Annual Report
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[GRAPHIC]
Patriot Global
Dividend Fund
JULY 31, 1997
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Mangement Firm
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TRUSTEES
Edward J. Boudreau, Jr.
James F. Carlin*
William H. Cunningham*
Charles F. Fretz*
Harold R. Hiser, Jr.*
Anne C. Hodsdon
Charles L. Ladner*
Leo E. Linbeck, Jr.*
Patricia P. McCarter*
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)*
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President
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
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617
Listed: New York Stock Exchange Symbol: PGD
John Hancock Closed-End Funds: 1-800-843-0090
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
The Taxpayer Relief Act of 1997 recently signed into law by President Clinton
includes new twists and important changes to Individual Retirement Account (IRA)
laws. The provisions will, among other things, allow more people to qualify for
annual tax-deductible IRA contributions and to save tax-free for college. It
also allows IRA investors to withdraw money penalty-free from all IRAs to buy a
first home or pay for college expenses.
For existing deductible IRAs, the law doubles income limits over the next
eight to 10 years for those eligible to deduct an annual IRA contribution of up
to $2,000. For individuals, the annual income cap will increase incrementally
from the current $25,000 to $50,000 by 2005. For couples, the limit would
increase from $40,000 today to $80,000 in 2007. The new law allows non-working
spouses to make IRA contributions even if their spouse is covered by a pension
plan at work, provided the couple's joint income is less than $150,000.
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A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.
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The law also creates two new IRA investment vehicles. One, called the "Roth
IRA" after its principal Congressional sponsor, allows for non-deductible annual
contributions up to a $2,000 maximum. But income accumulates tax-free and if the
account has been open for five years, distributions are tax-free if they are
used after age 59 1/2 or upon death, disability or a first-time home purchase.
Withdrawals for higher-education expenses would not be subject to a 10% penalty.
Eligible investors must earn less than $95,000 per year individually or $150,000
per couple.
A second new IRA plan is called the "Education IRA" which allows non-
deductible contributions of up to $500 per year, per child under age 18.
Earnings in the account accumulate tax-free, and withdrawals are also not taxed
when applied toward undergraduate or graduate-level expenses. Eligible investors
are subject to the same income restrictions as the Roth IRA.
The law has also made some important changes in capital gains tax rates and
estate tax laws. But the devil is in the details, and so we recommend exploring
how you can benefit from the changes with your investment professional and tax
advisor. The Taxpayer Relief Act of 1997 gives investors new options toward
savings. It's a move we applaud.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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By Gregory K. Phelps for the Portfolio Management Team
John Hancock
Patriot Global
Dividend Fund
Summer rally helps boost income-producing stocks
------------------------------------------------
Income-producing stocks rotated through a number of peaks and valleys during the
past year, reacting primarily to the bond market's worries about inflation. At
regular intervals, investors feared that the economy's strength would prompt the
Federal Reserve Board to raise interest rates to stave off any future inflation.
Those worries were most pronounced in December last year and in March and April
this year. The bond market fell during those periods not so much because of what
the Fed actually did -- although it did raise short-term interest rates modestly
in March -- but because of what it might do. When the Fed failed to announce
further interest rate hikes at its May, June and July Open Market Committee
meetings, the bond market staged an impressive summer rally. Fed Chairman Alan
Greenspan further calmed inflationary worries in July when he testified to
Congress that although the economy was strong, he didn't foresee any near-term
threat that inflation was on the rise.
"Income-producing stocks rotated through a number of peaks and valleys..."
For the year ended July 31, 1997, John Hancock Patriot Global Dividend Fund
had a total return of 16.57% at net asset value. By comparison, the 30-year
Treasury bond returned 16.00%. Because of its comparatively small weighting in
utility stocks, however, the Fund underperformed the Dow Jones Utility Average,
which returned 21.05% for the same period.
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A 2 1/4" x 3 1/2" photo of Gregory K. Phelps. Caption reads "Gregory K. Phelps."
