ITEM 1. REPORT TO STOCKHOLDERS
John Hancock
Patriot
Preferred
Dividend Fund
ANNUAL REPORT
5.31.03
[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."]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 9
Trustees & officers
page 23
For your information
page 29
Dear Fellow Shareholders,
After a weak first quarter 2003 due to the stalled economy, rising oil
prices and concerns about corporate earnings and the war in Iraq, the
stock market staged a strong rebound in April and May, with the end of
war and better-than-expected first-quarter corporate earnings. As a
result, the major indexes wiped out their first-quarter losses and wound
up gaining ground year to date through May 31, 2003. The Dow Jones
Industrial Average returned 7.17% and the Standard & Poor's 500 Index
rose 10.34%. A rebound in the distressed technology sector sent the
tech-heavy Nasdaq Composite Index up 19.50%. Bonds, which have
outperformed stocks for the last three years, continued their upward
trend this year, as investors still sought their relative safety and
growing demand pushed bond prices up.
After the jarring stock market losses of the last three years, it's a
relief for investors to be reminded that the market is indeed cyclical,
and does eventually move up -- not just down. But while the stock market
has been making its way back, the ride has been extremely volatile.
Uncertainty still abounds about the strength of the economy,
geopolitical issues, corporate governance problems, rising unemployment
and the sustainability of corporate earnings growth. Even though the
statistics suggest we might be emerging from this long, difficult bear
market, we're not quite ready to call it history.
While no one can predict whether this market upturn can be sustained,
and when the bear market cycle will turn, investors can take charge of
how they maneuver through such uncertain times. First, take a look at
how your portfolio is allocated among stocks, bonds and cash to make
sure it's in the proper balance. Work with your investment professional,
who knows your long-term goals and can help keep you on the right track,
rather than being lured by today's stars, which could wind up tomorrow's
laggards. And as always, keep a long-term investment horizon. We believe
this offers the best way for you to survive the tough times and reach
your investment objectives.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
This commentary reflects the chairman's views as of May 31, 2003. They
are subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
to provide high
current income,
consistent with
preservation of
capital, by invest-
ing primarily in
preferred stocks.
Over the last twelve months
* Preferred stocks performed well as interest rates fell and a dividend-
tax cut loomed.
* Utility common stocks staged a second-half rally as demand strengthened.
* The Fund benefited from good security selection.
[Bar chart with heading "John Hancock Patriot Preferred Dividend Fund."
Under the heading is a note that reads "Fund performance for the year
ended May 31, 2003." The chart is scaled in increments of 7% with 0% at
the bottom and 14% at the top. The first bar represents the 13.14% total
return for John Hancock Patriot Preferred dividend Fund. A note below the
chart reads "The total return for the Fund is at net asset value with all
distributions reinvested."]
Top 10 issuers
5.5% Lehman Brothers Holdings, Inc.
5.2% Citigroup, Inc.
5.1% Bear Stearns Companies, Inc.
4.8% HSBC USA, Inc.
4.4% Alabama Power Co.
4.3% Anadarko Petroleum Corp.
3.9% J.P. Morgan Chase & Co.
3.9% SLM Corp.
3.8% FleetBoston Financial Corp.
3.8% Apache Corp.
As a percentage of net assets plus the value of preferred shares on
May 31, 2003.
MANAGERS'
REPORT
BY GREGORY K. PHELPS AND MARK T. MALONEY FOR THE PORTFOLIO
MANAGEMENT TEAM
John Hancock
Patriot Preferred
Dividend Fund
Preferred stocks -- which make up the bulk of John Hancock Patriot
Preferred Dividend Fund -- performed quite well during the 12 months
ended May 31, 2003, in large part due to a second-half rally. Falling
interest rates, punctuated by a surprise half-percentage-point rate cut
by the Federal Reserve Board in November 2002, provided much of the fuel
powering preferred stocks' gains. Because preferreds pay dividends at a
fixed rate like the interest on a bond, preferred stocks tend to rally
when interest rates drop, just as bonds do. Another factor that helped
was stronger demand from income-seeking investors looking for
significantly higher yields than what companies paid on their bonds and
common stocks. Many preferred stocks continued to yield between 7% and
8%, outstripping by a fairly large margin the yields available on
Treasury and corporate bonds, as well as the dividends paid on common
stocks. Demand also strengthened in response to President Bush's
proposed dividend tax-cut package. Even though the measure was passed by
Congress in a much reduced form after the period ended, the anticipation
that at least some form of dividend tax relief ultimately would be
adopted was enough for investors to bid preferred-stock prices higher.
