---------------------------
The latest report from your
Fund's management team
---------------------------
SEMIANNUAL REPORT
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[GRAPHIC OMITTED]
Patriot Premium
Dividend Fund II
APRIL 30, 2000
[LOGO] JOHN HANCOCK FUNDS
A Global Investment Management Firm
<PAGE>
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TRUSTEES
Stephen L. Brown
James F. Carlin*
William H. Cunningham
Ronald R. Dion*
Maureen R. Ford
Charles L. Ladner
Steven R. Pruchansky*
Richard S. Scipione
Lt. Gen. Norman H. Smith, USMC (Ret.)
John P. Toolan
*Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
Osbert M. Hood
Executive Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
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
Bankers Trust Company
4 Albany Street
New York, New York 10005
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
Listed New York Stock Exchange Symbol: PDT
For shareholder assistance
refer to page 14
------------------------------------------------
===================================CEO CORNER===================================
DEAR SHAREHOLDERS:
Over the last six months, New Economy technology stocks dominated the
business-news headlines and the stock market's performance. Red-hot tech stocks
pushed the NASDAQ Composite Index to the stratosphere, as investors
single-mindedly pursued anything technology related. But after setting a new
high on March 10 amid significantly heightened volatility, the tables started to
turn rapidly. Concerns about Microsoft's antitrust ruling and out-of-sight
valuation levels finally triggered waves of selling that sent the index down
nearly 25% from its high by the end of April.
In this same period, fixed-income securities of all types, including bonds and
preferred stocks, struggled as interest rates rose on fears that the roaring
U.S. economy and the rebound of many others around the world would spark an
inflation outbreak.
--------------------------------------------------------------------------------
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman, President and Chief
Executive Officer, flush right next to second paragraph.]
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While the battle between old and new rages on, several things are clear: More
than ever, diversification and a long-term investment perspective are two of an
investor's best allies. Since not all parts of your portfolio will perform
equally well all the time, we believe it is important to allocate your assets
among different types of investments and funds that target a variety of stock-
and bond-market segments. This strategy, executed under the guidance of a
seasoned investment professional, could provide you with a better chance of both
realizing longer-term results and weathering the market's changing conditions.
Sincerely,
/s/Maureen R. Ford
------------------
MAUREEN R. FORD, VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
2
<PAGE>
================================================================================
By Gregory K. Phelps for the Portfolio Management Team
John Hancock Patriot
Premium Dividend Fund II
Utility stocks rebound while preferreds languish
------------------------------------------------
Emerging from the very dim months of late 1999, utility common stocks brightened
considerably in the first four months of 2000. At the beginning of the period
last November, investors worried that the Federal Reserve would continue to
raise interest rates as the stronger-than-expected economy fanned fears of
inflation. Utility stock prices tend to be quite sensitive to interest-rate
movements, falling when interest rates rise because they pay fixed incomes in
the form of dividends. On another front, utility commons unsuccessfully battled
an unprecedented deluge of "tax-loss selling." Simply put, investors were
dumping 1999's poorest performers at a loss to offset capital gains incurred
elsewhere in their portfolios. Perhaps more damaging was the fact that utility
stocks failed to gain the attention of investors, who were almost exclusively
focused on high-flying telecommunications, media and technology stocks.
February, March and April brought much better news for utility stocks.
First, year-end tax-loss selling ended. Another pivotal event occurred when the
U.S. Treasury started to buy back some of its long-maturity outstanding debt.
The ensuing decline in 30-year Treasury bond yields helped perk up
interest-rate-driven utility stocks. Additionally, U.K.-based PowerGen announced
its intention to purchase LG&E Energy, and National Grid closed on its
acquisition of New England Electric Systems. These transactions signaled the
potential beginnings of another round of utility mergers and acquisitions.
Finally, the technology sector suffered a significant sell-off in March and
April, with some bargain-hunting investors seeking
--------------------------------------------------------------------------------
[A 3" x 2" photo at bottom right side of page of John Hancock Patriot Premium
Dividend Fund II. Caption below reads "Fund management team members (l-r):
Sylvester Marquardt, Mark Maloney, Beverly Cleathero and Gregory Phelps."]
--------------------------------------------------------------------------------
"Preferred stocks, on the other hand, remained dreary throughout the past six
months..."
3
<PAGE>
================================================================================
John Hancock Funds - Patriot Premium Dividend Fund II
"...we remained intensely focused on adding utility common stocks..."
--------------------------------------------------------------------------------
[Pie chart at top left hand column with heading "Portfolio Diversification." The
chart is divided into five sections (from top to left): Short-Term Investments &
Other 2%, Industrials 8%, Financials 22%, Utility Preferred Stock 31% and
Utility Common Stock 37%. A note below the chart reads "As a percentage of net
assets on April 30, 2000."]