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3
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John Hancock Funds - Patriot Global Dividend Fund
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Pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into five sections. Going from top clockwise: Other
2%; Banks & Financials 41%; Utilities 40%; Industrials 13%; Oil & Gas 4%. A
footnote below states "As a percentage of net assets on July 31, 1997."
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"Many of our financial and utility holdings...were among our best performers."
Throughout the past year, we maintained our emphasis on so-called
cushion-preferred and common stocks with above-average dividend yields that tend
to "cushion" them against price swings. That focus helped our performance when
the bond market was in its weaker periods. When the bond market rallied,
however, cushion preferreds and commons had a mixed impact on the Fund's
performance. While they augmented our yield, they limited our price gains.
Nearly all of our preferred stock holdings were DRD-eligible, which generally
made a positive contribution to our performance. DRD stands for
"dividends-received deduction," which offers major tax advantages for
corporations that invest in them. The supply of DRD-eligible securities has been
on the decline for the past several years. In a classic example of limited
supply trying to satisfy strong demand, DRD-eligible preferred stocks performed
well during much of the past year. But in June and July there were a number of
DRD-eligible securities newly issued by foreign banks looking to redeem their
older, more expensive DRD-securities. The short-lived increase in supply caused
DRD-eligible securities to come under pressure. However, we believe that the
long-term outlook calls for less, not more supply as issuers of DRD-eligible
securities continue to redeem or tender for their outstanding DRD securities as
a way to trim their financing costs.
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Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investment"; the header for the right column is "Recent
performance ... and what's behind the numbers." The first listing is Florida
Progress Corp. followed by an up arrow and the phrase "Waning fears about
Crystal River nuclear plant." The second listing is Fleet Financial followed by
an up arrow and the phrase "Improving financial results/new acquisitions." The
third listing is Public Service Group followed by a down arrow and the phrase
"Worries about costs associated with nuclear plants." Footnote below reads: "See
"Schedule of Investments." Investment holdings are subject to change."
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Financials/electrics post strong gains
Many of our financial and utility holdings -- which together made up the vast
majority of the Fund's holdings at the end of the period -- were among our best
performers. Our financial-related holdings -- including domestic and foreign
banks, insurers and broker service companies -- were boosted by a combination of
factors including rapid consolidation among financial institutions and rising
demand for investment and banking services by aging baby boomers. For example,
our holdings in Merrill Lynch preferred stock were some of our biggest gainers
during the year. The securities have seven years left of call protection and an
attractive 9% coupon. Fleet Financial Group also rose, thanks to its improved
financial results gained by the aggressive acquisition of competitors. Fleet's
preferred stock offers DRD-eligibility, 10 years of call protection and a 6.75%
coupon.
After suffering through some rough spots in the first half of the period,
our stake in interest rate-sensitive electric utility common stocks rallied
along with the bond market in the second half of the year. One of our
best-performing stocks was Florida Progress, which had experi-
4
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John Hancock Funds - Patriot Global Dividend Fund
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Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the year ended July 31, 1997." The chart is scaled
in increments of 5% from bottom to top, with 25% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
16.57% total return for John Hancock Patriot Global Dividend Fund. The second
represents the 16.00% total return for the 30-year Treasury Bond. The third
represents the 21.05% 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."
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enced its share of trouble in early 1997 when the Nuclear Regulatory Commission
added the utility's Crystal Reserve nuclear plant to its watch list. We bought
Florida Progress in June based on its DRD-eligibility, its strong financials,
and because it is one of the few electric utilities that has demonstrated
dividend growth. South Carolina Electric and Gas was another good performer. Not
only is the security DRD-eligible, it carries a relatively high credit rating,
offers an attractive 6.52% coupon and 10 years of call protection -- a feature
which prevents issuers from redeeming for a set period of time. Strong call
protection is an advantage because it allows the Fund to lock in attractive
yields and hold these securities, even if bond prices rally and yields fall. On
the flip side, Public Service Enterprise Group common stock proved to be a
disappointment. The regulatory environment in New Jersey has been viewed as
unfavorable and the company had to shut down some its nuclear facilities for an
extended period of time. However, we continued to hold onto Public Service
Enterprise Group because the company is committed to its very attractive 8.90%
dividend yield. Additionally, we believe that the fears of competition haven't
yet materialized and the regulatory scene might not be as bleak as some
observers originally suspected. Ironically, the company's preferred securities
did quite well and helped the Fund's performance. Outside the electric sector,
some of our gas utility stocks -- such as El Paso Tennessee Pipeline -- did
well. Not only is the issue DRD-eligible, but it offers an attractive 8.25%
coupon and about four years of call protection.
