John Hancock Funds
Patriot
Global
Dividend
Fund
Annual Report
July 31, 1996
TRUSTEES
Edward J. Boudreau, Jr.
Thomas W.L. Cameron
James F. Carlin*
William H. Cunningham*
Charles F. Fretz*
Harold R. Hiser, Jr.*
Anne C. Hodsdon
Charles L. Ladner*
Leo E. Linbeck, Jr.*
Patricia P. McCarter*
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman J. Smith, USMC (Ret.)*
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
INVESTMENT SUB-ADVISER
John Hancock Advisers International Limited
34 Dover Street
London,England W1X3RA
CUSTODIAN AND TRANSFER AGENT
FOR COMMON SHAREHOLDERS
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT FOR DARTS
Chemical Bank
450 West 33rd Street
New York, New York 10001
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Anderson LLP
One International Place
Boston, Massachusetts 02110-2604
Listed: New York Stock Exchange Symbol: PGD
John Hancock Closed-End Funds: 1-800-843-0090
A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and
Chief Executive Officer, flush right, next to second paragraph.
Chairman's Message
DEAR FELLOW SHAREHOLDERS:
Since February, much of the economic news has been good. Employment
levels are at their highest in years. Real wages may have started
growing again after a long stagnant stretch. And a fair share of
Corporate America logged second-quarter earnings that exceeded
expectations, despite some glaring, headline-making exceptions in the
technology world. So why has the bond market soured this year and the
stock market been on a roller coaster? Isn't good economic news good?
What keeps the market interesting is that the answer is not
straightforward. While a healthy economy helps corporate profits grow,
an economy growing too fast, or the fear that it's heating up, sends
interest rates up out of concern that rising wages and higher prices
could spark inflation. That could prompt the Federal Reserve, which
views inflation as public enemy number one, to slow the economy down.
And the typical way to do that is to raise interest rates. For bonds,
higher interest rates mean lower bond prices, since the two move in
opposite directions. What's more, inflation erodes the value of a
bondholder's fixed income-stream. For stocks, higher interest rates mean
higher borrowing costs, which cut into profits.
Those are just a couple of the more textbook explanations. But there's
another element driving the market and it's far less tangible or
objective. It has to do with perception rather than reality. By taking
the market on a series of dizzying ups and downs lately, investors are
signaling uncertainties and fears, more than anything else. Since the
financial markets look forward, investors seem to be saying that they
are concerned about a number of things -- the specter of inflation, the
direction of interest rates, the upcoming election, the possibility that
markets may have advanced too far without a pullback.
So what should investors take away from it all? Probably the same thing
you've heard before -- that although the markets don't move up in a
straight line, they have historically rewarded patient, long-term
investors. Short-term turmoil is better as a topic of dinner party
conversation, rather than a call to action.
Sincerely,
/S/Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By Gregory K. Phelps, for the Portfolio Management Team
John Hancock
Patriot Global
Dividend Fund
Volatile economic climate undermines income-producing
stocks during period's second half; defensive strategy pays off
"...the past
year has
been like a
rollercoaster
ride..."
A 2 1/4" x 3 1/2" photo of the Patriot Management Team. Caption reads
"The Patriot Management Team: (l-r) Beverly Cleathero, Gregory Phelps
and Laura Provost."
While the net result was positive, the past year has been like a
rollercoaster ride for investors in John Hancock Patriot Global Dividend
Fund: steadily climbing returns during the first half, then dips and
swings during the second half. From August 1995 through January 1996,
the investment climate for income-producing stocks was nearly ideal.
Economic growth was moderate, inflation was never a serious threat and
interest rates pushed steadfastly lower. Federal Reserve monetary policy
was in line with the prevailing mood. Just before the period began, the
Fed lowered the interest rate banks charge each other for overnight
loans, known as the federal funds rate, one-quarter percentage point.
Two more quarter-point reductions followed in December 1995 and January
1996. Utility stocks, which comprised more than 38% of the Fund's net
assets halfway through the period, were among the prime beneficiaries of
declining interest rates, but that was not the only factor in their
favor. There was also good news on the regulatory front, a wave of
mergers and acquisitions and increased attention from investors who
exchanged high-flying technology stocks for less volatile utility stocks
during the fall of 1995. Looking ahead to 1996, most market participants
were cautiously optimistic.
