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SEMIANNUAL REPORT
[GRAPHIC OMITTED]
Patriot Premium
Dividend Fund I
MARCH 31, 1999
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
-------------------------------------------
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
James F. Carlin
William H. Cunningham*
Ronald R. Dion*
Harold R. Hiser, Jr.
Anne C. Hodsdon
Charles L. Ladner
Leo E. Linbeck, Jr.
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
Anne C. Hodsdon
President, Chief Operating Officer
and Chief Investment Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
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
State Street Bank and Trust Company
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
For shareholder assistance
refer to page 14
------------------------------------------------
============================CHAIRMAN'S MESSAGE==================================
DEAR FELLOW SHAREHOLDERS:
The stock market continues to show its resilience. At the end of March,
the Dow Jones Industrial Average reached a new high and broke an important
psychological barrier by passing the 10,000 mark. This feat was particularly
impressive since just six months earlier - last August and September - the
volatile market had tumbled from its July highs to the edge of what appeared to
many as bear-market territory.
In the last six months, investor sentiment has fluctuated dramatically,
going from fears of global economic meltdown last fall, to today's euphoria at
the strength of the U.S. economy and surprisingly solid earnings reports. As has
often been the case in recent years, high-growth technology stocks grabbed most
of the headlines during the market's latest advance. Large-capitalization growth
stocks have also continued their domination over small-cap stocks, many of which
have been out of favor with investors for three years and remain so - at least
for now.
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[A 1" x 1 1/2" photo of Edward J. Boudreau, Jr., Chairman and Chief Executive
Officer, flush right next to second paragraph.]
- --------------------------------------------------------------------------------
Once again, the market's latest moves are a reminder that successful
investing is a long-term proposition. History shows that despite several
well-known exceptions, the general direction of the market has been up. Indeed,
the axiom that "the market climbs a wall of worry" is being borne out once again
in the face of our contemporary political scandals and military crises. Concerns
will always be with us. But an investment strategy that properly aligns one's
goals with one's tolerance for risk is the sensible way to plan for the future.
We encourage you to work with your investment professional to make sure your
personal portfolio is thoughtfully allocated among stocks, bonds and money
market investments. This strategy could help you weather any short-term
uncertainties and still capitalize on any pleasant surprises the market might
offer.
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
Preferreds brighten while utility stocks dim,
but both groups lag in last six months
Preferred stocks and utility common stocks - the Fund's two primary focuses -
marched along different paths during the past six months, although both wound up
posting disappointing returns. Worried that protracted economic problems
overseas would curtail U.S. economic growth, droves of investors gravitated to
highly secure U.S. Treasuries early in the period. In the process, they shunned
preferred stocks and all other fixed-income securities throughout October and
November. During those same two months, however, global tumult benefited utility
common stocks, which had a myriad of things going for them. Their attractiveness
stemmed from their lack of exposure to foreign economies, their long history of
performing in tandem with the Treasury market, their reputation for providing
consistent earnings growth even in periods of economic weakness and their high
dividend yields.
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[A 3 1/2" x 2 1/2" photo at bottom right side of page of John Hancock Patriot
Premium Dividend Fund I. Caption below reads "Fund management team members
(l-r): Sylvester Marquardt, Mark Maloney, Beverly Cleathero and Gregory
Phelps."]
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By December, however, the winds started to shift significantly
on evidence that the U.S. economy's strength wasn't abating and that many
foreign economies appeared poised to turn the corner. Improving economic
sentiment fanned fears that inflation - a fixed-income investor's enemy - would
pick up. In addition, fewer investors felt the need to seek the safety and
security of Treasuries. From December through the end of the period in March,
investors sent bond yields which move in the inverse direction of their prices -
higher. Along with deteriorating bond prices came a sell-off of utility stocks,
which
"Preferred stocks and utility common stocks... marched along different paths..."
3
<PAGE>
================================================================================
John Hancock Funds - Patriot Premium Dividend Fund I
"...the Fund has been forced to surrender to calls some of its higher-yielding
preferred stocks..."