"...it appears that the Federal Reserve Board may be on hold for a while..."
Outlook calls for caution
At present, it appears that the Federal Reserve Board may be on hold for a while
based on its view that inflationary pressures aren't yet gathering steam. But
looking farther down the road, we think that the Fed's next move will be to
raise interest rates after it emerges from this holding pattern. Until the
"tightening" cycle is complete, we believe both the bond and stock markets could
be volatile. Given that outlook, we will continue to focus on DRD-eligible,
cushion preferreds. We believe that the supply/demand environment will be
favorable for these securities. What's more, our emphasis on cushion preferreds
with good call protection should help maximize the Fund's yield while
stabilizing its share price in the event of a market correction.
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This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. Of course, the team's views
are subject to change as market and other conditions warrant.
5
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FINANCIAL STATEMENTS
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, 1997. You'll also
find the net asset value for each common share.
Statement of Assets and Liabilities
July 31, 1997
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Assets:
Investments at value - Note C:
Preferred stocks (cost - $142,261,518) ..................... $149,645,931
Common stocks (cost - $27,021,376) ......................... 27,673,583
Short-term investments (cost - $1,820,185) ................. 1,820,185
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............................................................... 179,139,699
Cash ......................................................... 280
Receivable for investments sold .............................. 1,532,624
Dividends receivable ......................................... 926,145
Other assets ................................................. 12,239
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Total Assets ..................... 181,610,987
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Liabilities:
Payable for investments purchased ............................ 1,515,000
DARTS dividend payable - Note A .............................. 227,200
Common shares dividend payable ............................... 89,338
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................... 159,266
Accounts payable and accrued expenses ........................ 67,784
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Total Liabilities ................ 2,058,588
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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
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Common Shares - Without par value, unlimited
number of shares of beneficial interest authorized,
8,344,700 outstanding ...................................... 113,971,522
Accumulated net realized loss on investments ................. (4,203,779)
Net unrealized appreciation of investments ................... 8,037,540
Undistributed net investment income .......................... 1,747,116
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Net Assets applicable to
Common Shares ($14.33 per
share based on 8,344,700
shares outstanding) .............. 119,552,399
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Net Assets ....................... $179,552,399
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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, 1997
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Investment Income:
Dividends (net of foreign withholding taxes of $99,212) ...... $13,878,936
Interest ..................................................... 115,936
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13,994,872
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Expenses:
Investment management fee - Note B ......................... 1,405,454
Administration fee - Note B ................................ 263,523
DARTS and auction fees ..................................... 176,958
Federal excise tax ......................................... 108,807
Auditing fee ............................................... 55,500
Custodian fee .............................................. 54,264
Printing ................................................... 48,293
Miscellaneous .............................................. 29,115
Organization Expense - Note A .............................. 25,338
Transfer agent fee ......................................... 26,590
Trustees' fees ............................................. 17,426
Registration and filing fees ............................... 16,170
Legal fees ................................................. 7,117
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Total Expenses ................... 2,234,555
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Net Investment Income ............ 11,760,317
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Realized and Unrealized Gain on Investments:
Net realized gain on investments sold ........................ 246,639
Change in net unrealized appreciation/depreciation
of investments ............................................. 8,142,488
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Net Realized and Unrealized
Gain on Investments .............. 8,389,127
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Net Increase in Net Assets
Resulting from Operations ........ $20,149,444
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Distribution to DARTS ............ (2,486,179)
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Net Increase in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less DARTS
Distributions .................... $17,663,265
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SEE NOTES TO FINANCIAL STATEMENTS.
