SEMIANNUAL Report
[PHOTO OMITTED]
Patriot Premium Dividend Fund I
MARCH 31, 1998
TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin
William H. Cunningham*
Charles F. Fretz
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
Patricia P. McCarter*
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President and Chief Operating Officer
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN AND TRANSFER AGENT FOR
COMMON SHAREHOLDERS
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT FOR DARTS
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
Listed New York Stock Exchange Symbol: PDF
John Hancock Closed-End Funds:
1-800-843-0090
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
During the last decade, investors have become used to seeing stock market
returns averaging 15% or so each year. In the past three years, the stock market
has treated us to a record run, producing annual returns in excess of 20%.
After such a long and remarkable performance, many began this year wondering
what the market would do for an encore in 1998. The answer so far has been more
of the same. This achievement continues to bolster many investors' convictions
that the market will produce these results forever, or, in the worst case, that
market declines will always be short-lived. While the economy remains solid and
the environment favorable, history and reason tell us it's a highly unlikely
scenario.
This doesn't mean we know what the market will do next, or that it's riding for
a fall. But after such a run, even in this "new era" of strong economic growth
with low inflation, we believe it would be wise for investors to set more
realistic expectations. As we've said before, markets do indeed move in two
directions, even though we've seen "up" much more than "down" recently. Over the
long term, the market's historical results have been more in the 10% per year
range, which is still a solid result, considering it has been produced despite
wars, depressions and other social upheavals along the way.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief
Executive Officer, flush right, next to third paragraph.]
In addition to adjusting, or at least re-examining, expectations, now could also
be a good time to review with your investment professional how your assets are
diversified, perhaps with an eye toward a more conservative approach. Stocks,
especially with their outsized gains of the last three years, might have grown
to represent a larger piece of your portfolio than you had originally intended,
given your objectives, time horizon and risk level.
At John Hancock Funds, our goal is to help you reach your financial objectives
and maintain wealth. One way we can do that is by helping you keep your feet on
the ground as you pursue your dreams.
Sincerely,
/s/Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
By Gregory K. Phelps for the Portfolio Management Team
John Hancock Patriot
Premium Dividend Fund I
Electric utility stocks charge ahead
in favorable market and regulatory environment
Despite a relatively weak start, it was "lights on" for electric utility stocks
- - the Fund's primary focus - over the past six months as they staged one of
their most impressive rallies in years. When the curtain opened on the period,
electric companies were decidedly out of favor, because investors were flocking
to high-octane growth sectors of the market. But by late October, economic and
currency problems in Southeast Asia prompted a wave of electric utility stock
buying. In the face of a potentially dramatic slowdown in that region, with its
potentially negative effects on the world economies, investors turned their
sights toward the
"...the Dow Jones Utility Average [rose] to an all-time high..."
more essential, domestically oriented segments of the market including electric
utilities. Falling bond yields and rising bond prices further fueled electric
stocks, which typically follow bond prices because of their high yields.
Finally, the regulatory environment which had dealt the sector some blows in
early 1997 turned more favorable. The combination of these factors led the Dow
Jones Utility Average to an all-time high on December 31, 1997.
January and February proved to be less favorable to electric stocks, however,
largely because of a bout of profit-taking and new regulatory concerns. Although
they briefly faltered in those two months, electric stocks took center stage
again in March. Positive regulatory developments in Pennsylvania and Texas,
coupled with a number of favorable comments from influential
[A 2 1/4" x 3 1/2" photo of fund management team. Caption reads: Fund Management
Team (l-r): Susan Kelly, Gregory Phelps and Mark Maloney.]
3
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
["Pie chart with the heading "Portfolio Diversification" at the top left hand
column. The chart is divided into 5 sections. Going from top left to right;
Industrials 7%; Other 3%; Preferred Stock Utilities 48%; Common Stock Utilities
26%; Financials 16%. Footnote below states "As a percentage of net assets on
March 31, 1998."]
Wall Street analysts set off a new rally that pushed the Dow Jones Utility
Average back up to its previous high set on the last day of 1997.
Performance and strategy recap
For the six months ended March 31, 1998, the Fund posted a total return of
13.52% at net asset value. By comparison, for the same six-month period the Dow
Jones Utility Average had a total return of 22.40% and the average preferred
stock closed-end fund returned 8.74%, according to Lipper Analytical Services,
Inc. Prior to the start of the period, we had built up our stake in electric
common stocks because we felt that their prices were compelling. And after their
January and February weakness, we added more. At the end of the period, electric
utility common stocks made up 26% of the Fund's investments, compared to 21% six
months earlier. Our increased holdings in these stocks helped our performance
since they outpaced their preferred stock counterparts.
