<PAGE> 1
JOHN HANCOCK FUNDS
- -------------------------------------------------------------------------------
PATRIOT
PREMIUM
DIVIDEND
FUND II
SEMI-ANNUAL REPORT
April 30, 1995
<PAGE> 2
TRUSTEES
Edward J. Boudreau, Jr.
Thomas W.L. Cameron
James F. Carlin*
William H. Cunningham
Charles F. Fretz*
Harold R. Hiser, Jr.*
Charles L. Ladner*
Leo E. Linbeck, Jr.
Patricia P. McCarter*
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman J. Smith, USMC (Ret.)*
John P. Toolan*
*Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Robert G. Freedman
Vice Chairman and
Chief Investment Officer
Andrew F. St. Pierre
President
Anne C. Hodsdon
Executive Vice President
Michael P. DiCarlo
Senior Vice President
Thomas H. Drohan
Senior Vice President and Secretary
James K. Ho
Senior Vice President
James B. Little
Senior Vice President and
Chief Financial Officer
John A. Morin
Vice President and Compliance Officer
Susan S. Newton
Vice President and Assistant Secretary
James J. Stokowski
Vice President and Treasurer
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN AND TRANSFER AGENT FOR COMMON SHAREHOLDERS
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT FOR DARTS
Chemical Bank
450 West 33rd Street
New York, New York10001
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
Educating shareholders has always been of one of the most important
responsibilities of a mutual fund company. But that challenge has taken on new
significance in the past several years. Looking at the most recent statistics,
you can see why. According to the Investment Company Institute, the mutual fund
industry now manages more than $2.3 trillion for investors. More than half of
that money has come into mutual funds in just the last four years. Today, there
are more than 95 million mutual fund shareholder accounts. That's up from 12
million in 1980. These are people, like you, who are investing in mutual funds
to save for a home, to send their children to college or to build a nest egg for
a comfortable retirement. This explosive growth, coupled with the growing
complexity of the financial landscape, has made all of us in the mutual fund
industry work harder to inform our shareholders.
At John Hancock Funds, we strive to educate you about all aspects of your
fund: the performance, the strategies and the holdings. We want you to fully
understand what you own. We want you to have realistic expectations of the
potential risks as well as the potential rewards of your investment. These
shareholder reports -- which we send you twice a year -- are the best way to
give you the most in-depth and up-to-date information.
In the message that follows, the portfolio manager gives a candid commentary
on the market environment; the factors that affected performance; the fund's
current investment strategies; and the outlook for the months ahead. The ensuing
financial statements provide a comprehensive look at the fund's statistics and
holdings. We've included explanations of what each financial statement shows and
how it is used.
We hope you find these shareholder reports a useful tool in evaluating your
investments. Of course, if you have any questions or need more information,
feel free to call one of our Customer Service Representatives at 1-800-225-5291,
from 8:00 a.m. to 8:00 p.m. eastern standard time, Monday through Friday.
Sincerely,
/s/ Edward J. Boudreau, Jr.
- ---------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY ANDREW F. ST. PIERRE,
FOR THE PORTFOLIO MANAGEMENT TEAM
PATRIOT PREMIUM
DIVIDEND FUND II
BOND MARKET REBOUND, RISE IN UTILITY STOCKS
TRIGGER FUND PERFORMANCE
John Hancock Patriot Premium Dividend Fund II is now run by a team of portfolio
managers. Andrew F. St. Pierre, who has managed the Fund since 1992, heads up
the investment team. Gregory K. Phelps and Laura L. Provost joined the team in
January 1995. What follows is a discussion of their views on the market, the
Fund's current investment strategy and the outlook for the months ahead.
[A 2 1/2" x 3 1/2" photo of the Patriot management team. Caption reads: "The
Patriot management team: Laura Provost, Gregory Phelps, and Andrew St. Pierre."]
Rising interest rates and fears of inflation made life difficult for bond
investors in 1994. The downturn started with the Federal Reserve's first
interest-rate increase on February 4, 1994. Five subsequent rate hikes kept
bonds under pressure for most of the year. Yields peaked in November with the
long-term Treasury bond hitting 8.16%. From there, the bond market moved
sideways, finishing the year with one of its worst performances since the Great
Depression.
The New Year, however, brought good tidings for bonds. Prices rebounded
sharply in the first four months of the year, thanks to evidence that the Fed's
efforts would slow the economy
[CAPTION]
"UTILITY STOCKS... STAGED A STRONG COMEBACK."
