finish the year with a 9.15% return. Despite the Federal Reserve's five hikes in short-term interest rates, bonds still turned in positive results, with the Lehman Brothers Aggregate Bond Index up 4.34%. The way this year has played out in the financial markets serves as a good reminder of why keeping a long-term perspective is such a critical element of successful investing. Getting caught up in the day-to-day twists and turns of the market -- and trying to act on them -- can wreak havoc with your portfolio and derail progress toward meeting your overall financial objectives. Since no one can predict the market's moves, the best way to reach your goals is to stay invested and stick to your plan. Investing should be a marathon, not a sprint. Do not try to time the market, and make sure you work with your investment professional to ensure that your portfolio remains properly diversified to meet your long-term objectives. For example, after several years of dominance, small-cap stocks and value stocks could now represent higher percentages of your portfolio than you may want. If you are comfortable with your financial plan, it becomes easier to ride out the market's daily ups and downs. It could also provide you with a greater chance of success over time. Sincerely, /S/ JAMES A. SHEPHERDSON James A. Shepherdson, Chief Executive Officer This commentary reflects the CEO's views as of December 31, 2004. 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 invest- ing at least 80% of its assets in a diversi- fied portfolio of dividend-paying securities. The Fund will normally invest more than 65% of its total assets in securi- ties of companies in the utilities industry. Over the last six months * Despite rising interest rates, preferred stocks posted strong gains in response to strong demand, weak supply and hopes that dividend tax cuts would be made permanent. * The Fund outpaced its peer group due to solid security selection. * High-quality, tax-advantaged preferred and utility common stocks 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, 2004." The chart is scaled in increments of 5% with 0% at the bottom and 15% at the top. The first bar represents the fund's Net asset value of 14.78%. The second bar represents the fund's Market value of 10.75%. A note below the chart reads "The total return for the Fund is at net asset value with all distributions reinvested. The performance data contained within this material represents past performance, which does not guarantee future results."] Top 10 issuers 4.8% Energy East Corp. 4.7% NSTAR 4.3% El Paso Tennessee Pipeline Co. 4.2% Baltimore Gas & Electric 3.7% Sierra Pacific Power 3.3% Citigroup, Inc. 3.3% Bear Stearns Co. 3.3% Lehman Brothers 3.1% CH Energy Group, Inc. 3.1% DTE Energy Co. As a percentage of net assets plus the value of preferred shares on December 31, 2004. 1 BY GREGORY K. PHELPS AND MARK T. MALONEY FOR THE PORTFOLIO MANAGEMENT TEAM MANAGERS' REPORT JOHN HANCOCK Patriot Select Dividend Trust Preferred stocks posted strong gains during the six-month period ended December 31, 2004. The period began on somewhat of a sour note following a spring Treasury market sell-off that was triggered by robust economic reports which fanned fears of higher inflation and interest rates. Because preferreds make fixed-income payments in the form of dividends, their prices, like bond prices, tend to move in the opposite direction of interest rates. Even though the Federal Reserve Board did raise rates a quarter of a percentage point on four separate occasions during the period, the bond and preferred markets continued to rally. Investors also viewed the re-election of President George Bush as a positive for tax-advantaged preferred stocks. The president vowed to make permanent a recent reduction in the tax rate most individuals pay on many stock dividends. Finally, preferreds benefited from favorable supply and demand conditions. Supply dwindled as companies redeemed their outstanding preferred stock as a way of reducing their financing costs, and there wasn't much in the way of new issuance. Meanwhile, demand was strong as investors continued to seek out the relatively high dividends and quality of preferred stocks. "Preferred stocks posted strong gains during the six-month period ended December 31, 2004." Although the performance of preferred stocks was impressive for the six-month period, utility common stocks posted even stronger gains. Investors continued to pour money into the group, attracted by two main factors. First was the lure of high dividends, many of which were tax-advantaged. Second was the group's continued fundamental improvement, evidenced by reduced debt levels, improved balance sheets and the sale or closure of money-losing unregulated subsidiaries. 2 [Photos of Greg Phelps and Mark Maloney, flush right at top of page.] Performance For the six months ended December 31, 2004, John Hancock Patriot Select Dividend Trust returned 14.78% at net asset value and 10.75% at market value. The difference in the Fund's net asset value (NAV) performance and its market performance stems from the fact that the market share price is subject to the dynamics of secondary market trading, which could cause it to trade at a discount or premium to the Fund's NAV share price at any time. By comparison, the average income and preferred stock closed-end fund returned 12.95% at net asset value, 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 22.75%, and the broader stock market, as measured by the Standard & Poor's 500 Index, returned 7.19%. "Many of our utility common stock holdings also were our best performers for the period." Utility common stock holdings shine Many of our utility common stock holdings also were our best performers for the period. Among the best was KeySpan Corp., the largest natural gas distributor in the Northeast United States. The stock already had a lot going for it because it had an attractive yield. But it really got a boost from the success of its growing customer base and news that the company would increase its dividend. DTE Energy also performed well, hitting a 52-week high during the period. The stock offered an attractive dividend yield and was further aided by the favorable resolution of a major utility rate case in its home state of Michigan. Tax-advantaged preferred stocks do well Given expectations that the 2003 tax reform bill would be made permanent because of the re-election of President Bush and the larger Republican majority in both the House and Senate, tax-advantaged preferred stocks were in heavy demand and turned in good gains during the period. A good example was Southern Union, which also was helped by investors' expectations that the company would receive a credit-rating upgrade. Sierra Pacific Power benefited from its efforts to repair its balance sheet. In the financial sector, our holdings in Bear Stearns did well thanks to the combination of its attractive dividend and the strong financial performance of the 3 company. On the flip side, we continued to be disappointed by our holdings in multi-state energy provider Aquila, an electric and gas energy company that has been punished by investors after retreating from the wholesale energy-trading markets. Even though Aquila made some progress toward resolving its problems, our patience wore thin and we sold our holdings in the company to look for more attractive opportunities elsewhere. [Table at top left-hand side of page entitled "Top five industry groups1." The first listing is Electric utilities 57%, the second is Gas utilities 12%, the third is Investment banking & brokerage 10%, the fourth is Oil & gas exploration & production 7%, and the fifth is Regional banks 3%.] [Pie chart in middle of page with heading "Portfolio diversification1." The chart is divided into three sections (from top to left): Preferred stocks 61%, Common stocks 35% and Short-term investments & other 4%. ] A word about dividends Issuers exercising their call provisions to benefit from falling interest rates last year caused the supply of preferred stocks to shrink, and virtually every week other issuers continued to announce additional calls of preferred stocks. From a technical standpoint, calls largely have been beneficial for the preferred stock market because they have reduced available supply. By the same token, however, the Fund has been forced either to surrender to calls some of its higher-yielding preferred stock holdings and reinvest the proceeds in securities that carried lower dividend yields or to hold on to cash or equivalents. At the same time, rising interest rates forced the cost of leverage higher. The resulting downward pressure on the Fund's dividend income, coupled with the rising cost of leverage, caused us to reduce our monthly dividend on December 30, 2004. The new dividend amount of $0.0750 equates to an annualized yield of 5.97%, based on the Fund's closing market price as of December 29, 2004. 4 [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 KeySpan Corp. followed by an up arrow with the phrase "Attractive dividend increase lures investors." The second listing is Southern Union followed by an up arrow with the phrase "Positive credit fundamentals and growing gas pipeline assets." The third listing is Aquila followed by a down arrow with the phrase "Negative effects of energy-trading business linger."] Outlook In our view, the late 2004 decline in oil prices and reports of better economic data suggest that the Fed will continue on a measured path to raise short-term interest rates. Although the rate hikes that were enacted throughout the period haven't yet hurt the prices of preferred stocks, it's possible that potentially higher long-term interest rates could dampen their performance over the near term. As for utility stocks, we wouldn't be altogether surprised if they are poised for a breather or even a pullback over the short term given their rapid and recent impressive gains. Over the longer term, however, there are a couple of factors we believe will continue to work in favor of both preferred and utility common stocks. Making permanent the recently reduced dividend tax rate and strong demand from an aging American population potentially more intent on shifting assets to high-quality income-producing securities should provide some support for the group even if long-term bond yields rise. "As for utility stocks, we wouldn't be altogether surprized if they are poised for a breather..." This commentary reflects the views of the portfolio managers through the end of the Fund's period discussed in this report. The managers' 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 more broadly 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, 2004. 5 FINANCIAL STATEMENTS FUND'S INVESTMENTS Securities owned by the Fund on December 31, 2004 (unaudited) This schedule is divided into three main categories: common stocks, preferred stocks, and short-term investments. Common and preferred stocks are further broken down by industry group. Short-term investments, which represent the Fund's cash position, are listed last.
Issuer Shares Value Common stocks 52.04% $76,872,582 (Cost $74,997,922) Electric Utilities 44.93% 66,368,558 Alliant Energy Corp. 158,000 4,518,800 Ameren Corp. 85,400 4,281,956 CH Energy Group, Inc. 141,550 6,801,478 Cinergy Corp. 16,000 666,080 Consolidated Edison, Inc. 45,000 1,968,750 Dominion Resources, Inc. 46,000 3,116,040 DTE Energy Co. 155,900 6,723,967 Duke Energy Corp. 70,000 1,773,100 Energy East Corp. 242,000 6,456,560 Great Plains Energy, Inc. 35,000 1,059,800 NiSource, Inc. 97,850 2,229,023 NSTAR 94,000 5,102,320 OGE Energy Corp. 96,092 2,547,399 Progress Energy, Inc. 64,000 2,895,360 Progress Energy, Inc., (Contingent Value Obligation) (B)(I) 20,000 2,400 Public Service Enterprise Group, Inc. 16,000 828,320 Puget Energy, Inc. 170,500 4,211,350 Sierra Pacific Resources (I) 271,500 2,850,750 TECO Energy, Inc. 176,750 2,711,345 WPS Resources Corp. 51,000 2,547,960 Xcel Energy, Inc. 169,000 3,075,800 Gas Utilities 7.11% 10,504,024 KeySpan Corp. 161,850 6,384,983 National Fuel Gas Co. 52,150 1,477,931 Peoples Energy Corp. 41,800 1,837,110 Vectren Corp. 30,000 804,000 See notes to financial statements. 