| UNITED STATES | ||
| SECURITIES AND EXCHANGE COMMISSION | ||
| Washington, D.C. 20549 | ||
| FORM N-Q | ||
| QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS 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 Schaivone | ||
| 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: | July 31, 2009 | |
ITEM 1. SCHEDULE OF INVESTMENTS
Patriot Premium Dividend Fund II
Securities owned by the Fund on
July 31, 2009 (Unaudited)
| Shares | Value | |
| Common stocks 37.59% | $177,231,981 | |
| (Cost $206,001,581) | ||
| Diversified Financial Services 2.35% | 11,095,002 | |
| Citigroup, Inc. | 3,500,001 | 11,095,002 |
| Electric Utilities 3.99% | 18,810,772 | |
| American Electric Power Co., Inc. | 70,000 | 2,167,200 |
| Duke Energy Corp. (Z) | 230,000 | 3,560,400 |
| Northeast Utilities | 45,000 | 1,035,450 |
| Progress Energy, Inc. (Z) | 303,500 | 11,970,040 |
| Progress Energy, Inc. CVO (I)(Z) | 337,750 | 77,682 |
| Industrial Conglomerates 0.37% | 1,742,000 | |
| General Electric Co. (Z) | 130,000 | 1,742,000 |
| Integrated Telecommunication Services 2.08% | 9,824,377 | |
| AT&T, Inc. (Z) | 240,000 | 6,295,200 |
| FairPoint Communications, Inc. (Z) | 2,504 | 1,477 |
| Verizon Communications, Inc. (Z) | 110,000 | 3,527,700 |
| Multi-Utilities 28.80% | 135,759,830 | |
| Alliant Energy Corp. (Z) | 435,000 | 11,379,600 |
| Ameren Corp. (Z) | 165,400 | 4,206,122 |
| CH Energy Group, Inc. (Z) | 560,000 | 27,714,400 |
| Consolidated Edison, Inc. (Z) | 70,000 | 2,755,200 |
| Dominion Resources, Inc. (Z) | 125,000 | 4,225,000 |
| DTE Energy Co. (Z) | 435,000 | 14,990,100 |
| Integrys Energy Group, Inc. (Z) | 240,000 | 8,107,200 |
| NiSource, Inc. (Z) | 490,000 | 6,316,100 |
| NSTAR (Z) | 510,000 | 16,371,000 |
| OGE Energy Corp. (Z) | 255,000 | 7,675,500 |
| PNM Resources, Inc. (Z) | 500,000 | 6,100,000 |
| Teco Energy, Inc. (Z) | 570,000 | 7,689,300 |
| Vectren Corp. (Z) | 129,300 | 3,175,608 |
| Xcel Energy, Inc. (Z) | 755,000 | 15,054,700 |
| Shares | Value | |
| Preferred Stocks 109.62% | $516,771,447 | |
| (Cost $640,204,373) | ||
| Agricultural Products 3.02% | 14,253,891 | |
| Ocean Spray Cranberries, Inc., 6.250%, Ser A (S)(Z) | 224,250 | 14,253,891 |
| Cable & Satellite 0.22% | 1,017,318 | |
| Comcast Corp., 7.000% (Z) | 42,530 | 1,017,318 |
| Consumer Finance 6.94% | 32,734,419 | |
| HSBC Finance Corp., 6.360%, Depositary Shares, Ser B (Z) | 35,600 | 636,884 |
| HSBC Holdings PLC, 6.200%, Ser A (Z) | 25,000 | 501,750 |
| HSBC USA, Inc., 2.858% (Z) | 499,000 | 18,208,510 |
| SLM Corp., 6.970%, Ser A (Z) | 445,500 | 13,387,275 |
| Diversified Banks 5.66% | 26,674,743 | |
| Sovereign Bancorp, Inc., 7.300%, Depositary Shares, Ser C (Z) | 449,800 | 10,304,918 |
| Wells Fargo & Co., 8.000% (Z) | 683,500 | 16,369,825 |
| Page 1 |
Patriot Premium Dividend Fund II
Securities owned by the Fund on
July 31, 2009 (Unaudited)
| Shares | Value | |
| Diversified Financial Services 21.89% | 103,177,327 | |
| Bank of America Corp., 6.204%, Depositary Shares, Ser D (Z) | 960,000 | 18,528,000 |
| Bank of America Corp., 6.375% (Z) | 1,160,000 | 21,054,000 |
| Bank of America Corp., 6.625% (Z) | 360,000 | 6,620,400 |
| Bank of America Corp., 8.200% (Z) | 35,000 | 759,500 |
| Bank of America Corp., 8.625% (Z) | 102,000 | 2,317,440 |
| Citigroup Capital VII , 7.125% | 30,000 | 589,500 |
| Deutsche Bank Contingent Capital Trust II , 6.550% (Z) | 275,275 | 5,431,176 |
| Deutsche Bank Contingent Capital Trust III , 7.600% (Z) | 542,000 | 11,880,640 |
| JPMorgan Chase & Co., 5.490%, Ser G (Z) | 278,000 | 12,209,760 |
