<PAGE> 1
JOHN HANCOCK FUNDS
- --------------------------------------------------------------------------------
PATRIOT
PREMIUM
DIVIDEND
FUND II
ANNUAL REPORT
October 31, 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
Thomas H. Drohan
Senior Vice President and Secretary
James B. Little
Senior Vice President and Chief Financial Officer
John A. Morin
Vice President and Compliance Officer
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 York 10001
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
INDEPENDENTPUBLIC ACCOUNTANTS
Arthur Andersen LLP
One International Place
Boston, Massachusetts 02110-2604
CHAIRMAN'S MESSAGE
DEAR FELLOW SHAREHOLDERS:
Investors around the world have been watching Wall Street in awe for the better
part of 1995. Through October, the Standard & Poor's 500-Stock Index, a
widely-used barometer of stock performance, had grown by more than 25%.
Investors who stayed in the market after a disappointing 1994 have been
rewarded.
On another street, Pennsylvania Avenue, one of the hot topics many people are
watching is Medicare reform. While there's no clear-cut solution on the horizon,
today's Medicare debate should serve as another wake-up call to all Americans
about the need to have a financial plan and to save for retirement. Whether or
not the government changes the way health-care benefits are allotted to senior
citizens, the message is clear: your future security and well-being lies in your
own hands -- not Uncle Sam's.
[A 1 1/4" x 1" photo of Edward J. Boudreau Jr., Chairman and Chief Executive
Officer, flush right, next to second paragraph.]
We know you've heard it a hundred times. Pick up almost any financial
periodical today, and you'll see cover stories on retirement. Many of them will
perhaps scare you or make you think that the task of saving for retirement is
just too daunting. But take heart. We don't believe that and neither do many
financial experts.
Yet retirement planning is not to be taken lightly. To live the way you want
to -- the way you deserve to after all those years of hard work -- you need to
plan and save now, on a regular basis, no matter what your other costs, no
matter how small the amount, no matter what your current age. It may be easier
if you start earlier, but it's never too late.
Building a secure nest egg is indeed doable. Talk to your financial adviser
about establishing your retirement planning roadmap, if you haven't already. And
educate yourself by reading some of the many articles about how to save for
retirement. Take control of your future by saving today. That way, when it comes
time for retirement, you shouldn't have to think about any street but Easy
Street.
Sincerely,
/s/Edward J. Boudreau, Jr.
- --------------------------
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
2
<PAGE> 3
BY GREGORY K. PHELPS,
FOR THE PORTFOLIO MANAGEMENT TEAM
PATRIOT PREMIUM
DIVIDEND FUND II
BOND MARKET ADVANCE FUELS FUND PERFORMANCE
Fixed-income investors couldn't have asked for more. After falling for much of
1994, bond prices have staged a strong comeback so far this year. In fact, in
the first half, it seemed like the bond market had nowhere to go but up.
Propelled by hopes of a "soft landing" -- a moderately growing economy with low
inflation -- the benchmark 30-year U.S. Treasury bond rose nearly 20%.
Gains in the third quarter, though, didn't come quite as easily, as a host of
mixed economic signals confused bond investors. On July 6, the Federal Reserve
Board cut short-term interest rates one-quarter of a percentage point to spur
economic growth. By early August, however, it appeared that the economy wasn't
headed for a recession but, in fact, was gaining steam. That, coupled with an
enormous auction of new U.S. Treasury bonds, sent prices tumbling. Then in
September and October, bonds reversed course once again as a preponderance of
weaker-than-expected economic news pushed prices back up. In the end, bonds
ended the past 12 months with strong gains.
[A 2 1/2" x 3 3/4" photo of the Patriot management team, bottom center. Caption
reads: "The Patriot Management Team: Laura Provost, Gregory Phelps and Andrew
St. Pierre."]
PREFERRED UTILITY STOCK HOLDINGS ARE STRONG PERFORMERS
The rising bond market boosted the Fund's preferred stock holdings, which made
up slightly more than 60% of the Fund's net assets at the end of October.
Because of their fixed yields,
[CAPTION]
"UTILITY STOCKS... REBOUNDED SHARPLY THIS YEAR."
3
<PAGE> 4
JOHN HANCOCK FUNDS - PATRIOT PREMIUM DIVIDEND FUND II
[CAPTION]
"WE HAVEN'T MADE ANY MAJOR CHANGES TO OUR INVESTMENT STRATEGY..."