6
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FINANCIAL STATEMENTS
John Hancock Funds - Patriot Global Dividend Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income .................................................. $11,950,555 $11,760,317
Net realized gain on investments sold .................................. 1,611,254 246,639
Change in net unrealized appreciation/depreciation of investments ...... (392,815) 8,142,488
------------ ------------
Net Increase in Net Assets Resulting from Operations ................. 13,168,994 20,149,444
------------ ------------
Distributions to Shareholders:
DARTS ($4,301 and $4,144 per share, respectively) - Note A ............. (2,580,803) (2,486,179)
Common Shares - Note A
Dividends from accumulated net investment income
($1.0500 and $1.0500 per share, respectively) ...................... (8,761,507) (8,761,434)
------------ ------------
Total Distributions to Shareholders .................................. (11,342,310) (11,247,613)
------------ ------------
Net Assets:
Beginning of period .................................................... 168,823,884 170,650,568
------------ ------------
End of period (including undistributed net investment income
of $1,131,468 and $1,747,116, respectively) ......................... $170,650,568 $179,552,399
============ ============
Analysis of Common Shareholder Transactions:
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------
1996 1997
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Beginning of period ................................ 8,344,700 $114,172,797 8,344,700 $114,080,324
Reclassification of capital accounts - Note D ...... -- (92,473) -- (108,802)
--------- ------------ --------- ------------
End of period ...................................... 8,344,700 $114,080,324 8,344,700 $113,971,522
========= ============ ========= ============
</TABLE>
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses, distributions paid to
shareholders, and any increase due to the 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.
7
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FINANCIAL STATEMENTS
John Hancock Funds - Patriot Global Dividend Fund
Financial Highlights
Selected data for a Common Share outstanding throughout each period indicated,
investment returns, key ratios, and supplemental data are listed as follows:
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<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------
1993(1) 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period ..................................... $13.95 $15.42 $12.31 $13.04 $13.26
-------- -------- -------- -------- --------
Net Investment Income .................................................... 1.21 1.35 1.55 1.43 1.41(2)
Net Realized and Unrealized Gain (Loss) on Investments ................... 1.73 (2.52) 0.67 0.15 1.01
-------- -------- -------- -------- --------
Total from Investment Operations ..................................... 2.94 (1.17) 2.22 1.58 2.42
-------- -------- -------- -------- --------
Less Distributions:
Dividends to DARTS Shareholders ........................................ (0.17) (0.25) (0.33) (0.31) (0.30)
Dividends from Accumulated Net Investment Income to
Common Shareholders .................................................. (1.03) (1.11) (1.16) (1.05) (1.05)
Distributions 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) (1.35)
-------- -------- -------- -------- --------
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 $14.33
======== ======== ======== ======== ========
Per Share Market Value, End of Period .................................... $15.000 $12.000 $12.250 $12.375 $12.938
Total Investment Return at Market Value .................................. 7.26% (10.06%) 13.12% 9.65% 13.53%
Ratios and Supplemental Data
Net Assets Applicable to Common Shares, End of Period (000s omitted) ..... $128,673 $102,690 $108,824 $110,651 $119,552
Ratio of Expenses to Average Net Assets (3) .............................. 1.22% 1.27% 1.26% 1.27% 1.27%
Ratio of Net Investment Income to Average Net Assets (3) ................. 6.06% 6.42% 8.01% 6.91% 6.69%
Portfolio Turnover Rate .................................................. 98% 39% 96% 3 8% 28%
Average Brokerage Commission Rate (6) .................................... N/A N/A N/A N/A $0.0647
Senior Securities
Total DARTS Outstanding (000s omitted) ................................... $60,000 $60,000 $60,000 $60,000 $60,000
Asset Coverage per Unit (4) .............................................. $311,065 $267,019 $278,812 $283,164 $295,948
Involuntary Liquidation Preference per Unit (5) .......................... $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (5) .................................... $100,000 $100,000 $100,000 $100,000 $100,000
(1) For the period August 1, 1992 (commencement of operations) to July 31, 1993.
(2) Based on the average shares outstanding at the end of each month.
(3) 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.
(4) 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.
(5) Plus accumulated and unpaid dividends.