"...our focus remained on preferred stocks..."
["Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance...and what's behind the numbers. The first listing is Montana Power
followed by an up arrow and the phrase "Joint ventures with telecom providers
well received."
The second listing is Union Texas Petroleum followed by a up arrow with the
phrase "Scarcity of DRD-eligible securities boosts prices."
The third listing is TDS Capital followed by a left and right arrow with the
phrase "Investors shun its taxable status" Footnote at the bottom states: See
"Schedule of Investments". Investment holdings are subject to change.]
Despite the increase in our common stocks holdings, our focus remained on
preferred stocks because of their more consistent income stream. We also saw
solid performance from many of these preferred stock holdings, which generally
offer much higher yields than their common stock counterparts, but don't have as
much price movement as common stocks during market declines or rallies. Of our
preferred holdings, roughly three-quarters were securities eligible for the
dividends-received deduction (DRD), which offer distinct tax advantages to
corporate investors. Thanks to a favorable bond market, a dwindling supply of
these securities and a growing demand for them, many of our DRD-eligible
preferred holdings posted good gains.
Leaders and laggards
One of our best performers during the period was the DRD-eligible preferred
stock of Union Texas Petroleum. It rose by nearly 6% in the weeks after we
bought it near the period's end. One of the primary reasons for its rise was the
scarcity of high-quality, attractively priced preferred stocks in general, and
the scarcity of that security in particular. Not only did it offer an attractive
7.14% yield, but it also offered good call protection, which means it can't be
redeemed by the company before a specified date. Call protection is extremely
beneficial when interest rates are falling and corporations look to refinance
their outstanding obligations at lower rates as a way to cut their costs. This
feature allows us to hang on to stocks with higher-than-average yields. Another
good preferred stock performer was Ford Motor Company,
4
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
["Bar Chart with the heading "Fund Performance" at the top of left hand column.
Under the heading is the footnote: "For the six month ended March 31, 1998." The
chart is scaled in increments of 5% with 25% at the top and 0% at the bottom.
The first represents the 13.52% total return for John Hancock Patriot Premium
Dividend Fund I. The second represents the 8.74% total return for Average
preferred stock closed-end fund. The third represents the 22.40% total return
for Dow Jones Utility Average. A Footnote below reads " The total return for
John Hancock Patriot Premium Dividend Fund I is at net asset value with all
distributions reinvested. The average preferred stock closed-end fund is tracked
by Lipper Analytical Services, Inc. The Dow Jones Utility Average is an
unmanaged index that measures the performance of the utility industry in the
United States."]
which tendered, or bought back, our holdings at very attractive prices. A few of
our preferred holdings got left behind during the period, primarily because they
weren't DRD-eligible, and as such, their dividends were fully taxable. One
example was telephone and data systems holding TDS Capital. Despite the fact
that the company has strong operating results and that its preferred stock has
an attractive 8.50% yield and relatively good call protection, its price
languished because of its taxable status. Among our common stock utility
holdings, some of the strongest returns came from Montana Power and Boston
Edison. Montana Power, one of the nation's lowest-cost energy producers, got
rousing applause from investors for entering into a joint agreement with
Williams Companies and Enron to provide telecommunications services, and for
selling off its generating assets. In a similar development, Boston Edison has
teamed up with cable television operators to offer cable and Internet service to
its customers.
Outlook and strategy
We're optimistic about the prospects for electric utility stocks. Most companies
in the industry are feverishly cutting costs, slashing capital expenditures and
reducing debt. Those actions bode well for the profitability of those companies
that undertake these programs. In addition to better
"...the electric utility sector stands to benefit from its investment in
non-regulated utilities..."
profits, the electric utility sector stands to benefit from its investment in
non-regulated operations such as telecommunications. And we believe the sector
should get an added boost from the actions of many electric companies now
announcing and implementing stock buyback programs. For those reasons, we'll
continue to look for opportunities to add to attractive electric utility common
stocks as long as we feel those fundamentals are in place. As for preferred
stocks, we will keep them our primary focus. But with no signs of change in the
scarcity of DRD-eligible preferreds, electivity will be the watchword. We'll
take special care to find those that we believe are attractively priced in a
market environment that has pushed some DRD-eligible preferreds to very
expensive price levels.
This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. Of course, the team's views
are subject to change as market and other conditions warrant.
