---------------------------
The latest report from your
Fund's management team
---------------------------
ANNUAL REPORT
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Patriot Premium
Dividend Fund I
SEPTEMBER 30, 2000
John Hancock
--------------------
JOHN HANCOCK FUNDS
<PAGE>
--------------------------------------------
TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment 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
Bankers Trust Company
4 Albany Street
New York, New York 10005
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116
Listed New York Stock Exchange Symbol: PDF
For shareholder assistance
refer to page 15
----------------------------------------------
===================================CEO CORNER===================================
DEAR FELLOW SHAREHOLDERS:
After providing investors with sky-high returns for the last five years, the
financial markets have brought investors back down to earth in 2000. Rising
interest rates and oil prices, the prospects of a slowing economy and earnings
fears caught up with pricey growth stocks - technology in particular. A dramatic
plunge in the spring and again in early fall caused the major indexes to end
September in negative territory for the year. The tech-heavy NASDAQ Composite
Index was hardest hit, returning -9.63% year to date.
--------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
--------------------------------------------------------------------------------
But there is a silver lining. Investors have finally turned their attention to
broader swaths of the market, including both blue chip and old economy stocks in
sectors like financials, health care and energy, that combined both strong
fundamentals and less frothy valuation levels. Bonds also began to make a
comeback as the year progressed and investors grew more confident that the
series of Fed rate hikes might be coming to an end. Pockets of strength have
emerged there, including municipal bonds and longer-maturity Treasury bonds. The
30-year bond, for instance, has returned 11.53% since January.
Between now and year end, we expect the market's focus to be on Washington, as
it usually is in an election year. While the presidential election is important,
what warrants more attention is the Federal Reserve Board. The November election
will generate more ink, but won't have anywhere near the impact on financial
markets that further Fed action could. So we'll be watching the economic data to
see whether the Fed has truly wound down its string of interest-rate hikes.
The market's shifts in leadership so far this year highlight one of the key
investment tenets that we can't emphasize enough: investing should be a
marathon, not a sprint. If your portfolio is diversified and you have an
up-to-date financial plan crafted with an investment professional to meet your
goals, it becomes easier to ride out the market's short-term ups and downs. It
could also provide you with a greater chance of success over time.
Sincerely,
/s/Maureen R. Ford
------------------
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By Gregory K. Phelps for the Portfolio Management Team
John Hancock Patriot
Premium Dividend Fund I
Rebound in utility stocks lights up Fund's performance
------------------------------------------------------
Utility common stocks - which made up 36% of the Fund's net assets at year end -
have come on very strong so far in 2000, particularly during the third quarter
of the year. Part of their good fortune stemmed from the fact that utilities are
among a few stock-market sectors that pay handsome dividends. They also began to
shed their traditional reputation as being supersensitive to interest-rate
changes. In fact, most utilities derive a growing portion of their earnings from
unregulated businesses such as cellular, cable and others, and no longer need to
borrow large amounts to fund the building of new generating capacity. Third,
many investors began to embrace the notion that deregulation is unlocking value
for many utilities. Fourth, weary investors were seeking safer haven from the
volatility that marked many other industry groups, particularly the tech sector.
Fifth, many utility stocks were viewed favorably as bargains after years of
underperforming the stock market overall. Finally, second-quarter 2000 earnings
- most of which were announced in July - proved much better than expected,
thanks to cost-cutting and merger savings, stock buybacks and higher usage of
electricity and natural gas. That trend appeared to continue in the third
quarter as well. While investors were left stewing over warnings from many other
industry sectors about worse-than-expected third-quarter earnings, not one
utility pre-announced bad news. By the end of September, the Dow Jones Utility
Average hit an all-time high.
--------------------------------------------------------------------------------
[A 3" x 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): Mark
Maloney, Beverly Cleathero and Gregory Phelps."]
--------------------------------------------------------------------------------
"Preferred stocks - the Fund's other focus -steadily improved during the
year..."
