May 17, 2004
EDGAR
United States Securities and
Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form N-CSR
John Hancock Patriot Premium Dividend Fund I (the "Registrant")
File No. 811-5615
Ladies and Gentlemen:
Enclosed herewith for filing pursuant to the Investment Company Act of 1940 and
the Securities Exchange Act of 1934 is the Registrant's Form N-CSR filing for
the period ending March 31, 2004.
If you have any questions or comments regarding this filing, please contact the
undersigned at (617) 375-1513.
Sincerely,
/s/Alfred P. Ouellette
Alfred P. Ouellette
Senior Attorney and Assistant Secretary
ITEM 1. REPORT TO STOCKHOLDERS.
JOHN HANCOCK
Patriot Premium
Dividend Fund I
3.31.2004
Semiannual Report
[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 James A. Shepherdson, 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
To Our Shareholders,
I am pleased to be writing to you as Chairman, President and Chief
Executive Officer of John Hancock Funds.
As you may know, John Hancock Financial Services, Inc. -- the parent
company of John Hancock Funds -- was acquired by Manulife Financial
Corporation on April 28, 2004. The merger combines two exceptionally strong
companies into a single, integrated, global market leader whose scale and
capital will create an industry pacesetter strengthening our company's
leadership in markets around the world.
Although this change has no impact on the mutual funds you have invested
in, it did bring with it some changes in the executive-level management of
John Hancock Funds. Specifically, Maureen Ford Goldfarb has decided to step
down as chairman, president and chief executive officer in order to pursue
personal interests. Since her appointment in January 2000, Maureen has
provided John Hancock Funds with strong leadership and steady guidance
through several years of extremely turbulent market and industry
conditions.
Effective May 12, 2004, I have been appointed by your Board of Trustees to
the roles of Trustee, President and Chief Executive Officer of your fund. I
have been in the investment business for over 25 years, most recently as
President of Retirement Services at John Hancock Financial Services. In
that role, my responsibilities included developing and directing the sale
of John Hancock's variable and fixed annuity businesses through a diverse
distribution network of banks and broker/dealers -- including wirehouses,
regional brokerage houses and financial planners.
Prior to joining John Hancock, I served as Co-Chief Executive Officer of
MetLife Investors Group, a subsidiary of MetLife, Inc. In that capacity my
responsibilities included the design, manufacture and distribution of
MetLife's annuity and life insurance products sold through third-party
channels.
Although there has been a change in executive-level management, the one
thing that never waivers is John Hancock Funds' commitment to placing the
needs of our shareholders above all else. We are all dedicated to the task
of working with you and your financial advisors to help you reach your
long-term financial goals. It is the foundation of our relationship with
you.
Sincerely,
/S/ JAMES A. SHEPHERDSON
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of March 31, 2004. They are
subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks
to provide high
current income,
consistent with
modest growth
of capital, for
holders of its
common shares
by investing at
least 80% of
its assets in
dividend-paying
securities.
Over the last six months
* A dividend tax cut and bond rally helped buoy demand for preferred and
utility common stocks.
* The Fund benefited from advantageous security selection among preferred
stocks.
* A significant stake in utility common stocks also aided performance.
[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, 2004." The chart is scaled in increments of 7% with 0% at
the bottom and 14% at the top. The bar represents 13.75% 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 issuers
7.4% NSTAR
5.6% Energy East Corp.
4.8% Lehman Brothers Holdings, Inc.,
4.2% Shaw Communications, Inc.
4.0% Baltimore Gas & Electric Co.
3.3% El Paso Tennessee Pipeline Co.
3.2% CH Energy Group, Inc.
3.1% Sierra Pacific Power Co.
2.8% South Carolina Electric & Gas Co.
2.7% Alabama Power Co.
As a percentage of net assets plus value of preferred shares on March 31, 2004.