6 FINANCIAL STATEMENTS Credit Issuer, description rating (A) Shares Value Preferred stocks 90.32% $133,405,402 (Cost $130,742,641) Agricultural Products 2.20% 3,255,000 Ocean Spray Cranberries, Inc., 6.25%, Ser A (S) BB+ 40,000 3,255,000 Broadcasting & Cable TV 1.21% 1,783,875 Shaw Communications, Inc., 8.45%, Ser A (Canada) B+ 45,500 1,148,875 Shaw Communications, Inc., 8.50% (Canada) B+ 25,000 635,000 Consumer Finance 3.58% 5,290,000 SLM Corp., 6.97%, Ser A BBB+ 92,000 5,290,000 Diversified Banks 3.51% 5,187,600 Bank of America Corp., 6.75%, Depositary Shares, Ser VI A- 99,000 5,187,600 Electric Utilities 38.84% 57,373,396 Alabama Power Co., 5.20% BBB+ 225,000 5,456,250 Baltimore Gas & Electric Co., 6.99%, Ser 1995 Baa1 40,000 4,185,000 BGE Capital Trust II, 6.20% BBB- 190,000 4,862,100 Boston Edison Co., 4.25% BBB+ 64,157 5,164,638 Duquesne Light Co., 6.50% BB+ 34,000 1,785,000 Energy East Capital Trust I, 8.25% BBB- 147,000 3,944,010 Entergy Gulf States Capital I, 8.75%, Ser A BB 87,100 2,255,890 Interstate Power & Light Co., 8.375%, Ser B BBB- 32,000 1,072,000 Monongahela Power Co., $7.73, Ser L B- 50,000 4,950,000 Northern Indiana Public Service Co., 4.22% BB+ 11,251 846,990 PSEG Funding Trust II, 8.75% BB+ 30,000 834,000 PSI Energy, Inc., 6.875% BBB- 48,000 5,028,000 Public Service Electric & Gas Co., 6.92% BB+ 30,627 3,179,465 Sierra Pacific Power Co., 7.80%, Ser 1 (Class A) CCC+ 205,600 5,222,240 South Carolina Electric & Gas Co., 6.52% Baa1 55,000 5,720,000 Virginia Electric & Power Co., $6.98 BBB- 10,500 1,092,656 Virginia Electric & Power Co., $7.05 BBB- 10,000 1,041,250 Wisconsin Public Service Corp., 6.76% A 7,000 733,907 Gas Utilities 10.30% 15,219,191 El Paso Tennessee Pipeline Co., 8.25%, Ser A CCC- 183,500 9,341,306 Southern Union Co., 7.55% Ba2 210,300 5,877,885 Integrated Oil & Gas 1.33% 1,960,632 Coastal Finance I, 8.375% CCC- 78,300 1,960,632 See notes to financial statements. 7 FINANCIAL STATEMENTS Credit Issuer, description rating (A) Shares Value Investment Banking & Brokerage 14.50% $21,415,550 Bear Stearns Cos., Inc. (The), 5.49%, Ser G A3 116,400 5,878,200 Bear Stearns Cos., Inc. (The), 6.15%, Ser E A3 23,000 1,216,700 Citigroup, Inc., 6.213%, Ser G Aa3 44,000 2,329,800 Citigroup, Inc., 6.231%, Depositary Shares, Ser H Aa3 92,400 4,920,300 Lehman Brothers Holdings, Inc., 5.67%, Depositary Shares, Ser D BBB+ 125,600 6,405,600 Lehman Brothers Holdings, Inc.,5.94% Ser C BBB+ 13,000 664,950 Oil & Gas Exploration & Production 10.97% 16,200,158 Anadarko Petroleum Corp., 5.46%, Depositary Shares, Ser B Baa3 48,200 4,798,912 Apache Corp., 5.68%, Depositary Shares, Ser B Baa2 48,174 5,047,734 Devon Energy Corp., 6.49%, Ser A BB+ 53,500 5,545,612 Nexen, Inc., 7.35% (Canada) BB+ 30,000 807,900 Regional Banks 3.84% 5,670,000 HSBC USA, Inc., $2.8575 A1 108,000 5,670,000 Telecommunications Services 0.04% 50,000 Touch America Holdings, Inc., $6.875 BBB- 50,000 50,000 Interest Par value Issuer, description, maturity date rate (000) Value Short-term investments 4.70% $6,946,267 (Cost $6,946,267) Commercial Paper 4.70% 6,946,267 ChevronTexaco Corp, Due 01-03-05 1.900% $6,947 6,946,267 Total investments 147.06% $217,224,251 Other assets and liabilities, net (47.06%) ($69,510,052) Total net assets 100.00% $147,714,199 (A) Credit ratings are unaudited and are rated by Moody's Investors Service where Standard & Poor's ratings are not available. (B) This security is fair valued in good faith under procedures established by the Board of Trustees. (I) Non-income-producing security. (S) This security is exempt from registration under rule 144A of the Securities Act of 1933. Such security may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $3,255,000 or 2.20% of the Fund's net assets as of December 31, 2004. 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 PORTFOLIO CONCENTRATION December 31, 2004 (unaudited) This table shows the percentages of the Fund's investments as aggregated by various industries. Industry distribution Value as a percentage of Fund's total investments - ------------------------------------------------------------------------------ Agricultural products 1.50% Broadcasting & cable TV 0.82 Consumer finance 2.43 Diversified banks 2.39 Electric utilities 56.97 Gas utilities 11.84 Integrated oil and gas 0.90 Investment banking & brokerage 9.86 Oil & gas exploration & production 7.46 Regional banks 2.61 Telecommunications services 0.02 Short-term investments 3.20 Total investments 100.00% See notes to financial statements. 9 FINANCIAL STATEMENTS ASSETS AND LIABILITIES December 31, 2004 (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 $212,686,830) $217,224,251 Cash 1,034 Dividends receivable 782,123 Other assets 43,525 Total assets 218,050,933 Liabilities Payable to affiliates Management fees 152,381 Other 26,113 Other payables and accrued expenses 89,150 Total liabilities 267,644 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 70,069,090 Net assets Common shares capital paid-in 143,162,693 Accumulated net realized gain on investments 185,521 Net unrealized appreciation of investments 4,537,421 Distributions in excess of net investment income (171,436) Net assets applicable to common shares $147,714,199 Net asset value per common share Based on 10,010,393 shares of beneficial interest outstanding -- unlimited number of shares authorized with no par value $14.76 See notes to financial statements. 10 FINANCIAL HIGHLIGHTS OPERATIONS For the period ended December 31, 2004 (unaudited) 1 This Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operat- ing the Fund. It also shows net gains (losses) for the period stated. Investment income Dividends $6,495,091 Interest 47,576 Total investment income 6,542,667 Expenses Investment management fees 847,335 Administration fees 158,875 AMPS auction fees 93,367 Registration and filing fees 35,405 Printing 21,948 Custodian fees 21,081 Transfer agent fees 20,074 Professional fees 19,922 Trustees' fees 6,452 Total expenses 1,224,459 Net investment income 5,318,208 Realized and unrealized gain (loss) Net realized loss on investments (37,334) Change in net unrealized appreciation (depreciation) of investments 14,679,526 Net realized and unrealized gain 14,642,192 Distributions to AMPS (610,890) Increase in net assets from operations $19,349,510 1 Semiannual period from 7-1-04 to 12-31-04. See notes to financial statements. 11 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 difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions. Year Period ended ended 6-30-04 12-31-04 1 Increase (decrease) in net assets From operations Net investment income $9,600,735 $5,318,208 Net realized gain (loss) 636,979 (37,334) Change in net unrealized appreciation (depreciation) (2,432,023) 14,679,526 Distributions to AMPS (751,663) (610,890) Increase in net assets resulting from operations 7,054,028 19,349,510 Distributions to common shareholders From net investment income (10,769,063) (5,400,241) From Fund share transactions 557,883 339,016 Net assets Beginning of period 136,583,066 133,425,914 End of period 2 $133,425,914 $147,714,199 1 Semiannual period from 7-1-04 through 12-31-04. Unaudited. 2 Includes accumulated (distributions in excess of) net investment income of $521,487 and ($171,436), respectively. See notes to financial statements. 12 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 6-30-00 6-30-01 6-30-02 6-30-03 6-30-04 12-31-04 1 Per share operating performance Net asset value, beginning of period $16.00 $13.97 $15.43 $13.77 $13.73 $13.36 Net investment income 2 1.27 1.34 1.18 1.08 0.96 0.53 Net realized and unrealized gain (loss) on investments (1.91) 1.52 (1.61) 0.06 (0.17) 1.47 Distributions to AMPS (0.31) (0.32) (0.15) (0.10) (0.08) (0.06) Total from investment operations (0.95) 2.54 (0.58) 1.04 0.71 1.94 Less distributions to common shareholders From net investment income (1.08) (1.08) (1.08) (1.08) (1.08) (0.54) Net asset value, end of period $13.97 $15.43 $13.77 $13.73 $13.36 $14.76 Per share market value, end of period $12.38 $14.80 $13.69 $14.72 $13.65 $14.55 Total return at market value 3 (%) (2.46) 29.40 (0.45) 16.82 0.23 10.75 4 Ratios and supplemental data Net assets applicable to common shares, end of period (in millions) $138 $153 $136 $137 $133 $148 Ratio of expenses to average net assets 5 (%) 1.74 1.77 1.77 1.90 1.78 1.74 6 Ratio of net investment income to average net assets 7 (%) 8.57 8.22 7.99 8.62 7.04 7.55 6 Portfolio turnover (%) 20 13 15 2 18 20 Senior securities Total value of 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 $299,106 $316,086 $290,311 $294,629 $288,521 $309,534
See notes to financial statements. 13 FINANCIAL HIGHLIGHTS Notes to Financial Highlights 1 Semiannual period from 7-1-04 to 12-31-04. 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 of common shares. Without the exclusion of preferred shares, the annualized ratios of expenses would have been 1.18%, 1.21%, 1.20%, 1.22%, 1.18% and 1.16%, respectively. 6 Annualized. 7 Ratios calculated on the basis of net investment income relative to the average net assets of common shares. Without the exclusion of preferred shares, the annualized ratios of net investment income would have been 5.79%, 5.61%, 5.40%, 5.52%, 4.65% and 5.03%, 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. 14 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, which have a remaining maturity of 60 days or less may be 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. 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. 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. 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 to foreign withholding taxes, which are accrued as applicable. The Fund records distributions to shareholders from net investment income and net realized gains, if any, on the ex-dividend date. During the year ended June 30, 2004, the tax character of distributions paid was as follows: ordinary income -- $11,520,726. 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. 15 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 John Hancock Financial Services, Inc. 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 (collectively, "managed assets"). 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 managed assets, which amounted to $158,875 during the period ended December 31, 2004. Mr. James A. Shepherdson is a director and officer of the Adviser, as well as affiliated Trustee of the Fund, and is compensated by the Adviser. 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 Compen sation 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. Note C Fund share transactions Common shares This listing illustrates the Fund common shares dividend reinvestments, reclassification of the Fund's capital accounts and the number of common shares outstanding at the beginning and end of the last two years, along with the corresponding dollar value.
Year ended 6-30-04 Period ended 12-31-04 1 Shares Amount Shares Amount Beginning of period 9,945,720 $142,306,741 9,985,999 $142,823,677 Distributions reinvested 40,279 557,883 24,394 339,016 Reclassification of capital accounts -- (40,947) -- -- End of period 9,985,999 $142,823,677 10,010,393 $143,162,693
1 Semiannual period from 7-1-04 to 12-31-04. Unaudited. 16 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 1.27% to 2.09% during the period ended December 31, 2004. 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 of securities, other than short-term securities and obligations of the U.S. government, during the period ended December 31, 2004, aggregated $43,037,430 and $41,687,666, respectively. The cost of investments owned on December 31, 2004, including short-term investments, for federal income tax purposes was $212,690,017. Gross unrealized appreciation and depreciation of investments aggregated $15,163,860 and $10,629,626, respectively, resulting in net unrealized appreciation of $4,534,234. The difference between book basis and tax basis net unrealized appreciation of investments is attributable primarily to the tax deferral of losses on certain sales of securities. 17 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. By-laws 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. On December 16, 2003, the Trustees approved additional changes to the Fund's by-laws. The auction preferred shares section of the Fund's by-laws was changed to update the rating agency requirements in keeping with recent changes to the agencies' basic maintenance reporting requirements for leveraged closed-end funds. By-laws now require an independent accountant's confirmation only once per year, at the Fund's fiscal year end, and changes to the agencies' basic maintenance reporting requirements that include modifications to the eligible assets and their respective discount factors. These revisions bring the Fund's by-laws in line with current rating agency requirements. On September 14, 2004, the Trustees approved an amendment to the Fund's by-laws increasing the maximum applicable dividend rate ceiling on the preferred shares to conform with the modern calculation methodology used by the industry and other John Hancock funds. Dividend reinvestment plan The Fund offers its shareholders a Dividend Reinvestment Plan (the 18 "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 participants' 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 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 com missions, 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. 19 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 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. 