3
<PAGE>
================================================================================
John Hancock Funds - Patriot Premium Dividend Fund I
"Not sur-prisingly, our best performers during the period were utility common
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 6%, Oil & Gas 8%, Financials 14%, Utility Common Stock 36% and Utility
Preferred Stock 36%. A note below the chart reads "As a percentage of net assets
on September 30, 2000."]
--------------------------------------------------------------------------------
Preferred-stock rebound more moderate
Preferred stocks - the Fund's other focus - steadily improved during the year,
although their performance paled in comparison to that of utility common stocks.
From the beginning through the middle portion of the period, preferreds were
under pressure as worries about inflation and a string of interest-rate hikes
muted returns. Because of their high, mostly fixed, dividends, preferred stocks
tend to be quite sensitive to interest-rate movements. Throughout the summer and
early fall, however, slower economic growth and reduced concerns about higher
interest rates provided a more favorable investment backdrop. The preferred
market was further boosted by more favorable supply and demand conditions. On
the supply side, the number of preferred stocks issued was limited in response
to higher interest rates and financing costs. Preferreds
--------------------------------------------------------------------------------
[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 KeySpan Corp.
followed by an up arrow with the phrase "Planned merger generates excitement."
The second listing is Dominion Resources followed by an up arrow with the phrase
"Rise in gas prices boosts earnings." The third listing is Western Resources
followed by a down arrow with the phrase "Credit rating downgraded." A note
below the table reads "See `Schedule of Investments.' Investment holdings are
subject to change."]
--------------------------------------------------------------------------------
also got a lift from somewhat better demand, as investors opportunistically
looked to them for their bargain prices and high yields. Within the preferred
market, preferred stocks eligible for the dividends-received deduction (DRD) -
which offer distinct advantages to corporate investors - lagged their
non-DRD-eligible counterparts, which benefited from stronger demand from
investors looking for cheaper alternatives to corporate bonds.
Performance review
Thanks to the recent performance of utility stocks, the Fund's results were
strong. For the year ended September 30, 2000, the Fund returned 10.48% at net
asset value. By comparison, the average income and preferred stock closed-end
fund returned 4.68%, according to Lipper, Inc. The Dow Jones Utility Average
returned 38.84%. Not surprisingly, our best performers during the period were
utility common stocks. Electric utility company LG&E Energy got a significant
boost when it was announced that the company would be acquired by U.K.-based
PowerGen. We also enjoyed good gains from our holdings in two Florida utility
companies - TECO Energy and Florida Progress - which were boosted in part by
that state's above-average growth in electric usage and a hospitable regulatory
environment. Dominion Resources was another good performer, thanks to its
successful merger with Consolidated Natural Gas and a surge in natural gas
prices. Merger activity and rising gas prices also boosted KeySpan, which plans
to combine with Eastern Enterprises. It is also one of the largest gas
distribution utilities in the United States. Furthermore, the company enjoyed
improved profitability. We were also rewarded
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 year ended September 30, 2000." The chart
is scaled in increments of 10% with 0% at the bottom and 40% at the top. The
first bar represents the 10.48% total return for John Hancock Patriot Premium
Dividend Fund I. The second bar represents the 4.68% total return for Average
income and preferred stock closed-end fund. The third bar represents the 38.84%
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 income and 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 States."]
--------------------------------------------------------------------------------
for avoiding electric utilities in California, which performed poorly due to an
extremely difficult regulatory environment.
On the flip side, Western Resources drastically underperformed the
utility group due to its inability to complete a planned merger and problems
with its Protection One home security business. The company's credit rating was
downgraded in response.
The rise of natural gas prices also helped bolster the financial
results and stock prices of our preferred holdings involved in the exploration
and production of oil and gas. Anadarko Petroleum and Devon Energy both rode
that wave, and each ended the period with strong cash flow, an improved outlook
for earnings and the potential to get a better credit rating.
