-----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, UBoBTUlT8p9OqE0QXyH57a3dxvYecv3nMMoldgTUQHqVBelemoXXe1uOyPaXUB1d VDkvEELfwc+QOhq9e8DeLQ== 0000928816-05-001164.txt : 20050830 0000928816-05-001164.hdr.sgml : 20050830 20050830121619 ACCESSION NUMBER: 0000928816-05-001164 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050830 DATE AS OF CHANGE: 20050830 EFFECTIVENESS DATE: 20050830 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: 051057759 BUSINESS ADDRESS: STREET 1: C/O JOHN HANCOCK FUNDS STREET 2: 601 CONGRESS STREET CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 617-663-3000 MAIL ADDRESS: STREET 1: C/O JOHN HANCOCK FUNDS STREET 2: 601 CONGRESS STREET CITY: BOSTON STATE: MA ZIP: 02210 FORMER COMPANY: FORMER CONFORMED NAME: PATRIOT SELECT DIVIDEND TRUST DATE OF NAME CHANGE: 19920703 N-CSR 1 psd1.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) 601 Congress Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip code) Alfred P. Ouellette Senior Attorney and Assistant Secretary 601 Congress Street Boston, Massachusetts 02110 (Name and address of agent for service) Registrant's telephone number, including area code: 617-663-4324 Date of fiscal year end: June 30 Date of reporting period: June 30, 2005 ITEM 1. REPORT TO SHAREHOLDERS. JOHN HANCOCK Patriot Select Dividend Trust 6.30.2005 Annual 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 Keith F. Hartstein, President and Chief Executive Officer of John Hancock Funds, LLC 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 Trustees & officers page 25 For more information page 33 To Our Shareholders, I am pleased to be writing to you as the new President and Chief Executive Officer of John Hancock Funds, LLC, following the departure of James A. Shepherdson to pursue other opportunities. In addition, on July 25, 2005, your fund's Board of Trustees appointed me to the roles of President and Chief Executive Officer of your fund. As a means of introduction, I have been involved in the mutual fund industry since 1985. I have been with John Hancock Funds for the last 15 years, most recently as executive vice president of retail sales and marketing and a member of the company's executive and investment committees. In my former capacity, I was responsible for all aspects of the distribution and marketing of John Hancock Funds' open-end and closed-end mutual funds. Outside of John Hancock, I have served as Chairman of the Investment Company Institute (ICI) Sales Force Marketing Committee since September 2003. It is an exciting time to be at John Hancock Funds, and I am grateful for the opportunity to lead and shape its future growth. With the acquisition of John Hancock by Manulife Financial Corporation in April 2004, we are receiving broad support toward the goal of providing our shareholders with excellent investment opportunities and a more complete lineup of choices for the discerning investor. As you may have read, John Hancock recently entered into an agreement with GMO, a Boston-based institutional money manager, to acquire eight of their mutual funds. In addition, we are in the process of adding five "Lifestyle Portfolio" funds-of-funds that blend multiple fund offerings from internal and external money managers to create a broadly diversified asset allocation portfolio. Look for more information about these exciting additions to the John Hancock family of funds in your fourth quarter shareholder newsletter. Although there has been a change in executive-level management, rest assured that the one thing that never wavers is John Hancock Funds' commitment to placing the needs of shareholders above all else. We are all dedicated to the task of working with you and your financial advisors to help you reach your long-term financial goals. Sincerely, /s/ Keith F. Hartstein Keith F. Hartstein, President and Chief Executive Officer This commentary reflects the CEO's views as of June 30, 2005. 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 diver- sified portfolio of dividend-paying securities. The Fund will normally invest- more than 65% of its total assets in securities of companies in the utilities industry. Over the last twelve months * Dividend-paying securities posted strong gains, overcoming scattered bouts of weakness during the year. * The Fund's comparatively large stake in strong-performing utility common stocks helped it outpace its Lipper peer group average. * Preferred stock holdings mostly posted gains, although lower-coupon securities lagged. [Bar chart with heading "John Hancock Patriot Select Dividend Trust" Under the heading is a note that reads "Fund performance for the year ended June 30, 2005." The chart is scaled in increments of 5% with 0% at the bottom and 25% at the top. The first bar represents the 22.06% net asset value of the Fund. The second bar represents the 8.46% market value of the Fund. The third bar represents the 6.53% yield on closing market price. The first note below the chart reads "The total returns for the Fund are with all distributions reinvested. The performance data contained within this material represents past performance, which does not guarantee future results." The second note below the chart reads "The yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price."] Top 10 issuers 5.1% NSTAR 4.9% Energy East Corp. 4.1% Baltimore Gas & Electric Co. 3.8% Sierra Pacific Power Co. 3.7% Bear Stearns Co. 3.3% CH Energy Group, Inc. 3.3% DTE Energy Co. 3.2% Citigroup, Inc. 3.1% Lehman Brothers Holdings 3.0% KeySpan Corp. As a percentage of net assets plus the value of preferred shares on June 30, 2005. 1 BY GREGORY K. PHELPS AND MARK T. MALONEY FOR THE PORTFOLIO MANAGEMENT TEAM MANAGERS' REPORT JOHN HANCOCK Patriot Select Dividend Trust Dividend-paying securities posted strong gains for the 12-month period ended June 30, 2005, overcoming scattered bouts of weakness during the year. Preferred stocks -- which are the primary emphasis of John Hancock Patriot Select Dividend Trust -- began the period on somewhat rocky footing just after the Federal Reserve Board began to raise short-term interest rates, triggering a Treasury market sell-off that put pressure on preferred-stock prices. Because preferreds make fixed payments in the form of dividends, much like bonds pay in interest, their prices tend to follow those of U.S. Treasury securities. Despite evidence of a strengthening economy and additional rate hikes throughout the remainder of 2004, preferred-stock prices moved higher, responding to investors' confidence that even though the Fed might continue its campaign of raising interest rates, those rate hikes would be small and measured, given the potential for high oil prices and rising interest rates themselves to dampen future economic growth. Preferred stocks were further boosted by strong demand, as investors continued to seek dividend-paying securities, particularly in light of the fact that changes in the federal tax code in 2003 helped make ownership of certain dividend-yielding stocks more attractive. "Dividend-paying securities posted strong gains for the 12-month period ended June 30, 2005..." Utility common stocks Among dividend-paying stocks, utility common stocks were the clear victors during the past 12 months, and ended the period as one of the overall stock market's best-performing industry groups. There was robust investor demand for utility common stocks due to their high dividend payouts, which were very attractive in a period when fixed-income investments offered investors low interest rates. Additionally, investors became increasingly bullish on the group in 2 response to utility companies' strides to reduce their debt levels and improve their balance sheets. Utility commons really surged in the final month of the period, due to the announcement of planned mergers of several large well-known players, which fueled speculation that more merger and acquisition activity was on the horizon. [Photos of Greg Phelps and Mark Maloney, flush right at top of page.] Performance For the 12 months ended June 30, 2005, John Hancock Patriot Select Dividend Trust returned 22.06% at net asset value and 8.46% 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 16.20% at net asset value, according to Lipper, Inc. The main factor driving the Fund's outperformance versus its Lipper peer group average was our larger stake in utility common stocks. They, as measured by the Dow Jones Utility Average -- which tracks the performance of 15 electric and natural gas utilities -- returned 44.24% for the year, dramatically outpacing the broader stock market, as measured by the Standard & Poor's 500 Index's return of 6.32%. "...many of our utility common stock holdings also were our best performers during the year." Chart-topping utility common stocks Given the sector's overall strength, it's not surprising that many of our utility common stock holdings also were our best performers during the year. Among the best was NSTAR, which transmits and delivers electricity to customers in eastern and central Massachusetts. It also was powered by company-specific developments, including the settlement of a contentious strike, the company's effecting a two-for-one-stock split and continued financial improvement. Another chart topper was Cinergy Corp., which performed well throughout the year and then got an added kick from the news that Duke Energy would acquire the company. Utility companies with oil, gas and/or coal operations also fared well as the price of energy skyrocketed, with holdings such as 3 Vectren Corporation, National Fuel Gas Co. and NiSource each posting impressive stock price gains. [Table at top left-hand side of page entitled "Industry distribution1." The first listing is Electric utilities 33%, the second is Multi-utilities & unregulated power 27%, the third is Gas utilities 9%, the fourth is Oil & gas exploration & production 7%, the fifth is Investment banking & brokerage 7%, the sixth is Diversified financial services 3%, the seventh is Regional banks 3%, the eighth is Agricultural products 2%, the ninth is Consumer finance 2%, the tenth is Diversified banks 2%, the eleventh is Integrated telecommunication services 2%, the twelfth is Multi-line insurance 2% and the thirteenth is Integrated oil and gas 1%.] Preferred-stock holdings: leaders and laggards Among our preferred-stock holdings, Monongahela Power Co., a subsidiary of utility holding company Alleghany Energy, was one of our top performers. It benefited from improving financial results, prompting a major ratings agency to upgrade Monongahela's credit rating. Sierra Pacific Power Co. was another winner, helped by colder weather earlier this year and an increase in rates that became effective late last year. On the flip side were our holdings in Lehman Brothers, which tread water during the period because they carried yields below those offered by newly issued securities, which