(6) Per portfolio share traded. Required for fiscal years that began September 1, 1995, or later.
</TABLE>
The Financial Highlights summarizes the impact of the following factors on a
single Common Share for each 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.
8
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FINANCIAL STATEMENTS
John Hancock Funds - Patriot Global Dividend Fund
Schedule of Investments
July 31, 1997
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The Schedule of Investments is a complete list of all securities owned by the
Patriot Global Dividend Fund on July 31, 1997. It's divided into three main
categories: preferred stocks, common stocks, and short-term investments. The
stocks 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
- ------------------- ---------------- -----
PREFERRED STOCKS
Auto/Truck (7.42%)
Ford Motor Co., 8.25%,
Depositary Shares, Ser B ............. 180,000 $ 5,186,250
General Motors Corp., 9.120%,
Depositary Shares, Ser G ............. 113,414 3,225,211
General Motors Corp., 9.125%,
Depositary Shares, Ser B ............. 184,500 4,900,781
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13,312,242
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Banks - Foreign (5.71%)
Australia and New Zealand Banking
Group Ltd., 9.125% (Australia) ....... 40,000 1,102,500
Banco Bilbao Vizcaya International
(Gibraltar) Ltd., 9.75%,
American Depositary Receipt
(ADR) (Spain) ........................ 91,200 2,576,400
Indosuez Holdings S.C.A., 10.375%,
Gtd Ser A, ADR (Luxembourg) (R) ...... 157,100 4,418,438
National Westminster Bank PLC, 10.64%,
Ser A (United Kingdom) ............... 40,000 1,067,500
Santander Overseas Bank, Inc., 8.70%,
Gtd Ser B ............................ 41,600 1,084,200
-----------
10,249,038
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Banks - United States (14.49%)
ABN AMRO North America, Inc.,
Ser H 6.59% (R) ...................... 5,000 5,210,000
BankBoston Corp., 8.60%,
Depositary Shares, Ser E ............. 152,300 3,874,131
Chase Manhattan Corp., 10.84%, Ser C ... 155,600 4,813,875
Citicorp, 7.75%,
Depositary Shares, Ser 22 ............ 60,300 1,594,181
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Banks - United States (continued)
Fleet Financial Group, Inc., 6.75%,
Ser VI ............................... 40,000 $2,200,000
Fleet Financial Group, Inc., 9.35%,
Depositary Shares .................... 185,000 5,145,313
J.P. Morgan & Company Inc., 6.625%,
Depositary Shares, Ser H ............. 60,000 3,180,000
-----------
26,017,500
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Conglomerates (0.80%)
Grand Metropolitan Delaware, L.P.,
9.42%, Gtd Ser A ..................... 51,000 1,437,563
-----------
Equipment Leasing (2.75%)
AMERCO, 8.50%, Ser A ................... 162,000 4,282,875
Comdisco, Inc., 8.75%, Ser A ........... 25,800 657,900
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4,940,775
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Financial Services (11.28%)
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A ............. 200,000 6,150,000
Morgan Stanley Group, Inc., 7.75%,
Depositary Shares .................... 100,000 5,500,000
Salomon Inc., 8.08%,
Depositary Shares, Ser D ............. 51,068 1,308,618
Salomon Inc., 8.40%,
Depositary Shares, Ser E ............. 191,000 5,180,875
MBNA Corp., 7.50%, Series A ............ 80,000 2,120,000
-----------
20,259,493
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Insurance (6.77%)
American Life Holding Co., $2.16 ....... 102,765 2,697,581
Aon Corp., 8.00% ....................... 80,000 2,020,000
Provident Companies, Inc., 8.10%,
Depositary Shares .................... 60,000 1,530,000
Travelers Group, Inc., 6.213% .......... 30,000 1,522,500
Travelers Group, Inc., 6.365% .......... 85,200 4,387,800
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12,157,881
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Oil & Gas (4.15%)
Elf Overseas Ltd., 8.50%,
Gtd Ser A (Cayman Islands) ........... 113,000 2,973,313
Enterprise Oil PLC, 10.50%,
Ser A, ADR (United Kingdom) .......... 92,498 2,439,635
SEE NOTES TO FIANCIAL STATEMENTS.