"Preferred stocks...
performed quite well
during the 12 months
ended May 31, 2003..."
Utility common stocks -- the Fund's other primary area of emphasis --
were still mired in the remnants of the Enron debacle when the period
began and their performance was quite disappointing in the final months
of 2002. But conditions began to improve in early 2003, and utility
stocks staged a heartening rally through the end of the period. Some of
the group's better performance was due to investors' recognition that
the sector had become undervalued relative to the market as a whole and
relative to its historic value. Also aiding the group was the dividend
tax-relief proposal. Through the years, utilities have offered
consistently high dividends and were poised to benefit once the tax
relief was enacted. And the utility companies also did their part to
boost confidence. They began cleaning up their balance sheets by
renewing or extending financing and ridding themselves of money-losing
unregulated subsidiaries -- such as energy trading -- that caused them
pain in the post-Enron environment.
[A photo of Greg Phelps and Mark Maloney flush right next to first
paragraph.]
FUND PERFORMANCE
For the 12 months ended May 31, 2003, John Hancock Patriot Preferred
Dividend Fund returned 13.14% at net asset value. By comparison, the
average income and preferred stock closed-end fund returned 7.64%,
according to Lipper, Inc. In the same 12-month period, the Dow Jones
Utility Average -- which tracks the performance of 15 electric and
natural gas utilities -- returned -10.60%, and the broader stock market,
as measured by the Standard & Poor's 500 Index, returned -8.07%. We
believe our outperformance stemmed primarily from good security
selection in the preferred sector, and our decision to maintain holdings
in utility common stocks, which rebounded in 2003 after struggling last
fall.
"Some of the Fund's best
performers were preferred
stocks issued by financial
services companies..."
LEADERS AND LAGGARDS
Some of the Fund's best performers were preferred stocks issued by
financial services companies, benefiting from a confluence of favorable
trends. Banks and other lenders -- such as student loan giant SLM Corp. --
were helped by favorable lending spreads, meaning they could borrow money
at relatively low rates and lend it out at higher rates. Brokers -- such as
Bear Stearns Companies -- got a small boost from the better equity market,
which, in turn, fostered more trading revenues. Bear Stearns was also
helped by the fact that it posted better financial results than many of its
other broker competitors and by speculation that it is a takeover
candidate.
[Table at top left-hand side of page entitled "Top five industry
groups1." The first listing is Utilities 39%, the second is Finance 13%,
the third Broker services 13%, the fourth Oil & gas 12%, and the fifth
Banks-U.S. 9%.]
Among utility stocks, we saw winners in both the preferred and common
stock categories. Our holdings in the preferred stock of Alabama Power
Co., a wholly owned subsidiary of Southern Company, posted strong gains
in response to investors' enthusiasm over the company's "back-to-basics"
approach. Likewise, investors cheered Alliant Energy Corp.'s moves to
sell some of its non-utility businesses as part of a plan to pay down
debt, helping boost our common stock holdings in that company. The
common stock of Chicago-based gas utility Peoples Energy Corp. also was
among our list of top performers, due in part to strong pricing of oil
and gas.
[Pie chart in middle of page with heading "Portfolio diversification 1."
The chart is divided into three sections (from top to left): Preferred
stocks 82%, Common stocks 13%, and Short-term investments & other 5%. ]
Our single biggest disappointment during the period was AMERCO, the
parent company of truck-rental company U-Haul. The company struggled
during the year, in part due to a credit-rating downgrade which, in
turn, led to questions about its management strategies. Despite these
problems, we continued to hold onto our stake in AMERCO because we
believe that this well-known franchise is on course to reduce its debt
and strengthen its balance sheet, moves that, if successful, potentially
could put the company on firmer footing.
[Table at top of page entitled "SCORECARD." The header for the left
column is "INVESTMENT" and the header for the right column is "RECENT
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is SLM
Corp. followed by an up arrow with the phrase "Student loan provider
benefits from falling interest rates." The second listing is Alabama
Power followed by an up arrow with the phrase "Renewed focus on electric
business boosts investor confidence." The third listing is AMERCO
followed by a down arrow with the phrase "Credit-rating downgrade fosters
speculation about company's future."]