[A pie chart with the heading "Portfolio Diversification" at top of left hand
column. The chart is divided into five sections. Going from top left to right:
Common Stock utilities 35%, Short-Term & Other investments 3%, Preferred Stock
Utilities 33%, Industrials 12%, Financials 17%. A footnote states: "As a
percentage of net assets on October 31, 1995."]
preferred stocks tend to track movements in the bond market closely. In
particular, preferred stocks with dividends received deduction (DRD) eligibility
were strong performers this year. (DRD-eligible preferred stocks offer special
tax advantages to corporations.) With the supply of DRDs drying up quickly,
demand has been unusually strong and that's driven the stocks way up.
Utility stocks, both common and preferred -- which together totaled more than
65% of the Fund's net assets -- also rebounded sharply this year. That's not
surprising given that utilities tend to follow the bond market closely. But
other factors also lifted the group. Utility investors breathed a collective
sigh of relief as closely-watched California regulators relaxed their aggressive
stance on deregulation. What's more, a few key mergers fueled takeover
speculation throughout the industry, pushing utility shares higher. Among our
biggest winners were Texas Utilities, which received a credit upgrade on its
preferred shares, and Potomac Electric Power Co., which recently announced its
intent to merge with Baltimore Gas & Electric. Of course, not all of our utility
holdings went up. Gulf States Utilities was probably our biggest disappointment.
Suffering from regulatory difficulties, as well as problems at its nuclear
plants, Gulf States' preferred stock was downgraded in March.
[Table entitled "Scorecard" at bottom left hand column. The header for the left
column is "Investment"' the header for the right column is "Recent
performance...and what's behind the numbers." The first listing is "Potomac
Electric Power Co." followed by an up arrow and the phrase "To merge with
Baltimore Gas & Electric". The second listing is "Bowater" followed by an up
arrow and the phrase "Rising paper prices/credit upgrade". The third listing is
"Gulf States Utilities" followed by a down arrow and the phrase "Credit
downgrade". Footnote below reads: "See '"Schedule of Investments." Investment
holdings are subject to change."]
Against this backdrop, John Hancock PaTRIOT PREMIUM DIVIDEND FUND II finished
the year with strong gains. For the 12 months ended October 31, 1995, the Fund
had a total return of 32.83% at net asset value. By comparison, the Dow Jones
Utility Average had a total return of 18.28%, and the average income-oriented,
closed-end equity fund had a total return of 20.50%, according to Lipper
Analytical Services.
PORTFOLIO ADJUSTMENTS
We haven't made any major changes to our investment strategy, only minor
adjustments along the way. Throughout the year, we've continued to slowly cut
back our utility common stocks in favor of utility and non utility preferred
stocks. The main reason is that preferred stocks, especially the DRDs, offer
better value and more attractive yields. At the end of October, we owned 35% in
utility common stocks, 33% in utility preferred stocks and 29% in non utility
preferred stocks.
With utility common stocks, our focus remains on higher-yielding issues with
Group. Because of the strong utility run-up in the last few months, however,
4
<PAGE> 5
John Hancock Funds - Patriot Premium Dividend Fund II
FUND PERFORMANCE
[Bar chart with heading "Fund Performance" at top of left hand column. Under the
heading is the footnote "For the year ended October 31, 1995." The chart is
scaled in increments of 10% from top to bottom with 40% at the top and 0% at the
bottom. Within the chart, there are three solid bars. The first represents the
32.83% total return for John Hancock Patriot Premium Dividend Fund II. The
second represents the 20.50% total return for the average income-oriented
closed-end equity fund. The third represents the 18.28% 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. The Dow Jones Utility Average is an unmanaged index
which measures the performance of the utility industry in the United States."]
it has become more difficult to find stocks with attractive yields. In fact,
we've started selling holdings -- such as Unicom Corp. -- where yields are
getting too low. With utility-preferred stocks, we've concentrated on "cushion"
preferreds, especially those with DRD eligibility and good call protection (that
is, protection from being redeemed early by the issuer). Cushion preferreds tend
to have above-average yields, which can cushion against rising interest rates
- -hence their name. We've recently added to existing positions such as
Commonwealth Edison and Boise Cascade, as well as established new positions such
as UtiliCorp.
With our non utility preferred stocks, we own a combination of industrial and
financial stocks. Here, we've also emphasized higher-yielding cushion
preferreds. One of our biggest winners has been paper manufacturer Bowater.
Sharply rising paper prices and aggressive cost-cutting have fueled Bowater's
earnings and stock price. Thanks to continued strong earnings and rapid industry
consolidation, our bank holdings have also performed well. In this area, we've
recently added Boston-based Shawmut National Corp. It's a DRD-eligible preferred
with a high current yield and five years of call protection. What's more,
Shawmut's recent merger with Fleet Financial Group will eventually lead to a
credit upgrade.
