Certified Annual Shareholder Report for Management Investment Companies (n-csr)
September 24 2020 - 3:58PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED
MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file
number 811- 21131
John Hancock Preferred Income Fund
(Exact name of registrant as specified in charter)
200 Berkeley Street, Boston, Massachusetts 02116
(Address of principal
executive offices) (Zip code)
Salvatore
Schiavone
Treasurer
200 Berkeley Street
Boston, Massachusetts 02116
(Name
and address of agent for service)
Registrant's telephone number, including
area code: 617-663-4497
|
Date of fiscal year end:
|
July 31
|
|
|
|
|
Date of reporting period:
|
July 31, 2020
|
ITEM 1. REPORTS TO STOCKHOLDERS.
John Hancock
Preferred Income Fund
Ticker: HPI
Annual report
7/31/2020
Beginning on
January 1, 2021, as permitted by regulations adopted by the Securities and Exchange
Commission, paper copies of the fund's shareholder reports such as
this one will no longer be sent by mail, unless you specifically
request paper copies of the reports from the transfer agent or from
your financial intermediary. Instead, the reports will be made
available on our website, and you will be notified by mail each time
a report is posted and be provided with a website link to access
the report.
If you have already elected to receive shareholder reports
electronically, you will not be affected by this change and you do
not need to take any action. You may elect to receive shareholder
reports and other communications electronically by calling the
transfer agent, Computershare, at 800-852-0218, by going to
"Communication Preferences" at computershare.com/investor, or by
contacting your financial intermediary.
You may elect to receive all reports in paper, free of charge, at any
time. You can inform the transfer agent or your financial
intermediary that you wish to continue receiving paper copies of your
shareholder reports by following the instructions listed above. Your
election to receive reports in paper will apply to all funds held
with John Hancock Investment Management or your financial
intermediary.
A message to shareholders
Dear shareholder,
The financial markets delivered strong returns during first half of
the 12-month period ended
July 31, 2020; however, heightened fears over the coronavirus (COVID-19) sent
markets tumbling during the latter half of February and early March.
Yet by the end of the first quarter, equity markets began to rise—and
this comeback gathered momentum during the final four months of the
period; however, holdings of preferred shares in certain market
segments did not participate fully in the rebound.
Of course, it would be a mistake to consider this market turnaround a
trustworthy signal of assured or swift economic recovery. While there
has been economic growth in most of the United States, the pace has
slowed in many areas as spending remains far below pre-pandemic
levels.
From an investment perspective, we continue to think that maintaining
a focus on long-term objectives while pursuing a risk-aware strategy
is a prudent way forward. Above all, we believe the counsel of a
trusted financial professional continues to matter now more than
ever. Periods of heightened uncertainty are precisely the time to
review your financial goals and follow a plan that helps you make the
most of what continues to be a challenging situation.
On behalf of everyone at John Hancock Investment Management, I'd like
to take this opportunity to welcome new shareholders and thank
existing shareholders for the continued trust you've placed in us.
Sincerely,
Andrew G. Arnott
President and CEO,
John Hancock Investment Management
Head of Wealth and Asset Management,
United States and Europe
This commentary reflects the CEO's views as of this report's period
end and are subject to change at any time. Diversification does not
guarantee investment returns and does not eliminate risk of loss. All
investments entail risks, including the possible loss of principal.
For more up-to-date information, you can visit our website at
jhinvestments.com.
John Hancock
Preferred Income Fund
Table of contents
|
|
|
|
|
2
|
|
Your fund at a glance
|
|
6
|
|
Manager's discussion of fund performance
|
|
8
|
|
Fund's investments
|
|
16
|
|
Financial statements
|
|
20
|
|
Financial highlights
|
|
21
|
|
Notes to financial statements
|
|
30
|
|
Report of independent registered public accounting firm
|
|
31
|
|
Tax information
|
|
32
|
|
Additional information
|
|
35
|
|
Shareholder meeting
|
|
36
|
|
Continuation of investment advisory and subadvisory agreements
|
|
43
|
|
Trustees and Officers
|
|
47
|
|
More information
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 1
INVESTMENT OBJECTIVE
The fund seeks to provide a high level of current income consistent
with preservation of capital. The fund's secondary investment
objective is to provide growth of capital to the extent consistent
with its primary objective.
AVERAGE ANNUAL TOTAL RETURNS AS OF 7/31/2020 (%)
The ICE Bank of America Hybrid Preferred Securities Index is a subset
of the ICE Bank of America Fixed Rate Preferred Securities Index,
including all subordinated securities with a payment deferral
feature. The ICE Bank of America Fixed Rate Preferred Securities
Index tracks the performance of fixed-rate U.S. dollar-denominated
preferred securities issued in the U.S. domestic market. Qualifying
securities must have an investment-grade rating and the country of
risk must also have an investment-grade rating.
It is not possible to invest directly in an index. Index figures do
not reflect expenses or sales charges, 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 be
increased 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.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 2
PERFORMANCE HIGHLIGHTS OVER THE LAST TWELVE MONTHS
The spread of COVID-19 was the key driver of the preferred market's performance
After benefiting from a period of relative calm from August 2019
through January 2020, preferred securities came under severe pressure
during the global markets sell-off in March 2020.
Energy holdings hurt performance
A decline in energy demand, an effect of the pandemic, hampered the
fund's return.
Communication services holdings boosted relative performance
Investors' demand for companies benefiting from the work-from-home
trend helped telecommunications holdings.
PORTFOLIO COMPOSITION AS OF 7/31/2020 (%)
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 3
SECTOR COMPOSITION AS OF
7/31/2020 (%)
QUALITY COMPOSITION AS OF
7/31/2020 (%)
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 4
A note about 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. There is no guarantee prior distribution levels will be
maintained, and distributions may include a substantial tax return of
capital. A return of capital is the return of all or a portion of a
shareholder's investment in the fund. For the fiscal year ended
July 31, 2020, the fund's aggregate distributions included a return of capital of
$0.08 per share, or 5.07% of aggregate distributions, which could
impact the tax treatment of a subsequent sale of fund shares.
Fixed-income investments are subject to interest-rate risk; their
value will normally decline as interest rates rise or if a creditor,
grantor, or counterparty is unable or unwilling to make principal,
interest, or settlement payments. Preferred stock dividends are
payable only if declared by the issuer's board. Preferred stock may
be subject to redemption provisions. The market value of convertible
securities tend to fall as interest rates rise and rise as interest
rates fall. Convertible preferred stock's value can depend heavily on
the underlying common stock's value. Investments in higher-yielding,
lower-rated securities are subject to a higher risk of default. An
issuer of securities held by the fund may default, have its credit
rating downgraded, or otherwise perform poorly, which may affect fund
performance. Liquidity—the extent to which a security may be sold or
a derivative position closed without negatively affecting its market
value—may be impaired by reduced trading volume, heightened
volatility, rising interest rates, and other market conditions.
Domestic and foreign equity markets have experienced increased
volatility and turmoil which may adversely affect the fund and
issuers worldwide. The fund's use of leverage creates additional
risks, including greater volatility of the fund's NAV, market price,
and returns. There is no assurance that the fund's leverage strategy
will be successful. In addition, in volatile market environments, the
fund could be required to sell securities in the portfolio in order
to comply with regulatory or other debt compliance requirements,
which could negatively impact the fund's performance. Focusing on a
particular industry or sector may increase the fund's volatility and
make it more susceptible to market, economic, and regulatory risks as
well as other factors affecting those industries or sectors.
A widespread health crisis such as a global pandemic could cause
substantial market volatility, exchange trading suspensions and
closures,and affect fund performance. For example, the novel
coronavirus disease (COVID-19) has resulted in significant
disruptions to global business activity. The impact of a health
crisis and other epidemics and pandemics that may arise in the
future, could affect the global economy in ways that cannot
necessarily be foreseen at the present time. A health crisis may
exacerbate other pre-existing political, social, and economic risks.
Any such impact could adversely affect the fund's performance,
resulting in losses to your investment.
The fund normally will invest at least 25%, measured at the time of
purchase, of its total assets in the industries composing the
utilities sector, which includes telecommunications companies. When
the fund's investments focus on one or more sectors of the economy,
they are far less diversified than the broad securities markets. This
means that the fund may be more volatile than other funds, and the
values of its investments may go up and down more rapidly. Because
utility companies are capital intensive, they can be hurt by higher
interest rates, which would increase the companies' interest burden.
They can also be affected by costs in connection with capital
construction programs, costs associated with environmental and other
regulations, and the effects of economic declines, surplus capacity,
and increased competition. In addition, the fund may invest in
financial services companies, which can be hurt by economic declines,
changes in interest rates, and regulatory and market impacts. The
fund's investments in securities of foreign issuers involve special
risks, such as political, economic, and currency risks and
differences in accounting standards and financial reporting.
Cybersecurity incidents 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 affect performance.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 5
Manager's discussion of fund performance
How would you describe the investment backdrop during the 12 months ended
July 31, 2020?
Preferred securities suffered significant losses for the period,
hamstrung by poor performance during late February and throughout
March when growing investor anxiety over the COVID-19 pandemic led to
extreme global market volatility, with preferreds hit particularly
hard. April marked the beginning of a robust rebound that persisted
through period end, triggered largely by the U.S. Federal Reserve's
(Fed's) moves to cut interest rates and restore liquidity to
financial markets, as well as fiscal stimulus designed to shore up
the U.S. economy. Even after this late period rally, many preferreds
still hadn't fully recovered from their March lows by period end as
they tend to be issued by energy, utilities, and financial services
firms that saw their values hurt by the pandemic.
What elements of the fund's positioning affected results?
The fund's overweighting in the energy sector detracted from
performance relative to its comparative index, the ICE Bank of
America Hybrid Preferred Securities Index. The energy sector
performed poorly as investors began to discount future energy demand
in light of the forced pandemic-related shutdown of the economy. Even
the midstream energy companies—firms that process, store, and
transport oil and gas—were caught up in the sector's decline, even
though they tend to be less sensitive to commodity prices.
TOP 10 ISSUERS AS OF 7/31/2020 (%)
|
|
|
|
DTE Energy Company
|
5.3
|
|
CenterPoint Energy, Inc.
|
3.8
|
|
Morgan Stanley
|
3.7
|
|
Algonquin Power & Utilities Corp.
|
3.4
|
|
U.S. Cellular Corp.
|
3.3
|
|
Southern California Edison Company
|
3.2
|
|
PPL Capital Funding, Inc.
|
3.0
|
|
Citigroup, Inc.
|
3.0
|
|
South Jersey Industries, Inc.
|
2.9
|
|
Duke Energy Corp.
|
2.8
|
|
TOTAL
|
34.4
|
|
As a percentage of total investments.
|
|
Cash and cash equivalents are not included.
