| UNITED STATES | |
| SECURITIES AND EXCHANGE COMMISSION | |
| Washington, D.C. 20549 | |
| FORM N-CSR | |
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED | |
| MANAGEMENT INVESTMENT COMPANIES | |
| Investment Company Act file number 811- 05908 | |
| John Hancock Patriot Premium Dividend Fund II | |
| (Exact name of registrant as specified in charter) | |
| 601 Congress Street, Boston, Massachusetts 02210 | |
| (Address of principal executive offices) (Zip code) | |
| Salvatore Schiavone | |
| Treasurer | |
| 601 Congress Street | |
| Boston, Massachusetts 02210 | |
| (Name and address of agent for service) | |
| Registrant's telephone number, including area code: 617-663-4497 | |
| Date of fiscal year end: | October 31 |
| Date of reporting period: | April 30, 2010 |
Item 1. Schedule of Investments.
Portfolio summary
| Top 10 Holdings1 | ||||
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| Alabama Power Company, 5.200% | 3.3% | CH Energy Group, Inc. | 2.9% | |
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| MetLife, Inc., 6.500%, Series B | 3.0% | Bank of America Corp., 6.375% | 2.8% | |
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| Wells Fargo & Company, 8.000% | 3.0% | HSBC USA, Inc., 2.858% | 2.5% | |
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| Duquesne Light Company, 6.500% | 3.0% | Nexen, Inc., 7.350% | 2.5% | |
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| PPL Electric Utilities Corp., 6.250%, | DTE Energy Company | 2.5% | ||
| Depositary Shares | 2.9% |
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| Sector Composition2,3 | ||||
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| Utilities | 54% | Consumer Staples | 2% | |
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| Financials | 31% | Industrials | 1% | |
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| Telecommunication Services | 5% | Consumer Discretionary | 1% | |
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| Energy | 5% | Short-Term Investments | 1% | |
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1 As a percentage of the Fund’s total investments on April 30, 2010. Excludes cash and cash equivalents.
2 As a percentage of the Fund’s total investments on April 30, 2010.
3 The Fund normally will invest at least 25% of its managed assets in securities of companies in the utilities industry. Such an investment focus makes the Fund more susceptible to factors adversely affecting the utilities industry than a more broadly diversified fund. Sector investing is subject to greater risks than the market as a whole.
| 6 | Patriot Premium Dividend Fund II | Semiannual report |
Fund’s investments
As of 4-30-10 (unaudited)
| Shares | Value | |
| Preferred Stocks 100.94% | $578,228,780 | |
|
| ||
| (Cost $616,138,279) | ||
| Consumer Discretionary 1.19% | 6,818,684 | |
| Media 1.19% | ||
|
| ||
| Comcast Corp., 7.000% (Z) | 42,530 | 1,075,584 |
|
| ||
| Viacom, Inc., 6.850% (Z) | 230,000 | 5,743,100 |
| Consumer Staples 2.84% | 16,251,128 | |
| Food & Staples Retailing 2.84% | ||
|
| ||
| Ocean Spray Cranberries, Inc. 6.250% , Series A, (S)(Z) | 224,250 | 16,251,128 |
| Energy 4.92% | 28,200,825 | |
| Oil, Gas & Consumable Fuels 4.92% | ||
|
| ||
| Nexen, Inc., 7.350% (Z) | 860,700 | 21,302,325 |
|
| ||
| Southern Union Company, 7.550% (Z) | 270,000 | 6,898,500 |
| Financials 46.56% | 266,724,351 | |
| Capital Markets 1.70% | ||
|
| ||
| Credit Suisse Guernsey, 7.900% (Z) | 172,200 | 4,442,760 |
|
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| Goldman Sachs Group, Inc., 6.200%, Series B (Z) | 137,500 | 3,275,250 |
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| Lehman Brothers Holdings, Inc., 5.670%, | ||
| Depositary Shares, Series D (I) | 553,600 | 44,842 |
|
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| Lehman Brothers Holdings, Inc., 5.940%, | ||
| Depositary Shares, Series C (I) | 43,000 | 2,150 |
|
| ||
| Morgan Stanley Capital Trust III, 6.250% (Z) | 90,000 | 1,977,300 |
| Commercial Banks 7.59% | ||
|
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| HSBC Holdings PLC, 6.200%, Series A (Z) | 25,000 | 564,500 |
|
| ||
| Santander Finance Preferred SA Unipersonal, 10.500%, Series 10 (Z) | 230,000 | 6,249,100 |
|
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| Santander Holdings USA, Inc., 7.300% (Z) | 456,000 | 11,327,040 |
|
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| Wells Fargo & Company, 8.000% (Z) | 925,000 | 25,345,000 |
| Consumer Finance 6.96% | ||
|
| ||
| HSBC Finance Corp., 6.360%, Depositary Shares, Series B (Z) | 35,600 | 797,440 |
|
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| HSBC USA, Inc., 2.858% (Z) | 499,000 | 21,581,750 |
|
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| SLM Corp., 6.970%, Series A (Z) | 445,500 | 17,463,600 |
| Diversified Financial Services 21.75% | ||
|
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| Bank of America Corp., 8.625% (Z) | 102,000 | 2,685,660 |
|
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| Bank of America Corp., 6.375% (Z) | 1,160,000 | 24,081,600 |
|
| ||
| Bank of America Corp., 6.625% (Z) | 360,000 | 7,981,200 |
|
| ||
| Bank of America Corp., 8.200% (Z) | 35,000 | 893,200 |
| See notes to financial statements | Semiannual report | Patriot Premium Dividend Fund II | 7 |
| Shares | Value | |
| Diversified Financial Services (continued) | ||
|
| ||
| Bank of America Corp., 6.204%, Depositary Shares, | ||