Pie chart with the heading "Portfolio Diversification" at top of left
hand column. The chart is divided into five sections. Going from left
to right: Other 1%; Utilities 38%; Banks & Financials 37%; Oil & Gas
13%; Industrials 11%. A footnote below states "As a percentage of net
assets on July 31, 1996."
"...the Fund
pursued a
defensive
strategy..."
In retrospect, that optimism was misplaced. Three factors sparked the
change in market conditions: One, the Fed's semiannual auction of 30-
year Treasury bonds in February, which inundated the market with new
supplies, driving interest rates higher; two, a broad increase in new
corporate debt, which aggravated the supply imbalance; and three, the
infamous February employment report, the strength of which so surprised
analysts that the bond market suffered its biggest one-day decline in
more than five years.
By pursuing a defensive strategy, the Fund managed to preserve most of
its first-half gains and outperform its two benchmarks. For the year
that ended July 31, 1996, the Fund had a total return of 9.99% at net
asset value, compared to 3.30% for the 30-year Treasury bond and 6.63%
for the Dow Jones Utility Average.
Table entitled "Scorecard" at bottom of left hand column. The header
for the left column is "Investments"; the header for the right column
is "Recent performance ... and what's behind the numbers. The first
listing is Oklahoma Gas & Electric followed by an up arrow and the
phrase "No nuclear exposure/earnings growth." The second listing is
Coastal Corp. followed by an up arrow and the phrase "Earnings growth/
pending credit upgrade." The third listing is American Life Holding
followed by a down arrow and the phrase "Merger led to credit downgrade.
" Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."
Defensive strategy pays off in second half
Throughout the period, the Fund pursued a defensive strategy aimed at
stabilizing net asset value and maximizing yield. At the core of our
strategy was an emphasis on preferred stocks. Preferreds tend to be less
volatile than either common stocks or Treasury bonds. That's especially
true of so-called "cushion preferreds," which the Fund emphasized as
well. Cushion preferreds are so named because their above-average yields
cushion them against price swings. By the end of the period, preferred
stocks totaled close to 80% of the Fund's net assets.
Where possible, the Fund chose securities eligible for the dividends-
received deduction (DRD). DRD-eligible securities carry a distinct tax
advantage for corporate investors, yet they're increasingly hard to come
by. DRD-eligible securities made up almost 83% of the Fund's net assets
at the end of the period. Overall, the Fund's defensive strategy had a
mixed impact on performance, limiting price gains during the first half
of the period but protecting the Fund against the corrosive effect of
rising interest rates during the second half.
Utilities
Utility stocks totaled 38% of the Fund's net assets at the end of the
period, down slightly since the halfway mark. The reduced emphasis on
utility stocks is due mainly to having sold a portion of the Fund's
utility common stocks, which have come under enormous pressure in recent
months. That said, the Fund profited during the period from an
investment in Oklahoma Gas & Electric, one of the few utility commons to
have risen in price since the height of the market rally last fall.
Three factors worked in the stock's favor: an above-average yield, no
exposure to nuclear power and second-quarter earnings that far exceeded
analysts' expectations. Another top performer was Baltimore Gas &
Electric, a high-quality, DRD-eligible preferred with a 6.99% coupon and
10 years of call protection. Call protection protects investors by
preventing the issuer from redeeming the security for a defined period.
Bar chart with heading "Fund Performance" at top of left hand column.
Under the heading is the footnote: "For the year ended July 31, 1996."
The chart is scaled in increments of 5% from bottom to top, with 10%
at the top and 0% at the bottom. Within the chart, there are three
solid bars. The first represents the 9.99% total return for John Hancock
Patriot Global Dividend Fund. The second represents the 3.30% total
return for the 30-year Treasury Bond. The third represents the 6.63%
total return for the Dow Jones Utility Average. Footnote below reads:
"The total return for John Hancock Patriot Global Dividend Fund is at
net asset value with all distributions reinvested. The Dow Jones Utility
Average is an unmanaged index which measures the performance of the
utility industry in the United States."
Financials
Banks, insurance companies, leasing companies and other financial
holdings totaled 37% of the Fund's net assets at the end of the period.
