John Hancock
Patriot
Premium
Dividend Fund II
ANNUAL
REPORT
10.31.02
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Maureen R. Ford, Chairman and Chief Executive Officer, flush
left next to first paragraph.]
WELCOME
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 9
Trustees & officers
page 23
For your information
page 29
Dear Fellow Shareholders,
The year 2002 has been an extremely difficult one for the stock market. A
steady stream of accounting scandals and corporate misdeeds has shaken
investors' faith in corporate America. Plus, questions about the strength
of the economic rebound and prospects for corporate earnings have hung over
the financial markets, along with increased fears about Middle East
tensions and terrorism.
With all these concerns, the major stock market indexes have fallen
significantly for much of the year. Despite a strong rally in October, the
broad Standard & Poor's 500 Index is down 22% year to date through October,
the Dow Jones Industrial Average is off 15% and the technology-laden Nasdaq
Composite Index has fallen 32%. Investors in equity mutual funds have been
unable to escape the market's descent, as 99% of all U.S. diversified
equity funds have produced negative results through October, according to
Lipper, Inc., and the average equity fund has lost 23%. Bonds, on the other
hand, outperformed stocks and gained some ground, as often happens when
investors seek safer havens.
At such trying times as these, the impulse to flee is understandable,
especially after the negative stock market returns in 2000 and 2001. But we
urge you to stay the course and keep a well-diversified portfolio and a
longer-term investment perspective. Working with your investment
professional on your long-term plan is especially critical in turbulent
times. Financial markets have always moved in cycles, and even though the
current down cycle is painful, it comes after five straight years of
20%-plus returns between 1995 and 1999.
As discouraging as conditions may seem in the short-term, history shows us
that the bad times do pass. We believe that remains the case today. The
economy is sound and the vast majority of U.S. corporations are honest
institutions striving to do their best for their shareholders. And the
efforts of both the private sector and the U.S. government should address
the current issues of corporate governance, so that corporate credibility
and therefore investor confidence are restored.
Sincerely,
/S/ MAUREEN R. FORD
Maureen R. Ford,
Chairman and Chief Executive Officer
YOUR FUND
AT A GLANCE
The Fund seeks
to provide high
current income,
consistent with
modest growth
of capital, for
holders of its
common shares
by investing in
a diversified
portfolio of
dividend-paying
preferred and
common equity
securities.
Over the last twelve months
* Preferred stocks held up relatively well amid a common-stock bear market
and an anemic economy.
* The Fund benefited from oil and natural gas-related preferred holdings.
* Most utility commons stumbled, although the Fund's focus on basic
transmission and distribution companies helped it avoid problems.
[Bar chart with heading "John Hancock Patriot Premium Dividend Fund II."
Under the heading is a note that reads "Fund performance for the year
ended October 31, 2002." The chart is scaled in increments of 4% with
-12% at the bottom and 0% at the top. The first bar represents the
-11.06% total return for John Hancock Patriot Premium Dividend Fund II.
A note below the chart reads "The total return for the Fund is at net
asset value with all distributions reinvested."]
Top 10 issuers
4.9% Puget Energy, Inc.
4.6% Energy East Corp.
4.0% Bear Stearns Cos., Inc.
3.6% CH Energy Group
3.6% Citigroup
3.2% El Paso Tennessee Pipeline Co.
3.0% TDS Capital
3.0% Lehman Brothers Holdings Inc.
2.7% DTE Energy Company
2.5% TXU US Holdings
As a percentage of net assets plus value of preferred shares on
October 31, 2002.
BY GREGORY K. PHELPS, FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
Patriot Premium
Dividend Fund II
MANAGERS'
REPORT
Given all the economic uncertainty and stock market turmoil that have
dominated the past 12 months, preferred stocks -- which make up about
two-thirds of John Hancock Patriot Premium Dividend Fund II -- turned in
reasonably good performances for the year. Early on, the performance of
preferred stocks was boosted by falling interest rates. In the final
calendar quarter of 2001, the Federal Reserve Board continued to cut
interest rates, bringing them to lows not seen since the 1950s. Most
preferred stocks pay fixed dividends, just like bonds pay interest. Because
of this dividend feature, preferred stock prices tend to rise when interest
rates fall, just as bond prices do.
Even though there were no further rate cuts through October 2002, preferred
stocks continued to perform well, even as common stock prices were
collapsing. The reason? A key benefit of preferred stocks is that their
yields are often significantly higher than what companies pay on their
bonds and common stock. Many preferred stocks continued to yield between 7%
and 9%, outstripping both the yields paid by corporate bonds and the
dividends paid by common stocks. Furthermore, increasing numbers of
investors found preferreds to be attractive alternatives to U.S. Treasury
securities, whose yields had fallen substantially amid a darkening outlook
for the economy.
"...preferred stocks con-
tinued to perform well,
even as common stock
prices were collapsing."
UTILITY COMMON STOCKS SHORT CIRCUIT
Despite a few brief bouts of strength, utility common stocks -- the Fund's
other primary investment focus -- were bitter disappointments during the
period. Much of their poor performance stemmed from the investigation and
collapse of energy-trading company Enron and subsequent investigations of
similar companies. Questions about corporate accounting practices,
accountability and ethics at these rogue companies cast a pall over the
entire utility common stock group. In the late summer, even the most "plain
vanilla" utilities that transmit and distribute electricity came under
pressure, as mutual fund managers sold their strongest utility performers
in order to meet the swell of shareholder redemptions that resulted from a
weak overall stock market environment.