| Series D (Z) | 960,000 | $19,401,600 |
|
| ||
| Citigroup Capital VII, 7.125% | 35,000 | 804,650 |
|
| ||
| Citigroup Capital VIII, 6.950% | 27,100 | 599,723 |
|
| ||
| Citigroup Capital XII, (8.500% to 03-30-15, | ||
| then 3 month LIBOR + 5.870%) | 275,000 | 7,177,500 |
|
| ||
| Deutsche Bank Contingent Capital Trust II, 6.550% (Z) | 285,275 | 6,324,547 |
|
| ||
| Deutsche Bank Contingent Capital Trust III, 7.600% (Z) | 597,000 | 14,823,510 |
|
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| JPMorgan Chase & Company, 5.490%, Series G (Z) | 278,000 | 13,441,300 |
|
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| JPMorgan Chase & Company, 5.720%, Series F (Z) | 328,760 | 16,007,324 |
|
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| JPMorgan Chase & Company, 6.150%, Series E (Z) | 209,100 | 10,394,361 |
| Insurance 5.85% | ||
|
| ||
| MetLife, Inc., 6.500%, Series B (Z) | 1,055,000 | 25,562,650 |
|
| ||
| Principal Financial Group, (6.518% to 6-30-35, | ||
| then higher of 10 year Constant Maturity Treasury (CMT), | ||
| or 30 year CMT or 3 month LIBOR + 2.100%) Series B (Z) | 160,000 | 3,713,600 |
|
| ||
| Prudential PLC, 6.750% (Z) | 176,100 | 4,242,249 |
| Real Estate Investment Trusts 2.65% | ||
|
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| Kimco Realty Company, 6.650%, Depositary Shares, Series F (Z) | 200,000 | 4,656,000 |
|
| ||
| Public Storage, Inc., 6.750% (Z) | 60,000 | 1,488,000 |
|
| ||
| Public Storage, Inc., 6.950% (Z) | 190,000 | 4,742,400 |
|
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| Public Storage, Inc., 6.125% (Z) | 50,000 | 1,152,500 |
|
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| Public Storage, Inc., 6.450%, Depositary Shares, Series X (Z) | 48,000 | 1,128,000 |
|
| ||
| Wachovia Preferred Funding Corp., 7.250%, Series A | 85,500 | 2,030,625 |
| Thrifts & Mortgage Finance 0.06% | ||
|
| ||
| Federal Home Loan Mortgage Corp., (8.375% | ||
| to 12-31-12, then higher of 7.875% or 3 month LIBOR + | ||
| 4.160%) Series Z (I) | 55,000 | 88,550 |
|
| ||
| Federal National Mortgage Association, (8.250% | ||
| to 12-13-10, then higher of 7.750% or 3 month LIBOR + | ||
| 4.230%) Series S (I) | 159,500 | 232,870 |
| Industrials 1.71% | 9,789,000 | |
| Road & Rail 1.71% | ||
|
| ||
| AMERCO, Inc., 8.500%, Series A (Z) | 390,000 | 9,789,000 |
| Telecommunication Services 3.99% | 22,877,120 | |
| Diversified Telecommunication Services 0.00% | ||
|
| ||
| Touch America Holdings, Inc., 6.875% (I) | 161,778 | — |
| Wireless Telecommunication Services 3.99% | ||
|
| ||
| Telephone & Data Systems, Inc., 6.625% (Z) | 280,000 | 6,664,000 |
|
| ||
| United States Cellular Corp., 7.500% (Z) | 652,177 | 16,213,120 |
| Utilities 39.73% | 227,567,672 | |
| Electric Utilities 29.11% | ||
|
| ||
| Alabama Power Company, 5.200% (Z) | 1,172,500 | 28,116,550 |
|
| ||
| Carolina Power & Light Company, 5.440% (Z) | 11,382 | 1,096,229 |
|
| ||
| Duquesne Light Company, 6.500% (Z) | 519,900 | 25,280,138 |
|
| ||
| Entergy Arkansas, Inc., 6.450% (Z) | 350,000 | 8,301,580 |
|
| ||
| Entergy Mississippi, Inc., 6.250% | 667,000 | 16,695,877 |
| 8 | Patriot Premium Dividend Fund II | Semiannual report | See notes to financial statements |
| Shares | Value | |
| Electric Utilities (continued) | ||
|
| ||
| FPC Capital I, 7.100%, Series A (Z) | 242,500 | $6,161,925 |
|
| ||
| Georgia Power Company, 6.000%, Series R (Z) | 76,500 | 1,927,800 |
|
| ||
| HECO Capital Trust III, 6.500% (Z) | 181,000 | 4,606,450 |
|
| ||
| NSTAR Electric Company, 4.780% (Z) | 100,000 | 8,215,630 |
|
| ||
| PPL Electric Utilities Corp., 6.250%, Depositary Shares (Z) | 1,000,000 | 24,843,800 |
|
| ||
| PPL Energy Supply, LLC, 7.000% (Z) | 272,500 | 6,935,125 |
|
| ||
| Southern California Edison Company, 6.000%, Series C (Z) | 80,000 | 7,552,504 |
|
| ||
| Southern California Edison Company, 6.125% (Z) | 195,000 | 18,622,500 |
|
| ||
| Westar Energy, Inc., 6.100% (Z) | 333,700 | 8,412,577 |
| Independent Power Producers & Energy Traders 1.47% | ||
|
| ||
| Constellation Energy Group, Inc., 8.625%, Series A (Z) | 320,900 | 8,391,535 |
| Multi-Utilities 9.15% | ||
|
| ||
| Baltimore Gas & Electric Company, 6.990%, Series 1995 (Z) | 134,000 | 13,291,125 |
|
| ||
| Baltimore Gas & Electric Company, 6.700%, Series 1993 (Z) | 20,250 | 1,990,828 |
|
| ||
| BGE Capital Trust II, 6.200% (Z) | 616,000 | 14,414,400 |
|
| ||
| Central Illinois Light Company, 4.640% (Z) | 7,460 | 767,914 |
|
| ||
| Interstate Power & Light Company, 7.100%, Series C (Z) | 176,600 | 4,515,662 |
|
| ||
| Interstate Power & Light Company, 8.375%, Series B (Z) | 132,800 | 3,881,744 |
|
| ||
| Sempra Energy Corp., 4.360% (Z) | 38,500 | 3,195,500 |
|
| ||
| Sempra Energy Corp., 4.750% (Z) | 12,610 | 1,141,204 |
|
| ||
| Union Electric Company, 3.700% (Z) | 12,262 | 792,432 |
|
| ||
| Virginia Electric & Power Company, 6.980% (Z) | 45,500 | 4,490,281 |
|
| ||
| Xcel Energy, Inc., 4.080%, Series B (Z) | 8,610 | 645,750 |
|
| ||
| Xcel Energy, Inc., 4.110%, Series D (Z) | 33,691 | 2,518,402 |
|
| ||
| Xcel Energy, Inc., 4.160%, Series E (Z) | 9,410 | 762,210 |
| Common Stocks 45.73% | $261,936,135 | |
|
| ||
| (Cost $266,372,730) | ||
| Energy 2.16% | 12,380,800 | |
| Oil, Gas & Consumable Fuels 2.16% | ||
|
| ||
| BP PLC, SADR (Z) | 100,000 | 5,215,000 |
|
| ||
| Chevron Corp. (Z) | 45,000 | 3,664,800 |
|
| ||
| Spectra Energy Corp. | 150,000 | 3,501,000 |
| Industrials 0.43% | 2,451,800 | |
| Industrial Conglomerates 0.43% | ||