Top holdings included JP Morgan, another DRD-eligible security with 10
years of call protection and a 6.63% coupon, and Salomon, Inc., which
boasts DRD eligibility, five years of call protection and an 8.40%
coupon. Both have held their own in a difficult environment, especially
when compared to Treasury bonds. Among the Fund's disappointments was
American Life Holding, an insurance company that suffered a sharp credit
downgrade after its parent company was itself acquired by another
heavily leveraged insurance company. We've held onto it because it has
an attractive 8.64% coupon, is DRD-eligible and must be redeemed at par
within a defined time limit.
Industrials
Among the Fund's favorite industrial holdings six months ago was Coastal
Corp., an oil and gas exploration and refining company. Since then the
story has only gotten better, thanks to rising energy prices and
increased exploration activity. Besides an attractive 8.50% coupon, DRD
eligibility and two years of call protection, Coastal Corp. turned in
solid earnings growth in 1995 and was put on a credit-upgrade watch. It
should benefit further in the months ahead from the decision to sell its
coal assets to pay down debt.
"...there's a
good chance
the Fed will
raise interest
rates before
the end of
1996..."
Outlook
While there's a good chance the Fed will raise interest rates before the
end of 1996, we think it may only be a small increase. That's because
the Treasury market has already pushed rates significantly higher,
anticipating the Fed's move. Moreover, inflation remains under control
amidst signs that economic growth is leveling off again. Given those
trends, we see tremendous value in beaten-down utility common stocks. In
the months ahead, we'll look for opportunities to increase the Fund's
exposure to utility commons, hoping to take advantage of attractive
yields and improving prospects for price gains.
- -----------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
John Hancock Funds - Patriot Global Dividend Fund
The Statement of Assets and Liabilities is the Fund's balance sheet and shows the value
of what the Fund owns, is due and owes on July 31, 1996. You'll also find the net asset
value for each common share.
Statement of Assets and Liabilities
July 31, 1996
- -------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at value - Note C:
Preferred stocks (cost - $135,789,862) $135,713,846
Common stocks (cost - $31,266,376) 31,256,525
Capital securities (cost - $2,155,000) 2,135,000
Short-term investments (cost - $1,029,015) 1,029,015
------------
170,134,386
Dividends receivable 732,714
Deferred organization expenses - Note A 25,338
Other assets 26,572
------------
Total Assets 170,919,010
- -------------------------------------------------------------------------------------
Liabilities:
DARTS dividend payable - Note A 66,317
Payable to John Hancock Advisers, Inc. and affiliates -
Note B 159,524
Accounts payable and accrued expenses 42,601
------------
Total Liabilities 268,442
- -------------------------------------------------------------------------------------
Net Assets:
Dutch Auction Rate Transferable Securities Preferred
Shares (DARTS) - Without par value, unlimited
number of shares of beneficial interest authorized,
600 shares issued, liquidation preference
of $100,000 per share - Note A 60,000,000
------------
Common Shares - Without par value, unlimited number
of shares of beneficial interest authorized, 8,344,700
shares issued and outstanding 114,080,324
Accumulated net realized loss on investments (4,456,276)
Net unrealized depreciation of investments (104,948)
Undistributed net investment income 1,131,468
------------
Net Assets Applicable to
Common Shares ($13.26 per
share based on 8,344,700
shares outstanding) 110,650,568
------------
Net Assets $170,650,568
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
The Statement of Operations summarizes the Fund's investment income earned and expenses
incurred in operating the Fund. It also shows net gains (losses) for the period stated.