- --------------------------------------------------------------------------------
[Pie chart at top left hand column with heading "Portfolio Diversification." The
chart is divided into five sections (from top to left): Short-Term Investments &
Other 3%, Industrials 9%, Financials 21%, Common Stock Utilities 30% and
Preferred Stock Utilities 37%. A note below the chart reads "As a percentage of
net assets on March 31, 1999."]
- --------------------------------------------------------------------------------
suffered further from an exodus of investors seeking faster-growing groups of
stocks among Internet-related and other technology companies. At the same time,
preferred stocks - aided by diminished supply - began to gain ground on
poor-performing Treasuries.
Performance and strategy review
For the six months ended March 31, 1999, the Fund posted a total return of
- -1.98% at net asset value. By comparison, the Dow Jones Utility Average had a
total return of -2.90% in the same period and the average preferred stock
closed-end fund returned -0.65%, according to Lipper, Inc.
Throughout the period, we maintained our long-term focus on
DRD-eligible preferred stocks, which offer distinct tax advantages to corporate
investors. We also continued to focus on finding securities with good call
protection,
- --------------------------------------------------------------------------------
[Table at bottom of left hand column 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 Montana
Power followed by an up arrow with the phrase "Excitement over fiber-optic
business." The second listing is MCN Energy Group followed by a down arrow with
the phrase "Earnings disappointments, write-offs." The third listing is BEC
Energy followed by a down arrow with the phrase "Caught in utility stocks'
downdraft." A note below the table reads "See `Schedule of Investments.'
Investment holdings are subject to change."]
- --------------------------------------------------------------------------------
which means issuers can't redeem them before a specified date. Call protection
is important because it allows us to hang on to stocks with higher-than-average
dividend yields when interest rates are falling.
The supply of DRD-eligible preferred stocks shrunk by about 22% in
1998, according to one estimate, a direct result of issuers' exercising their
call provisions in light of falling interest rates. So far in 1999, issuers -
prompted by continued low rates - have announced plans to call an additional
estimated $1 billion of preferred stocks in the near future. From a technical
standpoint, calls largely have been beneficial for the DRD-eligible preferred
market because they have reduced available supply, while demand has remained
fairly constant. At the same time, however, the Fund has been forced to
surrender to calls some of its higher-yielding preferred stocks and reinvest the
proceeds in securities that offered the Fund lower dividend yields - a direct
by-product of low interest rates.
In many cases, we used the proceeds from preferred stocks called away
from us to buy attractively priced utility common stocks beginning in January,
when their yields were relatively high - although still lower than the preferred
stocks we had called away. From a historical perspective, the price-to-earnings
ratios (P/Es) of utility common stocks have run about 65% to 70% of the P/E of
the Standard & Poor's 500 Index. P/Es are one measure of how much you're paying
for earnings. By the end of the period, however, the P/E of the average utility
stock was only about 50% of the S&P. That's the cheapest utility stocks have
been in 20 years. Furthermore, that relative cheapness came amid a good backdrop
for utility stocks, as more and more utilities announced stock buybacks, merger
and acquisition activity accelerated and the regulatory environment remained
favorable.
4
<PAGE>
================================================================================
John Hancock Funds - Patriot Premium Dividend Fund I
- --------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended March 31, 1999." The
chart is scaled in increments of 1% with -3% at the bottom and 0% at the top.
The first bar represents the -1.98% total return for John Hancock Patriot
Premium Dividend Fund I. The second bar represents the -0.65% total return for
Average preferred stock closed-end fund. The third bar represents the -2.90%
total return for Dow Jones Utility Average. A note below the chart 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, Inc. The Dow Jones Utility Average is an unmanaged
index that measures the performance of the utility industry in the United
Sates."]