|
| ||
| General Electric Company (Z) | 130,000 | 2,451,800 |
| Telecommunication Services 3.41% | 19,508,725 | |
| Diversified Telecommunication Services 3.41% | ||
|
| ||
| AT&T, Inc. (Z) | 380,000 | 9,902,800 |
|
| ||
| Verizon Communications, Inc. (Z) | 332,500 | 9,605,925 |
| Utilities 39.73% | 227,594,810 | |
| Electric Utilities 10.40% | ||
|
| ||
| American Electric Power Company, Inc. (Z) | 215,000 | 7,374,500 |
|
| ||
| Duke Energy Corp. (Z) | 355,000 | 5,956,900 |
|
| ||
| Entergy Corp. | 113,250 | 9,206,093 |
|
| ||
| FirstEnergy Corp. | 187,500 | 7,100,625 |
| See notes to financial statements | Semiannual report | Patriot Premium Dividend Fund II | 9 |
| Shares | Value | |||
| Electric Utilities (continued) | ||||
|
| ||||
| Northeast Utilities (Z) | 192,500 | $5,349,575 | ||
|
| ||||
| PNM Resources, Inc. (Z) | 500,000 | 6,795,000 | ||
|
| ||||
| Progress Energy, Inc. (Z) | 380,000 | 15,169,600 | ||
|
| ||||
| Progress Energy, Inc. (I)(Z) | 337,750 | 50,663 | ||
|
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| Southern Company | 75,000 | 2,592,000 | ||
| Gas Utilities 0.71% | ||||
|
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| Atmos Energy Corp. (Z) | 95,000 | 2,810,100 | ||
|
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| ONEOK, Inc. | 25,000 | 1,228,500 | ||
| Multi-Utilities 28.62% | ||||
|
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| Alliant Energy Corp. (Z) | 447,520 | 15,305,184 | ||
|
| ||||
| Ameren Corp. (Z) | 80,000 | 2,076,800 | ||
|
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| Black Hills Corp. (Z) | 95,000 | 3,124,550 | ||
|
| ||||
| CH Energy Group, Inc. | 596,000 | 24,686,320 | ||
|
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| Consolidated Edison, Inc. (Z) | 85,000 | 3,842,000 | ||
|
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| Dominion Resources, Inc. (Z) | 195,000 | 8,151,000 | ||
|
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| DTE Energy Company (Z) | 435,000 | 20,953,950 | ||
|
| ||||
| Integrys Energy Group, Inc. (Z) | 240,000 | 11,906,400 | ||
|
| ||||
| NiSource, Inc. (Z) | 490,000 | 7,987,000 | ||
|
| ||||
| NSTAR (Z) | 545,000 | 19,947,000 | ||
|
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| OGE Energy Corp. (Z) | 255,000 | 10,551,900 | ||
|
| ||||
| Public Service Enterprise Group, Inc. | 120,000 | 3,855,600 | ||
|
| ||||
| TECO Energy, Inc. (Z) | 570,000 | 9,650,100 | ||
|
| ||||
| Vectren Corp. (Z) | 220,000 | 5,502,200 | ||
|
| ||||
| Xcel Energy, Inc. (Z) | 755,000 | 16,421,250 | ||
| Maturity | ||||
| Yield* | date | Par value | Value | |
| Short-Term Investments 1.90% | $10,899,927 | |||
|
| ||||
| (Cost $10,899,927) | ||||
| Commerical Paper 1.90% | 10,899,927 | |||
| Chevron Funding Corp. | 0.120% | 05-03-10 | $10,900,000 | 10,899,927 |
| Total investments (Cost $893,410,936)† 148.57% | $851,064,842 | |||
|
| ||||
| Other assets and liabilities, net (48.57%) | ($278,216,629) | |||
|
| ||||
| Total net assets 100.00% | $572,848,213 | |||
|
| ||||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
SADR Sponsored American Depositary Receipts
(I) Non-income producing security.
(S) 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 transactions exempt from registration.
(Z) All or a portion of this security is segregated as collateral pursuant to the Committed Facility Agreement (see Note 7). Total collateral value at April 30, 2010 was $679,190,714.
* Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end.
† At April 30, 2010, the aggregate cost of investment securities for federal income tax purposes was $896,226,631. Net unrealized depreciation aggregated $45,161,789, of which $40,027,203 related to appreciated investment securities and $85,188,992 related to depreciated investment securities.
| 10 | Patriot Premium Dividend Fund II | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Financial statements
Statement of assets and liabilities 4-30-10 (unaudited)
This Statement of Assets and Liabilities is the Fund’s balance sheet. It shows the value of what the Fund owns, is due and owes. You’ll also find the net asset value for each common share.
| Assets | |
|
| |
| Investments, at value (Cost $893,410,936) | $851,064,842 |
| Cash | 79,772 |
| Receivable for investments sold | 2,514,761 |
| Dividends receivable | 2,770,200 |
| Other assets | 94,444 |
| Total assets | 856,524,019 |
| Liabilities | |
|
| |
| Payable for investments purchased | 2,249,176 |
| Committed facility agreement payable (Note 7) | 281,200,000 |
| Interest payable (Note 7) | 17,728 |
| Payable to affiliates | |
| Accounting and legal services fees | 61,997 |
| Trustees’ fees | 67,913 |
| Other liabilities and accrued expenses | 78,992 |
| Total liabilities | 283,675,806 |
| Net assets | |
|
| |
| Capital paid-in | $616,329,826 |
| Undistributed net investment income | 5,380,094 |
| Accumulated net realized loss on investments | (6,515,613) |
| Net unrealized appreciation (depreciation) on investments | (42,346,094) |
| Net assets | $572,848,213 |
| Net asset value per share | |
|
| |
| Based on 49,969,927 shares of beneficial interest outstanding — unlimited | |
| number of shares authorized with no par value | $11.46 |
| See notes to financial statements | Semiannual report | Patriot Premium Dividend Fund II | 11 |
F I N A N C I A L S T A T E M E N T S
Statement of operations For the six-month period ended 4-30-10
(unaudited)
This 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.