5
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
The Statement of Assets and Liabilities is the Fund's balance
sheet on March 31, 1998. You'll also find the net asset value
per share, for each Common Share, as of that date.
Statement of Assets and Liabilities
March 31, 1998 (Unaudited)
Assets:
Investments at value - Note C:
Preferred stocks (cost - $148,180,629) ....................... $159,551,456
Common stocks (cost - $49,834,822) ........................... 60,827,441
Bonds (cost - $4,989,223) ................................... 5,029,200
Short-term investments (cost - $4,091,698) ................... 4,091,698
----------
229,499,795
Dividends receivable ......................................... 1,017,043
Interest receivable .......................................... 22,153
Other assets ................................................. 15,058
-----------
Total Assets ............................. 230,554,049
--------------------------------------------------------
Liabilities:
DARTS dividend payable ....................................... 70,555
Common shares dividend payable ............................... 136,394
Foreign tax payable .......................................... 7,453
Payable to John Hancock Advisers, Inc.
and affiliates- Note B ....................................... 263,142
Accounts payable and accrued expenses ........................ 87,940
-----------
Total Liabilities ........................ 565,484
--------------------------------------------------------
Net Assets:
Dutch Auction Rate Transferable Securities
Preferred Shares Stock Series A (DARTS) -
Without par value, unlimited number of shares
of beneficial interest authorized, 685 shares
issued, liquidation preference of $100,000 per
share - Note A ............................................... 68,500,000
-----------
Common Shares -
Without par value, unlimited number of shares of
beneficial interest authorized, 14,979,601
shares issued and outstanding ................................ 139,242,993
Accumulated net realized loss on investments ................. (657,798)
Net unrealized appreciation of investments ................... 22,405,608
Undistributed net investment income .......................... 497,762
------------
Net Assets applicable to
Common Shares ($10.78 per
share based on 14,979,601
shares outstanding) ...................... 161,488,565
------------
Net Assets ............................... $229,988,565
========================================================
The Statement of Operations summarizes the Fund's investment
income earned and expenses incurred in operating the Fund.
It also shows net gains and losses for the period stated.
Statement of Operations
Six months ended March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income:
Dividends (net of foreign withholding taxes
of $8,570) ................................................... $8,019,940
Interest ..................................................... 92,172
-----------
8,112,112
-----------
Expenses:
Investment management fee- Note B ........................... 962,828
Administration fee- Note B ................................... 111,353
DARTS and auction fees ....................................... 89,822
Custodian fee ................................................ 31,101
Transfer agent fee ........................................... 28,790
Auditing fee ................................................. 26,640
Printing and postage ......................................... 20,827
Miscellaneous ................................................ 19,880
Trustees' fee ................................................ 9,997
Legal fees ................................................... 2,480
Total Expenses ........................... 1,303,718
--------------------------------------------------------
Net Investment Income .................... 6,808,394
--------------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold ................... 1,509,940
Change in net unrealized appreciation/depreciation
of investments .......................................... 11,803,224
------------
Net Realized and Unrealized
Gain on Investments ...................... 13,313,164
-------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ................ 20,121,558
=======================================================
Distribution to DARTS .................... (1,403,433)
--------------------------------------------------------
Net Increase in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less DARTS
Distributions ............................ $18,718,125
========================================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED MARCH 31, 1998
SEPTEMBER 30, 1997 (UNAUDITED)
------------------ -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income .................. $14,602,155 $6,808,394
Net realized gain (loss) on investments
sold ................................... (303,554) 1,509,940
Change in net unrealized appreciation/
depreciation of investments ............ 12,496,755 11,803,224
----------- ----------
Net Increase in Net Assets Resulting
from Operations ........................ 26,795,356 20,121,558
---------- ----------
Distributions to Shareholders:
DARTS ($4,053 and $2,049 per share,