- --------------------------------------------------------------------------------
Leaders and laggards
Among our best-performing preferred stocks was El Paso Tennessee Pipeline, which
also was the Fund's largest holding at the end of the period. The stock surged
when the company announced a planned merger with large pipeline/oil and gas
producer Sonat. Montana Power, another of our largest holdings, also performed
relatively well. The company benefited from the sale of its generating plants
and from the fact that it is one of the lowest-cost electric producers in the
country. But investors seemed most excited by Montana Power's participation in
the high-growth business of building out a fiber-optic network. Another winner
was oil and gas producer/explorer Lasmo America, which benefited from the surge
in energy prices late in the period.
As we mentioned earlier, utility companies wound up lagging as the
period progressed. Even well-managed, highly respected companies such as BEC
Energy were caught in the downturn, despite the company's plans for a large
stock buyback and its success in selling off its electric generating plants at
attractive prices. Even the fact that BEC is partnering with RCN Corporation to
develop fast-growing cable, Internet access and local telephone service wasn't
enough to help it escape from the electric sector's doldrums. Company-specific
problems were the issue at natural gas provider MCN Energy Group, a
Michigan-based gas distribution utility. A string of earnings disappointments
and some significant one-time charges severely damaged the price of MCN stock.
Outlook
Assuming that the U.S. economy charts a moderate growth track and interest rates
remain relatively stable, we're optimistic about both preferred and utility
common stocks. From a technical standpoint, the continued shrinking supply of
DRD-eligible preferred stocks likely will work to that group's benefit. To the
extent that investors become concerned about the sustainability of corporate
earnings growth at large companies and in high-flying sectors such as
technology, utility stocks could benefit. Evidence of a slowing U.S. economy
would likely stir demand for utility stocks, given their relative cheapness.
That, plus ongoing industry consolidation, a favorable regulatory environment
and their strong financial shape should, in our view, position utility common
stocks to stage a turnaround in the months to come.
- --------------------------------------------------------------------------------
This commentary reflects the views of 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.
"Evidence of a slowing U.S. economy would likely stir demand for utility
stocks..."
5
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund I
The Statement of Assets and Liabilities is the Fund's balance sheet on March 31,
1999. 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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Preferred stocks (cost - $146,549,308)....................... $153,031,560
Common stocks (cost - $62,022,270)........................... 67,738,813
Short-term investments (cost - $2,000,266)................... 2,000,266
--------------
222,770,639
Dividends receivable.......................................... 827,897
Other assets.................................................. 26,076
--------------
Total Assets.......................... 223,624,612
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Liabilities:
Due to custodian.............................................. 53,134
Payable for investments purchased............................. 238,178
DARTS dividend payable........................................ 215,301
Common shares dividend payable................................ 122,356
Payable to John Hancock Advisers, Inc.
and affiliates - Note B...................................... 275,328
Accounts payable and accrued expenses......................... 13,460
--------------
Total Liabilities..................... 917,757
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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....................................... 140,700,663
Accumulated net realized gain on investments.................. 1,806,099
Net unrealized appreciation of investments.................... 12,200,987
Distributions in excess of net investment income.............. (500,894)
--------------
Net Assets applicable to
Common Shares ($10.29 per
share based on 14,979,601
shares outstanding)................... 154,206,855
--------------
Net Assets............................ $222,706,855
=====================================================
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, 1999 (Unaudited)
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Investment Income:
Dividends..................................................... $7,428,185
Interest...................................................... 55,044
--------------
7,483,229
--------------
Expenses:
Investment management fee - Note B........................... 941,944
Administration fee - Note B.................................. 113,557
DARTS and auction fees....................................... 93,868
Compliance systems fee....................................... 33,000
Custodian fee................................................ 32,955
Transfer agent fee........................................... 31,165
Auditing fee................................................. 25,955
Printing and postage......................................... 21,421
New York Stock Exchange fee ................................. 12,773
Trustees' fees .............................................. 7,233
Miscellaneous................................................ 1,597
Legal fees .................................................. 1,133
--------------
Total Expenses........................ 1,316,601
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Net Investment Income................. 6,166,628
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Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold ........................ 2,328,327
Change in net unrealized appreciation/depreciation
of investments .............................................. (10,192,165)
--------------
Net Realized and Unrealized
Loss on Investments .................. (7,863,838)
-----------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations............. (1,697,210)
=====================================================
Distribution to DARTS
Shareholders.......................... (1,381,610)
=====================================================
Net Decrease in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less DARTS
Distributions......................... ($3,078,820)
=====================================================
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund I
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, 1999
SEPTEMBER 30, 1998 (UNAUDITED)
------------------ ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income................................................................. $12,965,130 $6,166,628
Net realized gain on investments sold ................................................ 3,068,609 2,328,327
Change in net unrealized appreciation/depreciation of investments..................... 11,790,768 (10,192,165)
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations...................... 27,824,507 (1,697,210)
-------------- --------------
Distributions to Shareholders:
DARTS ($4,132 and $2,017 per share, respectively) - Note A ........................... (2,830,425) (1,381,610)
Common Shares - Note A
Dividends from net investment income ($0.6988 and $0.3498 per share, respectively)... (10,465,226) (5,239,411)
Distributions in excess of net investment income ($0.0008 and
none per share, respectively)....................................................... (11,930) -
-------------- --------------
Total Distributions to Shareholders................................................. (13,307,581) (6,621,021)
-------------- --------------
Net Assets:
Beginning of period................................................................... 216,508,160 231,025,086
-------------- --------------
End of period
(including distributions in excess of net investment income of
$46,501 and $500,894, respectively)................................................ $231,025,086 $222,706,855
============== ==============
Analysis of Common Shareholder Transactions:
SIX MONTHS ENDED
YEAR ENDED MARCH 31, 1999
SEPTEMBER 30, 1998 (UNAUDITED)
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- ---------
Shares outstanding, beginning of period.................... 14,979,601 $139,242,993 14,979,601 $140,700,663
Reclassification of net realized long-term gains retained
on investments sold (net of federal income taxes of
$767,306 and none, respectively) - Note A................. - 1,424,997 - -
Reclassification of capital accounts....................... - 32,673 - -
------------ -------------- ----------- --------------
Shares outstanding, end of period.......................... 14,979,601 $140,700,663 14,979,601 $140,700,663
============ ============== =========== ==============
</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 and at the end of the period for the last
two periods, along with the corresponding dollar value.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund I
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, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
------------ ------------ ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
COMMON SHARES