1
BY GREGORY K. PHELPS AND MARK T. MALONEY FOR THE PORTFOLIO MANAGEMENT TEAM
MANAGERS'
REPORT
JOHN HANCOCK
Patriot Premium Dividend Fund I
Preferred stocks -- which are the primary emphasis of John Hancock Patriot
Premium Dividend Fund I -- posted strong returns during the six-month
period ended March 31, 2004, fueled in large part by favorable supply and
demand conditions. An increasing number of companies that issued preferred
stocks in years when interest rates were higher redeemed those older
preferred stocks to take advantage of the lower interest rates that
prevailed during much of the period. Those redemptions resulted in a
reduced net supply of preferred stocks. At the same time, demand burgeoned
as individual and institutional investors increasingly sought out higher
yielding alternatives to most fixed-income securities and common stocks.
Demand got an added boost from the passage of President Bush's dividend
tax-cut package, which greatly reduced the taxes individuals pay on most
stock dividends. The preferred market was also helped by a Treasury market
rally in early March, which was sparked by a string of weak monthly
employment reports that showed job creation was well below expectations.
"Preferred stocks...posted
strong returns during the
six-month period ended
March 31, 2004..."
Utility common stocks -- the Fund's other area of focus -- also staged a
significant rally during the period. Part of investors' renewed optimism
was in reaction to efforts by utilities to reduce debt, improve their
financing and shed money-losing unregulated subsidiaries. Like preferreds,
utility common stocks also benefited from strong demand in response to
dividend tax relief. Utilities have traditionally offered consistently high
dividends over the years.
PERFORMANCE
For the six months ended March 31, 2004, John Hancock Patriot Premium
Dividend Fund I returned 13.75% at net asset value.
2
By comparison, the average income and preferred stock closed-end fund
returned 11.49%, according to Lipper, Inc. In the same six-month period,
the Dow Jones Utility Average -- which tracks the performance of 15
electric and natural gas utilities -- returned 14.34%, and the broader
stock market, as measured by the Standard & Poor's 500 Index, returned
14.07%.
[Photos of Greg Phelps and Mark Maloney flush right at top of page.]
LEADERS AND LAGGARDS
Within the preferred-stock category, some of our best-performing holdings
were those issued by financial services companies. Lehman Brothers, for
example, performed quite well, fueled by strength in bond trading and
underwriting, stock sales and mergers. Merrill Lynch also performed well,
thanks to its strong credit rating compared with its brokerage services
group peers and enhanced earnings consistency, resulting from what the
company termed "a diversity of revenues from multiple asset classes, client
segments and geographic regions." Bear Stearns benefited from increased
revenues and cost controls, which resulted in substantial improvement in
the company's profitability.
ENERGY STRONG
Preferred stocks issued by oil and natural gas companies also posted strong
returns during the period. In the post-September 11 era, energy prices
stayed high and, late in the period, began to climb, in part because of a
so-called "risk premium" for potential attacks, both here and abroad. Those
high energy prices, in turn, helped boost the fortunes of holdings such as
Anadarko Petroleum, Apache, Devon Energy and Nexen.
"Preferred stocks issued
by oil and natural gas com
panies also posted strong
returns..."
High energy prices also helped some of our utility common stocks,
particularly Dominion Resources, which has significant oil and gas
operations. It also enjoyed strong results from its regulated electric
operation. The common stock of electric utility Alliant Energy also
performed well, boosted in large part by investors' enthusiasm over the
company's back-to-basics approach.
3
A disappointment during the period was Kansas City-based Aquila, a
multi-national energy provider that has been trying to regain financial
stability after retreating from the wholesale energy-trading markets that
caused so many utilities pain in 2002. Despite these problems, we continued
to hold onto our stake in Aquila because we believe the company is making
positive steps toward reducing its debt, strengthening its balance sheet
and putting its energy-trading problems behind it.
[Table at top left-hand side of page entitled "Top five industry groups 1."
The first listing is Utilities 70%, the second is Broker services 8%, the
third is Oil & gas 8%, the fourth is Media 4% and the fifth is
Banks--United States 3%.]
OUTLOOK
In our view, the first half of 2004 likely will continue to favor preferred
and utility stocks. First off, we believe that both sectors will keep on
benefiting from the favorable supply and demand conditions that boosted
their prospects over the past six months. Our interest-rate forecast --
which calls for continued low interest rates over the near term -- also
should help preferreds because they pay dividends at a fixed rate like the
interest on a bond and, as such, tend to perform best when rates decline or
stabilize at relatively low levels, just as bonds do.