"Our emphasis on utility
companies that do rather
mundane things...helped
us avoid the most put-
upon electric trading
companies..."
[A photo of Greg Phelps flush right next to first paragraph.]
FUND PERFORMANCE
For the 12 months ended October 31, 2002, John Hancock Patriot Premium
Dividend Fund II returned -11.06% at net asset value. By comparison, the
average income and preferred closed-end fund returned -6.97%, according to
Lipper, Inc. The Fund's comparatively large stake in utility common stocks
-- the bulk of which we continued to hang onto because we felt that many
were unfairly painted with the brush of problems associated with Enron and
other energy trading firms - accounted for its underperformance relative
to its peers. The Dow Jones Utility Average, which tracks the performance
of 15 electric and natural gas utilities, returned -29.68%, and the
broader stock market, as measured by the Standard & Poor's 500 Index,
returned -15.10%.
HIGHER ENERGY PRICES BOOST HOLDINGS
Among our best-performing preferred stocks during the year were companies
involved in the production and distribution of oil and natural gas,
particularly Anadarko Petroleum and Devon Energy. The run-up in oil prices
-- which also helped pump up natural gas prices -- was due largely to
concerns about the escalation of tensions in the Middle East and a possible
U.S. attack on Iraq, which could disrupt oil supplies. Oil prices briefly
surged above the important psychological barrier of $30 a barrel late in
the period for the first time since February 2001. Another preferred stock
holding with decent returns was Energy East, which was helped by the fact
that it yielded 8.25% -- a very attractive yield in a low interest-rate
environment.
[Table at top left-hand side of page entitled "Top five industry
groups." The first listing is Utilities 67%, the second is Broker
services 8%, the third Oil & gas 6%, the fourth Finance 6%, and the
fifth Banks--United States 6%.]
[Pie chart in middle of page with heading "Portfolio diversification1"
The chart is divided into three sections (from top to left): Preferred
stock 71%, Common stock 28%, and Short-term investments 1%.]
But there were some notable disappointments among our preferred stock
holdings. El Paso Tennessee Pipeline Co. and its wholly owned subsidiary
Coastal, came under pressure when a judge ruled that the company had
manipulated pipeline capacity during the 2001 California power crisis. We
think the company will be exonerated in its appeal to the Federal Energy
Regulatory Commission. Our holdings in Sierra Pacific also came under
pressure due to what we believe to be an unfair rate decision, which
resulted in a substantial downgrade of the company's credit quality.
Despite that development, we continue to hang onto the stock because the
company has a very strong management team, and the demand for the
electricity it provides is growing much faster than most of its
counterparts across the country.
[Table at top of page 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
Anadarko Petroleum followed by an up arrow with the phrase "Oil prices
spike amid fears of Iraq war." The second listing is Energy East
followed by an up arrow with the phrase "Demand for high-yielding stocks
boosts price." The third listing is El Paso Tennessee Pipeline Co.
followed by a down arrow with the phrase "Company's role in California
power crisis questioned."]
BORING DOES BETTER
Our emphasis on utility companies that do rather mundane things like
transmitting and distributing electricity, mostly in regulated markets,
helped us avoid the most put-upon electric trading companies such as Enron.
Holdings such as NSTAR held up better than most, in part due to the
favorable regulatory environment in its service area. Investors also liked
the company's reputation for paying reliable dividends: NSTAR declared its
453rd consecutive dividend in July. Other holdings that held up better than
the utility common stock group overall included companies such as CH Energy
Group, DTE Energy, KeySpan and Northeast Utilities. Their resilience was
due to their lack of energy trading operations, and their location in
favorable regulatory environments that are enjoying strong and growing
demand.
"Low interest rates should
continue to prompt strong
demand for preferred
stocks."
OUTLOOK
Our view is that continued lackluster economic growth will preclude the
need for interest-rate hikes until well into 2003. Low interest rates
should continue to prompt strong demand for preferred stocks. As for
utility common stocks, we think that most of the trouble associated with
the fallout from Enron is behind them. In our view, utility common stocks
are very attractive given their earnings growth prospects and their low
prices. Even if the economy starts to grow faster next year, we don't think
that preferred stocks and utility common stocks -- two sectors that
historically have lagged in a strong economy -- will be left out in the
cold.
This commentary reflects the views of the portfolio managers through the
end of the Fund's period discussed in this report. Of course, the managers'
views are subject to change as market and other conditions warrant.
1 As a percentage of the Fund's portfolio on 10-31-02.
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
October 31, 2002
This schedule is divided into three main categories: preferred stocks,
common stocks and short-term investments. The preferred and common stocks
are further broken down by industry group. Short-term investments, which
represent the Fund's cash position, are listed last.