muted demand for the securities. Supply glut = opportunity In the final months of the period, there was a glut of newly issued preferred stocks as companies rushed to lock in low interest rates. That influx of supply temporarily weighed on preferred-stock prices and afforded us the opportunity to buy some attractively valued, tax-advantaged issues with relatively high coupons. Among our purchases was Entergy Mississippi, an electric utility company with an improving credit profile, and insurance giant MetLife, which carried coupons of 6.25% and 6.50%, respectively. [Pie chart at middle of page with heading "Portfolio diversification1." The chart is divided into two sections (from top to left): Preferred stocks 61% and Common stocks 39%.] Outlook After chalking up substantial gains over the past two years, the utilities sector has shown no signs of retreat. Utilities continue to reap the benefits of their efforts to repair their balance sheets, 4 improve cash flows, whittle down debts and return to their core competencies by shedding non-regulated business. And with utilities looking to consolidate and cut costs, we believe that more merger and acquisition activity is likely, which we expect to provide a good underpinning for utility stocks. In addition, there is the strong possibility that unfavorable federal regulation that has dogged the industry may be repealed. Finally, there remains a strong appetite for dividends, with utility stocks being a primary beneficiary of that trend. That said, given their strong recent gains, some moderation in utility stock performance is likely in the cards. Given our forecast for slowing economic conditions and ongoing strong demand for dividend-paying securities, we believe that preferred stocks also may have the wind at their backs in the months to come. [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 NSTAR followed by an up arrow with the phrase "Investors cheer improving financial results, strike settlement, stock split." The second listing is Cinergy followed by an up arrow with the phrase "Rallies on news that Duke Energy plans to acquire it." The third listing is Lehman Brothers followed by a down arrow with the phrase "Low coupon unattractive amid higher-coupon new issues."] "...there remains a strong appetite for dividends, with utility stocks being a primary beneficiary of that trend." This commentary reflects the views of the portfolio management team through the end of the Fund's period discussed in this report. The team's statements reflect their own opinions. As such, they are in no way guarantees of future events and are not intended to be used as investment advice or a recommendation regarding any specific security. They are also subject to change at any time as market and other conditions warrant. The Fund normally will invest more than 65% of its managed assets in securities of companies in the utilities industry. Such an investment concentration makes the Fund more susceptible to factors adversely affecting the utilities industry than a 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 June 30, 2005. 5 FINANCIAL STATEMENTS FUND'S INVESTMENTS Securities owned by the Fund on June 30, 2005 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 56.26% $85,534,110 (Cost $80,041,921) Electric Utilities 21.47% 32,649,974 Alliant Energy Corp. 148,000 4,166,200 Ameren Corp. 85,400 4,722,620 CH Energy Group, Inc. 151,250 7,355,287 Cinergy Corp. 26,000 1,165,320 Consolidated Edison, Inc. 45,000 2,107,800 Great Plains Energy, Inc. 35,750 1,140,067 NSTAR 188,000 5,796,040 Progress Energy, Inc. 64,000 2,895,360 Progress Energy, Inc., (Contingent Value Obligation) (B)(I) 20,000 2,400 Xcel Energy, Inc. 169,000 3,298,880 Gas Utilities 8.94% 13,588,311 Atmos Energy Corp. 9,700 279,360 KeySpan Corp. 161,850 6,587,295 National Fuel Gas Co. 56,150 1,623,297 NiSource, Inc. 97,850 2,419,831 Peoples Energy Corp. 41,800 1,816,628 Vectren Corp. 30,000 861,900 Integrated Telecommunication Services 2.28% 3,465,708 SBC Communications, Inc. 97,700 2,320,375 Verizon Communications, Inc. 33,150 1,145,333 Multi-Utilities & Unregulated Power 23.57% 35,830,117 Dominion Resources, Inc. 46,000 3,375,940 DTE Energy Co. 155,900 7,291,443 Duke Energy Corp. 70,000 2,081,100 Energy East Corp. 242,000 7,013,160 OGE Energy Corp. 96,092 2,780,902 See notes to financial statements. 6 FINANCIAL STATEMENTS Issuer Shares Value Public Service Enterprise Group, Inc. 16,000 $973,120 Puget Energy, Inc. 121,800 2,847,684 Sierra Pacific Resources (I) 261,500 3,255,675 TECO Energy, Inc. 176,750 3,342,343 WPS Resources Corp. 51,000 2,868,750 Credit Issuer, description rating (A) Shares Value Preferred stocks 88.71% $134,874,731 (Cost $132,088,386) Agricultural Products 2.32% 3,530,000 Ocean Spray Cranberries, Inc., 6.25%, Ser A (S) BB+ 40,000 3,530,000 Broadcasting & Cable TV 0.41% 630,250 Shaw Communications, Inc., 8.50% (Canada) B+ 25,000 630,250 Consumer Finance 3.45% 5,248,600 SLM Corp., 6.97%, Ser A BBB+ 92,000 5,248,600 Diversified Banks 3.41% 5,192,250 Bank of America Corp., 6.75%, Depositary Shares, Ser VI A 96,600 5,192,250 Diversified Financial Services 4.73% 7,197,388 Citigroup, Inc., 6.213%, Depositary Shares, Ser G A 44,000 2,266,000 Citigroup, Inc., 6.231%, Depositary Shares, Ser H A 92,400 4,931,388 Electric Utilities 26.61% 40,457,020 Alabama Power Co., 5.20% BBB+ 240,000 5,992,800 Boston Edison Co., 4.25% BBB+ 64,157 5,453,345 Duquesne Light Co., 6.50% BB+ 107,000 5,574,700 Entergy Mississippi, Inc., 6.25% BB+ 84,000 2,113,128 Interstate Power & Light Co., 7.10%, Ser C BBB- 25,000 687,500 Interstate Power & Light Co., 8.375%, Ser B BBB- 46,000 1,536,400 Monongahela Power Co., $7.73, Ser L B 50,000 5,025,000 Northern Indiana Public Service Co., 4.22% BB+ 11,526 969,265 PSI Energy, Inc., 6.875% BBB- 48,000 5,016,000 Sierra Pacific Power Co., 7.80%, Ser 1 (Class A) CCC+ 205,600 5,222,240 Virginia Electric & Power Co., $6.98 BBB- 10,500 1,092,329 Virginia Electric & Power Co., $7.05 BBB- 10,000 1,040,625 Wisconsin Public Service Corp., 6.76% A 7,000 733,688 See notes to financial statements. 7 FINANCIAL STATEMENTS Credit Issuer, description rating (A) Shares Value Gas Utilities 3.68% $5,593,980 Southern Union Co., 7.55% BB+ 210,300 5,593,980 Integrated Oil & Gas 1.29% 1,955,151 Coastal Finance I, 8.375% CCC- 78,300 1,955,151 Integrated Telecommunication Services 0.28% 421,100 Telephone & Data Systems, Inc., 6.625% A- 15,000 374,100 Touch America Holdings, Inc., $6.875 (H) D 47,000 47,000 Investment Banking & Brokerage 9.94% 15,105,576 Bear Stearns Cos., Inc. (The), 5.49%, Depositary Shares, Ser G BBB 141,400 7,047,376 Bear Stearns Cos., Inc. (The), 6.15%, Depositary Shares, Ser E BBB 23,000 1,184,500 Lehman Brothers Holdings, Inc., 5.67%, Depositary Shares, Ser D BBB+ 125,600 6,217,200 Lehman Brothers Holdings, Inc., 5.94%, Depositary Shares, Ser C BBB+ 13,000 656,500 Multi-Line Insurance 3.48% 5,287,800 MetLife, Inc., 6.50%, Ser B BBB 210,000 5,287,800 Multi-Utilities & Unregulated Power 14.82% 22,525,715 Baltimore Gas & Electric Co., 6.99%, Ser 1995 Baa1 40,000 4,162,500 BGE Capital Trust II, 6.20% BBB- 190,000 4,902,000 Energy East Capital Trust I, 8.25% BBB- 147,000 3,858,750 PSEG Funding Trust II, 8.75% BB+ 30,000 813,000 Public Service Electric & Gas Co., 6.92% BB+ 30,627 3,179,465 South Carolina Electric & Gas Co., 6.52% Baa1 55,000 5,610,000 Oil & Gas Exploration & Production 10.74% 16,329,901 Anadarko Petroleum Corp., 5.46%, Depositary Shares, Ser B BBB- 48,200 4,756,737 Apache Corp., 5.68%, Depositary Shares, Ser B BBB 48,174 4,993,539 Devon Energy Corp., 6.49%, Ser A BB+ 53,500 5,590,750 Nexen, Inc., 7.35% (Canada) BB+ 37,500 988,875 Regional Banks 3.55% 5,400,000 HSBC USA, Inc., $2.8575 A2 108,000 5,400,000 See notes to financial statements. 8 FINANCIAL STATEMENTS Interest Par value Issuer, description, maturity date rate (000) Value Short-term investments 0.67% $1,013,000 (Cost $1,013,000) Commercial Paper 0.67% 1,013,000 ChevronTexaco Corp., Due 7-1-05 3.140% $1,013 1,013,000 Total investments 145.64% $221,421,841 Other assets and liabilities, net 0.40% $614,289 Fund preferred shares, at value (46.04%) ($70,000,000) Total net assets 100.00% $152,036,130
(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. (H) Non-income-producing issuer filed for protection under the Federal Bankruptcy Code or is in default of interest payment. (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 $3,530,000 or 2.32% of the Fund's net assets as of June 30, 2005. 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. 9 FINANCIAL STATEMENTS ASSETS AND LIABILITIES June 30, 2005 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 $213,143,307) $221,421,841 Cash 114 Dividends receivable 867,979 Other assets 29,963 Total assets 222,319,897 Liabilities Payable to affiliates Management fees 159,630 Other 29,931 Other payables and accrued expenses 82,150 Total liabilities 271,711 Auction Market Preferred Shares (AMPS) and accrued dividends, unlimited number of shares of beneficial interest authorized with no par value, 700 shares issued, liquidation preference of $100,000 per share 70,012,056 Net assets Common shares capital paid-in 143,161,777 Accumulated net realized gain on investments 638,157 Net unrealized appreciation of investments 8,278,534 Distributions in excess of net investment income (42,338) Net assets applicable to common shares $152,036,130 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 $15.19 See notes to financial statements. 10 FINANCIAL STATEMENTS OPERATIONS For the year ended June 30, 2005 This Statement of Operations summarizes the Fund's investment income earned and expenses incurred in operating the Fund. It also shows net gains (losses) for the period stated. Investment income Dividends $12,651,227 Interest 127,172 Total investment income 12,778,399 Expenses Investment management fees 1,709,859 Administration fees 320,599 AMPS auction fees 185,417 Registration and filing fees 67,811 Printing 47,082 Professional fees 45,035 Custodian fees 42,896 Transfer agent fees 40,875 Trustees' fees 12,175 Federal excise tax 492 Total expenses 2,472,241 Net investment income 10,306,158 Realized and unrealized gain Net realized gain on investments 911,266 Change in net unrealized appreciation (depreciation) of investments 18,420,639 Net realized and unrealized gain 19,331,905 Distributions to AMPS (1,461,944) Increase in net assets from operations $28,176,119 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 Year ended ended 6-30-04 6-30-05 Increase (decrease) in net assets From operations Net investment income $9,600,735 $10,306,158 Net realized gain 636,979 911,266 Change in net unrealized appreciation (depreciation) (2,432,023) 18,420,639 Distributions to AMPS (751,663) (1,461,944) Increase in net assets resulting from operations 7,054,028 28,176,119 Distributions to common shareholders From net investment income (10,769,063) (9,904,919) From Fund share transactions 557,883 339,016 Net assets Beginning of period 136,583,066 133,425,914 End of period 1 $133,425,914 $152,036,130 1 Includes accumulated (distribution in excess of) net investment income of $521,487 and ($42,338), respectively. See notes to financial statements. 