--------------------------------------------------------------------------------
harbor in utility stocks. In April alone, the Dow Jones Utility Average rose 9%.
Preferred stocks, on the other hand, remained dreary throughout the
past six months, troubled by year-end tax-loss selling, interest-rate jitters
and most importantly, perhaps, lack of demand. Unlike utility commons, demand
for preferred stocks also remained weak in the first four months of 2000,
causing their prices to tread water. In the wake of inflationary worries,
investors shunned virtually all fixed-income investments, with the sole
exception of long-term Treasuries.
Performance review
For the six months ended April 30, 2000, John Hancock Patriot Premium Dividend
Fund II returned -0.03% at net asset value. By comparison, the average income
and preferred stock closed-end fund returned -0.86%, according to
--------------------------------------------------------------------------------
[Table at bottom of left hand column entitled "Scorecard". The header for the
left column is "Investment" and the header for the right column is "Recent
Performance...and What's Behind the Numbers". The first listing is Avista
followed by an up arrow with the phrase "Fuel cell biz causes buzz." The second
listing is LG&E Energy followed by an up arrow with the phrase "Acquisition
target." The third listing is Western Resources followed by a down arrow with
the phrase "Credit rating downgraded." A note below the table reads "See
`Schedule of Investments.' Investment holdings are subject to change."]
--------------------------------------------------------------------------------
Lipper, Inc., and the Dow Jones Utility Average returned 5.79%.
Our best performers during the period were the stocks of companies
being acquired. Our holdings in LG&E Energy got a significant boost when it was
announced that the company would be acquired by U.K.-based PowerGen, while our
holdings in New England Electric Systems were bought out at a nice profit when
its long-awaited acquisition by National Grid was consummated.
Other good performers included Avista, formerly known as Washington
Water Power. It rose in response to its successful Internet business. In
addition, the company is a leader in fuel cells, which produce low-cost
electricity without pollution and are generating a lot of excitement. More
recently, the company announced that it would convert its outstanding preferred
stock to common stock by the end of March, which it did. In contrast, Western
Resources drastically underperformed the utility group due to its inability to
complete a planned merger and problems with its home security Protection One
business. The company's credit rating was downgraded in response.
Although most of our preferreds were flat to down, one very bright spot
was Telephone and Data Systems (TDS Capital), which was upgraded to
investment-grade status during the period. The higher rating came in recognition
of the strength of TDS' wireless telephone business.
Growing biz lines = opportunities
During the past six months, we remained intensely focused on adding utility
common stocks, because they were cheap relative to their historic value and
offered attractive yields. We continued to place an emphasis on utilities such
4
<PAGE>
================================================================================
John Hancock Funds - Patriot Premium Dividend Fund II
--------------------------------------------------------------------------------
[Bar chart at top of left hand column with heading "Fund Performance". Under the
heading is a note that reads "For the six months ended April 30, 2000." The
chart is scaled in increments of 1% with -1% at the bottom and 6% at the top.
The first bar represents the -0.03% total return for John Hancock Patriot
Premium Dividend Fund II. The second bar represents the -0.86% total return for
Average income and preferred stock closed-end fund. The third bar represents the
5.79% total return for Dow Jones Utility Average. A note below the chart reads
"The total return for John Hancock Patriot Premium Dividend Fund II is at net
asset value with all distributions reinvested. The average income and preferred
stock closed-end fund is tracked by Lipper, Inc. The Dow Jones Utility Average
is an unmanaged index that measures the performance of the utility industry in
the United States."]
--------------------------------------------------------------------------------
as Avista and DTE Energy with fast growing, non-regulated businesses such as
fuel cells. Other utilities that held our attention were those pursuing
high-growth fiber-optic and broadband businesses as a way to boost their
earnings, such as NSTAR, Potomac Electric Power, Montana Power, CMP Group and
Kansas City Power and Light. We also favored Alliant Energy due to its large
holdings in a competitive local exchange carrier that has been grabbing
small-company phone business away from bigger competitors. We also occasionally
looked for utility stocks that offered the potential for strong returns
resulting from a takeover or merger.
Financials - a hold
Anticipated merger and acquisition activity and relatively high yields were the
main reasons we continued to hold onto some preferreds in the financial sector,
namely Lehman Brothers and Bear Stearns. With the repeal of the Glass- Steagall
Act, which once prevented banks, insurers and securities brokers from merging,
we believe the stage is set for many of our financial services holdings to be
merged into, or acquired by, higher-rated entities.