SHARES ISSUER, DESCRIPTION VALUE
PREFERRED STOCKS 118.90% $178,649,685
(Cost $189,431,915)
Agricultural Operations 2.44% $3,667,500
45,000 Ocean Spray Cranberries, Inc., 6.25% (R) 3,667,500
Banks -- United States 9.90% 14,873,240
97,000 FleetBoston Financial Corp., 6.75%, Depositary Shares, Ser VI 4,898,500
108,900 HSBC USA, Inc., $2.8575 5,074,740
100,000 J.P. Morgan Chase & Co., 6.625%, Depositary Shares, Ser H 4,900,000
Broker Services 14.03% 21,087,490
50,650 Bear Stearns Cos., Inc., 5.49%, Ser G 2,122,235
95,300 Bear Stearns Cos., Inc., 5.72%, Ser F 4,093,135
84,000 Bear Stearns Cos., Inc., 6.15%, Ser E 3,700,200
125,000 Lehman Brothers Holdings, Inc., 5.67%,
Depositary Shares, Ser D 5,281,250
53,000 Lehman Brothers Holdings, Inc., 5.94%, Ser C 2,199,500
132,300 Merrill Lynch & Co., Inc., 9.00%, Depositary Shares, Ser A 3,691,170
Diversified Operations 0.77% 1,157,100
42,000 Grand Metropolitan Delaware, L.P., 9.42%, Gtd Ser A 1,157,100
Finance 10.15% 15,256,475
96,000 Citigroup, Inc., 6.213%, Ser G 4,627,200
64,500 Citigroup, Inc., 6.231%, Depositary Shares, Ser H 2,967,000
28,500 Citigroup, Inc., 6.365%, Depositary Shares, Ser F 1,372,275
56,000 Household International, Inc., 7.50%, Depositary Shares,
Ser 2001-A 1,120,000
100,000 SLM Corp., 6.97%, Ser A 5,170,000
Leasing Companies 0.73% 1,091,730
90,600 AMERCO, 8.50%, Ser A 1,091,730
Media 2.26% 3,388,100
199,300 Shaw Communications, Inc., 8.50% (Canada) 3,388,100
Oil & Gas 10.72% 16,106,158
47,450 Anadarko Petroleum Corp., 5.46%, Depositary Shares 4,045,113
51,500 Apache Corp., 5.68%, Depositary Shares, Ser B 4,519,125
55,645 Devon Energy Corp., 6.49%, Ser A 5,341,920
20,000 Lasmo America Ltd., 8.15% (R) 2,200,000
Telecommunications 2.06% 3,100,000
50,000 Touch America Holdings, Inc., $6.875* 3,100,000
Utilities 65.84% 98,921,892
229,475 Alabama Power Co., 5.20% 4,933,713
19,450 Baltimore Gas & Electric Co., 6.70%, Ser 1993 1,947,431
30,000 Baltimore Gas & Electric Co., 6.99%, Ser 1995 3,063,750
67,342 Boston Edison Co., 4.78% 5,050,650
220,000 Coastal Finance I, 8.375% 3,795,000
186,000 El Paso Tennessee Pipeline Co., 8.25%, Ser A 7,998,000
180,700 Energy East Capital Trust I, 8.25% 4,557,254
33,000 Florida Power & Light Co., 6.75%, Ser U 3,267,000
52,000 Hawaiian Electric Industries Capital Trust I, 8.36% 1,318,200
14,000 Idaho Power Co., 7.07% 1,424,500
16,500 Massachusetts Electric Co., 6.99% 1,678,875
20,411 Monongahela Power Co., $6.28, Ser D 1,469,592
55,500 Monongahela Power Co., 7.73%, Ser L 4,606,500
49,260 PSI Energy, Inc., 6.875% 4,827,480
47,998 Public Service Electric & Gas Co., 6.92% 4,871,797
381,511 Puget Energy Inc., 7.45%, Ser II 9,575,926
220,986 Sierra Pacific Power Co., 7.80%, Ser 1 (Class A) 4,419,720
55,000 South Carolina Electric & Gas Co., 6.52% 5,445,000
184,215 TDS Capital Trust I, 8.50% 4,564,848
122,700 TDS Capital Trust II, 8.04% 2,964,432
34,000 TXU US Holdings Co., $1.805, Depositary Shares, Ser B 727,600
123,180 TXU US Holdings Co., $1.875, Depositary Shares, Ser A 2,722,278
53,200 TXU US Holdings Co., $7.98 5,507,865
35,000 Virginia Electric & Power Co., $6.98 3,539,375
10,000 Virginia Electric & Power Co., $7.05 1,021,250
35,528 Wisconsin Public Service Corp., 6.76% 3,623,856
COMMON STOCKS 46.36% 69,647,505
(Cost $82,505,705)
Telecommunications 0.02% 25,080
57,000 Touch America Holdings, Inc. 25,080
Utilities 46.34% 69,622,425
199,900 Alliant Energy Corp. 3,202,398
247,500 Aquila, Inc. 915,750
182,700 CH Energy Group, Inc. 9,107,595
79,700 Dominion Resources, Inc. 3,825,600
107,000 DPL, Inc. 1,476,600
148,500 DTE Energy Co. 6,695,865
90,000 Duke Energy Corp. 1,844,100
325,000 Energy East Corp. 6,922,500
166,000 KeySpan Corp. 6,063,980
44,000 NiSource, Inc. 726,880
255,100 Northeast Utilities 3,839,255
135,000 NSTAR 5,663,250
134,632 OGE Energy Corp. 2,147,380
44,500 Peoples Energy Corp. 1,617,575
69,000 Progress Energy, Inc. 2,878,680
176,250 Progress Energy, Inc. (Contingent Value Obligation) 31,725
130,400 Puget Energy, Inc. 2,776,217
369,000 Sierra Pacific Resources 2,206,620
221,750 TECO Energy, Inc. 3,281,900
52,400 WPS Resources Corp. 2,027,356
228,000 Xcel Energy, Inc. 2,371,200
INTEREST CREDIT PAR VALUE
ISSUER, MATURITY DATE RATE RATING (000s OMITTED) VALUE
SHORT-TERM INVESTMENTS 1.56% $2,348,000
(Cost $2,348,000)
Commercial Paper 1.56%
ChevronTexaco Corp., 11-01-02 1.64% A-1+ $2,348 2,348,000
TOTAL INVESTMENTS 166.82% $250,645,190
OTHER ASSETS AND LIABILITIES, NET (66.82%) ($100,395,604)
TOTAL NET ASSETS 100.00% $150,249,586
* Non-income producing security.