12 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share has changed since the end of the previous period. Period ended 6-30-01 6-30-02 6-30-03 6-30-04 6-30-05 Per share operating performance Net asset value, beginning of period $13.97 $15.43 $13.77 $13.73 $13.36 Net investment income 1 1.34 1.18 1.08 0.96 1.03 Net realized and unrealized gain (loss) on investments 1.52 (1.61) 0.06 (0.17) 1.94 Distributions to AMPS (0.32) (0.15) (0.10) (0.08) (0.15) Total from investment operations 2.54 (0.58) 1.04 0.71 2.82 Less distributions to common shareholders From net investment income (1.08) (1.08) (1.08) (1.08) (0.99) Net asset value, end of period $15.43 $13.77 $13.73 $13.36 $15.19 Per share market value, end of period $14.80 $13.69 $14.72 $13.65 $13.79 Total return at market value 2 (%) 29.40 (0.45) 16.82 0.23 8.46 Ratios and supplemental data Net assets applicable to common shares, end of period (in millions) $153 $136 $137 $133 $152 Ratio of expenses to average net assets 3 (%) 1.77 1.77 1.90 1.78 1.72 Ratio of net investment income to average net assets 4 (%) 8.22 7.99 8.62 7.04 7.17 Portfolio turnover (%) 13 15 2 18 36 Senior securities Total value of AMPS outstanding (in millions) $70 $70 $70 $70 $70 Involuntary liquidation preference per unit (in thousands) $100 $100 $100 $100 $100 Average market value per unit (in thousands) $100 $100 $100 $100 $100 Asset coverage per unit 5 $316,086 $290,311 $294,629 $288,521 $316,085
See notes to financial statements. 13 Notes to Financial Highlights 1 Based on the average of the shares outstanding. 2 Assumes dividend reinvestment. 3 Ratios calculated on the basis of expenses relative to the average net assets of common shares. Without the exclusion of preferred shares, the ratio of expenses would have been 1.21%, 1.20%, 1.22%, 1.18% and 1.16%, respectively. 4 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 ratio of net investment income would have been 5.61%, 5.40%, 5.52%, 4.65% and 4.82%, respectively. 5 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 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 maturing 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. Net capital losses of $16,509 that are attributable to security transactions incurred after October 31, 2004, are treated as arising on July 1, 2005, the first day of the Fund's next taxable year. 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. The Fund may place a security on non-accrual status and reduce related investment income by ceasing current accruals or writing off interest, or dividends receivable, when the collection of income has become doubtful. 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 gain, 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. 15 During the year ended June 30, 2005, the tax character of distributions paid was as follows: ordinary income $11,366,863. As of June 30, 2005, the components of distributable earnings on a tax basis included $688,216 of undistributed ordinary income. Such distributions and distributable earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Distributions in excess of tax basis earnings and profits, if any, are reported in the Fund's financial statements as a return of capital. Use of estimates The preparation of these financial statements, in accordance with accounting principles generally accepted in the United States of America, incorporates estimates made by management in determining the reported amount of assets, liabilities, revenues and expenses of the Fund. Actual results could differ from these estimates. Note B Management fee and transactions with affiliates and others The Fund has an investment management contract with John Hancock Advisers, LLC (the "Adviser"), a wholly owned subsidiary of 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. The compensation for the year amounted to $320,599. The Fund also paid the Adviser the amount of $104 for certain publishing services, included in the printing fees and the amount of $3,279 for certain compliance costs, included in the miscellaneous expenses. The compensation of unaffiliated Trustees is borne by the Fund. The unaffiliated Trustees may elect to defer, for tax purposes, their receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan. The Fund makes investments into other John Hancock funds, as applicable, to cover its liability for the deferred compensation. Investments to cover the Fund's deferred compensation liability are recorded on the Fund's books as an other asset. The deferred compensation liability and the related other asset are always equal and are marked to market on a periodic basis to reflect any income earned by the investments, as well as any unrealized gains or losses. The Deferred Compensation Plan investments had no impact on the operations of the Fund. The Fund is listed for trading on the New York Stock Exchange (NYSE) and has filed with the NYSE its chief executive officer certification regarding compliance with the NYSE's listing standards. The Fund also files with the Securities and Exchange Commission the certification of its chief executive officer and chief accounting officer required by Section 302 of the Sarbanes-Oxley Act. 16 Note C Fund share transactions Common shares
This listing illustrates the Fund's common shares distribution 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 Year ended 6-30-05 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) -- (916) End of period 9,985,999 $142,823,677 10,010,393 $143,161,777
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 3.10% during the year ended June 30, 2005. 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 year ended June 30, 2005, aggregated $81,360,324 and $74,569,416, respectively. The cost of investments owned on June 30, 2005, including short-term investments, for federal income tax purposes was $213,176,857. Gross unrealized appreciation and depreciation of investments aggregated $16,398,533 and $8,153,549, respectively, resulting in net unrealized appreciation of $8,244,984. 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. Note E Reclassification of accounts During the year ended June 30, 2005, the Fund reclassified amounts to reflect a decrease in accumulated net realized gain on investments of $495,964, a decrease in distributions in 17 excess of net investment income of $496,880 and a decrease in capital paid-in of $916. This represents the amounts necessary to report these balances on a tax basis, excluding certain temporary differences, as of June 30, 2005. Additional adjustments may be needed in subsequent reporting periods. These reclassifications, which have no impact on the net asset value of the Fund, are primarily attributable to certain differences in the computation of distributable income and capital gains under federal tax rules versus accounting principles generally accepted in the United States of America, book and tax differences in accounting for deferred compensation and federal excise tax. The calculation of net investment income per share in the Fund's Financial Highlights excludes these adjustments. Change in Independent Auditor (unaudited) Based on the recommendation of the Audit Committee of the Fund, the Board of Trustees has determined not to retain Deloitte & Touche LLP as the Fund's Independent Registered Public Accounting Firm and voted to appoint PricewaterhouseCoopers LLP for the fiscal year ended June 30, 2006. During the two most recent fiscal years, Deloitte & Touche LLP's audit reports contained no adverse opinion or disclaimer of opinion; nor were their reports qualified as to uncertainty, audit scope or accounting principles. Further, there were no disagreements between the Fund and Deloitte & Touche LLP on accounting principles, financial statements disclosures or audit scope, which, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused them to make reference to the disagreement in their reports. 18 AUDITORS' REPORT Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of John Hancock Patriot Select Dividend Trust, We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of John Hancock Patriot Select Dividend Trust (the "Fund"), as of June 30, 2005, and the related statement of operations for the year then ended, and the statement of changes in net assets for the years ended June 30, 2004 and 2005 and the financial highlights for each of the years in the five-year period ended June 30, 2005. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned at June 30, 2005, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of June 30, 2005, and the results of its operations, the changes in its net assets and its financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts August 4, 2005 19 TAX INFORMATION Unaudited For federal income tax purposes, the following information is furnished with respect to the distributions of the Fund, if any, paid during its taxable year ended June 30, 2005. With respect to the ordinary dividends paid by the Fund for the fiscal year ended June 30, 2005, 100% of the dividends qualifies for the corporate dividends-received deduction. The Fund hereby designates the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This amount will be reflected on Form 1099-DIV for the calendar year 2005. Shareholders will be mailed a 2005 U.S. Treasury Department Form 1099-DIV in January 2006. This will reflect the total of all distributions that are taxable for calendar year 2005. 20 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. Dividends and distributions During the year ended June 30, 2005, dividends from net investment income 21 totaling $0.9900 per share were paid to shareholders. The dates of payments and the amounts per share are as follows: INCOME PAYMENT DATE DIVIDEND - --------------------------------------- July 30, 2004 $0.0900 August 31, 2004 0.0900 September 30, 2004 0.0900 October 29, 2004 0.0900 November 30, 2004 0.0900 December 31, 2004 0.0900 January 31, 2005 0.0750 February 28, 2005 0.0750 March 31, 2005 0.0750 April 29, 2005 0.0750 May 31, 2005 0.0750 June 30, 2005 0.0750 Dividend reinvestment plan The Fund offers its shareholders a Dividend Reinvestment Plan (the "Plan"), which offers the opportunity to earn compounded yields. Each holder of common shares will automatically have all distributions of dividends and capital gains reinvested by Mellon Investor Services, as Plan Agent for the common shareholders (the "Plan Agent"), unless an election is made to receive cash. Holders of common shares who elect not to participate in the Plan will receive all distributions in cash, paid by check mailed directly to the shareholder of record (or, if the common shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Shareholders whose shares are held in the name of a broker or a nominee should contact the broker or nominee to determine whether and how they may participate in the Plan. If the Fund declares a dividend payable either in common shares or in cash, non-participants will receive cash and participants in the Plan will receive the equivalent in common shares. If the market price of the common shares on the payment date of the dividend is equal to or exceeds their net asset value as determined on the payment date, participants will be issued common shares (out of authorized but unissued shares) at a value equal to the higher of net asset value or 95% of the market price. If the net asset value exceeds the market price of the common shares at such time, or if the Board of Trustees declares a dividend payable only in cash, the Plan Agent will, as agent for Plan participants, buy shares in the open market, on the New York Stock Exchange or elsewhere, for the 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. 