Outlook
We believe that the Federal Reserve is near, if not at, the end of its
tightening activities. That viewpoint is based on the fact that we're beginning
to see growing evidence that the economy is slowing. To the extent that
investors recognize the value that preferred stocks now offer, preferreds will
continue to benefit.
As for utility common stocks, we're optimistic, believing that they
have even more room to run higher. We anticipate continued consolidation in the
industry, which will likely be favorable for the group. We are particularly
bullish on the companies that offer unregulated services like broadband and
fiber optics. We believe that investors may continue to find these companies
increasingly attractive alternatives to some of the much more expensive
telecommunications and technology companies.
--------------------------------------------------------------------------------
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.
"We believe that the Federal Reserve is near, if not at, the end of its
tightening activities."
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 September
30, 2000. You'll also find the net asset value per share, for each Common Share,
as of that date.
Statement of Assets and Liabilities
September 30, 2000
--------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Preferred stocks (cost - $143,429,108) ...................... $137,397,433
Common stocks (cost - $63,812,620) .......................... 80,155,867
Short-term investments (cost - $470,914) .................... 470,914
--------------
218,024,214
Receivable for investments sold .............................. 1,951,735
Dividends receivable ......................................... 1,717,922
Other assets ................................................. 40,578
--------------
Total Assets ........................ 221,734,449
----------------------------------------------------
Liabilities:
DARTS dividend payable ....................................... 372,906
Common shares dividend payable ............................... 808,899
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ..................................... 219,687
Accounts payable and accrued expenses ........................ 118,686
--------------
Total Liabilities ................... 1,520,178
----------------------------------------------------
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 ...................................... 140,818,196
Accumulated net realized gain on investments ................. 1,084,755
Net unrealized appreciation of investments ................... 10,311,572
Distributions in excess of net investment income ............. (500,252)
--------------
Net Assets Applicable to
Common Shares ($10.13 per
share based on 14,979,601
shares outstanding) ................. 151,714,271
--------------
Net Assets .......................... $220,214,271
====================================================
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains for the period
stated.
Statement of Operations
Year ended September 30, 2000
--------------------------------------------------------------------------------
Investment Income:
Dividends .................................................... $15,156,240
Interest ..................................................... 86,133
--------------
15,242,373
--------------
Expenses:
Investment management fee - Note B .......................... 1,815,609
Accounting and legal services - Note B ...................... 210,720
DARTS and auction fees ...................................... 193,466
Custodian fee ............................................... 61,720
Transfer agent fee .......................................... 57,145
Auditing fee ................................................ 55,050
Printing and postage ........................................ 47,099
Miscellaneous ............................................... 46,686
Trustees' fees .............................................. 10,281
Legal fees .................................................. 2,127
--------------
Total Expenses ...................... 2,499,903
----------------------------------------------------
Net Investment Income ............... 12,742,470
----------------------------------------------------
Realized and Unrealized Gain on Investments:
Net realized gain on investments sold ........................ 1,355,216
Change in net unrealized appreciation (depreciation)
of investments .............................................. 2,127,059
--------------
Net Realized and Unrealized
Gain on Investments ................. 3,482,275
----------------------------------------------------
Net Increase in
Net Assets Resulting from
Operations .......................... 16,224,745
====================================================
Distribution to DARTS ............... (3,181,911)
----------------------------------------------------
Net Increase in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less DARTS
Distributions ....................... $13,042,834