respectively)- Note A .................. (2,776,491) (1,403,433)
Common Shares - Note A Dividends from
net investment income ($0.7500 and
$0.3498 per share, respectively) ....... (11,207,156) (5,237,720)
----------- ----------
Total Distributions to Shareholders .... (13,983,647) (6,641,153)
----------- ----------
From Fund Share Transactions:*
Value of shares issued to common
shareholders in reinvestment of
distributions ......................... 1,271,862 -
-----------
Net Assets:
Beginning of period .................... 202,424,589 216,508,160
----------- -----------
End of period (including undistributed
net investment income of $330,521 and
$497,762, respectively) ................ $216,508,160 $229,988,565
=========== ===========
* Analysis of Common Shareholder Transactions:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, 1998
SEPTEMBER 30, 1997 (UNAUDITED)
-------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period ............. 14,843,056 $137,976,469 14,979,601 $139,242,993
Shares issued to common shareholders for
reinvestment of distributions........................ 136,545 1,271,862 - -
Reclassification of capital accounts ................ - (5,338) - -
---------- ------------ ---------- ------------
Shares outstanding, end of period ................... 14,979,601 $139,242,993 14,979,601 $139,242,993
========== ============ ========== ============
</TABLE>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders and any increase due to reinvestment of distributions. The footnote
illustrates any reclassifications of capital share amounts, the number of Common
Shares outstanding at the beginning of the period, reinvested and outstanding at
the end of the period for the last two periods, along with the corresponding
dollar value.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
Schedule of Investments
March 31, 1998 (Unaudited)
Financial Highlights
Selected data for a Common Share outstanding throughout the periods indicated,
investment returns, key ratios and supplemental data are listed as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED
------------------------------------------ MARCH 31, 1998
1993 1994 1995 1996 1997 (UNAUDITED)
------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
COMMON SHARES
Per Share Operating Performance
Net Asset Value, Beginning of Period ........ 10.47 $11.29 $7.93 $9.17 $9.02 $9.88
------- ------- ------- ------ ------ ------
Net Investment Income........................ 0.90 0.89 0.95 0.94 0.98 0.45
Net Realized and Unrealized Gain (Loss)
on Investments .............................. 1.25 (2.86) 1.30 (0.10 0.82 0.89
------- ------- ------- ------ ------ ------
Total from Investment Operations ........... 2.15 (1.97) 2.25 0.84 1.80 1.34
------- ------- ------- ------ ------ ------
Less Distributions:
Dividends to DARTS Shareholders ............. (0.13) (0.14) (0.21) (0.19 (0.19) (0.09)
Dividends from Accumulated Net Investment
Income to Common Shareholders .............. (0.64) (1.00) (0.80) (0.74) (0.75) (0.35)
Distributions in Excess of Accumulated
Net Investment Income to
Common Shareholders ......................... - - - (0.06) - -
Distributions from Net Realized
Short-Term Capital Gains on Investments to
Common Shareholders ......................... (0.56) (0.25) - - - -
------- ------- ------- ------ ------ ------
Total Distributions ........................ (1.33) (1.39) (1.01) (0.99) (0.94) (0.44)
------- ------- ------- ------ ------ ------
Net Asset Value, End of Period .............. $11.29 $7.93 $9.17 $9.02 $9.88 $10.78
======= ======= ======= ======= ====== ======
Per Share Market Value, End of Period ....... $10.875 $8.000 $9.000 $9.125 $9.375 $10.125
Total Investment Return at Market Value ..... 15.66% (16.05%) 23.68% 10.58% 11.35% 10.38%(d)
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000s omitted) ................$163,683 $116,123 $135,939 $133,925 $148,008 $161,489
Ratio of Expenses to Average
Net Assets* ................................. 1.40% 1.29% 1.32% 1.24% 1.26% 1.17%(e)
Ratio of Net Investment Income to
Average Net Assets* ......................... 5.62% 6.42% 7.29% 6.75% 6.97% 6.12%(e)
Portfolio Turnover Rate ..................... 69% 56% 74% 57% 56% 14%
Senior Securities
Total DARTS Outstanding (000s omitted) ...... $68,500 $68,500 $68,500 $68,500 $68,500 $68,500
Asset Coverage per Unit(a)...................$342,383 $271,736 $290,238 $294,044 $308,832 $327,989
Involuntary Liquidation
Preference per Unit(b) ......................$100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit(b).........$100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Average Brokerage Commission Rate(c)......... N/A N/A N/A $0.0580 $0.0384 $0.0504
* Ratios calculated on the basis of expenses and net investment income
applicable to both common and preferred shares relative to the average net
assets for both common and preferred shares.
(a) Calculated by subtracting the Fund's total liabilities (not including the
DARTS) from the Fund's total assets, and dividing such amount by the number
of DARTS outstanding as of the applicable 1940 Act Evaluation Date.
(b) Plus accumulated and unpaid dividends.
(c) Per portfolio share traded. Required for fiscal years that began September
1, 1995, or later.
(d) Not annualized.
(e) Annualized.