3
<PAGE> 4
John Hancock Funds - Patriot Premium Dividend Fund II
without killing it. The Fed's last half-point increase on February 1, 1995
reinforced investors' belief in the "soft-landing" scenario.
[Pie chart with heading "Portfolio Diversification" at top of left column. The
pie is divided into five sections. From left to right: Common Stock Utilities
43%; Short-Term Investments & Other 1%; Preferred Stock Utilities 25%;
Industrials 13%; and Financials 18%. A footnote below reads: "As a percentage
of net assets on April 30, 1995."]
Utility stocks, which totaled more than 65% of the Fund's assets, also staged
a strong comeback. That's not surprising since utility stocks are particularly
sensitive to movements in the bond market and, in some cases, were extremely
undervalued. After jumping sharply in January and February, the group suffered
from a bout of profit-taking in early March, but still ended the first four
months of the year with solid gains.
The rising bond market also lifted preferred stocks, which made up slightly
more than 50% of the Fund's assets. (That percentage also includes some utility
preferred stocks.) Because of their fixed yields, preferred stocks also tend to
follow the bond market closely.
[Table entitled "Scorecard" at bottom of left hand column. The header for the
left column is "Investments"; the header for the right column is "Recent
performance ... and what's behind the numbers. The first listing is Boston
Edison followed by an up arrow and the phrase "Successfully engineered rate
agreements." The second listing is New England Electric Systems followed by an
up arrow and the phrase "Increasing cost efficiencies." The third listing is
Central Maine Power followed by a down arrow and the phrase "Nuclear plant
difficulties." Footnote below reads: "See "Schedule of Investments." Investment
holdings are subject to change."]
John Hancock Patriot Premium Dividend Fund II -- because of its focus on
utility stocks and preferred stocks -- benefited from both the bond and utility
market rallies. For the six months ended April 30, 1995, the Fund had a total
return of 12.78% at net asset value. By comparison, the Dow Jones Utility
Average had a total return of 7.23% and the average income-oriented closed-end
equity fund had a total return of 6.98%, according to Lipper Analytical
Services.
STAYING CAUTIOUS
Because John Hancock Patriot Premium Dividend Fund II is leveraged, the dramatic
rise in short-term interest rates has impacted its income. So more than ever,
we've stayed focused on our primary goal of maintaining the Fund's monthly
dividend to provide shareholders with the steady income they've come to expect.
As it was throughout 1994, our strategy has remained cautious, focusing on
higher-yielding issues.
Our utility holdings are split between common stocks (43%) and preferred
stocks (25%). Within the common stock sector, we've built a sizable position in
high-yielding utilities. Our emphasis is on quality companies with steady
dividends. Recent additions include Northeast Utilities and Potomac Electric
Power. We've also maintained a core position in utilities -- including Southern
Co. and Florida Progress -- with strong growth prospects, but relatively lower
yields. These companies have progressive managements, strong competitive
positions and low cost structures. Within the preferred sector, we've upped
[CAPTION]
"...OUR STRATEGY HAS REMAINED CAUTIOUS..."
4
<PAGE> 5
John Hancock Funds -- Patriot Premium Dividend Fund II
our stake in "cushion" preferreds. Their above-average yields cushion their
prices against rising interest rates, hence their name. New holdings include
Columbus & Southern Power and Houston Lighting & Power.
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote: "For the six months ended April 30, 1995." The chart is
scaled in increments of 5% from top to bottom, with 15% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
12.78% total return for John Hancock Patriot Premium Dividend Fund II. The
second represents the 6.98% total return for the average income-oriented
closed-end equity fund. The third represents the 7.23% total return for the Dow
Jones Utility Average. Footnote below reads: "The total return for John Hancock
Patriot Premium Dividend Fund II is at net asset value with all distributions
reinvested. The average income-oriented, closed-end equity fund is tracked by
Lipper Analytical Services.(1) The Dow Jones Utility Average is an unmanaged
index, which measures the performance of the utility industry in the United
States."]
As for our non-utility holdings, which total 31% of the Fund's assets, we own
a mix of industrial and financial stocks. As with the utility preferreds, our
focus here is on the higher-yielding cushion preferreds. Our paper stocks --
Boise Cascade and Bowater -- have been among our best performers. Strong demand
and rising paper prices have boosted the stocks in the last six months. Auto
stocks like Ford and General Motors and energy stocks like Lasmo and Enterprise
Oil have also done well recently. In the financial arena, the bulk of our
holdings remain in domestic banks. Because the recent interest-rate hikes have
been accompanied by strong commercial and consumer loan growth, many banks have
been able to book higher-yielding assets to offset any increase in deposit
costs. So even though bank earnings may not match their spectacular growth rates
of the last few years, they should continue to be strong.