Outlook
The preferred-stock market suffered from an overabundance of supply and weak
demand in 1999, a situation we don't believe will correct itself until interest
rates stabilize. On that front, our view is that the Federal Reserve may be
nearing the end of its tightening activities. That view is based on the fact
that we're beginning to see some evidence, although it's still very subtle at
this point, that the economy could be slowing. New-home sales have leveled off,
existing-home sales have declined, auto sales have flattened and consumer
confidence has declined. To the extent that investors recognize the value that
preferred stocks now offer relative to U.S. Treasury securities, preferreds will
benefit.
As for utility common stocks, we're much more optimistic. We anticipate
continued consolidation in the utility industry, which will likely be favorable
for the group. We are particularly bullish on the companies that offer
non-regulated services like broadband and fiber optics. We believe that
investors may find these compa-nies increasingly attractive alternatives to some
of the much more expensive telecommunications and technology companies.
--------------------------------------------------------------------------------
This commentary reflects the views of the portfolio management team through the
end of the Fund's period discussed in this report. Of course, the team's views
are subject to change as market and other conditions warrant.
"We anticipate continued consolidation in the utility industry..."
5
<PAGE>
==============================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,
2000. You'll also find the net asset value per share, for each Common Share, as
of that date.
Statement of Assets and Liabilities
April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Assets:
Investments at value - Note C:
Preferred stocks (cost - $179,734,015)....................... $169,922,230
Common stocks (cost - $89,962,674) .......................... 102,564,914
Short-term investments (cost - $2,711,733) .................. 2,711,733
--------------
275,198,877
Dividends receivable ......................................... 1,216,139
Other assets ................................................. 44,311
--------------
Total Assets .................. 276,459,327
----------------------------------------------
Liabilities:
DARTS dividend payable ....................................... 83,858
Common shares dividend payable ............................... 975,177
Payable to John Hancock Advisers, Inc.
and affiliates - Note B ..................................... 244,775
Accounts payable and accrued expenses ........................ 30,110
--------------
Total Liabilities ............. 1,333,920
----------------------------------------------
Net Assets:
Dutch Auction Rate Transferable Securities Preferred
Shares 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
Shares 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 ...................................... 168,421,653
Accumulated net realized gain on investments ................. 3,527,580
Net unrealized appreciation of investments ................... 2,790,455
Undistributed net investment income .......................... 385,719
--------------
Net Assets applicable to
Common Shares ($11.67 per
share based on 15,002,724
shares outstanding) ........... 175,125,407
----------------------------------------------
Net Assets .................... $275,125,407
==============================================
The Statement of Operations summarizes the Fund's investment income earned and
expenses incurred in operating the Fund. It also shows net gains (losses) for
the period stated.
Statement of Operations
Six months ended April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income:
Dividends .................................................... $9,498,832
Interest ..................................................... 83,447
--------------
9,582,279
--------------
Expenses:
Investment management fee - Note B .......................... 1,153,287
Administration fee - Note B ................................. 134,835
DARTS and auction fees ...................................... 133,193
Federal excise tax .......................................... 70,074
Custodian fee ............................................... 35,152
Auditing fee ................................................ 27,257
Printing and postage ........................................ 26,457
Miscellaneous ............................................... 22,497
Transfer agent fee .......................................... 20,559
Trustees' fees .............................................. 5,518
Legal fees .................................................. 1,364
--------------
Total Expenses .................. 1,630,193
------------------------------------------------
Net Investment Income ........... 7,952,086
------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments sold ........................ 2,100,507
Change in net unrealized appreciation/depreciation
of investments .............................................. (8,312,279)
--------------
Net Realized and Unrealized
Loss on Investments ............. (6,211,772)
------------------------------------------------
Net Increase in Net Assets
Resulting from Operations ....... 1,740,314
================================================
Distribution to DARTS
Shareholders .................... (2,143,068)
------------------------------------------------
Net Decrease in Net Assets
Applicable to Common
Shareholders Resulting from
Operations Less DARTS
Distributions ................... ($402,754)
================================================
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund II
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 2000
OCTOBER 31, 1999 (UNAUDITED)
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income ...................................................................... $ 15,998,079 $ 7,952,086