| Investment income | |
|
| |
| Dividends | $26,403,161 |
| Interest | 4,367 |
| Total investment income | 26,407,528 |
| Expenses | |
|
| |
| Investment management fees (Note 4) | 3,324,953 |
| Accounting and legal services fees (Note 4) | 400,106 |
| Transfer agent fees | 66,234 |
| Trustees’ fees (Note 4) | 29,038 |
| Printing and postage fees | 102,659 |
| Professional fees | 174,750 |
| Custodian fees | 45,725 |
| Interest expense (Note 7) | 1,516,411 |
| Tax expense | 246,672 |
| Stock exchange listing fees | 22,074 |
| Other | 16,812 |
| Total expenses | 5,945,434 |
| Net investment income | 20,462,094 |
| Realized and unrealized gain (loss) | |
|
| |
| Net realized loss on | |
| Investments | (3,584,402) |
| Change in net unrealized appreciation (depreciation) of | |
| Investments | 89,214,073 |
| Net realized and unrealized gain | 85,629,671 |
| Increase in net assets from operations | $106,091,765 |
| 12 | Patriot Premium Dividend Fund II | Semiannual report | See notes to financial statements |
F I N A N C I A L S T A T E M E N T S
Statements of changes in net assets
These Statements of Changes in Net Assets show how the value of the Fund’s net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Fund share transactions.
| For the | ||
| six-month | ||
| period ended | Year | |
| 4-30-10 | ended | |
| (unaudited) | 10-31-09 | |
| Increase (decrease) in net assets | ||
|
| ||
| From operations | ||
| Net investment income | $20,462,094 | $39,560,780 |
| Net realized loss | (3,584,402) | (104,443) |
| Change in net unrealized appreciation (depreciation) | 89,214,073 | 53,645,136 |
| Increase in net assets resulting from operations | 106,091,765 | 93,101,473 |
| Distributions to shareholders | ||
| From net investment income | (21,137,279) | (36,483,314) |
| From net realized gain | — | (6,527,650) |
| Total distributions | (21,137,279) | (43,010,964) |
| From Fund share transactions (Note 5) | — | (18,353,857) |
| Total increase | 84,954,486 | 31,736,652 |
| Net assets | ||
|
| ||
| Beginning of period | 487,893,727 | 456,157,075 |
| End of period | $572,848,213 | $487,893,727 |
| Undistributed net investment income | $5,380,094 | $6,055,279 |
| See notes to financial statements | Semiannual report | Patriot Premium Dividend Fund II | 13 |
F I N A N C I A L S T A T E M E N T S
Statement of cash flows
This Statement of Cash Flows shows cash flow from operating and financing activities for the period stated.
| For the | |
| six-month | |
| period ended | |
| 4-30-10 | |
| (unaudited) | |
| Cash flows from operating activities | |
|
| |
| Net increase in net assets from operations | $106,091,765 |
| Adjustments to reconcile net increase in net assets from operations to net | |
| cash used in operating activities: | |
| Long-term investments purchased | (131,511,254) |
| Long-term investments sold | 92,340,685 |
| Decrease in short-term investments | 9,600,045 |
| Net amortization of premium (discount) | 43 |
| Decrease in dividends receivable | 502,904 |
| Increase in payable for investments purchased | 180,330 |
| Increase in receivable for investments sold | (1,878,344) |
| Increase in other receivables and prepaid expenses | (14,155) |
| Decrease in payable to affiliates | (4,054) |
| Decrease in interest payable | (6,736) |
| Decrease in other liabilities and accrued expenses | (69,905) |
| Net change in unrealized (appreciation) depreciation on investments | (89,214,073) |
| Net realized loss on investments | 3,584,402 |
| Net cash used in operating activities | ($10,398,347) |
|
| |
| Cash flows from financing activities | |
| Borrowings from committed facility agreement payable | 31,600,000 |
| Distributions to common shareholders | (21,137,279) |
| Net cash provided by financing activities | $10,462,721 |
| Net increase in cash | $64,374 |
| Cash at beginning of period | $15,398 |
| Cash at end of period | $79,772 |
| Supplemental disclosure of cash flow information | |
|
| |
| Cash paid for interest | $1,523,147 |
| 14 | Patriot Premium Dividend Fund II | Semiannual report | See notes to financial statements |
Financial highlights
The Financial Highlights show how the Fund’s net asset value for a share has changed since the end of the previous period.
| COMMON SHARES | ||||||
| Period ended | 4-30-101 | 10-31-09 | 10-31-08 | 10-31-07 | 10-31-06 | 10-31-052 |
| Per share operating performance | ||||||
|
| ||||||
| Net asset value, | ||||||
| beginning of period | $9.76 | $8.67 | $12.61 | $12.87 | $11.78 | $11.73 |
| Net investment income3 | 0.41 | 0.77 | 0.82 | 0.87 | 0.88 | 0.85 |
| Net realized and unrealized gain | ||||||
| (loss) on investments | 1.71 | 1.15 | (3.98) | (0.24) | 1.11 | 0.14 |
| Distributions to DARTS* | — | — | (0.20) | (0.29) | (0.25) | (0.17) |
| Total from | ||||||
| investment operations | 2.12 | 1.92 | (3.36) | 0.34 | 1.74 | 0.82 |
| Less distributions to | ||||||
| common shareholders | ||||||
| From net investment income | (0.42) | (0.72) | (0.58) | (0.60) | (0.65) | (0.77) |
| From net realized gain | — | (0.12) | (0.01) | — | — | — |
| Total distributions | (0.42) | (0.84) | (0.59) | (0.60) | (0.65) | (0.77) |
| Anti-dilutive impact of tender | ||||||
| offer and shares repurchase | — | 0.014 | 0.015 | — | — | — |
| Net asset value, end of period | $11.46 | $9.76 | $8.67 | $12.61 | $12.87 | $11.78 |
| Per share market value, end | ||||||
| of period | $10.81 | $9.14 | $7.00 | $10.59 | $11.26 | $11.05 |
| Total return at net asset | ||||||
| value (%)6 | 22.357 | 25.73 | (26.60) | 3.32 | 15.91 | 7.148 |
| Total return at market | ||||||
| value (%)6 | 23.247 | 45.84 | (29.43) | (0.83) | 8.11 | 5.35 |
| Ratios and supplemental data | ||||||
|
| ||||||
| Net assets applicable to | ||||||
| common shares, end of period | ||||||
| (in millions) | $573 | $488 | $456 | $709 | $194 | $177 |
| Ratios (as a percentage of | ||||||
| average net assets): | ||||||
| Expenses (excluding | ||||||
| interest expense) | 1.659,17 | 1.73 | 1.64 | 1.71 | 1.67 | 1.67 |
| Interest expense (Note 7) | 0.579 | 0.77 | 0.58 | — | — | — |
| Expenses (including | ||||||
| interest expense) | 2.229,17 | 2.50 | 2.22 | 1.7110 | 1.6710 | 1.6710 |
| Net investment income | 7.649 | 9.21 | 7.59 | 6.8611 | 7.3611 | 6.9611 |
| Portfolio turnover (%) | 12 | 7 | 15 | 1412 | 24 | 11 |
| See notes to financial statements | Semiannual report | Patriot Premium Dividend Fund II | 15 |
| COMMON SHARES | ||||||
| Period ended | 4-30-101 | 10-31-09 | 10-31-08 | 10-31-07 | 10-31-06 | 10-31-052 |