| JPMorgan Chase & Co., 5.720%, Ser F (Z) | 328,760 | 14,074,216 |
| JPMorgan Chase & Co., 6.150%, Ser E (Z) | 209,100 | 9,712,695 |
| Electric Utilities 39.94% | 188,296,705 | |
| Alabama Power Co., 5.200% (Z) | 1,172,500 | 24,446,625 |
| Carolina Power & Light Co., 5.440% (Z) | 11,382 | 1,016,555 |
| Central Illinois Light Co., 4.640% (Z) | 7,460 | 551,574 |
| Constellation Energy Group, Inc., 8.625%, Ser A (Z) | 300,000 | 7,185,000 |
| Duquesne Light Co., 6.500% (Z) | 519,900 | 23,298,019 |
| Entergy Arkansas, Inc., 6.450% (Z) | 350,000 | 7,098,455 |
| Entergy Mississippi, Inc., 6.250% (Z) | 667,000 | 13,673,500 |
| FPC Capital I, 7.100%, Ser A (Z) | 242,500 | 6,006,725 |
| Georgia Power Co., 6.000%, Ser R (Z) | 80,000 | 1,992,000 |
| Great Plains Energy, Inc., 4.500% (Z) | 7,085 | 541,648 |
| HECO Capital Trust III, 6.500% (Z) | 173,100 | 3,983,031 |
| Interstate Power & Light Co., 7.100%, Ser C (Z) | 176,600 | 4,467,980 |
| Interstate Power & Light Co., 8.375%, Ser B (Z) | 132,800 | 3,586,928 |
| NSTAR Electric Co., 4.780% (Z) | 100,000 | 7,209,380 |
| PPL Electric Utilities Corp., 4.400% (Z) | 29,780 | 2,233,500 |
| PPL Electric Utilities Corp., 4.600% (Z) | 3,917 | 263,271 |
| PPL Electric Utilities Corp., 6.250%, Depositary Shares (Z) | 1,000,000 | 23,250,000 |
| PPL Energy Supply, LLC, 7.000% (Z) | 272,500 | 6,995,075 |
| Public Service Electric & Gas Co., 4.180%, Ser B (Z) | 53,677 | 3,758,464 |
| Public Service Electric & Gas Co., 4.300%, Ser C (Z) | 8,280 | 645,840 |
| Public Service Electric & Gas Co., 6.920% (Z) | 131,425 | 12,366,278 |
| Southern California Edison Co., 6.000%, Ser C (Z) | 80,000 | 6,140,000 |
| Southern California Edison Co., 6.125% (Z) | 195,000 | 15,222,187 |
| Virginia Electric & Power Co., 6.980% (Z) | 45,500 | 4,322,500 |
| Westar Energy, Inc., 6.100% (Z) | 333,700 | 8,042,170 |
| Gas Utilities 0.38% | 1,787,979 | |
| Southwest Gas Capital II, 7.700% (Z) | 72,300 | 1,787,979 |
| Integrated Telecommunication Services 0.00% | 0 | |
| Touch America Holdings, Inc., 6.875% | 161,778 | — |
| Investment Banking & Brokerage 0.98% | 4,645,782 | |
| Goldman Sachs Group, Inc., 6.200%, Ser B (Z) | 129,500 | 3,092,460 |
| Lehman Brothers Holdings, Inc., 5.670%, | ||
| Depositary Shares, Ser D (I) | 553,600 | 8,304 |
| Lehman Brothers Holdings, Inc., 5.940%, | ||
| Depositary Shares, Ser C (I) | 300,600 | 9,018 |
| Morgan Stanley Capital Trust III, 6.250% (Z) | 75,000 | 1,536,000 |
| Page 2 |
Patriot Premium Dividend Fund II
Securities owned by the Fund on
July 31, 2009 (Unaudited)
| Shares | Value | |
| Life & Health Insurance 6.52% | 30,728,845 | |
| Metlife, Inc., 6.500%, Ser B (Z) | 1,055,000 | 24,159,500 |
| Principal Financial Group, 6.518%, Ser B (P)(Z) | 160,000 | 2,792,000 |
| Prudential PLC, 6.750% (Z) | 176,100 | 3,777,345 |
| Movies & Entertainment 0.98% | 4,604,100 | |
| Viacom, Inc., 6.850% (Z) | 206,000 | 4,604,100 |
| Multi-Utilities 7.16% | 33,761,326 | |
| Baltimore Gas & Electric Co., 6.700%, Ser 1993 (Z) | 20,250 | 1,793,391 |
| Baltimore Gas & Electric Co., 6.990%, Ser 1995 (Z) | 134,000 | 11,356,500 |
| BGE Capital Trust II, 6.200% (Z) | 616,000 | 12,166,000 |
| Sempra Energy Corp., 4.360% (Z) | 38,500 | 2,887,500 |
| Sempra Energy Corp., 4.750% (Z) | 12,610 | 1,043,477 |
| Union Electric Co., 3.700% (Z) | 12,262 | 866,387 |
| Xcel Energy, Inc., 4.080%, Ser B (Z) | 8,610 | 589,785 |
| Xcel Energy, Inc., 4.110%, Ser D (Z) | 33,691 | 2,358,370 |
| Xcel Energy, Inc., 4.160%, Ser E (Z) | 9,410 | 699,916 |
| Oil & Gas Exploration & Production 7.50% | 35,383,734 | |
