John Hancock
Patriot Premium
Dividend Fund I
SEMI
ANNUAL
REPORT
3.31.02
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Chairman and Chief Executive Officer,
flush left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 9
For your information
page 21
Dear Fellow Shareholders,
After punishing stock market losses for much of 2000 and 2001, investors
began 2002 with trepidation, wondering if a strong fourth quarter
rebound would continue. It didn't, but initial concerns about the
economy, and mistrust generated by the Enron scandal, began to give way
to relief, as signs of an economic rebound grew stronger. The Dow Jones
Industrial Average, with its blue chip roster of stocks, actually gained
ground in the first three months of 2002, returning 4.29%. The broader
Standard & Poor's 500 Index was essentially flat, at 0.28%, while the
tech-heavy Nasdaq Composite Index continued to reflect the technology
and telecommunications sectors' woes, losing 5.30% through March 31,
2002. Bond results were more muted than last year.
These last two years couldn't have provided a more vivid example of the
importance of being well diversified, not only among different asset
classes, such as stocks, bonds and cash, but also among various types of
each, such as growth or value stocks of different capitalizations.
Two disappointing years of stock performance could also be a reason to
re-evaluate with your investment professional whether you are still on
track to meet your long-term financial goals. It's possible that
downsized results, and modified expectations, could foster some changes
in your investing strategies. And now is certainly a good time to
perform this review, given the increased opportunities for retirement
and college savings offered in President Bush's major tax-cut
legislation enacted in June 2001.
While the stock market is still digesting the latest economic data, and
trying to determine its impact on earnings, it is becoming increasingly
clear that the economic and corporate profit cycles have begun to turn.
So we remain encouraged, and confident in the resilience of the economy,
the financial markets and the nation.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
YOUR FUND
AT A GLANCE
The Fund seeks
to provide high
current income,
consistent with
modest growth
in capital, by
investing in
a diversified
portfolio of
dividend-paying
preferred and
common equity
securities.
Over the last six months
* Changing expectations about the economy and the direction of interest
rates prompted stock and bond market volatility.
* Fears of rising interest rates pressured preferred stocks.
* The Fund's energy-related holdings performed well as oil and natural
gas prices skyrocketed.
[Bar chart with heading "John Hancock Patriot Premium Dividend Fund
I." Under the heading is a note that reads "Fund performance for the
six months ended March 31, 2002." The chart is scaled in increments of
1% with 0% at the bottom and 5% at the top. The first bar represents
the 4.16% total return for John Hancock Patriot Premium Dividend Fund
I. A note below the chart reads "The total return for the Fund is at
net asset value with all distributions reinvested."]
Top 10 holdings
3.7% NSTAR
3.1% CH Energy Group
3.1% Chevron
3.0% Puget Energy
2.7% El Paso Tennessee Pipeline (8.25%, Ser A)
2.5% Energy East Corp.
2.5% Coastal Finance I (8.375%)
2.4% Sierra Pacific Power (7.80%, Ser 1, Class A)
2.3% Energy East Capital Trust I (8.25%)
2.3% South Carolina Electric & Gas (6.52%)
As a percentage of net assets on March 31, 2002.
MANAGERS'
REPORT
BY GREGORY K. PHELPS, FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Patriot Premium Dividend Fund I
Preferred stocks -- one of the two primary areas of focus for John
Hancock Patriot Premium Dividend Fund I -- struggled during the past six
months amid post--September 11 jitters and fears of rising interest
rates. Because of their relatively high dividends, preferred stocks tend
to rise in value like bonds when interest rates fall, and fall in value
when rates are on the upswing. In October and November, the Federal
Reserve Board aggressively cut interest rates in an attempt to steady
global financial markets and prevent an economic slowdown from
worsening. Preferred stocks rallied along with the overall bond market.
But from December through March, preferreds went into a funk. An
evolving consensus that an economic rebound was just around the corner,
and strong indications that the Fed was at the end of its current cycle
of cutting rates, prompted investors to gravitate from the more
defensive segments of the market -- like preferreds -- into more
economically sensitive groups.
"Utility common stocks
...spent the first half of
the period in a valiant
struggle against the
many elements that
were stacked against
them."
