Newswires
Annual Report by Investment Company (Form N-CSR)
N-CSR
UNITED STATES
Washington, D.C. 20549
JOHN HANCOCK PREMIUM DIVIDEND FUND
SALVATORE SCHIAVONE
BOSTON, MA 02116
Premium Dividend Fund
October 31, 2024
Premium Dividend Fund
Joseph H. Bozoyan , CFA
James Gearhart , CFA
Caryn E. Rothman , CFA
Jonas Grazulis , CFA
John Hancock Premium Dividend Fund (the fund) is a closed-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act).
The Board of Trustees may terminate or reduce the amount paid under the Plan at any time. The termination or reduction may have an adverse effect on the market price of the fund's shares.
John Hancock Investment Management LLC (the Advisor) serves as investment advisor for the fund. John Hancock Investment Management Distributors LLC (the Distributor), an affiliate of the Advisor, serves as distributor for the common shares offered through the equity shelf offering of the fund. The Advisor and the Distributor are indirect, principally owned subsidiaries of John Hancock Life Insurance Company (U.S.A. ), which in tuis a subsidiary of Manulife Financial Corporation (MFC).
Boston, Massachusetts
December 16, 2024
U.S. Government agency obligations risk.
U.S. government-sponsored entities such as Federal National Mortgage Association (Fannie Mae ), Federal Home Loan Mortgage Corporation (Freddie Mac ) and the Federal Home Loan Banks, although chartered or sponsored by Congress , are not funded by congressional appropriations and the debt securities that they issue are neither guaranteed nor issued by the U.S. government. Such debt securities are subject to the risk of default on the payment of interest and/or principal, similar to the debt securities of private issuers. The maximum potential liability of the issuers of some U.S. government obligations may greatly exceed their current resources, including any legal right to support from the U.S. government. Although the U.S. government has provided financial support to Fannie Mae and Freddie Mac in the past, there can be no assurance that it will support these or other government-sponsored entities in the future.
Hassell H. McClellan ,
Steven R. Pruchansky ,
Andrew G. Arnott
Kristie M. Feinberg
Fernando A. Silva
Salvatore Schiavone
Christopher (Kit) Sechler
Trevor Swanberg
John Hancock Investment Management LLC
Manulife Investment Management (US) LLC
Joseph H. Bozoyan , CFA James Gearhart , CFA Jonas Grazulis , CFA Caryn E. Rothman , CFA
John Hancock Investment Management Distributors LLC
State Street Bank and Trust Company
Computershare Shareowner Services, LLC
K&L Gates LLP
PricewaterhouseCoopers LLP
Listed New York Stock Exchange : PDT
John Hancock Investment Management LLC , 200 Berkeley Street , Boston, MA 02116-5010, 800-225-5291, jhinvestments.com
Manulife Investment Management , the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by its affiliates under license.
SECURITIES AND EXCHANGE COMMISSION
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05908
(Exact name of registrant as specified in charter)
200 BERKELEY STREET , BOSTON, MA 02116
(Address of principal executive offices) (Zip code)
TREASURER
200 BERKELEY STREET
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 543-9634
Date of fiscal year end: October 31
Date of reporting period: October 31, 2024
ITEM 1. REPORT TO
STOCKHOLDERS
.
Annual report
John Hancock
Closed-end U.S. equity
Ticker: PDT
Managed distribution plan
The fund has adopted a managed distribution plan (Plan). Under the Plan, the fund makes monthly distributions of an amount equal to $0.0825 per share, which will be paid monthly until further notice. The fund may make additional distributions (i) for purposes of not incurring federal income tax on investment company taxable income and net capital gain, if any, not included in such regular distributions and (ii) for purposes of not incurring federal excise tax on ordinary income and capital gain net income, if any, not included in such regular monthly distributions.
The Plan provides that the Board of Trustees of the fund may amend the terms of the Plan or terminate the Plan at any time without prior notice to the fund's shareholders. The Plan is subject to periodic review by the fund's Board of Trustees .
You shouldn't draw any conclusions about the fund's investment performance from the amount of the fund's distributions or from the terms of the Plan. The fund's total retuat net asset value (NAV) is presented in the "Financial highlights" section of this report.
With each distribution that does not consist solely of net investment income, the fund will issue a notice to shareholders and an accompanying press release that will provide detailed information regarding the amount and composition of the distribution and other related information. The amounts and sources of distributions reported in the notice to shareholders are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend on the fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income-tax purposes. The fund may, at times, distribute more than its net investment income and net realized capital gains; therefore, a portion of your distribution may result in a retuof capital. A retuof capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A retuof capital does not necessarily reflect the fund's investment performance and should not be confused with "yield" or "income".
John Hancock
Table of contents
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48
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53
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| ANNUAL REPORT
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JOHN HANCOCK PREMIUM DIVIDEND FUND
|
1 |
Your fund at a glance
INVESTMENT OBJECTIVE
The fund seeks to provide high current income, consistent with modest growth of capital.
AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/2024 (%)
The Primary Blended Index is 70% ICE BofA U.S. All Capital Securities and 30% S&P 500 Utilities Index.
The Intercontinental Exchange (ICE) Bank of America (BofA ) U.S. All Capital Securities Index tracks all fixed-to floating-rate, perpetual callable and capital securities of the ICE BofA U.S. Corporate Index.
The S&P 500 Utilities Index tracks the performance of companies in the S&P 500 Index that are primarily involved in water, electrical power, and natural gas distribution industries.
It is not possible to invest directly in an index. Index figures do not reflect expenses, which would result in lower returns.
The performance data contained within this material represents past performance, which does not guarantee future results.
Investment returns and principal value will fluctuate and a shareholder may sustain losses. Further, the fund's performance at net asset value (NAV) is different from the fund's performance at closing market price because the closing market price is subject to the dynamics of secondary market trading. Market risk may increase when shares are purchased at a premium to NAV or sold at a discount to NAV. Current month-end performance may be higher or lower than the performance cited. The fund's most recent performance can be found at jhinvestments.com or by calling 800-852-0218.
| 2 | |
ANNUAL REPORT
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PERFORMANCE HIGHLIGHTS OVER THE LAST TWELVE MONTHS
Dividend-producing securities posted notable gains
Like most interest-rate sensitive investments, dividend-producing securities solidly advanced as 10-year Treasury bond yields declined.
Fund holdings in utility common stocks boosted performance
Utility common stocks with spare nuclear capacity ranked among the fund's top individual performers, powered by growing demand from energy-hungry data centers.
Bank preferred stocks lagged
Pressure in the real estate/office market, and deposit outflows following the failure of high-profile lenders weighed on regional bank preferred securities.
PORTFOLIO COMPOSITION AS OF 10/31/2024 (% of total investments)
SECTOR COMPOSITION AS OF 10/31/2024 (% of total investments)
ANNUAL REPORT 
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JOHN HANCOCK PREMIUM DIVIDEND FUND
|
3 |
Management's discussion of fund performance
How would you describe the investment backdrop during the 12 months ended October 31, 2024 ?
Dividend-producing investments posted sizable gains as 10-year Treasury yields declined during the past 12 months. Disinflation spurred expectations that the U.S. Federal Reserve would lower its benchmark policy rate after holding it at a decades-high level for more than a year, prompting investors to push market interest rates lower and the prices of fixed-income-sensitive securities higher. Utility common stocks performed especially well against this backdrop, further boosted by the historic growth of U.S. power demand alongside the rapid growth of data centers powering artificial intelligence (AI). Meanwhile, preferred securities, which are a form of equity that trades like a bond, posted gains that topped most other major fixed-income segments, even though they generally lagged utility common stocks.
How did the fund perform?
From a sector perspective, the electric utility, energy and communication groups posted the biggest gains in the past 12 months. The fund's top-performing individual holdings this period included Entergy Corp. , an integrated energy company that provides electricity to customers in Arkansas , Louisiana , Mississippi and Texas , and Public Service Enterprise Group, Inc. , an energy company serving New Jersey . Both were buoyed by expectations that the companies, which have
|
TOP 10 ISSUERS AS OF
|
|
| 4.6 | |
| 3.4 | |
| 3.3 | |
| 3.0 | |
| 3.1 | |
| 2.8 | |
| 2.7 | |
| 2.7 | |
| 2.5 | |
| Morgan Stanley | 2.3 |
|
TOTAL
|
30.4
|
| Cash and cash equivalents are not included. |
| 4 | |
ANNUAL REPORT
|
spare nuclear power generation capacity, will continue to benefit from demand for low-carbon electricity to power energy-hungry artificial intelligence data centers. Gas pipeline Kinder Morgan, Inc. was another individual standout holding, driven by expectations of its growth linked to the AI-driven need for energy and the "re-shoring" of U.S. manufacturing, as companies bring production back to the country to strengthen supply chains. Wireless and broadband provider AT&T, Inc. was another strong performer, advancing partly in response to more rational pricing of wireless services. The stock also carried an attractive dividend, which drew investor demand.
In contrast, bank preferred stocks were laggards. Regional banks in particular were hurt by pressure in the real estate/office market, and deposit outflows following the failure of high-profile lenders. Elsewhere, British oil company BP PLC also detracted, hurt by weak earnings results largely due to a slump in crude oil prices. Algonquin Power & Utilities Corp. was another detractor. The company disappointed investors with worse-than-expected earnings as it transitions to a pure-play regulated utility, exiting some lines of business and reducing its debt and simplify its business.
MANAGED BY
The views expressed in this report are exclusively those of the portfolio management team at Manulife Investment Management (US) LLC , and are subject to change. They are not meant as investment advice. Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund's investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
5 |
A look at performance
TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2024
|
Average annual total returns (%)
|
Cumulative total returns (%)
|
||||
|
1-Year
|
5-Year
|
10-Year
|
5-year
|
10-Year
|
|
| At Net asset value | 39.63 | 5.76 | 7.56 | 32.29 | 107.35 |
| At Market price | 45.73 | 2.12 | 8.25 | 11.05 | 120.96 |
| Primary Blended Index | 26.60 | 4.74 | 6.30 | 26.07 | 84.17 |
| Secondary Blended Index | 25.95 | 4.75 | 6.28 | 26.09 | 83.95 |
Performance figures assume all distributions have been reinvested.
The returns reflect past results and should not be considered indicative of future performance. Investment returns and principal value will fluctuate and a shareholder may sustain losses. Further, the fund's performance at net asset value (NAV) is different from the fund's performance at closing market price because the closing market price is subject to the dynamics of secondary market trading. Market risk may be augmented when shares are purchased at a premium to NAV or when shares need to be sold at a discount to NAV. Current month-end performance may be higher or lower than the performance cited. The fund's most recent performance can be found at jhinvestments.com or by calling 800-852-0218.
The performance table above and the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares. The fund's performance results reflect any applicable fee waivers or expense reductions, without which the expenses would increase and results would have been less favorable.
| 6 | |
ANNUAL REPORT
|
This chart shows what happened to a hypothetical $10,000 investment in John Hancock Premium Dividend Fund for the periods indicated, assuming all distributions were reinvested. For comparison, we've shown the same investment in two blended indexes.
The Primary Blended Index is 70% ICE BofA U.S. All Capital Securities and 30% S&P 500 Utilities Index.
The Secondary Blended Index is 70% ICE Bank of America Preferred Stock DRD Eligible Index and 30% S&P 500 Utilities Index.
The Intercontinental Exchange (ICE) Bank of America (BofA ) U.S. All Capital Securities Index tracks all fixed-to floating-rate, perpetual callable and capital securities of the ICE BofA U.S. Corporate Index.
The S&P 500 Utilities Index tracks the performance of companies in the S&P 500 Index that are primarily involved in water, electrical power, and natural gas distribution industries.
The Intercontinental Exchange (ICE) Bank of America (BofA ) Preferred Stock Dividend Received Deduction (DRD) Eligible Index tracks investment-grade fixed-rate U.S. dollar-denominated preferred securities and fixed-to-floating-rate securities.
It is not possible to invest directly in an index. Index figures do not reflect expenses, which would result in lower returns.
The returns reflect past results and should not be considered indicative of future performance.