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single share for each period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
The Schedule of Investments is a complete list of all securities owned by the
Patriot Premium Dividend Fund I on March 31, 1998. It's divided into four main
categories: preferred stocks, common stocks, long-term debt and short-term
investments. The stocks are further broken down by industry group. Under each
industry group is a list of the stocks owned by the Fund. Short-term
investments, which represent the Fund's "cash" position, are listed last.
<TABLE>
<CAPTION>
MARKET
ISSUER DESCRIPTIONS NUMBER OF SHARES VALUE
- ------------------- ---------------- --------
<S> <C> <C>
PREFERRED STOCKS
Automobile / Trucks (2.02%)
General Motors Corp., 9.12%,
Depositary Shares, Ser G ...................... 160,000 $4,660,000
---------
Banks - Foreign (2.08%)
Australia and New Zealand Banking Group
Ltd., 9.125% (Australia) ..................... 173,000 4,789,938
---------
Banks - U.S. (6.43%)
Chase Manhattan Corp., 10.84%, Ser C ............ 107,075 3,252,403
Fleet Financial Group, Inc., 6.75%, Ser VI ...... 59,000 3,304,000
Fleet Financial Group, Inc., 9.35%,
Depositary Shares .............................. 140,000 3,815,000
J.P. Morgan & Company, Inc., 6.625%,
Depositary Shares, Ser H ....................... 80,000 4,420,000
---------
14,791,403
----------
Broker Services (2.06%)
Bear Stearns Companies, Inc., 6.15%,
Ser E ......................................... 20,000 1,065,000
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A ....................... 90,000 2,840,625
Morgan Stanley Group, Inc., 7.75%,
Depositary Shares .............................. 15,000 838,125
---------
4,743,750
---------
Diversified Operations (0.44%)
Grand Metropolitan Delaware, L.P., 9.42%,
Gtd Ser A ...................................... 35,420 1,013,898
---------
Finance (0.40%)
SI Financing Trust I, 9.50%,
Gtd Pfd Sec & Purchase Contract ................ 34,200 921,263
---------
Insurance (2.13%)
Travelers Group, Inc., 8.40%,
Depositary Shares, Ser K ....................... 175,000 $4,900,000
---------
Leasing Companies (2.56%)
AMERCO, 8.50%, Ser A ........................... 90,000 2,396,250
Capita Preferred Trust, 9.06% .................. 130,000 3,485,625
---------
5,881,875
---------
Oil & Gas (2.28%)
Lasmo Plc, 10.00%, Ser A, American
Depositary Receipt (ADR)
(United Kingdom) .............................. 79,500 2,071,969
Union Texas Petroleum Holdings, Inc.,
7.14%, Ser A ................................... 30,000 3,165,000
---------
5,236,969
---------
Paper & Paper Products (1.36%)
Bowater, Inc., 8.40%,
Depositary Shares, Ser C ...................... 120,000 3,120,000
---------
Utilities (47.61%)
Appalachian Power Co., 8.25%, Ser A ............ 96,721 2,490,566
Baltimore Gas & Electric Co., 6.99% ............ 34,000 3,876,000
Boston Edison Co., 4.25% ....................... 37,172 2,713,556
Columbus Southern Power Co., 7.92%,
Ser B ......................................... 60,000 1,511,250
Columbus Southern Power Co., 8.375%,
Ser A ......................................... 66,000 1,695,375
Commonwealth Edison Co., $7.24 ................. 47,270 4,750,635
Commonwealth Edison Co., $8.40, Ser A .......... 51,103 5,139,045
Consumers Energy Co., $2.08 (Class A) .......... 76,751 1,957,151
Detroit Edison Co., 7.75%,
Depositary Shares ............................. 20,000 497,500
El Paso Tennessee Pipeline Co., 8.25%,
Ser A ......................................... 182,000 10,237,500
Entergy Gulf States, Inc., Adjustable Rate
Preferred (ARP), Depositary Shares,
Ser B ........................................ 34,967 1,748,350
Florida Power & Light Co., 6.75%, Ser U ........ 42,000 4,651,500
Hawaiian Electric Industries Capital Trust I,
8.36% ......................................... 100,000 2,568,750
Idaho Power Co., 7.07% ......................... 13,000 1,460,875
MCN Michigan, L.P., 9.375%, Ser A .............. 148,800 3,887,400
Massachusetts Electric Co., 6.99% .............. 13,500 1,513,688
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
MARKET