UTILITY COMMON STOCKS BRIGHTEN
Utility common stocks -- the Fund's other primary investment focus --
spent the first half of the period in a valiant struggle against the
many elements that were stacked against them. The same gravitation
toward growth stocks that muted preferred stocks' returns in October and
November hurt utility common stocks as well. The collapse of
energy-trading company Enron also was a major drag on utility stocks --
both common and preferred -- in the final weeks of 2001. The company,
once one of the nation's largest companies and a major component of the
Dow Jones Utility Average, filed for bankruptcy in December as investors
lost confidence in the company's financial reporting. Fears of
"Enronitis" spread across the utility sector, causing it to post losses
during January. But then conditions turned more favorable in February
and March. Despite a warmer-than-normal winter, electricity, oil and
natural gas prices rose dramatically in response to stronger industrial
demand and heightened tensions in the Middle East. Furthermore, there
was growing confidence that most utilities weren't subject to the types
of problems that brought down Enron.
"Thanks to our focus on
high-quality investments
...we completely avoided
the collapse of Enron..."
FUND PERFORMANCE
For the six months ended March 31, 2002, John Hancock Patriot Premium
Dividend Fund I returned 4.16% at net asset value. By comparison, the
average income and preferred closed-end fund returned 6.89%, according
to Lipper, Inc. The Fund had a larger-than-average stake in utility
common stocks, which accounted for its underperformance relative to its
peers. The Dow Jones Utility Average -- which tracks the performance of
15 electric and natural gas utilities -- returned 3.47%, and the broader
stock market, as measured by the Standard & Poor's 500 Index, returned
10.99%.
Thanks to our focus on high-quality investments -- which is driven by
our research process and emphasis on good company fundamentals -- we
completely avoided the collapse of Enron, never having held any of its
securities in the Fund. We also avoided other stocks that came under
pressure due to Enron-like concerns, including companies with
energy-trading operations such as Williams Company, Calpine and AES. But
our best performers during the six-month period were companies involved
in the production and distribution of oil and natural gas. Anadarko
Petroleum and Devon Energy, for example, each posted strong gains as
energy prices shot higher.
Our long-term commitment to well-managed, regionally based electric
transmission and distribution companies served us well. Progress Energy,
for example, performed reasonably well, thanks in part to its enjoying
one of the country's fastest growing customer bases. Other good regional
performers included those with higher-than-average dividends, such as
NSTAR (the former Boston Edison) and OGE, one of the lowest-cost
electric generators in the country.
[Table at top left-hand side of page entitled "Top five industry
groups." The first listing is Utilities 72%, the second is Oil & Gas
9%, the third Broker services 6%, the fourth Media 4%, and the fifth
Finance 2%.]
One of our biggest detractors during the period was the common stock of
electric provider Western Resources, which performed poorly when a
couple of regulatory rulings went against the company and put in
jeopardy the company's planned merger with Public Service of New Mexico.
[Pie chart in middle of page with heading "Portfolio diversification
As a percentage of net assets on 3-31-02." The chart is divided into
three sections (from top to left): Preferred stocks 63%, Common stocks
33% and Short-term investments & other 4%.]
OUTLOOK
At its most recent meeting in March 2002, the Fed decided not to raise
interest rates. Since then, Fed Chairman Alan Greenspan seems to have
grown more optimistic by the week that the economy is in the midst of a
recovery. Given that, it appears unlikely that interest rates are going
to decline any time soon. On the other hand, we don't think that
economic growth for 2002 will be so robust that it forces the Fed to
substantially raise rates either, given what we believe is a rather
anemic economy. With this backdrop in mind, we don't think that
preferreds will appreciate in price as much as they did during 2001 when
interest rates fell dramatically. So we're likely to focus on preferred
stocks that are selling below par and on high-coupon cushion preferreds,
both of which should help immunize the portfolio from rising interest
rates as the economy strengthens.
[Table at top of page 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
Anadarko Petroleum followed by an up arrow with the phrase "Rising
energy prices boost earnings prospects." The second listing is
Progress Energy followed by an up arrow with the phrase "Rate
settlement in Florida; growth lifts earnings." The third listing is
Western Resources followed by a down arrow with the phrase "Unfriendly
regulatory actions cast doubt about planned merger."]