OUTLOOK
We're approaching the balance of 2003 with a fairly optimistic outlook
for preferred and utility common stocks. Part of our optimism stems from
our macroeconomic outlook, which calls for a continually sluggish
economy coupled with sustained low interest rates, which should continue
to prompt strong demand for relatively high-yielding preferred and
utility common stocks. The dividend tax relief enacted in June -- which
cut the dividend tax rate from a maximum of 38.6% to 15% -- also could
help boost demand for many stocks that pay high dividends. We believe
utility common stocks have other factors going for them as well,
including the potential for more stable credit ratings, attractive
valuations and, given the colder-than-normal nature of this past winter
and spring, better year-over-year earnings comparisons.
"We're approaching the
balance of 2003 with a
fairly optimistic outlook
for preferred and utility
common stocks."
This commentary reflects the views of the portfolio management team
through the end of the Fund's period discussed in this report. The
team's statements reflect their own opinions. As such, they are in no
way guarantees of future events, and are not intended to be used as
investment advice or a recommendation regarding any specific security.
They are also subject to change at any time as market and other
conditions warrant.
1 As a percentage of the Fund's portfolio on 5-31-03.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
May 31, 2003
This schedule is divided into three main categories: preferred stocks,
common stocks and short-term investments. Stocks are further broken down
by industry group. Short-term investments, which represent the Fund's
cash position, are listed last.
SHARES ISSUER, DESCRIPTION VALUE
PREFERRED STOCKS 127.87% $121,155,812
(Cost $122,329,857)
Agricultural Operations 5.45% 5,160,000
60,000 Ocean Spray Cranberries, Inc., 6.25%, Ser A (R) 5,160,000
Banks -- United States 13.28% 12,583,700
102,100 FleetBoston Financial Corp., 6.75%,
Depositary Shares, Ser VI 5,564,450
133,700 HSBC USA, Inc., $2.8575 7,019,250
Broker Services 20.12% 19,063,266
100,600 Bear Stearns Companies, Inc., 6.15%,
Depositary Shares, Ser E 5,432,400
40,000 Bear Stearns Companies, Inc., 5.72%,
Depositary Shares, Ser F 2,124,000
48,000 Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D 2,546,400
102,500 Lehman Brothers Holdings, Inc., 5.94%,
Depositary Shares, Ser C 5,535,000
120,700 Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A 3,425,466
Diversified Operations 2.47% 2,340,920
86,000 Grand Metropolitan Delaware, L.P., 9.42%, Gtd Ser A 2,340,920
Finance 20.13% 19,076,450
52,000 Citigroup, Inc., 6.213%, Depositary Shares, Ser G 2,821,000
88,700 Citigroup, Inc., 6.231%, Depositary Shares, Ser H 4,789,800
100,000 J.P. Morgan Chase & Co., 6.625%,
Depositary Shares, Ser H $5,744,000
101,000 SLM Corp., 6.97%, Ser A 5,721,650
Leasing Companies 2.55% 2,420,000
220,000 AMERCO, 8.50%, Ser A 2,420,000
Media 5.20% 4,922,280
203,400 Shaw Communications, Inc., 8.45%, Ser A (Canada) 4,922,280
Oil & Gas 17.91% 16,973,157
60,989 Anadarko Petroleum Corp., 5.46%,
Depositary Shares, Ser B 6,251,373
52,200 Apache Corp., 5.68%, Depositary Shares, Ser B 5,521,784
50,000 Devon Energy Corp., 6.49%, Ser A 5,200,000
Utilities 40.76% 38,616,039
251,400 Alabama Power Co., 5.20% 6,536,400
20,000 Baltimore Gas & Electric Co., 6.99%, Ser 1995 2,105,000
15,790 Boston Edison Co., 4.78% 1,373,730
199,800 Coastal Finance I, 8.375% 4,185,810
136,600 El Paso Tennessee Pipeline Co., 8.25%, Ser A 4,098,000
168,000 Energy East Capital Trust I, 8.25% 4,561,200
10,500 Massachusetts Electric Co., 6.99% 1,086,750
15,000 Northern Indiana Public Service Co., 7.44% 1,543,595
