ANNUAL REPORT
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[GRAPHIC OMITTED]
Patriot Global
Dividend Fund
JULY 31, 1998
[JHF LOGO] JOHN HANCOCK FUNDS
A Global Investment Management 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.
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Anne C. Hodsdon
President and Chief Operating Officer
James B. Little
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Second Vice President and Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
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:
During the last decade, investors have become used to seeing stock market
returns averaging 15% or so each year. In the past three years, the stock market
has treated us to a record run, producing annual returns in excess of 20%.
After such a long and remarkable performance, many began this year
wondering what the market would do for an encore in 1998. The answer through the
end of June was more of the same. But further tremors from Asia sparked
increased volatility and a market downturn in late July, as corporate earnings
and the U.S. economy have shown signs of slowing. What's more, a good part of
the market's earlier advance had come from just a small group of the largest
companies in the major stock market indexes.
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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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Indeed, the move ahead has been so narrow that some observers believe that
most stocks have actually been in a bear market this year. The bond market had
its pockets of volatility as well, although U.S. Treasury bonds have benefited
from their safe-haven status. As the volatility continues, many observers are
now wondering if the market's long bull run has finally run its course.
While we don't make a practice of opining on what the market will do next,
we believe that after such a long run up, it would be wise for investors to set
more realistic expectations. Over the long term, the market's historical results
have been more in the 10% per year range, which is still a solid result,
considering it has been produced despite wars, depressions and other social
upheavals along the way.
In addition to adjusting, or at least re-examining, expectations, now could
also be a good time to review with your investment professional how your assets
are diversified, perhaps with an eye toward a more conservative approach.
Stocks, especially with their outsized gains of the last three years, might have
grown to represent a larger piece of your portfolio than you had originally
intended, given your objectives, time horizon and risk level.
At John Hancock Funds, our goal is to help you reach your financial
objectives and maintain wealth. One way we can do that is by helping you keep
your feet on the ground as you pursue your dreams.
Sincerely,
/s/ Edward J. Boudreau, Jr.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
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By Gregory K. Phelps for the Portfolio Management Team
John Hancock Patriot Global Dividend Fund
Uncertainty over Asia aids preferred and utility stocks
-------------------------------------------------------
Dividend-producing preferred stocks turned in a relatively good performance
during the past 12 months, although the overwhelming majority of their gains
came between August and December 1997. That's when Asia's economic crisis caused
a significant global stock sell-off, prompting an increasing number of investors
to seek out the relative stability, dependability and high quality of U.S.
Treasury bonds. Because of their relatively high dividend payments, preferred
stocks -- which made up 71% of the Fund's net assets at the end of the period --
tend to exhibit bond-like performance characteristics and rallied along with the
bond market. But so far in 1998, preferred stocks' performance has been more
moderate, in large part because the Treasury market has remained relatively
steady in response to stable interest rates. Furthermore, investors shifted
their attentions away from preferreds and toward common stocks as their fears
over Asia subsided. That said, preferreds performed especially well in the last
several weeks of July when the stock market suffered a serious decline because
of renewed fears over Japan's ability to counteract its ever-weakening economy.
"...so far in 1998, preferred stocks' performance has been more moderate..."
The performance of utility common stocks -- another important emphasis for
the Fund -- followed a similar pattern. Thanks to their lack of exposure to
Asia, their reputation as a safe haven in times of economic and market turmoil
and their attractive dividends, utility common stocks rallied with the Treasury
market on bad
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[A 2 1/4" x 3 3/4" photo at bottom of page of Fund management team. Caption
below reads "Fund management team members (l - r): Susan Kelly, Gregory Phelps
and Mark Maloney."]
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3
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John Hancock Funds - Patriot Global Dividend Fund
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[Pie Chart at the top of left hand column with the heading "Portfolio
Diversification". The chart is divided into five sections (from top to left):
Other 4%, Oil & Gas 5%, Industrials 7%, Banks & Financials 39% and Utilities
45%. A note below the chart reads "As a percentage of net assets on July 31,
1998."]
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"...we used periods of price weakness to... add to our utility common-stock
holdings."
news out of Asia during the final months of 1997. The Dow Jones Utility Average
hit an all-time high on the last day of the year. So far this year, utilities
have set new record highs in March and June, only to suffer bouts of profit
taking in April and July. Electric stocks uncharacteristically decoupled from
the rallying bond market in late July, posting losses at the hands of the stock
market sell-off.