[Pie chart in middle of page with heading "Portfolio diversification 1."
The chart is divided into three segments (from top to left): Preferred
stocks 65%, Common stocks 33% and Short-term investments 2%.]
Although the economy has heated up, we don't think that the Federal Reserve
Board will raise interest rates until the current recovery deepens and
sustains itself for a longer period of time. Granted, longer-term bond
yields could rise as investors worry about the prospects of future
inflation, but the expected lack of a near-term interest-rate hike would
keep short-term interest rates low, thereby making preferred stocks an
attractive alternative to shorter-term, lower yielding money market and
Treasury securities. Furthermore, we believe that investors'
4
appetite for preferred stocks and utility common stocks -- many of which
benefit from the new lower federal tax on dividends -- could remain strong.
In addition to robust demand, utility common stocks appear to have other
factors working in their favor. Chief among them are the potential for more
stable credit ratings and dividend payments.
[Table at top of page entitled "SCORECARD." The header for the left column
is "INVESTMENT," and the header for the right column is "PERIOD'S
PERFORMANCE...AND WHAT'S BEHIND THE NUMBERS." The first listing is Lehman
Brothers followed by an up arrow with the phrase "Stock rallies amid strong
earnings growth." The second listing is Dominion Resources followed by an
up arrow with the phrase "High energy prices help boost profits." The third
listing is Aquila followed by a down arrow with the phrase "Lingering
problems with energy trading causes concern."]
"In our view, the first half
of 2004 likely will continue
to favor preferred and
utility stocks."
This commentary reflects the views of the portfolio management team through
the end of the Fund's period discussed in this report. The team's
statements reflect their own opinions. As such, they are in no way
guarantees of future events, and are not intended to be used as investment
advice or a recommendation regarding any specific security. They are also
subject to change at any time as market and other conditions warrant.
The Fund normally will invest more than 65% of its managed assets in
securities of companies in the utilities industry. Such an investment
concentration makes the Fund more susceptible than a broader diversified
fund to factors adversely affecting the utilities industry. Sector
investing is subject to greater risks than the market as a whole.
1 As a percentage of the Fund's portfolio on March 31, 2004.
5
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
March 31, 2004
(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.
CREDIT
ISSUER, DESCRIPTION RATING* SHARES VALUE
PREFERRED STOCKS 96.02% $140,537,326
(Cost $137,706,311)
Agricultural Operations 1.88% 2,747,500
Ocean Spray Cranberries, Inc., 6.25%, Ser A (R) BB+ 35,000 2,747,500
Banks -- Foreign 1.70% 2,492,976
Royal Bank of Scotland Group Plc, 5.75%, Ser B
(United Kingdom) A1 100,200 2,492,976
Banks -- United States 4.41% 6,458,400
HSBC USA, Inc., $2.8575 A1 45,000 2,430,000
J.P. Morgan Chase & Co., 6.625%, Ser H A1 72,000 4,028,400
Broker Services 12.23% 17,900,896
Bear Stearns Cos., Inc. (The), 5.72%, Ser F A3 102,460 5,230,583
Lehman Brothers Holdings, Inc., 5.67%, Depositary
Shares, Ser D A3 102,700 5,462,613
Lehman Brothers Holdings, Inc., 5.94%, Depositary
Shares, Ser C BBB+ 90,400 4,791,200
Merrill Lynch & Co., Inc., 9.00%, Depositary Shares,
Ser A A- 90,000 2,416,500
Finance 2.17% 3,177,000
Morgan Stanley Capital Trust V, 5.75% A1 100,000 2,475,000
SLM Corp., 6.97%, Ser A BBB+ 12,000 702,000
Leasing Companies 0.88% 1,291,500
AMERCO, 8.50%, Ser A D 50,000 1,291,500
Media 6.24% 9,129,750
Shaw Communications, Inc., 8.45%, Ser A (Canada) B+ 177,500 4,465,900
Shaw Communications, Inc., 8.50% (Canada) B+ 185,000 4,663,850
Oil & Gas 11.58% 16,943,436
Anadarko Petroleum Corp., 5.46%, Depositary
Shares, Ser B Baa3 45,278 4,686,273
Apache Corp., 5.68%, Depositary Shares, Ser B Baa2 25,000 2,601,563
Devon Energy Corp., 6.49%, Ser A B 50,000 5,350,000
Nexen, Inc., 7.35% (Canada) BBB- 160,000 4,305,600
See notes to
financial statements.