"...it appears unlikely that
interest rates are going to
decline any time soon."
In contrast, we believe utility stocks can perform better than they have
during previous economic upturns, which typically favor faster-growing
stocks. Our belief is based on the fact that most utilities have
attractive earnings growth prospects and their stocks are priced lower
than they have been in decades from a price-to-earnings perspective. So
the sector looks cheap relative to other industry sectors. In our view,
"Enronitis" has unfairly tainted the entire utility sector, with
high-quality companies selling at very cheap prices. Furthermore, we
believe that 2001 served as a useful reminder for shareholders about the
importance of diversification. Because of that, we don't think that
utility stocks will be left out in the cold even if the economy were to
enjoy a quick and sharp rebound.
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.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
March 31, 2002
(unaudited)
This schedule is divided into three main categories: preferred stocks,
common stocks and short-term investments. The stocks are further broken
down by industry group. Short-term investments, which represent the
Fund's cash position, are listed last.
SHARES ISSUER VALUE
PREFERRED STOCKS 62.90% $135,561,298
(Cost $138,531,367)
Agricultural Operations 1.28% $2,765,000
35,000 Ocean Spray Cranberries, Inc., 6.25% (R) 2,765,000
Banks -- Foreign 1.07% 2,305,100
89,000 Australia and New Zealand Banking Group Ltd.,
9.125% (Australia) 2,305,100
Broker Services 5.97% 12,871,486
62,460 Bear Stearns Cos., Inc., 5.72%, Ser F 2,434,691
102,700 Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D 4,133,675
90,400 Lehman Brothers Holdings, Inc., 5.94%, Ser C 3,756,120
90,000 Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A 2,547,000
Diversified Operations 0.61% 1,323,319
48,420 Grand Metropolitan Delaware, L.P.,
9.42%, Gtd Ser A 1,323,319
Finance 1.98% 4,269,000
72,000 J.P. Morgan Chase & Co., 6.625%,
Depositary Shares, Ser H 3,672,000
12,000 USA Education, Inc., 6.97%, Ser A 597,000
Leasing Companies 1.04% 2,232,000
90,000 AMERCO, 8.50%, Ser A 2,232,000
Media 4.33% 9,323,750
200,453 Shaw Communications, Inc., 8.45%, Ser A (Canada) 4,690,600
199,361 Shaw Communications, Inc., 8.50% (Canada) 4,633,150
Oil & Gas 5.93% 12,787,421
45,278 Anadarko Petroleum Corp., 5.46%, Depositary Shares 3,692,421
50,000 Devon Energy Corp., 6.49%, Ser A 4,575,000
40,000 Lasmo America Ltd., 8.15% (R) 4,520,000
Telecommunications 1.94% 4,169,700
50,850 Touch America Holdings, Inc., $6.875 4,169,700
Utilities 38.75% 83,514,522
225,000 Alabama Power Co., 5.20% 4,455,000
34,000 Baltimore Gas & Electric Co., 6.99%, Ser 1995 3,451,000
47,029 Boston Edison Co., 4.25% 2,901,689
210,000 Coastal Finance I, 8.375% 5,300,400
115,000 El Paso Tennessee Pipeline Co., 8.25%, Ser A 5,819,000
200,000 Energy East Capital Trust I, 8.25% 5,004,000
42,000 Florida Power & Light Co., 6.75%, Ser U 4,221,000
100,000 Hawaiian Electric Industries Capital Trust I, 8.36% 2,525,000
13,000 Idaho Power Co., 7.07% 1,345,500
64,200 MCN Financing II, 8.625% 1,637,100
13,500 Massachusetts Electric Co., 6.99% 1,380,375
34,500 Monongahela Power Co., 7.73%, Ser L 3,631,125
40,000 Montana Power Capital I, 8.45%, Ser A 988,000
37,000 PSI Energy, Inc., 6.875% 3,589,000
25,800 Public Service Electric & Gas Co., 6.92% 2,573,550
254,000 Puget Sound Energy, Inc., 7.45%, Ser II 6,347,460
210,000 Sierra Pacific Power Co., 7.80%, Ser 1 (Class A) 5,166,000
50,000 South Carolina Electric & Gas Co., 6.52% 4,887,500
185,000 Southern Union Financing I, 9.48% 4,708,250
190,335 TDS Capital Trust I, 8.50% 4,765,988
135,600 TDS Capital Trust II, 8.04% 3,349,320