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 6
Also detracting from performance were sales of Kinder Morgan, Inc.
and Stanley Black & Decker, Inc. These sales permitted a reduction of
the fund's leverage in March, a strategy we pursued to manage the
portfolio's overall risk profile. Given the weak market environment
at the time, the sale of these securities resulted in losses for
the fund.
In contrast, the fund's overweighting in the communication services
sector contributed, with holdings in U.S. Cellular Corp. and
Telephone and Data Systems, Inc. adding value amid investors' search
for companies that would benefit from the work-from-home trend.
Elsewhere, the fund's overweighting in electric utility preferreds
further boosted relative performance.
How was the fund positioned at the end of the period?
We believe preferred securities will continue to recover over the
next 6 to 12 months. We think interest rates will remain low given
the economic impact of the coronavirus and that it will be some time
before the Fed decides to raise rates for fear of derailing a
recovery. The yields on preferreds looked very attractive relative to
the 10-year U.S. Treasury bond as of the end of July, at wide levels
not seen since the 2008 financial crisis. As the economy slowly goes
back to normal, we expect this spread to revert to the historical
mean, which will likely provide significant upside to preferred
securities. The credit quality of the average preferred issue is very
good, in our view, at an average of investment grade. We believe
that, over time, preferreds' credit quality and attractive valuations
will be recognized by the market and result in price appreciation for
the asset class.
MANAGED BY
|
|
|
Joseph H. Bozoyan, CFA, Manulife IM (US)
|
|
Brad Lutz, CFA, Manulife IM (US)
|
The views expressed in this report are exclusively those of Joseph H.
Bozoyan, CFA, Manulife Investment Management, 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 PREFERRED INCOME FUND 7
AS OF 7-31-20
|
|
|
|
|
Shares
|
Value
|
|
Preferred
securities (A) 114.8% (77.8% of Total investments)
|
|
|
$554,116,459
|
|
(Cost
$567,745,020)
|
|
|
|
|
|
|
Communication
services 11.3%
|
|
|
|
54,705,519
|
|
Diversified
telecommunication services 2.7%
|
|
|
|
|
|
Qwest
Corp., 6.125% (B)
|
|
|
|
30,000
|
715,800
|
|
Qwest
Corp., 6.500%
|
|
|
|
136,705
|
3,349,273
|
|
Qwest
Corp., 6.750%
|
|
|
|
360,000
|
9,147,600
|
|
Wireless
telecommunication services 8.6%
|
|
|
|
|
|
Telephone
& Data Systems, Inc., 6.625% (B)
|
|
|
|
233,381
|
6,018,896
|
|
Telephone
& Data Systems, Inc., 6.875%
|
|
|
|
119,781
|
3,029,261
|
|
Telephone
& Data Systems, Inc., 7.000% (B)
|
|
|
|
340,000
|
8,595,200
|
|
U.S.
Cellular Corp., 6.950% (B)(C)
|
|
|
|
720,000
|
18,576,000
|
|
U.S.
Cellular Corp., 7.250% (B)(C)
|
|
|
|
205,514
|
5,273,489
|
|
Consumer
discretionary 0.4%
|
|
|
|
1,837,080
|
|
Internet
and direct marketing retail 0.4%
|
|
|
|
|
|
QVC,
Inc., 6.250%
|
|
|
|
81,000
|
1,837,080
|
|
Consumer
staples 2.4%
|
|
|
|
11,726,000
|
|
Food
products 2.4%
|
|
|
|
|
|
Ocean
Spray Cranberries, Inc., 6.250% (D)
|
|
|
|
143,000
|
11,726,000
|
|
Energy
1.9%
|
|
|
|
8,954,900
|
|
Oil,
gas and consumable fuels 1.9%
|
|
|
|
|
|
Enbridge,
Inc. (6.375% to 4-15-23, then 3 month LIBOR + 3.593%) (B)(C)
|
|
|
|
210,000
|
5,229,000
|
|
NuStar
Logistics LP (3 month LIBOR + 6.734%), 7.009% (E)
|
|
|
|
185,000
|
3,725,900
|
|
Financials
40.6%
|
|
|
|
196,006,278
|
|
Banks
18.8%
|
|
|
|
|
|
Bank
of America Corp., 6.000% (B)
|
|
|
|
134,281
|
3,664,528
|
|
Bank
of America Corp. (6.450% to 12-15-66, then 3 month LIBOR + 1.327%) (B)
|
|
|
|
135,000
|
3,586,950
|
|
Citigroup
Capital XIII (3 month LIBOR + 6.370%), 6.638% (E)
|
|
|
|
384,725
|
10,387,575
|
|
Citigroup,
Inc. (7.125% to 9-30-23, then 3 month LIBOR + 4.040%)
|
|
|
|
318,337
|
9,037,587
|
|
Fifth
Third Bancorp, 6.000% (B)
|
|
|
|
234,293
|
6,279,052
|
|
First
Republic Bank, 4.700% (B)(C)
|
|
|
|
164,175
|
4,265,267
|
|
GMAC
Capital Trust I (3 month LIBOR + 5.785%), 6.177% (E)
|
|
|
|
450,544
|
10,844,594
|
|
Pinnacle
Financial Partners, Inc., 6.750%
|
|
|
|
175,000
|
4,550,000
|
|
Synovus
Financial Corp. (6.300% to 6-21-23, then 3 month LIBOR + 3.352%) (B)
|
|
|
|
188,000
|
4,726,320
|
|
8
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
|
|
|
|
|
Shares
|
Value
|
|
Financials
(continued)
|
|
|
|
|
|
Banks
(continued)
|
|
|
|
|
|
The
PNC Financial Services Group, Inc. (6.125% to 5-1-22, then 3 month LIBOR + 4.067%) (B)
|
|
|
|
187,000
|
$5,075,180
|
|
Truist
Financial Corp., Series G, 5.200% (B)
|
|
|
|
351,250
|
8,911,213
|
|
U.S.
Bancorp (6.500% to 1-15-22, then 3 month LIBOR + 4.468%) (B)
|
|
|
|
185,000
|
4,943,200
|
|
Wells
Fargo & Company (6.625% to 3-15-24, then 3 month LIBOR + 3.690%) (B)(C)
|
|
|
|
322,025
|
8,627,050
|
|
Wells
Fargo & Company, 6.000%
|
|
|
|
24,955
|
647,582
|
|
Wells
Fargo & Company, 7.500%
|
|
|
|
3,500
|
4,730,250
|
|
Western
Alliance Bancorp, 6.250%
|
|
|
|
21,000
|
535,710
|
|
Capital
markets 5.5%
|
|
|
|
|
|
Morgan
Stanley (6.375% to 10-15-24, then 3 month LIBOR + 3.708%) (B)
|
|
|
|
235,000
|
6,636,400
|
|
Morgan
Stanley (6.875% to 1-15-24, then 3 month LIBOR + 3.940%)
|
|
|
|
100,000
|
2,870,000
|
|
Morgan
Stanley (7.125% to 10-15-23, then 3 month LIBOR + 4.320%)
|
|
|
|
595,424
|
17,118,440
|
|
Consumer
finance 1.3%
|
|
|
|
|
|
Navient
Corp., 6.000% (B)
|
|
|
|
294,071
|
6,440,155
|
|
Insurance
14.8%
|
|
|
|
|
|
AEGON
Funding Company LLC, 5.100% (B)(C)
|
|
|
|
324,625
|
8,138,349
|
|
American
Equity Investment Life Holding Company (6.625% to 9-1-25, then 5 Year CMT + 6.297%)
|
|
|
|
158,375
|
3,948,289
|
|
American
Financial Group, Inc., 5.125% (B)
|
|
|
|
153,425
|
4,065,763
|
|
American
International Group, Inc., 5.850% (B)(C)
|
|
|
|
249,000
|
6,857,460
|
|
Athene
Holding, Ltd., Series A (6.350% to 6-30-29, then 3 month LIBOR + 4.253%) (B)(C)
|
|
|
|
305,000
|
7,948,300
|
|
Brighthouse
Financial, Inc., 6.600%
|
|
|
|
281,775
|
7,455,767
|
|
Prudential
Financial, Inc., 5.750% (B)
|
|
|
|
140,000
|
3,648,400
|
|
Prudential
PLC, 6.500% (B)(C)
|
|
|
|
154,500
|
4,295,100
|
|
Prudential
PLC, 6.750% (B)(C)
|
|
|
|
51,000
|
1,390,770
|
|
The
Hartford Financial Services Group, Inc. (7.875% to 4-15-22, then 3 month LIBOR + 5.596%) (B)
|
|
|
|
58,227
|
1,664,710
|
|
Unum
Group, 6.250%
|
|
|
|
147,500
|
3,882,200
|
|
W.R.