20 For more information The Fund's proxy voting policies, procedures and records are available without charge, upon request: By phone On the Fund's Web site On the SEC's Web site 1-800-225-5291 www.jhfunds.com/proxy www.sec.gov Trustees Charles L. Ladner, Chairman* James F. Carlin William H. Cunningham Ronald R. Dion Dr. John A. Moore* Patti McGill Peterson* Steven R. Pruchansky James A. Shepherdson Lt. Gen. Norman H. Smith, USMC (Ret.) *Members of the Audit Committee Officers James A. Shepherdson President and Chief Executive Officer Susan S. Newton Senior Vice President and Secretary William H. King Vice President and Treasurer Investment adviser John Hancock Advisers, LLC 101 Huntington Avenue Boston, MA 02199-7603 Custodian The Bank of New York One Wall Street New York, NY 10286 Transfer agent for common shareholders Mellon Investor Services 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 Transfer agent for AMPS Deutsche Bank Trust Company Americas 280 Park Avenue New York, NY 10017 Legal counsel Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, MA 02109-1803 Stock symbol Listed New York Stock Exchange: DIV For shareholder assistance refer to page 20 How to contact us Internet www.jhfunds.com Mail Regular mail: Mellon Investor Services 85 Challenger Road Overpeck Centre Ridgefield Park, NJ 07660 Phone 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 A listing of month-end portfolio holdings is available on our Web site, www.jhfunds.com. A more detailed portfolio holdings summary is available on a quarterly basis 60 days after the fiscal quarter on our Web site or upon request by calling 1-800-225-5291, or on the Securities and Exchange Commission'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) www.jhfunds.com PRESORTED STANDARD U. S. POSTAGE PAID MIS P30SA 12/04 2/05 ITEM 2. CODE OF ETHICS. Not applicable at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no material changes to previously disclosed John Hancock Funds - Administration Committee Charter. ITEM 11. 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 accounting 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 12. EXHIBITS. (a)(1) Separate certifications for the registrant's principal executive officer and principal accounting 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 accounting 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) 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. John Hancock Patriot Select Dividend Trust By: ------------------------------ James A. Shepherdson President and Chief Executive Officer Date: February 17, 2005 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: ------------------------------ James A. Shepherdson President and Chief Executive Officer Date: February 17, 2005 By: ------------------------------ William H. King Vice President and Treasurer Date: February 17, 2005 EX-99.CERT 2 exnn2.txt CERTIFICATION CERTIFICATION I, James A. Shepherdson, 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) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Ace 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) 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 17, 2005 - --------------------------------- James A. Shepherdson President and Chief Executive Officer CERTIFICATION I, William H. King, certify that: 1. I have reviewed this report on Form N-CSR of the John Hancock Patriot Select Dividend Trust (the "registrant"); 22. 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) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Ace 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) 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 17, 2005 - --------------------------------- William H. King Vice President and Treasurer EX-99.906 CERT 3 exnnos3.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. - --------------------------- James A. Shepherdson President and Chief Executive Officer Dated: February 17, 2005 - --------------------------- William H. King Vice President and Treasurer Dated: February 17, 2005 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 4 exnncodeth4.txt CODE OF ETHICS Code of Ethics of * John Hancock Advisers, LLC * Sovereign Asset Management Co. * each John Hancock fund * John Hancock Funds, LLC (together, called "John Hancock Funds") May 1, 2004 - -------------------------------------------------------------------------------- 1. General Principles......................................................2 2. To Whom Does This Code Apply?...........................................2 3. Overview of Policies....................................................3 4. Policies Outside the Code of Ethics.....................................4 >> Company Conflict & Business Practice Policy..........................4 >> Inside Information Policy and Procedures.............................4 5. Policies in the Code of Ethics..........................................5 >> Restriction on Gifts.................................................5 >> Preclearance of Securities Transactions..............................5 >> Ban on Short-Term Profits............................................6 >> Ban on IPOs..........................................................7 >> Disclosure of Private Placement Conflicts............................7 >> Seven Day Blackout Period............................................8 6. Reports and Other Disclosures Outside the Code of Ethics................8 >> Broker Letter/Duplicate Confirm Statements...........................8 7. Reports and Other Disclosures In the Code of Ethics.....................9 >> Initial Holdings Report and Annual Holdings Report...................9 >> Quarterly Transaction Reports........................................9 >> Annual Certification................................................10 8. Limited Access Persons.................................................10 9. Subadvisers............................................................10 10. Reporting Violations...................................................10 11. Interpretation and Enforcement.........................................11 Appendix A: Categories of Personnel.........................................12 Appendix B: Preclearance Procedures.........................................13 Appendix C: Limited Access Persons..........................................17 Appendix D: Subadvisers....................................................18 Appendix E: Administration and Recordkeeping...............................19 - -------------------------------------------------------------------------------- 1. General Principles Each person within the John Hancock Funds organization is responsible for maintaining the very highest ethical standards when conducting business. This means that: o You have a duty at all times to place the interests of our clients first. o All of your personal securities transactions must be conducted consistent with this code of ethics and in such a manner as to avoid any actual or potential conflict of interest or other abuse of your position of trust and responsibility. o You should not take inappropriate advantage of your position or engage in any fraudulent or manipulative practice (such as front-running or manipulative market timing) with respect to our clients' accounts. 2. To Whom Does This Code Apply? This code of ethics applies to you if you are a director, officer or employee of John Hancock Advisers, LLC, Sovereign Asset Management Co., John Hancock Funds, LLC or a "John Hancock fund" (any fund or account advised by John Hancock Advisers, LLC). It also applies to you if you are an employee of John Hancock Life Insurance Co. or its subsidiaries who participates in making recommendations for, or receives information about, portfolio trades of the John Hancock funds. Please note that if a policy described below applies to you, it applies to your personal accounts, those of a spouse, "significant other," minor children or family members sharing a household, as well as all accounts over which you have discretion or give advice or information. "Significant others" are defined for these purposes as two people who (1) share the same primary residence; (2) share living expenses; and (3) are in a committed relationship and intend to remain in the relationship indefinitely. There are three main categories for persons covered by this code of ethics, taking into account their positions, duties and access to information regarding fund portfolio trades. You have been notified about which of these categories applies to you, based on the Compliance Department's understanding of your current role. If you have a level of investment access beyond your assigned category, or if you are promoted or change duties and as a result should more appropriately be included in a different category, it is your responsibility to notify Tim Fagan, Assistant Investment Compliance Officer. The basic definitions of the three main categories, with examples, are provided below. The more detailed definitions of each category are attached as Appendix A. - --------------------------------------- -------------------------------------- -------------------------------------- "Regular Access" person "Investment Access" person A person who regularly obtains "Non-Access" person information regarding fund portfolio A person who regularly participates trades. A person who does not regularly in a fund's investment process. examples: participate in a fund's investment --------- process or obtain information o personnel in Investment regarding fund portfolio trades. examples: Operations or Compliance - --------- o most FFM personnel examples: o portfolio managers o Technology personnel with --------- o analysts access to investment systems o wholesalers o traders o attorneys and some legal o inside wholesalers who administration personnel don't attend investment o investment admin. personnel "morning meetings" o certain administrative personnel - --------------------------------------- -------------------------------------- --------------------------------------
2 3. Overview of Policies Please refer to the following chart to determine which policies apply to your category. These policies are described in detail below. - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Investment Regular Access Non-Access Access Person Person Person - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- General principles yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Policies outside the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Conflict of interest policy yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Inside information policy yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Policies in the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Restriction on gifts yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Pre-clearance requirement yes yes Limited - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Ban on short-term profits yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Ban on IPOs yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Disclosure of private placement conflicts yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Seven day blackout period yes no no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Reports and other disclosures outside the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Broker letter/duplicate confirms yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Reports and other disclosures in the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Annual recertification form yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Initial/annual holdings reports yes yes no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Quarterly transaction reports yes yes no - ------------------------------------------------------ ---------------------- ---------------------- ----------------------