Statement of Operations
Year ended July 31, 1996
- -------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividends (net of foreign withholding taxes
of $182,778) $13,998,305
Interest 146,678
-----------
14,144,983
-----------
Expenses:
Investment management fee - Note B 1,383,238
Administration fee - Note B 259,357
DARTS and auction fees 177,375
Federal excise tax 92,473
Auditing fee 54,400
Custodian fee 50,718
Printing 49,287
Trustees' fees 27,972
Transfer agent fee 25,837
Organization expense - Note A 25,337
Miscellaneous 23,087
Registration and filing fees 22,948
Legal fees 2,399
-----------
Total Expenses 2,194,428
- -------------------------------------------------------------------------------------
Net Investment Income 11,950,555
- -------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold 1,611,254
Change in net unrealized appreciation/depreciation
of investments (392,815)
-----------
Net Realized and Unrealized Gain
on Investments 1,218,439
- -------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations 13,168,994
=====================================================================================
Distributions to DARTS (2,580,803)
- -------------------------------------------------------------------------------------
Net Increase in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less DARTS
Distributions $10,588,191
=====================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------
1995 1996
------------ ------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $12,980,745 $11,950,555
Net realized gain (loss) on investments sold (5,444,639) 1,611,254
Change in net unrealized appreciation/
depreciation of investments 11,036,629 (392,815)
------------ ------------
Net Increase in Net Assets Resulting from Operations 18,572,735 13,168,994
------------ ------------
Distributions to Shareholders:
DARTS ($4,610 and $4,301 per share,
respectively) - Note A (2,766,286) (2,580,803)
Common Shares - Note A
Dividends from accumulated net investment
income ($1.1592 and $1.0500 per share, respectively) (9,672,846) (8,761,507)
------------ ------------
Total Distributions to Shareholders (12,439,132) (11,342,310)
------------ ------------
Net Assets:
Beginning of period 162,690,281 168,823,884
------------ ------------
End of period (including undistributed net investment
income of $430,750 and $1,131,468 respectively) $168,823,884 $170,650,568
============ ============
Analysis of Common Shareholder Transactions:
YEAR ENDED JULY 31,
----------------------------------------------------------------
1995 1996
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Beginning of period 8,344,700 $114,176,121 8,344,700 $114,172,797
Reclassification of capital accounts - Note D -- (3,324) -- (92,473)
---------- ------------ ---------- ------------
End of period 8,344,700 $114,172,797 8,344,700 $114,080,324
========== ============ ========== ============
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 sale of Common Shares and DARTS. The footnote illustrates
any reclassification of share capital amounts, the number of Common Shares and DARTS
sold and outstanding at the end of the last two periods, along with the corresponding
dollar value.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a Common Share outstanding throughout the period indicated, investment
returns, key ratios, and supplemental data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31,
-----------------------------------------------------
1993* 1994 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period $13.95(a) $15.42 $12.31 $13.04
-------- -------- -------- --------
Net Investment Income 1.21 1.35 1.55 1.43
Net Realized and Unrealized Gain (Loss) on Investments 1.73 (2.52) 0.67 0.15
-------- -------- -------- --------
Total from Investment Operations 2.94 (1.17) 2.22 1.58
-------- -------- -------- --------
Less Distributions:
Dividends to DARTS Shareholders (0.17) (0.25) (0.33) (0.31)
Dividends from Accumulated Net Investment Income to
Common Shareholders (1.03) (1.11) (1.16) (1.05)
Dividends to Common Shareholders from Net Realized
Short-Term Gain on Investments -- (0.54) -- --
Distributions in Excess of Accumulated Net Investment
Income -- (0.04) -- --
-------- -------- -------- --------
Total Distributions (1.20) (1.94) (1.49) (1.36)
-------- -------- -------- --------
DARTS and Common Shares Offering Costs (0.14) -- -- --
-------- -------- -------- --------
DARTS Underwriting Discounts (0.13) -- -- --
-------- -------- -------- --------
Net Asset Value, End of Period $15.42 $12.31 $13.04 $13.26
======== ======== ======== ========
Per Share Market Value, End of Period $15.000 $12.000 $12.250 $12.375
Total Investment Return at Market Value 7.26% (10.06%) 13.12% 9.65%
Ratios and Supplemental Data
Net Assets Applicable to Common Shares, End of Period
(000's omitted) $128,673 $102,690 $108,824 $110,651
Ratio of Expenses to Average Net Assets** 1.22% 1.27% 1.26% 1.27%
Ratio of Net Investment Income to Average Net Assets** 6.06% 6.42% 8.01% 6.91%
Portfolio Turnover Rate 98% 39% 96% 38%
Senior Securities
Total DARTS Outstanding (000's omitted) $60,000 $60,000 $60,000 $60,000
Asset Coverage per Unit (b) $311,065 $267,019 $278,812 $283,164
Involuntary Liquidation Preference per Unit (c) $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (c) $100,000 $100,000 $100,000 $100,000
* For the period August 1, 1992 (commencement of operations) to July 31, 1993.