Berkley Corp., 5.625% (B)(C)
|
|
|
|
716,641
|
18,152,517
|
|
Thrifts
and mortgage finance 0.2%
|
|
|
|
|
|
Federal
National Mortgage Association, Series S, 8.250% (F)
|
|
|
|
80,000
|
681,600
|
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
9
|
|
|
|
|
|
Shares
|
Value
|
|
Information
technology 2.3%
|
|
|
|
$10,838,645
|
|
Semiconductors
and semiconductor equipment 2.3%
|
|
|
|
|
|
Broadcom,
Inc., 8.000% (B)
|
|
|
|
9,500
|
10,838,645
|
|
Real
estate 4.5%
|
|
|
|
21,866,775
|
|
Equity
real estate investment trusts 4.5%
|
|
|
|
|
|
American
Homes 4 Rent, Series E, 6.350%
|
|
|
|
99,975
|
2,604,349
|
|
American
Homes 4 Rent, Series F, 5.875% (B)
|
|
|
|
165,575
|
4,362,901
|
|
Digital
Realty Trust, Inc., 6.350%
|
|
|
|
922
|
23,391
|
|
Diversified
Healthcare Trust, 5.625%
|
|
|
|
821,432
|
14,876,134
|
|
Utilities
51.4%
|
|
|
|
248,181,262
|
|
Electric
utilities 20.1%
|
|
|
|
|
|
Duke
Energy Corp., 5.125% (B)(C)
|
|
|
|
511,525
|
13,207,576
|
|
Duke
Energy Corp., 5.750% (B)
|
|
|
|
240,000
|
6,842,400
|
|
Entergy
Louisiana LLC, 5.250% (B)
|
|
|
|
141,476
|
3,727,893
|
|
Interstate
Power & Light Company, 5.100% (B)(C)
|
|
|
|
170,000
|
4,329,900
|
|
NextEra
Energy, Inc., 5.279% (B)(C)
|
|
|
|
200,000
|
9,688,000
|
|
NSTAR
Electric Company, 4.780% (B)
|
|
|
|
15,143
|
1,544,737
|
|
PG&E
Corp., 5.500%
|
|
|
|
55,000
|
5,513,750
|
|
PPL
Capital Funding, Inc., 5.900% (B)
|
|
|
|
837,439
|
21,547,305
|
|
SCE
Trust II, 5.100% (B)(C)
|
|
|
|
511,190
|
12,350,350
|
|
SCE
Trust III (5.750% to 3-15-24, then 3 month LIBOR + 2.990%) (B)
|
|
|
|
20,000
|
451,600
|
|
The
Southern Company, 6.250% (B)(C)
|
|
|
|
149,524
|
3,812,862
|
|
The
Southern Company, 6.750% (B)
|
|
|
|
300,000
|
13,836,000
|
|
Gas
utilities 4.2%
|
|
|
|
|
|
South
Jersey Industries, Inc., 5.625% (B)
|
|
|
|
239,275
|
6,182,866
|
|
South
Jersey Industries, Inc., 7.250%
|
|
|
|
357,100
|
14,130,447
|
|
Multi-utilities
27.1%
|
|
|
|
|
|
Algonquin
Power & Utilities Corp. (6.200% to 7-1-24, then 3 month LIBOR + 4.010%)
|
|
|
|
354,930
|
9,604,406
|
|
Algonquin
Power & Utilities Corp. (6.875% to 10-17-23, then 3 month LIBOR + 3.677%)
|
|
|
|
526,441
|
14,398,161
|
|
CenterPoint
Energy, Inc., 7.000% (B)
|
|
|
|
755,000
|
27,293,250
|
|
CMS
Energy Corp., 5.625% (B)
|
|
|
|
225,000
|
6,156,000
|
|
Dominion
Energy, Inc., 7.250% (B)
|
|
|
|
69,300
|
7,206,507
|
|
DTE
Energy Company (Callable 9-1-20), 5.250% (B)
|
|
|
|
248,120
|
6,371,722
|
|
DTE
Energy Company (Callable 12-1-22), 5.250% (B)
|
|
|
|
240,000
|
6,386,400
|
|
DTE
Energy Company, 6.000% (B)(C)
|
|
|
|
94,150
|
2,508,156
|
|
DTE
Energy Company, 6.250% (B)
|
|
|
|
503,000
|
22,680,270
|
|
Integrys
Holding, Inc. (6.000% to 8-1-23, then 3 month LIBOR + 3.220%) (B)
|
|
|
|
272,500
|
6,928,408
|
|
10
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
|
|
|
|
|
Shares
|
Value
|
|
Utilities
(continued)
|
|
|
|
|
|
Multi-utilities
(continued)
|
|
|
|
|
|
NiSource,
Inc. (6.500% to 3-15-24, then 5 Year CMT + 3.632%) (B)(C)
|
|
|
|
344,000
|
$9,442,800
|
|
Sempra
Energy, 5.750% (B)(C)
|
|
|
|
338,000
|
9,098,960
|
|
|
|
Sempra
Energy, 6.750%
|
|
|
|
28,400
|
2,940,536
|
|
Common
stocks 3.4% (2.3% of Total investments)
|
|
|
$16,500,663
|
|
(Cost
$27,444,514)
|
|
|
|
|
|
|
Communication
services 0.4%
|
|
|
|
1,833,500
|
|
Diversified
telecommunication services 0.4%
|
|
|
|
|
|
CenturyLink,
Inc. (B)(C)
|
|
|
|
190,000
|
1,833,500
|
|
Energy
3.0%
|
|
|
|
14,667,163
|
|
Oil,
gas and consumable fuels 3.0%
|
|
|
|
|
|
BP
PLC, ADR (B)(C)
|
|
|
|
172,500
|
3,801,900
|
|
Equitrans
Midstream Corp. (B)
|
|
|
|
442,012
|
4,265,416
|
|
The
Williams Companies, Inc. (B)(C)
|
|
|
|
345,000
|
6,599,847
|
|
|
|
|
Rate
(%)
|
Maturity
date
|
|
Par
value^
|
Value
|
|
Corporate
bonds 29.1% (19.7% of Total investments)
|
|
|
$140,398,841
|
|
(Cost
$148,255,827)
|
|
|
|
|
|
|
Communication
services 1.4%
|
|
|
|
6,756,435
|
|
Wireless
telecommunication services 1.4%
|
|
|
|
|
|
SoftBank
Group Corp. (6.875% to 7-19-27, then 5 Year ICE Swap Rate + 4.854%) (B)(G)
|
6.875
|
07-19-27
|
|
6,955,000
|
6,756,435
|
|
Consumer
discretionary 2.3%
|
|
|
|
11,258,779
|
|
Automobiles
2.3%
|
|
|
|
|
|
General
Motors Financial Company, Inc. (6.500% to 9-30-28, then 3 month LIBOR + 3.436%) (G)
|
6.500
|
09-30-28
|
|
11,922,000
|
11,258,779
|
|
Consumer
staples 0.2%
|
|
|
|
818,300
|
|
Food
products 0.2%
|
|
|
|
|
|
Land
O' Lakes, Inc. (D)(G)
|
8.000
|
07-16-25
|
|
835,000
|
818,300
|
|
Energy
4.6%
|
|
|
|
22,102,056
|
|
Oil,
gas and consumable fuels 4.6%
|
|
|
|
|
|
DCP
Midstream LP (7.375% to 12-15-22, then 3 month LIBOR + 5.148%) (G)
|
7.375
|
12-15-22
|
|
11,787,000
|
8,701,095
|
|
Energy
Transfer Operating LP (3 month LIBOR + 3.018%) (B)(E)
|
3.269
|
11-01-66
|
|
8,800,000
|
4,400,000
|
|
Energy
Transfer Operating LP (6.625% to 2-15-28, then 3 month LIBOR + 4.155%) (B)(C)(G)
|
6.625
|
02-15-28
|
|
8,000,000
|
5,760,000
|
|
MPLX
LP (6.875% to 2-15-23, then 3 month LIBOR + 4.652%) (G)
|
6.875
|
02-15-23
|
|
3,700,000
|
3,240,961
|
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
11
|
|
|
Rate
(%)
|
Maturity
date
|
|
Par
value^
|
Value
|
|
Financials
14.8%
|
|
|
|
$71,279,337
|
|
Banks
9.1%
|
|
|
|
|
|
Barclays
PLC (7.750% to 9-15-23, then 5 Year U.S. Swap Rate + 4.842%) (B)(G)
|
7.750
|
09-15-23
|
|
1,837,000
|
1,871,444
|
|
Barclays
PLC (8.000% to 6-15-24, then 5 Year CMT + 5.672%) (G)
|
8.000
|
06-15-24
|
|
3,226,000
|
3,415,528
|
|
Citigroup,
Inc. (6.125% to 11-15-20, then 3 month LIBOR + 4.478%) (G)
|
6.125
|
11-15-20
|
|
1,650,000
|
1,645,875
|
|
Citizens
Financial Group, Inc. (6.375% to 4-6-24, then 3 month LIBOR + 3.157%) (B)(G)
|
6.375
|
04-06-24
|
|
7,500,000
|
7,232,288
|
|
Comerica,
Inc. (5.625% to 7-1-25, then 5 Year CMT + 5.291%) (G)
|
5.625
|
07-01-25
|
|
3,500,000
|
3,737,300
|
|
Huntington
Bancshares, Inc. (5.625% to 7-15-30, then 10 Year CMT + 4.945%) (G)
|
5.625
|
07-15-30
|
|
2,000,000
|
2,207,460
|
|
JPMorgan
Chase & Co. (3 month LIBOR + 3.320%) (B)(C)(E)(G)
|
3.616
|
10-01-20
|
|
5,230,000
|
4,894,135
|
|
JPMorgan
Chase & Co. (6.750% to 2-1-24, then 3 month LIBOR + 3.780%) (B)(G)
|
6.750
|
02-01-24
|
|
6,000,000
|
6,649,980
|
|
Lloyds
Banking Group PLC (7.500% to 6-27-24, then 5 Year U.S. Swap Rate + 4.760%) (B)(G)
|
7.500
|
06-27-24
|
|
7,500,000
|
7,912,500
|
|
Regions
Financial Corp. (5.750% to 6-15-25, then 5 Year CMT + 5.430%) (G)
|
5.750
|
06-15-25
|
|
2,300,000
|
2,449,500
|
|
Wells
Fargo & Company (5.900% to 6-15-24, then 3 month LIBOR + 3.110%) (B)(G)
|
5.900
|
06-15-24
|
|
2,000,000
|
2,031,922
|
|
Capital
markets 1.5%
|
|
|
|
|
|
The
Bank of New York Mellon Corp. (4.700% to 9-20-25, then 5 Year CMT + 4.358%) (B)(G)
|
4.700
|
09-20-25
|
|
3,000,000
|
3,248,340
|
|
The
Charles Schwab Corp. (5.375% to 6-1-25, then 5 Year CMT + 4.971%) (B)(G)
|
5.375
|
06-01-25
|
|
3,800,000
|
4,161,000
|
|
Consumer
finance 1.0%
|
|
|
|
|
|
Discover
Financial Services (6.125% to 6-23-25, then 5 Year CMT + 5.783%) (G)
|
6.125
|
06-23-25
|
|
4,300,000
|
4,570,040
|
|
Insurance
3.2%
|
|
|
|
|
|
Markel
Corp. (6.000% to 6-1-25, then 5 Year CMT + 5.662%) (G)
|
6.000
|
06-01-25
|
|
2,500,000
|
2,628,125
|
|
MetLife,
Inc. (5.875% to 3-15-28, then 3 month LIBOR + 2.959%) (B)(C)(G)
|
5.875
|
03-15-28
|
|
5,000,000
|
5,475,000
|
|
SBL
Holdings, Inc. (7.000% to 5-13-25, then 5 Year CMT + 5.580%) (B)(D)(G)
|
7.000
|
05-13-25
|
|
8,536,000
|
7,148,900
|
|
Materials
0.6%
|
|
|
|
2,929,174
|
|
Chemicals
0.6%
|
|
|
|
|
|
Braskem
Netherlands Finance BV (8.500% to 10-24-25, then 5 Year CMT + 8.220%) (D)
|
8.500
|
01-23-81
|
|
2,900,000
|
2,929,174
|
|
12
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
|
|
Rate
(%)
|
Maturity
date
|
|
Par
value^
|
Value
|
|
Utilities
5.2%
|
|
|
|
$25,254,760
|
|
Electric
utilities 2.8%
|
|
|
|
|
|
Emera,
Inc. (6.750% to 6-15-26, then 3 month LIBOR + 5.440%) (B)(C)
|
6.750
|
06-15-76
|
|
3,224,000
|
3,583,476
|
|
Southern
California Edison Company (6.250% to 2-1-22, then 3 month LIBOR + 4.199%) (B)(C)(G)
|
6.250
|
02-01-22
|
|
10,000,000
|
9,900,000
|
|
Multi-utilities
2.4%
|
|
|
|
|
|
CMS
Energy Corp. (4.750% to 3-1-30, then 5 Year CMT + 4.116%) (B)
|
4.750
|
06-01-50
|
|
4,250,000
|
4,537,917
|
|
Dominion
Energy, Inc. (5.750% to 10-1-24, then 3 month LIBOR + 3.057%) (B)(C)
|
5.750
|
10-01-54
|
|
5,000,000
|
5,283,367
|
|
|
|
NiSource,
Inc. (5.650% to 6-15-23, then 5 Year CMT + 2.843%) (B)(G)
|
5.650
|
06-15-23
|
|
2,000,000
|
1,950,000
|
|
Capital
preferred securities (H) 0.1% (0.1% of Total investments)
|
|
|
$580,033
|
|
(Cost
$588,281)
|
|
|
|
|
|
|
Financials
0.1%
|
|
|
|
580,033
|
|
Banks
0.1%
|
|
|
|
|
|
Wachovia
Capital Trust III (Greater of 3 month LIBOR + 0.930% or 5.570%) (B)(E)(G)
|
5.570
|
08-31-20
|
|
583,000
|
580,033
|
|
|
|
|
|
|
|
Par
value^
|
Value