LOOKING AHEAD
The bond market probably won't repeat its spectacular returns of the last three
quarters. But in our view, its advance is likely to continue, albeit at a slower
pace, for several reasons. Inflation remains extremely low. There's reason to be
optimistic that Congress and President Clinton will come up with some meaningful
cuts in the budget to help reduce the deficit. Finally, while the Fed appears to
be in a wait-and-see mode right now, we believe its next move will be to cut
short-term interest rates again.
Utility common stocks and preferred stocks -- the Fund's main holdings --
should also continue to perform well. A firm bond market certainly bodes well
for both groups. Waning deregulation fears and ongoing consolidation should keep
the outlook for utility stocks bright. As for preferreds, positive technical
factors for DRDs -- scarce supply and growing demand -- are likely to keep
prices moving higher. As we head into 1996, we'll continue with our current
strategy of weighting the portfolio more heavily toward utility and non-utility
preferred stocks, especially those with DRD eligibility. That's where we see the
best value right now. However, we will also keep a close eye out for attractive
opportunities among utility common stocks.
[CAPTION]
["THE BOND MARKET... ADVANCE IS LIKELY TO CONTINUE, ALBEIT AT A SLOWER PACE..."]
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 OCTOBER
31, 1995. YOU'LL ALSO FIND THE NET ASSET VALUE PER SHARE, FOR EACH COMMON SHARE,
AS OF THAT DATE.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value - Note C:
Preferred stocks (cost - $165,762,427)..................... $171,884,300
Common stocks (cost - $93,932,490) ........................ 96,481,681
Capital securities (cost - $1,280,000) ................... 1,369,600
Short-term notes (cost - $1,847,000) ...................... 1,847,000
-------------
271,582,581
Cash ....................................................... 99
Receivable for investments sold ............................ 5,846,093
Dividends receivable ....................................... 1,487,640
-------------
Total Assets ............................. 278,916,413
------------------------------------------------------------
LIABILITIES:
DARTS dividend payable ..................................... 361,261
Payable for investments purchased .......................... 120,560
Payable to John Hancock Advisers, Inc. - Note B ............ 212,245
Accounts payable and accrued expenses ...................... 21,871
-------------
Total Liabilities ........................ 715,937
------------------------------------------------------------
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
Common Shares - Without par value, unlimited number
of shares of beneficial interest authorized,
15,002,724 shares issued and outstanding .................. 166,459,166
Accumulated net realized loss on investments ............... (1,316,514)
Net unrealized appreciation of investments ................. 8,760,664
Undistributed net investment income ........................ 4,297,160
-------------
Net Assets Applicable to
Common Shares ($11.88 per
share based on 15,002,724
shares outstanding) ...................... 178,200,476
------------------------------------------------------------
Net Assets ............................... $ 278,200,476
============================================================
</TABLE>
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>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $54,699) ............................................... $ 22,703,753
Interest .................................................... 393,738
------------
23,097,491
------------
Expenses:
Investment management fee - Note B ......................... 2,453,438
DARTS and auction fees ..................................... 309,108
Administration fee - Note B ................................ 259,166
Federal excise tax ......................................... 101,850
Custodian fee .............................................. 68,290
Printing ................................................... 63,692
Auditing fee ............................................... 53,100
Miscellaneous .............................................. 43,434
Transfer agent fee ......................................... 42,441
Trustees' fees ............................................. 35,667
Legal fees ................................................. 14,458
Organization expense - Note A .............................. 2,500
------------
Total Expenses ............................ 3,447,144
-----------------------------------------------------------
Net Investment Income ..................... 19,650,347
-----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold ....................... (870,125)
Change in net unrealized appreciation/depreciation
of investments ............................................ 31,160,232
------------
Net Realized and Unrealized
Gain on Investments ....................... 30,290,107
-----------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ................. $ 49,940,454
===========================================================