For the 12-month period ended July 31, 1998, John Hancock Patriot Global
Dividend Fund had a total return of 14.25% at net asset value. By comparison,
the 30-year Treasury bond returned 13.77% and the Dow Jones Utility Average
returned 23.28% for the same 12-month period.
Preferred-stock focus
Throughout the past year we continued to emphasize preferred stocks, which help
maximize the Fund's yield while keeping its net asset value stable. Because
preferreds have relatively large dividends, they tend to experience smaller
price swings than their common stock cousins. As a result, preferreds helped the
Fund's performance last fall and in July when the market trended down, but
struggled when the overall stock market rallied.
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[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Lehman
Brothers Holdings followed by an up arrow with the phrase "Bull market helps
profitability." The second listing is Pennzoil followed by an up arrow with the
phrase "Reorganization boosts profits." The third listing is TDS Capital Trust
II followed by a down arrow with the phrase "Pressured by market oversupply." A
note below the table reads "See `Schedule of Investments.' Investment holdings
are subject to change."]
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Preferreds were, however, also boosted by factors unique to their market.
Favorable supply and demand were the catalysts for the good performance of
preferred stocks eligible for the "dividends-received deduction." These
securities -- dubbed DRD-eligible securities -- offer major tax advantages for
the corporations that invest in them. Because interest rates have fallen
dramatically over the past several years, many companies that issue DRD-eligible
securities have redeemed or bought back these securities to reduce their
financing costs. That activity has effectively shrunk the supply of available
DRD-eligible securities. The demand for them, meanwhile, has remained strong
given their attractive dividends and their tax advantages.
Among our best-performing DRD-eligible preferred stocks was Pennzoil, which
rose in part because of the successful reorganization of its Quaker State and
Jiffy Lube businesses. The securities offered an attractive yield of 6.49% and
10 years of call protection, which shields investors from having to surrender
their high-yielding securities to issuers prematurely. Another winner was Lehman
Brothers Holdings, which, thanks to the continued strength of the stock market,
enjoyed strong profitability. What's more, consolidation in the financial
services industry fueled speculation that Lehman could be taken over by a firm
with a higher credit rating.
There were, however, disappointments among our preferred-stock holdings,
primarily
4
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John Hancock Funds - Patriot Global Dividend Fund
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[Bar chart at top of left hand column with the heading "Fund Performance". Under
the heading is a note that reads "For the year ended July 31, 1998". The chart
is scaled in increments of 5% with 0% at the bottom and 25% at the top. The
first bar represents the 14.25% total return for John Hancock Patriot Global
Dividend Fund. The second bar represents the 13.77% total return for the 30-Year
Treasury Bond. The third bar represents the 23.28% total return for the Dow
Jones Utility Average. A note below the chart 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
that measures the performance of the utility industry in the United States.]
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those whose dividends were fully taxable, rather than DRD-eligible. The fully
taxable preferred market suffered from too much supply, in contrast to the tight
supply and demand conditions that boosted the DRD-eligible market. As a result,
holdings such as TDS Capital Trust II proved to be a laggard, despite the
company's successful financial results, the security's attractive 8.04% yield
and its decent call protection. Given that we don't expect the supply/demand
equation to improve much for fully taxable preferreds, we reduced our stake in
them.
Growing stake in utility commons
Throughout the year we used periods of price weakness to bargain hunt and add to
our utility common-stock holdings. By the end of the period, utility common
stocks made up 29% of the Fund's net assets, up from 15% at the beginning. One
such addition was MarketSpan, the company that resulted from the merger of
Brooklyn Union and Long Island Lighting Company. The company announced a buyback
of its stock, which helped boost the price of its common stock. With more than
$2 billion cash in its corporate coffers, MarketSpan appears to many to be an
attractive takeover candidate. Another addition was Dominion Resources, the
parent company of Virginia Electric, which offers an attractive dividend yield
and has benefited from the sale of its United Kingdom-based electric subsidiary
at a significant profit.
"...little, if any, exposure to the problems in Asia."