| Senior securities | ||||||
|
| ||||||
| Total value of DARTS outstanding | ||||||
| (in millions) | — | — | — | $351 | $100 | $100 |
| Involuntary liquidation preference | ||||||
| per unit (in thousands) | — | — | — | 100 | 100 | 100 |
| Average market value per unit | ||||||
| (in thousands) | — | — | — | 100 | 100 | 100 |
| Asset coverage per unit13 | — | — | —14 | $300,814 | $292,301 | $276,340 |
| Total debt outstanding end of | ||||||
| year (in millions) (Note 7) | $281 | $250 | $239 | — | — | — |
| Asset coverage per $1,000 | ||||||
| of DARTS15 | — | — | — | $3,016 | $2,930 | $2,772 |
| Asset coverage per $1,000 | ||||||
| of debt16 | $3,037 | $2,954 | $2,913 | — | — | — |
* Dutch Auction Rate Transferable Securities
1 Semiannual period from 11-1-09 to 4-30-10. Unaudited.
2 Audited by previous independent registered public accounting firm.
3 Based on the average daily shares outstanding.
4 The tender offer was completed at a repurchase price of $6.98 for 2,629,996 shares, which equals $18,353,857 in redemptions. The tender offer had a $0.01 NAV impact.
5 The tender offer was completed at a repurchase price of $8.38 for 2,768,417 shares, which equals $23,199,333 in redemptions. The tender offer had a $0.01 NAV impact.
6 Total return based on net asset value reflects changes in the Fund’s net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that dividend and capital gain distributions, if any, were reinvested. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund’s shares traded during the period.
7 Not annualized.
8 Unaudited.
9 Annualized.
10 Ratios calculated on the basis of expenses relative to the average net assets of common shares. Without the exclusion of preferred shares, the annualized ratio of expenses would have been 1.13%, 1.07% and 1.08% for the years ended 10-31-07, 10-31-06 and 10-31-05, respectively.
11 Ratios calculated on the basis of net investment income relative to the average net assets of common shares. Without the exclusion of preferred shares, the annualized ratio of net investment income would have been 4.54%, 4.74% and 4.50% for the years ended 10-31-07, 10-31-06 and 10-31-05, respectively.
12 Excludes merger activity.
13 Calculated by subtracting the Fund’s total liabilities from the Fund’s total assets and dividing that amount by the number of DARTS outstanding, as of the applicable 1940 Act Evaluation Date, which may differ from the financial reporting date.
14 In May 2008, the Fund entered into a Revolving Credit Agreement with a third-party commercial bank in order to redeem the DARTS. The redemption of all DARTS was completed on July 3, 2008.
15 Asset coverage equals the total net assets plus DARTS divided by the DARTS of the Fund outstanding at period end.
16 Asset coverage equals the total net assets plus borrowings divided by the borrowing of the Fund outstanding at period end (Note 7).
17 Includes the impact of fund tax expense, which amounted to 0.05% of average net assets.
| 16 | Patriot Premium Dividend Fund II | Semiannual report | See notes to financial statements |
Notes to financial statements
(unaudited)
Note 1 — Organization
John Hancock Patriot Premium Dividend Income Fund II (the Fund) is a closed-end diversified management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act).
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the Fund:
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. The Fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these techniques are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes significant unobservable inputs when market prices are not readily available or reliable, including the Fund’s own assumptions in determining the fair value of investments. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the values by input classification of the Fund’s investments as of April 30, 2010, by major security category or type:
| LEVEL 2 | LEVEL 3 | |||
| TOTAL MARKET | SIGNIFICANT | SIGNIFICANT | ||
| VALUE AT | LEVEL 1 | OBSERVABLE | UNOBSERVABLE | |
| 4-30-10 | QUOTED PRICE | INPUTS | INPUTS | |
|
| ||||
| Common Stocks | ||||
| Energy | $12,380,800 | $12,380,800 | — | — |
| Industrials | 2,451,800 | 2,451,800 | — | — |
| Telecommunication | ||||
| Services | 19,508,725 | 19,508,725 | — | — |
| Utilities | 227,594,810 | 227,594,810 | — | — |
| Preferred Stocks | ||||
| Consumer Discretionary | 6,818,684 | 6,818,684 | — | — |
| Consumer Staples | 16,251,128 | — | $16,251,128 | — |
| Energy | 28,200,825 | 28,200,825 | — | — |
| Financials | 266,724,351 | 259,544,701 | 7,179,650 | — |
| Industrials | 9,789,000 | 9,789,000 | — | — |
| Telecommunication | ||||
| Services | 22,877,120 | 22,877,120 | — | — |
| Utilities | 227,567,672 | 94,485,630 | 133,082,042 | — |
| Short-Term Investments | 10,899,927 | — | 10,899,927 | — |
|
| ||||
| Total Investments in | ||||
| Securities | $851,064,842 | $683,652,095 | $167,412,747 | — |
| Semiannual report | Patriot Premium Dividend Fund II | 17 |
During the six-month period ended April 30, 2010, there were no significant transfers in/out of Level 1 and Level 2 assets.
In order to value the securities, the Fund uses the following valuation techniques. Equity securities held by the Fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, then securities are valued using the last quoted bid or evaluated price. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost.
Other portfolio securities and assets, where market quotations are not readily available, are valued at fair value, as determined in good faith by the Fund’s Pricing Committee, following procedures established by the Board of Trustees. Generally, trading in non-U.S. securities is substantially completed each day at various times prior to the close of trading on the NYSE. The values of non-U.S. securities, used in computing the net asset value of the Fund’s shares, are generally determined at these times. Significant market events that affect the values of non-U.S. securities may occur after the time when the valuation of the securities is generally determined and the close of the NYSE. During significant market events, these securities will be valued at fair value, as determined in good faith, following procedures established by the Board of Trustees.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation. Dividend income is recorded on the ex-date except for certain foreign dividends where the ex-date may have passed, which are recorded when the Fund becomes aware of the dividends.
Overdrafts. Pursuant to the custodian agreement, the Fund’s custodian may, in its discretion, advance funds to the Fund to make properly authorized payments. When such payments result in an overdraft, the Fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian has a lien, security interest or security entitlement in any Fund property, that is not segregated, to the maximum extent permitted by law to the extent of any overdraft.
Expenses. The majority of expenses are directly attributable to an individual fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Federal income taxes. The Fund intends to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, the Fund has a capital loss carryforward of $115,516 available to offset future net realized capital gains as of October 31, 2009. The loss carryforward of $115,516 expires on October 31, 2017.