Distributions to DARTS .................... (4,482,932)
-----------------------------------------------------------
Net Increase in Net Assets Applicable
to Common Shareholders Resulting
from Operations Less DARTS
Distributions ............................. $ 45,457,522
===========================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 7
FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income .......................................................... $ 19,650,347 $ 16,466,537
Net realized loss on investments sold .......................................... ( 870,125) ( 446,389)
Change in net unrealized appreciation/depreciation of investments .............. 31,160,232 ( 53,591,521)
------------- -------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ............... 49,940,454 ( 37,571,373)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
DARTS Series A ($4,474 and $3,364 per share, respectively) - Note A ............ ( 2,237,124) ( 1,682,116)
DARTS Series B ($4,492 and $3,284 per share, respectively) - Note A ............ ( 2,245,808) ( 1,642,000)
Common Shares -- Note A
Dividends from accumulated net investment income ($0.8250 and $0.9324
per share, respectively) ...................................................... ( 12,376,834) ( 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 ........................................... ( 16,859,766) ( 22,077,069)
------------- -------------
NET ASSETS:
Beginning of period ............................................................ 245,119,788 304,768,230
------------- -------------
End of period (including undistributed net investment income
of $4,297,160 and $1,411,521 respectively) ................................... $278,200,476 $245,119,788
============= =============
</TABLE>
*ANALYSIS OF COMMON SHAREHOLDER TRANSACTIONS:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1995 1994
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period ...... 15,002,724 $166,554,224 15,002,724 $166,618,703
Reclassification of undistributed
net investment income -- Note D ............. -- ( 95,058) -- ( 64,479)
------------- ------------- ------------- -------------
Shares outstanding, end of period ............ 15,002,724 $166,459,166 15,002,724 $166,554,224
============= ============= ========== =============
</TABLE>
THE STATEMENT OF CHANGES IN NET ASSETS SHOWS HOW THE VALUE OF THE FUND'S NET
ASSETS HAS CHANGED SINCE THE END OF THE PREVIOUS 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>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992(a) 1991
--------- --------- --------- --------- -----------
<S> <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
--------- --------- --------- --------- -----------
Net Investment Income ....................................... 1.31 1.10 1.13 1.18 1.28
Net Realized and Unrealized Gain (Loss) on Investments ...... 2.02 ( 3.61) 1.80 0.81 1.59
--------- --------- --------- --------- -----------
Total from Investment Operations .......................... 3.33 ( 2.51) 2.93 1.99 2.87
--------- --------- --------- --------- -----------
Less Distributions:
Dividends to DARTS Shareholders ............................. ( 0.30) ( 0.22) ( 0.21) ( 0.19) ( 0.28)
Dividends to Common Shareholders from Net Investment Income.. ( 0.82) ( 0.93) ( 0.86) ( 0.90) ( 0.90)
Distributions to Common Shareholders from Net Realized
Short-term Capital Gains on Investments ................... -- ( 0.32) ( 0.49) -- --
--------- --------- --------- --------- -----------
Total Distributions ....................................... ( 1.12) ( 1.47) ( 1.56) ( 1.09) ( 1.18)
--------- --------- --------- --------- -----------
Net Asset Value, End of Period .............................. $ 11.88 $ 9.67 $ 13.65 $ 12.28 $ 11.38
========= ========= ========= ========= ===========
Per Share Market Value, End of Period ....................... $ 10.750 $ 8.875 $ 12.625 $ 11.375 $ 10.50
Total Investment Return, at Market Value .................... 31.24% ( 20.91)% 22.06% 17.10% 12.03%
RATIOS AND SUPPLEMENTAL DATA
Net Assets Applicable to Common Shares, End of
Period (000's omitted) .................................... $178,200 $145,120 $204,768 $184,253 $170,701
Ratio of Expenses to Average Net Assets* .................... 1.33% 1.27% 1.28% 1.33% 1.38%
Ratio of Net Investment Income to Average Net Assets* ....... 7.58% 6.20% 5.53% 6.60% 8.13%
Portfolio Turnover Rate ..................................... 87% 52% 57% 99% 157%
SENIOR SECURITIES
Total DARTS Series A Outstanding (000's omitted) ............ $ 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
Asset Coverage per Unit (c) ................................. $276,974 $244,639 $307,595 $285,078 $268,819
Involuntary Liquidation Preference DARTS A per Unit (d) ..... $100,000 $100,000 $100,000 $100,000 $100,000
Involuntary Liquidation Preference DARTS B per Unit (d) ..... $100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit (d) ....................... $100,000 $100,000 $100,000 $100,000 $100,000
</TABLE>
* 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) 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.