22 When a participant withdraws from the Plan or upon termination of the Plan, as provided below, certificates for whole common shares credited to his or her account under the Plan will be issued and a cash payment will be made for any fraction of a share credited to such account. The Plan Agent maintains each shareholder's account in the Plan and furnishes monthly written confirmations of all transactions in the accounts, including information needed by the shareholders for personal and tax records. The Plan Agent will hold common shares in the account of each Plan participant in non-certificated form in the name of the participant. Proxy material relating to the shareholders' meetings of the Fund will include those shares purchased as well as shares held pursuant to the Plan. The reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable or required to be withheld on such dividends or distributions. Participants under the Plan will receive tax information annually. The amount of dividend to be reported on 1099-DIV should be: (1) in the case of shares issued by the Fund, the fair market value of such shares on the dividend payment date and (2) in the case of shares purchased by the Plan Agent in the open market, the amount of cash used by the Plan Agent to purchase shares in the open market, including the amount of cash allocated to brokerage commissions paid on such purchases. Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to all shareholders of the Fund at least 90 days before the record date for the dividend or distribution. The Plan may be amended or terminated by the Plan Agent after at least 90 days' written notice to all shareholders of the Fund. All correspondence or additional information concerning the Plan should be directed to the Plan Agent, Mellon Bank, N.A., c/o Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938 (Telephone: 1-800-852-0218). Shareholder communication and assistance If you have any questions concerning the Fund, we will be pleased to assist you. If you hold shares in your own name and not with a brokerage firm, please address all notices, correspondence, questions 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. 23 Shareholder meeting On March 2, 2005, the Annual Meeting of the Fund was held to elect five Trustees and to ratify the actions of the Trustees in selecting independent auditors for the Fund. Proxies covering 9,255,974 shares of beneficial interest were voted at the meeting. The common shareholders elected the following Trustees to serve until their respective successors are duly elected and qualified, with the votes tabulated as follows: WITHHELD FOR AUTHORITY - ------------------------------------------------------------------- James F. Carlin 9,156,909 98,451 William H. Cunningham 9,161,641 93,719 Richard P. Chapman, Jr. 9,152,239 103,121 James A. Shepherdson* 9,166,928 88,432 * Mr. James A. Shepherdson resigned, effective July 15, 2005. The preferred shareholders elected Patti McGill Peterson to serve as the Fund's Trustee until her successor is duly elected and qualified, with the votes tabulated as follows: 614 FOR, 0 AGAINST, 0 WITHHELD. The common and preferred shareholders ratified the Trustees' selection of Deloitte & Touche LLP as the Fund's independent auditor for the fiscal year ending December 31, 2005, with votes tabulated as follows: 9,139,366 FOR, 34,842 AGAINST and 81,766 ABSTAINING. 24 Board Consideration of and Continuation of Investment Advisory Agreement Section 15(c) of the Investment Company Act of 1940 (the "1940 Act") requires the Board of Trustees (the "Board") of John Hancock Patriot Select Dividend Trust (the "Fund"), including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreement and are not "interested persons" of the Fund, as defined in the 1940 Act (the "Independent Trustees"), annually to review and consider the continuation of the investment advisory agreement (the "Advisory Agreement") with John Hancock Advisers, LLC (the "Adviser") for the Fund. At meetings held on May 19-20 and June 6-7, 2005, the Board, including the Independent Trustees considered the factors and reached the conclusions described below relating to the selection of the Adviser and the continuation of the Advisory Agreement. During such meetings, the Board's Contracts/Operations Committee and the Independent Trustees also met in executive sessions with their independent legal counsel. In evaluating the Advisory Agreement, the Board, including the Contracts/Operations Committee and the Independent Trustees, reviewed a broad range of information requested for this purpose by the Independent Trustees, including but not limited to the following: (i) the investment performance of the Fund and a broader universe of relevant funds (the "Universe") selected by Lipper Inc. ("Lipper"), an independent provider of investment company data, for a range of periods, (ii) advisory and other fees incurred by, and the expense ratios of, the Fund and a peer group of comparable funds selected by Lipper (the "Peer Group"), (iii) the advisory fees of comparable portfolios of other clients of the Adviser, (iv) the Adviser's financial results and condition, including its and certain of its affiliates' profitability from services performed for the Fund, (v) breakpoints in the Fund's and the Peer Group's fees and a study undertaken at the direction of the Independent Trustees as to the allocation of the benefits of economies of scale between the Fund and the Adviser, (vi) the Adviser's record of compliance with applicable laws and regulations, with the Fund's investment policies and restrictions, and with the Fund's Code of Ethics and the structure and responsibilities of the Adviser's compliance department, (vii) the background and experience of senior management and investment professionals, and (viii) the nature, cost and character of advisory and non-investment management services provided by the Adviser and its affiliates. Nature, Extent and Quality of Services The Board considered the ability of the Adviser, based on its resources, reputation and other attributes, to attract and retain qualified investment professionals, including research, advisory, and supervisory personnel. The Board further considered the compliance programs and compliance records of the Adviser. In addition, the Board took into account the administrative services provided to the Fund by the Adviser and its affiliates. Based on the above factors, together with those referenced below, the Board concluded that, within the context of its full deliberations, the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser were sufficient to support renewal of the Advisory Agreement. Fund Performance The Board considered the performance results for the Fund over various time periods. The Board also considered these results in comparison to the performance of the Universe, as well as the Fund's benchmark indices. Lipper determined the Universe 25 for the Fund. The Board reviewed with a represen tative of Lipper the methodology used by Lipper to select the funds in the Universe and the Peer Group. The Board noted that the performance of the Fund was below the median and average performance of its Universe for most of the time periods under review, but noted that, more recently, the Fund's performance improved and was above the median and average performance of its Universe for the one-year period ended December 31, 2004. The Board also noted that the Fund's performance was not appreciably below the performance of the Lipper Closed-End Income and Preferred Funds Index during years under review, and was above the benchmark index's performance for the first quarter period ended March 31, 2005. The Board noted that, except for the one-year period ended December 31, 2004, the Fund's performance was either above or not appreciably below the performance of the Dow Jones Utility Average Index for the time periods under review. The Adviser provided information to the Board regarding factors contributing to the Fund's performance results, as well as the Adviser's outlook and investment strategy for the near future. The Board indicated its intent to continue to monitor the Fund's performance trends. Investment Advisory Fee Rates and Expenses The Board reviewed and considered the contractual investment advisory fee rate payable by the Fund to the Adviser for investment advisory services (the "Advisory Agreement Rate"). The Board received and considered information comparing the Advisory Agreement Rate and the actual management fee expense ratio with fees for the Peer Group. The Board noted that the Advisory Agreement Rate was at the high end of the range of other funds in the Peer Group, but noted that the Peer Group included very few funds. The Board also noted that the actual management fee expense ratio was higher than the median rate of the Peer Group. The Adviser explained that, in its view, the actual management fee expense ratio reported by Lipper is overstated because the Lipper analysis excludes amounts attributable to redeemable preferred shares from the denominator or asset base when converting dollars actually paid to a ratio. The Board received a more detailed analysis provided by the Adviser, which showed that the actual management fee expense ratio is in line with the industry average of other similar funds, when adjusted for leverage by including amounts attributable to redeemable preferred shares in the asset base. The Board received and considered information regarding the Fund's total operating expense ratio and its various components, including contractual advisory fees, actual advisory fees, non-management fees, transfer agent fees and custodian fees, including and excluding investment-related expenses. The Board also considered comparisons of these expenses to the Peer Group and the Universe. The Board noted that the total operating expense ratio of the Fund was higher than the Peer Group's and Universe's median total operating expense ratio. The Adviser provided additional analysis, which showed that the actual total operating expense ratio is in line with the industry average of other similar funds, when adjusted for leverage by including amounts attributable to redeemable preferred shares in the asset base. The Adviser also discussed the Lipper data and rankings, and other relevant information, for the Fund. Based on the above-referenced considerations and other factors, the Board concluded that the Fund's overall expense results and performance supported the re-approval of the Advisory Agreement. Profitability The Board received and considered a detailed profitability analysis of the 26 Adviser based on the Advisory Agreement, as well as on other relationships between the Fund and the Adviser and its affiliates. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits reported by the Adviser were not unreasonable. Economies of Scale The Board received and considered general information regarding economies of scale with respect to the management of the Fund, including the Fund's ability to appropriately benefit from economies of scale under the Fund's fee structure. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board's understanding that most of the Adviser's costs are not specific to individual Funds, but rather are incurred across a variety of products and services. The Board observed that the Advisory Agreement did not offer breakpoints. However, the Board considered the limited relevance of economies of scale in the context of a closed-end fund that, unlike an open-end fund, does not continuously offer its shares, and concluded that the fees were fair and equitable based on relevant factors, including the Fund's total expenses ranking relative to its Peer Group. Information About Services to Other Clients The Board also received information about the nature, extent and quality of services and fee rates offered by the Adviser to its other clients, including other registered investment companies, institutional investors and separate accounts. The Board concluded that the Advisory Agreement Rate was not unreasonable, taking into account fee rates offered to others by the Adviser and giving effect to differences in services covered by such fee rates Other Benefits to the Adviser The Board received information regarding potential "fall-out" or ancillary benefits received by the Adviser and its affiliates as a result of the Adviser's relationship with the Fund. Such benefits could include, among others, benefits directly attributable to the relationship of the Adviser with the Fund and benefits potentially derived from an increase in the business of the Adviser as a result of its relationship with the Fund (such as the ability to market to shareholders other financial products offered by the Adviser and its affiliates). The Board also considered the effectiveness of the Adviser's and the Fund's policies and procedures for complying with the requirements of the federal securities laws, including those relating to best execution of portfolio transactions and brokerage allocation. Other Factors and Broader Review As discussed above, the Board reviewed detailed materials received from the Adviser as part of the annual re-approval process under Section 15(c) of the 1940 Act. The Board also regularly reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of the Adviser at least quarterly, which include, among other things, a detailed portfolio review, detailed fund performance reports and compliance reports. In addition, the Board meets with portfolio managers and senior investment officers at various times throughout the year. After considering the above-described factors and based on its deliberations and its evaluation of the information described above, the Board concluded that approval of the continuation of the Advisory Agreement for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board unanimously approved the continuation of the Advisory Agreement. 27 TRUSTEES & OFFICERS This chart provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees.
Independent Trustees Name, age Number of Position(s) held with Fund Trustee John Hancock Principal occupation(s) and other of Fund funds overseen directorships during past 5 years since 1 by Trustee Charles L. Ladner, 2 Born: 1938 1992 51 Independent Chairman (since 2004); Chairman and Trustee, Dunwoody Village, Inc. (retirement services) (until 2003); Senior Vice President and Chief Financial Officer, UGI Corporation (public utility holding company) (retired 1998); Vice President and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas Partners, L.P. (until 1997) (gas distribution); Director, EnergyNorth, Inc. (until 1995); Director, Parks and History Association (since 2001). James F. Carlin, Born: 1940 1990 51 Director and Treasurer, Alpha Analytical Inc. (analytical laboratory) (since 1985); Part Owner and Treasurer, Lawrence Carlin Insurance Agency, Inc. (since 1995); Part Owner and Vice President, Mone Lawrence Carlin Insurance Agency, Inc. (since 1996); Director and Treasurer, Rizzo Associates (engineering) (until 2000); Chairman and CEO, Carlin Consolidated, Inc. (management/investments) (since 1987); Director and Partner, Proctor Carlin & Co., Inc. (until 1999); Trustee, Massachusetts Health and Education Tax Exempt Trust (since 1993); Director of the following: Uno Restaurant Corp. (until 2001), Arbella Mutual (insurance) (until 2000), HealthPlan Services, Inc. (until 1999), Flagship Healthcare, Inc. (until 1999), Carlin Insurance Agency, Inc. (until 1999); Chairman, Massachusetts Board of Higher Education (until 1999). Richard P. Chapman, Jr., 2 Born: 1935 2005 51 President and Chief Executive Officer, Brookline Bancorp Inc. (lending) (since 1972); Director, Lumber Insurance Co. (insurance) (until 2000); Chairman and Director, Northeast Retirement Services, Inc. (retirement administration) (since 1998). William H. Cunningham, Born: 1944 1995 51 Former Chancellor, University of Texas System and former President of the University of Texas, Austin, Texas; Chairman and CEO, IBT Technologies (until 2001); Director of the following: The University of Texas Investment Management Company (until 2000), Hire.com (until 2004), STC Broadcasting, Inc. and Sunrise Television Corp. (electronic manufacturing) (until 2001), Symtx, Inc. (electronic manufacturing) (since 2001), Adorno/Rogers Technology, Inc. (until 2004), Pinnacle Foods Corporation (until 2003), rateGenius (Internet 28 Independent Trustees (continued) Name, age Number of Position(s) held with Fund Trustee John Hancock Principal occupation(s) and other of Fund funds overseen directorships during past 5 years since 1 by Trustee William H. Cunningham, Born: 1944 (continued) 1995 51 service) (until 2003), Jefferson-Pilot Corporation (diversified life insurance company) (since 1985), New Century Equity Holdings (formerly Billing Concepts) (until 2001), eCertain (until 2001), ClassMap.com (until 2001), Agile Ventures (until 2001), LBJ Foundation (until 2000), Golfsmith International, Inc. (until 2000), Metamor Worldwide (until 2000), AskRed.com (until 2001), Southwest Airlines (since 2000) and Introgen (since 2000); Advisory Director, Q Investments (until 2003); Advisory Director, Chase Bank (formerly Texas Commerce Bank -- Austin) (since 1988), LIN Television (since 2002), WilTel Communications (until 2003) and Hayes Lemmerz International, Inc. (diversified automotive parts supply company) (since 2003). Ronald R. Dion, Born: 1946 1998 51 Chairman and Chief Executive Officer, R.M. Bradley & Co., Inc.; Director, The New England Council and Massachusetts Roundtable; Trustee, North Shore Medical Center; Director, Boston Stock Exchange; Director, BJ's Wholesale Club, Inc. and a corporator of the Eastern Bank; Trustee, Emmanuel College; Director, Boston Municipal Research Bureau; Member of the Advisory Board, Carroll Graduate School of Management at Boston College. John A. Moore, 2 Born: 1939 2005 51 President and Chief Executive Officer, Institute for Evaluating Health Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences International (health research) (until 2003); Principal, Hollyhouse (consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002). Patti McGill Peterson, 2 Born: 1943 2005 51 Executive Director, Council for International Exchange of Scholars and Vice President, Institute of International Education (since 1998); Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until 1998); Former President of Wells College and St. Lawrence University; Director, Niagara Mohawk Power Corporation (until 2003); Director, Ford Foundation, International Fellowships Program (since 2002); Director, Lois Roth Endowment (since 2002); Director, Council for International Educational Exchange (since 2003). Steven R. Pruchansky, Born: 1944 1992 51 Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2000); Director and President, Greenscapes of Southwest Florida, Inc. (until 2000); Managing Director, JonJames, LLC (real estate) (since 2001); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991). 29 Principal officers who are not Trustees Name, age Position(s) held with Fund Officer Principal occupation(s) and of Fund directorships during past 5 years since Keith F. Hartstein, Born: 1956 2005 President and Chief Executive Officer Senior Vice President, Manulife Financial Corporation (since 2004); Director, President and Chief Executive Officer, John Hancock Advisers, LLC (the "Adviser") and The Berkeley Financial Group, LLC ("The Berkeley Group") (holding company); Director, President and Chief Executive Officer, John Hancock Funds, LLC. ("John Hancock Funds"); Director, President and Chief Executive Officer, Sovereign Asset Management Corporation ("SAMCorp."); Director, John Hancock Signature Services, Inc.; President, John Hancock Trust; Chairman and President, NM Capital Management, Inc. (NM Capital) (since 2005); Chairman, Investment Company Institute Sales Force Marketing Committee (since 2003); Executive Vice President, John Hancock Funds, LLC (until 2005). William H. King, Born: 1952 1992 Vice President and Treasurer Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each of the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001). Francis V. Knox, Jr., Born: 1947 2005 Vice President and Chief Compliance Officer Vice President and Chief Compliance Officer for John Hancock Investment Company, John Hancock Life Insurance Company (U.S.A.), John Hancock Life Insurance Company and John Hancock Funds (since 2005); Fidelity Investments -- Vice President and Assistant Treasurer, Fidelity Group of Funds (until 2004); Fidelity Investments -- Vice President and Ethics & Compliance Officer (until 2001).