25,300 TXU US Holdings Co., $1.875, Depositary Shares, Ser A 633,765
36,000 TXU US Holdings Co., $7.98 3,807,000
10,000 Virginia Electric & Power Co., $7.05 1,027,500
COMMON STOCKS 33.41% $72,012,763
(Cost $66,064,786)
Telecommunications 0.38% 825,246
216,600 Touch America Holdings, Inc. 825,246
Utilities 33.03% 71,187,517
150,380 Alliant Energy Corp. 4,544,483
164,000 Aquila, Inc. 4,073,760
140,300 CH Energy Group, Inc. 6,657,235
101,000 DTE Energy Co. 4,595,500
64,300 Dominion Resources, Inc. 4,189,788
15,000 Duke Energy Corp. 567,000
247,000 Energy East Corp. 5,372,250
126,000 KeySpan Corp. 4,585,140
27,000 NiSource, Inc. 619,650
60,000 Northeast Utilities 1,192,200
175,000 NSTAR 7,934,500
130,000 OGE Energy Corp. 3,116,100
52,500 Progress Energy, Inc. 2,627,100
69,000 Progress Energy, Inc. (Contingent Value Obligation) 31,050
216,900 Puget Energy, Inc. 4,509,351
40,500 Reliant Energy, Inc. 1,044,495
246,600 Sierra Pacific Resources 3,721,194
153,000 TECO Energy, Inc. 4,380,390
40,400 WPS Resources Corp. 1,593,376
97,700 Western Resources, Inc. 1,675,555
164,000 Xcel Energy, Inc. 4,157,400
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 3.06% $6,592,000
(Cost $6,592,000)
Oil & Gas 3.06%
Chevron USA, Inc., Discount
Commercial Paper, 04-01-02 1.45% $6,592 6,592,000
TOTAL INVESTMENTS 99.37% $214,166,061
OTHER ASSETS AND LIABILITIES, NET 0.63% $1,361,158
TOTAL NET ASSETS 100.00% $215,527,219
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $7,285,000 or 3.38% of
net assets as of March 31, 2002.
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.
ASSETS AND
LIABILITIES
March 31, 2002
(unaudited)
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value for
each common
share.
ASSETS
Investments at value (cost $211,188,153) $214,166,061
Cash 134,339
Receivable for investments sold 64,977
Dividends receivable 1,438,507
Other assets 42,210
Total assets 215,846,094
LIABILITIES
Dutch Auction Rate Transferable Securities (DARTS)
preferred shares dividends payable 6,736
Payable to affiliates 202,695
Other payables and accrued expenses 109,444
Total liabilities 318,875
NET ASSETS
DARTS without par value, unlimited number
of shares of beneficial interest authorized,
685 shares issued, liquidation preference
of $100,000 per share 68,500,000
Common shares -- without par value,
unlimited number of shares of beneficial
interest authorized, 14,988,544 shares outstanding 140,852,196
Accumulated net realized gain on investments 3,022,580
Net unrealized appreciation of investments 2,977,908
Undistributed net investment income 174,535
Net assets applicable to common shares
($9.81 per share based on common
shares outstanding) 147,027,219
Net assets $215,527,219
See notes to
financial statements.
OPERATIONS
For the period ended
March 31, 2002
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in oper-
ating the Fund.
It also shows net
gains (losses) for
the period stated.
INVESTMENT INCOME
Dividends $7,292,973
Interest 29,853
Total investment income 7,322,826
EXPENSES
Investment management fee 899,348
Administration fee 106,640
DARTS and auction fee 96,856
Federal excise tax 96,209
Auditing fee 29,016
Miscellaneous 27,722
Transfer agent fee 23,495
Printing 21,830
Custodian fee 20,860
Trustees' fee 5,515
Legal fee 1,391
Total expenses 1,328,882
Net investment income 5,993,944
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investments 550,107
Change in net unrealized appreciation
(depreciation) on investments (18,929)
Net realized and unrealized gain 531,178
Increase in net assets from operations 6,525,122
Distribution to DARTS (672,101)
Net increase in net assets applicable
to common shareholders resulting
from operations, less DARTS distributions $5,853,021
1 Semiannual period from 10-1-01 through 3-31-02.
See notes to
financial statements.