6
FINANCIAL STATEMENTS
CREDIT
ISSUER, DESCRIPTION RATING* SHARES VALUE
Telecommunications 0.90% $1,322,100
Touch America Holdings, Inc., $6.875 BBB- 50,850 1,322,100
Utilities 54.03% 79,073,768
Alabama Power Co., 5.20% BBB+ 225,000 5,850,000
Baltimore Gas & Electric Co., 6.99%, Ser 1995 Baa1 34,000 3,706,000
BGE Capital Trust II, 6.20% BBB 190,000 4,928,600
Boston Edison Co., 4.25% A3 57,879 4,786,593
Boston Edison Co., 4.78% A3 24,668 2,281,790
Coastal Finance I, 8.375% CCC- 215,000 4,803,100
El Paso Tennessee Pipeline Co., 8.25%, Ser A CCC 156,400 7,184,625
Energy East Capital Trust I, 8.25% BBB- 200,000 5,518,000
FPC Capital I, 7.10%, Ser A BB+ 34,500 871,125
Georgia Power Co., 6.00%, Ser R A 213,800 5,469,004
Great Plains Energy, Inc., 4.35% Ba1 23,638 1,805,943
Great Plains Energy, Inc., 4.50% BBB 12,510 988,290
Hawaiian Electric Industries Capital Trust I, 8.36% BB+ 100,000 2,504,000
Idaho Power Co., 7.07% Baa2 13,000 1,364,594
Monongahela Power Co., $7.73, Ser L CCC+ 34,500 3,260,250
PPL Electric Utilities Corp., 4.60% Baa3 3,670 305,298
PSEG Funding Trust II, 8.75% Baa3 60,000 1,713,000
PSI Energy, Inc., 6.875% BBB- 37,000 3,857,250
Public Service Electric & Gas Co., 4.30%, Ser C BB+ 6,560 516,600
Public Service Electric & Gas Co., 6.92% BB+ 26,800 2,786,364
Sierra Pacific Power Co., 7.80%, Ser 1 (Class A) Caa1 210,000 4,777,500
South Carolina Electric & Gas Co., 6.52% Baa1 55,000 5,965,784
Southern Union Co., 7.55% Ba2 40,000 1,104,000
TECO Capital Trust I, 8.50% Ba3 25,000 664,750
Virginia Electric & Power Co., $7.05 BBB 10,200 1,062,713
Xcel Energy, Inc., $4.11, Ser D BB+ 13,500 998,595
COMMON STOCKS 48.21% $70,557,245
(Cost $71,617,089)
Telecommunications 0.00% 2,000
Touch America Holdings, Inc.** 200,000 2,000
Utilities 48.21% 70,555,245
Alliant Energy Corp. 150,380 3,918,903
Ameren Corp. 35,900 1,654,631
Aquila, Inc.** 180,000 847,800
CH Energy Group, Inc. 141,350 6,938,871
Consolidated Edison, Inc. 32,000 1,411,200
Dominion Resources, Inc. 64,300 4,134,490
DTE Energy Co. 126,000 5,184,900
Duke Energy Corp. 40,000 904,000
Energy East Corp. 257,000 6,517,520
See notes to
financial statements.