A LOOK AHEAD
Whether or not the Federal Reserve will actually be successful in engineering a
soft landing remains to be seen. According to most economic indicators, the
economy appears to be cooling off and inflation seems to be well-contained.
Having said that, though, it's possible that the Fed could boost short-term
interest rates one last time. But in our view, any increase will be relatively
small -- probably one half of a percentage point.
Looking ahead, we believe bonds are likely to do well for the rest of the
year, although they probably won't match their strong first-quarter pace. With
the economy slowing and inflation worries abating, interest rates are likely to
remain relatively stable. At the end of April, the yield on the 30-year Treasury
bond stood at 7.34%. We expect it to trade in a range of 6.75% to 7.75% for the
next several months. Against that backdrop, the dividend-paying stocks the Fund
emphasizes should perform well.
[CAPTION]
"...INTEREST RATES ARE LIKELY TO REMAIN RELATIVELY STABLE."
- --------------------------------------------------------------------------------
(1) Source: Lipper Analytical Services
5
<PAGE> 6
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
THE STATEMENT OF ASSETS AND LIABILITIES IS THE FUND'S BALANCE SHEET ON APRIL 30,
1995. YOU'LL ALSO FIND THE NET ASSET VALUE PER SHARE, FOR EACH COMMON SHARE, AS
OF THAT DATE.
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.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
- ---------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Preferred stocks (cost - $138,913,776)................... $139,267,817
Common stocks (cost - $123,939,249)...................... 110,321,856
Capital securities (cost - $3,155,000)................... 3,237,300
Short-term investments (cost - $3,966,000)............... 3,966,000
------------
256,792,973
Cash....................................................... 455
Receivable for investments sold............................ 9,145,829
Interest receivable........................................ 1,935
Dividends receivable....................................... 1,529,827
Prepaid expenses........................................... 68,136
Other assets............................................... 8,202
------------
Total Assets.............................. 267,547,357
---------------------------------------------------------
LIABILITIES:
DARTS dividend payable..................................... 539,676
Common Share dividend payable.............................. 1,125,204
Payable for investments purchased.......................... 9,196,309
Payable to John Hancock Advisers, Inc. - Note B............ 194,411
------------
Total Liabilities......................... 11,055,600
---------------------------------------------------------
NET ASSETS:
Dutch Auction Rate Transferable Securities Preferred Stock
Series A (DARTS) - Without par value, unlimited number
of shares of beneficial interest authorized, 500 shares
issued, liquidation preference of $100,000 per share
- Note A................................................. 50,000,000
Dutch Auction Rate Transferable Securities Preferred Stock
Series B (DARTS) - Without par value, unlimited number
of shares of beneficial interest authorized, 500 shares
issued, liquidation preference of $100,000 per share
- Note A................................................. 50,000,000
------------
100,000,000
------------
Common Shares - Without par value, unlimited number
of shares of beneficial interest authorized, 15,002,724
shares issued and outstanding............................ 166,554,224
Accumulated net realized gain on investments 507,985
Net unrealized depreciation of investments ( 13,181,052)
Undistributed net investment income........................ 2,610,600
------------
Net Assets Applicable to
Common Shares ($10.43 per
share based on 15,002,724
shares outstanding)....................... 156,491,757
---------------------------------------------------------
Total Net Assets.......................... $256,491,757
=========================================================
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- ---------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $20,202) $11,603,966
Interest................................................... 265,661
-----------
11,869,627
-----------
Expenses:
Investment management fee - Note B....................... 1,213,750
DARTS and auction fees................................... 125,288
Administration fee - Note B.............................. 124,023
Federal excise tax....................................... 93,648
Custodian fee............................................ 27,329
Printing................................................. 25,456
Transfer agent fee....................................... 20,795
Miscellaneous............................................ 19,677
Auditing fee............................................. 19,038
Trustees' fees........................................... 13,817
Legal fees............................................... 8,830
Organization expense - Note A............................ 2,500
-----------
Total Expenses............................ 1,694,151
-----------------------------------------------------
Net Investment Income..................... 10,175,476
-----------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold...................... 954,374
Change in net unrealized appreciation/depreciation
of investments........................................... 9,218,516
-----------
Net Realized and Unrealized Gain
on Investments............................ 10,172,890
---------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations................. $20,348,366
=========================================================
Distributions to DARTS.................... ( 2,225,367)
---------------------------------------------------------
Net Increase in Net Assets Applicable
to Common Shareholders Resulting
from Operations Less DARTS
Distributions............................. $18,122,999
=========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................................................. $ 10,175,476 $ 16,466,537
Net realized gain/(loss) on investments sold.......................................... 954,374 (446,389)
Change in net unrealized appreciation/depreciation of investments..................... 9,218,516 (53,591,521)
-------------- --------------
Net Increase/(Decrease) in Net Assets Resulting from Operations..................... 20,348,366 (37,571,373)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
DARTS Series A ($2,218 and $3,364 per share, respectively ) - Note A.................. (1,108,994) (1,682,116)
DARTS Series B ($2,233 and $3,284 per share, respectively ) - Note A.................. (1,116,373) (1,642,000)
Common Shares - Note A
Dividends from accumulated net investment income......................................