Outlook
We are optimistic about the prospects for electric common stocks for a number of
reasons. First, their domestic focus means they have little, if any, exposure to
the problems in Asia. Second, they offer dividend yields that are three times
the dividend yield of the average Standard & Poor's 500 Index stock. Third,
electric companies continue to undertake more and more stock buybacks. Fourth,
their earnings forecasts look promising. As a group, electrics are predicted to
post average earnings growth of 4% to 5% this year. Finally, electric common
stocks are compellingly inexpensive. At the end of the period, the S&P Utilities
Group was selling at about 63% of the S&P 500's price-to-earnings multiple.
Historically speaking, utilities have been priced at about 70% of the S&P 500.
That suggests that electric stocks have significant room to rally as they close
the gap between their recent and historical performances. As for DRD-eligible
preferred stocks, we think that the technical underpinnings -- meaning a
favorable supply and demand scenario -- will continue.
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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, 1998. You'll also
find the net asset value for each common share as of that date.
Statement of Assets and Liabilities
July 31, 1998
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Assets:
Investments at value - Note C:
Preferred stocks (cost - $123,996,226) ..................... $131,996,417
Common stocks (cost - $49,488,168) ......................... 53,174,005
Short-term investments (cost - $668,348) ................... 668,348
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185,838,770
Dividends receivable ......................................... 728,604
Other assets ................................................. 21,930
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Total Assets ..................... 186,589,304
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Liabilities:
DARTS dividend payable - Note A .............................. 34,167
Common shares dividend payable ............................... 70,581
Payable to John Hancock Advisers, Inc.
and affiliates - Note B .................................... 184,453
Accounts payable and accrued expenses ........................ 51,634
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Total Liabilities ................ 340,835
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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
------------
Common Shares - Without par value, unlimited number
of shares of beneficial interest authorized, 8,344,700
outstanding ................................................ 113,816,397
Accumulated net realized loss on investments ................. (1,262,868)
Net unrealized appreciation of investments ................... 11,687,884
Undistributed net investment income .......................... 2,007,056
------------
Net Assets applicable to
Common Shares ($15.13 per
share based on 8,344,700
shares outstanding) .............. 126,248,469
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Net Assets ....................... $186,248,469
=================================================
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, 1998
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Investment Income:
Dividends
(net of foreign withholding taxes of $33,624) .............. $12,863,256
Interest ..................................................... 292,315
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13,155,571
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Expenses:
Investment management fee - Note B ......................... 1,480,611
Administration fee - Note B ................................ 277,614
DARTS and auction fees ..................................... 159,621
Federal excise tax ......................................... 153,408
Custodian fee .............................................. 58,787
Auditing fee ............................................... 57,678
Printing ................................................... 38,292
Transfer agent fee ......................................... 25,398
Miscellaneous .............................................. 20,636
Registration and filing fees ............................... 16,170
Trustees' fees ............................................. 15,816
Legal fees ................................................. 1,087
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Total Expenses ................... 2,305,118
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Net Investment Income ............ 10,850,453
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Realized and Unrealized Gain on Investments:
Net realized gain on investments sold ........................ 3,446,142
Change in net unrealized appreciation/depreciation
of investments ............................................. 3,650,344
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Net Realized and Unrealized Gain
on Investments ................... 7,096,486
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Net Increase in Net Assets
Resulting from Operations ........ $17,946,939
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Distribution to DARTS ............ (2,489,567)
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Net Increase in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less DARTS
Distributions .................... $15,457,372