3 4. Policies Outside the Code of Ethics John Hancock Funds has certain policies that are not part of the code of ethics, but are equally important. The two most important of these policies are (1) the Company Conflict and Business Practice Policy; and (2) the Inside Information Policy. >> Company Conflict & Business Practice Policy - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- A conflict of interest occurs when your private interests interfere or could potentially interfere with your responsibilities at work. You must not place yourself or the company in a Non-Access Persons position of actual or potential conflict. This Policy covers a number of important issues. For example, you cannot serve as a director of any company without first obtaining the required written executive approval. Other important issues in this Policy include: o personal investments or business relationships o misuse of inside information o receiving or giving of gifts, entertainment or favors o misuse or misrepresentation of your corporate position o disclosure of confidential or proprietary information o antitrust activities o political campaign contributions and expenditures on public officials >> Inside Information Policy and Procedures - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- The antifraud provisions of the federal securities laws generally prohibit persons with material non-public information from trading on or communicating the information to others. Sanctions for violations can include civil injunctions, permanent bars from the securities industry, civil penalties up to three times the profits made or losses avoided, criminal fines and jail sentences. While Investment Access persons are most likely to come in contact with material non-public information, the rules (and sanctions) in this area apply to all John Hancock Funds personnel and extend to activities both related and unrelated to your job duties. The Inside Information Policy and Procedures covers a number of important issues, such as: o The misuse of material non-public information o The information barrier procedure o The "restricted list" and the "watch list" o broker letters and duplicate confirmation statements (see section 6 of this code of ethics) 4 5. Policies in the Code of Ethics >> Restriction on Gifts - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- You and your family cannot accept preferential treatment or favors from securities brokers or dealers or other organizations with which John Hancock Funds might transact business except in accordance with the Company Conflict and Business Practice Policy. For the protection of both you and John Hancock Funds, the appearance of a possible conflict of interest must be avoided. You should exercise caution in any instance in which business travel and lodging are paid for by someone other than John Hancock Funds. The purpose of this policy is to minimize the basis for any charge that you used your John Hancock Funds position to obtain for yourself opportunities which otherwise would not be offered to you. Please see the Company Conflict and Business Practice Policy's "Compensation and Gifts" section for additional details regarding restrictions on gifts and exceptions for "nominal value" gifts. >> Preclearance of Securities Transactions - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Also, for a limited category of trades: -------------------------- Non-Access Persons - ---------------------------------------- If you are an Investment Access person or Regular Access person, you must "preclear" (i.e.: receive advance approval of) any personal securities transactions. "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. Due to this preclearance requirement, participation in investment clubs is prohibited. Preclearance of private placements requires some special considerations--the decision will take into account whether, for example: (1) the investment opportunity should be reserved for John Hancock Funds clients; and (2) it is being offered to you because of your position with John Hancock Funds. The following securities are exempt from the preclear policy: (1) direct obligations of the U.S. Government, (2) shares of open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper & high quality short-term debt instruments, including repurchase agreements. ***Please note that, effective May 1, 2004, if you are an Investment Access person or Regular Access person, you now must preclear shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** If you are a Non-Access person, you must preclear transactions in securities of any closed-end funds advised by John Hancock Advisers, LLC. A Non-Access person is not required to preclear other trades. However, please keep in mind that a Non-Access person is required to report securities transactions after every trade (even those that are not required to be precleared) by submitting duplicate confirmation statements, as described in section 6 of this code of ethics. 5 The preclearance policy is designed to proactively identify possible "problem trades" that raise front-running, manipulative market timing or other conflict of interest concerns (example: when an Investment Access person trades a security on the same day as a John Hancock fund). Please keep in mind that even if you receive a preclearance, or are exempt from preclearing a securities transaction, you are still prohibited from engaging in any fraud or manipulative practice (such as front-running or manipulative market timing) with respect to a John Hancock fund. You preclear a trade by following the steps outlined in the preclearance procedures, which are attached as Appendix B. Please note that: o You may not trade until clearance is received. o Clearance approval is valid only for the date granted (i.e. the preclearance date and the trade date should be the same. However, for preclearance of John Hancock mutual funds, the preclearance date may be the trade date or the order submission date) . o A separate procedure should be followed for requesting preclearance of a private placement or a derivative, as detailed in Appendix B. The Compliance Department must maintain a five-year record of all clearances of private placement purchases by Investment Access persons, and the reasons supporting the clearances. >> Ban on Short-Term Profits - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are an Investment Access person, you cannot profit from the purchase and sale (or sale and purchase) of the same (or equivalent) securities within 60 calendar days. The purpose of this policy is to address the risk, real or perceived, of front-running, manipulative market timing or other abusive practices involving short-term personal trading. Any profits realized on short-term trades must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity. This policy applies to trades for your personal accounts, those of a spouse, "significant other," minor children or family members sharing a household, as well as all accounts over which you have discretion or give advice or information. If you give away a security, it is considered a sale. The following securities are exempt from this ban on short-term profits: (1) direct obligations of the U.S. Government, (2) shares of open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper & high quality short-term debt instruments, including repurchase agreements. ***Please note that, effective May 1, 2004, the short-term profit ban for Investment Access persons now applies to shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** You may invest in derivatives or sell short provided the transaction period exceeds the 60-day holding period. 6 You may request an exemption from this policy for involuntary sales due to unforeseen corporate activity (such as a merger), or hardship reasons (such as unexpected medical expenses) by sending an e-mail to Tim Fagan, Assistant Investment Compliance Officer. >> Ban on IPOs - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are an Investment Access person, you may not acquire securities in an initial public offering. You may not purchase any newly-issued securities until the next business (trading) day after the offering date. This policy applies to trades for your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. There are two main reasons for this prohibition: (1) these purchases may suggest that persons have taken inappropriate advantage of their positions for personal profit; and (2) these purchases may create at least the appearance that an investment opportunity that should have been available to the John Hancock funds was diverted to the personal benefit of an individual employee. You may request an exemption for certain investments that do not create a potential conflict of interest, such as: (1) securities of a mutual bank or mutual insurance company received as compensation in a demutualization and other similar non-voluntary stock acquisitions; or (2) fixed rights offerings. >> Disclosure of Private Placement Conflicts - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are an Investment Access person and you own securities purchased in a private placement, you must disclose that holding when you participate in a decision to purchase or sell that same issuer's securities for a John Hancock fund. Private placements are securities exempt from SEC registration under section 4(2), section 4(6) or rules 504 -506 of the Securities Act of 1933. The investment decision must be subject to an independent review by investment personnel with no personal interest in the issuer. This policy applies to holdings in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. The purpose of this policy is to provide appropriate scrutiny in situations in which there is a potential conflict of interest. 7 >> Seven Day Blackout Period - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are a portfolio manager (or were identified to the Compliance Department as part of a portfolio management team) you are prohibited from buying or selling a security within seven calendar days before and after that security is traded for a fund that you manage unless no conflict of interest exists in relation to that security. In addition, all investment access persons are prohibited from knowingly buying or selling a security within seven calendar days before and after that security is traded for a John Hancock fund unless no conflict of interest exists in relation to that security. If a John Hancock fund trades in a security within seven calendar days before or after you trade in that security, you may be required to demonstrate that you did not know that the trade was being considered for that John Hancock fund. You will be required to sell any security purchased in violation of this policy unless it is determined that no conflict of interest exists in relation to that security. Any profits realized on trades during a seven day blackout period must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity. This policy applies to holdings in your personal accounts, those of a spouse, "significant other" or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. 6. Reports and Other Disclosures Outside the Code of Ethics >> Broker Letter/Duplicate Confirm Statements - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- As required by the Inside Information Policy, you must inform your stockbroker that you are employed by an investment adviser or broker. Your broker is subject to certain rules designed to prevent favoritism toward your accounts. You may not accept negotiated commission rates that you believe may be more favorable than the broker grants to accounts with similar characteristics. When you open a brokerage account, before any trades are made, you must: o Notify the broker-dealer with which you are opening an account that you are a registered associate of JHF; o Ask the firm in writing to have duplicate written confirmations of any trade, as well as statements or other information concerning the account, sent to the JHF Compliance Department (contact: Fred Spring), 10th Floor, 101 Huntington Avenue, Boston, MA 02199; and o Notify the JHF Compliance Department, in writing, that you have an account before you place any trades. 8 These requirements apply to holdings in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. ***Please note that, effective May 1, 2004, the broker letter/duplicate confirm statements requirement now applies to shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** 7. Reports and Other Disclosures In the Code of Ethics >> Initial Holdings Report and Annual Holdings Report - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons - ---------------------------------------- You must file an initial holdings report within 10 calendar days after becoming an Investment Access person or a Regular Access person. You must also file an annual holdings report (as of December 31st) within 30 calendar days after the calendar year end. These reports must cover all holdings in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. You must report: o holdings of all securities except: (1) direct obligations of the U.S. Government, (2) shares of open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. ***Please note that, effective May 1, 2004, you must now report holdings of shares of open-end mutual funds that are advised by John Hancock Advisers, LLC (excluding the money market funds).*** o all brokerage accounts that contain securities (including brokerage accounts that only contain securities exempt from reporting). >> Quarterly Transaction Reports - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons - ---------------------------------------- You must file a quarterly transaction report within 10 calendar days after the end of a calendar quarter if you are an Investment Access person or a Regular Access person. This report must cover all transactions during the past calendar quarter in your personal accounts, those of a spouse, "significant other," minor children or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. You must report: o transactions in all securities except: (1) direct obligations of the U.S. Government, (2) open-end mutual funds that are not advised by John Hancock Advisers, LLC, (3) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including 9 repurchase agreements. ***Please note that, effective May 1, 2004, you must now report transactions of shares of open-end mutual funds that are advised John Hancock Advisers, LLC (excluding the money market funds and any by dividend reinvestment, payroll deduction, systematic investment/withdrawal, investment election changes in the 401(k) plans and other program trades).