($0.4500 and $0.9324 per share, respectively) (6,751,030) (13,988,195)
Distributions from net realized gain on investments sold
(none and $0.3176 per share, respectively).......................................... .... (4,764,758)
-------------- --------------
Total Distributions to Shareholders................................................. (8,976,397) (22,077,069)
-------------- --------------
NET ASSETS:
Beginning of period................................................................... 245,119,788 304,768,230
------------- -------------
End of period (including undistributed net investment income of
$2,610,600 and $1,411,521, respectively)............................................ $256,491,757 $245,119,788
============= =============
</TABLE>
*ANALYSIS OF COMMON SHAREHOLDER TRANSACTIONS:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
----------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Beginning of period.......................................... 15,002,724 $166,554,224 15,002,724 $166,618,703
Reclassification of capital accounts - Note A................ .... .... .... (64,479)
---------- ------------ ---------- -------------
End of period................................................ 15,002,724 $166,554,224 15,002,724 $166,554,224
========== ============ ========== =============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAVE CHANGED SINCE THE END OF THE PREVIOUS YEAR. THE DIFFERENCE REFLECTS
EARNINGS LESS EXPENSES, ANY INVESTMENT GAINS AND LOSSES AND DISTRIBUTIONS PAID
TO SHAREHOLDERS. THE FOOTNOTE ILLUSTRATES ANY RECLASSIFICATIONS OF SHARE CAPITAL
AMOUNTS, THE NUMBER OF COMMON SHARES OUTSTANDING AT THE BEGINNING AND END OF THE
PERIOD, FOR THE LAST TWO PERIODS, ALONG WITH THE CORRESPONDING DOLLAR VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 8
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a Common Share outstanding throughout the periods indicated,
investment returns, key ratios and supplemental data are listed as follows:
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -----------------------------------------------------
(UNAUDITED) 1994 1993 1992(a) 1991 1990*
----------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............... $ 9.67 $ 13.65 $ 12.28 $ 11.38 $ 9.69 $ 10.98(b)
-------- -------- -------- -------- ------- --------
Net Investment Income.............................. 0.68 1.10 1.13 1.18 1.28 1.20
Net Realized and Unrealized Gain (Loss) on
Investments...................................... 0.68 ( 3.61) 1.80 0.81 1.59 ( 1.19)
-------- -------- -------- -------- ------- --------
Total from Investment Operations.................. 1.36 ( 2.51) 2.93 1.99 2.87 0.01
-------- -------- -------- -------- ------- --------
Less Distributions:
Dividends to DARTS Shareholders.................... ( 0.15) ( 0.22) ( 0.21) ( 0.19) ( 0.28) ( 0.31)
Dividends to Common Shareholders from Net
Investment Income................................ ( 0.45) ( 0.93) ( 0.86) ( 0.90) ( 0.90) ( 0.89)
Distributions to Common Shareholders from Net
Realized Short-term Capital Gains
on Investments .................................. .... ( 0.32) ( 0.49) .... .... ....