(d) 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 OCTOBER 31, 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
October 31, 1995
- --------------------------------------------------------------------------------
<CAPTION>
ISSUER, DESCRIPTION NUMBER OF SHARES MARKET VALUE
- ------------------- ---------------- ------------
<S> <C> <C>
PREFERRED STOCKS
AUTO/TRUCK (3.15)%
Ford Motor Co., 8.25%, Depositary
Shares, Ser B ............................. 65,800* $ 1,776,600
General Motors Corp., 9.125%,
Depositary Shares, Ser B .................. 50,000 1,356,250
General Motors Corp., 9.12%,
Depositary Shares, Ser G .................. 200,000 5,625,000
-----------
8,757,850
-----------
BANKS -- FOREIGN (0.51)%
Banesto Holdings Ltd., 10.50%,
Gtd Ser A (Guernsey) (R) .................. 50,000 1,418,750
-----------
BANKS -- U.S. (11.54)%
Ahmanson, H.F. & Co., 9.60%,
Depositary Shares, Ser B .................. 117,900 3,109,613
Ahmanson, H.F. & Co., 8.40%,
Depositary Shares, Ser C .................. 50,000 1,306,250
Bank of Boston Corp., 8.60%,
Depositary Shares, Ser E .................. 146,000 3,814,250
BankAmerica Corp., 11.00%,
Depositary Shares, Ser J .................. 45,000 1,237,500
BankAmerica Corp., 9.625%, Ser F ............ 71,650 1,862,900
BankAmerica Corp., 9.00%, Ser H ............. 25,000 659,375
Chase Manhattan Corp., 9.76%, Ser H ......... 26,700 754,275
Citicorp, 7.75%, Depositary Shares,
Ser 22 ................................... 80,000* 2,060,000
First Fidelity Bancorporation, 10.64%,
Depositary Shares, Ser F .................. 72,900 1,913,625
First Interstate Bancorp, 9.875%,
Depositary Shares, Ser F .................. 167,700 4,402,125
KeyCorp, 10.00%, Depositary Shares,
Ser A ..................................... 35,000* 914,375
LaSalle National Corp., 8.75%,
Ser K(R) .................................. 78,000 4,095,000
Mellon Bank Corp., 9.60%, Ser I ............. 55,000* 1,423,125
Shawmut National Corp., 9.35%,
Depositary Shares ......................... 165,700* 4,556,750
-----------
32,109,163
-----------
COMPUTER SERVICES (0.29)%
Comdisco, Inc., 8.75%, Ser A ................ 30,900 795,675
-----------
CONGLOMERATE/DIVERSIFIED (0.53)%
Grand Metropolitan Delaware,
9.42%, Gtd Ser A .......................... 54,000* 1,485,000
-----------
EQUIPMENT LEASING (0.45)%
AMERCO, 8.50%, Ser A ........................ 55,300 $ 1,258,075
-----------
FINANCIAL SERVICES (0.76)%
Merrill Lynch & Co., 9.00%,
Depositary Shares, Ser A .................. 30,000 866,250
Salomon Inc., 8.08%,
Depositary Shares, Ser D .................. 50,000 1,237,500
-----------
2,103,750
-----------
INSURANCE (3.50)%
American Life Holding Co., $2.16 ............ 40,000 960,000
Old Republic International Corp.,
8.75%, Ser H .............................. 27,000* 695,250
Progressive Corp., 9.375%, Ser A ............ 78,000 1,998,750
Provident Life & Accident Insurance Co. .....
of America, 8.10%, Depositary Shares ...... 87,800 2,260,850
SunAmerica Inc., 9.25%, Ser B ............... 100,000 2,637,500
Travelers Group, Inc., 9.25%,
Depositary Shares, Ser D .................. 44,200* 1,171,300
-----------
9,723,650
-----------
OIL & GAS (6.07)%
Coastal Corp., $2.125, Ser H ................ 128,740* 3,298,963
Elf Overseas Ltd., 8.50%, Gtd Ser A
(Cayman Islands) .......................... 200,000 5,225,000
ENSERCH Corp., Adjustable Rate
Preferred ("ARP"), Depositary
Shares, Ser F ............................. 35,000 739,375
Enterprise Oil PLC, 10.50%, American
Depositary Receipt ("ADR"),
Ser A (United Kingdom) .................... 30,000 780,000
</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 $ 3,679,062
Phillips Gas Co., 9.32%, Ser A ............... 120,000 3,165,000
------------
16,887,400
------------
PAPER (1.85%)
Boise Cascade Corp., 9.40%, Ser F ............ 68,400 1,812,600
Bowater, Inc., 8.40%,
Depositary Shares, Ser C ................... 120,000 3,345,000
------------
5,157,600
------------
PUBLISHING (0.27%)
Newscorp Overseas Ltd., 8.625%,
Gtd Ser A (Cayman Islands) ................. 30,000 757,500
------------
UTILITIES (32.86%)
Appalachian Power Co., 7.40% ................. 14,937* 1,463,826
Baltimore Gas & Electric Co., 7.125% ......... 15,000* 1,575,000
Baltimore Gas & Electric Co., 6.99% .......... 20,000* 2,075,000
Central Maine Power Co., 8.875% (R) .......... 16,000 1,536,000
Central Maine Power Co., 7.999%, Ser A ....... 10,000 960,000
Central Power & Light Co., 7.12% ............. 11,601* 1,177,501
CL&P Capital, 9.30%, Ser A ................... 35,000* 931,875
Columbus Southern Power Co., 9.50% ........... 2,286* 244,602
Columbus Southern Power Co.,
8.375%, Ser A .............................. 140,000* 3,552,500
Columbus Southern Power Co., 7.875% .......... 8,000 856,000
Commonwealth Edison Co., $8.40, Ser A ........ 32,560 3,223,440
Commonwealth Edison Co., $8.38 ............... 7,560* 752,220