Per Share Operating Performance
Net Asset Value, Beginning of Period.... $11.29 $7.93 $9.17 $9.02 $9.88 $10.85
--------- --------- --------- --------- ---------- ----------
Net Investment Income................... 0.89 0.95 0.94 0.98 0.87 0.41
Net Realized and Unrealized Gain (Loss)
on Investments ........................ (2.86) 1.30 (0.10) 0.82 0.99 (0.53)
--------- --------- --------- --------- ---------- ----------
Total from Investment Operations...... (1.97) 2.25 0.84 1.80 1.86 (0.12)
--------- --------- --------- --------- ---------- ----------
Less Distributions:
Dividends to DARTS Shareholders......... (0.14) (0.21) (0.19) (0.19) (0.19) (0.09)
Dividends from Accumulated Net
Investment Income to Common Shareholders (1.00) (0.80) (0.74) (0.75) (0.70) (0.35)
Distributions in Excess of Accumulated
Net Investment Income to Common Shareholders - - (0.06) - (0.00)(5) -
Distributions from Net Realized
Short-Term Capital Gains on Investments
to Common Shareholders................. (0.25) - - - - -
--------- ---------- --------- ---------- ---------- ----------
Total Distributions.................... (1.39) (1.01) (0.99) (0.94) (0.89) (0.44)
--------- ---------- --------- ---------- ---------- ----------
Net Asset Value, End of Period.......... $7.93 $9.17 $9.02 $9.88 $10.85 $10.29
========= ========== ========= ========== ========== ==========
Per Share Market Value, End of Period... $8.000 $9.000 $9.125 $9.375 $10.188 $9.563
Total Investment Return at Market Value. (16.05%) 23.68% 10.58% 11.35% 16.57% (2.81%)(6)
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000s omitted)........... $116,123 $135,939 $133,925 $148,008 $162,525 $154,207
Ratio of Expenses to
Average Net Assets(1).................. 1.95% 2.06% 1.87% 1.87% 1.65% 1.66%(7)
Ratio of Net Investment Income to
Average Net Assets(2).................. 9.66% 11.33% 10.12% 10.35% 8.26% 7.77%(7)
Portfolio Turnover Rate................. 56% 74% 57% 56% 32% 9%
Senior Securities
Total DARTS Outstanding (000s omitted).. $68,500 $68,500 $68,500 $68,500 $68,500 $68,500
Asset Coverage per Unit(3).............. $271,736 $290,238 $294,044 $308,832 $330,525 $323,144
Involuntary Liquidation Preference per
Unit(4)................................ $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit(4).... $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
</TABLE>
(1) 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 1.29%, 1.32%,
1.24%, 1.26%, 1.15% and 1.16%, respectively.
(2) Ratios calculated on the basis of net investment income applicable to common
shares relative to the average net assets of common shares. Without the
exclusion of preferred shares, the ratio of net investment income would have
been 6.42%, 7.29%, 6.75%, 6.97%. 5.75% and 5.43%, respectively.
(3) 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.
(4) Plus accumulated and unpaid dividends.
(5) Less than $0.01 per share.
(6) Not annualized.
(7) Annualized.
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>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund I
Schedule of Investments
March 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Patriot Premium Dividend Fund I on March 31, 1999. It's divided into three main
categories: preferred stocks, common stocks 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.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
PREFERRED STOCKS
Agricultural Operations (1.67%)
Ocean Spray Cranberries, Inc.,
6.25% (R)................................. 35,000 $3,710,000
----------
Automobile / Trucks (2.00%)
General Motors Corp., 9.12%,
Depositary Shares, Ser G ................. 160,000 4,460,000
----------
Banks - Foreign (2.12%)
Australia and New Zealand Banking
Group Ltd., 9.125% (Australia)............ 173,000 4,725,062
----------
Banks - United States (6.77%)
Chase Manhattan Corp., 10.84%, Ser C....... 107,075 3,118,559
Fleet Financial Group, Inc., 6.75%, Ser VI. 59,000 3,215,500
Fleet Financial Group, Inc., 9.35%,
Depositary Shares......................... 140,000 3,657,500
J.P. Morgan & Company, Inc., 6.625%,
Depositary Shares, Ser H.................. 80,000 4,320,000
Republic New York Corp., $2.8575........... 15,000 765,000
----------
15,076,559
----------
Broker Services (6.68%)
Bear Stearns Companies, Inc., 5.49%,
Ser G..................................... 64,500 2,745,281
Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D.................. 90,000 3,915,000
Lehman Brothers Holdings, Inc., 5.94%,
Ser C .................................... 100,000 4,637,500
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A ................. 90,000 2,773,125
Morgan Stanley Group, Inc., 7.75%,
Depositary Shares ........................ 15,000 815,625
----------
14,886,531
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Diversified Operations (0.45%)