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
7 |
Fund's investments
AS OF 10-31-24
|
Shares
|
Value
|
||||
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Common stocks 68.4% (44.2% of Total investments)
|
|
||||
| (Cost |
|||||
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Communication services 7.4%
|
49,700,994
|
||||
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Diversified telecommunication services 7.3%
|
|||||
| 1,091,919 | 24,611,854 | ||||
| 579,417 | 24,410,838 | ||||
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Media 0.1%
|
|||||
| 62,002 | 678,302 | ||||
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Consumer staples 2.0%
|
13,270,000
|
||||
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Tobacco 2.0%
|
|||||
| 100,000 | 13,270,000 | ||||
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Energy 11.1%
|
74,511,633
|
||||
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Oil, gas and consumable fuels 11.1%
|
|||||
| 590,950 | 17,350,292 | ||||
| 281,200 | 11,360,480 | ||||
| 1,164,001 | 28,529,661 | ||||
| 110,000 | 10,656,800 | ||||
| 265,000 | 6,614,400 | ||||
|
Financials 1.3%
|
8,578,060
|
||||
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Banks 1.3%
|
|||||
| 300,879 | 8,578,060 | ||||
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Materials 0.8%
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5,136,000
|
||||
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Metals and mining 0.8%
|
|||||
| 480,000 | 5,136,000 | ||||
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Real estate 1.7%
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11,286,450
|
||||
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Specialized REITs 1.7%
|
|||||
| 105,000 | 11,286,450 | ||||
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Utilities 44.1%
|
294,574,376
|
||||
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Electric utilities 26.7%
|
|||||
| 140,000 | 13,825,000 | ||||
| 175,000 | 20,172,250 | ||||
| 110,000 | 17,025,800 | ||||
| 245,000 | 14,807,800 | ||||
| 234,033 | 15,411,073 | ||||
| 230,000 | 9,039,000 | ||||
| 415,000 | 17,359,450 | ||||
| 530,000 | 21,194,700 | ||||
| 70,000 | 6,146,700 |
| 8 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
SEE NOTES TO FINANCIAL STATEMENTS |
|
Shares
|
Value
|
||||
|
Utilities (continued)
|
|||||
|
Electric utilities (continued)
|
|||||
| 565,000 | |||||
| The SoutheCompany (B) | 135,000 | 12,289,050 | |||
| 295,000 | 12,844,300 | ||||
|
Gas utilities 2.4%
|
|||||
| 200,000 | 12,772,000 | ||||
| 140,000 | 3,347,400 | ||||
|
Independent power and renewable electricity producers
1.8%
|
|||||
| 710,086 | 11,709,318 | ||||
|
Multi-utilities 13.2%
|
|||||
| 1,742,584 | 8,434,107 | ||||
| 268,800 | 16,001,664 | ||||
| 105,000 | 13,043,100 | ||||
| 199,166 | 12,664,966 | ||||
| 230,000 | 8,086,800 | ||||
| 200,000 | 17,882,000 | ||||
| Sempra (B) | 145,394 | 12,121,498 | |||
|
Preferred securities (D) 40.4% (26.1% of Total investments)
|
|
||||
| (Cost |
|||||
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Consumer discretionary 0.7%
|
4,323,000
|
||||
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Broadline retail 0.7%
|
|||||
| 330,000 | 4,323,000 | ||||
|
Financials 28.0%
|
187,071,386
|
||||
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Banks 11.1%
|
|||||
| 6,000 | 7,410,000 | ||||
| 323,425 | 8,764,818 | ||||
| 197,400 | 3,979,584 | ||||
| 261,075 | 6,782,729 | ||||
| 98,925 | 2,304,953 | ||||
| 80,000 | 2,036,000 | ||||
| 134,275 | 3,350,161 | ||||
| 325,000 | 8,879,000 | ||||
| 293,250 | 5,627,468 | ||||
| 74,850 | 1,887,717 | ||||
| 218,000 | 5,766,100 | ||||
| 14,000 | 17,288,320 |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
9 |
|
Shares
|
Value
|
||||
|
Financials (continued)
|
|||||
|
Capital markets 6.9%
|
|||||
| 309,200 | |||||
| 170,000 | 3,139,900 | ||||
| 53,575 | 1,046,856 | ||||
| Morgan Stanley, 6.375% (B) | 344,227 | 8,746,808 | |||
| Morgan Stanley, 6.500% (B) | 279,000 | 7,281,900 | |||
| Morgan Stanley, 6.625% (B) | 145,050 | 3,829,320 | |||
| Morgan Stanley, 7.125% (B) | 190,075 | 4,812,699 | |||
| 349,525 | 9,056,193 | ||||
|
Consumer finance 1.6%
|
|||||
| 124,350 | 2,575,289 | ||||
| 325,825 | 8,458,417 | ||||
|
Financial services 1.9%
|
|||||
| 437,250 | 11,805,750 | ||||
| 40,000 | 1,084,000 | ||||
| 3,375 | 66,150 | ||||
|
Insurance 6.5%
|
|||||
| 54,253 | 1,362,835 | ||||
| 207,525 | 5,269,060 | ||||
| 349,213 | 8,754,770 | ||||
| 125,485 | 3,112,028 | ||||
| 121,400 | 2,596,746 | ||||
| 300,100 | 8,150,716 | ||||
| 330,275 | 9,356,691 | ||||
| 166,975 | 4,545,060 | ||||
|
Industrials 0.3%
|
2,111,589
|
||||
|
Aerospace and defense 0.3%
|
|||||
| 39,300 | 2,111,589 | ||||
|
Information technology 0.6%
|
4,266,438
|
||||
|
Technology hardware, storage and peripherals 0.6%
|
|||||
| 73,750 | 4,266,438 |
| 10 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
SEE NOTES TO FINANCIAL STATEMENTS |
| Shares | Value | ||||
| Utilities 10.8% | |||||
| Electric utilities 9.0% | |||||
| 199,700 | 5,024,452 | ||||
| 166,600 | 7,455,350 | ||||
| 83,250 | 4,404,758 | ||||
| 13,347 | 974,464 | ||||
| 100,000 | 8,350,000 | ||||
| 566,770 | 11,981,518 | ||||
| 249,380 | 5,139,722 | ||||
| SCE Trust VII, 7.500% (B) | 400,000 | 10,676,000 | |||
| SCE Trust VIII, 6.950% (B) | 217,275 | 5,757,788 | |||
| 12,262 | 822,412 | ||||
| Gas utilities 0.7% | |||||
| 183,775 | 4,572,322 | ||||
| Multi-utilities 1.1% | |||||
| 240,675 | 6,182,941 | ||||
| Sempra, 5.750% (B) | 45,000 | 1,116,900 | |||
| Rate (%) | Maturity date | Par value^ | Value | ||
| Corporate bonds 44.7% (28.9% of Total investments) | |||||
| (Cost |
|||||
| Communication services 0.8% | 5,520,592 | ||||
| Media 0.8% | |||||
| 6.375 | 5,963,000 | 5,520,592 | |||
| Consumer discretionary 1.0% | 6,487,551 | ||||
| Automobiles 1.0% | |||||
| 6.500 | 6,546,000 | 6,487,551 | |||
| Energy 3.0% | 20,302,149 | ||||
| Oil, gas and consumable fuels 3.0% | |||||
| 6.250 | 10,000,000 | 9,814,769 | |||
| 7.200 | 3,525,000 | 3,641,064 |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
11 |
|
Rate (%)
|
Maturity date
|
Par value^
|
Value
|
||
|
Energy (continued)
|
|||||
|
Oil, gas and consumable fuels (continued)
|
|||||
| 7.375 | 3,304,000 | ||||
| 8.500 | 3,130,000 | 3,477,558 | |||
|
Financials 35.2%
|
235,227,168
|
||||
|
Banks 24.2%
|
|||||
| 5.875 | 7,000,000 | 7,064,659 | |||
| 6.125 | 13,000,000 | 13,204,931 | |||
| 7.375 | 8,095,000 | 8,464,432 | |||
| 7.625 | 10,225,000 | 10,879,569 | |||
| 7.854 | 18,000,000 | 17,900,663 | |||
| 8.008 | 5,285,000 | 5,252,650 | |||
| 6.450 | 7,000,000 | 7,030,919 | |||
| 7.250 | 4,300,000 | 4,468,659 | |||
| 5.625 | 12,115,000 | 11,967,222 | |||
| 5.625 | 3,571,000 | 3,556,382 | |||
| 6.875 | 6,445,000 | 6,810,309 | |||
| 5.000 | 4,253,000 | 4,088,118 | |||
| 3.500 | 9,600,000 | 8,734,165 | |||
| 3.400 | 4,900,000 | 4,516,560 | |||
| 6.000 | 11,285,000 | 11,297,335 | |||
| 6.200 | 12,680,000 | 12,785,967 | |||
| 6.250 | 6,100,000 | 6,106,686 |
| 12 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
SEE NOTES TO FINANCIAL STATEMENTS |
| Rate (%) | Maturity date | Par value^ | Value | ||
| Financials (continued) | |||||
| Banks (continued) | |||||
| 6.850 | 5,350,000 | ||||
| 7.625 | 11,301,000 | 12,146,247 | |||
| Capital markets 5.4% | |||||
| 6.700 | 4,332,000 | 4,459,855 | |||
| 5.000 | 4,389,000 | 4,275,727 | |||
| 6.125 | 5,896,000 | 5,847,981 | |||
| 7.500 | 12,857,000 | 13,745,869 | |||
| 7.500 | 7,308,000 | 7,662,792 | |||
| Consumer finance 0.6% | |||||
| 6.125 | 3,750,000 | 3,739,678 | |||
| Insurance 5.0% | |||||
| 6.625 | 3,400,000 | 3,343,564 | |||
| 7.950 | 6,000,000 | 6,225,557 | |||
| 6.000 | 5,100,000 | 5,091,677 | |||
| 6.500 | 10,000,000 | 8,595,701 | |||
| 7.000 | 11,549,000 | 10,447,374 | |||
| Industrials 0.7% | 4,432,323 | ||||
| Trading companies and distributors 0.7% | |||||
| 6.000 | 4,500,000 | 4,432,323 | |||
| Utilities 4.0% | 26,784,533 | ||||
| Electric utilities 3.0% | |||||
| 5.000 | 4,650,000 | 4,525,811 | |||
| 5.375 | 9,835,000 | 9,737,074 |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
13 |
|
Rate (%)
|
Maturity date
|
Par value^
|
Value
|
||
|
Utilities (continued)
|
|||||
|
Electric utilities (continued)
|
|||||
| 7.125 | 5,600,000 | ||||
|
Multi-utilities 1.0%
|
|||||
| 4.350 | 7,000,000 | 6,796,326 | |||
|
Capital preferred securities (H) 1.2% (0.7% of Total investments)
|
|
||||
| (Cost |
|||||
|
Financials 1.2%
|
7,679,109
|
||||
|
Insurance 1.2%
|
|||||
| 7.875 | 6,990,000 | 7,679,109 | |||
|
Yield (%)
|
Shares
|
Value
|
|||
|
Short-term investments 0.2% (0.1% of Total investments)
|
|
||||
| (Cost |
|||||
|
Short-term funds 0.2%
|
1,424,990
|
||||
| 4.6622(J) | 142,455 | 1,424,990 |
|
Total investments (Cost
|
|
||||
|
Other assets and liabilities, net (54.9%)
|
(366,666,267)
|
||||
|
Total net assets 100.0%
|
|
| The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund unless otherwise indicated. | |
| ^All par values are denominated in |
|
|
Security Abbreviations and Legend
|
|
| ADR | American Depositary Receipt |
| CME | CME Group Published Rates |
| CMT | Constant Maturity Treasury |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
| (A) | All or a portion of this security is on loan as of 10-31-24, and is a component of the fund's leverage under the Liquidity Agreement. The value of securities on loan amounted to |
| (B) | All or a portion of this security is pledged as collateral pursuant to the Liquidity Agreement. Total collateral value at |
| (C) | Non-income producing security. |
| (D) | Includes preferred stocks and hybrid securities with characteristics of both equity and debt that pay dividends on a periodic basis. |
| (E) | Variable rate obligation. The coupon rate shown represents the rate at period end. |
| (F) | Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date. |
| (G) | This security is 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. |
| (H) | Includes hybrid securities with characteristics of both equity and debt that trade with, and pay, interest income. |
| 14 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
SEE NOTES TO FINANCIAL STATEMENTS |
| (I) | Investment is an affiliate of the fund, the advisor and/or subadvisor. |
| (J) | The rate shown is the annualized seven-day yield as of 10-31-24. |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
15 |
DERIVATIVES
SWAPS
|
Interest rate swaps
|
||||||||||
|
Counterparty (OTC)/
Centrally cleared |
Notional
amount |
Currency
|
Payments
made |
Payments
received |
Fixed
payment frequency |
Floating
payment frequency |
Maturity
date |
Unamortized
upfront payment paid (received) |
Unrealized
appreciation (depreciation) |
Value
|
| Centrally cleared | 187,000,000 | USD | Fixed 3.662% | USD SOFR Compounded OIS
(a)
|
Semi-Annual | Quarterly | - | |||
| Centrally cleared | 93,000,000 | USD | Fixed 3.473% | USD SOFR Compounded OIS
(a)
|
Semi-Annual | Quarterly | - | 276,024 | 276,024 | |
| Centrally cleared | 46,850,000 | USD | Fixed 3.817% | USD SOFR Compounded OIS
(a)
|
Semi-Annual | Quarterly | - | (382,445) | (382,445) | |
|
-
|
|
|
|
(a)
|
At 10-31-24, the overnight SOFR was 4.900%. |
|
Derivatives Currency Abbreviations
|
|
| USD |
|
Derivatives Abbreviations
|
|
| OIS | Overnight Index Swap |
| OTC | Over-the-counter |
| SOFR | Secured Overnight Financing Rate |
At 10-31-24, the aggregate cost of investments for federal income tax purposes was $967,644,579 . Net unrealized appreciation aggregated to $67,250,138 , of which $111,271,584 related to gross unrealized appreciation and $44,021,446 related to gross unrealized depreciation.