====================================================
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>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------
1999 2000
------------------- --------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ............................................................ $12,470,665 $12,742,470
Net realized gain on investments sold ............................................ 555,291 1,355,216
Change in net unrealized appreciation (depreciation) of investments .............. (14,208,639) 2,127,059
---------------- -----------------
Net Increase (Decrease) in Net Assets Resulting from Operations ................. (1,182,683) 16,224,745
---------------- -----------------
Distributions to Shareholders:
DARTS ($3,912 and $4,645 per share, respectively) - Note A ....................... (2,679,551) (3,181,911)
Common Shares - Note A
Dividends from net investment income ($0.6537 and $0.6382 per share, respectively) (9,791,114) (9,560,559)
Distributions in excess of net investment income ($0.0330 and
$0.0097 per share, respectively) ............................................... (494,459) (145,283)
---------------- -----------------
Total Distributions to Shareholders ............................................ (12,965,124) (12,887,753)
---------------- -----------------
Net Assets:
Beginning of period .............................................................. 231,025,086 216,877,279
---------------- -----------------
End of period (including distributions in excess of net investment income of
$385,258 and $500,252, respectively) ............................................ $216,877,279 $220,214,271
================ =================
Analysis of Common Shareholder Transactions:
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------
1999 2000
------------------------------- --------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period ............. 14,979,601 $140,700,663 14,979,601 $140,817,977
Reclassification of net realized long-term gains
retained on investments sold (net of federal income
taxes of $63,731 and none, respectively) - Note A .. - 118,358 - -
Reclassification of capital accounts ................ - (1,044) - 219
------------- -------------- ------------- --------------
Shares outstanding, end of period ................... 14,979,601 $140,817,977 14,979,601 $140,818,196
============= ============== ============= ==============
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:
--------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
COMMON SHARES
Per Share Operating Performance
Net Asset Value, Beginning of Period ....................... $9.17 $9.02 $9.88 $10.85 $9.91
--------- --------- --------- ---------- ---------
Net Investment Income(1) ................................... 0.94 0.98 0.87 0.83 0.85
Net Realized and Unrealized Gain (Loss) on Investments ..... (0.10) 0.82 0.99 (0.90) 0.23
--------- --------- --------- ---------- ---------
Total from Investment Operations .......................... 0.84 1.80 1.86 (0.07) 1.08
--------- --------- --------- ---------- ---------
Less Distributions:
Dividends to DARTS Shareholders ............................ (0.19) (0.19) (0.19) (0.18) (0.21)
Dividends from Accumulated Net Investment Income to
Common Shareholders ....................................... (0.74) (0.75) (0.70) (0.66) (0.64)
Distributions in Excess of Accumulated Net Investment Income
to Common Shareholders .................................... (0.06) - - (2) (0.03) (0.01)
--------- --------- --------- ---------- ---------
Total Distributions ....................................... (0.99) (0.94) (0.89) (0.87) (0.86)
--------- --------- --------- ---------- ---------
Net Asset Value, End of Period ............................. $9.02 $9.88 $10.85 $9.91 $10.13
========= ========= ========= ========== =========
Per Share Market Value, End of Period ....................... $9.125 $9.375 $10.188 $8.813 $8.250
Total Investment Return at Market Value .................... 10.58% 11.35% 16.57% (7.01%) 1.19%
Ratios and Supplemental Data
Net Assets Applicable to Common Shares, End of
Period (000s omitted) ..................................... $133,925 $148,008 $162,525 $148,377 $151,714
Ratio of Expenses to Average Net Assets (3) ................ 1.87% 1.87% 1.65% 1.66% 1.75%
Ratio of Net Investment Income to Average Net Assets (4) ... 10.12% 10.35% 8.26% 7.92% 8.94%
Portfolio Turnover Rate .................................... 57% 56% 32% 18% 19%
Senior Securities
Total DARTS Outstanding (000s omitted) ..................... $68,500 $68,500 $68,500 $68,500 $68,500
Asset Coverage per Unit (5) ................................ $294,044 $308,832 $330,525 $323,124 $315,176
Involuntary Liquidation Preference per Unit (6) ............ $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (6) ...................... $100,000 $100,000 $100,000 $100,000 $100,000
</TABLE>
(1) Based on the average of the shares outstanding at the end of each month.
(2) Less than $0.01 per share.