*** o the opening of any brokerage account that contains securities (including brokerage accounts that only contain securities exempt from reporting). >> Annual Certification - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- You must provide an annual certification at a date designated by the Compliance Department that: (1) you have read and understood this code of ethics; (2) you recognize that you are subject to its policies; and (3) you have complied with its requirements. You are required to make this certification to demonstrate that you understand the importance of these policies and your responsibilities under the Code. 8. Limited Access Persons There is an additional category of persons called "Limited Access" persons. This category consists only of directors of John Hancock Advisers, LLC or the John Hancock funds who: (a) are not also officers of John Hancock Advisers, LLC; and (b) do not ordinarily obtain information about fund portfolio trades. A more detailed definition of Limited Access persons, and a list of the policies that apply to them, is attached as Appendix C. 9. Subadvisers A subadviser to a John Hancock fund has a number of responsibilities under this code of ethics, as described in Appendix D. 10. Reporting Violations If you know of any violation of our code of ethics, you have a responsibility to immediately report it. You should also report any deviations from the controls and procedures that safeguard John Hancock Funds and the assets of our clients. You can report confidentially to: o Tim Fagan (375-6205); or Susan Newton (375-1702) or o Your manager or department head 10 11. Interpretation and Enforcement This code of ethics cannot anticipate every situation in which personal interests may be in conflict with the interests of our clients. You should be responsive to the spirit and intent of this code of ethics as well as its specific provisions. When any doubt exists regarding any code of ethics provision or whether a conflict of interest with clients might exist, you should discuss the transaction beforehand with the Legal Department (contacts: Tim Fagan (375-6205) or Susan Newton (375-1702)). The code of ethics is designed to detect and prevent fraud against clients and fund investors, and to avoid the appearance of impropriety. If you feel inequitably burdened by any policy, you should feel free to contact Susan Newton or the Ethics and Business Practices Committee. Exceptions may be granted where warranted by applicable facts and circumstances. To provide assurance that policies are effective, the Compliance Department will monitor and check personal securities transaction reports and certifications against fund portfolio transactions. Other internal auditing procedures may be adopted from time to time. Additional administration and recordkeeping procedures are described in Appendix E. The Ethics and Business Practices Committee of John Hancock Funds has general responsibility for this code of ethics. The Legal Department will refer violations to the Ethics and Business Practices Committee for review and appropriate action. The following factors will be considered when the Ethics and Business Practices Committee determines a fine or other disciplinary action: o the person's position and function (senior personnel may be held to a higher standard); o the amount of the trade; o whether the funds or accounts hold the security and were trading the same day; o whether the violation was by a family member. o whether the person has had a prior violation and which policy was involved. o whether the employee self-reported the violation. You can request reconsideration of any disciplinary action by submitting a written request to the Ethics and Business Practices Committee. No less frequently than annually, a written report of all material violations and sanctions, significant conflicts of interest and other related issues will be submitted to the boards of directors of the John Hancock funds for their review. Sanctions for violations could include fines, limitation of personal trading activity, suspension or termination of the violator's position with John Hancock Funds and/or a report to the appropriate regulatory authority. 11 Appendix A: Categories of Personnel You have been notified about which of these categories applies to you, based on the Compliance Department's understanding of your current role. If you have a level of investment access beyond that category, or if you are promoted or change duties and as a result should more appropriately be included in a different category, it is your responsibility to immediately notify Tim Fagan (375-6205) or Fred Spring (375-4987). 1) Investment Access person: You are an Investment Access person if you are an employee of John Hancock Advisers, LLC, a John Hancock fund, or John Hancock Life Insurance Company or its subsidiaries who, in connection with your regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by a John Hancock fund. (examples: portfolio managers, analysts, traders) 2) Regular Access person: You are a Regular Access person if: o You are an officer (vice president and higher) or director of John Hancock Advisers, LLC or a John Hancock fund. (Some directors may be Limited Access persons--please see Appendix C for this definition.) o You are: -an employee of John Hancock Advisers, LLC, a John Hancock fund or John Hancock Life Insurance Co. or its subsidiaries , or -a director, officer (vice president and higher) or employee of John Hancock Funds, LLC who: (i) in connection with your regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of securities by a John Hancock fund; or (ii) your functions relate to the making of any recommendation to the fund regarding the purchase or sale of securities by a John Hancock fund. (examples: Investment Operations personnel, Compliance Department personnel, most Fund Financial Management personnel, investment administrative personnel, Technology Resources personnel with access to investment systems, attorneys and some legal administration personnel) 3) Non-Access person: You are a non-access person if you are an employee of John Hancock Advisers, LLC, John Hancock Funds, LLC or a John Hancock fund who does not fit the definitions of any of the other three categories (Investment Access Person, Regular Access Person or Limited Access Person). To be a non-access person, you must not obtain information regarding the purchase or sale of securities by a John Hancock fund in connection with your regular functions or duties. (examples: wholesalers, inside wholesalers, certain administrative staff) 4) Limited Access Person: Please see Appendix C for this definition. Appendix B: Preclearance Procedures CODE OF ETHICS PRE-CLEARANCE PROCEDURES You should read the Code of Ethics to determine whether you must obtain a preclearance before you enter into a securities transaction. If you are required to obtain a preclearance, you should follow the procedures detailed below. 1. Pre-clearance for Public Securities including Derivatives, Futures, Options and Selling Short: A request to pre-clear should be entered into the John Hancock Personal Trading & Reporting System. The John Hancock Personal Trading & Reporting System is located under your Start Menu on your Desktop. It can be accessed by going to JH Applications/Personal Trading & Reporting/ Personal Trading & Reporting and by entering your Web Security Services user id and password. If JH Applications or the John Hancock Personal Trading & Reporting System is not on your Desktop, please contact the HELP Desk at (617) 375-4357 for assistance. The Trade Request Screen: At times you may receive a message like "System is currently unavailable". The system is scheduled to be offline from 8:00 PM until 7:00 AM each night. Ticker/Security Cusip: Fill in this one of these fields with the proper information of the security you want to buy or sell. Then click the [Lookup] button. Select one of the hyperlinks for the desired security, and the system will populate the proper fields Ticker, Security Cusip, Security Name and Security Type automatically on the Trade Request Screen. If You Don't Know the Ticker, Cusip, or Security Name: If you do not know the full ticker, you may type in the first few letters followed by an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of Intel, but all you can remember of the ticker is that it begins with int, so you enter int* for Ticker. If any tickers beginning with int are found, they are displayed on a new screen. Select the hyperlink of the one you want, and the system will populate Security Cusip, Security Name and Security Type automatically on the Trade Request Screen. If you do not know the full cusip, you may type in the first few numbers followed by an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of Microsoft, but all you can remember of the cusip is that it begins with 594918, so you enter 594918* for Ticker. If any cusips beginning with 594918 are found, they are displayed on a new screen. Select the hyperlink of the one you want, and the system will fill in Ticker, Security Name and Security Type automatically on the Trade Request Screen. If you do not know the Ticker but have an idea of what the Security Name is, you may type in an asterisk, a few letters of the name and an asterisk * and click the [Lookup] button. For example, let's say you want to buy some shares of American Brands, so you enter *amer* for Security Name. Any securities whose names have amer in them are displayed on a new screen, where you are asked to select the hyperlink of the one you want, and the system will fill in Ticker, Cusip and Security Type automatically on the Trade Request Screen. Other Items on the Trade Request Screen: Brokerage Account: Click on the dropdown arrow to the right of the Brokerage Account field to choose the account to be used for the trade. Transaction Type: Choose one of the values displayed when you click the dropdown arrow to the right of this field. Trade Date: You may only submit trade requests for the current date. Note: One or more of these fields may not appear on the Request Entry screen if the information is not required. Required fields are determined by the compliance department. Click the [Submit Request] button to send the trade request to your compliance department. Once you click the [Submit Request] button, you will be asked to confirm the values you have entered. Review the information and click the [Confirm] button if all the information is correct. After which, you will receive immediate feedback in your web browser. (Note: We suggest that you print out this confirmation and keep it as a record of the trade you have made). After this, you can either submit another trade request or logout. 14 Attention Investment Access Persons: If the system identifies a potential violation of the Ban on Short Term Profits Rule, your request will be sent to the Compliance Department for review and you will receive feedback via the e-mail system. Starting Over: To clear everything on the screen and start over, click the [Clear Screen] button. Exiting Without Submitting the Trade Request: If you decide not to submit the trade request before clicking the [Submit Request] button, simply exit from the browser by clicking the [X] button on the upper right or by pressing [Alt+F4], or by clicking the Logout hyperlink on the lower left side of the screen. Ticker/Security Name Lookup Screen: You arrive at this screen from the Trade Request Screen, where you've clicked the [Lookup] button (see above, "If You Don't Know the Ticker, Cusip, or Security Name"). If you see the security you want to trade, you simply select its corresponding hyperlink, and you will automatically return to the Trade Request Screen, where you finish making your trade request. If the security you want to trade is not shown, that means that it is not recognized by the system under the criteria you used to look it up. Keep searching under other names (click the [Return to Request] button) until you are sure that the security is not in the system. If you determine that the desired security is not in the system, please contact a member of the compliance department to add the security for you. Contacts are listed below: Fred Spring x54987 Adding Brokerage Accounts: To access this functionality, click on the Add Brokerage Account hyperlink on the left frame of your browser screen. You will be prompted to enter the Brokerage Account Number, Brokerage Account Name, Date Opened, and Broker. When you click the [Create New Brokerage Account] button, you will receive a message that informs you whether the account was successfully created. 