See Notes to financial statements regarding investment transactions and other derivatives information.
| 16 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
SEE NOTES TO FINANCIAL STATEMENTS |
Financial statements
STATEMENT OF ASSETS AND LIABILITIES
10-31-24
|
Assets
|
|
| Unaffiliated investments, at value (Cost |
|
| Affiliated investments, at value (Cost |
1,424,990 |
|
Total investments, at value (Cost
|
1,035,146,968
|
| Receivable for centrally cleared swaps | 3,837,358 |
| Dividends and interest receivable | 5,102,498 |
| Other assets | 239,188 |
|
Total assets
|
1,044,326,012
|
|
Liabilities
|
|
| Liquidity agreement | 373,700,000 |
| Interest payable | 1,779,538 |
| Payable to affiliates | |
| Administrative services fees | 88,657 |
| Trustees' fees | 613 |
| Other liabilities and accrued expenses | 276,503 |
|
Total liabilities
|
375,845,311
|
|
Net assets
|
|
|
Net assets consist of
|
|
| Paid-in capital | |
| Total distributable earnings (loss) | 67,623,456 |
|
Net assets
|
|
|
Net asset value per share
|
|
| Based on 49,185,225 shares of beneficial interest outstanding - unlimited number of shares authorized with no par value |
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
17 |
STATEMENT OF OPERATIONS
10-31-24
For the year ended
|
Investment income
|
|
| Dividends | |
| Interest | 20,327,979 |
| Dividends from affiliated investments | 483,079 |
| Less foreign taxes withheld | (327,920) |
|
Total investment income
|
57,277,446
|
|
Expenses
|
|
| Investment management fees | 7,873,806 |
| Interest expense | 22,652,343 |
| Administrative services fees | 981,495 |
| Transfer agent fees | 92,776 |
| Trustees' fees | 42,066 |
| Custodian fees | 78,174 |
| Printing and postage | 97,652 |
| Professional fees | 122,822 |
| Stock exchange listing fees | 47,932 |
| Other | 19,279 |
|
Total expenses
|
32,008,345
|
| Less expense reductions | (83,144) |
|
Net expenses
|
31,925,201
|
|
Net investment income
|
25,352,245
|
|
Realized and unrealized gain (loss)
|
|
|
Net realized gain (loss) on
|
|
| Unaffiliated investments and foreign currency transactions | 19,801,008 |
| Affiliated investments | 5,727 |
| Swap contracts | 6,251,283 |
|
26,058,018
|
|
|
Change in net unrealized appreciation (depreciation) of
|
|
| Unaffiliated investments | 151,778,108 |
| Affiliated investments | 1,161 |
| Swap contracts | (6,612,483) |
|
145,166,786
|
|
|
Net realized and unrealized gain
|
171,224,804
|
|
Increase in net assets from operations
|
|
| 18 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
SEE NOTES TO FINANCIAL STATEMENTS |
STATEMENTS OF CHANGES IN NET ASSETS
|
Year ended
|
Year ended
|
|
|
Increase (decrease) in net assets
|
||
|
From operations
|
||
| Net investment income | ||
| Net realized gain | 26,058,018 | 28,931,234 |
| Change in net unrealized appreciation (depreciation) | 145,166,786 | (96,963,351) |
|
Increase (decrease) in net assets resulting from operations
|
196,577,049
|
(44,670,218)
|
|
Distributions to shareholders
|
||
| From earnings | (48,693,374) | (48,362,463) |
| From tax retuof capital | - | (6,202,768) |
|
Total distributions
|
(48,693,374)
|
(54,565,231)
|
|
Fund share transactions
|
||
| Issued in shelf offering | - | 394,292 |
| Issued pursuant to Dividend Reinvestment Plan | - | 794,202 |
|
Total from fund share transactions
|
-
|
1,188,494
|
|
Total increase (decrease)
|
147,883,675
|
(98,046,955)
|
|
Net assets
|
||
| Beginning of year | 520,597,026 | 618,643,981 |
|
End of year
|
|
|
|
Share activity
|
||
|
Shares outstanding
|
||
| Beginning of year | 49,185,225 | 49,091,976 |
| Issued in shelf offering | - | 29,487 |
| Issued pursuant to Dividend Reinvestment Plan | - | 63,762 |
|
End of year
|
49,185,225
|
49,185,225
|
| SEE NOTES TO FINANCIAL STATEMENTS | ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
19 |
STATEMENT OF CASH FLOWS
10-31-24
For the year ended
|
Cash flows from operating activities
|
|
| Net increase in net assets from operations | |
|
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:
|
|
| Long-term investments purchased | (273,220,085) |
| Long-term investments sold | 263,385,926 |
| Net purchases and sales of short-term investments | 27,736,182 |
| Net amortization of premium (discount) | 471,990 |
| (Increase) Decrease in assets: | |
| Receivable for centrally cleared swaps | 1,373,648 |
| Dividends and interest receivable | (163,883) |
| Receivable for investments sold | 3,735,165 |
| Other assets | (1,545) |
| Increase (Decrease) in liabilities: | |
| Payable for investments purchased | (1,632,251) |
| Interest payable | (157,681) |
| Payable to affiliates | 12,558 |
| Other liabilities and accrued expenses | 22,290 |
| Net change in unrealized (appreciation) depreciation on: | |
| Investments | (151,779,269) |
| Net realized (gain) loss on: | |
| Investments | (19,516,540) |
| Proceeds received as retuof capital | 1,849,820 |
|
Net cash provided by operating activities
|
|
|
Cash flows provided by (used in) financing activities
|
|
| Distributions to shareholders | |
|
Net cash used in financing activities
|
|
|
Cash at beginning of year
|
-
|
|
Cash at end of year
|
-
|
|
Supplemental disclosure of cash flow information:
|
|
|
Cash paid for interest
|
|
| 20 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
SEE NOTES TO FINANCIAL STATEMENTS |
Financial highlights
|
Period ended
|
|
|
|
|
|
|
Per share operating performance
|
|||||
|
Net asset value, beginning of period
|
|
|
|
|
|
| Net investment income
1
|
0.52 | 0.48 | 0.72 | 0.83 | 0.83 |
| Net realized and unrealized gain (loss) on investments | 3.48 | (1.39) | (1.83) | 2.40 | (2.53) |
|
Total from investment operations
|
4.00
|
(0.91)
|
(1.11)
|
3.23
|
(1.70)
|
|
Less distributions
|
|||||
| From net investment income | (0.99) | (0.98) | (1.17) | (1.17) | (1.17) |
| From net realized gain | - | - | - | (0.02) | (0.03) |
| From tax retuof capital | - | (0.13) | - | - | - |
|
Total distributions
|
(0.99)
|
(1.11)
|
(1.17)
|
(1.19)
|
(1.20)
|
| Premium from shares sold through shelf offering | - | -
2
|
-
2
|
- | - |
|
Net asset value, end of period
|
|
|
|
|
|
|
Per share market value, end of period
|
|
|
|
|
|
|
Total retuat net asset value (%)
3,4
|
39.63
|
(7.65)
|
(8.30)
|
25.56
|
(10.89)
|
|
Total retuat market value (%)
3
|
45.73
|
(24.77)
|
(12.28)
|
49.09
|
(22.55)
|
|
Ratios and supplemental data
|
|||||
| Net assets, end of period (in millions) | |||||
| Ratios (as a percentage of average net assets): | |||||
| Expenses before reductions | 5.26 | 5.07 | 2.42 | 1.82 | 2.32 |
| Expenses including reductions
5
|
5.25 | 5.06 | 2.41 | 1.81 | 2.31 |
| Net investment income | 4.17 | 3.93 | 5.08 | 5.78 | 6.07 |
| Portfolio turnover (%) | 27 | 26 | 16 | 17 | 24 |
|
Senior securities
|
|||||
| Total debt outstanding end of period (in millions) | |||||
| Asset coverage per 6
|
|
1
|
Based on average daily shares outstanding. |
|
2
|
Less than |
|
3
|
Total retubased on net asset value reflects changes in the fund's net asset value during each period. Total retubased on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax retuof capital, if any, were reinvested. |
|
4
|
Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
|
5
|
Expenses including reductions excluding interest expense were 1.52%, 1.54%, 1.39%, 1.41% and 1.48% for the periods ended 10-31-24, 10-31-23, 10-31-22, |
|
6
|
Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 8). As debt outstanding changes, the level of invested assets may change accordingly. Asset coverage ratio provides a measure of leverage. |
| SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT
|
JOHN HANCOCK Premium Dividend Fund
|
21 |
Notes to financial statements
Note 1-Organization
Note 2-Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
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 scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M. , EasteTime. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the Valuation Policies and Procedures of the Advisor, John Hancock Investment Management LLC .
In order to value the securities, the fund uses the following valuation techniques: Equity securities, including exchange-traded or closed-end funds, are typically valued at the last sale price or official closing price on the exchange or principal market where the security trades. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. Investments by the fund in open-end mutual funds, including John Hancock Collateral Trust (JHCT), are valued at their respective NAVs each business day. Debt obligations are typically valued based on evaluated prices provided by an independent pricing vendor. Independent pricing vendors utilize matrix pricing, which takes 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, as well as broker supplied prices. Swaps are generally valued using evaluated prices obtained from an independent pricing vendor. Foreign securities and currencies are valued in U.S. dollars based on foreign currency exchange rates supplied by an independent pricing vendor.
In certain instances, the Pricing Committee of the Advisor may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the Pricing Committee following procedures established by the Advisor and adopted by the Board of Trustees . The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
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 securities valued using quoted prices in active markets for identical securities, including registered investment companies. Level 2 includes securities valued using other 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 inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the Advisor's assumptions in determining the fair value of investments. Factors used in determining value may include
| 22 | JOHN HANCOCK Premium Dividend Fund
|
ANNUAL REPORT
|
market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the fund's investments as of October 31, 2024 , by major security category or type:
|
Total
value at |
Level 1
quoted price |
Level 2
significant observable inputs |
Level 3
significant unobservable inputs |
|
|
Investments in securities:
|
||||
|
Assets
|
||||
|
Common stocks
|
|
- | - | |
|
Preferred securities
|
||||
| Consumer discretionary |
4,323,000
|
4,323,000 | - | - |
| Financials |
187,071,386
|
187,071,386 | - | - |
| Industrials |
2,111,589
|
2,111,589 | - | - |
| Information technology |
4,266,438
|
4,266,438 | - | - |
| Utilities |
72,458,627
|
63,286,215 | - | |
|
Corporate bonds
|
298,754,316
|
- | 298,754,316 | - |
|
Capital preferred securities
|
7,679,109
|
- | 7,679,109 | - |
|
Short-term investments
|
1,424,990
|
1,424,990 | - | - |
|
Total investments in securities
|
|
|
|
-
|
|
Derivatives:
|
||||
|
Assets
|
||||
| Swap contracts |
|
- | - | |
|
Liabilities
|
||||
| Swap contracts |
(528,275)
|
- | (528,275) | - |
The fund holds liabilities for which the fair value approximates the carrying amount for financial statement purposes. As of October 31, 2024 , the liability for the fund's Liquidity agreement on the Statement of assets and liabilities is categorized as Level 2 within the disclosure hierarchy.
Real estate investment trusts.
The fund may invest in real estate investment trusts (REITs). Distributions from REITs may be recorded as income and subsequently characterized by the REIT at the end of their fiscal year as a reduction of cost of investments and/or as a realized gain. As a result, the fund will estimate the components of distributions from these securities. Such estimates are revised when the actual components of the distributions are known.
Security transactions and related investment income.
Investment security transactions are accounted for on a trade date plus one basis for daily NAV calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income is recorded on ex-date, except for dividends of certain foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the fund becomes aware of the dividends. Non-cash dividends, if any, are recorded at the fair market value of the securities received.
| ANNUAL REPORT
|
JOHN HANCOCK Premium Dividend Fund
|
23 |
Distributions received on securities that represent a tax retuof capital and/or capital gain, if any, are recorded as a reduction of cost of investments and/or as a realized gain, if amounts are estimable. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Foreign investing.
Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments. Foreign investments are subject to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs), accounting standards and other factors.
Foreign taxes.
The fund may be subject to withholding tax on income, capital gains or repatriations imposed by certain countries, a portion of which may be recoverable. Foreign taxes are accrued based upon the fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. Taxes are accrued based on gains realized by the fund as a result of certain foreign security sales. In certain circumstances, estimated taxes are accrued based on unrealized appreciation of such securities. Investment income is recorded net of foreign withholding taxes.
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 may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
Expenses.
Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such 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 net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Statement of cash flows.