Distributions from Capital to Common Shareholders.. .... .... .... .... .... ( 0.10)
-------- -------- -------- -------- ------- --------
Total Distributions............................... ( 0.60) ( 1.47) ( 1.56) ( 1.09) ( 1.18) ( 1.30)
-------- -------- -------- -------- ------- --------
Net Asset Value, End of Period..................... $ 10.43 $ 9.67 $ 13.65 $ 12.28 $ 11.38 $ 9.69
======== ======== ======== ======== ======= ========
Per Share Market Value, End of Period.............. $ 9.750 $ 8.875 $ 12.625 $ 11.375 $ 10.50 $ 10.25
Total Investment Return, at Market Value........... 14.93% ( 20.91%) 22.06% 17.10% 12.03% ( 5.81%)
RATIOS AND SUPPLEMENTAL DATA
Net Assets Applicable to Common Shares,
End of Period (000's omitted).................... $156,492 $145,120 $204,768 $184,253 $170,701 $145,378
Ratio of Expenses to Average Net Assets **......... 1.37%(c) 1.27% 1.28% 1.33% 1.38% 1.39%(c)
Ratio of Net Investment Income to Average Net
Assets *......................................... 8.20%(c) 6.20% 5.53% 6.60% 8.13% 8.83%(c)
Portfolio Turnover Rate............................ 52% 52% 57% 99% 157% 288%(c)
SENIOR SECURITIES
Total DARTS Series A Outstanding (000's omitted)... $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
Total DARTS Series B Outstanding (000's omitted)... $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
Asset Coverage per Unit (d)........................ $ 255,472 $244,639 $307,595 $285,078 $268,819 $241,963
Involuntary Liquidation Preference DARTS A
per Unit (e)..................................... $ 100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Involuntary Liquidation Preference DARTS B
per Unit (e)..................................... $ 100,000 $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (e).............. $ 100,000 $100,000 $100,000 $100,000 $100,000 $100,000
</TABLE>
* For the period December 21, 1989 (commencement of operations) to October 31,
1990.
** Ratios calculated on the basis of expenses and net investment income
applicable to both common and preferred shares relative to the average net
assets for both common and preferred shares.
(a) Prior to the assumption of the advisory contract on May 6, 1992 by John
Hancock Advisers, Inc., the Fund was advised by Patriot Advisers, Inc.
(b) Initial capitalization, net of offering expenses.
(c) On an annualized basis.
(d) 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.
(e) Plus accumulated and unpaid dividends.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
THE SCHEDULE OF INVESTMENTS IS A COMPLETE LIST OF ALL SECURITIES OWNED BY THE
FUND ON APRIL 30, 1995. IT'S DIVIDED INTO FOUR MAIN CATEGORIES: PREFERRED
STOCKS, COMMON STOCKS, CAPITAL SECURITIES, AND SHORT-TERM INVESTMENTS. THE
STOCKS ARE FURTHER BROKEN DOWN BY INDUSTRY GROUPS. UNDER EACH INDUSTRY GROUP IS
A LIST OF THE STOCKS OWNED BY THE FUND. SHORT-TERM INVESTMENTS, WHICH REPRESENT
THE FUND'S "CASH" POSITION, ARE LISTED LAST.
<TABLE>
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
- -----------------------------------------------------------------------------
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
PREFERRED STOCKS
AUTO/TRUCK (3.41%)
Ford Motor Co., 8.25%, Depositary
Shares, Ser B .............................. 65,800* $ 1,719,025
General Motors Corp., 9.125%,
Depositary Shares, Ser B ................. 50,000 1,375,000
General Motors Corp., 9.12%,
Depositary Shares, Ser G ................. 200,000 5,650,000
------------
8,744,025
------------
BANKS - FOREIGN (0.51%)
Banesto Holdings Ltd., 10.50%, Gtd Ser A
(Guernsey) (R) ........................... 50,000 1,306,250
------------
BANKS - U.S. (11.64%)
Ahmanson, H.F. & Co., 9.60%,
Depositary Shares, Ser B ................. 117,900 3,109,612
Ahmanson, H.F. & Co., 8.40%,
Depositary Shares, Ser C ................. 50,000 1,281,250
Bank of Boston Corp., 8.60%,
Depositary Shares, Ser E ................. 146,000 3,741,250
BankAmerica Corp., 11.00%,
Depositary Shares, Ser J ................. 45,000 1,254,375
BankAmerica Corp., 9.625%, Ser F ........... 99,750 2,655,844
BankAmerica Corp., 9.00%, Ser H ............ 25,000 653,125