Net realized gain on investments sold ...................................................... 1,426,057 2,100,507
Change in net unrealized appreciation/depreciation of investments .......................... (17,924,063) (8,312,279)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations ........................... (499,927) 1,740,314
------------- -------------
Distributions to Shareholders:
DARTS Series A - ($3,912 and $2,154 per share, respectively) - Note A ...................... (1,956,188) (1,077,231)
DARTS Series B - ($3,937 and $2,132 per share, respectively) - Note A ...................... (1,968,729) (1,065,837)
Common Shares - Note A:
Dividends from accumulated net investment income ($0.84 and $0.39 per share, respectively) (12,655,871) (5,850,696)
Distributions in excess of accumulated net investment income ($0.01 and
none per share, respectively) ............................................................ (95,696) -
------------- -------------
Total Distributions to Shareholders ...................................................... (16,676,484) (7,993,764)
------------- -------------
Net Assets:
Beginning of period ........................................................................ 298,555,268 281,378,857
------------- -------------
End of period (including undistributed net investment income of $427,397
and $385,719, respectively) ............................................................... $ 281,378,857 $ 275,125,407
============= =============
Analysis of Common Shareholder Transactions:
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 2000
OCTOBER 31, 1999 (UNAUDITED)
------------------------------ ----------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ---------------- -------------
Shares outstanding, beginning of period ................. 15,002,724 $168,433,934 15,002,724 $168,421,653
Reclassification of capital accounts .................... - (12,281) - -
------------ -------------- ------------- -------------
Shares outstanding, end of period ....................... 15,002,724 $168,421,653 15,002,724 $168,421,653
============ ============== ============= =============
The Statement of Changes in Net Assets shows how the value of the Fund's net
assets has changed since the end of the previous period. The difference reflects
earnings less expenses, any investment gains and losses and distributions paid
to shareholders. The footnote illustrates any reclassifications of share capital
amounts, and the number of Common Shares outstanding at the beginning and the
end of the period for the last two periods, along with the corresponding dollar
value.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund II
Financial Highlights
Selected data for a Common Share outstanding throughout each period indicated,
investment returns, key ratios and supplemental data are listed as follows:
--------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
------------------------------------------------ APRIL 30, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
-------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period ...................... $ 9.67 $ 11.88 $ 11.76 $ 12.34 $ 13.23 $ 12.09
--------- --------- -------- -------- --------- ----------
Net Investment Income(5) ................................. 1.31 1.19 1.16 1.09 1.07 0.53
Net Realized and Unrealized Gain (Loss) on Investments ... 2.02 (0.06) 0.75 0.97 (1.10) (0.42)
--------- --------- -------- -------- --------- ----------
Total from Investment Operations ........................ 3.33 1.13 1.91 2.06 (0.03) 0.11
--------- --------- -------- -------- --------- ----------
Less Distributions:
Dividends to DARTS Shareholders .......................... (0.30) (0.28) (0.27) (0.27) (0.26) (0.14)
Dividends to Common Shareholders from Net Investment Income (0.82) (0.97) (1.06) (0.90) (0.84) (0.39)
Distributions in Excess of Net Investment Income ......... -- -- -- -- (0.01) --
--------- --------- -------- -------- --------- ----------
Total Distributions ..................................... (1.12) (1.25) (1.33) (1.17) (1.11) (0.53)
--------- --------- -------- -------- --------- ----------
Net Asset Value, End of Period ............................ $ 11.88 $ 11.76 $ 12.34 $ 13.23 $ 12.09 $ 11.67
========= ========= ======== ======== ========= ==========
Per Share Market Value, End of Period ..................... $ 10.750 $ 10.875 $ 11.500 $ 12.125 $ 9.750 $ 9.375
Total Investment Return, at Market Value .................. 31.24% 9.86% 16.12% 13.51% (13.16%) 0.24%(6)
Ratios and Supplemental Data
Net Assets Applicable to Common Shares, End of Period
(000s omitted) ........................................... $178,200 $176,504 $185,127 $198,555 $181,379 $175,125
Ratio of Expenses to Average Net Assets(1) ................ 2.17% 1.98% 1.89% 1.72% 1.74% 1.92%(7)
Ratio of Net Investment Income to Average Net Assets(2) ... 12.34% 10.15% 9.71% 8.24% 8.29% 9.43%(7)
Portfolio Turnover Rate ................................... 87% 35% 41% 27% 26% 11%
Senior Securities
Total DARTS Series A Outstanding (000s omitted) ........... $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
Total DARTS Series B Outstanding (000s omitted) ........... $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
Asset Coverage per Unit(3) ................................ $ 276,974 $ 272,651 $284,939 $302,763 $286,177 $274,074
Involuntary Liquidation Preference DARTS A per Unit(4) .... $ 100,000 $ 100,000 $100,000 $100,000 $100,000 $100,000
Involuntary Liquidation Preference DARTS B per Unit(4) .... $ 100,000 $ 100,000 $100,000 $100,000 $100,000 $100,000
Approximate Market Value per Unit(4) ...................... $ 100,000 $ 100,000 $100,000 $100,000 $100,000 $100,000
(1) Ratios calculated on the basis of expenses applicable to common shares
relative to the average net assets of common shares. Without the exclusion of
preferred shares, the ratio of expenses would have been 1.33%, 1.26%, 1.21%,
1.14%, 1.14% and 1.21%, respectively.