A Statement of cash flows is presented when a fund has a significant amount of borrowing during the period, based on the average total borrowing in relation to total assets, or when a certain percentage of the fund's investments is classified as Level 3 in the fair value hierarchy. 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 the fund's custodian and does not include any short-term investments or collateral on derivative contracts, if any.
Federal income taxes.
The fund intends to continue 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.
As of October 31, 2024 , the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Managed distribution plan.
The fund has adopted a managed distribution plan (Plan) on September 29, 2014 . Under the current plan, the fund makes monthly distributions of an amount equal to $0.0825 per share, which will be paid monthly until further notice.
Distributions under the Plan may consist of net investment income, net realized capital gains and, to the extent
| 24 | JOHN HANCOCK Premium Dividend Fund
|
ANNUAL REPORT
|
necessary, retuof capital. Retuof capital distributions may be necessary when the fund's net investment income and net capital gains are insufficient to meet the minimum distribution. In addition, the fund may also make additional distributions for the purpose of not incurring federal income and excise taxes.
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 under the managed distribution plan described above. Capital gain distributions, if any, are typically distributed annually.
The tax character of distributions for the years ended October 31, 2024 and 2023 was as follows:
|
|
|
|
| Ordinary income | ||
| Long-term capital gains | 14,564,253 | 21,762,673 |
| Retuof capital | - | 6,202,768 |
|
Total
|
|
|
As of October 31, 2024 , the components of distributable earnings on a tax basis consisted of $373,318 of undistributed ordinary income.
Such distributions and distributable earnings, on a tax basis, if any, are determined in conformity with income tax regulations, which may differ from US GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in the fund's financial statements as a retuof capital.
Capital accounts within the financial statements are adjusted for permanent book-tax differences at fiscal year end. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are primarily attributable to contingent payment debt instruments, derivative transactions, amortization and accretion on debt securities and dividend redesignation.
Note 3-Derivative instruments
The fund may invest in derivatives in order to meet its investment objective. Derivatives include a variety of different instruments that may be traded in the over-the-counter (OTC) market, on a regulated exchange or through a clearing facility. The risks in using derivatives vary depending upon the structure of the instruments, including the use of leverage, optionality, the liquidity or lack of liquidity of the contract, the creditworthiness of the counterparty or clearing organization and the volatility of the position. Some derivatives involve risks that are potentially greater than the risks associated with investing directly in the referenced securities or other referenced underlying instrument. Specifically, the fund is exposed to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction.
Certain derivatives are traded or cleared on an exchange or central clearinghouse. Exchange-traded or centrally-cleared transactions generally present less counterparty risk to a fund than OTC transactions. The exchange or clearinghouse stands between the fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the exchange or clearinghouse and the clearing member.
Centrally-cleared swap contracts are subject to clearinghouse rules, including initial and variation margin requirements, daily settlement of obligations and the clearinghouse guarantee of payments to the broker. There is, however, still counterparty risk due to the potential insolvency of the broker with respect to any margin held in the brokers' customer accounts. While clearing members are required to segregate customer assets from their own assets, in the event of insolvency, there may be a shortfall in the amount of margin held by the broker for its
| ANNUAL REPORT
|
JOHN HANCOCK Premium Dividend Fund
|
25 |
clients. Collateral or margin requirements for centrally-cleared derivatives are set by the broker or applicable clearinghouse. Margin for centrally-cleared transactions is detailed in the Statement of assets and liabilities as Receivable/Payable for centrally-cleared swaps. Securities pledged by the fund for centrally-cleared transactions, if any, are identified in the Fund's investments.
Swaps.
Swap agreements are agreements between the fund and a counterparty to exchange cash flows, assets, foreign currencies or market-linked returns at specified intervals. Swap agreements are privately negotiated in the OTC market (OTC swaps) or may be executed on a registered commodities exchange (centrally cleared swaps). Swaps are marked-to-market daily and the change in value is recorded as a component of unrealized appreciation/depreciation of swap contracts. The value of the swap will typically impose collateral posting obligations on the party that is considered out-of-the-money on the swap.
Upfront payments made/received by the fund, if any, are amortized/accreted for financial reporting purposes, with the unamortized/unaccreted portion included in the Statement of assets and liabilities. A termination payment by the counterparty or the fund is recorded as realized gain or loss, as well as the net periodic payments received or paid by the fund.
Entering into swap agreements involves, to varying degrees, elements of credit, market and documentation risk that may provide outcomes that produce losses in excess of the amounts recognized on the Statement of assets and liabilities. Such risks involve the possibility that there will be no liquid market for the swap, or that a counterparty may default on its obligation or delay payment under the swap terms. The counterparty may disagree or contest the terms of the swap. In addition to interest rate risk, market risks may also impact the swap. The fund may also suffer losses if it is unable to terminate or assign outstanding swaps or reduce its exposure through offsetting transactions.
Interest rate swaps.
Interest rate swaps represent an agreement between the fund and a counterparty to exchange cash flows based on the difference between two interest rates applied to a notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. The fund settles accrued net interest receivable or payable under the swap contracts at specified, future intervals.
During the year ended October 31, 2024 , the fund used interest rate swap contracts to manage against changes in the liquidity agreement interest rates. The fund held interest rate swaps with total USD notional amounts ranging from $280 million to $326.9 million , as measured at each quarter end.
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at October 31, 2024 by risk category:
|
Risk
|
Statement of assets
and liabilities location |
Financial
instruments location |
Assets
derivatives fair value |
Liabilities
derivatives fair value |
| Interest rate | Swap contracts, at value
1
|
Interest rate swaps |
|
1
|
Reflects cumulative value of swap contracts. Receivable/payable for centrally cleared swaps, which includes value and margin, are shown separately on the Statement of assets and liabilities. |
| 26 | JOHN HANCOCK Premium Dividend Fund
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ANNUAL REPORT
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Effect of derivative instruments on the Statement of operations
The table below summarizes the net realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended October 31, 2024 :
|
Statement of operations location - Net realized gain (loss) on:
|
|
|
Risk
|
Swap contracts
|
| Interest rate |
The table below summarizes the net change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended October 31, 2024 :
|
Statement of operations location - Change in net unrealized appreciation (depreciation) of:
|
|
|
Risk
|
Swap contracts
|
| Interest rate |
Note 4-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. The risk of material loss from such claims is considered remote.
Note 5-Fees and transactions with affiliates
Management fee.
The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor, equivalent on an annual basis to 0.50% of the fund's average daily managed assets (net assets plus borrowing under the Liquidity Agreement (LA)) (see Note 8). In addition, the fund pays to the Advisor 5.00% of the fund's daily gross income, which amounted to $2,962,950 for the year ended October 31, 2024 . The Advisor has a subadvisory agreement with Manulife Investment Management (US) LLC , an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate managed assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the year ended October 31, 2024 , this waiver amounted to 0.01% of the fund's average daily net assets. This agreement expires on July 31, 2026 , unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at that time.
The expense reductions described above amounted to $83,144 for the year ended October 31, 2024 .
Expenses waived or reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
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JOHN HANCOCK Premium Dividend Fund
|
27 |
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the year ended October 31, 2024 , were equivalent to a net annual effective rate of 0.79% of the fund's average daily managed assets.
Administrative services.
The fund has an administrative agreement with the Advisor under which the Advisor oversees the custodial, auditing, valuation, accounting, legal, compliance, stock transfer and dividend disbursing services and other operational activities and maintains fund communications with shareholders. The fund pays the Advisor a monthly administration fee at an annual rate of 0.10% of the fund's average weekly managed assets.
Distributor.
The fund will compensate the Distributor with respect to sales of the common shares offered through the equity shelf offering at a commission rate of 1.00% of the gross proceeds of the sale of common shares, a portion of which is allocated to the selling dealers. During the year ended October 31, 2024 , compensation to the Distributor was $0 , as there were no sales of common shares offered through the equity shelf offering. The Distributor has an agreement with a sub-placement agent in the sale of common shares. The fund is not responsible for payment of commissions to the sub-placement agent.
Trustee expenses.
The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. These Trustees receive from the fund and the other John Hancock closed-end funds an annual retainer. In addition, Trustee out-of-pocket expenses are allocated to each fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 6-Fund share transactions
On December 17, 2014 , the Board of Trustees approved a share repurchase plan, which is subsequently reviewed by the Board of Trustees each year in December. Under the current share repurchase plan, the fund may purchase in the open market, between January 1, 2024 and December 31, 2024 up to 10% of its outstanding common shares as of December 31, 2023 . The share repurchase plan will remain in effect between January 1, 2024 and December 31, 2024 .
During the years ended October 31, 2024 and 2023, the fund had no activities under the repurchase program. Shares repurchased and corresponding dollar amounts, if any, are included on the Statements of changes in net assets. The anti-dilutive impacts of these share repurchases, if any, are included on the Financial highlights.
Transactions in common shares, if any, are presented in the Statements of changes in net assets. In 2022, the fund filed a registration statement with the Securities and Exchange Commission , registering an additional 2,000,000 common shares through an equity shelf offering program. Under this program, the fund, subject to market conditions, may raise additional equity capital from time to time by offering new common shares at a price equal to or above the fund's net asset value per common share. Shares issued in shelf offering and corresponding dollar amounts, if any, are included on the Statements of changes in net assets. The net proceeds in excess of the net asset value of the shares sold were $0 and $27,219 for the years ended October 31, 2024 and October 31, 2023 , respectively. The premium from shares sold through these shelf offerings, if any, are included on the Financial highlights. Proceeds received in connection with the shelf offering are net of commissions and offering costs. Total offering costs of $239,770 have been prepaid by the fund. As of October 31, 2024 , $25,541 has been deducted from proceeds of shares issued and the remaining $214,229 is included in Other assets on the Statement of assets and liabilities.
Note 7-Leverage risk
The fund utilizes the LA to increase its assets available for investment. When the fund leverages its assets, shareholders bear the expenses associated with the LA and have potential to benefit or be disadvantaged from the use of leverage. The Advisor's fee is also increased in dollar terms from the use of leverage. Consequently, the fund and the Advisor may have differing interests in determining whether to leverage the fund's assets. Leverage creates risks that may adversely affect the retufor the holders of shares, including:
| • | the likelihood of greater volatility of NAV and market price of shares; |
| 28 | JOHN HANCOCK Premium Dividend Fund
|
ANNUAL REPORT
|
| • | fluctuations in the interest rate paid for the use of the LA; |
| • | 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; and |
| • | 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 retuwill 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. The use of securities lending to obtain leverage in the fund's investments may subject the fund to greater risk of loss than would reinvestment of collateral in short term highly rated investments.
In addition to the risks created by the fund's use of leverage, the fund is subject to the risk that it would be unable to timely, or at all, obtain replacement financing if the LA is terminated. Were this to happen, the fund would be required to de-leverage, selling securities at a potentially inopportune time and incurring tax consequences. Further, the fund's ability to generate income from the use of leverage would be adversely affected.
Note 8-Liquidity Agreement
The fund has entered into a LA with State Street Bank and Trust Company (SSB) that allows it to borrow or otherwise access up to $383.7 million (maximum facility amount) through a line of credit, securities lending and reverse repurchase agreements. The amounts outstanding at October 31, 2024 are shown in the Statement of assets and liabilities as the Liquidity agreement.
The fund pledges its assets as collateral to secure obligations under the LA. The fund retains the risks and rewards of the ownership of assets pledged to secure obligations under the LA and makes these assets available for securities lending and reverse repurchase transactions with SSB acting as the fund's authorized agent for these transactions. All transactions initiated through SSB are required to be secured with cash collateral received from the securities borrower (the Borrower) or cash is received from the reverse repurchase agreement (Reverse Repo) counterparties. Securities lending transactions will be secured with cash collateral in amounts at least equal to 100% of the market value of the securities utilized in these transactions. Cash received by SSB from securities lending or Reverse Repo transactions is credited against the amounts borrowed under the line of credit. As of October 31, 2024 , the LA balance of $373,700,000 was comprised of $299,473,843 from the line of credit and $74,226,157 cash received by SSB from securities lending or Reverse Repo transactions.
Upon retuof securities by the Borrower or Reverse Repo counterparty, SSB will retuthe cash collateral to the Borrower or proceeds from the Reverse Repo, as applicable, which will eliminate the credit against the line of credit and will cause the drawdowns under the line of credit to increase by the amounts returned. Income earned on the loaned securities is retained by SSB, and any interest due on the reverse repurchase agreements is paid by SSB.
SSB has indemnified the fund for certain losses that may arise if the Borrower or a Reverse Repo Counterparty fails to retusecurities when due. With respect to securities lending transactions, upon a default of the securities borrower, SSB uses the collateral received from the Borrower to purchase replacement securities of the same issue, type, class and series. If the value of the collateral is less than the purchase cost of replacement securities, SSB is responsible for satisfying the shortfall but only to the extent that the shortfall is not due to any of the fund's losses on the reinvested cash collateral. Although the risk of the loss of the securities is mitigated by receiving collateral from the Borrower or proceeds from the Reverse Repo counterparty and through SSB indemnification, the fund could experience a delay in recovering securities or could experience a lower than expected retuif the Borrower or Reverse Repo counterparty fails to retuthe securities on a timely basis.