As of October 31, 2009, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure. The Fund’s federal tax return is subject to examination by the Internal Revenue Service for a period of three years.
| 18 | Patriot Premium Dividend Fund II | Semiannual report |
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The Fund generally declares and pays dividends monthly and capital gain distributions, if any, annually.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Material distributions in excess of tax basis earnings and profits, if any, are reported in the Fund’s financial statements as a return of capital.
Capital accounts within financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Statement of cash flows. Information on financial transactions that have been settled through the receipt and disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is the amount included in the Fund’s Statement of Assets and Liabilities and represents the cash on hand at its custodian and does not include any short-term investments.
Note 3 — Guarantees and indemnifications
Under the Fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred.
Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Adviser) serves as investment adviser for the Fund. The Adviser is an indirect wholly owned subsidiary of Manulife Financial Corporation (MFC).
Management fee. The Fund has an investment management contract with the Adviser under which the Fund pays a daily management fee to the Adviser equivalent, on an annual basis, of 0.50% of the Fund’s average daily net assets and the value attributed to the committed facility agreement (see Note 7) (collectively, managed assets). In addition, the Fund pays 5.00% of the Fund’s daily gross income, which amounted to $1,320,376. The Adviser has a subadvisory agreement with MFC Global Investment Management (U.S.), LLC, an indirect owned subsidiary of MFC and an affiliate of the Adviser. The Fund is not responsible for payment of the subadvisory fees.
The investment management fees incurred for the six months ended April 30, 2010 were equivalent to an annual effective rate of 0.83% of the Fund’s average daily managed assets.
Accounting and legal services. The Fund has an administrative agreement with the Adviser under which the Adviser oversees the custodial, auditing, valuation, accounting, compliance, legal, stock transfer and dividend disbursing services and maintains Fund communications with shareholders. The Fund pays the Adviser a monthly administration fee at an annual rate of 0.10% of the Fund’s average weekly managed assets.
Trustees expenses. The Trust compensates each Trustee who is not an employee of the Adviser or its affiliates. These Trustees may, for tax purposes, elect to defer receipt of this compensation under the John Hancock Group of Funds Deferred Compensation Plan (the Plan). Deferred amounts are invested in various John Hancock funds and remain in the funds until distributed in accordance
| Semiannual report | Patriot Premium Dividend Fund II | 19 |
with the Plan. The investment of deferred amounts and the offsetting liability are included in the accompanying Statement of Assets and Liabilities.
Note 5 — Fund share transactions
On March 11, 2008, the Trustees approved a semiannual series tender offer program. Under the program, the Fund offers to repurchase up to 5% of the Fund’s outstanding common stock at 98% of net asset value on the date the tender offer expires, provided that the common shares of the Fund have traded at an average daily discount to net asset value of greater than 10% of during a twelve-week measurement period.
On March 27, 2009, the Fund accepted 2,629,996 shares for payment, which represented 5.00% of the Fund’s then outstanding shares. Final payment was made on March 27, 2009 at $6.98 per share, representing 98% of the NAV per share on March 27, 2009. There was no shares repurchased during the six months ended April 30, 2010.
Note 6 — Leverage risk
The Fund utilizes a Committed Facility Agreement (CFA) to increase its assets available for investment. When the Fund leverages its assets, the common shareholders bear all fees associated with the facility and have the potential for benefit or be disadvantaged from the use of leverage. The Adviser’s fee is also incurred from the use of leverage. Consequently, the Fund and the Adviser may have differing interests in determining whether to leverage the Fund’s assets. Leverage creates risks that may adversely affect the return for the holders of common shares, including:
• the likelihood of greater volatility of net asset value and market price of common shares
• fluctuations in the interest rate paid for the use of the credit facility
• increased operating costs, which may reduce the Fund’s total return
• the potential for a decline in the value of an investment acquired through leverage, while the Fund’s obligations under such leverage remains fixed
• the Fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements
To the extent the income or capital appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the Fund’s return will be greater than if leverage had not been used, conversely, returns would be lower if the cost of the leverage exceeds the income or capital appreciation derived.
Note 7 — Committed Facility Agreement
The Fund has entered into a CFA with a subsidiary of BNP Paribas (BNP) that allows it to borrow up to $284 million and to invest the borrowings in accordance with its investment practices. Borrowings under the CFA are secured by the assets of the Fund as disclosed in the Fund’s investments. Interest charged is at the rate of one month LIBOR (reset daily) plus 0.85%. The Fund also pays a commitment fee of 0.60% per annum on the unused portion of the facility. Commitment fee for the six months ended April 30, 2010 totaled $45,614 and is included in the interest expense in the Statement of Operations. As of April 30, 2010, the Fund had borrowings of $281,200,000 at an interest rate of 1.13% which are reflected in the committed facility agreement payable on the Statement of Assets and Liabilities. For the six months ended April 30, 2010, the average borrowing under the CFA and the effective average interest rate were $268,879,558 and 1.09%, respectively.
| 20 | Patriot Premium Dividend Fund II | Semiannual report |
The Fund may terminate the agreement with 60 days’ notice, if the Board of Trustees determines that the elimination of all indebtedness leveraging the Fund’s investments is in the best interests of the Fund’s shareholders.In certain circumstances, the CFA may automatically terminate or, it may be reduced to a 30-day facility. In addition, upon the occurrence of certain defaults, the lender may terminate the CFA, and it may modify or terminate the CFA upon 270 days’ notice.
On October 30, 2009, the Fund entered into an agreement with BNP that allows BNP to borrow a portion of the pledged collateral (Lent Securities) in an amount not to exceed the lesser of: (i) outstanding borrowings owed by the Fund to BNP and (ii) thirty three and one third percent of the Fund’s total assets. The Fund can designate any security within the pledged collateral as ineligible to be a Lent Security and can recall any of the Lent Securities. The Fund also has the right to apply and set-off an amount equal to one hundred percent (100%) of the then-current fair market value of such Lent Securities against the current borrowings under the CFA.
Note 8 — Purchase and sale of securities
Purchases and sales of securities, other than short-term securities, aggregated $131,511,254 and $92,340,685, respectively, for the six months ended April 30, 2010.
| Semiannual report | Patriot Premium Dividend Fund II | 21 |
Additional information
Unaudited
Investment objective and policy
The Fund’s investment objective is to provide a high current income, consistent with modest growth of capital for holders of its common shares of beneficial interest. The Fund will pursue its objective by investing in a diversified portfolio of dividend paying preferred and common stocks.