30,000 PSEG Funding Trust II, 8.75% 820,500
14,350 PSI Energy, Inc., 6.875% 1,534,732
19,000 Public Service Electric & Gas Co., 6.92% 1,938,000
38,100 Puget Energy, Inc., 7.45%, Ser II 998,220
110,000 Sierra Pacific Power Co., 7.80%, Ser 1 (Class A) 2,145,000
148,400 TDS Capital II, 8.04% 3,754,520
53,000 TXU US Holdings Co., $1.805, Depositary Shares, Ser B 1,340,900
5,703 Wisconsin Public Service Corp., 6.76% 593,682
COMMON STOCKS 20.41% $19,336,765
(Cost $22,475,143)
Utilities 20.41% 19,336,765
60,000 Alliant Energy Corp. 1,198,800
88,000 Aquila, Inc. 243,760
27,500 Dominion Resources, Inc. 1,732,500
30,000 DTE Energy Co. 1,299,900
81,000 KeySpan Corp. 2,852,820
34,000 NiSource, Inc. 666,740
113,000 Northeast Utilities 1,826,080
50,000 NSTAR 2,331,500
28,000 Peoples Energy Corp. 1,193,920
37,500 Progress Energy, Inc. (CVO) (I)* 4,500
73,500 Puget Energy, Inc. 1,723,575
234,000 Sierra Pacific Resources* 1,263,600
62,000 TECO Energy, Inc. 801,660
30,000 WPS Resources Corp. 1,289,400
59,000 Xcel Energy, Inc. 908,010
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 7.09% $6,713,791
(Cost $6,713,791)
Commercial Paper 7.09%
ChevronTexaco Corp., 06-02-03 1.12% $1,263 6,713,791
TOTAL INVESTMENTS 155.37% $147,206,368
OTHER ASSETS AND LIABILITIES, NET (55.37%) ($52,462,302)
TOTAL NET ASSETS 100.00% $94,744,066
* Non-income-producing security.
(I) This security is valued in good faith under procedures established
by the Board of Trustees.
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $5,160,000 or 5.45% of
net assets as of May 31, 2003.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
ASSETS AND
LIABILITIES
May 31, 2003
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 $151,518,791) $147,206,368
Cash 688
Dividends receivable 249,124
Other assets 28,204
Total assets 147,484,384
LIABILITIES
Payable to affiliates
Management fee 103,997
Administration fee 19,610
Other payables and accrued expenses 96,061
Total liabilities 219,668
Auction Rate Preferred Shares (ARPS), at value,
unlimited number of shares of beneficial
interest authorized with no par value,
525 shares issued, liquidation preference of
$100,000 per share 52,520,650
NET ASSETS
Common shares capital paid-in 99,027,349
Accumulated net realized loss on investments (3,022,472)
Net unrealized depreciation of investments (4,312,423)
Accumulated net investment income 3,051,612
Net assets applicable to common shares $94,744,066
NET ASSET VALUE PER COMMON SHARE
Based on 7,257,200 shares of beneficial interest
outstanding -- unlimited number of shares
authorized with no par value $13.06
See notes to
financial statements.
OPERATIONS
For the year ended
May 31, 2003
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat-
ing the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends $9,602,951
Interest 42,796
Total investment income 9,645,747
EXPENSES
Investment management fee 1,102,113
Administration fee 206,646
ARPS auction fee 138,849
Federal excise tax 126,994
Auditing fee 51,450
Transfer agent fee 51,439
Custodian fee 37,072
Printing 35,754
Registration fee 33,972
Trustees' fee 9,178
Legal fee 1,812
Interest expense 1,295
Total expenses 1,796,574
Net investment income 7,849,173
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (1,089,148)
Change in net unrealized appreciation
(depreciation) of investments 5,149,584
Net realized and unrealized gain 4,060,436
Distributions to ARPS (795,256)
Increase in net assets from operations $11,114,353
See notes to
financial statements.
CHANGES IN
NET ASSETS
This Statement
of Changes in
Net Assets
shows how the
value of the
Fund's net assets
has changed
since the end of
the previous
period. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses and
distributions
paid to share-
holders.