Interest charged is at the rate of overnight bank funding rate (OBFR) plus 0.700% and is payable monthly on the aggregate balance of the drawdowns outstanding under the LA. As of October 31, 2024 , the fund had an
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JOHN HANCOCK Premium Dividend Fund
|
29 |
aggregate balance of $373,700,000 at an interest rate of 5.53%, which is reflected in the Liquidity agreement on the Statement of assets and liabilities. During the year ended October 31, 2024 , the average balance of the LA and the effective average interest rate were $373,700,000 and 6.06%, respectively.
The fund may terminate the LA with 60 days' notice. If certain asset coverage and collateral requirements, or other covenants are not met, the LA could be deemed in default and result in termination. Absent a default or facility termination event, SSB is required to provide the fund with 360 days' notice prior to terminating the LA.
Note 9-Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $273,220,085 and $263,385,926 , respectively, for the year ended October 31, 2024 .
Note 10-Industry or sector risk
The fund may invest a large percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the fund's assets are economically tied to a single or small number of industries or sectors of the economy, the fund will be less diversified than a more broadly diversified fund, and it may cause the fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry or sector may make the fund's NAV more volatile. Further, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors affecting those industries or sectors.
Note 11-Investment in affiliated underlying funds
The fund may invest in affiliated underlying funds that are managed by the Advisor and its affiliates. Information regarding the fund's fiscal year to date purchases and sales of the affiliated underlying funds as well as income and capital gains earned by the fund, if any, is as follows:
|
Dividends and distributions
|
|||||||||
|
Affiliate
|
Ending
share amount |
Beginning
value |
Cost of
purchases |
Proceeds
from shares sold |
Realized
gain (loss) |
Change in
unrealized appreciation (depreciation) |
Income
distributions received |
Capital gain
distributions received |
Ending
value |
| 142,455 | - |
| 30 | JOHN HANCOCK Premium Dividend Fund
|
ANNUAL REPORT
|
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of John Hancock Premium Dividend Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the fund's investments, of John Hancock Premium Dividend Fund (the "Fund") as of October 31, 2024 , the related statements of operations and cash flows for the year ended October 31, 2024 , the statements of changes in net assets for each of the two years in the period ended October 31, 2024 , including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2024 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2024 , the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended October 3, 2024 and the financial highlights for each of the five years in the period ended October 31, 2024 in conformity with accounting principles generally accepted in the United States of America .
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States ) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2024 by correspondence with the custodian, transfer agent and broker. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
We have served as the auditor of one or more investment companies in the John Hancock group of funds since 1988.
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JOHN HANCOCK PREMIUM DIVIDEND FUND
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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, 2024 .
The fund reports the maximum amount allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund reports the maximum amount allowable as Section 163(j) Interest Dividends.
The fund paid $14,564,253 in long-term capital gain dividends.
The fund reports the maximum amount allowable of its Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
Eligible shareholders will be mailed a 2024 Form 1099-DIV in early 2025. This will reflect the tax character of all distributions paid in calendar year 2024.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
| 32 | JOHN HANCOCK PREMIUM DIVIDEND FUND
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ANNUAL REPORT
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Investment objective, principal investment strategies, and principal risks
Unaudited
Investment Objective
The Fund's investment objective is to provide high current income, consistent with modest growth of capital. The Fund will pursue its objective by investing in a diversified portfolio comprised primarily of dividend paying preferred securities and common equity securities.
Principal Investment Strategies
Under normal circumstances, the Fund will invest at least 80% of its net assets (plus borrowings for investment purposes) in dividend-paying securities. This is a non-fundamental policy and may be changed by the Board of Trustees of the fund provided that shareholders are provided with at least 60 days prior written notice of any change as required by the rules under the 1940 Act. The Fund will focus on common stocks of those issuers which, in the opinion of the Advisor, have strong fundamental characteristics, large market capitalizations, favorable credit quality and current dividend yields generally higher than the currently available dividend yield quoted on the Standard & Poor's 500 Index. The Advisor intends to manage the Fund's portfolio to generate income qualifying for the dividends received deduction (the Dividends Received Deduction) allowed corporations under Section 243(a)(1) of the Internal Revenue Code of 1986, as amended (the Code).
The Fund may invest in floating-rate, fixed-to-floating rate, and fixed-rate preferred securities and debt obligations rated investment grade (at least "BBB" by Standard & Poor's or "Baa" by Moody's) at the time of investment or that are preferred securities 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 Advisor. 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 Advisor to be of comparable quality.
The Fund may invest in money market instruments, which include short-term U.S. Government securities, investment grade commercial paper (unsecured promissory notes issued by corporations to finance their short-term credit needs), certificates of deposit and bankers' acceptances.
The Fund may invest up to 10% of the value of its total assets in dividend-paying securities of registered investment companies that invest primarily in investment grade securities.
The fund concentrates its investments in securities of issuers primarily engaged in the utilities industry. The Fund may also invest in derivatives such as futures contracts, options, interest rate swaps and reverse repurchase agreements. The Fund intends to use reverse repurchase agreements to obtain investment leverage either alone and/or in combination with other forms of investment leverage or for temporary purposes. The fund also utilizes a liquidity agreement to increase its assets available for investments and may seek to obtain additional income or portfolio leverage by making secured loans of its portfolio securities with a value of up to 33 1/3% of its total assets.
The Fund may invest up to 20% of its net assets in restricted securities purchased in direct placements.
The Advisor may also take into consideration env
ironmen
tal, social, and/or governance (ESG) factors, alongside other relevant factors, as part of its investment selection process. The ESG characteristics utilized in the fund's investment process may change over time and one or more characteristics may not be relevant with respect to all issuers that are eligible fund investments.
Principal Risks
As is the case with all exchange-listed closed-end funds, shares of this fund may trade at a discount or a premium to the fund's net asset value (NAV). An investment in the fund is subject to investment and market risks, including the possible loss of the entire principal invested.
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JOHN HANCOCK PREMIUM DIVIDEND FUND
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33 |
The fund's main risks are listed below in alphabetical order, not in order of importance.
Changing distribution level & retuof capital risk.
There is no guarantee prior distribution levels will be maintained, and distributions may include a substantial tax retuof capital. A retuof capital is the retuof all or a portion of a shareholder's investment in the fund, which may increase the potential tax gain or decrease the potential tax loss of a subsequent sale of shares of the fund. For the fiscal year ended October 31, 2024 , the fund's aggregate distributions included no tax retuof capital.
Concentration risk.
Because the fund may focus on one or more industries or sectors of the economy, its performance depends in large part on the performance of those industries or sectors. As a result, the value of an investment may fluctuate more widely since it is more susceptible to market, economic, political, regulatory, and other conditions and risks affecting those industries or sectors than a fund that invests more broadly across industries and sectors.
Credit and counterparty risk.
The issuer or guarantor of a fixed-income security, the counterparty to an over-the-counter derivatives contract, or a borrower of fund securities may not make timely payments or otherwise honor its obligations. U.S. government securities are subject to varying degrees of credit risk depending upon the nature of their support. A downgrade or default affecting any of the fund's securities could affect the fund's performance.
Economic and market events risk.
Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth, may at times result in unusually high market volatility, which could negatively impact performance. Reduced liquidity in credit and fixed-income markets could adversely affect issuers worldwide. Banks and financial services companies could suffer losses if interest rates rise or economic conditions deteriorate.
Equity securities risk.
The price of equity securities may decline due to changes in a company's financial condition or overall market conditions.
ESG integration risk.
The manager considers ESG factors that it deems relevant or additive, along with other material factors and analysis, when managing the fund. The manager may consider these ESG factors on all or a meaningful portion of the fund's investments. In certain situations, the extent to which these ESG factors may be applied according to the manager's integrated investment process may not include U.S. Treasuries, government securities, or other asset classes. ESG factors may include, but are not limited to, matters regarding board diversity, climate change policies, and supply chain and human rights policies. Incorporating ESG criteria and making investment decisions based on certain ESG characteristics, as determined by the manager, carries the risk that the fund may perform differently, including underperforming funds that do not utilize ESG criteria or funds that utilize different ESG criteria. Integration of ESG factors into the fund's investment process may result in a manager making different investments for the fund than for a fund with a similar investment universe and/or investment style that does not incorporate such considerations in its investment strategy or processes, and the fund's investment performance may be affected. Because ESG factors are one of many considerations for the fund, the manager may nonetheless include companies with low ESG characteristics or exclude companies with high ESG characteristics in the fund's investments.
Fixed-income securities risk.
A rise in interest rates typically causes bond prices to fall. The longer the average maturity or duration of the bonds held by a fund, the more sensitive it will likely be to interest-rate fluctuations. An issuer may not make all interest payment or repay all or any of the principal borrowed. Changes in a security's credit qualify may adversely affect fund performance. Additionally, the value of inflation-indexed securities is subject to the effects of changes in market interest rates caused by factors other than inflation ("real interest rates"). Generally, when real interest rates rise, the value of inflation-indexed securities will fall and the fund's value may decline as a result of this exposure to these securities.
| 34 | JOHN HANCOCK PREMIUM DIVIDEND FUND
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ANNUAL REPORT
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Hedging, derivatives, and other strategic transactions risk.
Hedging, derivatives, and other strategic transactions may increase a fund's volatility and could produce disproportionate losses, potentially more than the fund's principal investment. Risks of these transactions are different from and possibly greater than risks of investing directly in securities and other traditional instruments. Under certain market conditions, derivatives could become harder to value or sell and may become subject to liquidity risk (i.e., the inability to enter into closing transactions). Derivatives and other strategic transactions that the fund intends to utilize include: futures contracts, options, interest rate swaps and reverse repurchase agreements. Futures contracts, options, and swaps generally are subject to counterparty risk. In addition, swaps may be subject to interest-rate and settlement risk, and the risk of default of the underlying reference obligation. An event of default or insolvency of the counterparty to a reverse repurchase agreement could result in delays or restrictions with respect to the fund's ability to dispose of the underlying securities. In addition, a reverse repurchase agreement may be considered a form of leverage and may, therefore, increase fluctuations in the fund's NAV.
Illiquid and restricted securities risk.
Illiquid and restricted securities may be difficult to value and may involve greater risks than liquid securities. Illiquidity may have an adverse impact on a particular security's market price and the fund's ability to sell the security.
Investment company securities risk.
Fund shareholders indirectly bear their proportionate share of the expenses of any investment company in which the fund invests. The total retuon such investments will be reduced by the operating expenses and fees of such other investment companies, including advisory fees.
Large company risk.
Larger companies may grow more slowly than smaller companies or be slower to respond to business developments. Large-capitalization securities may underperform the market as a whole.
Leveraging risk.
Issuing preferred shares or using derivatives may result in a leveraged portfolio. Leveraging long exposures increases a fund's losses when the value of its investments declines. Some derivatives have the potential for unlimited loss, regardless of the size of the initial investment. The fund also utilizes a Liquidity Agreement to increase its assets available for investment. See "Note 7 - Leverage risk" above.
Liquidity risk.
The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be impaired by reduced market activity or participation, legal restrictions, or other economic and market impediments. Widespread selling of fixed-income securities during periods of reduced demand may adversely impact the price or salability of such securities.
Operational and cybersecurity risk.
Cybersecurity breaches may allow an unauthorized party to gain access to fund assets, customer data, or proprietary information, or cause a fund or its service providers to suffer data corruption or lose operational functionality. Similar incidents affecting issuers of a fund's securities may negatively impact performance. Operational risk may arise from human error, error by third parties, communication errors, or technology failures, among other causes.
Preferred and convertible securities risk.
Preferred stock dividends are payable only if declared by the issuer's board. Preferred stock may be subject to redemption provisions. The market values of convertible securities tend to fall as interest rates rise and rise as interest rates fall. Convertible preferred stock's value can depend heavily upon the underlying common stock's value.
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JOHN HANCOCK PREMIUM DIVIDEND FUND
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35 |
ADDITIONAL INFORMATION
Unaudited
The fund is a closed-end, diversified management investment company, common shares of which were initially offered to the public on December 15, 1989 , and are publicly traded on the New York Stock Exchange (the NYSE).
Dividends and distributions
During the year ended October 31, 2024 , distributions from net investment income totaling $0.9900 per share were paid to shareholders. The dates of payments and the amounts per share were as follows:
|
Payment Date
|
Income Distributions
|
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
| 0.0825 | |
|
Total
|
|
Dividend reinvestment plan
The fund's Dividend Reinvestment Plan (the Plan) provides that distributions of dividends and capital gains are automatically reinvested in common shares of the fund by Computershare Trust Company, N.A. (the Plan Agent). Every shareholder holding at least one full share of the fund is entitled to participate in the Plan. In addition, every shareholder who became a shareholder of the fund after June 30, 2011 , and holds at least one full share of the fund will be automatically enrolled in the Plan. Shareholders may withdraw from the Plan at any time and shareholders who do not participate in the Plan will receive all distributions in cash.