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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,
------------------------------
1997 1998
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ....................................................... $11,760,317 $10,850,453
Net realized gain on investments sold ....................................... 246,639 3,446,142
Change in net unrealized appreciation/depreciation of investments ........... 8,142,488 3,650,344
------------ ------------
Net Increase in Net Assets Resulting from Operations ...................... 20,149,444 17,946,939
------------ ------------
Distributions to Shareholders:
DARTS ($4,144 and $4,149 per share, respectively) - Note A .................. (2,486,179) (2,489,567)
Common Shares - Note A
Dividends from accumulated net investment income
($1.05 and $1.05 per share, respectively)
(8,761,434) (8,761,302)
------------ ------------
Total Distributions to Shareholders ....................................... (11,247,613) (11,250,869)
------------ ------------
Net Assets:
Beginning of period ......................................................... 170,650,568 179,552,399
------------ ------------
End of period (including undistributed net investment income
of $1,747,116 and $2,007,056, respectively) ............................... $179,552,399 $186,248,469
============ ============
Analysis of Common Shareholder Transactions:
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------------------------------
1997 1998
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Beginning of period ............................. 8,344,700 $114,080,324 8,344,700 $113,971,522
Reclassification of capital accounts - Note D ... -- (108,802) -- (155,125)
--------- ------------ --------- ------------
End of period ................................... 8,344,700 $113,971,522 8,344,700 $113,816,397
========= ============ ========= ============
</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,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Common Shares
Per Share Operating Performance
Net Asset Value, Beginning of Period ............. $15.42 $12.31 $13.04 $13.26 $14.33
-------- -------- -------- -------- --------
Net Investment Income ............................ 1.35 1.55 1.43 1.41(1) 1.30(1)
Net Realized and Unrealized Gain (Loss)
on Investments ................................. (2.52) 0.67 0.15 1.01 0.85
-------- -------- -------- -------- --------
Total from Investment Operations ............. (1.17) 2.22 1.58 2.42 2.15
-------- -------- -------- -------- --------
Less Distributions:
Dividends to DARTS Shareholders ................ (0.25) (0.33) (0.31) (0.30) (0.30)
Dividends from Accumulated Net Investment Income
to Common Shareholders ....................... (1.11) (1.16) (1.05) (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 .......................... (1.94) (1.49) (1.36) (1.35) (1.35)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ................... $12.31 $13.04 $13.26 $14.33 $15.13
======== ======== ======== ======== ========
Per Share Market Value, End of Period ............ $12.000 $12.250 $12.375 $12.938 $13.188
Total Investment Return at Market Value .......... (10.06%) 13.12% 9.65% 13.53% 10.30%
Ratios and Supplemental Data
Net Assets Applicable to Common Shares,
End of Period (000s omitted) ................... $102,690 $108,824 $110,651 $119,552 $126,248
Ratio of Expenses to Average Net Assets (2) ...... 1.27% 1.26% 1.27% 1.27% 1.25%
Ratio of Net Investment Income to
Average Net Assets (2) ......................... 6.42% 8.01% 6.91% 6.69% 5.86%
Portfolio Turnover Rate .......................... 39% 96% 38% 28% 43%
Senior Securities
Total DARTS Outstanding (000s omitted) ........... $60,000 $60,000 $60,000 $60,000 $60,000
Asset Coverage per Unit (3) ...................... $267,019 $278,812 $283,164 $295,948 $310,691
Involuntary Liquidation Preference per Unit (4) .. $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (4) ............ $100,000 $100,000 $100,000 $100,000 $100,000
</TABLE>
(1) Based on the average shares outstanding at the end of each month.
(2) 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.
(3) Calculated by subtracting the Fund's total liabilities (not including the
DARTS) from the Fund's total assets and dividing such amount by the number
of DARTS outstanding, as of the applicable 1940 Act Evaluation Date.
(4) Plus accumulated and unpaid dividends.
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, 1998
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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, 1998. It's divided into three main
categories: preferred stocks, common stocks and short-term investments. The
preferred and common 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
Automobile/Trucks (4.24%)
General Motors Corp., 9.12%,
Depositary Shares, Ser G ............... 113,414 $3,175,592
General Motors Corp., 9.125%,
Depositary Shares, Ser B ............... 184,500 4,727,813
------------
7,903,405
------------
Banks - Foreign (2.86%)
Australia and New Zealand Banking Group
Ltd., 9.125% (Australia) ............... 99,900 2,778,469
Banco Bilbao Vizcaya International Ltd.,
9.75%, American Depositary Receipt,
Gtd Ser A (Spain) ...................... 91,200 2,553,600
------------
5,332,069
------------
Banks - United States (12.01%)
ABN AMRO North America, Inc., 6.59%,
Ser H, (R) ............................. 5,000 5,552,500
ABN AMRO North America, Inc., 8.75%,