(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 $5,867,500 or 2.34% of net assets as of
October 31, 2002.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to
financial statements.
ASSETS AND
LIABILITIES
October 31, 2002
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 $274,285,620) $250,645,190
Cash 495
Dividends receivable 1,053,283
Other assets 58,754
Total assets 251,757,722
LIABILITIES
Income payable 975,177
Payable to affiliates 195,626
Other payables and accrued expenses 139,784
Total liabilities 1,310,587
Dutch Auction Rate Transferrable Securities preferred
shares (DARTS) Series A, at value, unlimited number
of shares of beneficial interest authorized with no
par value, 500 shares issued, liquidation preference
of $100,000 per share 50,105,047
DARTS Series B, at value, unlimited number of shares of
beneficial interest authorized with no par value, 500
shares issued, liquidation preference of $100,000
per share 50,092,502
NET ASSETS
Common shares capital paid-in 168,078,401
Accumulated net realized loss on investments (543,363)
Net unrealized depreciation of investments (23,640,430)
Accumulated net investment income 6,354,978
Net assets applicable to common shares $150,249,586
NET ASSET VALUE PER COMMON SHARE
Based on 15,002,724 shares of beneficial interest
outstanding -- unlimited number of shares
authorized with no par value $10.01
See notes to
financial statements.
OPERATIONS
For the year ended
October 31, 2002
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 $17,956,205
Interest 90,723
Total investment income 18,046,928
EXPENSES
Investment management fee 2,256,544
Administration fee 270,840
DARTS auction fee 268,472
Federal excise tax 191,446
Miscellaneous 54,350
Auditing fee 53,550
Custodian fee 51,550
Printing 47,129
Transfer agent fee 46,454
Trustees' fee 13,940
Legal fee 3,713
Interest expense 859
Total expenses 3,258,847
Net investment income 14,788,081
REALIZED AND UNREALIZED LOSS
Net realized loss on investments (535,880)
Change in net unrealized appreciation (depreciation)
of investments (31,436,761)
Net realized and unrealized loss (31,972,641)
Distributions to DARTS Series A (897,552)
Distributions to DARTS Series B (868,249)
(1,765,801)
Decrease in net assets from operations ($18,950,361)
See notes to
financial statements.
CHANGES IN
NET ASSETS
This 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 dif-
ference reflects
earnings less
expenses, any
investment gains
and losses, distri-
butions paid to
shareholders,
if any, and any
increase due
to the sale of
common shares.
YEAR YEAR
ENDED ENDED
10-31-01 10-31-02
INCREASE IN NET ASSETS
From operations
Net investment income $15,714,277 $14,788,081
Net realized gain (loss) 2,175,201 (535,880)
Change in net unrealized
appreciation (depreciation) (5,189,747) (31,436,761)
Distributions to DARTS Series A and B (3,738,945) (1,765,801)
Increase (decrease) in net assets
resulting from operations 8,960,786 (18,950,361)
Distributions to common shareholders
From net investment income (11,701,326) (11,701,834)
NET ASSETS APPLICABLE TO COMMON SHARES
Beginning of period 183,642,321 180,901,781
End of period 1 $180,901,781 $150,249,586
1 Includes accumulated net investment income of $2,674,929 and $6,354,978,
respectively.
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 10-31-98 10-31-99 10-31-00 10-31-01 10-31-02
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $12.34 $13.23 $12.09 $12.24 $12.06
Net investment income 1 1.09 1.07 1.06 1.05 0.99
Net realized and unrealized
gain (loss) on investments 0.97 (1.10) 0.21 (0.20) (2.14)
Distributions to DARTS Series A and B (0.27) (0.26) (0.31) (0.25) (0.12)
Total from investment operations 1.79 (0.29) 0.96 0.60 (1.27)
Less distributions to
common shareholders
From net investment income (0.90) (0.84) (0.81) (0.78) (0.78)
In excess of net investment income -- (0.01) -- -- --
(0.90) (0.85) (0.81) (0.78) (0.78)
Net asset value, end of period $13.23 $12.09 $12.24 $12.06 $10.01
Per share market value, end of period $12.13 $9.75 $10.13 $10.93 $9.40
Total return at market value 2 (%) 13.51 (13.16) 12.56 15.22 (7.55)
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to common
shares, end of period (in millions) $199 $181 $184 $181 $150
Ratio of expenses to average
net assets 3 (%) 1.72 1.74 1.85 1.78 1.91
Ratio of net investment income
to average net assets 4 (%) 8.24 8.29 9.13 8.46 8.66
Portfolio turnover (%) 27 26 18 27 10
SENIOR SECURITIES
Total DARTS Series A outstanding
(in millions) $50 $50 $50 $50 $50
Total DARTS Series B outstanding
(in millions) $50 $50 $50 $50 $50
Involuntary liquidation preference
DARTS Series A per unit (in thousands) $100 $100 $100 $100 $100
Involuntary liquidation preference
DARTS Series B per unit (in thousands) $100 $100 $100 $100 $100
Approximate market value per unit
(in thousands) $100 $100 $100 $100 $100
Asset coverage per unit 5 $302,763 $286,177 $283,629 $283,166 $247,689
1 Based on the average of the shares outstanding.
2 Assumes dividend reinvestment.
3 Ratios calculated on the basis of expenses relative to the average net
assets for common shares. Without the exclusion of preferred shares, the
ratio of expenses would have been 1.14%, 1.14%, 1.17%, 1.16% and 1.20%
respectively.