CHANGES IN
NET ASSETS
This 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 share
holders, if any,
and any increase
due to the sale of
common shares.
YEAR PERIOD
ENDED ENDED
9-30-01 3-31-02 1
INCREASE IN NET ASSETS
From operations
Net investment income $12,474,424 $5,993,944
Net realized gain 1,507,882 550,107
Change in net unrealized
appreciation (depreciation) (7,314,735) (18,929)
Increase in net assets
resulting from operations 6,667,571 6,525,122
Distributions to shareholders
DARTS preferred shares (2,734,970) (672,101)
Common shares --
From net investment income (9,705,946) (4,853,574)
(12,440,916) (5,525,675)
From fund share transactions -- 86,846
NET ASSETS
Beginning of period 220,214,271 214,440,926
End of period 2 $214,440,926 $215,527,219
1 Semiannual period from 10-1-01 through 3-31-02. Unaudited.
2 Includes distributions in excess of net investment income of $293,734
and undistributed net investment income of $174,535, respectively.
See notes to
financial statements.
FINANCIAL
HIGHLIGHTS
COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the end of the previous period.
PERIOD ENDED 9-30-97 9-30-98 9-30-99 9-30-00 9-30-01 3-31-02 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $9.02 $9.88 $10.85 $9.91 $10.13 $9.74
Net investment income 2 0.98 0.87 0.83 0.85 0.83 0.40
Net realized and unrealized
gain (loss) on investments 0.82 0.99 (0.90) 0.23 (0.39) 0.04
Total from
investment operations 1.80 1.86 (0.07) 1.08 0.44 0.44
Less distributions
Dividends to DARTS shareholders (0.19) (0.19) (0.18) (0.21) (0.18) (0.05)
Dividends to common shareholders
from net investment income (0.75) (0.70) (0.66) (0.64) (0.65) (0.32)
Distributions to common shareholders
in excess of net investment income -- -- 3 (0.03) (0.01) -- --
(0.94) (0.89) (0.87) (0.86) (0.83) (0.37)
Net asset value, end of period $9.88 $10.85 $9.91 $10.13 $9.74 $9.81
Per share market value,
end of period $9.38 $10.19 $8.81 $8.25 $8.75 $9.16
Total return at market value (%) 11.35 16.57 (7.01) 1.19 13.79 8.26 4
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common
shares, end of period (in millions) $148 $163 $148 $152 $146 $147
Ratio of expenses
to average net assets 5 (%) 1.87 1.65 1.66 1.75 1.72 1.83 6
Ratio of net investment income
to average net assets 7 (%) 10.35 8.26 7.92 8.94 8.35 8.27 6
Portfolio turnover (%) 56 32 18 19 23 6
SENIOR SECURITIES
Total DARTS outstanding (in millions) $68 $68 $68 $68 $68 $68
Asset coverage per unit 8 $308,832 $330,525 $323,124 $315,176 $318,208 $311,595
Involuntary liquidation preference
per unit 9 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Approximate market value per unit 9 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
1 Semiannual period from 10-1-01 through 3-31-02. Unaudited.
2 Based on the average of the shares outstanding at the end of each month.
3 Less than $0.01 per share.
4 Not annualized.
5 Ratios calculated on the basis of expenses applicable to common shares
relative to the average net assets of common shares. Without the
exclusion of preferred shares, the ratio of expenses would have been
1.24%, 1.26%, 1.15%, 1.15%, 1.18% and 1.25%, respectively.
6 Annualized.
7 Ratios calculated on the basis of net investment income applicable to
common shares relative to the average net assets of common shares.
Without the exclusion of preferred shares, the ratio of net investment
income would have been 6.97%, 5.75%, 5.52%, 6.03%, 5.72% and 5.62%,
respectively.
8 Calculated by subtracting the Fund's total liabilities (excluding the
DARTS) from the Fund's total assets, and dividing this amount by the
number of DARTS outstanding as of the applicable 1940 Act Evaluation
Date.