Ser A, (R) ............................. 540 642,668
Chase Manhattan Corp., 10.84%, Ser C ..... 179,700 5,458,388
Fleet Financial Group, Inc., 6.75%, Ser VI 40,000 2,280,000
Fleet Financial Group, Inc., 9.35%,
Depositary Shares ...................... 185,000 5,018,125
J.P. Morgan & Company, Inc., 6.625%,
Depositary Shares, Ser H ............... 60,000 3,420,000
------------
22,371,681
------------
Broker Services (13.46%)
Bear Stearns Companies, Inc., 5.72%,
Depositary Shares, Ser F ............... 40,000 2,040,000
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- --------------
Broker Services (continued)
Bear Stearns Companies, Inc., 6.15%,
Depositary Shares, Ser E ............... 93,000 $5,056,875
Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D ............... 40,000 1,990,000
Lehman Brothers Holdings, Inc., 5.94%,
Depositary Shares, Ser C ............... 100,000 5,312,500
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A ............... 168,000 5,313,000
Morgan Stanley Group, Inc., 7.75%,
Depositary Shares ...................... 100,000 5,362,500
------------
25,074,875
------------
Conglomerates (0.78%)
Grand Metropolitan Delaware, L.P., 9.42%,
Gtd Ser A .............................. 51,000 1,447,125
------------
Equipment Leasing (2.32%)
AMERCO, 8.50%, Ser A ..................... 162,000 4,313,250
------------
Financial Services (0.82%)
Entergy London Capital L.P., 8.625%,
Ser A .................................. 60,000 1,518,750
------------
Insurance (7.98%)
Travelers Group, Inc., 6.213% ............ 90,000 4,905,000
Travelers Group, Inc., 6.231%,
Depositary Shares, Ser H ............... 85,200 4,639,073
Travelers Group, Inc., 8.40%,
Depositary Shares, Ser K ............... 191,000 5,312,188
------------
14,856,261
------------
Media (1.33%)
Shaw Communications, Inc., 8.45%,
Ser A (Canada) ......................... 99,600 2,477,550
------------
Oil & Gas (5.23%)
Anadarko Petroleum Corp., 5.46%,
Depositary Shares ...................... 45,627 4,494,260
Pennzoil Co., 6.49% ...................... 50,000 5,250,000
------------
9,744,260
------------
Paper & Paper Products (3.11%)
Bowater, Inc., 8.40%,
Depositary Shares, Ser C ............... 225,000 5,793,750
------------
SEE NOTES TO FINANCIAL STATEMENTS.
9
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FINANCIAL STATEMENTS
John Hancock Funds - Patriot Global Dividend Fund
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
- ------------------- ---------------- --------------
Utilities (16.73%)
Baltimore Gas & Electric Co., 6.99%,
Ser 1995 ............................... 10,000 $1,150,000
Commonwealth Edison Co., $8.40, Ser A .... 46,775 4,724,273
Commonwealth Edison Co., $8.40, Ser B .... 9,750 936,609
Consumers Energy Co., $2.08 (Class A) .... 74,014 1,915,111
Duke Power Co., 7.85%, Ser S ............. 10,874 1,245,073
El Paso Tennessee Pipeline Co., 8.25%,
Ser A .................................. 146,000 8,176,000
Narragansett Electric Co., 6.95% ......... 32,000 1,780,000
PSI Energy, Inc., 6.875% ................. 42,500 4,738,750
Public Service Electric & Gas Co., 6.92% . 7,000 780,500
South Carolina Electric & Gas Co., 6.52% . 25,000 2,818,750
TDS Capital Trust II, 8.04% .............. 118,000 2,898,375
------------
31,163,441
------------
TOTAL PREFERRED STOCKS
(Cost $123,996,226) (70.87%) 131,996,417
-------- ------------
COMMON STOCKS
Utilities (28.55%)
Allegheny Energy, Inc. ................... 57,200 1,558,700
BEC Energy ............................... 65,000 2,486,250
Conectiv, Inc. ........................... 110,500 2,265,250
Consolidated Edison, Inc. ................ 51,000 2,157,938
Dominion Resources, Inc. ................. 47,500 1,935,625
DTE Energy Co. ........................... 49,900 2,002,238
Eastern Enterprises ...................... 32,700 1,305,956
Florida Progress Corp. ................... 35,000 1,360,625
Houston Industries, Inc. ................. 69,600 1,944,450
Interstate Energy Corp. .................. 127,420 3,734,999
LG&E Energy Corp. ........................ 91,400 2,227,875
MarketSpan Corp. ......................... 159,120 4,385,745
MCN Energy Group, Inc. ................... 80,000 1,985,000
MidAmerican Energy Holdings Co. .......... 230,000 4,686,250
Nevada Power Co. ......................... 38,000 897,750
PacifiCorp ............................... 44,000 943,250
PECO Energy Co. .......................... 30,000 898,125
Potomac Electric Power Co. ............... 100,000 2,412,500
Public Service Enterprise Group, Inc. .... 65,000 2,124,688
Puget Sound Energy, Inc. ................. 187,800 4,753,688
Sempra Energy ............................ 133,086 3,352,103
UtiliCorp United, Inc. ................... 60,000 2,115,000
Washington Water Power Co. ............... 80,000 1,640,000
------------
TOTAL COMMON STOCKS
(Cost $49,488,168) (28.55%) 53,174,005
-------- ------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------- -------------- ------------
SHORT-TERM INVESTMENTS
Commercial Paper (0.36%)
Chevron USA, Inc.,
08-03-98 ................... 5.50% $669 $668,348
------------
TOTAL SHORT-TERM INVESTMENTS (0.36%) 668,348
-------- ------------
TOTAL INVESTMENTS (99.78%) 185,838,770
-------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.22%) 409,699
-------- ------------
TOTAL NET ASSETS (100.00%) $186,248,469
======== ============
(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 $6,195,168 or 3.33% of the net assets as
of July 31, 1998.