9
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FINANCIAL STATEMENTS
John Hancock Funds - Patriot Global Dividend Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
Oil & Gas (continued)
Lasmo PLC, 10.00%, Ser A, ADR
(United Kingdom) ..................... 77,000 $2,045,313
------------
7,458,261
Paper & Paper Products (5.63%)
Boise Cascade Corp., 9.40%,
Depositary Shares, Ser F ............. 163,000 4,207,438
Bowater Inc., 8.40%,
Depositary Shares, Ser C ............. 225,000 5,906,250
------------
10,113,688
Utilities (24.34%)
Baltimore Gas & Electric Co., 6.99%,
Ser 1995 ............................. 10,000 1,088,750
Coastal Corp., $2.125, Ser H ........... 175,100 4,541,656
Commonwealth Edison Co., $8.40, Ser A .. 46,775 4,689,194
Commonwealth Edison Co., $8.40, Ser B .. 12,165 1,214,979
Duke Power Co., 7.00% Ser W ............ 9,700 1,060,938
Duke Power Co., 7.85%, Ser S ........... 27,410 3,035,658
El Paso Tennessee Pipeline Co., 8.25%,
Ser A ................................ 119,000 6,485,500
Indianapolis Power & Light Co., 8.20% .. 10,350 1,047,938
Jersey Central Power & Light Co.,
7.52%, Ser K ......................... 28,000 2,891,000
Narragansett Electric Co., 6.95% ....... 32,000 1,704,000
Pacificorp, $1.98, Ser 1992 ............ 30,500 775,844
Phillips Gas Co., 9.32%, Ser A ......... 190,000 4,821,250
PSI Energy, Inc., 6.875% ............... 42,500 4,558,125
Public Service Electric & Gas Co.,
6.92% ................................ 7,000 738,500
South Carolina Electric & Gas Co.,
6.52% ................................ 25,000 2,653,125
Southern California Gas Co., 7.75% ..... 94,075 2,393,033
------------
43,699,490
------------
TOTAL PREFERRED STOCKS
(Cost $142,261,518) (83.34%) 149,645,931
------- ------------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- -----
COMMON STOCKS
Utilities (15.41%)
Allegheny Power System, Inc. ........... 57,200 $1,676,675
Boston Edison Co. ...................... 40,000 1,125,000
Consolidated Edison Co. of NY, Inc. .... 51,000 1,612,875
Delmarva Power & Light Co. ............. 50,000 900,000
DTE Energy Corp. ....................... 26,000 778,375
Florida Progress Corp. ................. 35,000 1,126,560
Houston Industries, Inc. ............... 69,600 1,457,250
IES Industries, Inc. ................... 73,000 2,235,625
MidAmerican Energy Holdings Co. ........ 255,000 4,414,685
PECO Energy Co. ........................ 40,000 940,000
Potomac Electric Power Co. ............. 70,000 1,561,875
Public Service Enterprise Group, Inc. .. 129,000 3,192,750
Puget Sound Power & Light Co. .......... 187,800 5,011,913
Washington Water Power Co. ............. 80,000 1,640,000
------------
TOTAL COMMON STOCKS
(Cost $27,021,376) (15.41%) 27,673,583
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED) VALUE
---- -------------- -----
SHORT-TERM INVESTMENTS
Commercial Paper (1.02%)
Prudential Funding Corp.,
08-01-97 .................... 5.55% $1,820 1,820,185
------------
TOTAL SHORT-TERM INVESTMENTS (1.02%) 1,820,185
------- ------------
TOTAL INVESTMENTS (99.77%) $179,139,699
======= ============
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $9,628,438 or 5.36% of net assets as of
July 31, 1997.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer; however, security is U.S.
dollar-denominated.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
10
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Patriot Global Dividend Fund
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 OF INVESTMENTS Securities in the Fund's portfolio are valued on the
basis of market quotations, valuations provided by independent pricing services,
or at fair value as determined in good faith in accordance with procedures
approved by the Trustees. Short-term debt investments maturing within 60 days
are valued at amortized cost, which approximates market value.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $3,204,405 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent 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, 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 July 31, 1997, 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
that was established at the offering of the DARTS and have been reset every 49
days thereafter by an auction. Dividend rates ranged from 3.87% to 4.26% during
the period ended July 31, 1997.