** Ratios calculated on the basis of expenses and net investment income applicable to both the common
and preferred shares relative to the average net assets for both common and preferred shares.
(a) Initial price to commence operations.
(b) 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.
(c) Plus accumulated and unpaid dividends.
The Financial Highlights summarizes the impact of the following factors on a single Common Share for
the period indicated: net investment income, gains (losses) and distributions of the Fund. It shows
how the Fund's net asset value for a Common Share has changed during the periods. It also shows the
total investment return for the periods based on the market value of the Fund shares. Additionally,
important relationships between some items presented in the financial statements are expressed in
ratio form, as well as information about the DARTS.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
July 31, 1996
- ---------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the Patriot
Global Dividend Fund on July 31, 1996. It's divided into four main categories:
preferred stocks, common stocks, capital securities and short-term investments.
The stocks and capital securities are further broken down by industry groups.
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
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS
Auto/Truck (4.91%)
Ford Motor Co., 8.25%,
Depositary Shares, Ser B 130,000 $3,461,250
General Motors Corp., 9.125%,
Depositary Shares, Ser B 184,500 4,912,312
------------
8,373,562
------------
Banks - Foreign (6.17%)
Banco Bilbao Vizcaya International
(Gibraltar) Ltd., 9.75%, Gtd Ser A,
American Depositary Receipt
("ADR") (Spain) 91,200 2,542,200
Indosuez Holdings S.C.A., 10.375%,
Gtd Ser A, ADR (Luxembourg), (R) 157,100 4,143,512
Royal Bank of Scotland Group PLC,
11.25%, Ser A (United Kingdom) 105,000 2,769,375
Santander Overseas Bank, Inc., 8.70%,
Gtd Ser B (Puerto Rico) 41,600 1,076,400
------------
10,531,487
------------
Banks - U.S. (12.40%)
Bank of Boston Corp., 8.60%,
Depositary Shares, Ser E 152,300 3,921,725
Chase Manhattan Corp., 10.84%, Ser I 141,600 4,230,300
Citicorp, 7.75%, Depositary Shares,
Ser 22 60,300 1,560,262
Fleet Financial Group, Inc., Adjustable Rate
Preferred ("ARP") (formerly Shawmut
National Corp.) 43,750 1,750,000
Fleet Financial Group, Inc., 9.35%,
Depositary Shares, (formerly
Shawmut National Corp.) 155,000 4,185,000
J.P. Morgan & Company, Inc., 6.625%,
Depositary Shares, Ser H 60,000 2,857,500
LaSalle National Corp.,
8.75%, Ser K, (R) 19,000 983,250
Wells Fargo & Co., 9.875%,
Depositary Shares, Ser F 65,000 1,665,625
------------
21,153,662
------------
Computer Services (0.39%)
Comdisco Inc., 8.75%, Ser A 25,800 664,350
------------
Conglomerates (0.82%)
Grand Metropolitan Delaware Co., 9.42%,
Gtd Ser A 51,000 1,396,125
------------
Equipment Leasing (0.27%)
AMERCO, 8.50%, Ser A 20,000 467,500
------------
Financial Services (10.50%)
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A 145,000 4,078,125
Morgan Stanley Group Inc., 7.75%,
Depositary Shares 20,000 1,000,000
Salomon Inc., 8.08%, Depositary Shares,
Ser D 51,068 1,225,632
Salomon Inc., 8.40%, Depositary Shares,
Ser E 191,000 4,703,375
Source One Mortgage Services Corp.,
8.42%, Ser A 60,700 1,509,912
SunAmerica Inc., 9.25%, Ser B 207,000 5,407,875
------------
17,924,919
------------
Insurance (6.00%)