ISSUER DESCRIPTIONS NUMBER OF SHARES VALUE
- ------------------- ---------------- --------
<S> <C> <C>
Utilities (continued)
Monongahela Power Co., 7.73%, Ser L ........... 34,500 $3,967,500
Montana Power Capital I, 8.45%, Ser A ......... 40,000 1,075,000
Montana Power Co., $6.875 ..................... 22,500 2,517,188
NIPSCO Capital Markets, Inc., 7.75%,
Ser A ........................................ 196,110 4,964,034
Narragansett Electric Co., 6.95% .............. 28,500 1,596,000
PSI Energy, Inc., 6.875% ...................... 37,000 4,120,875
PacifiCorp 8.375%, Ser A ...................... 25,000 635,938
Portland General Electric Co., 8.25%,
Ser A ........................................ 59,500 1,517,250
Potomac Electric Power Co., $3.82 ............. 25,701 1,317,176
Public Service Electric & Gas Co., 6.92% ...... 25,800 2,860,575
Puget Sound Energy, Inc., 7.45%, Ser II ....... 124,000 3,348,000
Puget Sound Energy, Inc., 8.50%, Ser III ...... 135,836 3,557,205
Sierra Pacific Power Capital I, 8.60% ......... 28,000 729,750
Sierra Pacific Power Co., 7.80%, Ser 1
(Class A) .................................... 50,000 1,418,750
South Carolina Electric & Gas Co., 6.52% ...... 50,000 5,525,000
Southern Union Financing I, 9.48% ............. 185,000 4,775,313
TDS Capital Trust I, 8.50% .................... 132,235 3,305,875
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A ..................... 55,100 1,467,038
Texas Utilities Electric Co., $7.98 ........... 36,000 4,117,500
UtiliCorp Capital, L.P., 8.875%, Ser A ........ 184,256 4,859,752
Virginia Electric & Power Co., $7.05 .......... 10,000 1,117,500
-----------
109,492,360
-----------
TOTAL PREFERRED STOCKS
(Cost $148,180,629) (69.37%) 159,551,456
-------- -----------
COMMON STOCKS
Utilities (26.45%)
Boston Edison Co. .............................. 175,000 7,339,063
Conectiv, Inc. ................................. 140,000 3,071,250
Consolidated Edison, Inc. ...................... 50,000 2,337,500
Dominion Resources, Inc. ....................... 64,300 2,700,600
DTE Energy Co. ................................. 67,000 2,633,938
Enova Corp. .................................... 40,000 1,117,500
Florida Progress Corp. ......................... 69,000 2,876,438
Houston Industries, Inc. ....................... 93,500 2,688,125
IES Industries, Inc. ........................... 42,000 1,561,875
KeySpan Energy Corp. ........................... 78,000 2,832,375
LG&E Energy Corp. .............................. 42,000 1,084,125
Long Island Lighting Co. ....................... 66,000 2,079,000
MidAmerican Energy Holdings Co. ................ 143,700 3,260,194
Montana Power Co. .............................. 108,300 3,905,569
Nevada Power Co. ............................... 56,600 1,514,050
Utilities (continued)
New England Electric System ................... 62,000 $2,832,625
PECO Energy Co. ............................... 40,000 885,000
Potomac Electric Power Co. .................... 114,000 2,857,125
Public Service Enterprise Group, Inc. ......... 64,500 2,442,938
Puget Sound Energy, Inc. ...................... 216,900 6,113,869
Southern Co. .................................. 57,000 1,578,188
WPL Holdings, Inc. ............................ 92,500 3,116,094
----------
TOTAL COMMON STOCKS
(Cost $49,834,822) (26.45%) 60,827,441
--------- ----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST CREDIT PAR VALUE
RATE RATING (000s OMITTED)
---- ------ --------------
<S> <C> <C> <C>
LONG-TERM DEBT
Utilities (2.19%)
K N Energy, Inc.,
Sr Deb 03-01-28.... 7.25% BBB- $5,000 5,029,200
---------
TOTAL LONG-TERM DEBT
(Cost $4,989,223) (2.19%) 5,029,200
---------- ---------
SHORT-TERM INVESTMENTS
Oil & Gas (1.78%)
Chevron USA, Inc.
04-01-98 5.55 4,092 4,091,698
-----------
TOTAL SHORT-TERM INVESTMENTS (1.78%) 4,091,698
---------- -----------
TOTAL INVESTMENTS (99.79%) 229,499,795
---------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.21%) 488,770
---------- -----------
TOTAL NET ASSETS (100.00%) 229,988,565
========== ===========
</TABLE>
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer; however, security is U.S. dollar
denominated.