Commonwealth Edison Co., $7.24 ............... 10,000 935,000
Consolidated Edison of NY, Inc.,
5.75%, Ser E................................ 32,000* 2,788,000
Detroit Edison Co., 7.45% .................... 22,930 2,235,675
Detroit Edison Co.,
Depositary Shares, 7.75% ................... 80,000 2,050,000
Duke Power Co., 7.85%, Ser S ................. 10,000 1,082,500
Florida Power & Light Co., 6.98%, Ser S ...... 13,021* 1,360,695
Florida Power Corp., 7.76% ................... 27,100 2,777,750
Georgia Power Co., $7.80 ..................... 10,890* 1,094,445
GTE Florida, Inc., 8.16% ..................... 16,790* 1,716,778
GTE North, Inc., $7.60, Ser IND .............. 10,000 1,010,000
Gulf States Utilities Co., $9.96 ............. 23,250* 2,371,500
Gulf States Utilities Co., $8.52 ............. 18,997 1,809,464
Gulf States Utilities Co., ARP,
Depositary Shares, Ser B ................... 36,968 1,802,190
Houston Lighting & Power Co., $8.12 .......... 10,302* 1,053,379
Idaho Power Co., 8.375% ...................... 23,800* 2,546,600
Idaho Power Co., 7.07% ....................... 14,000* 1,459,500
Jersey Central Power & Light Co.,
7.52%, Ser K ............................... 15,000* 1,560,000
MCN Michigan Limited Partnership,
9.375%, Ser A .............................. 50,000 1,343,750
Monongahela Power Co., $7.73, Ser L .......... 45,500* 4,925,375
Narragansett Electric Co., 6.95% ............. 43,500* 2,234,813
New York State Electric & Gas
Corp., 8.95% ............................... 50,000* 1,300,000
Northern States Power Co. ....................
of MN, $7.00 ............................... 17,050 1,687,950
PacifiCorp, 8.375%, Ser A .................... 25,000* 637,500
PECO Energy Co., $7.48 ....................... 13,000* 1,332,500
PSI Energy, Inc., 7.44% ...................... 84,900* 2,164,950
PSI Energy, Inc., 6.875% ..................... 7,500* 748,125
Public Service Co. of NH, 10.60%,
Ser A ...................................... 50,000* 1,275,000
Public Service Electric & Gas
Co., 6.92% ................................. 32,000* 3,264,000
Public Service Electric & Gas
Co., 6.80% ................................. 22,060* 2,095,700
Sierra Pacific Power Co., $3.90, Ser C ....... 11,981* 605,040
Sierra Pacific Power Co., 7.80%,
Ser 1 (Class A) ............................ 139,688* 3,579,505
Tampa Electric Co., 7.44%, Ser F ............. 13,547 1,368,247
Texas Utilities Electric Co., $7.98 .......... 31,500 3,268,125
Texas Utilities Electric Co., $1.875,
Depositary Shares, Ser A ................... 82,880 2,134,160
UtiliCorp Capital Limited
Partnership, 8.875%, Ser A ................. 70,000* 1,820,000
Virginia Electric & Power Co., $6.98 ......... 15,000* 1,563,750
Washington Natural Gas Company,
8.50%, Ser III ............................. 158,505 4,041,878
Washington Natural Gas Company,
7.45%, Ser II .............................. 80,716* 2,038,079
------------
91,429,887
------------
TOTAL PREFERRED STOCKS
(Cost $165,762,427) ............... (61.78%) 171,884,300
------------ ------------
</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>
COMMON STOCKS
UTILITIES (34.68%)
American Electric Power Co., Inc. .......... 111,000 $ 4,231,875
Boston Edison Co. .......................... 200,000 5,475,000
Central & South West Corp. ................. 13,400 358,450
CINergy Corp. .............................. 170,000 4,823,750
Consolidated Edison Co. of NY, Inc. ........ 289,000 8,778,375
Delmarva Power & Light Co. ................. 88,600* 1,949,200
Dominion Resources, Inc. of VA ............. 190,000 7,552,500
DPL, Inc. .................................. 180,000 4,275,000
Florida Progress Corp. ..................... 176,250 5,838,281
Houston Industries, Inc. ................... 122,800 5,694,850
MidAmerican Energy Co. ..................... 64,300* 1,028,800
Montana Power Co. .......................... 90,000* 2,047,500
New England Electric System ................ 177,500 6,922,500
Northeast Utilities ........................ 50,000* 1,237,500
Oklahoma Gas & Electric Co. ................ 90,000* 3,600,000
Pacific Gas and Electric Co. ............... 99,000 2,908,125
PECO Energy Co. ............................ 50,000 1,462,500
Potomac Electric Power Co. ................. 292,500 7,312,500
Public Service Enterprise Group, Inc. ...... 196,000 5,757,500
Puget Sound Power & Light Co. .............. 175,400 3,990,350
Scana Corp. ................................ 85,000 2,156,875
Southern Co. ............................... 161,000 3,843,875
Southwestern Public Service Co. ............ 70,000* 2,301,250
Texas Utilities Co. ........................ 62,500 2,296,875
Washington Water Power Co. ................. 37,000* 638,250
-----------
TOTAL COMMON STOCKS
(Cost $93,932,490) ............. (34.68%) 96,481,681
----------- -----------
CAPITAL SECURITIES
BANKS - FOREIGN (0.49%)
Australia and New Zealand Banking
Group Ltd., 9.125%,