9 Plus accumulated and unpaid dividends.
See notes to
financial statements.
NOTES TO
STATEMENTS
Unaudited
NOTE A
Accounting policies
John Hancock Patriot Premium Dividend Fund I (the "Fund") is a
diversified, closed-end 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. The
Fund determines the net asset value of the common shares each business
day.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis.
Federal income taxes
The Fund qualifies as a "regulated investment company" by complying with
the applicable provisions of the Internal Revenue Code and will not be
subject to federal income tax on taxable income that is distributed to
shareholders. Therefore, no federal income tax provision is required.
Net capital losses of $260,189 that are attributable to security
transactions incurred after October 31, 2000 are treated as arising on
October 1, 2001, the first day of the Fund's next taxable year.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be
subject to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions
are determined in conformity with income tax regulations, which may
differ from accounting principles generally accepted in the United
States of America.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of
America, incorporates estimates made by management in determining the
reported amount of assets, liabilities, revenues and expenses of the
Fund. Actual results could differ from these estimates.
Dutch Auction Rate Transferable Securities (DARTS) preferred stock Series A
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 auction. Dividend rates ranged from 1.50% to
2.89% during the period ended March 31, 2002.
The DARTS are redeemable, at the option of the Fund, at a redemption
price equal to $100,000 per share, plus accumulated and unpaid dividends
on any dividend payment date. The DARTS are also subject to mandatory
redemption at a redemption price equal to $100,000 per share, plus
accumulated and unpaid dividends, if the Fund is in default on its asset
coverage requirements with respect to the DARTS. If the dividend on the
DARTS shall remain unpaid in an amount equal to two full years'
dividends, the holders of the DARTS, as a class, have the right to elect
a majority of the Board of Trustees. In general, the holders of the
DARTS and the common shares have equal voting rights of one vote per
share, except that the holders of the DARTS, as a class, vote to elect
two members of the Board of Trustees, and separate class votes are
required on certain matters that affect the respective interests of the
DARTS and common shares. The DARTS have a liquidation preference of
$100,000 per share, plus accumulated and unpaid dividends. The Fund is
required to maintain certain asset coverage with respect to the DARTS,
as defined in the Fund's by-laws.
NOTE B
Management fee and transactions with affiliates and others
The Fund has an investment management contract with John Hancock
Advisers, LLC (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, LLC. Under the investment management contract, the Fund
pays a monthly management fee to the Adviser at an annual rate of 0.50%
of the Fund's average weekly net assets plus 5.00% of the Fund's weekly
gross income. The Adviser's total fee is limited to a maximum amount
equal to 1.00% annually of the Fund's average weekly net assets. For the
period ended March 31, 2002, the advisory fee incurred did not exceed
the maximum advisory fee allowed.
The Fund has an administrative agreement with the Adviser under which
the Adviser oversees the custodial, auditing, valuation, accounting,
legal, stock transfer and dividend disbursing services and maintains
Fund communications with the shareholders. The Fund pays the Adviser a
monthly administration fee at an annual rate of 0.10% of the Fund's
average weekly net assets.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer for tax purposes
their receipt of this compensation under the John Hancock Group of Funds
Deferred Compensation Plan. The Fund makes investments into other John
Hancock funds, as applicable, to cover its liability for the deferred
compensation. Investments to cover the Fund's deferred compensation
liability are recorded on the Fund's books as an other asset. The
deferred compensation liability and the related other asset are always
equal and are marked to market on a periodic basis to reflect any income
earned by the investment as well as any unrealized gains or losses. The
Deferred Compensation Plan investments had no impact on the operations
of the Fund.
NOTE C
Fund common share transactions
This listing illustrates the reclassification of capital accounts,
dividend reinvestments and the number of common shares outstanding at
the beginning and end of the last two periods, along with the
corresponding dollar value.