| Apache Corp., 5.680%, Depositary Shares, Ser B (Z) | 236,649 | 19,634,484 |
| Nexen, Inc., 7.350% (Z) | 759,000 | 15,749,250 |
| Oil & Gas Storage & Transportation 1.34% | 6,298,500 | |
| Southern Union Co., 7.550% (Z) | 255,000 | 6,298,500 |
| Real Estate Investment Trusts 3.12% | 14,727,778 | |
| Kimco Realty Co., 6.650%, Depositary Shares, Ser F (Z) | 200,000 | 3,842,000 |
| Public Storage, Inc., 6.125% (Z) | 92,700 | 2,052,378 |
| Public Storage, Inc., 6.450%, Depositary Shares, Ser X (Z) | 48,000 | 985,440 |
| Public Storage, Inc., 6.625% (Z) | 64,000 | 1,377,280 |
| Public Storage, Inc., 6.750% (Z) | 60,000 | 1,311,600 |
| Public Storage, Inc., 6.950% (Z) | 190,000 | 4,202,800 |
| Public Storage, Inc., 7.500%, Depositary Shares, Ser V (Z) | 39,000 | 956,280 |
| Specialized Finance 0.22% | 1,045,580 | |
| CIT Group, Inc., 6.350%, Ser A (Z) | 454,600 | 1,045,580 |
| Trucking 1.89% | 8,892,000 | |
| AMERCO, Inc., 8.500%, Ser A (Z) | 390,000 | 8,892,000 |
| U.S. Government Agency 0.08% | 368,720 | |
| Federal Home Loan Mortgage Corp. (8.375% to 12-31-12, then | ||
| variable), 8.375%, Ser Z | 55,000 | 72,050 |
| Federal National Mortgage Association (8.250% to 12-31-10 then | ||
| variable), 8.250%, Ser S | 159,500 | 296,670 |
| Wireless Telecommunication Services 1.78% | 8,372,700 | |
| Telephone & Data Systems, Inc., 6.625% (Z) | 246,000 | 4,907,700 |
| United States Cellular Corp., 7.500% (Z) | 157,500 | 3,465,000 |
| Page 3 |
Patriot Premium Dividend Fund II
Securities owned by the Fund on
July 31, 2009 (Unaudited)
| Value | |||
| Short-term investments 1.19% | $5,599,978 | ||
| (Cost $5,599,978) | |||
| Rate | Par Value | Value | |
| Commercial Paper 1.19% | 5,599,978 | ||
| Chevron Funding Corp. | 0.0700% | $5,600,000 | 5,599,978 |
| Total investments (Cost $851,805,932)† 148.40% | $699,603,406 | ||
| Other assets and liabilities, net (48.40%) | ($228,181,584) | ||
| Total net assets 100.00% | $471,421,822 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
(I) Non-income producing security.
(P) Variable rate obligation. The coupon rate shown represents the rate at period end.
(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 for the Committed Facility Agreement. Total collateral value at July 31, 2009 was $590,985,250.
† At July 31, 2009, the aggregate cost of investment securities for federal income tax purposes was $854,632,699. Net unrealized depreciation aggregated $155,029,293, of which $18,420,822 related to appreciated investment securities and $173,450,115 related to depreciated investment securities.
| Page 4 |
Notes to the Schedule of Investments (Unaudited)
Security valuation
Investments are stated at value as of the close of the regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. Equity securities held by the Fund are valued at the last sale price or official closing price (closing bid price or last evaluated price if no sale has occurred) as of the close of business on the principal securities exchange (domestic or foreign) on which they trade. Debt obligations are valued based on the evaluated prices provided by an independent pricing service, which utilizes both dealer-supplied and electronic data processing techniques, which take into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. 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. Equity and debt obligations, for which there are no prices available from an independent pricing service, are valued based on broker quotes or fair valued as described below. Certain short-term debt instruments are valued at amortized cost.