Parenthetical disclosure of a foreign country in the security description
represents country of a 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.
Effective June 1, 1998, the Fund determines the net asset value of the
Common Shares each business day at the close of regular trading.
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 $303,910 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, 1998, which has no effect on the Fund's net assets, net
investment income or net realized gains.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund.
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 3.94% to 4.26% during
the year ended July 31, 1998.
The DARTS are redeemable at the option of the Fund, at a redemption price
equal to $100,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The DARTS are also subject to mandatory redemption at a
redemption price equal to $100,000 per share, plus accumulated and unpaid
dividends, if the Fund is in default on its asset coverage requirements with
respect to the DARTS. If the 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, Inc., 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 PaineWebber 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, 1998, 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 year
ended July 31, 1998, aggregated $79,525,382 and $78,769,641, respectively. There
were no purchases or sales of obligations of the U.S. government and its
agencies during the year ended July 31, 1998.
The cost of investments owned at July 31, 1998 (including short-term
investments) for federal income tax purposes was $175,317,425. Gross unrealized
appreciation and depreciation of investments aggregated $13,075,156 and
$2,553,811, respectively, resulting in net unrealized appreciation of
$10,521,345.
NOTE D -
RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with Statement of Position 93-2, the Fund has reclassified amounts
to reflect an increase in undistributed net investment income of $660,356, an
increase in accumulated net realized loss on investments of $505,231 and a
decrease in common shares capital of $155,125. This represents the amount
necessary to report these balances on a tax basis, excluding certain temporary
differences, as of July 31, 1998. Additional adjustments may be needed in
subsequent reporting periods. These reclassifications, which have no impact on
the net asset value of the Fund, are primarily attributable to federal excise
taxes and passive foreign investment companies. 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, 1998, the related statement of operations for the year
then ended, and the statements of changes in net assets and financial highlights
for each of the years in the two-year period ended July 31, 1998. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for each of the years in the three-year period ended July 31, 1996
were audited by other auditors whose report, dated September 6, 1996, expressed
an unqualified opinion on those financial highlights.
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 at July 31,
1998 by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund at July 31,
1998, the results of its operations, the changes in its net assets, and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 4, 1998
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,
1998.
All of the dividends paid for the fiscal year are taxable as ordinary
income. Distributions to preferred and common shareholders were 100% qualified
for the dividends-received deduction available to corporations.
Shareholders will be mailed a 1998 U.S. Treasury Department Form 1099-DIV
in January 1999. This will reflect the total of all distributions which are
taxable for calendar year 1998.
SHAREHOLDER MEETING (UNAUDITED)
On March 5, 1998, 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
--- ---------
Edward J. Boudreau, Jr. 7,714,359 96,197
Anne C. Hodsdon 7,707,021 103,535
Steven R. Pruchansky 7,714,363 96,193
Norman H. Smith 7, 714,363 96,193
The shareholders also ratified the Trustees' selection of Deloitte & Touche
LLP as the Fund's independent auditors for the fiscal year ending July 31, 1998,
with the votes tabulated as follows: 7,683,203 FOR, 49,822 AGAINST and 77,931
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
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 to 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.
14
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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, Massachusetts
02266-8209 (telephone 1-800-426-5523).
YEAR 2000 COMPLIANCE
The Adviser and the Fund's service providers are taking steps to address any
year 2000-related computer problems. However, there is some risk that these
problems could disrupt the Fund's operations or financial markets generally.
15
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