15 3. Pre-clearance for Private Placements and Initial Public Offerings: You may request a preclearance of private placement securities or an Initial Public Offering by contacting Fred Spring via Microsoft Outlook (please "cc." Tim Fagan on all such requests). Please keep in mind that the code of ethics prohibits Investment Access persons from purchasing securities in an initial public offering. The request must include: |_| the associate's name; |_| the associate's John Hancock Funds' company; |_| the complete name of the security; |_| the seller and whether or not the seller is one with whom the associate does business on a regular basis; |_| any potential conflict, present or future, with fund trading activity and whether the security might be offered as inducement to later recommend publicly traded securities for any fund; and |_| the date of the request. Clearance of private placements or initial public offerings may be denied if the transaction could create the appearance of impropriety. Clearance of initial public offerings will also be denied if the transaction is prohibited for a person due to his or her access category under the code of ethics. 16 Appendix C: Limited Access Persons You are a Limited Access person if you are a director of John Hancock Advisers, LLC or a John Hancock fund and you meet the two following criteria: (a) you are not an officer of John Hancock Advisers, LLC or a John Hancock fund; and (b) you do not obtain information in the ordinary course of business regarding the purchase or sale of securities by a John Hancock fund. (examples: certain directors of John Hancock Advisers, LLC or a John Hancock fund) The following policies apply to your category. These policies are described in detail in the code of ethics. o Fundamental concept o Inside information policy and procedures* o Broker letter/Duplicate Confirms* o Initial/annual holdings reports* o Quarterly transaction reports* o Annual recertification* *Exception: If you are an independent director of a John Hancock fund: o you are exempt from the broker letter/duplicate confirms requirement o you are exempt from the inside information policy and procedures o you do not have to file an initial holdings report. o you do not have to file an annual holdings report. o you do not have to file a quarterly transaction report unless you knew (or should have known) that during the 15 calendar days before or after you trade a security, either: (i) a John Hancock fund purchased or sold the same security, or (ii) a John Hancock fund or John Hancock Advisers, LLC considered purchasing or selling the same security. This policy applies to holdings in your personal accounts, those of a spouse, "significant other" or family members sharing your household, as well as all accounts over which you have discretion or give advice or information. If this situation occurs, it is your responsibility to contact Tim Fagan, Assistant Investment Compliance Officer, at (617) 375-6205 and he will assist you with the requirements of the quarterly transaction report. 17 Appendix D: Subadvisers A subadviser to a John Hancock fund has a number of responsibilities under this code of ethics. If John Hancock Advisers, LLC determines that a subadviser has failed to comply with the provisions of Rule 17j-1, John Hancock Advisers, LLC may deem the subadviser's directors, officers or employees to be subject to this code of ethics. >> Approval of Code of Ethics Each subadviser to a John Hancock fund must provide a copy of its code of ethics to the trustees of the relevant John Hancock funds for approval initially and within 60 calendar days of any material amendment. The trustees will give their approval if they determine that the code: o contains provisions reasonably necessary to prevent the subadviser's Access Persons (as defined in Rule 17j-1) from engaging in any conduct prohibited by Rule 17j-1; o requires the subadviser's Access Persons to make reports to at least the extent required in Rule 17j-1(d); o requires the subadviser to institute appropriate procedures for review of these reports by management or compliance personnel (as contemplated by Rule 17j-1(d)(3)); o provides for notification of the subadviser's Access Persons in accordance with Rule 17j-1(d)(4); and o requires the subadviser's Access Persons who are Investment Personnel to obtain the pre-clearances required by Rule 17j-1(e); >> Reports and Certifications Each subadviser must provide an annual report and certification to John Hancock Advisers, LLC and the fund's trustees in accordance with Rule 17j-1(c)(2)(ii). The subadviser must also provide other reports or information that John Hancock Advisers, LLC may reasonably request. >> Recordkeeping Requirements The subadviser must maintain all records for its Access Persons as required by Rule 17j-1(f). 18 Appendix E: Administration and Recordkeeping >> Adoption and Approval The trustees of a John Hancock fund must approve the code of ethics of an adviser, subadviser or affiliated principal underwriter before initially retaining its services. Any material change to a code of ethics of a John Hancock fund, John Hancock Funds, LLC, John Hancock Advisers, LLC or a subadviser to a fund must be approved by the trustees of the John Hancock fund, including a majority of trustees who are not interested persons, no later than six months after adoption of the material change. >> Administration No less frequently than annually, John Hancock Funds, LLC, John Hancock Advisers, LLC, each subadviser and each John Hancock fund will furnish to the trustees of each John Hancock fund a written report that: o describes issues that arose during the previous year under the code of ethics or the related procedures, including, but not limited to, information about material code or procedure violations, and o certifies that each entity has adopted procedures reasonably necessary to prevent its access persons from violating its code of ethics. >> Recordkeeping The Compliance Department will maintain: o a copy of the current code of ethics for John Hancock Funds, LLC, John Hancock Advisers, LLC, and each John Hancock fund, and a copy of each code of ethics in effect at any time within the past five years. o a record of any violation of the code of ethics, and of any action taken as a result of the violation, for six years. o a copy of each report made by an Access person under the code of ethics, for six years (the first two years in a readily accessible place). o a record of all persons, currently or within the past five years, who are or were required to make reports under the code of ethics. This record will also indicate who was responsible for reviewing these reports. o a copy of each code of ethics report to the trustees, for six years (the first two years in a readily accessible place). o a record of any decision, and the reasons supporting the decision, to approve the acquisition by an Investment Access person of initial public offering securities or private placement securities, for six years. 19 EX-99 5 exnnaudit5.txt AUDIT COMMITTEE CHARTER JOHN HANCOCK FUNDS AUDIT COMMITTEE CHARTER A. Membership. The Audit Committee shall be composed exclusively of Trustees ("Independent Trustees") who are not "interested persons" as defined in the Investment Company Act of 1940, as amended, of John Hancock Advisers, LLC and who satisfy the independence and financial literacy requirements in this charter. The Audit Committee shall be composed at least three Independent Trustees who are designated for membership from time to time by the Administration Committee, subject to ratification by the Board of Trustees. In selecting Independent Trustees to serve on the Audit Committee, the Administration Committee should select members who are free of any relationship that, in the opinion of the Administration Committee, may interfere or give the appearance of interfering with such member's individual exercise of independent judgment. Unless otherwise determined by the Board, no member of the Audit Committee may serve on the audit committee of more than two other public companies (other than another John Hancock Fund). Except as otherwise permitted by the applicable rules of the New York Stock Exchange, each member of the Audit Committee shall be independent as defined by such NYSE rules and Rule 10A-3(b)(1) of the Exchange Act. Each member of the Audit Committee must be financially literate, as such qualification is interpreted by the Board of Trustees in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Audit Committee. At least one member of the Audit Committee must have accounting or related financial management expertise, as the Board of Trustees interprets such qualification in its business judgment. B. Overview. The Audit Committee's purpose is to: 1. assist the Board of Trustee's oversight of (1) the integrity of the funds' financial statements, (2) the funds' compliance with legal and regulatory requirements (except to the extent such responsibility is delegated to another committee), (3) the independent auditor's qualifications and independence, and (4) the performance of the funds' internal audit function and independent auditors; 2. act as a liaison between the funds' independent accountants and the full Board; and 3. prepare an Audit Committee Report as required by the Securities and Exchange Commission ("SEC") to the extent required to be included in the funds' annual proxy statement or other filings. The Audit Committee shall discharge its responsibilities, and shall access the information provided by the funds' management and independent auditors, in accordance with its business judgment. Management is responsible for the preparation of the fund's financial statements and the independent auditors are responsible for auditing those financial statements. The Audit Committee and the Board of Trustees recognize that management (including the internal audit staff) and the independent auditors have more experience, expertise, resources and time, and more detailed knowledge and information regarding a fund's accounting, auditing, internal control and financial reporting practices than the Audit Committee does. Accordingly, the Audit Committee's oversight role does not provide any expert or special assurance as to the financial statements and other financial information provided by a fund to its shareholders and others. The independent auditors are responsible for auditing the funds' financial statements and for reviewing the funds' unaudited interim financial statements. The authority and responsibilities set forth in this charter do not reflect or create any duty or obligation of the Audit Committee to plan or conduct any audit, to determine or certify that any fund's financial statements are complete, accurate, fairly presented, or in accordance with generally accepted accounting principles or applicable law, or to guarantee any independent auditor's report. C. Oversight. The independent auditors shall report directly to the Audit Committee, and the Audit Committee shall be directly responsible for oversight of the work of the independent auditors, including resolution of disagreements between any fund's management and the independent auditors regarding financial reporting. In connection with its oversight role, the Audit Committee should also review with the independent auditors, from time to time as appropriate: significant risks and uncertainties with respect to the quality, accuracy or fairness of presentation of a fund's financial statements; recently disclosed problems with respect to the quality, accuracy or fairness of presentation of the financial statements of companies similarly situated to the funds and recommended actions which might be taken to prevent or mitigate the risk of problems at the funds arising from such matters; accounting for unusual transactions; adjustments arising from audits that could have a significant impact on the funds' financial reporting process; and any recent SEC comments on the funds' SEC reports, including, in particular, any compliance comments. The Audit Committee should inquire of the independent auditor concerning the quality, not just the acceptability, of the funds' accounting determinations and other judgmental areas and question whether management's choices of accounting principles are, as a whole, conservative, moderate or aggressive. D. Specific Responsibilities. The Audit Committee shall have the following duties and powers, to be exercised at such times and in such manner as the Committee shall deem necessary or appropriate: 1. To oversee the funds' auditing and accounting process. 