The business address for all Trustees and Officers is 601 Congress Street, Boston, Massachusetts 02210-2805. The Statement of Additional Information of the Fund includes additional information about members of the Board of Trustees of the Fund and is available, without charge, upon request, by calling 1-800-225-5291. 1 Each Trustee serves until resignation, retirement age or until his or her successor is elected. 2 Member of Audit Committee. 30 31 32 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 Investment adviser John Hancock Advisers, LLC 601 Congress Street Boston, MA 02210-2805 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 Independent registered public accounting firm Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116-5022 Stock symbol Listed New York Stock Exchange: DIV For shareholder assistance refer to page 23 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. 33 [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 - -------------- P300A 6/05 8/05 ITEM 2. CODE OF ETHICS. As of the end of the period, June 30, 2005, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the "Senior Financial Officers"). A copy of the code of ethics is filed as an exhibit to this Form N-CSR. The code of ethics was amended effective February 1, 2005 to address new Rule 204A-1 under the Investment Advisers Act of 1940 and to make other related changes. The most significant amendments were: (a) Broadening of the General Principles of the code to cover compliance with all federal securities laws. (b) Eliminating the interim requirements (since the first quarter of 2004) for access persons to preclear their personal trades of John Hancock mutual funds. This was replaced by post-trade reporting and a 30 day hold requirement for all employees. (c) A new requirement for "heightened preclearance" with investment supervisors by any access person trading in a personal position worth $100,000 or more. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Charles L. Ladner is the audit committee financial expert and is "independent", pursuant to general instructions on Form N-CSR Item 3. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees The aggregate fees billed for professional services rendered by the principal accountant(s) for the audit of the registrant's annual financial statements or services that are normally provided by the accountant(s) in connection with statutory and regulatory filings or engagements amounted to $31,250 for the fiscal year ended June 30, 2004 and $33,000 for the fiscal year ended June 30, 2005. These fees were billed to the registrant and were approved by the registrant's audit committee. (b) Audit-Related Services There were no audit-related fees during the fiscal year ended June 30, 2004 and fiscal year ended June 30, 2005 billed to the registrant or to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant ("control affiliates"). (c) Tax Fees The aggregate fees billed for professional services rendered by the principal accountant(s) for the tax compliance, tax advice and tax planning ("tax fees") amounted to $2,250 for the fiscal year ended June 30, 2004 and $2,400 for the fiscal year ended June 30, 2005. The nature of the services comprising the tax fees was the review of the registrant's income tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant's audit committee. There were no tax fees billed to the control affiliates. (d) All Other Fees The all other fees billed to the registrant for products and services provided by the principal accountant were $4,000 for the fiscal year ended June 30, 2004 and $4,000 for the fiscal year ended June 30, 2005. There were no other fees during the fiscal year ended June 30, 2004 and June 30, 2005 billed to control affiliates for products and services provided by the principal accountant. The nature of the services comprising the all other fees was related to the principal accountant's report on the registrant's Eligible Asset Coverage. These fees were approved by the registrant's audit committee. (e)(1) See attachment "Approval of Audit, Audit-related, Tax and Other Services", with the audit committee pre-approval policies and procedures. (e)(2) There were no fees that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended June 30, 2004 and June 30, 2005 on behalf of the registrant or on behalf of the control affiliates that relate directly to the operations and financial reporting of the registrant. (f) According to the registrant's principal accountant, for the fiscal year ended June 30, 2005, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%. (g) The aggregate non-audit fees billed by the registrant's accountant(s) for services rendered to the registrant and rendered to the registrant's control affiliates for each of the last two fiscal years of the registrant were $41,187.50 for the fiscal year ended June 30, 2004, and $71,400 for the fiscal year ended June 30, 2005. (h) The audit committee of the registrant has considered the non-audit services provided by the registrant's principal accountant(s) to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant(s)' independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows: Charles L. Ladner - Chairman Richard P. Chapman, Jr. Dr. John A. Moore Patti McGill Peterson ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. See attached Exhibit "Proxy Voting Policies and Procedures". ITEM 8. 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. (a) The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached "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 financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of Ethics for Senior Financial Officers is attached. (a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference. (c)(1) Proxy Voting Policies and Procedures are attached. (c)(2) Submission of Matters to a Vote of Security Holders is attached. See attached "John Hancock Funds - Administration Committee Charter". (c)(3) Approval of Audit, Audit-related, Tax and Other Services is attached. (c)(4) 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: /s/ Keith F. Hartstein ------------------------------ Keith F. Hartstein President and Chief Executive Officer Date: August 29, 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: /s/ Keith F. Hartstein ------------------------------ Keith F. Hartstein President and Chief Executive Officer Date: August 29, 2005 By: /s/ William H. King ------------------------------ William H. King Vice President and Treasurer Date: August 29, 2005 EX-99.CERT 2 exnn2.txt CERTIFICATION CERTIFICATION I, Keith F. Hartstein, 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 Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) 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: August 29, 2005 /s/ Keith F. Hartstein - ------------------------------ Keith F. Hartstein 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"); 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 Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) 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: August 29, 2005 /s/ William H. King - ------------------------------ 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. /s/ Keith F. Hartstein - ------------------------------ Keith F. Hartstein President and Chief Executive Officer Dated: August 29, 2005 /s/ William H. King - ------------------------------ William H. King Vice President and Treasurer Dated: August 29, 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 Owner: Tim Fagan Administrator: Tim Fagan Last Revision Date: 02/05 Next Revision Date: 05/05 This is the code of ethics of: o John Hancock Advisers, LLC o Sovereign Asset Management Co. o each open-end and closed-end fund advised by John Hancock Advisers, LLC o John Hancock Funds, LLC (together, called "John Hancock Funds") 1. General Principles Each person within the John Hancock Funds organization is responsible for maintaining the very highest ethical standards when conducting our business. This means that: o You have a fiduciary 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. o You must treat as confidential any information concerning the identity of security holdings and financial circumstances of clients. o You must comply with all applicable federal securities laws. o You must promptly report any violation of this code of ethics that comes to your attention to the Chief Compliance Officer, Timothy M. Fagan, or the Chief Legal Officer, Susan S. Newton. The General Principles discussed above govern all conduct, whether or not the conduct is also covered by more specific standards and procedures in this code of ethics. As described below under the heading "Interpretation and Enforcement", failure to comply with the code of ethics may result in disciplinary action, including termination of employment. 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 advised by John Hancock Advisers, LLC or Sovereign Asset Management Co.). 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 or holdings of the John Hancock funds or accounts. Certain provisions apply to trustees of the John Hancock mutual funds and closed-end funds-see Appendix C for more information. Please note that if a policy described below applies to you, it also applies all accounts over which you have a beneficial interest. Normally, you will be deemed to have a beneficial interest in 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 Investment 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 Timothy M. Fagan, Chief 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. - --------------------------------------- -------------------------------------- -------------------------------------- "Investment Access" person "Regular Access" person "Non-Access" person A person who regularly participates A person who regularly obtains A person who does not regularly in a fund's investment process or information regarding (1) fund participate in a fund's investment makes securities recommendations portfolio trades or (2) non-public process or obtain information to clients. information regarding holdings or regarding fund portfolio trades. securities recommendations to clients. examples: examples: examples: - --------- --------- --------- o portfolio managers o personnel in Investment o wholesalers o analysts Operations or Compliance o inside wholesalers who o traders o most FFM personnel don't attend investment o Technology personnel with "morning meetings" access to investment systems o certain administrative o attorneys and some legal personnel administration personnel o investment admin. personnel - --------------------------------------- -------------------------------------- --------------------------------------
3. Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions? If this code of ethics describes "Personal Trading Requirements" (i.e. John Hancock Mutual Fund reporting requirement and holding period, the preclearance requirement, the ban on short-term profits, the ban on IPOs, the disclosure of private placement conflicts and the reporting requirements) that apply to your access category as described above, then the requirements apply to trades for any account over which you have a beneficial interest. Normally, this includes 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. This includes all brokerage accounts that contain securities (including brokerage accounts that only contain securities exempt from reporting). Accounts over which you have no direct or indirect influence or control are exempt. To prevent potential violations of this code of ethics, you are strongly encouraged to request clarification for any accounts that are in question. These personal trading requirements do not apply to the following securities: o Direct obligations of the U.S. government (e.g., treasury securities); o Bankers' acceptances, bank certificates of deposit, commercial paper, and high quality short-term debt obligations, including repurchase agreements; o Shares of open-end mutual funds that are not advised or sub-advised by John Hancock Advisers or by John Hancock or Manulife entities; o Shares issued by money market funds; and o Securities in accounts over which you have no direct or indirect influence or control. Except as noted above, the Personal Trading Requirements apply to all securities, including: o stocks or bonds; o government securities that are not direct obligations of the U.S. government, such as Fannie Mae or municipal securities; o Shares of all closed-end funds; o Options on securities, on indexes, and on currencies; o All kinds of limited partnerships; o Foreign unit trusts and foreign mutual funds; o Private investment funds and hedge funds; and o Futures, investment contracts or any other instrument that is considered a "security" under the Investment Advisers Act. Different requirements apply to shares of open-end mutual funds that are advised or sub-advised by John Hancock Advisers or by John Hancock or Manulife entities-see the section below titled "John Hancock Mutual Funds Reporting Requirement and Holding Period". 4. Overview of Policies - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- 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 - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Policy regarding dissemination of mutual fund portfolio information yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Policies in the code - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Restriction on gifts yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- John Hancock mutual funds reporting requirement and holding period yes yes yes - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Pre-clearance requirement yes yes Limited - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- Heightened preclearance of securities transactions for "Significant Personal Positions" yes yes no - ------------------------------------------------------ ---------------------- ---------------------- ---------------------- 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 - ------------------------------------------------------ ---------------------- ---------------------- ----------------------
5. 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 position of actual or potential conflict. This Policy for officers and employees 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. This Policy includes significant requirements to be followed if your personal securities holdings overlap with John Hancock Funds investment activity. For example, if you or a member of your family own: o a 5% or greater interest in a company, John Hancock Funds and its affiliates may not make any investment in that company; o a 1% or greater interest in a company, you cannot participate in any decision by John Hancock Funds and its affiliates to buy or sell that company's securities; o ANY interest in a company, you cannot recommend or participate in a decision by John Hancock Funds and its affiliates to buy or sell that company's securities unless your personal interest is fully disclosed at all stages of the investment decision. (This is just a summary of this requirement-please read Section IV of the Company Conflict and Business Practices Policy for more detailed information.) 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 7 of this code of ethics) >> Policy Regarding Dissemination of Mutual Fund Portfolio Information - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- Information about securities held in a mutual fund cannot be disclosed except in accordance with this Policy, which generally requires time delays of approximately one month and public posting of the information to ensure that it uniformly enters the public domain. 6. 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 (for example, gifts) 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. >> John Hancock Mutual Funds Reporting Requirement and Holding Period - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- You must follow a reporting requirement and a holding period requirement if you purchase either: o a "John Hancock Mutual Fund" (i.e. a mutual fund that is advised by John Hancock Advisers or by John Hancock or Manulife entity, excluding the money market funds and any dividend reinvestment, payroll deduction, systematic investment/withdrawal and other program trades); or o a "John Hancock Variable Product" (i.e. contacts funded by insurance company separate accounts that use one or more portfolios of Manufacturers Investment Trust or John Hancock Variable Series Trust). Reporting Requirement: You must report your holdings and your trades in a John Hancock Mutual Fund or a John Hancock Variable Product. This is not a preclearance requirement-you can report your holdings after you trade by submitting duplicate confirmation statements to the Investment Compliance Department. If you are an Investment Access Person or a Regular Access Person, you must also make sure that your holdings in a John Hancock Mutual Fund are included in your Initial Holdings Report (upon hire) and Annual Holdings Report (each year end). If you purchase a John Hancock Variable Product, you must notify the Investment Compliance Department. The Investment Compliance Department will then obtain directly from the contract administrators the personal trade and holdings information regarding the portfolios underlying the Manulife or John Hancock variable insurance contracts. The Investment Compliance Department will obtain personal securities trade and holdings information in the 401(k) plans for John Hancock Funds or John Hancock employees directly from the plan administrators. Holding Requirement: You cannot profit from the purchase and sale of a John Hancock Mutual Fund within 30 calendar days. The purpose of this policy is to address the risk, real or perceived, of manipulative market timing or other abusive practices involving short-term personal trading in the John Hancock Mutual Funds. 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, upon determination by the Compliance and Business Practices Committee. If you give away a security, it is considered a sale. 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 Timothy M. Fagan, Chief Compliance Officer. >> Preclearance of Securities Transactions - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Also, for a limited category of trades: -------------------------- Non-Access Persons - ---------------------------------------- Limited Category of Trades for Non-Access Persons: 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 requiring your broker to submit duplicate confirmation statements, as described in section 7 of this code of ethics. Investment Access persons and Regular 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 in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". 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. How to preclear: 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. o A separate procedure should be followed for requesting preclearance of a private placement or a derivative, as detailed in Appendix B. The Investment 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. 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). >> Heightened Preclearance of Securities Transactions for "Significant Personal Positions" - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons - ---------------------------------------- If you are an Investment Access person or Regular Access person with a personal securities position that is worth $100,000 or more, this is deemed to be a "Significant Personal Position". This applies to any personal securities positions in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". Before you make personal trades to establish, increase or decrease a Significant Personal Position, you must notify either the Chief Fixed Income Officer or the Chief Equity Officer that (1) you intend to trade in a Significant Personal Position and (2) confirm that you are not aware of any clients for whom related trades should be completed first. You must receive their pre-approval to proceed--their approval will be based on their conclusion that your personal trade in a Significant Personal Position will not "front-run" any action that John Hancock Funds should take for a client. This Heightened Preclearance requirement is in addition to, not in place of, the regular preclearance requirement described above-you must also receive the regular preclearance before you trade. >> 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. This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". You may invest in derivatives or sell short provided the transaction period exceeds the 60-day holding period. If you give away a security, it is considered a sale. 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, upon determination by the Compliance and Business Practices Committee. 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 Timothy M. Fagan, Chief 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 (IPO). You may not purchase any newly-issued securities until the next business (trading) day after the offering date. This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". 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; (2) fixed rights offerings; or (3) a family member's participation as a form of employment compensation in their employer's IPO. >> 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. This applies to any private placement holdings in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". 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. The purpose of this policy is to provide appropriate scrutiny in situations in which there is a potential conflict of interest. >> Seven Day Blackout Period - ---------------------------------------- Applies to: Investment Access Persons - ---------------------------------------- If you are a portfolio manager (or were identified to the Investment 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 (as determined by the Compliance and Ethics Committee). 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. This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions". 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 (as determined by the Compliance and Ethics Committee). Any profits realized on trades determined by the Compliance and Ethics Committee to be in violation of this policy must be surrendered by check payable to John Hancock Advisers, LLC and will be contributed by John Hancock Advisers, LLC to a charity. 7. 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 a brokerage account is opened for which you have a beneficial interest, 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 Investment Compliance Department (contact: Fred Spring), 10th Floor, 101 Huntington Avenue, Boston, MA 02199; and o Notify the JHF Investment Compliance Department, in writing, that you have an account before you place any trades. This applies to any personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions" as well as trades in John Hancock Mutual Funds and John Hancock Variable Products. The Investment Compliance Department may rely on information submitted by your broker as part of your reporting requirements under this code of ethics. 8. 