7
FINANCIAL STATEMENTS
ISSUER, DESCRIPTION SHARES VALUE
Utilities (continued)
KeySpan Corp. 136,450 $5,215,119
National Fuel Gas Co. 47,150 1,159,890
NiSource, Inc. 67,600 1,436,500
Northeast Utilities 209,450 3,906,243
NSTAR 175,000 8,876,000
Peoples Energy Corp. 42,500 1,897,625
Progress Energy, Inc. 52,500 2,471,700
Progress Energy, Inc.** (Contingent Value Obligation) (l) 69,000 20,010
Puget Energy, Inc. 216,900 4,852,053
Sierra Pacific Resources** 246,600 1,824,840
TECO Energy, Inc. 173,000 2,530,990
WPS Resources Corp. 40,400 1,931,120
Xcel Energy, Inc. 164,000 2,920,840
INTEREST PAR VALUE
ISSUER, DESCRIPTION, MATURITY DATE RATE (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 2.40% $3,519,000
(Cost $3,519,000)
Oil & Gas 2.40%
Chevron USA, Inc., Discount Commercial Paper,
04-01-04 0.87% $3,519 3,519,000
TOTAL INVESTMENTS 146.63% $214,613,571
OTHER ASSETS AND LIABILITIES, NET (46.63%) ($68,247,906)
TOTAL NET ASSETS 100.00% $146,365,665
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service.
** Non-income-producing security.
(l) This security is valued in good faith under procedures established by
the Board of Trustees.
(R) This security is exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. Rule 144A
securities amounted to $2,747,500 or 1.88% of net assets as of March 31,
2004.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
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.
8
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
March 31, 2004
(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 $212,842,400) $214,613,571
Cash 886
Dividends receivable 611,785
Other assets 41,345
Total assets 215,267,587
LIABILITIES
Payable to affiliates
Management fee 181,312
Other 18,352
Other payables and accrued expenses 107,830
Total liabilities 307,494
Dutch Auction Rate Transferable Securities preferred
shares Series A (DARTS), at value, unlimited number
of shares of beneficial interest authorized with no par
value, 685 shares issued, liquidation preference of
$100,000 per share 68,594,428
NET ASSETS
Common shares capital paid-in 142,621,828
Accumulated net realized gain on investments 322,385
Net unrealized appreciation of investments 1,771,171
Accumulated net investment income 1,650,281
Net assets applicable to common shares $146,365,665
NET ASSET VALUE PER COMMON SHARE
Based on 15,215,682 shares of beneficial interest
outstanding -- unlimited number of shares authorized
with no par value $9.62
See notes to
financial statements.
9
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
March 31, 2004
(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 (net of foreign withholding taxes of $4,330) $5,983,130
Interest 23,443
Total investment income 6,006,573
EXPENSES
Investment management fee 822,995
Administration fee 104,577
DARTS auction fee 91,366
Federal excise tax 88,645
Printing 23,733
Transfer agent fee 22,885
Custodian fee 22,484
Auditing fee 19,449
Registration and filing fee 17,123
Miscellaneous 12,875
Trustees' fee 6,268
Legal fee 1,917
Total expenses 1,234,317
Net investment income 4,772,256
REALIZED AND UNREALIZED GAIN
Net realized gain on investments 401,762
Change in net unrealized appreciation (depreciation)
of investments 13,245,629
Net realized and unrealized gain 13,647,391
Distributions to DARTS (375,878)
Increase in net assets from operations $18,043,769
1 Semiannual period from 10-1-03 through 3-31-04.
See notes to
financial statements.
10
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in
Net Assets show
how the value
of the Fund's
net assets has
changed during
the last two
periods. The dif-
ference reflects
earnings less
expenses, any
investment gains
and losses,
distributions,
if any, paid to
shareholders
and any increase
due to the
reinvestment of
common shares.
YEAR PERIOD
ENDED ENDED
9-30-03 3-31-04 1
INCREASE IN NET ASSETS
From operations
Net investment income $10,484,062 $4,772,256
Net realized gain 510,730 401,762
Change in net unrealized
appreciation (depreciation) 7,579,644 13,245,629
Distributions to DARTS (906,591) (375,878)
Increase in net assets resulting
from operations 17,667,845 18,043,769
Distributions to
common shareholders
From net investment income (9,775,707) (5,981,963)
From Fund share transactions 1,062,637 678,737
NET ASSETS
Beginning of period 124,670,347 133,625,122
End of period 2 $133,625,122 $146,365,665
1 Semiannual period from 10-1-03 through 3-31-04. Unaudited.
2 Includes accumulated net investment income of $3,235,866 and $1,650,281,
respectively.
See notes to
financial statements.