|
|
Short-term
investments 0.2% (0.1% of Total investments)
|
|
|
$810,000
|
|
(Cost
$810,000)
|
|
|
|
|
|
|
Repurchase
agreement 0.2%
|
|
|
|
|
810,000
|
|
Repurchase
Agreement with State Street Corp. dated 7-31-20 at 0.000% to be repurchased at $810,000 on 8-3-20, collateralized by $796,300 U.S. Treasury Notes, 1.625% due 11-15-22 (valued at $826,225)
|
|
|
|
810,000
|
810,000
|
|
|
|
Total
investments (Cost $744,843,642) 147.6%
|
|
|
|
$712,405,996
|
|
Other
assets and liabilities, net (47.6%)
|
|
|
|
(229,737,177)
|
|
Total
net assets 100.0%
|
|
|
|
|
$482,668,819
|
|
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 U.S. dollars unless otherwise indicated.
|
|
Security
Abbreviations and Legend
|
|
ADR
|
American
Depositary Receipt
|
|
CMT
|
Constant
Maturity Treasury
|
|
ICE
|
Intercontinental
Exchange
|
|
LIBOR
|
London
Interbank Offered Rate
|
|
(A)
|
Includes
preferred stocks and hybrid securities with characteristics of both equity and debt that pay dividends on a periodic basis.
|
|
(B)
|
All of a
portion of this security is pledged as collateral pursuant to the Credit Facility Agreement. Total collateral value at 7-31-20 was $479,081,336. A portion of the securities pledged as collateral were loaned pursuant to the Credit Facility Agreement.
The value of securities on loan amounted to $196,347,691.
|
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
13
|
|
(C)
|
All or a portion of this
security is on loan as of 7-31-20, and is a component of the fund's leverage under the Credit Facility Agreement.
|
|
(D)
|
These
securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration.
|
|
(E)
|
Variable
rate obligation. The coupon rate shown represents the rate at period end.
|
|
(F)
|
Non-income
producing security.
|
|
(G)
|
Perpetual
bonds have no stated maturity date. Date shown as maturity date is next call date.
|
|
(H)
|
Includes
hybrid securities with characteristics of both equity and debt that trade with, and pay, interest income.
|
|
14
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
DERIVATIVES
FUTURES
|
Open
contracts
|
Number
of
contracts
|
Position
|
Expiration
date
|
Notional
basis^
|
Notional
value^
|
Unrealized
appreciation
(depreciation)
|
|
10-Year
U.S. Treasury Note Futures
|
640
|
Short
|
Sep
2020
|
$(88,883,635)
|
$(89,650,000)
|
$(766,365)
|
|
|
|
|
|
|
|
$(766,365)
|
^ Notional basis refers to the
contractual amount agreed upon at inception of open contracts; notional value represents the current value of the open contract.
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
|
73,000,000
|
USD
|
Fixed
2.136%
|
USD
3 month LIBOR BBA(a)
|
Semi-Annual
|
Quarterly
|
Oct
2022
|
—
|
$(3,600,598)
|
$(3,600,598)
|
|
|
|
|
|
|
|
|
|
—
|
$(3,600,598)
|
$(3,600,598)
|
|
(a)
|
At 7-31-20, the 3 month LIBOR
was 0.249%.
|
|
Derivatives
Currency Abbreviations
|
|
USD
|
U.S.
Dollar
|
|
Derivatives
Abbreviations
|
|
BBA
|
The
British Banker's Association
|
|
LIBOR
|
London
Interbank Offered Rate
|
|
OTC
|
Over-the-counter
|
At 7-31-20, the aggregate cost of
investments for federal income tax purposes was $744,203,083. Net unrealized depreciation aggregated to $36,164,050, of which $19,167,005 related to gross unrealized appreciation and $55,331,055 related to gross unrealized depreciation.
See Notes to financial statements regarding investment
transactions and other derivatives information.
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
15
|
STATEMENT OF ASSETS AND LIABILITIES 7-31-20
|
Assets
|
|
|
Unaffiliated
investments, at value (Cost $744,843,642)
|
$712,405,996
|
|
Receivable
for centrally cleared swaps
|
773,559
|
|
Collateral
held at broker for futures contracts
|
1,280,000
|
|
Dividends
and interest receivable
|
3,253,942
|
|
Receivable
for investments sold
|
1,123,364
|
|
Other
assets
|
43,050
|
|
Total
assets
|
718,879,911
|
|
Liabilities
|
|
|
Payable
for futures variation margin
|
40,032
|
|
Due
to custodian
|
357,417
|
|
Credit
facility agreement payable
|
235,500,000
|
|
Interest
payable
|
176,904
|
|
Payable
to affiliates
|
|
|
Accounting
and legal services fees
|
21,915
|
|
Trustees'
fees
|
141
|
|
Other
liabilities and accrued expenses
|
114,683
|
|
Total
liabilities
|
236,211,092
|
|
Net
assets
|
$482,668,819
|
|
Net
assets consist of
|
|
|
Paid-in
capital
|
$546,096,628
|
|
Total
distributable earnings (loss)
|
(63,427,809)
|
|
Net
assets
|
$482,668,819
|
|
|
|
Net
asset value per share
|
|
|
Based
on 26,192,030 shares of beneficial interest outstanding - unlimited number of shares authorized with no par value
|
$18.43
|
|
16
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
STATEMENT OF OPERATIONS For
the year ended 7-31-20
|
Investment
income
|
|
|
Dividends
|
$39,729,539
|
|
Interest
|
8,941,468
|
|
Total
investment income
|
48,671,007
|
|
Expenses
|
|
|
Investment
management fees
|
5,911,847
|
|
Interest
expense
|
5,595,487
|
|
Accounting
and legal services fees
|
81,600
|
|
Transfer
agent fees
|
27,604
|
|
Trustees'
fees
|
40,809
|
|
Custodian
fees
|
74,601
|
|
Printing
and postage
|
144,025
|
|
Professional
fees
|
65,925
|
|
Stock
exchange listing fees
|
25,573
|
|
Other
|
24,886
|
|
Total
expenses
|
11,992,357
|
|
Less
expense reductions
|
(56,216)
|
|
Net
expenses
|
11,936,141
|
|
Net
investment income
|
36,734,866
|
|
Realized
and unrealized gain (loss)
|
|
|
Net
realized gain (loss) on
|
|
|
Unaffiliated
investments
|
(10,967,996)
|
|
Futures
contracts
|
(8,538,819)
|
|
Swap
contracts
|
(263,764)
|
|
|
(19,770,579)
|
|
Change
in net unrealized appreciation (depreciation) of
|
|
|
Unaffiliated
investments
|
(53,477,151)
|
|
Futures
contracts
|
650,016
|
|
Swap
contracts
|
(2,516,190)
|
|
|
(55,343,325)
|
|
Net
realized and unrealized loss
|
(75,113,904)
|
|
Decrease
in net assets from operations
|
$(38,379,038)
|
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
17
|
STATEMENTS OF CHANGES IN NET ASSETS
|
|
Year
ended
7-31-20
|
Year
ended
7-31-19
|
|
Increase
(decrease) in net assets
|
|
|
|
From
operations
|
|
|
|
Net
investment income
|
$36,734,866
|
$34,842,691
|
|
Net
realized loss
|
(19,770,579)
|
(4,911,293)
|
|
Change
in net unrealized appreciation (depreciation)
|
(55,343,325)
|
14,262,649
|
|
Increase
(decrease) in net assets resulting from operations
|
(38,379,038)
|
44,194,047
|
|
Distributions
to shareholders
|
|
|
|
From
earnings
|
(37,561,339)
|
(36,386,401)
|
|
From
tax return of capital
|
(2,007,312)
|
(7,360,791)
|
|
Total
distributions
|
(39,568,651)
|
(43,747,192)
|
|
Fund
share transactions
|
|
|
|
Issued
pursuant to Dividend Reinvestment Plan
|
2,381,995
|
1,068,633
|
|
Total
increase (decrease)
|
(75,565,694)
|
1,515,488
|
|
Net
assets
|
|
|
|
Beginning
of year
|
558,234,513
|
556,719,025
|
|
End
of year
|
$482,668,819
|
$558,234,513
|
|
Share
activity
|
|
|
|
Shares
outstanding
|
|
|
|
Beginning
of year
|
26,070,792
|
26,020,486
|
|
Issued
pursuant to Dividend Reinvestment Plan
|
121,238
|
50,306
|
|
End
of year
|
26,192,030
|
26,070,792
|
|
18
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
STATEMENT OF CASH FLOWS For
the year ended 7-31-20
|
|
|
|
Cash
flows from operating activities
|
|
|
Net
decrease in net assets from operations
|
$(38,379,038)
|
|
Adjustments
to reconcile net decrease in net assets from operations to net cash provided by operating activities:
|
|
|
Long-term
investments purchased
|
(269,055,015)
|
|
Long-term
investments sold
|
337,989,987
|
|
Net
purchases and sales in short-term investments
|
(330,046)
|
|
Net
amortization of premium (discount)
|
507,857
|
|
(Increase)
Decrease in assets:
|
|
|
Receivable
for centrally cleared swaps
|
(94,785)
|
|
Collateral
held at broker for futures contracts
|
(533,000)
|
|
Dividends
and interest receivable
|
92,543
|
|
Receivable
for investments sold
|
2,790,057
|
|
Other
assets
|
8,889
|
|
Increase
(Decrease) in liabilities:
|
|
|
Payable
for futures variation margin
|
(9,955)
|
|
Payable
for investments purchased
|
(3,890,589)
|
|
Interest
payable
|
(579,810)
|
|
Payable
to affiliates
|
(46,741)
|
|
Other
liabilities and accrued expenses
|
(13,117)
|
|
Net
change in unrealized (appreciation) depreciation on:
|
|
|
Investments
|
53,477,151
|
|
Net
realized (gain) loss on:
|
|
|
Investments
|
10,967,996
|
|
Proceeds
received as return of capital
|
807,981
|
|
Net
cash provided by operating activities
|
$93,710,365
|
|
Cash
flows provided by (used in) financing activities
|
|
|
Distributions
to shareholders
|
$(37,186,656)
|
|
Increase
in due to custodian
|
357,417
|
|
Borrowings
(repayments) under the credit facility agreement
|
(57,000,000)
|
|
Net
cash used in financing activities
|
$(93,829,239)
|
|
Net
decrease in cash
|
$(118,874)
|
|
Cash
at beginning of year
|
$118,874
|
|
Cash
at end of year
|
—