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. The information must be current as of a date no more than 45 days prior to your becoming an Investment Access person or a Regular Access person. You must also file an annual holdings report (as of December 31st) within 45 calendar days after the calendar year end. This applies to any personal securities holdings in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions" as well as holdings in John Hancock Mutual Funds and John Hancock Variable Products. Your reports must include: o the title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security; o the name of any broker, dealer or bank with which you maintain an account; and o the date that you submit the report. >> Quarterly Transaction Reports - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons - ---------------------------------------- You must file a quarterly transaction report within 30 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 for any accounts and personal securities trades in the categories described above in the section "Which Accounts and Securities are Subject to the Code's Personal Trading Restrictions" as well as transactions in John Hancock Mutual Funds and John Hancock Variable Products. You must submit a quarterly report even if you have no transactions during the quarter. Your quarterly transaction report must include the following information about these transactions: o the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved; o the nature of the transaction (i.e. purchase, sale or any other type of acquisition or disposition); o the price at which the transaction was effected; o the name of the broker, dealer or bank with or through which the transaction was effected; and o the date that you submit the report. >> Annual Certification - ---------------------------------------- Applies to: Investment Access Persons Regular Access Persons Non-Access Persons - ---------------------------------------- At least annually (or additionally when the code of ethics has been significantly changed), you must provide a certification at a date designated by the Investment 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 of ethics. 9. 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. 10. Subadvisers A subadviser to a John Hancock fund has a number of code of ethics responsibilities, as described in Appendix D. 11. Reporting Violations If you know of any violation of our code of ethics, you have a responsibility to promptly 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 request confidential treatment of your reporting action. You can report violations to: Alfred P. Ouellette, Senior Attorney and Assistant Secretary (617) 663-4324 12. 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 in advance with the Chief Compliance Officer Timothy M. Fagan, (617-375-6205) or the Chief Legal Officer Susan Newton (617-375-1702)). 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 Timothy Fagan, Susan Newton or the Compliance and Business Practices Committee. Exceptions may be granted where warranted by applicable facts and circumstances. For example, exemption for some Personal Trading Requirements may be granted for transactions effected pursuant to an automatic investment plan. To provide assurance that policies are effective, the Investment Compliance Department will monitor and check personal securities transaction reports and certifications against fund portfolio transactions. Additional administration and recordkeeping procedures are described in Appendix E. The Chief Compliance Officer has general administrative responsibility for this code of ethics, and will administer procedures to review personal trading reports. The Compliance and Business Practices Committee of John Hancock Funds approves amendments to the code of ethics and dispenses sanctions for violations of the code of ethics. Accordingly, the Investment Compliance Department will refer violations to the Complaince and Business Practices Committee for review and appropriate action. The following factors will be considered when the Compliance 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 Compliance 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. 13. Education of Employees The Investment Compliance Department will provide a paper copy or electronic version of the code of ethics (and any amendments) to each person subject to this code of ethics. The Investment Compliance Department will also administer training of employees on the principles and procedures of the code of ethics. Appendix A: Categories of Personnel You have been notified about which of these categories applies to you, based on the Investment 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 the Chief Compliance Officer Timothy M. Fagan, (617-375-6205) or the Code of Ethics Administrator Fredrick Spring (617-375-4987). 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 you do not fit the definition of Investment Access Person, but you do fit one of the following two sub-categories: 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 has access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund or who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic. (examples: Investment Operations personnel, Investment 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 or nonpublic information regarding the portfolio holdings 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 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 Programs/Personal Trading & Reporting/ Personal Trading & Reporting and by entering your Web Security Services user id and password. If the John Hancock Personal Trading & Reporting System is not on your Desktop, please contact the HELP Desk at (617) 572-6950 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. [GRAPHIC: Trade Request Screen] 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 Investment Compliance Department. Click the [Submit Request] button to send the trade request to your Investment 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. 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 Investment 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 Investment 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. [GRAPHIC: Add Brokerage Account screen] 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. Appendix C: Limited Access Persons There are two types of Limited Access Persons-(1) Certain directors of the Adviser and (2) the Independent Trustees/Directors of the Funds. (1) Certain Directors of the Adviser: You are a Limited Access person if you are a director of John Hancock Advisers, LLC or Sovereign Asset Management Co. and you meet the three following criteria: (a) you are not also an officer of John Hancock Advisers, LLC, Sovereign Asset Management Co. or a John Hancock fund; (b) you do not have access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any John Hancock fund or account; and (c) you are not involved in making securities recommendations to clients and do not have access to such recommendations that are nonpublic. (examples: directors of John Hancock Advisers, LLC or Sovereign Asset Management Co. who are not involved in the daily operations of the adviser) If you are a Limited Access Person who fits this definition, the following policies apply to your category. These policies are described in detail in the code of ethics. o General principles o Inside information policy and procedures o Broker letter/Duplicate Confirms o Initial/annual holdings reports o Quarterly transaction reports o Annual recertification Preclearance requirement LIMITED: You only need to preclear any direct or indirect acquisition of beneficial ownership in any security in an initial public offering (an IPO) or in a limited offering (i.e. a private placement). To request preclearance of these securities, contact Timothy Fagan at tfagan@jhancock.com and/or Fredrick Spring at fspring@jhancock.com. - --------------- *A Limited Access Person may complete this requirement under the code of ethics of another Manulife/John Hancock adviser or fund by the applicable regulatory deadlines and arrange for copies of the required information to be sent to the John Hancock Funds Compliance Department. - --------------- (2) The Independent Trustees/Directors of the Funds: If you are an independent trustee/director to a John Hancock fund (i.e. not an "interested person" of the fund within the meaning of the Investment Company Act of 1940), the following policies apply to your category. These policies are described in detail in the code of ethics. o General principles o Annual recertification o Quarterly transaction report, but only if 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 Timothy M. Fagan, Chief Compliance Officer, at (617) 375-6205 and he will assist you with the requirements of the quarterly transaction report. This means that the independent trustees of the funds will not usually be required to file a quarterly transaction report-they are only required to file in the situation described above. Appendix D: Subadvisers Each subadviser to a John Hancock fund is subject to its own code of ethics, which must meet the requirements of Rule 17j-1 and Rule 204A-1. 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). 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 Investment 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. EX-99 5 exnnaudcom5.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 exnnadmincom6.txt ADMINISTRATION COMMITTEE CHARTER JOHN HANCOCK FUNDS ADMINISTRATION COMMITTEE CHARTER A. Composition. The Administration Committee shall be composed entirely of Trustees who are "independent" as defined in the rules of the New York Stock Exchange ("NYSE") and the NASDAQ Stock Market, Inc. ("NASDAQ") or any other exchange, as applicable and are not "interested persons" as defined in the Investment Company Act of 1940 of any of the funds, or any fund's investment adviser or principal underwriter (the "Independent Trustees"). All of the Board's Independent Trustees shall be members of the Administration Committee. B. Overview. The overall charter of the Administration Committee is: (i) to review and comment on complex-wide matters to facilitate uniformity among, and administration of, the funds; (ii) to oversee liaison between management and the Independent Trustees; (iii) to review matters relating to the Independent Trustees, such as retirement arrangements that have not been assigned to another committee; (iv) to review the performance of the Independent Trustees as appropriate; and (v) when appropriate, to oversee the assignment of tasks to other Committees. C. 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 number of funds under supervision by the Independent Trustees and the ability of the Independent Trustees to discharge successfully their fiduciary duties. 2. To evaluate, from time to time, the retirement policies for the Independent Trustees. 3. To participate in the development of agendas for Board and Committee meetings. 4. 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. 5. To identify qualified individuals to serve as Chief Compliance Officer ("CCO"), and recommend an appropriate candidate to the Board, as needed from time to time. The Administration Committee shall assist the Board in monitoring: (i) the performance of the CCO and (ii) the cooperation of the adviser(s) and other service providers with the CCO, including the requirement of regular reports by the CCO to the Administration Committee and to the Board. The Administration Committee shall have the power to annually review the CCO's responsibilities and the extent of his or her authority and to conduct annual compensation and retention review with the CCO and make appropriate recommendations to the Board. 6. 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. 7. To evaluate feedback from shareholders as appropriate. D. 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 at each Regular Board meeting following a Committee meeting, as appropriate. E. Governance. The Chairman of the Board shall serve as the chair of the Administration Committee. 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. F. 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. G. Review. The Committee shall review this Charter periodically and recommend such changes to the full Board as it deems desirable. 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-----