Grand Metropolitan Delaware, L.P.,
9.42%, Gtd Ser A.......................... 35,420 $1,009,470
----------
Finance (4.68%)
Citigroup, Inc., 8.40%,
Depositary Shares, Ser K.................. 175,000 4,757,812
Coastal Finance I, 8.375%.................. 190,000 4,750,000
SI Financing Trust I, 9.50%,
Gtd Pfd Sec & Purchase Contract........... 34,200 906,300
----------
10,414,112
----------
Leasing Companies (1.06%)
AMERCO, 8.50%, Ser A....................... 90,000 2,362,500
----------
Media (0.99%)
Shaw Communications, Inc., 8.45%,
Ser A (Canada)............................ 89,453 2,202,780
----------
Oil & Gas (4.88%)
Anadarko Petroleum Corp., 5.46%,
Depositary Shares......................... 45,278 4,075,020
Lasmo America Ltd., 8.15% (R).............. 20,000 2,090,000
PennzEnergy Co., 6.49%, Ser A ............. 50,000 4,700,000
----------
10,865,020
----------
Utilities (37.41%)
Alabama Power Co., 5.20%................... 225,000 5,653,125
Avista Corp., 1.24%, Ser L, Conv........... 90,045 1,542,021
Baltimore Gas & Electric Co., 6.99%,
Ser 1995.................................. 34,000 3,897,250
Boston Edison Co., 4.25%................... 39,643 3,057,466
El Paso Tennessee Pipeline Co., 8.25%,
Ser A..................................... 182,000 10,032,750
Florida Power & Light Co., 6.75%, Ser U.... 42,000 4,698,750
Hawaiian Electric Industries Capital
Trust I, 8.36%............................ 100,000 2,531,250
Idaho Power Co., 7.07%..................... 13,000 1,462,500
MCN Michigan, L.P., 9.375%, Ser A.......... 148,800 3,785,100
Massachusetts Electric Co., 6.99%.......... 13,500 1,503,563
Monongahela Power Co., 7.73%, Ser L........ 34,500 3,967,500
Montana Power Capital I, 8.45%, Ser A ..... 40,000 1,050,000
Montana Power Co., $6.875.................. 22,500 2,531,250
PSI Energy, Inc., 6.875%................... 37,000 4,125,500
Public Service Electric & Gas Co., 6.92%... 25,800 2,867,025
Puget Sound Energy, Inc., 7.45%, Ser II.... 124,000 3,503,000
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund I
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Utilities (continued)
Sierra Pacific Power Capital I, 8.60%...... 28,000 $722,750
Sierra Pacific Power Co., 7.80%,
Ser 1 (Class A) .......................... 50,000 1,350,000
South Carolina Electric & Gas Co., 6.52% .. 50,000 5,531,250
Southern Union Financing I, 9.48%.......... 185,000 4,740,625
TDS Capital Trust I, 8.50% ................ 132,235 3,330,669
TDS Capital Trust II, 8.04%................ 31,000 775,000
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A ................. 25,100 669,856
Texas Utilities Electric Co., $7.98........ 36,000 4,133,250
UtiliCorp Capital, L.P., 8.875%, Ser A .... 184,256 4,733,076
Virginia Electric & Power Co., $7.05 ...... 10,000 1,125,000
----------
83,319,526
----------
TOTAL PREFERRED STOCKS
(Cost $146,549,308) (68.71%) 153,031,560
--------- -----------
COMMON STOCKS
Utilities (30.42%)
BEC Energy................................. 175,000 6,431,250
Conectiv, Inc.............................. 140,000 2,712,500
Consolidated Edison, Inc................... 50,000 2,265,625
DTE Energy Co.............................. 90,000 3,459,375
Dominion Resources, Inc.................... 64,300 2,375,081
Eastern Enterprises ....................... 58,100 2,113,388
Edison International....................... 58,000 1,290,500
Florida Progress Corp...................... 69,000 2,604,750
Interstate Energy Corp..................... 150,380 3,985,070
KN Energy, Inc............................. 42,500 847,344
KeySpan Energy............................. 136,080 3,419,010
MCN Energy Group, Inc...................... 75,000 1,204,688
Montana Power Co........................... 108,300 7,966,819
Nevada Power Co............................ 56,600 1,400,850
New England Electric System................ 74,250 3,601,125
Northern States Power Co................... 20,000 463,750
PacifiCorp................................. 54,000 931,500
Potomac Electric Power Co.................. 114,000 2,643,375
Public Service Enterprise Group, Inc....... 64,500 2,463,094
Puget Sound Energy, Inc.................... 216,900 5,002,256
Reliant Energy, Inc........................ 93,500 2,436,844
Sempra Energy ............................. 50,000 959,375
Southern Co................................ 57,000 1,328,813
TECO Energy, Inc........................... 42,000 834,750
UtiliCorp United, Inc...................... 87,000 1,979,250
Western Resources, Inc..................... 68,700 1,833,431
Williams Cos., Inc. (The).................. 30,000 1,185,000
----------
TOTAL COMMON STOCKS
(Cost $62,022,270) (30.42%) 67,738,813
-------- ----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- ---- -------------- -----
SHORT-TERM INVESTMENTS
Oil & Gas (0.90%)
Chevron USA, Inc.