YEAR YEAR
ENDED ENDED
5-31-02 5-31-03
INCREASE IN NET ASSETS
From operations
Net investment income $8,558,159 $7,849,173
Net realized loss (1,651,031) (1,089,148)
Change in net unrealized
appreciation (depreciation) (3,644,115) 5,149,584
Distributions to ARPS (1,164,688) (795,256)
Increase in net assets resulting
from operations 2,098,325 11,114,353
Distributions to common shareholders
From net investment income (6,269,099) (6,270,221)
NET ASSETS APPLICABLE TO COMMON SHARES
Beginning of period 94,070,708 89,899,934
End of period 1 $89,899,934 $94,744,066
1 Includes accumulated net investment income of $2,140,155 and
$3,051,612, respectively.
See notes to
financial statements.
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 5-31-99 5-31-00 5-31-01 05-31-02 05-31-03
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $14.54 $13.84 $11.76 $12.96 $12.39
Net investment income 1 1.23 1.25 1.24 1.18 1.08
Net realized and unrealized
gain (loss) on investments (0.61) (2.16) 1.16 (0.73) 0.56
Distributions to ARPS (0.29) (0.31) (0.34) (0.16) (0.11)
Total from
investment operations 0.33 (1.22) 2.06 0.29 1.53
Less distributions to
common shareholders
From net investment income (1.03) (0.86) (0.86) (0.86) (0.86)
Net asset value,
end of period $13.84 $11.76 $12.96 $12.39 $13.06
Per share market value,
end of period $11.50 $10.25 $11.75 $12.47 $13.07
Total return at market value 2 (%) (14.79) (3.37) 23.81 13.76 12.50
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common shares,
end of period (in millions) $100 $85 $94 $90 $95
Ratio of expenses
to average net assets 3 (%) 1.84 1.96 1.91 1.96 2.11
Ratio of net investment income
to average net assets 4 (%) 8.66 9.97 9.89 9.09 9.21
Portfolio turnover (%) 30 22 10 16 9
SENIOR SECURITIES
Total value of ARPS outstanding
(in millions) $53 $53 $53 $53 $53
Involuntary liquidation preference
per unit (in thousands) $100 $100 $100 $100 $100
Approximate market value
per unit (in thousands) $100 $100 $100 $100 $100
Asset coverage per unit 5 $290,113 $260,212 $276,853 $270,318 $277,801
1 Based on the average of the shares outstanding.
2 Assumes dividend reinvestment.
3 Ratios calculated on the basis of expenses applicable to common shares
relative to the average net assets of common shares. Without the
exclusion of preferred shares, the ratio of expenses would have been
1.22%, 1.24%, 1.21%, 1.26% and 1.30% 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
5.73%, 6.31%, 6.27%, 5.84% and 5.70% respectively.
5 Calculated by subtracting the Fund's total liabilities from the Fund's
total assets and dividing that amount by the number of ARPS outstanding
as of the applicable 1940 Act Evaluation Date, which may differ from the
financial reporting date.
See notes to
financial statements.
NOTES TO
STATEMENTS
NOTE A
Accounting policies
John Hancock Patriot Preferred Dividend Fund (the "Fund") is a
diversified closed-end management investment company registered under
the Investment Company Act of 1940.
Significant accounting policies of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at
fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60
days are valued at amortized cost, which approximates market value. The
Fund determines the net asset value of the common shares each business day.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis.
Expenses
The majority of the expenses are directly identifiable to an individual
fund. Expenses that are not readily identifiable to a specific fund will
be 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. For
federal income tax purposes, the Fund has $2,301,910 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent that such carryforward is
used by the Fund, no capital gain distributions will be made. The loss
carryforward expires as follows: May 31, 2010 -- $1,226,894 and May 31,
2011 -- $1,075,016. Net capital losses of $465,371 that are attributable to
security transactions incurred after October 31, 2002, are treated as
arising on June 1, 2003, 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. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to common and preferred shareholders from
net investment income and net realized gains on the ex-dividend date.
During the year ended May 31, 2003, the tax character of distributions paid
was as follows: ordinary income $7,065,477. As of May 31, 2003, the
components of distributable earnings on a tax basis included $2,974,007 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. Distri butions in excess of tax basis
earnings and profits, if any, are reported in the Fund's financial
statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with John Hancock
Advisers, LLC (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, LLC. Under the investment management contract, the Fund
pays a monthly management fee to the Adviser at an annual rate of 0.80%
of the Fund's average weekly net assets and the value attributable to
the ARPS.