YEAR ENDED 9-30-01 PERIOD ENDED 3-31-02 1
SHARES AMOUNT SHARES AMOUNT
Beginning of period 14,979,601 $140,818,196 14,979,601 $140,765,350
Reclassification of capital accounts -- (52,846) -- --
Dividends reinvested -- -- 8,943 86,846
End of period 14,979,601 $140,765,350 14,988,544 $140,852,196
1 Semiannual period from 10-1-01 through 3-31-02. Unaudited.
NOTE D
Investment transactions
Purchases and proceeds from sales of securities, other than short-term
securities and obligations of the U.S. government, during the period
ended March 31, 2002, aggregated $13,619,079 and $19,592,719,
respectively.
The cost of investments owned at March 31, 2002, including short-term
investments, for federal income tax purposes was $211,188,410. Gross
unrealized appreciation and depreciation of investments aggregated
$12,731,306 and $9,753,655, respectively, resulting in net unrealized
appreciation of $2,977,651.
INVESTMENT OBJECTIVE AND POLICY
The Fund's investment objective is to provide high current income,
consistent with modest growth of capital, for holders of its common
shares. The Fund will pursue its objective by investing in a diversified
portfolio of dividend- paying preferred and common equity securities.
The Fund's non-fundamental investment policy, with respect to the
quality of ratings of its portfolio investments, was changed by a vote
of the Fund's Trustees on September 13, 1994. The new policy, which
became effective October 15, 1994, stipulates that preferred stocks and
debt obligations in which the Fund will invest will be rated investment
grade (at least "BBB" by S&P or "Baa" by Moody's) at the time of
investment or will be preferred stocks of issuers of investment-grade
senior debt, some of which may have speculative characteristics, or, if
not rated, will be of comparable quality as determined by the Adviser.
The Fund will invest in common stocks of issuers whose senior debt is
rated investment grade or, in the case of issuers who have no rated
senior debt outstanding, whose senior debt is considered by the Adviser
to be of comparable quality.
On November 20, 2001, the Trustees approved the following investment
policy change effective 12-15-01: Under normal circumstances the Fund
will invest at least 80% of its net assets in dividend-paying
securities. "Net assets" is defined as Fund's net assets plus borrowings
for investment purposes. In addition, the Fund will notify shareholders
at least 60 days prior to any change in this 80% investment policy.
DIVIDEND REINVESTMENT PLAN
The Fund provides shareholders with a Dividend Reinvestment Plan ("the
Plan") which offers the opportunity to earn compounded yields. Each
holder of common shares will automatically have all distributions of
dividends and capital gains reinvested by State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02210, as agent for
the common shareholders, unless an election is made to receive cash.
Holders of common shares who elect not to participate in the Plan will
receive all distributions in cash, paid by check, mailed directly to the
shareholder of record (or, if the common shares are held in street or
other nominee name, then to the nominee) by the Plan Agent, as dividend
disbursing agent. Shareholders whose shares are held in the name of a
broker or nominee should contact the broker or nominee to determine
whether and how they may participate in the Plan.
If the Fund declares a dividend payable either in common shares or in
cash, nonparticipants will receive cash and participants in the Plan
will receive the equivalent in common shares. If the market price of the
common shares on the payment date for the dividend is equal to or
exceeds their net asset value as determined on the payment date,
participants will be issued common shares (out of authorized but
unissued shares) at a value equal to the higher of net asset value or
95% of the market price. If the net asset value exceeds the market price
of the common shares at such time, or if the Board of Trustees declares
a dividend payable only in cash, the Plan Agent will, as agent for Plan
participants, buy shares in the open market, on the New York Stock
Exchange or elsewhere, for the participant's accounts. Such purchases
will be made promptly after the payable date for such dividend and, in
any event, prior to the next ex- dividend date, after such date except
where necessary to comply with federal securities laws. If, before the
Plan Agent has completed its purchases, the market price exceeds the net
asset value of the common shares, the average per share purchase price
paid by the Plan Agent may exceed the net asset value of the common
shares, resulting in the acquisition of fewer shares than if the
dividend had been paid in shares issued by the Fund.