(2) Ratios calculated on the basis of net investment income applicable to common
shares relative to the average net assets of common shares. Without the
exclusion of preferred shares, the ratio of net investment income would have
been 7.58%, 6.47%, 6.24%, 5.48%, 5.46% and 5.95%, respectively.
(3) Calculated by subtracting the Fund's total liabilities (not including the
DARTS) from the Fund's total assets and dividing such amount by the number of
DARTS outstanding as of the applicable 1940 Act Evaluation Date.
(4) Plus accumulated and unpaid dividends.
(5) Based on the average of the shares outstanding at the end of each month.
(6) Not annualized.
(7) Annualized.
The Financial Highlights summarizes the impact of the following factors on a
single share for the period indicated: net investment income, gains (losses),
dividends and total investment return of the Fund. It shows how the Fund's net
asset value for a share has changed since the end of the previous period.
Additionally, important relationships between some items presented in the
financial statements are expressed in ratio form.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund II
Schedule of Investments
April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by the
Fund on April 30, 2000. It's divided into three main categories: preferred
stocks, common stocks and short-term investments. The stocks are further broken
down by industry group. Short-term investments, which represent the Fund's
"cash" position, are listed last.
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
PREFERRED STOCKS
Agricultural Operations (1.29%)
Ocean Spray Cranberries, Inc.,
6.25% (R) ..................................... 45,000 $3,532,500
----------
Automobile / Trucks (1.94%)
General Motors Corp., 9.12%,
Depositary Shares, Ser G ...................... 208,800 5,337,450
----------
Banks - United States (6.57%)
ABN AMRO North America, Inc., 6.59%,
Ser H (R) ..................................... 2,000 1,869,000
ABN AMRO North America, Inc., 8.75%,
Ser A (R) ..................................... 1,060 1,124,925
Chase Manhattan Corp., 10.84%, Ser C ........... 137,376 3,691,980
FleetBoston Financial Corp., 6.75%,
Depositary Shares, Ser IV ..................... 97,000 4,947,000
HSBC USA, Inc., $2.8575 ........................ 35,000 1,498,438
J.P. Morgan & Company Inc., 6.625%,
Depositary Shares, Ser H ...................... 100,000 4,950,000
----------
18,081,343
----------
Broker Services (7.41%)
Bear Stearns Cos., Inc., 5.49%, Ser G .......... 139,300 5,154,100
Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D ...................... 139,000 5,212,500
Lehman Brothers Holdings, Inc., 5.94%,
Ser C ......................................... 38,000 1,605,500
Merrill Lynch & Co., Inc., 9.00%,
Depositary Shares, Ser A ...................... 132,300 3,803,625
Morgan Stanley Group, Inc., 7.75%,
Depositary Shares ............................. 91,000 4,618,250
----------
20,393,975
----------
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
Diversified Operations (0.35%)
Grand Metropolitan Delaware, L.P.,
9.42%, Gtd Ser A .............................. 38,000 $959,500
----------
Finance (6.78%)
Citigroup, Inc., 6.213%, Ser G ................. 96,000 4,272,000
Citigroup, Inc., 6.231%,
Depositary Shares, Ser H ...................... 64,500 2,838,000
Citigroup, Inc., 6.365%,
Depositary Shares, Ser F ...................... 28,500 1,368,000
Citigroup, Inc., 8.40%,
Depositary Shares, Ser K ...................... 160,000 4,120,000
SI Financing Trust I, 9.50%,
Gtd Pfd Sec & Purchase Contract ............... 50,100 1,277,550
SLM Holding Corp., 6.97%, Ser A ................ 100,000 4,783,000
----------
18,658,550
----------
Leasing Companies (0.84%)
AMERCO, 8.50%, Ser A ........................... 90,600 2,310,300
----------
Oil & Gas (5.14%)
Anadarko Petroleum Corp., 5.46%,
Depositary Shares ............................. 27,348 2,064,774
Apache Corp., 5.68%,
Depositary Shares, Ser B ...................... 32,500 2,486,250
Coastal Finance I, 8.375% ...................... 140,000 3,193,750
Devon Energy Corp., 6.49%, Ser A .............. 50,000 4,367,000
Lasmo America Ltd., 8.15% (R) ................. 20,000 2,035,000
----------
14,146,774
----------
Utilities (31.44%)
Alabama Power Co., 5.20% ....................... 266,900 5,504,813
Baltimore Gas & Electric Co., 6.70%,
Ser 1993 ...................................... 10,000 953,000
Baltimore Gas & Electric Co., 6.99%,
Ser 1995 ...................................... 30,000 2,955,000
Boston Edison Co., 4.78% ....................... 53,261 3,781,531
El Paso Tennessee Pipeline Co., 8.25%,
Ser A ......................................... 181,100 9,417,200
Florida Power & Light Co., 6.75%, Ser U ........ 33,000 3,184,500
FPC Capital I, 7.10%, Ser A .................... 186,465 3,787,570