12
FINANCIAL HIGHLIGHTS
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 9-30-99 9-30-00 9-30-01 9-30-02 9-30-03 3-31-04 1
PER SHARE OPERATING PERFORMANCE
Net asset value,
beginning of period $10.85 $9.91 $10.13 $9.74 $8.30 $8.82
Net investment income 2 0.83 0.85 0.83 0.78 0.69 0.31
Net realized and unrealized
gain (loss) on investments (0.90) 0.23 (0.39) (1.49) 0.54 0.91
Distribution to DARTS (0.18) (0.21) (0.18) (0.08) (0.06) (0.03)
Total from investment operations (0.25) 0.87 0.26 (0.79) 1.17 1.19
Less distributions to
common shareholders
From net investment income (0.69) (0.65) (0.65) (0.65) (0.65) (0.39)
Net asset value, end of period $9.91 $10.13 $9.74 $8.30 $8.82 $9.62
Per share market value,
end of period $8.81 $8.25 $8.75 $9.15 $9.24 $9.69
Total return at market value 3 (%) (7.01) 1.19 13.79 12.03 8.91 9.37 4
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common
shares, end of period (in millions) $148 $152 $146 $125 $134 $146
Ratio of expenses to average
net assets 5 (%) 1.66 1.75 1.72 1.79 1.90 1.76 6
Ratio of net investment income to
average net assets 7 (%) 7.92 8.94 8.35 8.42 8.33 6.79 6
Portfolio turnover (%) 18 19 23 11 10 11
SENIOR SECURITIES
Total value of DARTS outstanding
(in millions) $68 $68 $68 $68 $69 $69
Involuntary liquidation preference
per unit (in thousands) $100 $100 $100 $100 $100 $100
Average market value per unit
(in thousands) $100 $100 $100 $100 $100 $100
Asset coverage per unit 8 $323,124 $315,176 $318,208 $280,462 $287,811 $311,642
See notes to
financial statements.
12
FINANCIAL HIGHLIGHTS
Notes to Financial Highlights
1 Semiannual period from 10-1-03 through 3-31-04. Unaudited.
2 Based on the average of the shares outstanding.
3 Assumes dividend reinvestment.
4 Not annualized.
5 Ratios calculated on the basis of expenses applicable to the common
shares relative to the average net assets of common shares. Without the
exclusion of preferred shares, the ratio of expenses would have been 1.15%,
1.18%, 1.18%, 1.20%, 1.23% and 1.18%, 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 5.52%, 6.03%, 5.72%, 5.65%, 5.39% and 4.56%, respectively.
8 Calculated by subtracting the Fund's total liabilities from the Fund's
total assets and dividing such amount by the number of DARTS outstanding as
of the applicable 1940 Act Evaluation Date, which may differ from the
financial reporting date.
See notes to
financial statements.
13
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.
Expenses
The majority of expenses are directly identifiable to an individual fund.
Expenses that are not readily identifiable to a specific fund are allocated
in such a manner as deemed equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
funds.
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. For
federal income tax purposes, the Fund has $55,954 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent that such carryforward is
used by the Fund, no capital gain distributions will be made. The entire
amount of the loss carryforward expires September 30, 2010.
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 common and preferred shareholders from
net investment income and net realized gains on the ex-dividend date. Such
distributions, on a tax basis, are determined in conformity with income tax
regulations, which may differ from accounting principles generally accepted
in the
14
United States of America. Distributions in excess of tax basis earnings and
profits, if any, are reported in the Fund's financial statements as a
return of capital.
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.
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 asset value attributable to the DARTS, 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
asset value and the value attributable to the preferred shares. For the
period ended March 31, 2004, 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 shareholders. The Fund pays the Adviser a monthly
administration fee at an annual rate of 0.10% of the Fund's average weekly
net asset value plus the value attributable to the preferred shares.