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 the shareholders. The Fund pays the Adviser a
monthly administration fee at an annual rate of 0.15% of the Fund's
average weekly net assets and the value attributable to the ARPS.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compen sation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C
Fund share transactions
Common shares
This listing illustrates the reclassification of the Fund's capital
accounts and the number of common shares outstanding at the beginning and
end of the last two periods, along with the corresponding dollar value.
YEAR ENDED 5-31-02 YEAR ENDED 5-31-03
SHARES AMOUNT SHARES AMOUNT
Beginning of period 7,257,200 $99,248,833 7,257,200 $99,156,472
Reclassification of
capital accounts -- (92,361) -- (129,123)
End of period 7,257,200 $99,156,472 7,257,200 $99,027,349
Auction rate preferred shares
The Fund issued 525 shares of Auction Rate Preferred Shares ("ARPS") on
July 29, 1993, in a public offering. The underwriting discount of
$918,750 and the offering costs of $610,007 associated with the offering
of the common shares and ARPS were recorded as a reduction of the
capital of common shares.
Dividends on the ARPS, which accrue daily, are cumulative at a rate that
was established at the offering of the ARPS and has been reset every 49
days thereafter by an auction. Dividend rates on ARPS ranged from 1.18%
to 1.77% during the year ended May 31, 2003. Accrued dividends on ARPS
are included in the value of ARPS on the Fund's Statement of Assets and
Liabilities.
The ARPS 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 ARPS 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 ARPS, as defined in the Funds'
by-laws. On September 12, 2001, the Fund's Trustees approved the
elimination of the dividend coverage test, effective October 1, 2001. If
the dividends on the ARPS shall remain unpaid in an amount equal to two
full years' dividends, the holders of the ARPS, as a class, have the
right to elect a majority of the Board of Trustees. In general, the
holders of the ARPS and the common shareholders have equal voting rights
of one vote per share, except that the holders of the ARPS, 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 ARPS and common shares.
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
May 31, 2003, aggregated $11,489,390 and $13,616,414, respectively.
The cost of investments owned on May 31, 2003, including short-term
investments, for federal income tax purposes was $151,688,719. Gross
unrealized appreciation and depreciation of investments aggregated
$9,415,437 and $13,897,788, respectively, resulting in net unrealized
depreciation of $4,482,351. The difference between book basis and tax
basis net unrealized depreciation of investments is attributable
primarily to the tax deferral of losses on wash sales.
NOTE E
Reclassification of accounts
During the year ended May 31, 2003, the Fund reclassified amounts to
reflect a decrease in accumulated net realized loss on investments of
$1,362, an increase in accumulated net investment income of $127,761 and
a decrease in capital paid-in of $129,123. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of May 31, 2003. 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 compen - sation, federal
excise tax and expiring capital loss carryforward. The calculation of
net investment income (loss) per share in the Financial Highlights
excludes these adjustments.
AUDITORS'
REPORT
Report of
Deloitte & Touche
LLP, Independent
Auditors
To The Board of Trustees and Shareholders of John Hancock Patriot
Preferred Dividend Fund,
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of John Hancock Patriot Preferred
Dividend Fund (the "Fund") as of May 31, 2003, the related statement of
operations for the year then ended, the statement of changes in net
assets for the years ended May 31, 2002 and 2003, and the financial
highlights for each of the years in the five-year period ended May 31,
2003. 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 auditing standards generally
accepted in the United States of America. 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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
May 31, 2003, by correspondence with the custodian and brokers or by
other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
Fund as of May 31, 2003, 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
July 9, 2003
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund paid during its taxable
year ended May 31, 2003.
With respect to the ordinary dividends paid by the Fund for the fiscal
year ended May 31, 2003, 100% of the dividends qualify 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 2003.
If the Fund paid dividends during the fiscal year end, shareholders will
be mailed a 2003 U.S. Treasury Department Form 1099-DIV in January 2004.
This will reflect the total of all distributions that are taxable for
calendar year 2003.
INVESTMENT
OBJECTIVE
AND POLICY
The Fund's investment objective is to provide a high level of current
income consistent with preservation of capital. The Fund will pursue its
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, with respect to the
quality of ratings of its portfolio investments, was changed by a vote
of the Fund's Trustees on September 13, 1994. The new policy, which
became effective October 15, 1994, stipulates that 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. This policy supersedes the requirement that
at least 80% of the Fund's total assets consist of preferred stocks and
debt obligations rated "A" or higher and dividend paying common stocks
whose issuers have senior debt rated "A" or higher.