4 Ratios calculated on the basis of net investment income relative to the
average net assets for common shares. Without the exclusion of preferred
shares, the ratio of net investment income would have been 5.48%, 5.46%,
5.80%, 5.50% and 5.46%, respectively.
5 Calculated by subtracting the Fund's total liabilities from the Fund's
total assets and dividing such amount by the number of DARTS outstanding as
of the applicable 1940 Act Evaluation Date, which may differ from the
financial reporting date.
See notes to
financial statements.
NOTES TO
STATEMENTS
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.
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 that is distributed to
shareholders. Therefore, no federal income tax provision is required. For
federal income tax purposes, the Fund has $533,811 of a capital loss
carryforward available, to the extent provided by regulations, to offset
future net realized capital gains. To the extent that such carryforward is
used by the Fund, no capital gain distributions will be made. The entire
loss carryforward expires October 31, 2010.
Dividends, interest and distributions
Dividend income on investment securities is recorded on the ex-dividend
date or, in the case of some foreign securities, on the date thereafter
when the Fund identifies the dividend. Interest income on investment
securities is recorded on the accrual basis. Foreign income may be subject
to foreign withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income
and realized gains on the ex-dividend date. During the year ended October
31, 2002, the tax character of distributions paid was as follows: ordinary
income $13,467,635. As of October 31, 2002, the components of distributable
earnings on a tax basis included $7,421,799 of undistributed ordinary
income.
Such distributions and distributable earnings, 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.
Distributions in excess of tax basis earnings and profits, if any, are
reported in the Fund's financial statements as a return of capital.
Dutch Auction Rate Transferable Securities preferred shares Series A and
Series B
The Fund issued Dutch Auction Rate Transferable Securities preferred shares
("DARTS"), 598 shares of Series A and 598 shares of Series B, in a public
offering. The underwriting discount was recorded as a reduction of the
capital of common shares. During the year ended October 31, 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 that
was established at the offering of the DARTS and has been reset every 49
days thereafter by an auction. Dividend rates on DARTS Series A ranged from
1.50% to 2.13% and on Series B from 1.43% to 2.03%, during the year ended
October 31, 2002. Accrued dividends on DARTS are included in the value of
DARTS on the Fund's statement of assets and liabilities.
The DARTS are redeemable at the option of the Fund, at a redemption price
equal to $100,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The DARTS are also subject to mandatory redemption
at a redemption price equal to $100,000 per share, plus accumulated and
unpaid dividends, if the Fund is in default on its asset coverage
requirements with respect to the DARTS. If the dividends on the DARTS shall
remain unpaid in an amount equal to two full years' dividends, the holders
of the DARTS, as a class, have the right to elect a majority of the Board
of Trustees. In general, the holders of the DARTS and the common
shareholders have equal voting rights of one vote per share, except that
the holders of the DARTS, as a class, vote to elect two members of the
Board of Trustees, and separate class votes are required on certain matters
that affect the respective interests of the DARTS and common
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.
Change in financial classification for DARTS
In accordance with the provisions of EITF D-98, "Classification and
Measurement of Redeemable Securities", effective for the current period,
the Fund has reclassified its DARTS outside of permanent equity in the net
assets section of the statement of assets and liabilities. In addition,
distributions to DARTS shareholders are now classified as a component of
the "Increase in net assets resulting from operations" on the statement of
operations and statement of changes in net assets, and as a component of
the "Total from investment operations" in the financial highlights. Prior
years' amounts presented have been restated to conform to this year's
presentation. This change has no impact on the net assets applicable to
common shares of the Fund.
Use of estimates
The preparation of these financial statements, in accordance with
accounting principles generally accepted in the United States of America,
incorporates estimates made by management in determining the reported
amount of assets, liabilities, revenues and expenses of the Fund. Actual
results could differ from these estimates.
NOTE B
Management fee and transactions
with affiliates and others
The Fund has an investment management contract with John Hancock Advisers,
LLC (the "Adviser"), a wholly owned subsidiary of The Berkeley Financial
Group, LLC. Under the investment management contract, the Fund pays a
monthly management fee to the Adviser at an annual rate of 0.50% of the
Fund's average weekly net assets and the value attributable to the DARTS,
plus 5.00% of the Fund's weekly gross income. The Adviser's total fee is
limited to a maximum amount equal to 1.00% annually of the Fund's average
weekly net assets and the value attributable to the DARTS. For the year
ended October 31, 2002, the advisory fee incurred did not exceed the
maximum advisory fee allowed.
The Fund has an administrative agreement with the Adviser under which the
Adviser oversees the custodial, auditing, valuation, accounting, legal,
stock transfer and dividend disbursing services and maintains Fund
communications with the shareholders. The Fund pays the Adviser a monthly
administration fee at an annual rate of 0.10% of the Fund's average weekly
net assets plus the value attributable to the DARTS.
Ms. Maureen R. Ford and Mr. John M. DeCiccio 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 Compen-
sation Plan. The Fund makes investments into other John Hancock funds, as
applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are
recorded on the Fund's books as an other asset. The deferred compensation
liability and the related other asset are always equal and are marked to
market on a periodic basis to reflect any income earned by the investment
as well as any unrealized gains or losses. The Deferred Compen-
sation Plan investments had no impact on the operations of the Fund.
NOTE C
Fund common share transactions
This listing illustrates the reclassification of the Fund's capital
accounts and the number of common shares outstanding at the beginning and
end of the last two periods, along with the corresponding dollar value.