If the fund declares a dividend or distribution payable either in cash or in common shares of the fund and the market price of shares on the payment date for the distribution or dividend equals or exceeds the fund's net asset value per share (NAV), the fund will issue common shares to participants at a value equal to the higher of NAV or 95% of the market price. The number of additional shares to be credited to each participant's account will be determined by dividing the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If the market price is lower than NAV, or if dividends or distributions are payable only in cash, then participants will receive shares purchased by the Plan Agent on participants' behalf on the NYSE or otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed its purchases, the average per share purchase price may exceed NAV, resulting in fewer shares being acquired than if the fund had issued new shares.
There are no brokerage charges with respect to common shares issued directly by the fund. However, whenever shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently $0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested.
The reinvestment of dividends and net capital gains distributions does not relieve participants of any income tax that may be payable on such dividends or distributions.
| 36 | |
ANNUAL REPORT
|
Shareholders participating in the Plan may buy additional shares of the fund through the Plan at any time in amounts of at least $50 per investment, up to a maximum of $10,000 , with a total calendar year limit of $100,000 . Shareholders will be charged a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. Purchases of additional shares of the fund will be made on the open market. Shareholders who elect to utilize monthly electronic fund transfers to buy additional shares of the fund will be charged a $2 transaction fee plus $0.05 per share brokerage trading fee for each automatic purchase. Shareholders can also sell fund shares held in the Plan account at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent's website at www.computershare.com/investor. The Plan Agent will mail a check (less applicable brokerage trading fees) on settlement date. Pursuant to regulatory changes, effective September 5, 2017 , the settlement date is changed from three business days after the shares have been sold to two business days after the shares have been sold. If shareholders choose to sell shares through their stockbroker, they will need to request that the Plan Agent electronically transfer those shares to their stockbroker through the Direct Registration System.
Shareholders participating 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 website at www.computershare.com/investor. Such termination will be effective immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on the first trading day after the payment date for such dividend or distribution, with respect to any subsequent dividend or distribution. If shareholders withdraw from the Plan, their shares will be credited to their account; or, if they wish, the Plan Agent will sell their full and fractional shares and send the shareholders the proceeds, less a transaction fee of $5 and less brokerage trading fees of $0.05 per share. If a shareholder does not maintain at least one whole share of common stock in the Plan account, the Plan Agent may terminate such shareholder's participation in the Plan after written notice. Upon termination, shareholders will be sent a check for the cash value of any fractional share in the Plan account, less any applicable broker commissions and taxes.
Shareholders who hold at least one full share of the fund may join the Plan by notifying the Plan Agent by telephone, in writing or by visiting the Plan Agent's website at www.computershare.com/investor. 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. If shareholders wish to participate in the Plan and their shares are held in the name of a brokerage firm, bank or other nominee, shareholders should contact their nominee to see if it will participate in the Plan. If shareholders wish to participate in the Plan, but their brokerage firm, bank or other nominee is unable to participate on their behalf, they will need to request that their shares be re-registered in their own name, or they will not be able to participate. The Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by shareholders as representing the total amount registered in their name and held for their account by their nominee.
Experience under the Plan may indicate that changes are desirable. Accordingly, the fund and the Plan Agent reserve the right to amend or terminate the Plan. Participants generally will receive written notice at least 90 days before the effective date of any amendment. In the case of termination, participants will receive written notice at least 90 days before the record date for the payment of any dividend or distribution by the fund.
All correspondence or requests for additional information about the Plan should be directed to Computershare Trust Company, N.A. , at the address stated below, or by calling 800-852-0218, 201-680-6578 (For International Telephone Inquiries) and 800-952-9245 (For the Hearing Impaired (TDD)).
Additional Financial Highlights and Senior securities
The following information is presented in conformance with annual reporting requirements for funds that have filed a registration statement pursuant to General Instruction A.2 of Form N-2 ("Short Form N-2"). The table below sets forth additional Financial Highlights and each class of senior securities outstanding of the fund for the years ended, as indicated below. Refer to the "Financial highlights" for the most recent five years of senior securities outstanding, which have been audited by PricewaterhouseCoopers LLP ("PwC"), the fund's independent registered public accounting firm. The report of PwC is included within this report.
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JOHN HANCOCK PREMIUM DIVIDEND FUND
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37 |
|
Period ended
|
|
|
|
|
|
|
Per share operating performance
|
|||||
|
Net asset value, beginning of period
|
|
|
|
|
|
| Net investment income
1
|
0.72 | 0.85 | 1.11 | 0.98 | 0.97 |
| Net realized and unrealized gain (loss) on investments | 1.89 | (0.77) | 0.14 | 1.16 | (0.21) |
|
Total from investment operations
|
2.61
|
0.08
|
1.25
|
2.14
|
0.76
|
|
Less distributions
|
|||||
| From net investment income | (1.17) | (1.17) | (1.17) | (0.97) | (0.89) |
| From realized gains | (0.03) | (0.53) | (0.30) | (0.14) | (0.20) |
|
Total distributions
|
(1.20)
|
(1.70)
|
(1.47)
|
(1.11)
|
(1.09)
|
| Anti-dilutive impact of repurchase plan | - | - | - | -
2, 3
|
0.04
3
|
|
Net asset value, end of period
|
|
|
|
|
|
|
Per share market value, end of the period
|
|
|
|
|
|
|
Total retuat net asset value (%)
4, 5
|
18.52
|
0.19
|
8.26
|
14.83
|
6.18
|
|
Total retuat market value (%)
4
|
22.04
|
2.84
|
24.50
|
17.58
|
8.29
|
|
Ratio and Supplemental data
|
|||||
| Net assets, end of period (in millions) | |||||
| Ratios (as a percentage of average net assets): | |||||
| Expenses before reductions | 3.01 | 2.80 | 2.28 | 1.95 | 1.86 |
| Expenses including reductions
6
|
3.00 | 2.79 | 2.27 | 1.94 | 1.85 |
| Net investment income | 4.79 | 5.75 | 7.00 | 6.14 | 6.38 |
| Portfolio turnover (%) | 18 | 24 | 14 | 19 | 15 |
|
|
|||||
| Total debt outstanding end of period (in
millions)
|
$
384
|
$
384
|
$
384
|
$
384
|
$
384
|
| Asset coverage per 7
|
$
2,992
|
$
2,811
|
$
3,009
|
$
3,035
|
$
2,909
|
| 1 | Based on average daily shares outstanding. |
| 2 | Less than |
| 3 | The repurchase plan was completed at an average repurchase price of |
| 4 | Total retubased on net asset value reflects changes in the fund's net asset value during each period. Total retubased on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax retuof capital, if any, were reinvested. |
| 5 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
| 6 | Expenses including reductions excluding interest expense were 1.41%, 1.44%, 1.45%, 1.40% and 1.41% for the periods ended 10-31-19, 10-31-18, 10-31-17, |
| 7 | Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 8). As debt outstanding changes, the level of invested assets may change accordingly. Asset coverage ratio provides a measure of leverage. |
Summary of fund expenses
The following information is presented in conformance with annual reporting requirements for funds that have filed a registration statement pursuant to General Instruction A.2 of Short Form N-2. The purpose of the table below is to help you understand all fees and expenses that you, as a common shareholder, would bear directly or indirectly. In accordance with SEC requirements, the table below shows the fund's expenses as a percentage of its average net assets as of October 31, 2024 , and not as a percentage of total assets. By showing expenses as a percentage of average net assets, expenses are not expressed as a percentage of all of the assets in which the
| 38 | |
ANNUAL REPORT
|
fund invests. The offering costs to be paid or reimbursed by the fund are not included in the annual expenses table below. However, these expenses will be borne by common shareholders and may result in a reduction in the NAV of the common shares. The table and example are based on the fun
d's c
apital structure as of
|
Shareholder Transaction Expenses
|
|
| Sales load (as a percentage of offering price)
1
|
-% |
| Offering expenses (as a percentage of offering price)
1
|
-% |
| Dividend Reinvestment Plan fees
2
|
None |
|
Annual Expenses (Percentage of Net Assets Attributable to Common Shares)
|
|
| Management fees
3
|
1.29% |
| Interest payments on borrowed funds
4
|
3.72% |
| Other expenses | 0.25% |
| Total Annual Operating Expenses | 5.26% |
| Contractual Expense Reimbursement
5
|
(0.01)% |
| Total Annual Fund Operating Expenses After Expense Reimbursements | 5.25% |
| 1 | If common shares are sold to or through underwriters, the fund's prospectus will set forth any applicable sales load and the estimated offering expenses. |
| 2 | Participants in the fund's dividend reinvestment plan do not pay brokerage charges with respect to common shares issued directly by the fund. However, whenever common shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees, currently ributi
ons" and "Dividend reinvestment plan". |
| 3 | See "Note 5 - Fees and transactions with affiliates." |
| 4 | The fund uses leverage by borrowing under a liquidity agreement. "Interest payments on borrowed funds" includes all interest paid in connection with outstanding loans. See "Note 8 - "Liquidity Agreement." |
| 5 | The Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate managed assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the year ended |
Example
The following example illustrates the expenses that Common Shareholders would pay on a $1,000 investment in co
mm
on shares, assuming (i) total annual expenses set forth above, including any reimbursements through their current expiration date; ; (ii) (a 5% annual return; and (iii) all distributions are reinvested at NAV:
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
|
| Total Expenses |
The above table and example and the assumption in the example of a 5% annual retuare required by regulations of the SEC that are applicable to all investment companies; the assumed 5% annual retuis not a prediction of, and does not represent, the projected or actual performance of the fund's common shares. For more complete descriptions of certain of the fund's costs and expenses, see "Management of the Fund" in the fund's prospectus. In addition, while the example assumes reinvestment of all dividends and distributions at NAV, participants in the Fund's dividend reinvestment plan may receive Common Shares purchased or issued at a price or value different from NAV. See "Distribution Policy" and "Dividend Reinvestment Plan" in the fund's prospectus.
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JOHN HANCOCK PREMIUM DIVIDEND FUND
|
39 |
The example should not be considered a representation of past or future expenses, and the fund's actual expenses may be greater or less than those shown. Moreover, the fund's actual rate of retumay be greater or less than the hypothetical 5% retushown in the example.
Market and Net Asset Value Information
The following table, presented in conformance with annual reporting requirements for funds that have filed a registration statement pursuant to General Instruction A.2 of Short Form N-2, sets forth, for each of the periods indicated, the high and low closing market prices of the fund's Common Shares on the NYSE, the high and low NAV per common share and the high and low premium/discount to NAV per common share. See Note 2, Investment Valuation and Fair Value Measurements in the Notes to Financial Statements for information as to how the Fund's NAV is determined.
The fund's currently outstanding Common Shares are listed on the New York Stock Exchange ("NYSE") under the symbol PDT and commenced trading on the NYSE in 1994.
The fund's common shares have traded both at a premium and at a discount to its net asset value ("NAV"). The fund cannot predict whether its shares will trade in the future at a premium or discount to NAV. The provisions of the 1940 Act generally require that the public offering price of common shares (less any underwriting commissions and discounts) must equal or exceed the NAV per share of a company's common stock (calculated within 48 hours of pricing). The fund's issuance of common shares may have an adverse effect on prices in the secondary market for common shares by increasing the number of common shares available, which may put downward pressure on the market price for common shares. Shares of common stock of closed-end investment companies frequently trade at a discount from NAV. See "Risk Factors-General Risks-Market Discount Risk" and "-Secondary Market for the Common Shares" in the within the fund's prospectus.
The following table sets forth for each of the periods indicated the high and low closing market prices for common shares on the NYSE, and the corresponding NAV per share and the premium or discount to NAV per share at which the fund's common shares were trading as of such date. NAV is determined once daily as of the close of regular trading of the NYSE (typically 4:00 P.M. , EasteTime). See "Determination of Net Asset Value" within the fund's prospectus for information as to the determination of the fund's NAV.
|
Market Price
|
NAV per Share on
Date of Market Price High and Low |
Premium/(Discount) on
Date of Market Price High and Low |
||||
|
Fiscal Quarter Ended
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
| 14.20 | 12.72 | 12.95 | 12.84 | 9.65% | -0.93% | |
| 13.39 | 11.81 | 13.69 | 11.31 | -2.19% | 4.42% | |
| 12.57 | 11.10 | 12.13 | 11.25 | 3.63% | -1.33% | |
| 11.14 | 8.97 | 11.94 | 10.41 | -6.70% | -13.83% | |
| 11.08 | 9.83 | 11.69 | 10.67 | -5.22% | -7.87% | |
| 11.84 | 10.71 | 12.08 | 11.51 | -1.99% | -6.95% | |
| 12.37 | 11.23 | 12.92 | 12.33 | -4.26% | -8.92% | |
| 13.54 | 11.87 | 13.83 | 12.61 | -2.10% | -5.87% |
The last reported sale price, NAV per share and percentage discount to NAV per share of the common shares as of October 31, 2024 were $12.83 , $13.59 and (5.59)%, respectively. As of October 31, 2024 , the fund had 49,185,225 common shares outstanding and net assets of the fund were $668,480,701 .