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 including the liquidation preference amount of the ARPS plus
borrowings for investment purposes. The Fund will notify shareholders at
least 60 days prior to any change in this 80% investment policy.
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 that 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.
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 may elect to have all distributions of dividends
and capital gains reinvested by Mellon Investor Services, as plan agent
for the common shareholders (the "Plan Agent"). Holders of common shares
who do not elect 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 may join the Plan by filling out and mailing an
authorization card, by notifying the Plan Agent by telephone, or by
visiting the Plan Agent's Web site at www.melloninvestor.com.
Shareholders must indicate an election to reinvest all or a portion of
dividend payments. If received in proper form by the Plan Agent before
the record date of a dividend, the election will be effective with
respect to all dividends paid after such record date. Shareholders whose
shares are held in the name of a broker or nominee should contact the
broker or nominee to determine whether and how they may participate in
the Plan.
If the Fund declares a dividend payable either in common shares or in
cash, non-participants will receive cash and participants in the Plan
will receive the equivalent in common shares. If the market price of the
common shares on the payment date of the dividend is equal to or exceeds
their net asset value as determined on the payment date, participants
will be issued common shares (out of authorized but unissued shares) at
a value equal to the higher of net asset value or 95% of the market
price. If the net asset value exceeds the market price of the common
shares at such time, or if the Board of Trustees declares a dividend
payable only in cash, the Plan Agent will, as agent for Plan
participants, buy shares in the open market, on the New York Stock
Exchange or elsewhere, for the participant's accounts. Such purchases
will be made promptly after the payable date for such dividend and, in
any event, prior to the next ex-dividend date after such date, except
where necessary to comply with federal securities laws. If, before the
Plan Agent has completed its purchases, the market price exceeds the net
asset value of the 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. In each
case, the cost per share of the shares purchased for each participant's
account will be the average cost, including brokerage commissions, of
any shares purchased on the open market plus the cost of any shares
issued by the Fund. There 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 ten days prior to a
dividend record date; otherwise, it will be effective for all subsequent
dividend record dates. When a participant withdraws from the Plan or
upon termination of the Plan, as provided below, certificates for whole
common shares credited to his or her account under the Plan will be
issued and a cash payment will be made for any fraction of a share
credited to such account.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the
accounts, including information needed by the shareholders for personal
and tax records. 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 shareholder's 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.
SHAREHOLDER MEETING
On March 20, 2003, the Annual Meeting of the Fund was held to elect four
Trustees and to ratify the actions of the Trustees in selecting
independent auditors for the Fund. The common shareholders elected the
following Trustees to serve until their respective successors are duly
elected and qualified, with the votes tabulated as follows:
WITHHELD
FOR AUTHORITY
- -------------------------------------------
Maureen R. Ford 6,788,023 79,814
Charles L. Ladner 6,779,102 88,735
Dr. John Moore 6,781,544 86,293
The preferred shareholders elected Ronald Dion to serve until his
respective successor is duly elected and qualified, with the votes
tabulated as follows: 425 FOR and 0 WITHHELD AUTHORITY.
The shareholders also ratified the Trustees' selection of Deloitte &
Touche LLP as the Fund's independent auditors for the fiscal year ending
May 31, 2003, with the votes tabulated as follows: 6,765,366 FOR, 54,268
AGAINST and 48,627 ABSTAINING.
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
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
James F. Carlin, Born: 1940 1993 30
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 (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).
William H. Cunningham, Born: 1944 1985 30
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 (since 2000), STC Broadcasting,
Inc. and Sunrise Television Corp. (until 2001), Symtx, Inc. (since 2001), Adorno/
Rogers Technology, Inc. (since 2001), Pinnacle Foods Corporation (since 2001),
rateGenius (since 2001), LaQuinta Motor Inns, Inc. (hotel management company)
(until 1998), 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 (since 2000); Advisory
Director, Chase Bank (formerly Texas Commerce Bank -- Austin) (since 1988),
LIN Television (since 2002) and WilTel Communications (since 2002).
Ronald R. Dion, Born: 1946 1998 30
Chairman and Chief Executive Officer, R.M. Bradley & Co., Inc.; Director,
The New England Council and Massachusetts Roundtable; Trustee, North
Shore Medical Center; Director, BJ's Wholesale Club, Inc. and a corporator
of the Eastern Bank; Trustee, Emmanuel College.