Bankers Trust New York Corp., Adjustable
Rate Preferred ("ARP"), Ser Q ............ 80,000 1,650,000
Chase Manhattan Corp., 9.76%, Ser H ........ 21,000 582,750
Chase Manhattan Corp., ARP, Ser N .......... 60,000 1,335,000
First Fidelity Bancorporation, 10.64%,
Depositary Shares, Ser F ................. 72,900 1,931,850
First Interstate Bancorp, 9.875%,
Depositary Shares, Ser F ................. 167,700 4,423,088
KeyCorp, 10.00%, Depositary
Shares, Ser A ............................ 35,000* 927,500
LaSalle National Corp., 8.75%, Ser K (R).... 78,000 3,920,280
Mellon Bank Corp., 9.60%, Ser I ............ 55,000* 1,436,875
Shawmut National Corp., 9.35%,
Depositary Shares ........................ 35,700* 963,900
------------
29,866,699
------------
COMPUTER SERVICES (0.30%)
Comdisco, Inc., 8.75%, Ser A ............... 30,900 776,363
------------
CONGLOMERATE/DIVERSIFIED (0.82%)
Grand Metropolitan Delaware, 9.42%,
Gtd Ser A ................................ 79,000* 2,093,500
------------
EQUIPMENT LEASING (0.48%)
AMERCO, 8.50%, Ser A ....................... 55,300 1,230,425
------------
FINANCIAL SERVICES (0.79%)
Merrill Lynch & Co., 9.00%
Depositary Shares, Ser A ................. 30,000 825,000
Salomon Inc., 8.08%, Depositary
Shares, Ser D ............................ 50,000 1,193,750
------------
2,018,750
------------
INSURANCE (3.72%)
American Life Holding Co., $2.16 ........... 40,000 870,000
Old Republic International Corp.,
8.75%, Ser H ............................. 27,000* 691,875
Progressive Corp., 9.375%, Ser A ........... 78,000 2,018,250
Provident Life & Accident Insurance Co.
of America, 8.10%, Depositary Shares ..... 87,800 2,140,125
SunAmerica Inc., 9.25%, Ser B .............. 100,000 2,662,500
Travelers Inc., 9.25%, Depositary
Shares, Ser D............................. 44,200* 1,165,775
------------
9,548,525
------------
OIL & GAS (6.23%)
Coastal Corp., $2.125, Ser H................ 120,000* 2,925,000
Elf Overseas Ltd., 8.50%, Gtd Ser A
(Cayman Islands).......................... 200,000 5,000,000
ENSERCH Corp., ARP, Depositary
Shares, Ser F............................. 35,000 713,125
Enterprise Oil PLC, 10.50%, American
Depositary Receipt ("ADR"), Ser A
(United Kingdom).......................... 30,000 742,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
OIL & GAS (CONTINUED)
Lasmo PLC, 10.00%, ADR, Ser A
(United Kingdom)........................ 152,500 $ 3,469,375
Phillips Gas Co., 9.32%, Ser A............ 120,000 3,120,000
------------
15,970,000
------------
PAPER (1.45%)
Boise Cascade Corp., 9.40%, Ser F......... 28,400 738,400
Bowater, Inc., 8.40%, Depositary
Shares, Ser C........................... 120,000 2,985,000
------------
3,723,400
------------
PUBLISHING( 0.27%)
Newscorp Overseas Ltd., 8.625%,
Gtd Ser A (Cayman Islands).............. 30,000 690,000
------------
UTILITIES (24.68%)
Appalachian Power Co., 7.40%.............. 14,637* 1,273,419
Central Maine Power Co., 8.875% (R)....... 16,000 1,460,000
Central Maine Power Co., 7.999%, Ser A.... 10,000 900,000
Cincinnati Gas & Electric Co., 9.15%...... 10,250 1,066,000
Cincinnati Gas & Electric Co., 7.44%...... 14,570 1,311,300
CL&P Capital, 9.30%, Ser A................ 35,000* 905,625
Columbus & Southern Power Corp.,
9.50%................................... 23,000* 2,461,000
Columbus & Southern Power Corp.,
7.875%.................................. 8,000 820,000
Commonwealth Edison Co., $8.40, Ser A..... 31,830 2,992,020
Commonwealth Edison Co., $7.24............ 10,000 822,500
Consolidated Edison of NY, Inc.,
5.75%, Ser E............................ 32,000* 2,384,000
Detroit Edison Co., 7.45%................. 22,930 2,040,770
Detroit Edison Co., Depositary
Shares, 7.75%........................... 80,000 1,980,000
Duke Power Co., 7.85%, Ser S.............. 20,000 2,055,000
Florida Power Corp., 7.76%................ 27,100 2,679,512
GTE North, Inc., $7.60, Ser IND........... 10,000 1,015,600
Gulf States Utilities Co., $9.96.......... 12,000* 1,206,000
Gulf States Utilities Co., $8.52.......... 18,997 1,728,727
Gulf States Utilities Co., ARP,