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid for interest
|
$(6,175,297)
|
|
Noncash
financing activities not included herein consists of reinvestment distributions
|
$2,381,995
|
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
19
|
|
Period
ended
|
7-31-20
|
7-31-19
|
7-31-18
|
7-31-17
|
7-31-16
|
|
Per
share operating performance
|
|
|
|
|
|
|
Net
asset value, beginning of period
|
$21.41
|
$21.40
|
$22.15
|
$22.82
|
$21.75
|
|
Net
investment income1
|
1.41
|
1.34
|
1.51
|
1.61
|
1.60
|
|
Net
realized and unrealized gain (loss) on investments
|
(2.87)
|
0.35
|
(0.58)
|
(0.60)
|
1.15
|
|
Total
from investment operations
|
(1.46)
|
1.69
|
0.93
|
1.01
|
2.75
|
|
Less
distributions
|
|
|
|
|
|
|
From
net investment income
|
(1.44)
|
(1.40)
|
(1.68)
|
(1.68)
|
(1.55)
|
|
From
tax return of capital
|
(0.08)
|
(0.28)
|
—
|
—
|
(0.13)
|
|
Total
distributions
|
(1.52)
|
(1.68)
|
(1.68)
|
(1.68)
|
(1.68)
|
|
Net
asset value, end of period
|
$18.43
|
$21.41
|
$21.40
|
$22.15
|
$22.82
|
|
Per
share market value, end of period
|
$20.80
|
$24.30
|
$21.95
|
$22.29
|
$23.22
|
|
Total
return at net asset value (%)2,3
|
(7.14)
|
8.35
|
4.61
|
4.94
|
13.66
|
|
Total
return at market value (%)2
|
(7.67)
|
19.90
|
6.62
|
3.78
|
27.30
|
|
Ratios
and supplemental data
|
|
|
|
|
|
|
Net
assets, end of period (in millions)
|
$483
|
$558
|
$557
|
$576
|
$593
|
|
Ratios
(as a percentage of average net assets):
|
|
|
|
|
|
|
Expenses
before reductions
|
2.32
|
2.95
|
2.49
|
2.05
|
1.79
|
|
Expenses
including reductions4
|
2.31
|
2.94
|
2.48
|
2.04
|
1.78
|
|
Net
investment income
|
7.12
|
6.49
|
7.10
|
7.40
|
7.33
|
|
Portfolio
turnover (%)
|
35
|
37
|
24
|
20
|
14
|
|
Senior
securities
|
|
|
|
|
|
|
Total
debt outstanding end of period (in millions)
|
$236
|
$293
|
$293
|
$293
|
$293
|
|
Asset
coverage per $1,000 of debt5
|
$3,050
|
$2,908
|
$2,903
|
$2,970
|
$3,027
|
|
1
|
Based
on average daily shares outstanding.
|
|
2
|
Total
return based on net asset value reflects changes in the fund’s net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax
return of capital, if any, were reinvested.
|
|
3
|
Total
returns would have been lower had certain expenses not been reduced during the applicable periods.
|
|
4
|
Expenses
including reductions excluding interest expense were 1.24%, 1.25%, 1.24%, 1.25% and 1.23% for the periods ended 7-31-20, 7-31-19, 7-31-18, 7-31-17 and 7-31-16, respectively.
|
|
5
|
Asset
coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 7). As debt outstanding changes, the level of invested assets may change accordingly. Asset coverage ratio provides a measure
of leverage.
|
|
20
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
SEE NOTES TO FINANCIAL
STATEMENTS
|
Notes to financial statements
Note 1—Organization
John Hancock Preferred Income 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).
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., Eastern Time. 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 fund's Valuation Policies and Procedures.
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. 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. Futures contracts are typically valued at the last traded price on the exchange on which they trade. Swaps are generally valued using evaluated prices obtained from an independent pricing vendor.
In certain instances, the Pricing Committee 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 fund's Pricing Committee following procedures established 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 fund's
own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or
|
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
21
|
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 July 31, 2020, by major security category or type:
|
|
Total
value at
7-31-20
|
Level
1
quoted
price
|
Level
2
significant
observable
inputs
|
Level
3
significant
unobservable
inputs
|
|
Investments
in securities:
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Preferred
securities
|
|
|
|
|
|
Communication
services
|
$54,705,519
|
$54,705,519
|
—
|
—
|
|
Consumer
discretionary
|
1,837,080
|
1,837,080
|
—
|
—
|
|
Consumer
staples
|
11,726,000
|
—
|
$11,726,000
|
—
|
|
Energy
|
8,954,900
|
8,954,900
|
—
|
—
|
|
Financials
|
196,006,278
|
196,006,278
|
—
|
—
|
|
Information
technology
|
10,838,645
|
10,838,645
|
—
|
—
|
|
Real
estate
|
21,866,775
|
21,866,775
|
—
|
—
|
|
Utilities
|
248,181,262
|
241,252,854
|
6,928,408
|
—
|
|
Common
stocks
|
16,500,663
|
16,500,663
|
—
|
—
|
|
Corporate
bonds
|
140,398,841
|
—
|
140,398,841
|
—
|
|
Capital
preferred securities
|
580,033
|
—
|
580,033
|
—
|
|
Short-term
investments
|
810,000
|
—
|
810,000
|
—
|
|
Total
investments in securities
|
$712,405,996
|
$551,962,714
|
$160,443,282
|
—
|
|
Derivatives:
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Futures
|
$(766,365)
|
$(766,365)
|
—
|
—
|
|
Swap
contracts
|
(3,600,598)
|
—
|
$(3,600,598)
|
—
|
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund's custodian, or for tri-party repurchase
agreements, collateral is held at a third-party custodian bank in a segregated account for the benefit of the fund. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less
than the principal amount of the repurchase agreement plus any accrued interest. Collateral received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase
agreement.
Repurchase agreements are typically
governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net
amounts owed. Absent an event of default, assets and liabilities resulting from repurchase agreements are not offset in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds
could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay claims resulting from close-out of the transactions.
|
22
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
|
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 the 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 the 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.
Distributions received on securities that represent a tax return of 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.
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.
Change in accounting
principle. Accounting Standards Update (ASU) 2017-08, Premium Amortization on Purchased Callable Debt Securities,
shortens the premium amortization period for purchased non contingently callable debt securities and is effective for public companies with fiscal years beginning after December 15, 2018. Adoption of the ASU did not have a material impact to the
fund.
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.
For federal income tax purposes, as of July 31, 2020, the fund
has a short-term capital loss carryforward of $8,647,239 and a long-term capital loss carryforward of $18,616,520 available to offset future net realized capital gains. These carryforwards do not expire.
|
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
23
|
As of July 31, 2020, 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.
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. Capital gain distributions, if any, are
typically distributed annually.
The tax character
of distributions for the years ended July 31, 2020 and 2019 was as follows:
|
|
July
31, 2020
|
July
31, 2019
|
|
Ordinary
income
|
$37,561,339
|
$36,386,401
|
|
Return
of capital
|
2,007,312
|
7,360,791
|
|
Total
|
$39,568,651
|
$43,747,192
|
As of July 31, 2020, there were no
distributable earnings on a tax basis.
Such distributions
and distributable earnings, on a tax basis, 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 return of capital.
Capital accounts within the
financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. Book-tax differences are
primarily attributable to contingent payment debt instruments, amortization and accretion on debt securities and derivative transactions.
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 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.
|
24
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
|
Futures. A futures contract is
a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Futures are traded on an exchange and cleared through a central clearinghouse. Risks related to the use of futures
contracts include possible illiquidity of the futures markets and contract prices that can be highly volatile and imperfectly correlated to movements in the underlying financial instrument and potential losses in excess of the amounts recognized on
the Statement of assets and liabilities. Use of long futures contracts subjects the fund to the risk of loss up to the notional value of the futures contracts. Use of short futures contracts subjects the fund to unlimited risk of loss.