Charles L. Ladner 2, Born: 1938 1993 30
Chairman and Trustee, Dunwoody Village, Inc. (retirement services);
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).
Patti McGill Peterson 2, Born: 1943 2002 39
Executive Director, Council for International Exchange of Scholars (since
1998), Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1997); President Emerita of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (electric utility).
John A. Moore 2, Born: 1939 2002 39
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Senior Scientist, Sciences
International (health research) (since 1998); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Steven Pruchansky, Born: 1944 1993 30
Chairman and Chief Executive Officer, Mast Holdings, Inc. (since 2000);
Director and President, Mast Holdings, 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).
Norman H. Smith, Born: 1933 1993 30
Lieutenant General, United States Marine Corps; Deputy Chief of Staff for
Manpower and Reserve Affairs, Headquarters Marine Corps; Commanding
General III Marine Expeditionary Force/3rd Marine Division (retired 1991).
John P. Toolan 2, Born: 1930 1993 30
Director, The Smith Barney Muni Bond Funds, The Smith Barney Tax-Free
Money Funds, Inc., Vantage Money Market Funds (mutual funds), The
Inefficient-Market Fund, Inc. (closed-end investment company); Chairman,
Smith Barney Trust Company of Florida (retired 1991); Director, Smith
Barney, Inc., Mutual Management Company and Smith Barney Advisers, Inc.
(investment advisers) (retired 1991); Senior Executive Vice President, Director
and member of the Executive Committee, Smith Barney, Harris Upham & Co.,
Incorporated (investment bankers) (until 1991).
INTERESTED TRUSTEES 3
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
John M. DeCiccio, Born: 1948 2001 61
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC, (Subsidiaries, LLC), Hancock
Natural Resource Group, Independence Investment LLC, Independence Fixed
Income LLC, John Hancock Advisers, LLC (the "Adviser"), The Berkeley
Financial Group, LLC ("The Berkeley Group"), John Hancock Funds, LLC
("John Hancock Funds") and Massachusetts Business Development Corporation;
Director, John Hancock Insurance Agency, Inc. ("Insurance Agency, Inc.")
(until 1999).
Maureen R. Ford, Born: 1955 2000 61
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director, President and Chief Executive Officer, John Hancock Funds;
Chairman, Director and Chief Executive Officer, Sovereign Asset
Management Corporation ("SAMCorp."); Director, Independence
Investment LLC, Subsidiaries, LLC, Independence Fixed Income LLC
and Signature Services; Senior Vice President, MassMutual Insurance Co.
(until 1999).
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
William L. Braman, Born: 1953 2000
Executive Vice President and Chief Investment Officer
Executive Vice President and Chief Investment Officer, the Adviser and each of the John
Hancock funds; Director, SAMCorp.; Executive Vice President and Chief Investment
Officer, Baring Asset Management, London U.K. (until 2000).
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds, and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1993
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1993
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).
Susan S. Newton, Born: 1950 1993
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000); Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
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.
3 Interested Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
1 Wall Street
New York, New York 10286
TRANSFER AGENT FOR
COMMON SHAREHOLDERS
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
TRANSFER AGENT FOR
AUCTION RATE PREFERRED SHARES
Deutsche Bank Trust Company Americas
280 Park Avenue
New York, New York 10017
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116-5022
STOCK SYMBOL
Listed New York Stock Exchange:
PPF
For shareholder assistance
refer to page 21
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Customer service representatives 1-800-852-0218
Portfolio commentary 1-800-344-7054
24-hour automated information 1-800-843-0090
TDD Line 1-800-231-5469
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
1-800-852-0218
1-800-843-0090
1-800-231-5469 (TDD)
www.jhfunds.com
P700A 5/03
7/03
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
See attached Exhibit "Proxy Voting Policies and Procedures".
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's principal executive officer and principal financial officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
ITEM 10. EXHIBITS.
(a) Not applicable at this time.
(b)(1) 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)(2) 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) Proxy Voting Policies and Procedures
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By:
- -----------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: July 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:
- -----------------------
Maureen R. Ford
Chairman, President and Chief Executive Officer
Date: July 24, 2003
By:
- -----------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: July 24, 2003