YEAR ENDED 10-31-01 YEAR ENDED 10-31-02
SHARES AMOUNT SHARES AMOUNT
Beginning of
period 15,002,724 $168,349,024 15,002,724 $168,272,712
Reclassification of
capital accounts -- (76,312) -- (194,311)
End of period 15,002,724 $168,272,712 15,002,724 $168,078,401
NOTE D
Investment transactions
Purchases and proceeds from sales of securities, other than short-term
securities and obligations of the U.S. government, during the year ended
October 31, 2002, aggregated $30,652,343 and $27,633,156, respectively.
The cost of investments owned on October 31, 2002, including short-term
investments, for federal income tax purposes was $274,295,175. Gross
unrealized appreciation and depreciation of investments aggregated
$9,310,745 and $32,960,730, respectively, resulting in net unrealized
depreciation of $23,649,985. The difference between book basis and tax
basis net unrealized depreciation of investments is attributable primarily
to the tax deferral of losses on wash sales.
NOTE E
Reclassification of accounts
During the year ended October 31, 2002, the Fund reclassified amounts to
reflect an increase in accumulated net realized loss on investments of
$2,165,292, an increase in accumulated net investment income of $2,359,603
and a decrease in capital paid-in of $194,311. This represents the amount
necessary to report these balances on a tax basis, excluding certain
temporary differences, as of October 31, 2002. Additional adjustments may
be needed in subsequent reporting periods. These reclassifications, which
have no impact on the net asset value of the Fund, are primarily
attributable to the treatment of deferred compensation in the computation
of distributable income and capital gains under federal tax rules versus
accounting principles generally accepted in the United States of America.
The calculation of net investment income per share in the financial
highlights excludes these adjustments.
AUDITORS'
REPORT
Report of
Deloitte & Touche
LLP, Independent
Auditors
To The Board of Trustees and Shareholders of
John Hancock Patriot Premium Dividend Fund II,
We have audited the accompanying statement of assets and liabilities of
John Hancock Patriot Premium Dividend Fund II (the "Fund") including the
schedule of investments, as of October 31, 2002, and the related statement
of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at October 31, 2002,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the John Hancock Patriot Premium Dividend Fund II as of October 31,
2002, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 6, 2002
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished
with respect to the distributions of the Fund, if any, paid during its
taxable year ended October 31, 2002.
With respect to the ordinary dividends paid by the Fund for the fiscal year
ended October 31, 2002, 100.00% of the dividends qualify for the corporate
dividends-received deduction.
If the Fund paid dividends during the fiscal year, shareholders will be
mailed a 2002 U.S. Treasury Department Form 1099-DIV in January 2003. This
will reflect the total of all distributions that are taxable for the
calendar year 2002.
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
of beneficial interest. The Fund will pursue its objective by investing in
a diversified portfolio of dividend paying preferred and common stocks.
The Fund's non-fundamental investment policy, with respect to the quality
of ratings of its portfolio investments, 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 of
comparable quality as determined by the Adviser. The Fund will invest in
common stocks of issuers whose senior debt is rated investment grade or, in
the case of issuers that have no rated senior debt outstanding, whose
senior debt is considered by the Adviser to be of comparable quality. This
policy supersedes the requirement that at least 80% of the Fund's total
assets consist of preferred stocks and debt obligations rated "A" or higher
and dividend paying common stocks whose issuers have senior debt rated "A"
or higher.
On November 20, 2001, the Fund's Trustees approved the following investment
policy investment restriction change, effective December 15, 2001. Under
normal circumstances the Fund will invest at least 80% of its assets in
dividend-paying securities. The "Assets" are defined as net assets
including the liquidation preference amount of the DARTS plus borrowings
for investment purposes. The Fund will notify shareholders at least 60 days
prior to any change in this 80% investment policy.
In November 2002, the Board of Trustees adopted several amendments to the
Fund's By-Laws, including provisions relating to the calling of a special
meeting and requiring advance notice of shareholder proposals or nominees
for Trustee. The advance notice provisions in the By-Laws require
shareholders to notify the Fund in writing of any proposal which they
intend to present at an annual meeting of shareholders, including any
nominations for trustee, between 90 and 120 days prior to the first
anniversary of the mailing date of the notice from the prior year's annual
meeting of shareholders. The notification must be in the form prescribed by
the By-Laws. The advance notice provisions provide the Fund and its
Trustees with the opportunity to thoughtfully consider and address the
matters proposed before the Fund prepares and mails its proxy statement to
shareholders. Other amendments set forth the procedures, which must be
followed in order for a shareholder to call a special meeting of
shareholders. Please contact the Secretary of the Fund for additional
information about the advance notice requirements or the other amendments
to the By-Laws.
DIVIDEND
REINVESTMENT PLAN
The Fund offers its shareholders 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 Mellon Investor Services, as plan agent for the common
shareholders (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. Share- holders 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,
non-participants will receive cash and participants in the Plan will
receive the equivalent in common shares. If the market price of the common
shares on the payment date of the dividend is equal to or exceeds their net
asset value as determined on the payment date, participants will be issued
common shares (out of authorized but unissued shares) at a value equal to
the higher of net asset value or 95% of the market price. If the net asset
value exceeds the market price of the common shares at such time, or if the
Board of Trustees declares a dividend payable only in cash, the Plan Agent
will, as agent for Plan participants, buy shares in the open market, on the
New York Stock Exchange or elsewhere, for the participant's accounts. Such
purchases will be made promptly after the payable date for such dividend
and, in any event, prior to the next ex- dividend date after such date,
except where necessary to comply with federal securities laws. If, before
the Plan Agent has completed its purchases, the market price exceeds the
net asset value of the common shares, the average per share purchase price
paid by the Plan Agent may exceed the net asset value of the common shares,
resulting in the acquisition of fewer shares than if the dividend had been
paid in shares issued by the Fund.