American Life Holding Co., $2.16 102,765 2,286,521
Aon Corp., 8.00% 80,000 2,030,000
Provident Companies, Inc., 8.10%
Depositary Shares 60,000 1,507,500
Travelers Group, Inc., 9.25%,
Depositary Shares, Ser D 170,460 4,410,653
------------
10,234,674
------------
Oil & Gas (12.96%)
Coastal Corp., $2.125, Ser H 175,100 4,421,275
Elf Overseas Ltd., 8.50%, Gtd Ser A
(Cayman Islands) 150,000 3,900,000
ENSERCH Corp., ARP, Ser F 25,000 550,000
Oil & Gas (continued)
Enterprise Oil PLC, 10.50%, Ser A, ADR
(United Kingdom) 197,498 5,085,574
Lasmo PLC, 10.00%, Ser A, ADR
(United Kingdom) 130,000 3,266,250
Phillips Gas Co., 9.32%, Ser A 190,000 4,892,500
------------
22,115,599
------------
Paper Products & Containers (5.59%)
Boise Cascade Corp., 9.40%,
Depositary Shares, Ser F 150,000 3,862,500
Bowater Inc., 8.40%, Depositary Shares,
Ser C 225,000 5,681,250
------------
9,543,750
------------
Utilities (19.52%)
Baltimore Gas & Electric Co.,
6.99%, Ser 1995 10,000 1,000,000
Central Maine Power Co., 7.999%,
Ser A 10,000 950,000
Central Maine Power Co., 8.875%, (R) 9,600 945,600
Commonwealth Edison Co., $8.40,
Ser A 46,775 4,630,725
Commonwealth Edison Co., $8.40,
Ser B 13,381 1,338,100
Duke Power Co., 7.85%, Ser S 27,410 2,898,608
Duke Power Co., 7.00%, Ser W 9,700 977,275
Entergy Gulf States, Inc., $9.96 7,500 757,500
Houston Lighting & Power Co., $8.12 13,006 1,320,109
Indianapolis Power & Light Co., 8.20% 10,350 1,045,350
Jersey Central Power & Light Co., 7.52%,
Ser K 28,000 2,870,000
Narragansett Electric Co., 6.95% 32,000 1,548,000
PSI Energy, Inc., 6.875% 42,500 4,080,000
Pacificorp, $1.98, Ser 1992 30,500 766,313
Public Service Electric & Gas, Co.,
6.92% 7,000 658,000
Sierra Pacific Power Co., 7.80%, Ser 1 50,000 1,293,750
Southern California Gas Co., 7.75% 94,075 2,387,153
Texas Utilities Electric Co., $1.805,
Depositary Shares, Ser B 107,581 2,635,735
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A 48,000 1,206,000
------------
33,308,218
------------
TOTAL PREFERRED STOCKS
(Cost $135,789,862) (79.53%) 135,713,846
------------ ------------
COMMON STOCKS
Utilities (18.32%)
Allegheny Power System, Inc. 150,000 $4,387,500
Boston Edison Co. 40,000 905,000
CINergy Corp. 45,000 1,333,125
Consolidated Edison Co. of NY, Inc. 51,000 1,377,000
Delmarva Power & Light Co. 50,000 1,031,250
Dominion Resources, Inc. of VA 55,000 2,069,375
Houston Industries, Inc. 139,600 3,158,450
IES Industries, Inc. 73,000 2,153,500
Oklahoma Gas & Electric Co. 65,000 2,551,250
PECO Energy Co. 40,000 940,000
Potomac Electric Power Co. 100,000 2,412,500
Public Service Enterprise Group, Inc. 129,000 3,370,125
Puget Sound Power & Light Co. 137,800 3,134,950
Southwestern Public Service Co. 30,000 952,500
Washington Water Power Co. 80,000 1,480,000
------------
TOTAL COMMON STOCKS
(Cost $31,266,376) (18.32%) 31,256,525
------------ ------------
CAPITAL SECURITIES
Banks (1.25%)
Australia and New Zealand Banking
Group Ltd., 9.125% (Australia) 40,000 1,060,000
National Westminster Bank PLC, 10.64%,
Ser A (United Kingdom) 40,000 1,075,000
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TOTAL CAPITAL SECURITIES
(Cost $2,155,000) (1.25%) 2,135,000
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<CAPTION>
INTEREST PAR VALUE MARKET
RATE (000'S OMITTED) VALUE
----------- ------------ ------------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (0.60%)
Commercial Paper
Prudential Funding Corp.