The Fund’s nonfundamental 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 policy, which became effective October 15, 1994, stipulates that preferred stocks and debt obligations in which the Fund will invest will be rated investment grade (at least BBB by S&P or Baa by Moody’s) at the time of investment or will be preferred stocks of issuers of investment grade senior debt, some of which may have speculative characteristics, or, if not rated, will be of comparable quality as determined by the Adviser. The Fund will invest in common stocks of issuers whose senior debt is rated investment grade or, in the case of issuers that have no rated senior debt outstanding, whose senior debt is considered by the Adviser to be of comparable quality.
On November 20, 2001, the Fund’s Trustees approved the following investment policy investment restriction change, effective December 15, 2001. Under normal circumstances, the Fund will invest at least 80% of its assets in dividend paying securities. The Fund will notify shareholders at least 60 days prior to any change in this 80% investment policy.
On January 25, 2008, the Fund’s Trustees approved a change to the fund’s investment policy regarding investments in securities of companies in the utilities industry. The Fund’s non-fundamental investment policy stating that the Fund normally will invest more than 65% of its total assets in securities of companies in the utilities industry was changed to a fundamental policy to state that the Fund normally will invest more than 25% of its total assets in securities of companies in the utilities industry.
Bylaws
In November 2002, the Board of Trustees adopted several amendments to the Fund’s bylaws, including provisions relating to the calling of a special meeting and requiring advance notice of shareholder proposals or nominees for Trustee. The advance notice provisions in the bylaws require shareholders to notify the Fund in writing of any proposal that they intend to present at an annual meeting of shareholders, including any nominations for Trustee, between 90 and 120 days prior to the first anniversary of the mailing date of the notice from the prior year’s annual meeting of shareholders. The notification must be in the form prescribed by the bylaws. The advance notice provisions provide the Fund and its Trustees with the opportunity to thoughtfully consider and address the matters proposed before the Fund prepares and mails its proxy statement to shareholders. Other amendments set forth the procedures that must be followed in order for a shareholder to call a special meeting of shareholders.
Effective September 9, 2008, the Fund’s bylaws were amended with respect to notice requirements for Trustee nominations and other proposals by the Fund’s shareholders. These provisions require the disclosure of the nominating shareholder and the nominee’s investment interests as they relate to the Fund, as well as the name of any other shareholder supporting the nominee for election as a Trustee or the proposal of other business. In order for notice to be proper, such notice must disclose the economic interests of the nominating shareholder and nominee, including his or her holdings of shares in the Fund, the intent upon which those shares were acquired, and any hedging arrangements (including leveraged or short positions) made with respect to the shares of the Fund. Additionally, any material interest that the shareholder has in the business to be brought before the meeting must be disclosed.
| 22 | Patriot Premium Dividend Fund II | Semiannual report |
Please contact the Secretary of the Fund for additional information about the advance notice requirements or the other amendments to the bylaws.
Dividends and distributions
During the six-month period ended April 30, 2010, dividends from net investment income totaling $0.42 per share were paid to shareholders. The dates of payments and the amounts per share are as follows:
| INCOME | |||
| PAYMENT DATE | DIVIDEND | ||
|
|
|||
| November 30, 2009 | $0.0705 | ||
| December 31, 2009 | 0.0705 | ||
| January 29, 2010 | 0.0705 | ||
| February 26, 2010 | 0.0705 | ||
| March 31, 2010 | 0.0705 | ||
| April 30, 2010 | 0.0705 | ||
| Total | 0.4230 | ||
Dividend reinvestment plan
The Fund offers its shareholders a Dividend Reinvestment Plan (the Plan), which offers the opportunity to earn compounded yields. Each shareholder will automatically have all distributions of dividends and capital gains reinvested by Mellon Bank, N.A., as Plan Agent (the Plan Agent). 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, by notifying the Plan Agent by telephone or by visiting the Plan Agent’s Web site at www.melloninvestor.com. Shareholders must indicate an election to reinvest all or a portion of dividend payments. If received in proper form by the Plan Agent before the record date of 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 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 of the dividend is equal to or exceeds their net asset value as determined on the payment date, participants will be issued common shares (out of authorized but unissued shares) at a value equal to the higher of net asset value or 95% of the market price. If the net asset value exceeds the market price of the common shares at such time, or if the Board of Trustees declares a dividend payable only in cash, the Plan Agent will, as agent for Plan participants, buy shares in the open market, on the New York Stock Exchange or elsewhere, for the participants’ accounts. Such purchases will be made on or promptly after the payable date for such dividend and, in any event, prior to the next ex-dividend date after such date, except where necessary to comply with federal securities laws. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value of the common shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the common shares, resulting in the acquisition of fewer shares than if the dividend had been paid in shares issued by the Fund.
Each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of dividends and distributions. In each case, the cost per share of the shares purchased for each participant’s account
| Semiannual report | Patriot Premium Dividend Fund II | 23 |
will be the average cost, including brokerage commissions, of any shares purchased on the open market plus the cost of any shares issued by the Fund. There will be no brokerage charges with respect to common shares issued directly by the Fund. There are no other charges to participants for reinvesting dividends or capital gain distributions.
Participants in the Plan may withdraw from the Plan at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s Web site at www.melloninvestor.com. Such withdrawal will be effective immediately if received prior to a dividend record date; otherwise, it will be effective for all subsequent dividend record dates. When a participant withdraws from the Plan or upon termination of the Plan, as provided below, certificates for whole common shares credited to his or her account under the Plan will be issued, and a cash payment will be made for any fraction of a share credited to such account.
The Plan Agent maintains each shareholder’s account in the Plan and furnishes monthly written confirmations of all transactions in the accounts, including information needed by the shareholders for personal and tax records. The Plan Agent will hold common shares in the account of each Plan participant in noncertificated form in the name of the participant. Proxy material relating to the shareholders’ meetings of the Fund will include those shares purchased as well as shares held pursuant to the Plan.
The reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable or required to be withheld on such dividends or distributions. Participants under the Plan will receive tax information annually. The amount of dividend to be reported on 1099-DIV should be (1) in the case of shares issued by the Fund, the fair market value of such shares on the dividend payment date and (2) in the case of shares purchased by the Plan Agent in the open market, the amount of cash used by the Plan Agent to purchase shares in the open market, including the amount of cash allocated to brokerage commissions paid on such purchases.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to all shareholders of the Fund at least 90 days before the record date for the dividend or distribution. The Plan may be amended or terminated by the Plan Agent after at least 90 days’ written notice to all shareholders of the Fund. All correspondence or additional information concerning the Plan should be directed to the Plan Agent, Mellon Bank, N.A., c/o Mellon Investor Services, P.O. Box 358015, Pittsburgh, PA 15252-8015 (Telephone: 1-800-852-0218).