Other portfolio securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by the Fund’s Pricing Committee in accordance with procedures adopted 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 such securities used in computing the net asset value of the Fund’s shares are generally determined as of such times. Occasionally, significant events that affect the values of such securities may occur between the times at which such values are generally determined and the close of the NYSE. Upon such an occurrence, these securities will be valued at fair value as determined in good faith under consistently applied procedures established by and under the General supervision of the Board of Trustees.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer’s assets, general economic and market conditions, interest rates, investor perceptions and market liquidity.
Fair Value Measurements
The Fund uses a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three-tier hierarchy of inputs and the valuation techniques used are summarized below:
• Level 1 — Exchange traded prices in active markets for identical securities. This technique is used for exchange-traded domestic common and preferred equities, certain foreign equities, warrants, rights, options and futures. In addition, investment companies, including mutual funds, are valued using this technique.
• Level 2 — Prices determined using 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 are based on an evaluation of the inputs described. These techniques are used for certain domestic preferred equities, certain foreign equities, unlisted rights and warrants, and fixed income securities. Also, over-the-counter derivative contracts, including swaps, foreign forward currency contracts, and certain options use these techniques.
| 5 |
• Level 3 — Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable, such as when there is little or no market activity for an investment, unobservable inputs may be used. Unobservable inputs reflect the Fund’s Pricing Committee’s own assumptions about the factors that market participants would use in pricing an investment and would be based on the best information available. Securities using this technique are generally thinly traded or privately placed, and may be valued using broker quotes, which may not only use observable or unobservable inputs but may also include the use of the brokers’ own judgments about the assumptions that market participants would use.
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 inputs used to value the Funds’ investments as of July 31, 2009, by major security category or security type.
| Investments in Securities | Level 1 | Level 2 | Level 3 | Total |
| Consumer Discretionary | $5,621,418 | - | - | $5,621,418 |
| Consumer Staples | - | $14,253,891 | - | 14,253,891 |
| Energy | 23,083,200 | 19,634,484 | - | 42,717,684 |
| Financials | 225,198,196 | - | - | 225,198,196 |
| Industrials | 10,634,000 | - | - | 10,634,000 |
| Telecommunication Services | 18,197,077 | - | - | 18,197,077 |
| Utilities | 247,832,006 | 129,471,474 | $77,682 | 377,381,162 |
| Short-term Investments | - | 5,599,978 | - | 5,599,978 |
| Total Investments in Securities | $530,565,897 | $168,959,827 | $77,682 | $699,603,406 |
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
| Consumer | Utilities | Total | |
| Staples | |||
| Balance as of 10/31/08 | $19,621,875 | $111,457 | $19,733,332 |
| Accrued discounts/premiums | - | - | - |
| Realized gain (loss) | - | - | - |
| Change in Unrealized | |||
| appreciation (depreciation) | - | (33,775) | (33,775) |
| Net purchases (sales) | - | - | - |
| Transfers in and/or out of Level 3 | (19,621,875) | - | (19,621,875) |
| Balance as of 7/31/09 | - | $77,682 | $77,682 |
Fixed income risk
Fixed income securities are subject to credit and interest rate risk and involve some risk of default in connection with principal and interest payments.
Leverage utilization risk
The Fund utilizes leverage to increase assets available for investment. The Fund has a Committed Facility Agreement (CFA) with a third party commercial bank 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.
| 6 |
Sector risk
The Fund may concentrate investments in a particular industry, sector of the economy or invest in a limited number of companies. The concentration is closely tied to a single sector of the economy which may cause the Fund to underperform other sectors. Specifically, utilities can be hurt by higher interest costs in connection with capital construction programs, costs associated with environmental and other regulations and the effects of economic declines, surplus capacity and increased competition. Accordingly, the concentration may make the Fund’s value more volatile and investment values may rise and fall more rapidly.
| 7 |
ITEM 2. 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-Q, the registrant's principal executive officer and principal accounting 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 last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Separate certifications for the registrant's principal executive officer and principal accounting officer, as required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
| 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: September 15, 2009
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: September 15, 2009
By: /s/ Charles A. Rizzo
-------------------------------------
Charles A. Rizzo
Chief Financial Officer
Date: September 15, 2009