Depositary Shares, Ser B................ 36,968 1,811,432
Houston Lighting & Power Co., $7.52....... 8,940 864,319
Jersey Central Power & Light Co.,
7.52%, Ser K............................ 15,000* 1,485,000
MCN Michigan Limited Partnership,
9.375%, Ser A........................... 50,000 1,318,750
Monongahela Power Co., $7.73, Ser L....... 17,000* 1,701,020
Narragansett Electric Co., 6.95%.......... 32,000* 1,421,120
New York State Electric & Gas Corp.,
8.95%................................... 50,000* 1,325,000
Northern States Power Co. of MN, $7.00.... 14,050 1,243,425
PSI Energy Inc., 7.44%.................... 81,000* 1,933,875
Public Service Co. of NH, 10.60%, Ser A... 50,000* 1,287,500
Public Service Electric & Gas Co., 7.70%.. 22,500 2,092,500
Public Service Electric & Gas Co., 6.92%.. 40,675* 3,472,832
Sierra Pacific Power Co., 7.80%,
Ser 1 (Class A)......................... 49,000* 1,222,550
Southern California Edison Co., 7.58%..... 40,700 3,764,750
Tampa Electric Co., 7.44%, Ser F.......... 13,547 1,308,979
Texas Utilities Electric Co., $7.98....... 31,500 3,079,440
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A................ 25,000 584,375
Virginia Electric & Power Co., $7.45...... 25,640 2,397,340
Virginia Electric & Power Co., $7.20...... 6,100* 561,200
Washington Natural Gas Company,
8.50%, Ser III.......................... 54,000 1,323,000
------------
63,299,880
------------
TOTAL PREFERRED STOCKS
(Cost $138,913,776) ( 54.30%) 139,267,817
-------- ------------
COMMON STOCKS
UTILITIES (43.01%)
American Electric Power Co., Inc.......... 111,000 3,635,250
Boston Edison Co.......................... 200,000 4,775,000
Carolina Power & Light Co................. 50,000* 1,375,000
Central & South West Corp................. 133,400 3,284,975
Cinergy Corp.............................. 170,000 4,271,250
Consolidated Edison Co. of NY, Inc........ 289,000 8,019,750
Delmarva Power & Light Co................. 88,600* 1,727,700
Dominion Resources, Inc. of VA............ 190,000 6,935,000
DPL, Inc.................................. 250,000 5,218,750
Entergy Corp.............................. 37,475 815,081
Florida Progress Corp..................... 176,250 5,375,625
Houston Industries, Inc................... 122,800 4,850,600
New England Electric System............... 177,500 5,347,187
Northeast Utilities....................... 120,000* 2,625,000
Pacific Gas and Electric Co............... 373,000 10,024,375
PECO Energy Co............................ 100,000 2,575,000
Potomac Electric Power Co................. 292,500 5,703,750
Public Service Enterprise Group, Inc...... 196,000 5,390,000
Puget Sound Power & Light Co.............. 175,400 3,727,250
Scana Corp................................ 115,000 4,930,625
Southern Co............................... 315,000 6,496,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
<TABLE>
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
UTILITIES (CONTINUED)
Southwestern Public Service Co............ 70,000* 1,995,000
Texas Utilities Co........................ 211,500 6,900,188
Unicom Corp............................... 143,000 3,753,750
Washington Water Power Co................. 37,000* 568,875
------------
TOTAL COMMON STOCKS
(Cost $123,939,249) ( 43.01%) 110,321,856
------- ------------
CAPITAL SECURITIES
BANKS - FOREIGN (1.26%)
A/S Eksportfinans, 8.70%, Capital
Securities (Norway)..................... 75,000 1,912,500
Australia and New Zealand Banking
Group Ltd., 9.125%,
Capital Securities (Australia).......... 51,200 1,324,800
------------
TOTAL CAPITAL SECURITIES
(Cost $3,155,000) ( 1.26%) 3,237,300
------- ------------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000's OMITTED) MARKET VALUE
- ------------------- -------- --------------- ------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER (1.55%)
Prudential Funding Corp.
05-02-95................................ 5.85% $ 3,966 $ 3,966,000
------
TOTAL SHORT-TERM INVESTMENTS ( 1.55%) 3,966,000
------ -----------
TOTAL INVESTMENTS (100.12%) $256,792,973
======== ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the period ended April 30, 1995.