The percentage shown for each investment category is the total
value of that category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
Patriot Premium Dividend Fund I (the "Fund") is a diversified closed-end
management investment company, registered under the Investment Company Act of
1940, as amended. Significant accounting policies of the Fund are as follows:
VALUATION OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services,
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value.
INVESTMENT TRANSACTIONS
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are determined
on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $1,225,714 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforward is used by the Fund, no
capital gains distributions will be made. The carryforward expires on September
30, 2003. Additionally, net capital losses of $2,399 attributable to security
transactions incurred after October 31, 1996 are treated as arising on the first
day (October 1, 1997) of the Fund's next taxable year.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment securities
is recorded on the ex-dividend date. Interest income on investment securities is
recorded on the accrual basis. The Fund records all dividends and distributions
to shareholders from net investment income and realized gains on the ex-dividend
date. Such distributions are determined in conformity with federal income tax
regulations. Due to permanent book/tax differences in accounting for certain
transactions, this has the potential for treating certain distributions as
return of capital as opposed to distributions of net investment income or
realized capital gains. The Fund has adjusted for the cumulative effect of such
permanent book/tax differences through September 30, 1997, which has no effect
on the Fund's net assets, net investment income or net realized gains.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
DUTCH AUCTION RATE TRANSFERABLE SECURITIES PREFERRED STOCK SERIES A (DARTS)The
Fund issued 685 shares of Dutch Auction Rate Transferable Securities Preferred
Stock Series A (DARTS) concurrently with the issuance of its Common Shares in
the public offering. The underwriting discount was recorded as a reduction of
the capital of the Common Shares. Dividends on the DARTS, which accrue daily,
are cumulative at a rate which was established at the offering of the DARTS and
has been reset every 49 days thereafter by auction. Dividend rates ranged from
3.90% to 4.28% during the period ended March 31, 1998. The DARTS 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 DARTS
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 DARTS. If the dividend on
the DARTS shall remain unpaid in an amount equal to two full years' dividends,
the holders of the DARTS, as a class, have the right to elect a majority of the
Board of Trustees. In general, the holders of the DARTS and the Common Shares
have equal voting rights of one vote per share, except that the holders of the
DARTS, 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 DARTS and Common Shares. The DARTS have a liquidation
preference of $100,000 per share, plus accumulated and unpaid dividends. The
11
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
Fund is required to maintain certain asset coverage with respects to the DARTS,
as defined in the Fund's By-Laws.
NOTE B - MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the investment management contract, the Fund pays a monthly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly owned
subsidiary of The Berkeley Financial Group, for a continuous investment program
equivalent, on an annual basis, to the sum of 0.50% of the Fund's average weekly
net assets, plus 5.00% of the Fund's weekly gross income. The Adviser's total
fee is limited to a maximum amount equal to 1.00% annually of the Fund's average
weekly net assets. For the period ended March 31, 1998, the advisory fee
incurred did not exceed the maximum advisory fee allowed. The Fund has entered
into an administrative agreement with the Adviser under which the Adviser
oversees the custodial, auditing, valuation, accounting, legal, stock transfer
and dividend disbursing services and maintains Fund communications services with
the shareholders. The Adviser receives a monthly administration fee equivalent,
on an annual basis, to 0.10% of the Fund's average weekly net assets. Each
unaffiliated Trustee is entitled, as compensation for his or her services, to an
annual fee plus remuneration for attendance at various meetings. Mr. Edward J.
Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S. Scipione are directors
and/or officers of the Adviser and/or its affiliates, as well as Trustees of the
Fund. The compensation of unaffiliated Trustees is borne by the Fund. The
unaffiliated Trustees may elect to defer for tax purposes their receipt of this
compensation under the John Hancock Group of Funds Deferred Compensation Plan.
The Fund makes investments into other John Hancock Funds, as applicable, to
cover its liability for the deferred compensation. Investments to cover the
Fund's deferred compensation liability are recorded on the Fund's books as an
other asset. The deferred compensation liability and the investment to cover the
liability are marked to market on a periodic basis to reflect income earned by
the investment, and income earned by the investment is recorded on the Fund's
books. At March 31, 1998, the Fund's investment to cover the deferred
compensation liability had unrealized appreciation of $2,192.
NOTE C - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended March 31, 1998, aggregated $31,075,917 and $33,645,937, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended March 31, 1998.
The cost of investments owned at March 31, 1998 (including the joint
repurchase agreement) for federal income tax purposes was $207,621,067. Gross
unrealized appreciation and depreciation of investments aggregated $22,502,928
and $624,200, respectively, resulting in net unrealized appreciation of
$21,878,728 for federal tax purposes.