2. To approve, and recommend to the full Board of Trustees for its ratification and approval in accord with applicable law, the selection, appointment, retention and compensation of an independent auditor for each fund prior to the engagement of such independent auditor. The Committee should meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit. The Committee should periodically consider whether, in order to assure continuing auditor independence, there should be regular rotation of the independent audit firm and obtain and review a copy of the most recent report on the independent auditor issued by the Public Company Accounting Oversight Board pursuant to Section 104 of the Sarbanes-Oxley Act. 3. To periodically review and evaluate the lead partner and other senior members of the independent auditor's team and confirm the regular rotation of the lead audit partner and reviewing partner as required by Section 203 of the Sarbanes-Oxley Act. 4. To confirm that the officers of the funds were not employed by the independent auditor, or if employed, did not participate in any capacity in the audit of the funds, in each case, during the one-audit-year period preceding the date of initiation of the audit, as required by Section 206 of the Sarbanes-Oxley Act. 5. To pre-approve all audit and non-audit services provided to each fund by its independent auditor, directly or by establishing pre-approval policies and procedures pursuant to which such services may be rendered, provided however, that any such policies and procedures are detailed as to particular services, the Audit Committee is informed of each service, and any such policies and procedures do not include the delegation of the Audit Committee's responsibilities under the Securities Exchange Act of 1934 or applicable rules or listing requirements. The Committees should periodically compare the fees paid for audit services to those paid by peer companies as a means of assessing whether the scope of audit work is sufficient. 6. To pre-approve all non-audit services provided by a fund's independent auditor to the fund's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the fund, if the engagement relates directly to the operations and financial reporting of the fund. The Committee is authorized to delegate, to the extent permitted by law, pre-approval responsibilities to one or more members of the Committee who shall report to the Committee regarding approved services at the Committee's next regularly scheduled meeting. The Committee is also authorized to adopt policies and procedures which govern the pre-approval of audit, audit-related, tax and other services provided by the independent accountants to the funds. 7. To monitor the independent auditor of each fund throughout the engagement to attempt to identify: conflicts of interest between management and the independent auditor as a result of employment relationships; the provision of prohibited non-audit services to a fund by its independent auditor; violations of audit partner rotation requirements; and prohibited independent auditor compensation arrangements whereby individuals employed by the auditor are compensated based on selling non-audit services to the fund. The independent auditors should promptly contact the Audit Committee or its Chair about any significant issue or disagreement concerning a fund's accounting practices or financial statements that is not resolved to their satisfaction or if Section 10A(b) of the Exchange Act has been implicated. 8. To meet with independent auditors, including private meetings, as necessary, management's internal auditors, and the funds' senior management (i) to review the arrangements for and scope of the annual audit and any special audits; (ii) to review the form and substance of the funds' financial statements and reports, including each fund's disclosures under "Management's Discussion of Fund Performance" and to discuss any matters of concern relating to the funds' financial statements, including any adjustments to such statements recommended by the independent accountants, or other results of an audit; (iii) to consider the independent accountants' comments with respect to the funds' financial policies, procedures and internal accounting controls and management's responses thereto; (iv) to review the resolution of any disagreements between the independent accountants and management regarding the funds' financial reporting; and (v) to review the form of opinion the independent accountants propose to render to the Board and shareholders. The Audit Committee should request from the independent auditors a frank assessment of management. 9. With respect to any listed fund, to consider whether it will recommend to the Board of Trustees that the audited financial statements be included in a fund's annual report. The Board delegates to the Audit Committee the authority to release the funds' financial statements for publication in the annual and semi-annual report, subject to the Board's right to review and ratify such financial statements following publication. With respect to each fund, to review and discuss with each fund's management and independent auditor the funds' audited financial statements and the matters about which Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU 380) requires discussion. The Audit Committee shall prepare an annual committee report for inclusion where necessary in the proxy statement of a fund relating to its annual meeting of security holders or in any other filing required by the SEC's rules. 10. To receive and consider reports on the audit functions of the independent auditors and the extent and quality of their auditing programs. 11. To oversee the adoption and implementation of any codes of ethics required under applicable law. 12. To obtain and review, at least annually, a report by the independent auditor describing: the firm's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and, to access the auditor's independence, all relationships between the independent auditor and each fund, including the disclosures required by any applicable Independence Standards Board Standard No. 1. The Audit Committee shall engage in an active dialogue with each independent auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the auditor. 13. To review with the independent auditor any problems that may be reported to it arising out of a fund's accounting, auditing or financial reporting functions and management's response, and to receive and consider reports on critical accounting policies and practices and alternative treatments discussed with management. 14. To review the procedures for allocating fund brokerage, the allocation of trades among various accounts under management and the fees and other charges for fund brokerage. 15. To receive and consider reports from the independent auditors regarding reviews of the operating and internal control structure of custodian banks and transfer agents, including procedures to safeguard fund assets. 16. To monitor securities pricing procedures and review their implementation with management, management's internal auditors, independent auditors and others as may be required. 17. To establish and monitor, or cause to be established and monitored, procedures for the receipt, retention, and treatment of complaints received by a fund regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of the investment adviser, administrator, principal underwriter or any other provider of accounting related services for a listed fund, as well as employees of the fund regarding questionable accounting or auditing matters, as and when required by applicable rules or listing requirements. The procedures currently in effect are attached as Exhibit A. 18. To report regularly to the Board of Trustees, including the Audit Committee's conclusions with respect to the independent auditor and the funds' financial statements and accounting controls. E. Subcommittees. The Audit Committee may, to the extent permitted by applicable law, form and delegate authority to one or more subcommittees (including a subcommittee consisting of a single member), as it deems appropriate from time to time under the circumstances. Any decision of a subcommittee to preapprove audit or non-audit services shall be presented to the full Audit Committee at its next meeting. F. Additional Responsibilities. The Committee shall serve as the "qualified legal compliance committee" (as such term is defined in 17 CFR Part 205)("QLCC"), the duties of which are listed on Exhibit B to this charter; and shall also perform other tasks assigned to it from time to time by the Administration Committee or the full Board, and will report findings and recommendations to the Administration Committee or the full Board, as appropriate. G. Funding. Each fund shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board of Trustees, for payment of: 1. Compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the fund. 2. Compensation to any advisers employed by the Audit Committee under its authority to engage independent counsel and other advisers. 3. Ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties. H. Governance. One member of the Committee shall be appointed as chair. The chair shall be responsible for leadership of the Committee, including scheduling meetings or reviewing and approving the schedule for them, preparing agendas or reviewing and approving them before meetings, presiding over meetings, and making reports to the Administration Committee or the full Board, as appropriate. The designation of a person as an "audit committee financial expert", within the meaning of the rules under Section 407 of the Sarbanes-Oxley Act of 2002, shall not impose any greater responsibility or liability on that person than the responsibility and liability imposed on such person as a member of the Committee, nor shall it decrease the duties and obligations of other Committee members or the Board. The compensation of Audit Committee members shall be as determined by the Board of Trustees. No member of the Audit Committee may receive, directly or indirectly, any consulting, advisory or other compensatory fee from a fund, other than fees paid in his or her capacity as a member of the Board of Trustees or a committee of the Board. The members of the Audit Committee should confirm that the minutes of the Audit Committee's meetings accurately describe the issues considered by the Committee, the process the Committee used to discuss and evaluate such issues and the Committee's final determination of how to proceed. The minutes should document the Committee's consideration of issues in a manner that demonstrates that the Committee acted with due care. I. Evaluation. At least annually, the Audit Committee evaluate its own performance, including whether the Audit Committee is meeting frequently enough to discharge its responsibilities appropriately. J. Miscellaneous. The Committee shall meet as often as it deems appropriate, with or without management, as circumstances require. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to retain independent counsel and other advisers, experts or consultants, at the funds' expense, as it determines necessary to carry out its duties. The Committee shall have direct access to such officers of and service providers to the funds as it deems desirable. K. Review. The Committee shall review this charter at least annually and shall recommend such changes to the Administration Committee or the full Board as it deems desirable. EXHIBIT A Policy for Raising and Investigating Complaints or Concerns About Accounting or Auditing Matters As contemplated by the Audit Committee Charter, the Committee has established the following procedures for: the receipt, retention and treatment of complaints received by a fund regarding accounting, internal accounting controls or auditing matters; and the confidential, anonymous submission by employees of the John Hancock Advisers, LLC or its affiliates of concerns regarding questionable accounting or auditing matters. A. Policy Objectives The objective of this policy is to provide a mechanism by which complaints and concerns regarding accounting, internal accounting controls or auditing matters may be raised and addressed without the fear or threat of retaliation. The funds desire and expects that the employees and officers of John Hancock Advisers, LLC or any other service provider to the funds will report any complaints or concerns they may have regarding accounting, internal accounting controls or auditing matters. B. Procedures for Raising Complaints and Concerns Persons with complaints regarding accounting, internal accounting controls or auditing matters or concerns regarding questionable accounting or auditing matters may submit such complaints or concerns to the attention of funds' Secretary by sending a letter or other writing to the funds' principal executive offices. Complaints and concerns may be made anonymously to any of the above individuals. In addition any complaints or concerns may also be communicated anonymously, directly to any member of the Audit Committee. C. Procedures for Investigating and Resolving Complaints and Concerns All complaints and concerns received will be promptly forwarded to the Audit Committee of the Board of Trustees or the chair of the Audit Committee, unless they are determined to be without merit by Secretary of the funds. If sent only to the chair, the chair may determine the appropriate response or may refer the issues to the entire Audit Committee. In any event, the funds' Secretary will provide a record of all complaints and concerns received (whether or not determined to have merit) to the Audit Committee each fiscal quarter. The Audit Committee will evaluate any complaints or concerns received (including those reported to the committee on a quarterly basis and which the funds' Secretary has previously determined to be without merit). If the Audit Committee requires additional information to evaluate any complaint or concern, it may conduct an investigation, including interviews of persons believed to have relevant information. The Audit Committee may, in its discretion, assume responsibility for directing or conducting any investigation or may delegate such responsibility to another person or entity. After its evaluation of the complaint or concern, the Audit Committee will authorize such follow-up actions, if any, as deemed necessary and appropriate to address the substance of the complaint or concern. The funds reserves the right to take whatever action the Audit Committee believes appropriate, up to an including discharge of any employee deemed to have engaged in improper conduct. Regardless of whether a complaint or concern is submitted anonymously, the Audit Committee will strive to keep all complaints and concerns and the identity of those who submit them and participate in any investigation as confidential as possible, limiting disclosure to those with a business need to know. John Hancock Advisers, LLC and its affiliates shall not penalize or retaliate against any person or entity for reporting a complaint or concern, unless it is determined that the complaint or concern was made with knowledge that it was false. The funds will not tolerate retaliation against any person or entity for submitting, or for cooperating in the investigation of, a complaint or concern. Moreover, any such retaliation is unlawful and may result in criminal action. Any retaliation will warrant disciplinary action against the offending party, up to and including termination of employment. John Hancock Advisers, LLC and its subadvisers shall include this policy in its employee manual and shall distribute, at least annually, the policy to all of its employees. The funds shall retain records of all complaints and concerns received, and the disposition thereof, for five years. EXHIBIT B-QLCC DUTIES AND RESPONSIBILITIES The QLCC shall adopt written procedures for the confidential receipt, retention, and consideration of any report of evidence of a material violation. The QLCC has the authority and responsibility, once a report of evidence of a material violation by a Fund, its officers, directors, employees or agents has been received by the QLCC: (i) to inform the CLO and CEO of such report (except in the case where the reporting attorney reasonably believes that it would be futile to report evidence of a material violation to the CLO and CEO, and has informed the QLCC of such belief); and (ii) to determine whether an investigation is necessary or appropriate, and, if it determines an investigation is necessary or appropriate, to: (A) notify the full board of directors; (B) initiate an investigation, which may be conducted either by the CLO or by outside attorneys; and (C) retain such additional expert personnel as the QLCC deems necessary; and, at the conclusion of such investigation, to: (A) recommend, by majority vote, that the Fund implement an appropriate response to evidence of a material violation; and (B) inform the CLO and the CEO and the Board of Trustees of the results of any such investigation and the appropriate remedial measures. (iii) by majority vote, to take all other appropriate action, including notifying the U.S. Securities and Exchange Commission in the event that the Fund fails in any material respect to implement an appropriate response that the QLCC has recommended. EX-99 6 exnnadmin6.txt ADMINISTRATION COMMITTEE CHARTER JOHN HANCOCK FUNDS ADMINISTRATION COMMITTEE CHARTER A. Composition. The Administration Committee shall be composed of all Trustees who are both "independent" as defined in the rules of the New York Stock Exchange and are not "interested persons" as defined in the Investment Company Act of 1940 of John Hancock Adviser LLC or of the Trust (the "Independent Trustees"). B. Overview. The overall charter of the Administration Committee is: (i) to review and comment on complex-wide matters to facilitate uniformity among the funds; (ii) to select and nominate Independent Trustees to be added to the Board; (iii) to oversee liaison between management and the Independent Trustees; (iv) to review the performance of the Independent Trustees as appropriate; (v) to review matters relating to the Independent Trustees, such as compensation, retirement arrangements, Committee assignments and the like; (vi) to consider matters of general corporate governance applicable to the Independent Trustees, and (vii) when appropriate, to oversee the assignment of tasks to other Committees. C. Nomination of Independent Trustees 1. Selection of Trustee Nominees. Except where the funds are legally required to provide third parties with the ability to nominate trustees, the Administration Committee shall be responsible for (i) identifying individuals qualified to become Independent Trustees and (ii) recommending to the Board of Trustees the persons to be nominated for election as Independent Trustees at any meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board by the death, resignation or removal of an Independent Trustee. Persons to serve as Trustees who are not Independent Trustees shall be nominated by the Board. 2. Criteria for Selecting Trustees. The Administration Committee shall use the criteria and the principles set forth on Annex A, as revised from time to time, to guide its trustee selection process. The Administration Committee shall periodically review the requisite skills and criteria for Independent Trustees as well as the composition of the Board as a whole. The Committee shall adopt, and periodically review and revise as it deems appropriate, procedures regarding trustee candidates recommended by shareholders. The current policy is attached as Annex A. D. Other Specific Responsibilities. The Administration Committee shall have the following duties and powers, to be exercised at such times and in such manner as the Committee shall deem necessary or appropriate: 1. To consider the allocation of activities among the various Committees and the full Board, to suggest to the Committees the degree of detail in their reports to the full Board, and to establish membership and rotation policies for Committees. 2. To consider the number of funds under supervision by the Independent Trustees and the ability of the Independent Trustees to discharge successfully their fiduciary duties and to pursue self-education in mutual fund matters. 3. To propose the amount of compensation to be paid by the funds to the Independent Trustees and to address compensation-related matters, such as expense reimbursement policies. 4. To evaluate, from time to time, the time, energy, expertise, knowledge, judgment and personal skills which Independent Trustees brings to the Board and to consider retirement policies for the Independent Trustees. 5. To participate in the development of agendas for Board and Committee meetings. 6. To consider, evaluate and make recommendations regarding the type and amount of fidelity bond, and director and officer and/or errors and omission insurance coverage, for the funds, the Board and the Independent Trustees, as applicable. 7. To consider, evaluate and make recommendations and necessary findings regarding independent legal counsel and any other advisers, experts or consultants, that may be engaged from time to time, other than as may be engaged directly by another Committee. 8. To evaluate feedback from shareholders as appropriate. Annex A includes procedures for shareholders to communicate with the members of the Administration Committee. E. Additional Responsibilities. The Committee will also perform other tasks assigned to it from time to time by full Board, and will report findings and recommendations to the full Board, as appropriate. F. Governance. One member of the Committee shall be appointed as chair. The chair shall be responsible for leadership of the Committee, including scheduling meetings or reviewing and approving the schedule for them, preparing agendas or reviewing and approving them before meetings, presiding over meetings, and making reports to the full Board, as appropriate. G. Miscellaneous. The Committee shall meet as often as it deems appropriate, with or without management, as circumstances require. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to retain special counsel and other advisers, experts or consultants, at the funds' expense, as it determines necessary to carry out its duties. The Committee shall have direct access to such officers of and service providers to the funds as it deems desirable. H. Review. The Committee shall review this Charter periodically and recommend such changes to the full Board as it deems desirable. ANNEX A General Criteria 1. Nominees should have a reputation for integrity, honesty and adherence to high ethical standards. 2. Nominees should have demonstrated business acumen, experience and ability to exercise sound judgments in matters that relate to the current and long-term objectives of the Fund(s) and should be willing and able to contribute positively to the decision-making process of the Fund(s). 3. Nominees should have a commitment to understand the Fund(s), and the responsibilities of a Trustee/Director of an investment company and to regularly attend and participate in meetings of the Board and its committees. 4. Nominees should have the ability to understand the sometimes conflicting interests of the various constituencies of the Fund, including shareholders and the management company, and to act in the interests of all shareholders. 5. Nominees should not have, nor appear to have, a conflict of interest that would impair the nominee's ability to represent the interests of all the shareholders and to fulfill the responsibilities of a director /trustee. 6. Nominees shall not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis proscribed by law. The value of diversity on the Board should be considered. Application of Criteria to Existing The renomination of existing Trustees should not be viewed as automatic, but should be based on continuing qualification under the criteria set forth above. In addition, the Administrative Committee shall consider the existing trustees' performance on the Board and any committee. Review of Shareholder Nominations Any shareholder recommendation must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934 to be considered by the Administration Committee. In evaluating a nominee recommended by a shareholder, the Administration Committee, in addition to the criteria discussed above, may consider the objectives of the shareholder in submitting that nomination and whether such objectives are consistent with the interests of all shareholders. If the Board determines to include a shareholder's candidate among the slate of nominees, the candidate's name will be placed on the Fund's proxy card. If the Administration Committee or the Board determines not to include such candidate among the Board's designated nominees and the shareholder has satisfied the requirements of Rule 14a-8, the shareholder's candidate will be treated as a nominee of the shareholder who originally nominated the candidate. In that case, the candidate will not be named on the proxy card distributed with the Fund's proxy statement. As long as an existing Independent Trustee continues, in the opinion of the Administration Committee, to satisfy the criteria listed above, the Committee generally would favor the re-nomination of an existing Trustee rather than a new candidate. Consequently, while the Administration Committee will consider nominees recommended by shareholders to serve as trustees, the Administration Committee may only act upon such recommendations if there is a vacancy on the Board or the Administration Committee determines that the selection of a new or additional Independent Trustee is in the best interests of the Fund. In the event that a vacancy arises or a change in Board membership is determined to be advisable, the Administration Committee will, in addition to any shareholder recommendations, consider candidates identified by other means, including candidates proposed by members of the Administration Committee. While it has not done so in the past, the Administration Committee may retain a consultant to assist the Committee in a search for a qualified candidate Communications from shareholders Shareholders may communicate with the members of the Board as a group or individually. Any such communication should be sent to the Board or an individual Trustee c/o the secretary of the Fund at the address on the notice of this meeting. The Secretary may determine not to forward any letter to the members of the Board that does not relate to the business of the Fund. EX-99 7 exnnproxvot7.txt PROXY VOTING POLICIES 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. -----END PRIVACY-ENHANCED MESSAGE-----