Mr. James A. Shepherdson is a director and/or officer of the Adviser and/or
its affiliates, as well as Trustee 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 investments, 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 share transactions
Common shares
This listing illustrates the Fund's common shares, dividend reinvestments,
reclassification of the Fund's capital accounts 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 9-30-03 PERIOD ENDED 3-31-04 1
SHARES AMOUNT SHARES AMOUNT
Beginning of period 15,017,782 $141,016,976 15,142,247 $141,943,091
Dividends reinvested 124,465 1,062,637 73,435 678,737
Reclassification of
capital accounts -- (136,522) -- --
End of period 15,142,247 $141,943,091 15,215,682 $142,621,828
1 Semiannual period from 10-1-03 through 3-31-04. Unaudited.
15
Dutch Auction Rate
Transferable Securities
preferred shares Series A
The Fund issued 685 shares of Dutch Auction Rate Transferable Securities
preferred shares Series A ("DARTS") in a public offering. The underwriting
discount was recorded as a reduction of the capital of common shares.
Dividends on the DARTS, which accrue daily, are cumulative at a rate that
was established at the offering of the DARTS and has been reset every 49
days thereafter by an auction. Dividend rates on DARTS ranged from 1.04% to
1.14% during the period ended March 31, 2004. Accrued dividends on DARTS
are included in the value of DARTS on the Fund's Statement of Assets and
Liabilities.
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, as defined in the Fund's by-laws.
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 shareholders 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 shareholders.
NOTE D
Investment
transactions
Purchases and proceeds from sales or maturities of securities, other than
short-term securities and obligations of the U.S. government, during the
period ended March 31, 2004, aggregated $31,372,938 and $23,045,485,
respectively.
The cost of investments owned on March 31, 2004, including short-term
investments, for federal income tax purposes, was $212,865,785. Gross
unrealized appreciation and depreciation of investments aggregated
$20,829,474 and $19,081,688, respectively, resulting in net unrealized
appreciation of $1,747,786. The difference between book basis and tax basis
net unrealized appreciation of investments is attributable primarily to the
tax deferral of losses on certain sales of securities.
16
INVESTMENT
OBJECTIVE
AND POLICY
The Fund's investment objective is to provide a high 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.
The Fund's non-fundamental investment policy with respect to the quality of
ratings of its portfolio investments, which was changed by a vote of the
Fund's Trustees on September 13, 1994 and 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.
This revised 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.
On November 20, 2001, the Fund's Trustees approved the following investment
policy investment restriction change, effective December 15, 2001. Under
normal circumstances, the Fund will invest at least 80% of its assets in
dividend-paying securities. The "Assets" are defined as net assets
including the liquidation preference amount of the DARTS plus borrowings
for investment purposes. The Fund will notify shareholders at least 60 days
prior to any change in this 80% investment policy.
BY-LAWS
In November 2002, the Board of Trustees adopted several amendments to the
Fund's by-laws, including provisions relating to the calling of a special
meeting and requiring advance notice of shareholder proposals or nominees
for Trustee. The advance notice provisions in the by-laws require
shareholders to notify the Fund in writing of any proposal that they intend
to present at an annual meeting of shareholders, including any
nominations for Trustee, between 90 and 120 days prior to the first
anniversary of the mailing date of the notice from the prior year's annual
meeting of shareholders. The notification must be in the form prescribed by
the by-laws. The advance notice provisions provide the Fund and its
Trustees with the opportunity to thoughtfully consider and address the
matters proposed before the Fund prepares and mails its proxy statement to
shareholders. Other amendments set forth the procedures that must be
followed in order for a shareholder to call a special meeting of
shareholders. Please contact the Secretary of the Fund for additional
information about the advance notice requirements or the other amendments
to the by-laws.
Effective December 16, 2003, the Trustees approved additional changes to
the Fund's by-laws. The changes included updating the leveraged rating
agency requirements, in keeping with recent changes to the agencies' basic
maintenance reporting requirements for leveraged closed-end funds. In
addition, changes were made to reflect recent updates that Moody's made to
some of their eligible asset and discount factors. These revisions bring
the Fund's by-laws in line with current rating agency requirements.
DIVIDEND
REINVESTMENT PLAN
The Fund offers its shareholders a Dividend Reinvestment Plan (the "Plan"),
which offers the
17
opportunity to earn compounded yields. Each holder of common shares will
automatically have all distributions of dividends and capital gains
reinvested by Mellon Investor Services, as Plan agent for the common
shareholders (the "Plan Agent"), 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 a 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,
non-participants 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 of 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.