Upon entering into a futures contract, the fund is required to
deposit initial margin with the broker in the form of cash or securities. The amount of required margin is set by the broker and is generally based on a percentage of the contract value. The margin deposit must then be maintained at the established
level over the life of the contract. Cash that has been pledged by the fund is detailed in the Statement of assets and liabilities as Collateral held at broker for futures contracts. Securities pledged by the fund, if any, are identified in the
Fund's investments. Subsequent payments, referred to as variation margin, are made or received by the fund periodically and are based on changes in the market value of open futures contracts. Futures contracts are marked-to-market daily and
unrealized gain or loss is recorded by the fund. Payable for futures variation margin is included on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was closed.
During the year ended July 31, 2020, the fund used futures
contracts to manage against anticipated interest rate changes. The fund held futures contracts with USD notional values ranging from $81.6 million to $89.7 million, as measured at each quarter end.
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 are 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 July 31, 2020, the fund used interest
rate swap contracts to manage against anticipated interest rate changes. The notional values at the period end are representative of the fund's exposure throughout the period. No new interest rate swap positions were entered into or closed during
the year ended July 31, 2020.
|
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
25
|
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held
by the fund at July 31, 2020 by risk category:
|
Risk
|
Statement
of assets
and liabilities
location
|
Financial
instruments
location
|
Assets
derivatives
fair value
|
Liabilities
derivatives
fair value
|
|
Interest
rate
|
Receivable/payable
for futures variation margin
|
Futures
1
|
—
|
$(766,365)
|
|
Interest
rate
|
Swap
contracts, at value
|
Interest
rate swaps2
|
—
|
(3,600,598)
|
|
|
|
|
—
|
$(4,366,963)
|
|
1
|
Reflects cumulative
appreciation/depreciation on futures as disclosed in Fund's investments. Only the year end variation margin is separately disclosed on the Statement of assets and liabilities.
|
|
2
|
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.
|
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 July 31, 2020:
|
|
Statement
of operations location - Net realized gain (loss) on:
|
|
Risk
|
Futures
contracts
|
Swap
contracts
|
Total
|
|
Interest
rate
|
$(8,538,819)
|
$(263,764)
|
$(8,802,583)
|
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 July 31, 2020:
|
|
Statement
of operations location - Change in net unrealized appreciation (depreciation) of:
|
|
Risk
|
Futures
contracts
|
Swap
contracts
|
Total
|
|
Interest
rate
|
$650,016
|
$(2,516,190)
|
$(1,866,174)
|
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
John Hancock Investment Management LLC (the Advisor) serves as
investment advisor for the fund. The Advisor is an indirect, principally owned subsidiary of Manulife Financial Corporation (MFC).
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 0.75% of the fund’s average daily managed assets including any assets attributable to
the Credit Facility Agreement (see Note 7) (collectively, managed assets). 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.
|
26
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
|
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 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. During the year ended July 31, 2020, this waiver amounted to 0.01% of the fund’s average daily
net assets. This arrangement expires on July 31, 2022, 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 $56,216 for
the year ended July 31, 2020.
Expenses waived or
reimbursed in the current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees, including the impact of the
waivers and reimbursements as described above, incurred for the year ended July 31, 2020, were equivalent to a net annual effective rate of 0.74% of the fund's average daily managed assets.
Accounting and legal services.
Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, compliance, accounting and recordkeeping services to the fund, including the preparation of all tax
returns, periodic reports to shareholders and regulatory reports, among other services. These accounting and legal services fees incurred, for the year ended July 31, 2020, amounted to an annual rate of 0.01% of the fund's average daily managed
assets.
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—Leverage risk
The fund
utilizes a Credit Facility Agreement (CFA) to increase its assets available for investment. When the fund leverages its assets, shareholders bear the expenses associated with the CFA 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 return for the holders of shares, including:
|
•
|
the likelihood of greater
volatility of NAV and market price of shares;
|
|
•
|
fluctuations in the interest
rate paid for the use of the CFA;
|
|
•
|
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 return will be greater than if leverage had not been used; conversely, returns would be lower if the cost of the leverage exceeds the income or
capital appreciation derived.
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 CFA 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.
|
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
27
|
Note 7—Credit Facility Agreement
The fund has entered into a Credit Facility Agreement (CFA)
with a subsidiary of BNP Paribas (BNP) that allows it to borrow up to $292.5 million (maximum facility amount) and to invest the borrowings in accordance with its investment practices.
The fund pledges a portion of its assets as collateral to
secure borrowings under the CFA. Such pledged assets are held in a special custody account with the fund’s custodian. The amount of assets required to be pledged by the fund is determined in accordance with the CFA. The fund retains the
benefits of ownership of assets pledged to secure borrowings under the CFA. Interest charged is at the rate of one month LIBOR (London Interbank Offered Rate) plus 0.70% and is payable monthly. As of July 31, 2020, the fund had borrowings of
$235,500,000 at an interest rate of 0.85%, which are reflected in the Credit facility agreement payable on the Statement of assets and liabilities. During the year ended July 31, 2020, the average borrowings under the CFA and the effective average
interest rate were $271,908,219 and 2.06%, respectively.
The fund is required to pay a commitment fee equal to 0.60% on
any unused portion of the maximum facility amount, only for days on which the aggregate outstanding amount of the loans under the CFA is less than 80% of the maximum facility amount. For the year ended July 31, 2020, there were no commitment fees
incurred by the fund.
The fund may terminate the CFA with
30 days’ notice. If certain asset coverage and collateral requirements, minimum net assets or other covenants are not met, the CFA could be deemed in default and result in termination. Absent a default or facility termination event, BNP
generally is required to provide the fund with 360 days’ notice prior to terminating or amending the CFA.
The fund has an agreement with BNP that allows BNP to borrow a
portion of the pledged collateral (Lent Securities) in an amount not to exceed the lesser of: (i) outstanding borrowings owed by the fund to BNP or (ii) 331/3% of the fund’s total assets. The fund can designate any security within the pledged
collateral as ineligible to be a Lent Security and can recall any of the Lent Securities. The fund also has the right to apply and set-off an amount equal to 100% of the then-current fair market value of such Lent Securities against the current
borrowings under the CFA in the event that BNP fails to timely return the Lent Securities and in certain other circumstances. In such circumstances, however, the fund may not be able to obtain replacement financing required to purchase replacement
securities and, consequently, the fund’s income generating potential may decrease. Even if the fund is able to obtain replacement financing, it might not be able to purchase replacement securities at favorable prices. Income earned from Lent
Securities of $37,398 for the year ended July 31, 2020 is recorded as a component of interest income on the Statement of operations.
Due to the anticipated discontinuation of LIBOR, as discussed
in Note 8, the CFA may be amended to remove LIBOR as the reference rate for interest and to replace LIBOR with an alternative reference rate for interest mutually agreed upon by the fund and BNP. However, there remains uncertainty regarding the
future utilization of LIBOR and the nature of any replacement rate and the potential effect of a transition away from LIBOR on the fund and/or the CFA cannot yet be fully determined.
Note 8—LIBOR Discontinuation Risk
The CFA utilizes LIBOR as the reference or benchmark rate for
interest rate calculations. LIBOR is a measure of the average interest rate at which major global banks can borrow from one another. Following allegations of rate manipulation and concerns regarding its thin liquidity, in July 2017, the U.K.
Financial Conduct Authority, which regulates LIBOR, announced that it will stop encouraging banks to provide the quotations needed to sustain LIBOR after 2021. This event will likely cause LIBOR to cease to be published. Before then, it is expected
that market participants such as the fund and BNP will transition to the use of different reference or benchmark rates. However, although regulators have suggested alternative rates, there is currently no definitive information regarding the future
utilization of LIBOR or of any replacement rate.
It is
uncertain what impact the discontinuation of LIBOR will have on the use of LIBOR as a reference rate in the
|
28
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
|
CFA. It is expected that market participants will amend
financial instruments referencing LIBOR, such as the CFA, to include fallback provisions and other measures that contemplate the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the transition process nor
the viability of such measures is known. In addition, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus multiple
alternative reference rates in new or existing financial instruments and products has not been determined. As market participants transition away from LIBOR, LIBOR's usefulness may deteriorate, which could occur prior to the end of 2021. The
transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. LIBOR's deterioration may adversely affect the liquidity and/or market value of securities that use LIBOR as a
benchmark interest rate. The use of an alternative reference rate, or the transition process to an alternative reference rate, may result in increases to the interest paid by the fund pursuant to the CFA and, therefore, may adversely affect the
fund's performance.
Note
9—Purchase and sale of securities
Purchases and sales of securities, other than short-term
investments, amounted to $269,055,015 and $337,989,987, respectively, for the year ended July 31, 2020.
Note 10—Industry or sector risk
The fund generally invests 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. Financial services companies can be hurt by economic declines, changes in interest rates
regulatory and market impacts.
Note 11—Coronavirus (COVID-19) pandemic
The novel COVID-19 disease has resulted in significant
disruptions to global business activity. A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and affect fund performance.
|
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
29
|
Report of Independent Registered Public Accounting
Firm
To the Board of Trustees and Shareholders of JOHN HANCOCK
PREFERRED INCOME FUND
Opinion on the Financial
Statements
We have audited the accompanying statement of
assets and liabilities, including the Fund’s investments, of JOHN HANCOCK PREFERRED INCOME FUND (the "Fund") as of July 31, 2020, the related statements of operations and cash flows for the year ended July 31, 2020, the statements of changes
in net assets for each of the two years in the period ended July 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended July 31, 2020 (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 July 31, 2020, 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 July 31, 2020 and the financial highlights for each of the five years in the period ended July 31, 2020 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 July 31, 2020 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our
opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 2020
We have served as the auditor of one or more investment
companies in the John Hancock group of funds since 1988.
|
30
|
JOHN HANCOCK PREFERRED
INCOME FUND | ANNUAL REPORT
|
|
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 July 31, 2020.
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 of its Section
199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
Eligible shareholders will be mailed a 2020 Form 1099-DIV in
early 2021. This will reflect the tax character of all distributions paid in calendar year 2020.
Please consult a tax advisor regarding the tax consequences of
your investment in the fund.
|
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND
|
31
|
Additional information (Unaudited)
Investment objective and principal investment strategies
The fund is a closed-end, diversified management investment company,
common shares of which were initially offered to the public on
August 27, 2002 and are publicly traded on the New York Stock Exchange (the NYSE).