The fund does not believe that there are any material unresolved written comments, received 180 days or more before October 31, 2024 , from the Staff of the SEC regarding any of the fund's periodic or current reports under the Securities Exchange Act or the 1940 Act, or its registration statement.
| 40 | |
ANNUAL REPORT
|
Shareholder communication and ass
ista
nce
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:
Regular Mail:
Computershare
P.O. Box 43006
Providence, RI 02940-3078
P.O. Box 43006
Registered or Overnight Mail:
Computershare
150 Royall Street , Suite 101
Canton, MA 02021
If your shares are held with a brokerage firm, you should contact that firm, bank or other nominee for assistance.
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
41 |
EVALUATION OF ADVISORY AND SUBADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Premium Dividend Fund (the fund) of the Advisory Agreement (the Advisory Agreement) with John Hancock Investment Management LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with Manulife Investment Management (US) LLC (the Subadvisor). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 24-27, 2024 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at the meeting held on May 27-May 30, 2024 . The Trustees who are not "interested persons" of the Trust as defined by the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees) also met separately to evaluate and discuss the information presented, including with counsel to the Independent Trustees and a third-party consulting firm.
Approval of Advisory and Subadvisory Agreements
At meetings held on June 24-27, 2024 , the Board, including the Trustees who are not parties to any Agreement or considered to be interested persons of the fund under the 1940 Act, reapproved for an annual period the continuation of the Advisory Agreement between the fund and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and other pertinent information, such as the market premium and discount information, and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board noted that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board (including its various committees) at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect to the fund. The information received and considered by the Board in connection with the May and June meetings and throughout the year was both written and oral. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates. The Board considered the Advisory Agreement and Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Advisor and Subadvisor in providing services to the fund.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the fund and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
| 42 | |
ANNUAL REPORT
|
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and did not treat any single factor as determinative, and each Trustee may have attributed different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services.
Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the fund's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board observed that the scope of services provided by the Advisor, and of the undertakings required of the Advisor in connection with those services, including maintaining and monitoring its own and the fund's compliance programs, risk management programs, liquidity risk management programs, derivatives risk management programs, and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers. The Board also considered the significant risks assumed by the Advisor in connection with the services provided to the fund including entrepreneurial risk in sponsoring new funds and ongoing risks including investment, operational, enterprise, litigation, regulatory and compliance risks with respect to all funds.
The Board also considered the differences between the Advisor's services to the fund and the services it provides to other clients that are not closed-end funds, including, for example, the differences in services related to the regulatory and legal obligations of closed-end funds.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the fund and of the other funds in the John Hancock group of funds complex (the John Hancock Fund Complex ).
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
| (a) | the skills and competency with which the Advisor has in the past managed the fund's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; |
| (b) | the background, qualifications and skills of the Advisor's personnel; |
| (c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and fund industry developments; |
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
43 |
| (d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund, as well as the Advisor's oversight of any securities lending activity, its monitoring of class action litigation and collection of class action settlements on behalf of the fund, and bringing loss recovery actions on behalf of the fund; |
| (e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; |
| (f) | the Advisor's initiatives intended to improve various aspects of the fund's operations and investor experience with the fund; and |
| (g) | the Advisor's reputation and experience in serving as an investment advisor to the fund and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance.
In considering the fund's performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund's performance results. In connection with the consideration of the Advisory Agreement, the Board:
| (a) | reviewed information prepared by management regarding the fund's performance; |
| (b) | considered the comparative performance of an applicable benchmark index; |
| (c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; |
| (d) | took into account the Advisor's analysis of the fund's performance; and |
| (e) | considered the fund's share performance and premium/discount information. |
The Board noted that while it found the data provided by the independent third-party generally useful it recognized its limitations, including in particular that the data may vary depending on the end date selected and the results of the performance comparisons may vary depending on the selection of the peer group. The Board noted that, based on its net asset value, the fund outperformed its benchmark index for the three-, five- and ten-year periods ending December 31, 2023 and underperformed for the one-year period. The Board also noted that, based on its net asset value, the fund outperformed its peer group median for the one- and ten-year periods ended December 31, 2023 , underperformed for the three-year period, and performed in-line for the five-year period ended December 31, 2023 . The Board concluded that the fund's performance, based on net asset value, has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index over the longer term.
Fees and expenses.
The Board reviewed comparative information prepared by an independent third-party provider of fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund in light of the nature, extent and quality of the management and advisory and subadvisory services provided by the Advisor and the Subadvisor. The Board considered the fund's ranking within a smaller group of peer funds chosen by the independent third-party provider, as well as the fund's ranking within a broader group of funds. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs.
| 44 | |
ANNUAL REPORT
|
The Board also took into account the impact of leverage on fund expenses. The Board took into account the management fee structure, including that management fees for the fund were based on the fund's total managed assets, which are attributable to common stock and borrowings. The Board noted that net management for the fund are lower than the peer group median and net total expenses for the fund are higher than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the overall management fee and the fees of the Subadvisor, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee, in each case in light of the services rendered for those amounts and the risks undertaken by the Advisor. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had agreed to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the John Hancock Fund Complex ) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable in light of the nature, extent and quality of the services provided to the fund under the Advisory Agreement.
Profitability/Fall out benefits.
In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor's relationship with the fund, the Board:
| (a) | reviewed financial information of the Advisor; |
| (b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; |
| (c) | received and reviewed profitability information with respect to the |
| (d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data and considered that the advisor hired an independent third-party consultant to provide an analysis of the Advisor's allocation methodologies; |
| (e) | considered that the Advisor also provides administrative services to the fund on a cost basis pursuant to an administrative services agreement; |
| (f) | noted that the fund's Subadvisor is an affiliate of the Advisor; |
| (g) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; |
| (h) | noted that the subadvisory fees for the fund are paid by the Advisor; |
| (i) | considered the Advisor's ongoing costs and expenditures necessary to improve services, meet new regulatory and compliance requirements, and adapt to other challenges impacting the fund industry; and |
| (j) | considered that the Advisor should be entitled to eaa reasonable level of profits in exchange for the level of services it provides to the fund and the risks it assumes as Advisor, including entrepreneurial, operational, reputational, litigation and regulatory risk. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the fund was reasonable and not excessive.
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
45 |
Economies of scale.
In considering the extent to which the fund may realize any economies of scale and whether fee levels reflect these economies of scale for the benefit of the fund shareholders, the Board noted that the fund has a limited ability to increase its assets as a closed-end fund. The Board took into account management's discussions of the current advisory fee structure, and, as noted above, the services the Advisor provides in performing its functions under the Advisory Agreement and in supervising the Subadvisor.
The Board also considered potential economies of scale that may be realized by the fund as part of the John Hancock Fund Complex . Among them, the Board noted that the Advisor has contractually agreed to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock Fund Complex , including the fund (the participating portfolios). This waiver is based upon aggregate net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. The Board also considered the Advisor's overall operations and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the fund.
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
| (1) | information relating to the Subadvisor's business, including current subadvisory services to the fund (and other funds in the |
| (2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and |
| (3) | the subadvisory fee for the fund and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
Nature, extent, and quality of services.
With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the fund's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
| 46 | |
ANNUAL REPORT
|
Subadvisor compensation.
In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also received information and took into account any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock Fund Complex and reputational benefits.
Subadvisory fees.
The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays subadvisory fees to the Subadvisor. As noted above, the Board also considered the fund's subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fee paid by the Advisor to the Subadvisor with respect to the fund and compared them to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance.
As noted above, the Board considered the fund's performance as compared to the fund's peer group median and the benchmark index and noted that the Board reviews information about the fund's performance results at its regularly scheduled meetings. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
| (1) | the Subadvisor has extensive experience and demonstrated skills as a manager; |
| (2) | the fund's performance, based on net asset value, has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index over the longer term; and |
| (3) | the subadvisory fees are reasonable in relation to the level and quality of services being provided under the Subadvisory Agreement. |
* * *
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
47 |
Trustees and 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 | ||
Position(s) held with fund Principal occupation(s) and other directorships during past 5 years |
Trustee of the Trust since 1
|
Number of John Hancock funds overseen by Trustee |
| 2012 | 185 | |
| Trustee and Chairperson of the Board | ||
| Trustee of |
||
2,3
Born: 1956 |
2024 | 179 |
| Trustee | ||
| Director, Audit Committee Chairman, and Risk Committee Member, |
||
| 2015 | 179 | |
| Trustee | ||
| Board Member, |
||
4
Born: 1944 |
1994 | 182 |
| Trustee | ||
| Professor, |
| 48 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
| Independent Trustees
(continued)
|
||
Position(s) held with fund Principal occupation(s) and other directorships during past 5 years |
Trustee of the Trust since 1
|
Number of John Hancock funds overseen by Trustee |
| 2022 | 179 | |
| Trustee | ||
| Senior Vice President, General Counsel & Corporate Secretary, |
||
| 2012 | 185 | |
| Trustee | ||
| Chief Executive Officer, |
||
| 2022 | 179 | |
| Trustee | ||
| Vice President, |
||
| 2008 | 182 | |
| Trustee | ||
| President, Cambridge College, |
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
49 |
| Independent Trustees
(continued)
|
||
Position(s) held with fund Principal occupation(s) and other directorships during past 5 years |
Trustee of the Trust since 1
|
Number of John Hancock funds overseen by Trustee |
| 1992 | 179 | |
| Trustee and Vice Chairperson of the Board | ||
| Managing Director, |
||
4
Born: 1960 |
2020 | 179 |
| Trustee | ||
| Director, Audit Committee Chair, |
||
2
Born: 1961 |
2024 | 179 |
| Trustee | ||
| Chief Operating Officer, |
| Non-Independent Trustees
5
|
||
Position(s) held with fund Principal occupation(s) and other directorships during past 5 years |
Trustee of the Trust since 1
|
Number of John Hancock funds overseen by Trustee |
| 2017 | 182 | |
| Non-Independent Trustee | ||
| Global Head of Retail for Manulife (since 2022); Head of Wealth and Asset Management, |
| 50 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
| Non-Independent Trustees
5
(continued)
|
||
Position(s) held with fund Principal occupation(s) and other directorships during past 5 years |
Trustee of the Trust since 1
|
Number of John Hancock funds overseen by Trustee |
| 2022 | 179 | |
| Non-Independent Trustee | ||
| Global Head, Manulife Wealth and Asset Management (since 2017); General Manager, Manulife, Individual Wealth Management and Insurance (2013-2017); President, Manulife Investments (2010-2016). Trustee of various trusts within the |
| Principal officers who are not Trustees | |
Position(s) held with fund Principal occupation(s) during past 5 years |
Current Position(s) with the Trust since |
| 2023 | |
| President | |
| Head of Wealth and Asset Management, |
|
| 2024 | |
| Chief Financial Officer | |
| Director, |
|
| 2010 | |
| Treasurer | |
| Assistant Vice President, |
|
| 2018 | |
| Secretary and Chief Legal Officer | |
| Vice President and Deputy Chief Counsel, |
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
51 |
| Principal officers who are not Trustees
(continued)
|
|
Position(s) held with fund Principal occupation(s) during past 5 years |
Current Position(s) with the Trust since |
| 2020 | |
| Chief Compliance Officer | |
| Chief Compliance Officer, |
The business address for all Trustees and Officers is 200 Berkeley Street , Boston, Massachusetts 02116-5023.
A copy of the Statement of Additional Information may be obtained without charge by visiting the Fund's website, (jhinvestments.com) or by calling 800-225-6020 (toll-free) or from the SEC's website at www.sec.gov.
|
1
|
|
|
2
|
Appointed to serve as Trustee effective |
|
3
|
Member of the Audit Committee as of |
|
4
|
Member of the Audit Committee. |
|
5
|
The Trustee is a Non-Independent Trustee due to current or former positions with the Advisor and certain of its affiliates. |
| 52 | JOHN HANCOCK PREMIUM DIVIDEND FUND
|
ANNUAL REPORT
|
More information
Trustees
Chairperson
Vice Chairperson
†
#,π
*
†
*
#
Officers
President
‡
Chief Financial Officer
Treasurer
Secretary and Chief Legal Officer
Chief Compliance Officer
Investment advisor
Subadvisor
Portfolio Managers
Distributor
Custodian
Transfer agent
Legal counsel
Independent registered public accounting firm
Stock symbol
†
Non-Independent Trustee
# Appointed to serve as Trustee effective August 1, 2024 .
π Member of the Audit Committee as of September 24, 2024 .
*
Member of the Audit Committee
‡ Effective July 1, 2024 .