Hawaiian Electric Industries Capital
Trust I, 8.36% ................................ 52,000 1,157,000
Idaho Power Co., 7.07% ......................... 14,000 1,400,000
Indianapolis Power & Light Co., 5.65% .......... 11,150 920,655
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
==============================FINANCIAL STATEMENTS==============================
John Hancock Funds - Patriot Premium Dividend Fund II
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
Utilities (continued)
Massachusetts Electric Co., 6.99% .............. 16,500 $1,629,375
MCN Michigan, L.P., 9.375%, Ser A .............. 50,000 1,212,500
Monongahela Power Co., 7.73%, Ser L ............ 45,500 4,641,000
Montana Power Co., $6.875 ...................... 50,000 4,700,000
PSI Energy, Inc., 6.875% ....................... 45,430 4,406,710
Public Service Electric & Gas Co.,
6.92% ......................................... 45,500 4,357,535
Puget Sound Energy, Inc., 7.45%, Ser II ........ 155,711 4,048,486
Sierra Pacific Power Capital I, 8.60% .......... 32,000 744,000
Sierra Pacific Power Co., 7.80%, Ser 1
(Class A) ..................................... 155,986 4,153,127
South Carolina Electric & Gas Co.,
6.52% ......................................... 50,000 4,800,000
TDS Capital Trust I, 8.50% ..................... 157,415 3,345,069
TDS Capital Trust II, 8.04% .................... 112,700 2,282,175
TXU Electric Co., $1.875,
Depositary Shares, Ser A ...................... 122,380 3,028,905
TXU Electric Co., $7.98 ........................ 34,500 3,415,500
UtiliCorp Capital, L.P., 8.875%, Ser A ......... 95,500 2,256,187
Virginia Electric & Power Co., $6.98 ........... 35,000 3,430,000
Virginia Electric & Power Co., $7.05 ........... 10,000 990,000
----------
86,501,838
----------
TOTAL PREFERRED STOCKS
(Cost $179,734,015) (61.76%) 169,922,230
--------- -------------
COMMON STOCKS
Utilities (37.28%)
Alliant Energy Corp. ........................... 199,900 5,997,000
Ameren Corp. ................................... 62,000 2,274,625
Avista Corp. ................................... 54,777 1,619,345
CH Energy Group, Inc. .......................... 176,300 5,806,881
Cinergy Corp. .................................. 105,000 2,808,750
CMP Group, Inc. ................................ 31,250 904,297
Conectiv, Inc. (Class A) ....................... 20,100 422,100
Consolidated Edison, Inc. ...................... 42,000 1,477,875
Dominion Resources, Inc. ....................... 79,700 3,586,500
DPL, Inc. ...................................... 107,000 2,487,750
DTE Energy Co. ................................. 177,500 5,790,937
Duke Energy Corp. .............................. 37,500 2,156,250
Eastern Enterprises ............................ 43,400 2,641,975
Florida Progress Corp. ......................... 176,250 8,636,250
Hawaiian Electric Industries, Inc. ............. 19,500 721,500
Kansas City Power & Light Co. .................. 86,000 2,209,125
KeySpan Corp. .................................. 95,000 2,790,625
LG&E Energy Corp. .............................. 207,250 4,831,516
Montana Power Co. .............................. 206,600 9,103,313
MARKET
ISSUER, DESCRIPTION NUMBER OF SHARES VALUE
------------------- ---------------- ------
Utilities (continued)
New Century Energies, Inc. ..................... 17,000 $554,625
Northern States Power Co. ...................... 60,000 1,308,750
NSTAR .......................................... 110,000 4,846,875
OGE Energy Corp. ............................... 246,000 4,873,875
Potomac Electric Power Co. ..................... 221,500 5,191,406
Puget Sound Energy, Inc. ....................... 145,400 3,453,250
Reliant Energy, Inc. ........................... 82,300 2,191,238
Sierra Pacific Resources ....................... 287,000 4,340,875
Teco Energy, Inc. .............................. 185,750 4,063,281
UtiliCorp United, Inc. ......................... 122,500 2,358,125
Western Resources, Inc. ........................ 126,900 1,998,675
WPS Resources Corp. ............................ 37,400 1,117,325
----------
TOTAL COMMON STOCKS
(Cost $89,962,674) (37.28%) 102,564,914
-------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Oil & Gas (0.99%)
Chevron USA, Inc., 05-01-00 .......... 5.80% $2,712 2,711,733
-------- -----------
TOTAL SHORT-TERM INVESTMENTS (0.99%) 2,711,733
-------- -----------
TOTAL INVESTMENTS (100.03%) 275,198,877
-------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.03%) (73,470)
-------- -----------
TOTAL NET ASSETS (100.00%) $275,125,407
======== ============
</TABLE>
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to qualified
institutional buyers, in transaction exempt from registration. Rule 144A
securities amounted to $8,561,425 or 3.11% of net assets as of
April 30, 2000.