Each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of dividends and distributions. 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 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, except for certain
brokerage commissions, as described above.
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 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. The Plan Agent will hold common shares in the account of each
Plan participant in non-certificated form in the name of the participant.
Proxy material relating to the shareholder's 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 3338, South Hackensack, NJ
07606-1938 (telephone 1-800-852-0218).
SHAREHOLDER
COMMUNICATION
AND ASSISTANCE
If you have any questions concerning the Fund, we will be pleased to assist
you. If you hold shares in your own name and not with a brokerage firm,
please address all notices, correspondence, questions or other
communications regarding the Fund to the transfer agent at:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Telephone 1-800-852-0218
If your shares are held with a brokerage firm, you should contact that
firm, bank or other nominee for assistance.
SHAREHOLDER MEETING (unaudited)
On March 7, 2002, the Annual Meeting of the Fund was held to elect five
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 are duly elected and qualified, with the votes
tabulated as follows:
WITHHELD
FOR AUTHORITY
James F. Carlin 8,743,336 114,918
William H. Cunningham 8,724,767 133,487
John P. Toolan 8,726,227 132,027
John A. Moore 8,725,370 132,884
Patti McGill Peterson 8,726,834 131,420
The preferred shareholders elected John M. Deciccio to serve until his
respective successor is duly elected and qualified, with the votes
tabulated as follows: 539 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, 2002, with the votes tabulated as follows: 8,714,742 FOR, 48,422
AGAINST and 95,090 ABSTAINING.
TRUSTEES & OFFICERS
This chart provides information about the Trustees and Officers who oversee
your John Hancock fund. Officers elected by the Trustees manage the
day-to-day operations of the Fund and execute policies formulated by the
Trustees.
INDEPENDENT TRUSTEES
NUMBER OF
NAME, AGE TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
James F. Carlin 2, Born: 1940 1989 30
Chairman and CEO, Alpha Analytical Laboratories (chemical analysis); Part
Owner and Treasurer, Lawrence Carlin Insurance Agency, Inc. (since 1995);
Part Owner and Vice President, Mone Lawrence Carlin Insurance Agency, Inc.
(since 1996); Director/Treasurer, Rizzo Associates (until 2000); Chairman and
CEO, Carlin Consolidated, Inc. (management/investments); Director/Partner,
Proctor Carlin & Co., Inc. (until 1999); Trustee, Massachusetts Health and
Education Tax Exempt Trust; Director of the following: Uno Restaurant Corp.
(until 2001), Arbella Mutual (insurance) (until 2000), HealthPlan Services, Inc.
(until 1999), Flagship Healthcare, Inc. (until 1999), Carlin Insurance Agency, Inc.
(until 1999), Chairman, Massachusetts Board of Higher Education (until 1999).
William H. Cunningham, Born: 1944 1995 30
Former Chancellor, University of Texas System and former President of the
University of Texas, Austin, Texas; Chairman and CEO, IBT Technologies
(until 2001); Director of the following: The University of Texas Investment
Management Company (until 2000), Hire.com (since 2000), STC Broad-
casting, Inc. and Sunrise Television Corp. (since 2001), Symtx, Inc. (since 2001),
Adorno/Rogers Technology, Inc. (since 2001), Pinnacle Foods Corporation
(since 2001), rateGenius (since 2001); LaQuinta Motor Inns, Inc. (hotel manage-
ment company) (until 1998), Jefferson-Pilot Corporation (diversified life insurance
company), New Century Equity Holdings (formerly Billing Concepts) (until
2001), eCertain (until 2001), ClassMap.com (until 2001), Agile Ventures
(until 2001), LBJ Foundation (until 2000), Golfsmith International, Inc. (until
2000), Metamor Worldwide (until 2000); AskRed.com (until 2001), Southwest
Airlines and Introgen; Advisory Director, Q Investments; Advisory Director,
Chase Bank (formerly Texas Commerce Bank -- Austin), LIN Television (since 2002),
WilTel Communications (since 2002).
Ronald R. Dion, Born: 1946 1998 30
Chairman and Chief Executive Officer, R.M. Bradley & Co., Inc.; Director,
The New England Council and Massachusetts Roundtable; Trustee, North
Shore Medical Center; Director, BJ's Wholesale Club, Inc. and a corporator
of the Eastern Bank; Trustee, Emmanuel College.
Charles L. Ladner 2, Born: 1938 1992 30
Chairman and Trustee, Dunwoody Village, Inc. (continuing care retire-
ment community); Senior Vice President and Chief Financial Officer, UGI
Corporation (Public Utility Holding Company) (retired 1998); Vice President
and Director for AmeriGas, Inc. (retired 1998); Director of AmeriGas
Partners, L.P. (until 1997) (gas distribution); Director, EnergyNorth, Inc.
(until 1995); Director, Parks and History Association (since 2001).
Patti McGill Peterson, Born: 1943 2002 39
Executive Director, Council for International Exchange of Scholars
(since 1998), Vice President, Institute of International Education
(since January 1998); Senior Fellow, Cornell Institute of Public Affairs,
Cornell University (until 1997); President Emerita of Wells College and
St. Lawrence University; Director, Niagara Mohawk Power Corporation
(electric utility).