04-01-99....................... 4.75% $2,000 $2,000,266
-----------
TOTAL SHORT-TERM INVESTMENTS (0.90%) 2,000,266
--------- -----------
TOTAL INVESTMENTS (100.03%) 222,770,639
--------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.03%) (63,784)
--------- -----------
TOTAL NET ASSETS (100.00%) $222,706,855
========= ============
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer; however, security is U.S. dollar
denominated.
(R) This security is exempt from registration under rule 144A of the Securities
Act of 1933. Such security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $5,800,000 or 2.60% of net assets as of
March 31, 1999.
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>
=========================NOTES TO FINANCIAL STATEMENTS==========================
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 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 which is distributed to
shareholders.
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 March 31, 1999, which have no effect on the Fund's
net assets, net investment income or net realized gains. The Fund has the option
and has chosen to retain and pay the applicable federal income tax on $2,192,303
of its net long-term capital gain for the fiscal period ended September 30,
1998.
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
3.69% to 4.37% during the period ended March 31, 1999.
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 Fund is required to maintain certain asset
coverage with respect to the DARTS, as defined in the Fund's By-Laws.
11
<PAGE>
=========================NOTES TO FINANCIAL STATEMENTS==========================
John Hancock Funds - Patriot Premium Dividend Fund I
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, Inc., 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, 1999, 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., Mr. Stephen L. Brown, 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 related 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. At March 31, 1999, 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, 1999, aggregated $21,299,910 and $21,965,669, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended March 31, 1999.
The cost of investments owned at March 31, 1999 (including short-term
investments) for federal income tax purposes was $211,067,807. Gross unrealized
appreciation and depreciation of investments aggregated $19,774,626 and
$8,071,794, respectively, resulting in net unrealized appreciation of
$11,702,832 for federal income tax purposes.
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.
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 who have no rated
senior debt outstanding, whose senior debt is considered by the Adviser to be of
comparable quality.
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
13
<PAGE>
================================================================================
John Hancock Funds - Patriot Premium Dividend Fund I
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 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, P.O. Box 8209,
Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
YEAR 2000 COMPLIANCE
The Adviser and the Fund's service providers are taking steps to address any
year 2000-related computer problems. However, there is some risk that these
problems could disrupt the issuers in which the Fund invests, the Fund's
operations or financial markets generally.
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning the John Hancock Patriot Premium Dividend
Fund I, 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:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 426-5523
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
SHAREHOLDER MEETING (UNAUDITED)
On March 18, 1999, the Annual Meeting of John Hancock Patriot Premium Dividend
Fund I (the "Fund") was held to elect five 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
--- ---------
Stephen L. Brown 10,056,118 198,539
James F. Carlin 10,002,825 251,833
William H. Cunningham 10,003,995 250,662
John P. Toolan 10,007,454 247,204
The preferred shareholders elected Harold R. Hiser, Jr. to serve until
his successor is duly elected and qualified, with the votes tabulated as
follows: 394 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
September 30, 1999, with the votes tabulated as follows: 10,057,956 FOR, 60,278
AGAINST and 136,817 ABSTAINING.
14
<PAGE>
===================================NOTES========================================
John Hancock Funds - Patriot Premium Dividend Fund I
15
<PAGE>
================================================================================
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