The percentage shown for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
========================NOTES TO FINANCIAL STATEMENTS===========================
John Hancock Funds - Patriot Premium Dividend Fund II
(UNAUDITED)
NOTE A -
ACCOUNTING POLICIES
John Hancock 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. The Fund
determines the net asset value of the Common Shares each business day.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the date of
purchase, sale or maturity. Net realized gains and losses on sales of
investments are determined on the identified cost basis.
FEDERAL INCOME TAXES The Fund qualifies as a "regulated investment company" by
complying with the applicable provisions of the Internal Revenue Code and will
not be subject to federal income tax on taxable income which is distributed to
shareholders. Therefore, no federal income tax provision is required.
DIVIDENDS, INTEREST AND DISTRIBUTIONS 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, 1999, which have no effect on the Fund's net
assets, net investment income or net realized gains.
USE OF ESTIMATES The preparation of these financial statements in accordance
with generally accepted accounting principles incorporates estimates made by
management in determining the reported amounts of assets, liabilities, revenues
and expenses of the Fund. Actual results could differ from these estimates.
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. During the year ended October 30, 1990, the Fund retired
98 shares of DARTS from both Series A and Series B. 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 4.090% to 4.580%
and 4.050% to 4.578%, respectively, during the period ended April 30, 2000.
The DARTS are redeemable at the option of the Fund, at a redemption
price equal to $100,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The DARTS are also subject to mandatory redemption at a
redemption price equal to $100,000 per share, plus accumulated and unpaid
dividends, if the Fund is in default on its asset coverage requirements with
respect to the DARTS. If the dividend on the DARTS shall remain unpaid in an
amount equal to two full years' dividends, the holders of the DARTS, as a class,
have the right to elect a majority of the Board of Trustees. In general, the
holders of the DARTS and the Common Shares have equal voting rights of one vote
per share, except that the holders of the DARTS, as a class, vote to elect two
members of the Board of Trustees, and separate class votes are required on
certain matters that affect the respective interests of the DARTS and Common
Shares. The DARTS have a liquidation preference of $100,000 per share, plus
accumulated and unpaid dividends. The Fund is required to maintain certain asset
coverage with respect to the DARTS, as defined in the Fund's By-Laws.
11
<PAGE>
========================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, Inc., for a continuous investment program equivalent,
on an annual basis, to the sum of 0.50% of the Fund's average weekly net assets,
plus 5.00% of the Fund's weekly gross income. The Adviser's total fee is limited
to a maximum amount equal to 1.00% annually of the Fund's average weekly net
assets. For the period ended April 30, 2000, 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 0.10% 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.
Mr. Stephen L. Brown, Ms. Maureen R. Ford and Mr. Richard S. Scipione
are directors and/or officers of the Adviser and/or its affiliates, as well as
Trustees of the Fund. The compensation of unaffiliated Trustees is borne by the
Fund. The unaffiliated Trustees may elect to defer, for tax purposes, their
receipt of this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation. Investments to
cover the Fund's deferred compensation liability are recorded on the Fund's
books as other assets. The deferred compensation liability and the related other
assets are always equal and are marked to market on a periodic basis to reflect
any income earned by the investment as well as any unrealized gains or losses.
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies and short-term securities, during the period
ended April 30, 2000, aggregated $30,653,927 and $30,946,566, respectively.
There were no purchases or sales of obligations of the U.S. government and its
agencies during the period ended April 30, 2000.
The cost of long-term investments owned at April 30, 2000, for federal
income tax purposes was $272,412,341. Gross unrealized appreciation and
depreciation of investments aggregated $19,679,539 and $16,893,003,
respectively, resulting in net unrealized appreciation of $2,786,536 for federal
tax purposes.
12
<PAGE>
================================================================================
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.