(3) Ratios calculated on the basis of expenses applicable to common shares
relative to the average net assets of common shares. Without the exclusion
of preferred shares, the ratio of expenses would have been 1.24%, 1.26%,
1.15%, 1.15% and 1.18%, respectively.
(4) 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 6.75%, 6.97%, 5.75%, 5.52% and 6.03%, respectively.
(5) Calculated by subtracting the Fund's total liabilities (excluding the DARTS)
from the Fund's total assets, and dividing this amount by the number of
DARTS outstanding as of the applicable 1940 Act Evaluation Date.
(6) Plus accumulated and unpaid dividends.
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
September 30, 2000
--------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Patriot Premium Dividend Fund I on September 30, 2000. 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 (1.26%)
Ocean Spray Cranberries, Inc.,
6.25% (R) .................................. 35,000 $2,761,500
----------
Automobile / Trucks (1.34%)
General Motors Corp., 9.12%,
Depositary Shares, Ser G ................... 115,000 2,946,875
----------
Banks - Foreign (2.02%)
Australia and New Zealand Banking
Group Ltd., 9.125% (Australia) ............. 173,000 4,443,937
----------
Banks - United States (2.94%)
Chase Manhattan Corp., 10.84%, Ser C ........ 107,075 2,877,641
J.P. Morgan & Co., Inc., 6.625%,
Depositary Shares, Ser H ................... 72,000 3,604,500
----------
6,482,141
----------
Broker Services (6.10%)
Bear Stearns Cos., Inc., 5.49%, Ser G ....... 64,500 2,471,156
Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D ................... 123,700 4,824,300
Lehman Brothers Holdings, Inc., 5.94%,
Ser C ...................................... 68,400 2,838,600
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A ................... 90,000 2,542,500
Morgan Stanley Group, Inc., 7.75%,
Depositary Shares .......................... 15,000 765,000
----------
13,441,556
----------
Diversified Operations (0.42%)
Grand Metropolitan Delaware, L.P., 9.42%,
Gtd Ser A ................................... 35,420 923,134
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- -------
Finance (2.69%)
Citigroup, Inc., 8.40%, Depositary Shares,
Ser K ...................................... 175,000 $4,484,375
SI Financing Trust I, 9.50%,
Gtd Pfd Sec & Purchase Contract ............ 34,200 861,413
USA Education, Inc., 6.97%, Ser A ........... 12,000 580,500
----------
5,926,288
----------
Leasing Companies (1.00%)
AMERCO, 8.50%, Ser A ........................ 90,000 2,210,625
----------
Media (0.95%)
Shaw Communications, Inc., 8.45%,
Ser A (Canada) ............................. 89,453 2,096,555
----------
Oil & Gas (7.61%)
Anadarko Petroleum Corp., 5.46%,
Depositary Shares .......................... 45,278 3,541,645
Coastal Finance I, 8.375% ................... 190,000 4,488,750
Devon Energy Corp., 6.49%, Ser A ............ 50,000 4,615,500
Lasmo America Ltd., 8.15% (R) ............... 40,000 4,112,800
----------
16,758,695
----------
Utilities (36.06%)
Alabama Power Co., 5.20% .................... 225,000 4,429,687
Baltimore Gas & Electric Co., 6.99%,
Ser 1995 ................................... 34,000 3,425,500
Boston Edison Co., 4.25% .................... 39,894 2,376,486
El Paso Tennessee Pipeline Co., 8.25%,
Ser A ...................................... 182,000 9,191,000
Florida Power & Light Co., 6.75%, Ser U ..... 42,000 4,087,440
FPC Capital I, 7.10%, Ser A ................. 40,000 870,000
Hawaiian Electric Industries Capital Trust I,
8.36% ...................................... 100,000 2,381,250
Idaho Power Co., 7.07% ...................... 13,000 1,335,750