John A. Moore 2, Born: 1939 2002 39
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Senior Scientist, Sciences
International (health research) (since 1998); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Steven Pruchansky, Born: 1944 1992 30
Chairman and Chief Executive Officer, Mast Holdings, Inc. (since 2000);
Director and President, Mast Holdings, Inc. (until 2000); Managing
Director, JonJames, LLC (real estate) (since 2001); Director, First Signature
Bank & Trust Company (until 1991); Director, Mast Realty Trust (until
1994); President, Maxwell Building Corp. (until 1991).
Norman H. Smith, Born: 1933 1992 30
Lieutenant General, United States Marine Corps; Deputy Chief of Staff for
Manpower and Reserve Affairs, Headquarters Marine Corps; Commanding
General III Marine Expeditionary Force/3rd Marine Division (retired 1991).
John P. Toolan 2, Born: 1930 1993 30
Director, The Smith Barney Muni Bond Funds, The Smith Barney Tax-Free
Money Funds, Inc., Vantage Money Market Funds (mutual funds), The
Inefficient-Market Fund, Inc. (closed-end investment company) and Smith
Barney Trust Company of Florida; Chairman, Smith Barney Trust Company
(retired 1991); Director, Smith Barney, Inc., Mutual Management Company
and Smith Barney Advisers, Inc. (investment advisers) (retired 1991); Senior
Executive Vice President, Director and member of the Executive Committee,
Smith Barney, Harris Upham & Co., Incorporated (investment bankers) (until 1991).
INTERESTED TRUSTEES 3
NAME, AGE NUMBER OF
POSITION(S) HELD WITH FUND TRUSTEE JOHN HANCOCK
PRINCIPAL OCCUPATION(S) AND OTHER OF FUND FUNDS OVERSEEN
DIRECTORSHIPS DURING PAST 5 YEARS SINCE 1 BY TRUSTEE
John M. DeCiccio, Born: 1948 2001 61
Trustee
Executive Vice President and Chief Investment Officer, John Hancock
Financial Services, Inc.; Director, Executive Vice President and Chief
Investment Officer, John Hancock Life Insurance Company; Chairman of
the Committee of Finance of John Hancock Life Insurance Company;
Director, John Hancock Subsidiaries, LLC, Hancock Natural Resource Group,
Independence Investment LLC, Independence Fixed Income LLC, John
Hancock Advisers, LLC (the "Adviser") and The Berkeley Financial Group,
LLC ("The Berkeley Group"), John Hancock Funds, LLC ("John Hancock
Funds"), Massachusetts Business Development Corporation; Director, John
Hancock Insurance Agency, Inc. ("Insurance Agency, Inc.") (until 1999) and
John Hancock Signature Services, Inc.("Signature Services") (until 1997).
Maureen R. Ford, Born: 1955 2000 61
Trustee, Chairman, President and Chief Executive Officer
Executive Vice President, John Hancock Financial Services, Inc., John
Hancock Life Insurance Company; Chairman, Director, President and
Chief Executive Officer, the Adviser and The Berkeley Group; Chairman,
Director and Chief Executive Officer, John Hancock Funds; Chairman,
Director and Chief Executive Officer, Sovereign Asset Management
Corporation ("SAMCorp."); Director, Independence Investment LLC,
Independence Fixed Income LLC and Signature Services; Senior Vice
President, MassMutual Insurance Co. (until 1999).
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME, AGE
POSITION(S) HELD WITH FUND OFFICER
PRINCIPAL OCCUPATION(S) AND OF FUND
DIRECTORSHIPS DURING PAST 5 YEARS SINCE
William L. Braman, Born: 1953 2000
Executive Vice President and Chief Investment Officer
Executive Vice President and Chief Investment Officer, the Adviser and each of the John
Hancock funds; Director, SAMCorp., Executive Vice President and Chief Investment
Officer, Baring Asset Management, London U.K. (until 2000).
Richard A. Brown, Born: 1949 2000
Senior Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, the Adviser, John Hancock
Funds, and The Berkeley Group; Second Vice President and Senior Associate Controller,
Corporate Tax Department, John Hancock Financial Services, Inc. (until 2001).
Thomas H. Connors, Born: 1959 1992
Vice President and Compliance Officer
Vice President and Compliance Officer, the Adviser and each of the John Hancock funds;
Vice President, John Hancock Funds.
William H. King, Born: 1952 1992
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each
of the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 1992
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Vice President,
Signature Services (until 2000), Director, Senior Vice President and Secretary, NM Capital.
The business address for all Trustees and Officers is 101 Huntington
Avenue, Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or her
successor is elected.
2 Member of Audit Committee.
3 Interested Trustees hold positions with the Fund's investment adviser,
underwriter and certain other affiliates.
FOR YOUR
INFORMATION
INVESTMENT ADVISER
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, Massachusetts 02199-7603
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND DISBURSER
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
TRANSFER AGENT FOR DARTS
Bankers Trust Company
4 Albany Street
New York, New York 10005
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, Massachusetts 02116-5022
STOCK SYMBOL
Listed New York Stock Exchange:
PDT
For shareholder assistance
refer to page 21
HOW TO
CONTACT US
On the Internet www.jhfunds.com
By regular mail Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
Customer service representatives 1-800-852-0218
24-hour automated information 1-800-843-0090
TDD Line 1-800-231-5469
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-852-0218
1-800-843-0090
1-800-231-5469 (TDD)
www.jhfunds.com
PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
P200A 10/02
12/02