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.
11
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NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Patriot Global Dividend Fund
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the investment management contract, the Fund pays a monthly management fee
to John Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, for a continuous investment program equivalent, on an
annual basis, to the sum of 0.80% 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 0.05% 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 0.15%
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.
Mr. Edward J. Boudreau, Jr., Ms. Anne C. Hodsdon and Mr. Richard S.
Scipione are directors and/or officers of the Adviser and/or its affiliates, as
well as Trustees of the Fund. The compensation of unaffiliated Trustees is borne
by the Fund. The unaffiliated Trustees may elect to defer for tax purposes their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation. Investments to
cover the Fund's deferred compensation liability are recorded on the Fund's
books as an other asset. The deferred compensation liability and the 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, 1997, the Fund's investment to cover the deferred
compensation liability had unrealized appreciation of $1,856.
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, 1997, aggregated $47,822,046 and $47,997,029, respectively. There
were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended July 31, 1997.
The cost of investments owned at July 31, 1997 (including short-term
investments) for federal income tax purposes was $172,814,978. Gross unrealized
appreciation and depreciation of investments aggregated $8,418,633 and
$2,093,912, respectively, resulting in net unrealized appreciation of
$6,324,721.
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, 1997, the Fund has reclassified amounts to reflect an increase in
undistributed net investment income of $102,944, an increase in accumulated net
realized loss on investments of $5,858 and a decrease in common shares capital
of $108,802. The calculation of net investment income per share in the financial
highlights excludes these adjustments.
12
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John Hancock Funds - Patriot Global Dividend Fund
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
John Hancock Patriot Global Dividend Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of John Hancock Patriot Global Dividend Fund (the
"Fund") as of July 31, 1997, the related statements of operations and changes in
net assets, and financial highlights for the year then ended. 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 audit. The financial statements
of the Fund for the year ended July 31, 1996 and the financial highlights for
the four years then ended were audited by other auditors whose report, dated
September 6, 1996, expressed an unqualified opinion on those statements.
We conducted our audit 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 at July 31,
1997 by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 audit provides 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 July 31,
1997, the results of its operations, the changes in its net assets, and its
financial highlights for the year then ended in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 5, 1997
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes, the following information is furnished with
respect to the dividends of the Fund paid during its taxable year ended July 31,
1997.
All of the dividends paid for the fiscal year are taxable as ordinary
income. Distributions to preferred and common shareholders were 99.17% qualified
for the dividends received deduction available to corporations.
Shareholders will be mailed a 1997 U.S. Treasury Department Form 1099-DIV
in January 1998. This will reflect the total of all distributions which are
taxable for calendar year 1997.
SHAREHOLDER MEETING (UNAUDITED)
On March 6, 1997, the Annual Meeting of John Hancock Patriot Global Dividend
Fund (the "Fund") was held to elect four 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
FOR AUTHORITY
--- ---------
Charles L. Ladner 8,021,070 83,220
Leo E. Linbeck, Jr. 8,010,401 93,889
Patricia P. McCarter 8,011,667 92,623
The preferred shareholders elected Richard S. Scipione to serve until his
successor is duly elected and qualified, with the votes tabulated as follows:
390 FOR and 0 WITHHELD AUTHORITY.
The shareholders also ratified the Trustees' selection of Deloitte & Touche
LLP as the Fund's independent auditors for the Fund for the fiscal year ending
July 31, 1997, with the votes tabulated as follows: 7,965,252 FOR, 37,383
AGAINST, and 102,045 ABSTAINING.
13
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John Hancock Funds - Patriot Global Dividend Fund
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
gains 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 gains distributions, except for certain
brokerage commissions, as described above.
14
<PAGE>
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John Hancock Funds - Patriot Global Dividend Fund
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, Mas-sachusetts 02266-8209 (telephone 1-800-426-5523).
15
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