08-01-96 5.52% 1,029 1,029,015
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TOTAL SHORT-TERM INVESTMENTS (0.60%) 1,029,015
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TOTAL INVESTMENTS (99.70%) $170,134,386
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(R) These securities are exempt from registration under rule 144A of the Securities
Act of 1933. Such securities may be resold, normally to qualified institutional
buyers, in transactions exempt from registration. See Note A of the Notes to
Financial Statements for valuation policy. Rule 144A securities amounted to
$6,072,362 as of July 31, 1996.
Parenthetical disclosure of a foreign country in the security description represents
country of foreign issuer, however, security is U.S. dollar denominated. The percentage
shown for each investment category is the total value of that category as a percentage
of the net assets of the Fund.
See notes to financial statments.
</TABLE>
NOTE A --
ACCOUNTING POLICIES
John Hancock Patriot Global Dividend Fund (the "Fund") is a closed-end,
diversified management investment company, registered under the
Investment Company Act of 1940. Significant accounting policies of the
Fund are as follows:
VALUATION 0F INVESTMENTS Securities in the Fund's portfolio are valued
on the basis of market quotations, valuations provided by independent
pricing services, or at fair value as determined in good faith in
accordance with procedures approved by the Trustees. Short-term debt
investments maturing within 60 days are valued at amortized cost which
approximates market value.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute all of its taxable
income, including any net realized gain on investments, to its
shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has $3,221,160 of a capital
loss carryforward available, to the extent provided by regulations, to
offset future net realized capital gains. If such carryforward is used
by the Fund, no capital gains distributions will be made. The
carryforward expires July 31, 2002.
DIVIDENDS, DISTRIBUTIONS AND INTEREST 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, it is possible that certain distributions would be
treated 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
July 31, 1996, which has no effect on the Fund's net assets, net
investment income or net realized gains.
DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged
ratably to the Fund's operations over a five-year period that began with
the commencement of the investment operations of the Fund.
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.
DUTCH AUCTION RATE TRANSFERABLE SECURITIES PREFERRED SHARES (DARTS) The
Fund issued 600 shares of DARTS on October 16, 1992 in a 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 have been reset every 49 days thereafter by an auction.
Dividend rates ranged from 3.92% to 4.57% during the period ended July
31, 1996.
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 dividends 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.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the investment management contract, the Fund pays a monthly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly-
owned subsidiary of The Berkeley Financial Group, for a continuous
investment program equivalent, on an annual basis, to the sum of .80 of
1% of the Fund's average weekly net assets.
In addition, the Adviser has a sub-investment management contract with
John Hancock Advisers International Limited (the "Sub-Adviser"), a
wholly-owned subsidiary of the Adviser. Under the Sub-Advisory Agreement
between the Adviser and the Sub-Adviser, the Sub-Adviser will furnish
the Adviser with international portfolio management assistance. The
Adviser pays the Sub-Adviser a monthly management fee equivalent, on an
annual basis, to .05 of 1% of the Fund's average weekly net assets.
The Fund has entered into an administrative agreement with Mitchell
Hutchins Asset Management Inc. (the "Administrator"), under which the
Administrator, if requested by the Adviser, assists in preparing
financial information and reports, providing information for tax
reporting purposes, compliance, calculation of net asset values, etc.
The Fund pays the Administrator a monthly fee equivalent, on an annual
basis, to the sum of .15 of 1% of the Fund's average weekly net assets,
with a minimum annual fee of $125,000. The Administrator is an affiliate
of Paine-Webber Incorporated, which acted as an underwriter of the
Fund's Common Shares.
Each unaffiliated Trustee is entitled as compensation for his or her
services, to an annual fee plus remuneration for attendance at various
meetings.
Edward J. Boudreau, Jr., Anne C. Hodsdon, Thomas W.L. Cameron and
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. Effective with the fees paid
for 1995, 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. At
July 31, 1996, the Fund's investment to cover the deferred compensation
liability had unrealized appreciation of $919.
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 July 31, 1996, aggregated $68,244,558 and
$63,545,253, respectively. There were no purchases or sales of
obligations of the U.S. government and its agencies during the period
ended July 31, 1996.