MCN Michigan, L.P., 9.375%, Ser A ........... 227,900 5,697,500
Massachusetts Electric Co., 6.99% ........... 13,500 1,363,500
Monongahela Power Co., 7.73%, Ser L ......... 34,500 3,576,270
Montana Power Capital I, 8.45%, Ser A ....... 40,000 975,000
Montana Power Co., $6.875 ................... 22,500 2,198,700
PSI Energy, Inc., 6.875% .................... 37,000 3,590,850
Public Service Electric & Gas Co., 6.92% .... 25,800 2,507,502
Puget Sound Energy, Inc., 7.45%, Ser II ..... 124,000 3,115,500
Sierra Pacific Power Capital I, 8.60% ....... 28,000 679,000
SEE NOTEDS 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 Co., 7.80%, Ser 1
(Class A) ................................... 50,000 $1,300,000
South Carolina Electric & Gas Co., 6.52% ..... 50,000 4,676,500
Southern Union Financing I, 9.48% ............ 185,000 4,555,625
TDS Capital Trust I, 8.50% ................... 164,935 3,940,297
TDS Capital Trust II, 8.04% .................. 135,600 3,152,700
TXU Electric Co., $1.875, Depositary
Shares, Ser A ............................... 25,300 632,500
TXU Electric Co., $7.98 ...................... 36,000 3,780,000
UtiliCorp Capital, L.P., 8.875%, Ser A ....... 184,256 4,548,820
Virginia Electric & Power Co., $7.05 ......... 10,000 1,018,750
----------
79,406,127
----------
TOTAL PREFERRED STOCKS
(Cost $143,429,108) (62.39%) 137,397,433
-------- -----------
COMMON STOCKS
Utilities (36.40%)
Alliant Energy Corp. ......................... 150,380 4,417,412
Avista Corp. ................................. 30,128 677,880
CH Energy Group, Inc. ........................ 136,300 5,434,962
Consolidated Edison, Inc. .................... 55,000 1,876,875
DTE Energy Co. ............................... 124,000 4,743,000
Dominion Resources, Inc. ..................... 64,300 3,733,419
Eastern Enterprises .......................... 50,600 3,228,912
Energy East Corp. ............................ 104,000 2,353,000
Florida Progress Corp. ....................... 69,000 3,652,687
Kansas City Power & Light Co. ................ 77,000 2,054,937
KeySpan Corp. ................................ 59,000 2,367,375
LG&E Energy Corp. ............................ 104,100 2,543,944
Montana Power Co. ............................ 216,600 7,229,025
NSTAR ........................................ 175,000 7,043,750
OGE Energy Corp. ............................. 130,000 2,770,625
Potomac Electric Power Co. ................... 199,000 5,012,313
Puget Sound Energy, Inc. ..................... 216,900 5,503,838
Reliant Energy, Inc. ......................... 93,500 4,347,750
Sierra Pacific Resources ..................... 206,600 3,718,800
TECO Energy, Inc. ............................ 134,000 3,852,500
WPS Resources Corp. .......................... 28,400 930,100
Western Resources, Inc. ...................... 97,700 2,112,763
Xcel Energy, Inc. ............................ 20,000 550,000
----------
TOTAL COMMON STOCKS
(Cost $63,812,620) (36.40%) 80,155,867
-------- ----------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
------------------- -------- -------------- ------
SHORT-TERM INVESTMENTS
Oil & Gas (0.21%)
Chevron USA, Inc.,
Discount Commercial Paper
10-02-00 .......................... 6.55% $471 $470,914
-----------
TOTAL SHORT-TERM INVESTMENTS (0.21%) 470,914
-------- -----------
TOTAL INVESTMENTS (99.00%) 218,024,214
-------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.00%) 2,190,057
-------- -----------
TOTAL NET ASSETS (100.00%) $220,214,271
======== ============
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $6,874,300 or 3.12% of net assets as of
September 30, 2000.