Capital Securities (Australia) ........... 51,200 1,369,600
-----------
TOTAL CAPITAL SECURITIES
(Cost $1,280,000) ............. (0.49%) 1,369,600
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000's OMITTED) MARKET VALUE
- ------------------- ---- --------------- ------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER (0.67)%
Prudential Funding Corp.
11-01-95 ........... 5.82% $1,847 $ 1,847,000
------------
TOTAL SHORT-TERM INVESTMENTS (0.67%) 1,847,000
------ ------------
TOTAL INVESTMENTS (97.62%) $271,582,581
====== ============
</TABLE>
* Securities, other than short-term investments, newly added to the portfolio
during the year ended October 31, 1995.
(R) The securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transactions exempt from registration. See
Note A of the Notes to Financial Statements for valuation policy. Rule 144A
securities amounted to $7,049,750 as of October 31, 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
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, as amended. 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.
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, 1995, 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 and reorganization of the Fund have been capitalized and are being
charged ratably to the Fund's operations over a five-year period that began with
the commencement of the investment operations of the Fund and from the effective
date of the reorganization.
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 October 31, 1995. During the period ended October 31, 1990, the
Fund retired 98 shares of DARTS from both Series A and Series 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 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 respects to the DARTS, as defined in the Fund's By-Laws.
12
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Patriot Premium Dividend Fund II
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS WITH AFFILIATES AND OTHERS
Under the investment management contract, the Fund pays a monthly management fee
to John Hancock Advisers, Inc. (the "Adviser"), a wholly-owned subsidiary of The
Berkeley Financial Group, for a continuous investment program equivalent, on an
annual basis, to the sum of .50 of 1% of the Fund's average weekly net assets,
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 assets.
For the period ended October 31, 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 services with the shareholders. The Adviser receives a monthly
administration fee equivalent, on an annual basis, to .10 of 1% of the Fund's
average weekly net assets.
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 and the investment to cover the liability will be marked
to market on a periodic basis to reflect income earned by the investment.
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obli-gations of the
U.S. government and its agencies and short-term securities, during the period
ended October 31, 1995, aggregated $213,196,628 and $213,182,210, respectively.
Purchases and proceeds from sales of obligations of the U.S. government and its
agencies during the period ended October 31, 1995, aggregated $8,273,773 and
$8,336,313, respectively.
The cost of long-term investments owned at October 31, 1995 for federal
income tax purposes was $262,799,301. Gross unrealized appreciation and
depreciation of investments aggregated $9,897,290 and $2,961,010, respectively,
resulting in net unrealized appreciation of $6,936,280 for federal tax purposes.
NOTE D --
RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with Statement of Position 93-2, the Fund has recorded several
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of the Fund and are designed generally to present
undistributed net investment income or accumulated net realized gains and losses
on a tax basis, which is considered to be more informative to the shareholder.
As of October 31, 1995, the Fund has reclassified $95,058 from undistributed net
investment income to Common Shares capital.
13
<PAGE> 14
John Hancock Funds - Patriot Premium Dividend Fund II
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of John Hancock Patriot Premium
DIVIDEND FUND II:
We have audited the accompanying statement of assets and liabilities of John
Hancock Patriot Premium Dividend Fund II (the Fund), including the schedule of
investments, as of October 31, 1995, the related statement of operations for the
year then ended, and the statement of changes in net assets and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of John
Hancock Patriot Premium Dividend Fund II as of October 31, 1995, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 1, 1995
TAX INFORMATION NOTICE (UNAUDITED)
For Federal Income Tax purposes, the following information is furnished with
respect to the taxable distributions of the Fund during its fiscal year ended
October 31, 1995.