The fund's primary investment objective is to provide a high level of
current income consistent with preservation of capital. The fund's
secondary investment objective is to provide growth of capital to the
extent consistent with its primary investment objective. The fund
seeks to achieve its investment objectives by investing in securities
that, in the opinion of the Advisor, may be undervalued relative to
similar securities in the marketplace. The fund's principal
investment strategies include, but are not limited to, the following:
Under normal market conditions, the fund invests at least 80% of its
assets (net assets plus borrowings for investment purposes) in
preferred stocks and other preferred securities, including
convertible preferred securities. The fund normally invests 25% or
more of its total assets in the industries composing the utilities
sector. The Fund will invest at least 50% of its total assets in
preferred securities and other fixed-income securities that are rated
investment grade (i.e., at least "Baa" by Moody's Investors Service,
Inc. ("Moody's") or "BBB" by Standard & Poor's Ratings Services
("S&P"), or in unrated securities determined by the Advisor to be of
comparable credit quality. The fund can invest up to 50% of its total
assets in preferred securities and other fixed income securities that
are rated below investment grade by either S&P or Moody's or in
comparable unrated securities. Below investment grade securities must
be rated "B" or higher by either S&P or Moody's (or determined to be
of comparable quality). These investment policies are based on credit
quality ratings at the time of acquisition.
Dividends and distributions
During the year ended
July 31, 2020, distributions from net investment income totaling $1.4382 per share
and tax return of capital totaling $0.0768 per share were paid to
shareholders. The dates of payments and the amounts per share were
as follows:
|
|
|
|
|
|
|
|
|
Payment Date
|
|
|
Distributions
|
|
|
|
August 30, 2019
|
|
|
$0.1400
|
|
|
|
September 30, 2019
|
|
|
0.1400
|
|
|
|
October 31, 2019
|
|
|
0.1235
|
|
|
|
November 29, 2019
|
|
|
0.1235
|
|
|
|
December 19, 2019
|
|
|
0.1235
|
|
|
|
January 31, 2020
|
|
|
0.1235
|
|
|
|
February 28, 2020
|
|
|
0.1235
|
|
|
|
March 31, 2020
|
|
|
0.1235
|
|
|
|
April 30, 2020
|
|
|
0.1235
|
|
|
|
May 29, 2020
|
|
|
0.1235
|
|
|
|
June 30, 2020
|
|
|
0.1235
|
|
|
|
July 31, 2020
|
|
|
0.1235
|
|
|
|
Total
|
|
|
$1.5150
|
|
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
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 32
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.
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 (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
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 33
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)).
Shareholder communication and assistance
If you have any questions concerning the fund, we will be pleased to
assist you. If you hold shares in your own name and not with a
brokerage firm, please address all notices, correspondence, questions
or other communications regarding the fund to the transfer agent at:
Regular Mail:
Computershare
P.O. Box 505000
Louisville, KY 40233
Registered or Overnight Mail:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
If your shares are held with a brokerage firm, you should contact
that firm, bank or other nominee for assistance.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 34
Shareholder meeting
The fund held its Annual Meeting of Shareholders on Monday,
February 3, 2020. The following proposal was considered by the shareholders:
Proposal: To elect five (5) Trustees (James R. Boyle, William H. Cunningham,
Grace K. Fey, Hassell H. McClellan and Gregory A. Russo) to serve for
a three-year term ending at the 2023 Annual Meeting of Shareholders.
|
|
|
|
|
|
Total votes
for the nominee
|
Total votes withheld
from the nominee
|
|
Independent Trustees
|
|
|
|
James R. Boyle
|
20,854,989.056
|
523,577.000
|
|
William H. Cunningham
|
20,793,589.056
|
584,977.000
|
|
Grace K. Fey
|
20,649,363.056
|
729,203.000
|
|
Hassell H. McClellan
|
20,612,331.056
|
766,235.000
|
|
Gregory A. Russo
|
20,628,773.056
|
749,793.000
|
Trustees whose term of office continued after the Annual Meeting of
Shareholders because they were not up for election are: Charles L.
Bardelis, Peter S. Burgess, Marianne Harrison, Andrew G. Arnott,
Deborah C. Jackson, James M. Oates and Steven R. Pruchansky.
.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 35
CONTINUATION OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS
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 Preferred Income 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 23-25, 2020 telephonic1 meeting at which the Agreements were approved, the Board also
discussed and considered information regarding the proposed
continuation of the Agreements at a telephonic meeting held on May
26-27, 2020.
Approval of Advisory and Subadvisory Agreements
At telephonic meetings held on June 23-25, 2020, the Board, including
the Trustees who are not parties to any Agreement or considered to be
interested persons of the fund under the Investment Company Act of
1940, as amended (the 1940 Act) (the Independent Trustees),
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 notes 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
____________________
1 On
March 25, 2020, as a result of health and safety measures put in place to combat
the global COVID-19 pandemic, the Securities and Exchange Commission
issued an exemptive order (the "Order") pursuant to Sections 6(c) and
38(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), that temporarily exempts registered investment management
companies from the in-person voting requirements under the 1940 Act,
subject to certain requirements, including that votes taken pursuant
to the Order are ratified at the next in-person meeting. The Board
determined that reliance on the Order was necessary or appropriate
due to the circumstances related to current or potential effects of
COVID-19 and therefore, the Board's May and June meetings were held
telephonically in reliance on the Order.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 36
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
the 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.
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 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).
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 37
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;
|
|
|
(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 one-, three-, five- and
ten-year periods ended
December 31, 2019. The Board also noted that, based on its net asset value, the fund
outperformed its peer group median for the one-year period and
underperformed its peer group median for the three-, five- and
ten-year periods ended
December 31, 2019. The Board took into account management's discussion of the fund's
performance, including the favorable performance relative to the
benchmark for the one-, three-, five- and ten-year periods and to
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 38
the peer group for the one-year period. The Board concluded that the
fund's performance has generally been in line with or outperformed
the historical performance of the fund's benchmark index.
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.
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 fees and net total expenses for
the fund are each lower than the peer group median. The Board also
noted that the contractual fee waiver and/or expense reimbursement
reduces certain expenses of the fund.
The Board took into account management's discussion with respect to
the overall management fee, 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
John Hancock Fund Complex as a whole and with respect to the fund;
|
|
|
|
|
|
|
(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;
|
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
(g)
|
|
|
noted that the fund's Subadvisor is an affiliate of the Advisor;
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 earn a reasonable
level of profits in exchange for the level of services it provides to
the fund and the risks that 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.
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 on the 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. The Board noted that although the fund does not have
breakpoints in its contractual management fee, its net management fee
and total expenses are each below the peer group median. The Board
determined that the management fee structure for the fund was
reasonable.
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 John Hancock
Fund Complex);
|
|
|
(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.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 40
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.
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 considered
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 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.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 41
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 the fund's
benchmark; 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 PREFERRED INCOME FUND 42
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
|
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
|
Trustee
of the
Trust
since1
|
Number of John
Hancock funds
overseen by
Trustee
|
|
Hassell H. McClellan, Born: 1945
|
2012
|
195
|
Trustee and Chairperson of the Board
Director/Trustee, Virtus Funds (since 2008); Director, The Barnes
Group (since 2010); Associate Professor, The Wallace E. Carroll
School of Management, Boston College (retired 2013). Trustee (since
2005) and Chairperson of the Board (since 2017) of various trusts
within the John Hancock Fund Complex.
|
|
|
|
|
|
Charles L. Bardelis,2 Born: 1941
|
2012
|
195
|
Trustee
Director, Island Commuter Corp. (marine transport). Trustee of
various trusts within the John Hancock Fund Complex (since 1988).
|
|
|
|
|
|
James R. Boyle, Born: 1959
|
2015
|
195
|
Trustee
Chief Executive Officer, Foresters Financial (since 2018); Chairman
and Chief Executive Officer, Zillion Group, Inc. (formerly
HealthFleet, Inc.) (healthcare) (2014-2018); Executive Vice President
and Chief Executive Officer, U.S. Life Insurance Division of Genworth
Financial, Inc. (insurance) (January 2014-July 2014); Senior
Executive Vice President, Manulife Financial, President and Chief
Executive Officer, John Hancock (1999-2012); Chairman and Director,
John Hancock Investment Management LLC, John Hancock Investment
Management Distributors LLC, and John Hancock Variable Trust Advisers
LLC (2005-2010). Trustee of various trusts within the John Hancock
Fund Complex (2005-2014 and since 2015).
|
|
|
|
|
|
Peter S. Burgess,2 Born: 1942
|
2012
|
195
|
Trustee
Consultant (financial, accounting, and auditing matters) (since
1999); Certified Public Accountant; Partner, Arthur Andersen
(independent public accounting firm) (prior to 1999); Director,
Lincoln Educational Services Corporation (since 2004); Director,
Symetra Financial Corporation (2010-2016); Director, PMA Capital
Corporation (2004-2010). Trustee of various trusts within the John
Hancock Fund Complex (since 2005).
|
|
|
|
|
|
William H. Cunningham, Born: 1944
|
2002
|
195
|
Trustee
Professor, University of Texas, Austin, Texas (since 1971); former
Chancellor, University of Texas System and former President of the
University of Texas, Austin, Texas; Chairman (since 2009) and
Director (since 2006), Lincoln National Corporation (insurance);
Director, Southwest Airlines (since 2000); former Director, LIN
Television (2009-2014). Trustee of various trusts within the John
Hancock Fund Complex (since 1986).
|
|
|
|
|
|
Grace K. Fey, Born: 1946
|
2012
|
195
|
Trustee
Chief Executive Officer, Grace Fey Advisors (since 2007); Director
and Executive Vice President, Frontier Capital Management Company
(1988-2007); Director, Fiduciary Trust (since 2009). Trustee of
various trusts within the John Hancock Fund Complex (since 2008).
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 43
Independent Trustees (continued)
|
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
|
Trustee
of the
Trust
since1
|
Number of John
Hancock funds
overseen by
Trustee
|
|
Deborah C. Jackson, Born: 1952
|
2008
|
195
|
Trustee
President, Cambridge College, Cambridge, Massachusetts (since 2011);
Board of Directors, Massachusetts Women's Forum (since 2018); Board
of Directors, National Association of Corporate Directors/New England
(since 2015); Board of Directors, Association of Independent Colleges
and Universities of Massachusetts (2014-2017); Chief Executive
Officer, American Red Cross of Massachusetts Bay (2002-2011); Board
of Directors of Eastern Bank Corporation (since 2001); Board of
Directors of Eastern Bank Charitable Foundation (since 2001); Board
of Directors of American Student Assistance Corporation (1996-2009);
Board of Directors of Boston Stock Exchange (2002-2008); Board of
Directors of Harvard Pilgrim Healthcare (health benefits company)
(2007-2011). Trustee of various trusts within the John Hancock Fund
Complex (since 2008).
|
|
|
|
|
|
James M. Oates,2 Born: 1946
|
2012
|
195
|
Trustee
Managing Director, Wydown Group (financial consulting firm) (since
1994); Chairman and Director, Emerson Investment Management, Inc.