The Fund's non-fundamental investment policy, with respect to the
quality of ratings of its portfolio investments, was changed by a vote of the
Fund's Trustees on September 13, 1994. The new policy, which became effective
October 15, 1994, stipulates that preferred stocks and debt obligations in which
the Fund will invest will be rated investment grade (at least "BBB" by S&P or
"Baa" by Moody's) at the time of investment or will be preferred stocks of
issuers of investment-grade senior debt, some of which may have speculative
characteristics, or, if not rated, will be comparable quality as determined by
the Adviser. The Fund will invest in common stocks of issuers whose senior debt
is rated investment grade or, in the case of issuers who have no rated senior
debt outstanding, whose senior debt is considered by the Adviser to be of
comparable quality.
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
reinvested by State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02210, as Plan Agent for the common shareholders. Holders of
Common Shares who do not elect 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 may
join the Plan by filling out and mailing an authorization card showing an
election to revisit all or a portion of dividend payments. If received in proper
form by State Street Bank and Trust Company, P.O. Box 8209, Boston,
Massachusetts 02266-8209 no later than seven business days before the record
date for a dividend, the election will be effective with respect to all
dividends paid after such record date. Shareholders whose shares are held in the
name of a broker or nominee should contact the broker, bank or nominee to
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 participants' accounts. Such purchases will be
made promptly after the payable date for such dividend and, in any event, prior
to the next ex-dividend date after such date, except where necessary to comply
with federal securities laws. If, before the Plan Agent has completed its
purchases, the market price exceeds the net asset value of the Common Shares,
the average per share purchase price paid by the Plan Agent may exceed the net
asset value of the Common Shares, resulting in the acquisition of fewer shares
than if the dividend had been paid in shares issued by the Fund.
Participants in the Plan may withdraw from the Plan upon written notice
to the Plan Agent. Such withdrawal will be effective immediately if received not
less than ten days prior to a dividend record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant withdraws
from the Plan or upon termination of the Plan as provided below, certificates
for whole Common Shares credited to his or her account under the Plan will be
issued and a cash payment will be made for any fraction of a share credited to
such account.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the accounts,
including information needed by the shareholders for personal and tax records.
Common Shares in the account of each Plan participant will be held by the Plan
Agent in non-certificated form in the name of the participant. Proxy material
relating to the shareholder's meetings of
13
<PAGE>
================================================================================
John Hancock Funds - Patriot Premium Dividend Fund II
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 distri-butions, except for certain brokerage commissions, as described
above.
The automatic reinvestment of dividends and distributions will not
relieve participants of any federal income tax that may be payable or required
to be withheld on such dividends or distributions. Participants under the Plan
will receive tax information annually. The amount of dividend to be reported on
Form 1099-DIV should be (1) in the case of shares issued by the Fund, the fair
market value of such shares on the dividend payment date and (2) in the case of
shares purchased by the Plan Agent in the open market, the amount of cash used
to purchase them (including the amount of cash allocated to brokerage
commissions paid on such purchases).
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all shareholders of the Fund at least 90 days before the record
date for the dividend or distribution. The Plan may be amended or terminated by
the Plan Agent after at least 90 days, written notice to all shareholders of the
Fund. All correspondence or additional information concerning the Plan should be
directed to the Plan Agent, State Street Bank and Trust Company, at P.O. Box
8209, Boston, Massachusetts 02266-8209 (telephone 1-800-426-5523).
SHAREHOLDER COMMUNICATION AND ASSISTANCE
If you have any questions concerning the John Hancock Patriot Premium Dividend
Fund II, we will be pleased to assist you. If you hold shares in your own name
and not with a brokerage firm, please address all notices, correspondence,
questions or other communications regarding the Fund to the transfer agent at:
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Telephone: (800) 426-5523
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
SHAREHOLDER MEETING (UNAUDITED)
On March 16, 2000, the Annual Meeting of John Hancock Patriot Premium Dividend
Fund II (the "Fund") was held to elect four Trustees and to ratify the actions
of the Trustees in selecting independent auditors for the Fund.
The common shareholders elected the following Trustees to serve until
their respective successors ar duly elected and qualified, with the votes
tabulated as follows:
WITHHELD
FOR AUTHORITY
--- ---------
Maureen R. Ford 13,414,058 167,991
Charles L. Ladner 13,412,308 169,740
The preferred shareholders elected Ronald R. Dion and Richard S.
Scipione to serve until their respective successors are duly elected and
qualified, with the votes tabulated as follows: 740 FOR and 0 WITHHELD
AUTHORITY.
The shareholders also ratified the Trustees' selection of Deloitte &
Touche LLP as the Fund's independent auditors for the fiscal year ending October
31, 2000, with the votes tabulated as follows: 13,440,861 FOR, 53,338 AGAINST
and 88,589 ABSTAINING.
14
<PAGE>
=====================================NOTES======================================
John Hancock Funds - Patriot Premium Dividend Fund II
15
<PAGE>
================================================================================
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