(R) Securities which are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. See Note A
of the Notes to Financial Statements for valuation policy. Rule 144A
securities amounted to $7,315,150 as of April 30, 1995.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer, however, security is U.S. dollar
denominated.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
Patriot Premium Dividend Fund II (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.
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
investment, to its shareholders. Therefore, no federal income tax provision is
required. For federal income tax purposes, the Fund has $178,285 of a capital
loss carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. If such carryforward is used by the Fund, no
capital gains distributions will be made. The carryforward expires October 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 October 31, 1994, which has no effect on the Fund's net assets, net
investment income or net realized gains.
DEFERRED ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Fund have been capitalized and are being charged to the
Fund's operations ratably over a five-year period that began with the
commencement of the investment operations of the Fund.
DUTCH AUCTION RATE TRANSFERABLE SECURITIES PREFERRED STOCK SERIES A AND SERIES B
(DARTS) The Fund issued 598 shares of DARTS Series A and 598 shares of DARTS
Series B concurrently with the issuance of its Common Shares in the 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 auction. Dividend rates on the DARTS Series A and
Series B ranged from 3.81% to 4.58% and 3.86% to 4.65%, respectively, during the
period ended April 30, 1995. During the period ended October 31, 1990, the Fund
retired 98 shares of DARTS from both Series A and B.
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
12
<PAGE> 13
Notes to Financial Statements
John Hancock Funds -- Patriot Premium Dividend Fund II
affect the respective interests of the DARTS and Common Shares. The DARTS have a
liquidation preference of $100,000 per share, plus accumulated and unpaid
dividends. The Fund is required to maintain certain asset coverage with respect
to the DARTS, as defined in the Fund's By-Laws.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
Under the present investment management contract, the Fund pays a monthly
management fee to John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned
subsidiary of The Berkeley Financial Group, for a continuous investment program,
equivalent on an annual basis, to the sum of 0.50% of the Fund's average weekly
net asset value, plus 5% of the Fund's weekly gross income. The Adviser's total
fee is limited to a maximum amount equal to 1% annually of the Fund's average
weekly net asset value. For the period ended April 30, 1995, the advisory fee
incurred did not exceed the maximum advisory fee allowed.
The Fund has entered into 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 ser vices with the shareholders. The Fund pays a monthly
administrative fee to the Adviser equivalent, on an annual basis, to 0.10% of
the Fund's average weekly net asset value.
Each unaffiliated Trustee is entitled, as compensation for his
or her services, to an annual fee plus remuneration for attendance at various
meetings.
Messrs. Edward J. Boudreau, Jr. and Richard S. Scipione are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of the Fund.
The compensation of unaffiliated Trustees is borne by the Fund. Effective with
the fees paid for 1995, the unaffiliated Trustees may elect to defer for tax
purposes their receipt of this compensation under the John Hancock Group of
Funds Deferred Compensation Plan. The Fund will make investments into other John
Hancock funds, as applicable, to cover its liability with regard to the deferred
compensation. Investments to cover the Fund's deferred compensation liability
will be recorded on the Fund's books as an other asset. The deferred
compensation liability will be marked to market on a periodic basis and income
earned by the investment will be recorded on the Fund's books
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than short-term
securities, during the period ended April 30, 1995, aggregated $129,503,331 and
$126,342,844, respectively.
The cost of investments owned at April 30, 1995 for Federal income tax
purposes was $270,535,642. Gross unrealized appreciation and depreciation of
investments aggregated $3,909,502 and $17,652,171, respectively, resulting in
net unrealized depreciation of $13,742,669.
13
<PAGE> 14
John Hancock Funds - Patriot Premium Dividend Fund II
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.
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 may elect to have all distributions of dividends and capital gains
automatically reinvested by State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts, 02210, as agent for the common shareholders.
Holders of Common Shares who do not 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 shareholders' 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.
14
<PAGE> 15
John Hancock Funds - Patriot Premium Dividend Fund II
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 the 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 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).
15
<PAGE> 16
[LOGO] JOHN HANCOCK FUNDS Bulk Rate
A GLOBAL INVESTMENT MANAGEMENT FIRM U.S. Postage
101 Huntington Avenue Boston, MA 02199-7603 PAID
So. Hackensack
Permit No. 750
[A 1/2" by 1/2" John Hancock Funds logo in upper left hand corner of the page. A
box sectioned in quadrants with a triangle in upper left, a circle in upper
right, a cube in lower left and a diamond in lower right. A tag line below
reads: "A global Investment Management Firm."]
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Paper."]
JHF P20SA 4/95