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 plus the cost of any shares issued by the Fund. There
will be no brokerage charges with respect to common shares issued directly
by the Fund. There are no other charges to participants for reinvesting
dividends or capital gain distributions.
Participants in the Plan may withdraw from the Plan at any time by
contacting the Plan Agent by telephone, in writing or by visiting the Plan
Agent's Web site at www.melloninvestor.com. Such withdrawal will be
effective immediately if received 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. The Plan Agent will hold common shares in the account of each
Plan participant in non-certificated form in the name of the participant.
Proxy material relating to the shareholders' meetings of the Fund will
include
18
those shares purchased, as well as shares held pursuant to the Plan.
The 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 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 by the Plan Agent to purchase shares in the open
market, 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, Mellon Bank,
N.A., c/o Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ
07606-1938 (telephone 1-800-852-0218).
SHAREHOLDER
COMMUNICATION
AND ASSISTANCE
If you have any questions concerning the Fund, 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:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Telephone 1-800-852-0218
If your shares are held with a brokerage firm, you
should contact that firm, bank or other nominee for assistance.
19
SHAREHOLDER MEETING
On March 18, 2004, the Annual Meeting of the Fund was held to elect three
Trustees and to ratify the actions of the Trustees in selecting independent
auditors for the Fund.
Proxies covering 14,044,018 common shares of beneficial interest were voted
at the meeting. 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
------------------------------------------------------------------------
Patti McGill Peterson 13,833,353 210,665
Steven Pruchansky 13,885,053 158,965
Norman H. Smith 13,856,705 187,313
Proxies covering 497 DARTS were voted at the meeting.
The common and preferred shareholders ratified the Trustees' selection of
Deloitte & Touche LLP as the Fund's independent auditor for the fiscal year
ending September 30, 2004, with votes tabulated as follows: 13,842,852 FOR,
64,146 AGAINST and 137,517 ABSTAINING.
20
FOR YOUR
INFORMATION
TRUSTEES
James F. Carlin
William H. Cunningham
Ronald R. Dion
Charles L. Ladner*
Patti McGill Peterson*
Dr. John A. Moore*
Steven R. Pruchansky
James A. Shepherdson
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan*
*Members of the Audit Committee
OFFICERS
James A. Shepherdson
President and
Chief Executive 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
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND DISBURSER
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
TRANSFER AGENT
FOR DARTS
Deutsche Bank Trust Company Americas
280 Park Avenue
New York, New York 10017
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 19
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Customer service
representatives 1-800-852-0218
Portfolio commentary 1-800-344-7054
24-hour automated information 1-800-843-0090
TDD Line 1-800-231-5469
The Fund's voting policies and procedures are available without
charge, upon request:
By phone 1-800-225-5291
On the Fund's Web site www.jhfunds.com/proxy
On the SEC's Web site www.sec.gov
21
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-852-0218
1-800-843-0090 EASI-Line
1-800-231-5469 (TDD)
www.jhfunds.com
---------------
PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
---------------
P10SA 3/04
5/04
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The registrant has adopted procedures by which shareholders may recommend
nominees to the registrant's Board of Trustees. A copy of the procedures is
filed as an exhibit to this Form N-CSR. See attached "John Hancock Funds -
Administration Committee Charter".
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form N-CSR,
the registrant's principal executive officer and principal financial officer
have concluded that those disclosure controls and procedures provide reasonable
assurance that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive officer
and principal financial officer, as required by 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule
30a-2(b) under the Investment Company Act of 1940, are attached. The
certifications furnished pursuant to this paragraph are not deemed to be "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise
subject to the liability of that section. Such certifications are not deemed to
be incorporated by reference into any filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent that the Registrant
specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See
attached "John Hancock Funds - Administration Committee Charter".
(c)(2) Approval of Audit, Audit-related, Tax and Other Services is attached.
(c)(3) Contact person at the registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Patriot Premium Dividend Fund I
By:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: May 17, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:
-------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: May 17, 2004
By:
-----------------------
Richard A. Brown
Senior Vice President and Chief Financial Officer
Date: May 17, 2004