The Board of Trustees of the Fund declared dividends on the Common Shares
from undistributed net investment income amounting to $0.82 per share for the
year ended October 31, 1995. Distributions to preferred and common shareholders
were 100% qualified for the dividends received deductions. Shareholders will be
mailed a 1995 U.S. Treasury Department Form 1099-DIV in January 1996
representing their proportionate share.
14
<PAGE> 15
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 will automatically have all distributions of dividends and capital gains
reinvested by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts, 02210, as agent for the common shareholders unless an election is
made to receive cash. Holders of Common Shares who elect not to participate in
the Plan will receive all distributions in cash, paid by check, mailed directly
to the shareholder of record (or if the Common Shares are held in street or
other nominee name then to the nominee) by the Plan Agent, as dividend
disbursing agent. Shareholders whose shares are held in the name of a broker or
nominee should contact the broker or nominee to determine whether and how they
may participate in the Plan.
If the Fund declares a dividend payable either in Common Shares or in cash,
nonparticipants will receive cash, and participants in the Plan will receive the
equivalent in Common Shares. If the market price of the Common Shares on the
payment date for the dividend is equal to or exceeds their net asset value as
determined on the payment date, participants will be issued Common Shares (out
of authorized but unissued shares) at a value equal to the higher of net asset
value or 95% of the market price. If the net asset value exceeds the market
price of the Common Shares at such time, or if the Board of Trustees declares a
dividend payable only in cash, the Plan Agent will, as agent for Plan
participants, buy shares in the open market, on the New York Stock Exchange or
elsewhere, for the participant's accounts. Such purchases will be made promptly
after the payable date for such dividend and, in any event, prior to the next
ex-dividend date, after such date except where necessary to comply with federal
securities laws. If, before the Plan Agent has completed its purchases, the
market price exceeds the net asset value of the Common Shares, the average per
share purchase price paid by the Plan Agent may exceed the net asset value of
the Common Shares, resulting in the acquisition of fewer shares than if the
dividend had been paid in shares issued by the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent. Such withdrawal will be effective immediately if received not
less than 10 days prior to a dividend record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant withdraws
from the Plan or upon termination of the Plan as provided below, certificates
for whole Common Shares credited to his or her account under the Plan will be
issued, and a cash payment will be made for any fraction of a Share credited to
such account.
The Plan Agent maintains each shareholder's account in the Plan and furnishes
monthly written confirmations of all transactions in the accounts, including
information needed by the shareholders for personal and tax records. Common
Shares in the account of each Plan participant will be held by the Plan Agent in
non certificated form in the name of the participant. Proxy material relating
the shareholder's meetings of the Fund will include those shares purchased as
well as shares held pursuant to the Plan.
There will be no brokerage charges with respect to Common Shares issued
directly by the Fund. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of dividends and distributions. In
each case, the cost per share of the shares purchased for each participant's
account will be the average cost, including brokerage commissions, of any shares
purchased on the open market plus the cost of any shares issued by the Fund.
There are no other charges to participants for reinvesting dividends or capital
gain distributions, except for certain brokerage commissions, as described
above.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable
15
<PAGE> 16
John Hancock Funds - Patriot Premium Dividend Fund II
or required to be withheld on such dividends or distributions. Participants
under the Plan will receive tax information annually. The amount of dividend to
be reported on Form 1099-DIV should be (1) in the case of shares issued by the
Fund, the fair market value of such shares on the dividend payment date and (2)
in the case of shares purchased by the Plan Agent in the open market, the amount
of cash used to purchase them (including the amount of cash allocated to
brokerage commissions paid on such purchases).
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all shareholders of the Fund at least 90 days before the record
date for the dividend or distribution. The Plan may be amended or terminated by
the Plan Agent after at least 90 days written notice to all shareholders of the
Fund. All correspondence or additional information concerning the plan should be
directed to the Plan Agent, State Street Bank and Trust Company, at P.O. Box
8209, Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
16
<PAGE> 17
NOTES
John Hancock Funds - Patriot Premium Dividend Fund II
17
<PAGE> 18
NOTES
John Hancock Funds - Patriot Premium Dividend Fund II
18
<PAGE> 19
NOTES
John Hancock Funds - Patriot Premium Dividend Fund II
19
<PAGE> 20
[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" x 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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