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
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==========================NOTES TO FINANCIAL STATEMENTS=========================
John Hancock Funds - Patriot Premium Dividend Fund I
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. Additionally, net capital losses of $123,786 attributable to
security transactions incurred after October 31, 1999, are treated as arising on
the first day of the Fund's next taxable year, October 1, 2000.
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, 2000, which have 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 accounting principles generally accepted in the United States of America
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
4.03% to 4.88% during the year ended September 30, 2000.
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
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==========================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 year ended September 30, 2000, 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. Stephen L. Brown, Ms. Maureen R. Ford 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
other asset are always equal and are marked to market on a periodic basis to
reflect any income earned by the investment as well as any unrealized gains or
losses. The Deferred Compensation Plan investments had no impact on the
operations of the Fund.
NOTE C -
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 year
ended September 30, 2000, aggregated $39,849,350 and $41,625,886, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended September 30, 2000.
The cost of investments owned at September 30, 2000 (including
short-term investments) for federal income tax purposes was $208,081,384. Gross
unrealized appreciation and depreciation of investments aggregated $18,441,283
and $8,498,453, respectively, resulting in net unrealized appreciation of
$9,942,830 for federal tax purposes.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
During the year ended September 30, 2000, the Fund reclassified amounts to
reflect a decrease in accumulated net realized gain on investments of $30,508, a
decrease in distributions in excess of net investment income of $30,289 and an
increase in capital paid-in of $219. This represents the amount necessary to
report these balances on a tax basis, excluding certain temporary differences,
as of September 30, 2000. Additional adjustments may be needed in subsequent
reporting periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to certain differences in
computation of distributable income and capital gains under federal tax rules
versus generally accepted accounting principles. The calculation of net
investment income per share in the financial highlights excludes these
adjustments.
12
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John Hancock Funds - Patriot Premium Dividend Fund I
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
John Hancock Patriot Premium Dividend Fund I
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of John Hancock Patriot Premium Dividend Fund I
(the "Fund") as of September 30, 2000, the related statement of operations for
the year then ended, the statement of changes in net assets for the years ended
September 30, 2000 and 1999, and the financial highlights for each of the years
in the four-year period ended September 30, 2000. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the year
ended September 30, 1996 were audited by other auditors whose report, dated
November 1, 1996, expresses an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at September 30, 2000 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the Fund at
September 30, 2000, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
/s/DELOITTE & TOUCHE LLP
------------------------
Boston, Massachusetts
November 3, 2000
13
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John Hancock Funds - Patriot Premium Dividend Fund I
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund during its fiscal year ended September
30, 2000.
All of the dividends paid for the fiscal year are taxable as ordinary
income. Distributions to preferred and common shareholders were 83.80% qualified
for the dividends received deduction available to corporations.
Shareholders will be mailed a 2000 U.S. Treasury Department Form
1099-DIV in January of 2001. This will reflect the tax character of all
distributions which are taxable for the calendar year 2000.
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
14
<PAGE>
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John Hancock Funds - Patriot Premium Dividend Fund I
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 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 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).
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 16, 2000, 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
--- ---------
Maureen R. Ford 12,576,668 182,387
Charles L. Ladner 12,577,988 181,068
15
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John Hancock Funds - Patriot Premium Dividend Fund I
The preferred shareholders elected Ronald R. Dion and Richard S. Scipione to
serve until their respective successors are duly elected and qualified, with the
votes tabulated as follows: 472 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, 2000, with the votes tabulated as follows: 12,631,706 FOR, 57,928
AGAINST and 69,943 ABSTAINING.
16
<PAGE>
====================================NOTES=======================================
John Hancock Funds - Patriot Premium Dividend Fund I
17
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====================================NOTES=======================================
John Hancock Funds - Patriot Premium Dividend Fund I
18
<PAGE>
====================================NOTES=======================================
John Hancock Funds - Patriot Premium Dividend Fund I
19
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================================================================================
John Hancock -------------------
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