SHAREHOLDER MEETING
On March 5, 1998, the Annual Meeting of John Hancock Patriot Premium Dividend
Fund I (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
--- ---------
Edward J. Boudreau, Jr. 10,972,605 202,353
Anne C. Hodsdon 10,930,658 244,299
Steven R. Pruchansky 10,974,784 200,174
Norman H. Smith 10,966,549 208,408
The shareholders also ratified the Trustees' selection of Deloitte & Touche
LLP as the Fund's independent auditors for the Fund for the fiscal year ending
September 30,1998, with the votes tabulated as follows: 10,911,754 FOR, 75,511
AGAINST and 188,064 ABSTAINING.
12
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
INVESTMENT OBJECTIVE AND POLICY
The Fund's investment objective is to provide high current income, consistent
with modest growth of capital for holders of its Common Shares. The Fund will
pursue its objective by investing in a diversified portfolio of dividend-paying
preferred and common equity securities.
DIVIDEND REINVESTMENT PLAN
The Fund provides shareholders with a Dividend Reinvestment Plan ("the Plan")
which offers the opportunity to earn compounded yields. Each holder of Common
Shares will automatically have all distributions of dividends and capital gains
reinvested by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02210 as agent for the common shareholders unless an election is
made to receive cash. Holders of Common Shares who elect not to participate in
the Plan will receive all distributions in cash, paid by check, mailed directly
to the shareholder of record (or if the Common Shares are held in street or
other nominee name then to the nominee) by the Plan Agent, as dividend
disbursing agent. Shareholders whose shares are held in the name of a broker or
nominee should contact the broker or nominee to determine whether and how they
may participate in the Plan.
If the Fund declares a dividend payable either in Common Shares or in cash,
nonparticipants will receive cash, and participants in the Plan will receive the
equivalent in Common Shares. If the market price of the Common Shares on the
payment date for the dividend is equal to or exceeds their net asset value as
determined on the payment date, participants will be issued Common Shares (out
of authorized but unissued shares) at a value equal to the higher of net asset
value or 95% of the market price. If the net asset value exceeds the market
price of the Common Shares at such time, or if the Board of Trustees declares a
dividend payable only in cash, the Plan Agent will, as agent for Plan
participants, buy shares in the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. Such purchases will be made promptly
after the payable date for such 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.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent. Such withdrawal will be effective immediately if received not
less than ten days prior to a dividend record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant withdraws
from the Plan or upon termination of the Plan as provided below, certificates
for whole Common Shares credited to his or her account under the Plan will be
issued and a cash payment will be made for any fraction of a Share credited to
such account. The
Plan Agent maintains each shareholder's account in the Plan and furnishes
monthly written confirmations of all transactions in the accounts, including
information needed by the shareholders for personal and tax records. Common
Shares in the account of each Plan participant will be held by the Plan Agent in
non-certificated form in the name of the participant. Proxy material relating to
the shareholder's meetings of the Fund will include those shares purchased as
well as shares held pursuant to the Plan.
There will be no brokerage charges with respect to Common Shares issued
directly by the Fund. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of dividends and distributions. In
each case, the cost per share of the shares purchased for each participant's
account will be the average cost, including brokerage commissions, of any shares
purchased on the open market plus the cost of any shares issued by the Fund.
There are no other charges to participants for reinvesting dividends or capital
gain distributions, except for certain brokerage commissions, as described
above.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable or required to be
withheld on such dividends or distributions. Participants under the Plan will
receive tax information annually. The amount of dividend to be reported on Form
1099-DIV should be (1) in the case of shares issued by the Fund, the fair market
value of such shares
13
<PAGE>
John Hancock Funds - Patriot Premium Dividend Fund I
on the dividend payment date and (2) in the case of shares purchased by the Plan
Agent in the open market, the amount of cash used to purchase them (including
the amount of cash allocated to brokerage commissions paid on such purchases).
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
dividend or distribution paid subsequent to written notice of the change sent to
all shareholders of the Fund at least 90 days before the record date for the
dividend or distribution. The Plan may be amended or terminated by the Plan
Agent 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, State Street Bank and Trust Company, at P.O. Box
8209, Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
14
<PAGE>
NOTES
John Hancock Funds - Patriot Premium Dividend Fund I
<PAGE>
[LOGO] John Hancock Funds ----------------
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INTERNET: www.jhancock.com/funds Permit No. 750
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