Participants in the Plan may withdraw from the Plan upon written notice
to the Plan Agent. Such withdrawal will be effective immediately if
received not less than ten days prior to a dividend record date;
otherwise, it will be effective for all subsequent dividend record
dates. When a participant withdraws from the Plan or upon termination of
the Plan as provided below, certificates for whole common shares
credited to his or her account under the Plan will be issued and a cash
payment will be made for any fraction of a share credited to such
account.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the
accounts, including information needed by the shareholders for personal
and tax records. Common shares in the account of each Plan participant
will be held by the Plan Agent in non-certificated form in the name of
the participant. Proxy material relating to the shareholder's meetings
of the Fund will include those shares purchased as well as shares held
pursuant to the Plan.
There will be no brokerage charges with respect to common shares issued
directly by the Fund. However, each participant will pay a pro rata
share of brokerage commissions incurred with respect to the Plan Agent's
open market purchases in connection with the reinvestment of dividends
and distributions. In each case, the cost per share of the shares
purchased for each participant's account will be the average cost,
including brokerage commissions, of any shares purchased on the open
market plus the cost of any shares issued by the Fund. There are no
other charges to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described
above.
The automatic reinvestment of dividends and distributions will not
relieve participants of any federal income tax that may be payable or
required to be withheld on such dividends or distributions. Participants
under the Plan will receive tax information annually. The amount of
dividend to be reported on Form 1099-DIV should be (1) in the case of
shares issued by the Fund, the fair market value of such shares on the
dividend payment date and (2) in the case of shares purchased by the
Plan Agent in the open market, the amount of cash used to purchase them
(including the amount of cash allocated to brokerage commissions paid on
such purchases).
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan
as applied to any dividend or distribution paid subsequent to written
notice of the change sent to all shareholders of the Fund at least 90
days before the record date for the dividend or distribution. The Plan
may be amended or terminated by the Plan Agent after at least 90 days
written notice to all shareholders of the Fund. All correspondence or
additional information concerning the Plan should be directed to the
Plan Agent, State Street Bank and Trust Company, at P.O. Box 8209,
Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning the John Hancock Patriot Premium
Dividend Fund I, we will be pleased to assist you. If you hold shares in
your own name and not with a brokerage firm, please address all notices,
correspondence, questions, or other communications regarding the Fund to
the transfer agent at:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: 1-800-426-5523
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
SHAREHOLDER MEETING
On March 7, 2002, the Annual Meeting of the Fund was held to elect six
Trustees and to ratify the actions of the Trustees in selecting
independent auditors for the Fund.
The common shareholders elected the following Trustees to serve until
their respective successors are duly elected and qualified, with the
votes tabulated as follows:
WITHHELD
FOR AUTHORITY
--- ---------
James F. Carlin 9,112,568 144,189
William H. Cunningham 9,077,137 179,620
John P. Toolan 9,083,749 173,008
John A. Moore 9,089,895 166,862
Patti McGill Peterson 9,080,519 176,238
The preferred shareholders elected John M. DeCiccio to serve until his
respective successors are duly elected and qualified, with the votes
tabulated as follows: 463 FOR and 0 WITHHELD AUTHORITY.
The shareholders also ratified the Trustees' selection of Deloitte &
Touche LLP as the Fund's independent auditors for the fiscal year ending
September 30, 2002, with the votes tabulated as follows: 9,046,941 FOR,
85,846 AGAINST and 123,969 ABSTAINING.
FOR YOUR
INFORMATION
TRUSTEES
James F. Carlin*
William H. Cunningham
John M. DeCiccio
Ronald R. Dion
Maureen R. Ford
Charles L. Ladner*
Dr. John A. Moore
Patti McGill Peterson
Steven R. Pruchansky
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Maureen R. Ford
Chairman, President
and Chief Executive Officer
William L. Braman
Executive Vice President
and Chief Investment Officer
Richard A. Brown
Senior Vice President
and Chief Financial Officer
Susan S. Newton
Senior Vice President
and Secretary
William H. King
Vice President
and Treasurer
Thomas H. Connors
Vice President
and Compliance Officer
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, NY 10286
TRANSFER AGENT AND DIVIDEND DISBURSER
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT FOR DARTS
Bankers Trust Company
4 Albany Street
New York, New York 10005
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
STOCK SYMBOL
Listed New York Stock Exchange:
PDF
For shareholder assistance refer to page 18
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Customer service representatives 1-800-426-5523
24-hour automated information 1-800-843-0090
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-426-5523
1-800-843-0090
www.jhfunds.com
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