Shareholder communication and assistance
If you have any questions concerning the Fund, we will be pleased to assist you. If you hold shares in your own name and not with a brokerage firm, please address all notices, correspondence, questions or other communications regarding the Fund to the transfer agent at:
Mellon Investor Services
Newport Office Center VII
480 Washington Boulevard
Jersey City, NJ 07310
Telephone: 1-800-852-0218
| 24 | Patriot Premium Dividend Fund II | Semiannual report |
If your shares are held with a brokerage firm, you should contact that firm, bank or other nominee for assistance.
Shareholder meeting (unaudited)
The Fund held its Annual Meeting of Shareholders on January 22, 2010. The following action was taken by the shareholders:
Proposal: Election of four (4) Trustees to serve for a three-year term ending at the Annual Meeting of Shareholders in 2013. The votes cast with respect to each Trustee are set forth below:
THE PROPOSAL PASSED FOR ALL TRUSTEES ON JANUARY 22, 2010.
| TOTAL VOTES FOR | TOTAL VOTES WITHHELD | |
| THE NOMINEE | FROM THE NOMINEE | |
|
| ||
| James R. Boyle | 43,805,571 | 1,299,553 |
| Deborah C. Jackson | 43,737,579 | 1,367,545 |
| Patti McGill Peterson | 43,748,697 | 1,356,427 |
| Steven R. Pruchansky | 43,796,053 | 1,309,071 |
The following seven Trustees of the Fund were not up for election and remain in office: James F. Carlin, William H. Cunningham, Charles L. Ladner, Stanley Martin, John A. Moore, Gregory A. Russo, and John G. Vrysen.
| Semiannual report | Patriot Premium Dividend Fund II | 25 |
More information
| Trustees | Officers | Investment adviser |
| Patti McGill Peterson, | Keith F. Hartstein | John Hancock Advisers, LLC |
| Chairperson | President and | |
| James R. Boyle† | Chief Executive Officer | Subadviser |
| James F. Carlin | MFC Global Investment | |
| William H. Cunningham | Andrew G. Arnott | Management (U.S.), LLC |
| Deborah C. Jackson* | Chief Operating Officer | |
| Charles L. Ladner | Custodian | |
| Stanley Martin* | Thomas M. Kinzler | State Street Bank and |
| Dr. John A. Moore | Secretary and | Trust Company |
| Steven R. Pruchansky* | Chief Legal Officer | |
| Gregory A. Russo | Transfer agent | |
| John G. Vrysen† | Francis V. Knox, Jr. | Mellon Investor Services |
| *Member of the Audit Committee | Chief Compliance Officer | |
| †Non-Independent Trustee | Legal counsel | |
| Charles A. Rizzo | K&L Gates LLP | |
| Chief Financial Officer | ||
| Stock symbol | ||
| Salvatore Schiavone | Listed New York Stock | |
| Treasurer | Exchange: PDT | |
For shareholder assistance refer to page 24
| You can also contact us: | 1-800-852-0218 | Regular mail: |
| jhfunds.com | Mellon Investor Services | |
| Newport Office Center VII | ||
| 480 Washington Boulevard | ||
| Jersey City, NJ 07310 |
The Fund’s proxy voting policies and procedures, as well as the Fund’s proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) Web site at www.sec.gov or on our Web site.
The Fund’s complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The Fund’s Form N-Q is available on our Web site and the SEC’s Web site, www.sec.gov, and can be reviewed and copied (for a fee) at the SEC’s Public Reference Room in Washington, DC. Call 1-800-SEC-0330 to receive information on the operation of the SEC’s Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our Web site www.jhfunds.com or by calling 1-800-852-0218.
The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.
The Fund is listed for trading on the NYSE and has filed with the NYSE its chief executive officer certification regarding compliance with the NYSE’s listing standards. The Fund also files with the SEC the certification of its chief executive officer and chief financial officer required by Section 302 of the Sarbanes-Oxley Act.
| 26 | Patriot Premium Dividend Fund II | Semiannual report |
1-800-852-0218
1-800-231-5469 TDD
1-800-843-0090 EASI-Line
www.jhfunds.com
PRESORTED
STANDARD
U.S. POSTAGE
PAID
MIS
| P20SA 4/10 |
| 6/10 |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
(a) Not applicable.
| (b) REGISTRANT PURCHASES OF EQUITY SECURITIES | ||||
| Maximum | ||||
| Total Number of | Number | |||
| Shares | of Shares that | |||
| Purchased | May | |||
| Total | as Part of | Yet Be | ||
| Number of | Average | Publicly | Purchased | |
| Shares | Price per | Announced | Under the | |
| Period | Purchased* | Share | Plan* | Plan* |
|
| ||||
| November 1, 2009 to | ||||
| November 30, 2009 | 0 | 0 | 0 | 2,498,496 |
| December 1, 2009 to | ||||
| December 31, 2009 | 0 | 0 | 0 | 2,498,496 |
| January 1, 2010 to | ||||
| January 31, 2010 | 0 | 0 | 0 | 2,498,496 |
| February 1, 2010 to | ||||
| February 28, 2010 | 0 | 0 | 0 | 2,498,496 |
| March 1, 2010 to | ||||
| March 31, 2010 | 0 | 0 | 0 | 2,498,496 |
| April 1, 2010 to | ||||
| April 30, 2010 | 0 | 0 | 0 | 2,498,496 |
|
| ||||
| Total | 0 | 0 | ||
|
| ||||
* On March 11, 2008, the Board of Trustees approved a semiannual series tender offer program. Under the program, the Fund offers to repurchase up to 5.00% of the Fund’s outstanding common stock at 98% of net asset value on the date the tender offer expires, provided that the common shares of the Fund have traded at an average daily discount to net asset value of greater than 10% during a twelve week measurement period. The tender offer will occur twice a year if the thresholds are met, with the Board of Trustees to review the program annually. On March 27, 2009, the Fund completed the tender offer. The Fund accepted 2,629,996 shares for payment which represented 5.00% of the Fund’s then outstanding shares. Final payment was made on March 27, 2009 at $6.98 per share, representing 98% of the NAV per share on March 27, 2009. There was no shares repurchased during the six months ended April 30, 2010.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to previously disclosed John Hancock Funds – Governance Committee Charter.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Governance Committee Charter”.
(c)(2) Contact person at the registrant.
| SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Patriot Premium Dividend Fund II
| By: | /s/ Keith F. Hartstein |
| ------------------------------ | |
| Keith F. Hartstein | |
| President and | |
| Chief Executive Officer | |
| Date: | June 22, 2010 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Keith F. Hartstein |
| ------------------------------- | |
| Keith F. Hartstein | |
| President and | |
| Chief Executive Officer | |
| Date: | June 22, 2010 |
| By: | /s/ Charles A. Rizzo |
| --------------------------------- | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Date: | June 22, 2010 |