The fund's proxy voting policies and procedures, as well as the fund 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) website at sec.gov or on our website.
All of the fund's holdings as of the end of the third month of every fiscal quarter are filed with the SEC on Form N-PORT within 60 days of the end of the fiscal quarter. The fund's Form N-PORT filings are available on our website and the SEC's website, sec.gov.
We make this information on your fund, as well as
monthly portfolio holdings
, and other fund details available on our website at jhinvestments.com or by calling 800-852-0218.
The report is certified under the Sarbanes-Oxley Act, which requires closed-end 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.
| You can also contact us: | ||
| 800-852-0218 | Regular mail: | Express mail: |
| jhinvestments.com | P.O. Box 43006 |
| ANNUAL REPORT
|
JOHN HANCOCK PREMIUM DIVIDEND FUND
|
53 |
| MF3988739 | P2A 10/24 |
12/24
ITEM 2. CODE OF ETHICS.
As of the end of the year,
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant for the audits of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to
(b) Audit-Related Services
Audit-related fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser ("control affiliates") that provides ongoing services to the registrant. The nature of the services provided was related to a software licensing fee. Amounts billed to the registrant were
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning ("tax fees") amounted to
o f the services comprising the tax fees was the review of the registrant's tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant's audit committee.
(d) All Other Fees
Other fees amounted to
(e)(1) Audit Committee Pre-Approval Policies and Procedures
The registrant's Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the "Auditor") relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The registrant's Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of audit-related and non-audit services by the Auditor. The policies and procedures require that any audit- related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
Audit-Related Fees, Tax Fees and All Other Fees
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f)According to the registrant's principal accountant for the fiscal year ended
(g)The aggregate non-audit fees billed by the registrant's principal accountant for non-audit services rendered to the registrant and rendered to the registrant's control affiliates were
(h)The audit committee of the registrant has considered the non-audit services provided by the registrant's principal accountant to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant's independence.
(i)Not applicable.
(j)Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:
ITEM 6. SCHEDULE OF INVESTMENTS.
(a)Refer to information included in Item 1.
(b)Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
Not applicable.
ITEM 10. REMUNERATION PAID TO DIRECTORS, OFFICERS, AND OTHERS OF OPEN-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 11. STATEMENT REGARDING BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACT.
Information included in Item 1, if applicable.
ITEM 12. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
See attached exhibit "Proxy Voting Policies and Procedures".
ITEM 13. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Information about the portfolio managers
Management Biographies
Below is a list of the
Managing Director and Portfolio Manager
Began business career in 1993
Managed the Fund since 2015
Managing Director and Portfolio Manager
Managed the Fund since 2022
Began business career in 2011
Managing Director and Portfolio Manager
Managed the Fund since 2022
Began business career in 2011
Managing Director and Portfolio Manager
Managed the Fund since 2022
Began business career in 1996
Other Accounts the Portfolio Managers are Managing
The table below indicates, for each portfolio manager, information about the accounts over which the portfolio manager has day-to-day investment responsibility. All information on the number of accounts and total assets in the table is as of
|
Registered |
Other Pooled |
|||||||||||
|
Investment |
||||||||||||
|
Companies |
Investment Vehicles |
Other Accounts |
||||||||||
|
Number |
Total |
Number |
Total |
Number |
Total |
|||||||
|
of |
Assets |
of |
Assets |
of |
Assets |
|||||||
|
Accounts |
$Million |
Accounts |
$Million |
Accounts |
$Million |
|||||||
|
Joseph H. |
5 |
3,361 |
7 |
674 |
1 |
37 |
||||||
|
Bozoyan, CFA |
|
Registered |
Other Pooled |
|||||||||||
|
Investment |
||||||||||||
|
Companies |
Investment Vehicles |
Other Accounts |
||||||||||
|
Number |
Total |
Number |
Total |
Number |
Total |
|||||||
|
of |
Assets |
of |
Assets |
of |
Assets |
|||||||
|
Accounts |
$Million |
Accounts |
$Million |
Accounts |
$Million |
|||||||
|
James |
7 |
4,809 |
14 |
3,257 |
1 |
37 |
||||||
|
Gearhart, |
||||||||||||
|
CFA |
||||||||||||
|
Jonas |
7 |
4,809 |
14 |
3,257 |
1 |
37 |
||||||
|
Grazulis, |
||||||||||||
|
CFA |
||||||||||||
|
Caryn E. |
8 |
4,923 |
16 |
4,262 |
4 |
336 |
||||||
|
Rothman, |
||||||||||||
|
CFA |
Number and value of accounts within the total accounts that are subject to a performance- based advisory fee: 0
Conflicts of Interest. When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one account over another. The principal types of potential conflicts of interest that may arise are discussed below. For the reasons outlined below, the Fund does not believe that any material conflicts are likely to arise out of a portfolio manager's responsibility for the management of the Fund as well as one or more other accounts. The Advisor and Subadvisor have adopted procedures that are intended to monitor compliance with the policies referred to in the following paragraphs. Generally, the risks of such conflicts of interests are increased to the extent that a portfolio manager has a financial incentive to favor one account over another. The Advisor and Subadvisor have structured their compensation arrangements in a manner that is intended to limit such potential for conflicts of interests. See "Compensation of Portfolio Managers" below.
•A portfolio manager could favor one account over another in allocating new investment opportunities that have limited supply, such as initial public offerings and private placements. If, for example, an initial public offering that was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account may be expected to have better investment performance than other accounts that did not receive an allocation on the initial public offering. The Subadvisor has policies that require a portfolio manager to allocate such investment opportunities in an equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives.
•A portfolio manager could favor one account over another in the order in which trades for the accounts are placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security for more than one account, the policies of the
Subadvisor generally require that such trades be "bunched," which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed brokerage arrangements). Circumstances may also arise where the trader believes that bunching the orders may not result in the best possible price. Where those accounts or circumstances are involved, the Subadvisor will place the order in a manner intended to result in as favorable a price as possible for such client.
•A portfolio manager could favor an account if the portfolio manager's compensation is tied to the performance of that account rather than all accounts managed by the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are disregarded for this purpose, the portfolio manager will have a financial incentive to seek to have the accounts that determine the portfolio manager's bonus achieve the best possible performance to the possible detriment of other accounts. Similarly, if the Subadvisor receives a performance-based advisory fee, the portfolio manager may favor that account, whether or not the performance of that account directly determines the portfolio manager's compensation. The investment performance on specific accounts is not a factor in determining the portfolio manager's compensation. See "Compensation of Portfolio Managers" below. Neither the Advisor nor the Subadvisor receives a performance-based fee with respect to any of the accounts managed by the portfolio managers.
•A portfolio manager could favor an account if the portfolio manager has a beneficial interest in the account, in order to benefit a large client or to compensate a client that had poor returns. For example, if the portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the portfolio manager would have an economic incentive to favor the account in which the portfolio manager held an interest. The Subadvisor imposes certain trading restrictions and reporting requirements for accounts in which a portfolio manager or certain family members have a personal interest in order to confirm that such accounts are not favored over other accounts.
•If the different accounts have materially and potentially conflicting investment objectives or strategies, a conflict of interest may arise. For example, if a portfolio manager purchases a security for one account and sells the same security short for another account, such trading pattecould disadvantage either the account that is long or short. In making portfolio manager assignments, the Subadvisor seeks to avoid such potentially conflicting situations. However, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one account to sell a portfolio security while another account continues to hold or increase the holding in such security.
Compensation of Portfolio Managers. The Subadvisor has adopted a system of compensation for portfolio managers and others involved in the investment process that is applied systematically among investment professionals. At the Subadvisor, the structure of compensation of investment professionals is currently composed of the following basic components: base salary and short-and long-term incentives. The following describes each component of the compensation package for the individuals identified as a portfolio manager for the Funds.
•Base salary. Base compensation is fixed and normally reevaluated on an annual basis. The Subadvisor seeks to set compensation at market rates, taking into account the experience and responsibilities of the investment professional.
•Incentives. Only investment professionals are eligible to participate in the short-and long- term incentive plan. Under the plan, investment professionals are eligible for an annual cash award. The plan is intended to provide a competitive level of annual bonus compensation that is tied to the investment professional achieving superior investment performance and aligns the financial incentives of the Subadvisor and the investment professional. Any bonus under the plan is completely discretionary, with a maximum annual bonus that may be well in excess of base salary. Payout of a portion of this bonus may be deferred for up to five years. While the amount of any bonus is discretionary, the following factors are generally used in determining bonuses under the plan:
•Investment Performance: The investment performance of all accounts managed by the investment professional over one, three and five-year periods are considered, and no specific benchmark is used to measure performance. With respect to fixed income accounts, relative yields are also used to measure performance.
•Financial Performance: The profitability of the Subadvisor and its parent company are also considered in determining bonus awards.
•Non-InvestmentPerformance: To a lesser extent, intangible contributions, including the investment professional's support of client service and sales activities, new fund/strategy idea generation, professional growth and development, and management, where applicable, are also evaluated when determining bonus awards.
•In addition to the above, compensation may also include a revenue component for an investment team derived from a number of factors including, but not limited to, client assets under management, investment performance, and firm metrics.
•Manulife Equity Awards. A limited number of senior investment professionals may receive options to purchase shares of
•Deferred Incentives. Investment professionals may receive deferred incentives which are fully invested in strategies managed by the team/individuals as well as other
The Subadvisor also permits investment professionals to participate on a voluntary basis in a deferred compensation plan, under which the investment professional may elect on an annual basis to defer receipt of a portion of their compensation until retirement. Participation in the plan is voluntary.
Share Ownership by Portfolio Managers. The following table indicates as of
|
Range of Beneficial Ownership in the |
|
|
Portfolio Manager |
Fund |
|
|
|
|
|
|
|
|
None |
|
|
|
ITEM 14. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
(a)Not applicable.
REGISTRANT PURCHASES OF EQUITY SECURITIES
|
Maximum |
||||
|
Total number of |
number of shares |
|||
|
Total number of |
Average price per |
shares purchased |
that may yet be |
|
|
as part of publicly |
purchased under |
|||
|
Period |
shares purchased |
share |
announced plans* |
the plans* |
|
Nov-23 |
- |
- |
- |
4,913,810 |
|
Dec-23 |
- |
- |
- |
4,913,810 |
|
Jan-24 |
- |
- |
- |
4,918,523 |
|
Feb-24 |
- |
- |
- |
4,918,523 |
|
Mar-24 |
- |
- |
- |
4,918,523 |
|
Apr-24 |
- |
- |
- |
4,918,523 |
|
May-24 |
- |
- |
- |
4,918,523 |
|
Jun-24 |
- |
- |
- |
4,918,523 |
|
Jul-24 |
- |
- |
- |
4,918,523 |
|
Aug-24 |
- |
- |
- |
4,918,523 |
|
Sep-24 |
- |
- |
- |
4,918,523 |
|
Oct-24 |
- |
- |
- |
4,918,523 |
|
Total |
- |
- |
- |
* On
ITEM 15. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No material changes.
ITEM 16. 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
(b)There were no changes in the registrant's internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 17. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Fund did not participate directly in securities lending activities. See Note 8 to financial statements in Item 1.
ITEM 18. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.
Not applicable.
ITEM 19. EXHIBITS.
(a)(1) Code of Ethics for Covered Officers is attached.
(a)(2) Not applicable.
(c)(1) Proxy Voting Policies and Procedures are attached.
(d) Exhibit 99. CONSENT - Consent of Independent Registered Public Accounting Firm
SIGNATURES
Pursuant to the requirements o f 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.
|
By: |
/s/ |
|
------------------------------ |
|
|
|
|
|
President, Principal Executive |
|
|
Officer |
|
|
Date: |
|
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/ |
|
------------------------------ |
|
|
|
|
|
President, Principal Executive |
|
|
Officer |
|
|
Date: |
|
|
By: |
/s/ |
|
--------------------------- |
|
|
|
|
|
Chief Financial Officer, Principal |
|
|
Financial Officer |
|
|
Date: |
|
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- Findings from Purdue University Yields New Data on Cervical Cancer (Association Between Health Insurance Coverage and Stage of Diagnosis for Cervical Cancer Among Females In Indiana From 2011-2019): Oncology – Cervical Cancer
- Seek savings from insurers, not medical research
- Minnesota judge: lawsuit over UnitedHealth use of AI can continue
- After more than 1,000 layoffs, worries persist about CVS Health's future in Connecticut
More Health/Employee Benefits NewsLife Insurance News
- AM Best Places Credit Ratings of Banner Life Insurance Company and William Penn Life Insurance Company of New York Under Review With Developing Implications
- Best's Review Examines Value in Innovation Culture
- Initial Registration Statement for Employee Benefit Plan (Form S-8)
- Securian Financial Enhances Its Flagship Indexed Universal Life Insurance Product
- AM Best Affirms Credit Ratings of The Dai-ichi Life Insurance Company, Limited
More Life Insurance News