The cost of investments owned at July 31, 1996 (including
short-term investments) for Federal income tax purposes was
$171,883,770. Gross unrealized appreciation and depreciation of
investments aggregated $3,394,810 and $5,144,194, respectively,
resulting in net unrealized depreciation of $1,749,384.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with Statement of Position 93-2, the Fund has recorded
several reclassifications in the capital accounts. These
reclassifications have no impact on the net asset value of the Fund and
are designed generally to present undistributed net investment income or
accumulated net realized gains and losses on a tax basis, which is
considered to be more informative to the shareholder. As of July 31,
1996, the Fund has reclassified amounts to reflect an increase in
undistributed net investment income of $92,473 and a decrease in capital
paid in of $92,473.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
John Hancock Patriot Global Dividend Fund:
We have audited the accompanying statement of assets and liabilities of
John Hancock Patriot Global Dividend Fund (the "Fund"), including the
schedule of investments, as of July 31, 1996, the related statement of
operations for the year then ended, and the statement of changes in net
assets and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 as of July 31, 1996 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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of John Hancock Patriot Global Dividend Fund as of
July 31, 1996, the results of its operations for the year then ended and
the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
September 6, 1996
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished
with respect to the taxable distributions of the Fund during its fiscal
year ended July 31, 1996.
The Board of Trustees of the Fund declared dividends on the Common
Shares from undistributed net investment income amounting to $1.05 per
share, for the year ended July 31, 1996. Distributions to preferred and
common shareholders were 93.86% qualified for the dividends received
deductions. Preferred shareholders received additional dividends of
$26.34 per share as of July 31, 1996 so that their net after-tax return
for all dividends including the additional dividends was the same as if
all regular dividends were 100% qualified for the dividends received
deduction, as defined in the Fund's By-Laws. Shareholders will be mailed
a 1996 U.S. Treasury Department Form 1099-DIV in January 1997
representing their proportionate share.
INVESTMENT OBJECTIVE AND POLICY
The Fund's investment objective is to provide a high level of current
income, consistent with modest growth of capital, for holders of its
Common Shares of beneficial interest. The Fund will pursue its objective
by investing in a diversified portfolio of dividend paying preferred and
common stocks of domestic and foreign issuers, as well as debt
obligations, with the Fund investing only in U.S. dollar denominated
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 that have no rated senior
debt outstanding, whose senior debt is considered by the Adviser to be
of comparable quality. The new policy supersedes the requirement that at
least 80% of the Fund's total assets consist of preferred stocks and
debt obligations rated "A" or higher and dividend paying common stocks
whose issuers have senior debt rated "A" or higher.
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.
The Plan Agent serves as agent for the holders of Common Shares in
administering the Plan. After the Fund declares a dividend or makes a
capital gain distribution, the Plan Agent will, as agent for the
participants, receive the cash payment and use it to buy Common Shares
in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts. The Fund will not issue any new shares in
connection with the Plan.
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 the shareholder's meetings of
the Fund will include those shares purchased as well as shares held
pursuant to the Plan.
The Plan Agent's fees for the handling of reinvestment of dividends and
other distributions will be paid by the Fund. Each participant will pay
a pro rata share of brokerage commissions incurred with respect to the
Plan Agent's open market purchases in connection with the reinvestment
of dividends and distributions. The cost per share of the shares
purchased for each participant's account will be the average cost,
including brokerage commissions, of any shares purchased on the open
market. 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.
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 at least 90 days
after 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 MEETING
On March 7, 1996, the Annual Meeting of John Hancock Patriot Global
Dividend Fund (the "Fund") was held to elect five Trustees and to ratify
the action 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
NAME OF TRUSTEE FOR AUTHORITY
- --------------------------------------------------
James F. Carlin 7,404,621 50,608
William H. Cunningham 7,398,722 54,683
Charles F. Fretz 7,404,742 50,487
John P. Toolan 7,404,621 50,608
The preferred shareholders elected Harold R. Hiser, Jr. to serve until
his successor is duly elected and qualified, with the votes tabulated as
follows: 441 FOR and 0 WITHHELD AUTHORITY
The shareholders also ratified the Trustees' selection of Arthur
Andersen, LLP as the Fund's independent auditors for the Fund for the
fiscal year ending July 31, 1996, with the votes tabulated as follows:
7,367,795 FOR, 26,792 AGAINST and 61,082 ABSTAINING.
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