(2000-2015); Independent Chairman, Hudson Castle Group, Inc.
(formerly IBEX Capital Markets, Inc.) (financial services company)
(1997-2011); Director, Stifel Financial (since 1996); Director,
Investor Financial Services Corporation (1995-2007); Director,
Connecticut River Bancorp (1998-2014); Director/Trustee, Virtus Funds
(since 1988). Trustee (since 2004) and Chairperson of the Board
(2005-2016) of various trusts within the John Hancock Fund Complex.
|
|
|
|
|
|
Steven R. Pruchansky, Born: 1944
|
2002
|
195
|
Trustee and Vice Chairperson of the Board
Managing Director, Pru Realty (since 2017); Chairman and Chief
Executive Officer, Greenscapes of Southwest Florida, Inc.
(2014-2020); Director and President, Greenscapes of Southwest
Florida, Inc. (until 2000); Member, Board of Advisors, First American
Bank (until 2010); Managing Director, Jon James, LLC (real estate)
(since 2000); Partner, Right Funding, LLC (2014-2017); Director,
First Signature Bank & Trust Company (until 1991); Director, Mast
Realty Trust (until 1994); President, Maxwell Building Corp. (until
1991). Trustee (since 1992), Chairperson of the Board (2011-2012),
and Vice Chairperson of the Board (since 2012) of various trusts
within the John Hancock Fund Complex.
|
|
|
|
|
|
Gregory A. Russo, Born: 1949
|
2008
|
195
|
Trustee
Director and Audit Committee Chairman (2012-2020), and Member, Audit
Committee and Finance Committee (2011-2020), NCH Healthcare System,
Inc. (holding company for multi-entity healthcare system); Director
and Member (2012-2018) and Finance Committee Chairman (2014-2018),
The Moorings, Inc. (nonprofit continuing care community); Vice
Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002-2006);
Vice Chairman, Industrial Markets, KPMG (1998-2002); Chairman and
Treasurer, Westchester County, New York, Chamber of Commerce
(1986-1992); Director, Treasurer, and Chairman of Audit and Finance
Committees, Putnam Hospital Center (1989-1995); Director and Chairman
of Fundraising Campaign, United Way of Westchester and Putnam
Counties, New York (1990-1995). Trustee of various trusts within the
John Hancock Fund Complex (since 2008).
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 44
Non-Independent Trustees3
|
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
|
Trustee
of the
Trust
since1
|
Number of John
Hancock funds
overseen by
Trustee
|
|
Andrew G. Arnott, Born: 1971
|
2017
|
195
|
President and Non-Independent Trustee
Head of Wealth and Asset Management, United States and Europe, for
John Hancock and Manulife (since 2018); Executive Vice President,
John Hancock Financial Services (since 2009, including prior
positions); Director and Executive Vice President, John Hancock
Investment Management LLC (since 2005, including prior positions);
Director and Executive Vice President, John Hancock Variable Trust
Advisers LLC (since 2006, including prior positions); President, John
Hancock Investment Management Distributors LLC (since 2004, including
prior positions); President of various trusts within the John Hancock
Fund Complex (since 2007, including prior positions). Trustee of
various trusts within the John Hancock Fund Complex (since 2017).
|
|
|
|
|
|
Marianne Harrison, Born: 1963
|
2018
|
195
|
Non-Independent Trustee
President and CEO, John Hancock (since 2017); President and CEO,
Manulife Canadian Division (2013-2017); Member, Board of Directors,
CAE Inc. (since 2019); Member, Board of Directors, MA Competitive
Partnership Board (since 2018); Member, Board of Directors, American
Council of Life Insurers (ACLI) (since 2018); Member, Board of
Directors, Communitech, an industry-led innovation center that
fosters technology companies in Canada (2017-2019); Member, Board of
Directors, Manulife Assurance Canada (2015-2017); Board Member, St.
Mary's General Hospital Foundation (2014-2017); Member, Board of
Directors, Manulife Bank of Canada (2013-2017); Member, Standing
Committee of the Canadian Life & Health Assurance Association
(2013-2017); Member, Board of Directors, John Hancock USA, John
Hancock Life & Health, John Hancock New York (2012-2013). Trustee of
various trusts within the John Hancock Fund Complex (since 2018).
|
Principal officers who are not Trustees
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s)
during past 5 years
|
Officer
of the
Trust
since
|
|
Charles A. Rizzo, Born: 1957
|
2007
|
Chief Financial Officer
Vice President, John Hancock Financial Services (since 2008); Senior
Vice President, John Hancock Investment Management LLC and John
Hancock Variable Trust Advisers LLC (since 2008); Chief Financial
Officer of various trusts within the John Hancock Fund Complex (since
2007).
|
|
|
|
|
Salvatore Schiavone, Born: 1965
|
2010
|
Treasurer
Assistant Vice President, John Hancock Financial Services (since
2007); Vice President, John Hancock Investment Management LLC and
John Hancock Variable Trust Advisers LLC (since 2007); Treasurer of
various trusts within the John Hancock Fund Complex (since 2007,
including prior positions).
|
|
|
|
|
Christopher (Kit) Sechler, Born: 1973
|
2018
|
Chief Legal Officer and Secretary
Vice President and Deputy Chief Counsel, John Hancock Investments
(since 2015); Assistant Vice President and Senior Counsel
(2009-2015), John Hancock Investment Management; Chief Legal Officer
and Secretary of various trusts within the John Hancock Fund Complex
(since 2018); Assistant Secretary of John Hancock Investment
Management LLC and John Hancock Variable Trust Advisers LLC (since
2009).
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 45
Principal officers who are not Trustees (continued)
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s)
during past 5 years
|
Officer
of the
Trust
since
|
|
Trevor Swanberg, Born: 1979
|
2020
|
Chief Compliance Officer
Chief Compliance Officer, various trusts within the John Hancock Fund
Complex, John Hancock Investment Management LLC, and John Hancock
Variable Trust Advisers LLC (since 2020); Deputy Chief Compliance
Officer, various trusts within the John Hancock Fund Complex
(2018-2020); Deputy Chief Compliance Officer, John Hancock Investment
Management LLC and John Hancock Variable Trust Advisers LLC
(2019-2020); Assistant Chief Compliance Officer, various trusts
within the John Hancock Fund Complex (2016-2018); Assistant Chief
Compliance Officer, John Hancock Investment Management LLC and John
Hancock Variable Trust Advisers LLC (2016-2019); Vice President,
State Street Global Advisors (2015-2016).
|
The business address for all Trustees and Officers is 200 Berkeley
Street, Boston, Massachusetts 02116-5023.
|
1
|
Mr. Bardelis, Mr. Burgess and Ms. Harrison serve as Trustees for a
term expiring in 2021; Mr. Arnott, Ms. Jackson, Mr. Oates and Mr.
Pruchansky serve as Trustees for a term expiring in 2022; Mr. Boyle,
Mr. Cunningham, Ms. Fey, Mr. McClellan and Mr. Russo serve as
Trustees for a term expiring in 2023; Mr. Boyle has served as Trustee
at various times prior to date listed in the table.
|
|
2
|
Member of the Audit Committee.
|
|
3
|
The Trustee is a Non-Independent Trustee due to current or former
positions with the Advisor and certain of its affiliates.
|
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 46
|
|
|
|
Trustees
Hassell H. McClellan, Chairperson
Steven R. Pruchansky, Vice Chairperson
Andrew G. Arnott†
Charles L. Bardelis*
James R. Boyle
Peter S. Burgess*
William H. Cunningham
Grace K. Fey
Marianne Harrison†
Deborah C. Jackson
James M. Oates*
Gregory A. Russo
Officers
Andrew G. Arnott
President
Charles A. Rizzo
Chief Financial Officer
Salvatore Schiavone
Treasurer
Christopher (Kit) Sechler
Secretary and Chief Legal Officer
Trevor Swanberg1
Chief Compliance Officer
|
Investment advisor
John Hancock Investment Management LLC
Subadvisor
Manulife Investment Management (US) LLC
Portfolio Managers
Joseph H. Bozoyan, CFA
Bradley L. Lutz, CFA
Custodian
State Street Bank and Trust Company
Transfer agent
Computershare Shareowner Services, LLC
Legal counsel
K&L Gates LLP
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Stock symbol
Listed New York Stock Exchange: HPI
|
* Member of the Audit Committee
† Non-Independent Trustee
1 Effective
July 31, 2020
For shareholder assistance refer to page
7
|
|
|
|
|
|
|
You can also contact us:
|
|
|
800-852-0218
jhinvestments.com
|
Regular mail:
Computershare
P.O. Box 505000
Louisville, KY 40233
|
Express mail:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
|
The fund's proxy voting policies and procedures, as well as the
fund's proxy voting record for the most recent twelve-month period
ended June 30, are available free of charge on the Securities and
Exchange Commission (SEC) 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.
ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND 47
John Hancock family of funds
|
|
|
|
|
DOMESTIC EQUITY FUNDS
Blue Chip Growth
Classic Value
Disciplined Value
Disciplined Value Mid Cap
Equity Income
Financial Industries
Fundamental All Cap Core
Fundamental Large Cap Core
New Opportunities
Regional Bank
Small Cap Core
Small Cap Growth
Small Cap Value
U.S. Global Leaders Growth
U.S. Quality Growth
GLOBAL AND INTERNATIONAL EQUITY FUNDS
Disciplined Value International
Emerging Markets
Emerging Markets Equity
Fundamental Global Franchise
Global Equity
Global Shareholder Yield
Global Thematic Opportunities
International Dynamic Growth
International Growth
International Small Company
|
|
INCOME FUNDS
Bond
California Tax-Free Income
Emerging Markets Debt
Floating Rate Income
Government Income
High Yield
High Yield Municipal Bond
Income
Investment Grade Bond
Money Market
Short Duration Bond
Short Duration Credit Opportunities
Strategic Income Opportunities
Tax-Free Bond
ALTERNATIVE AND SPECIALTY FUNDS
Absolute Return Currency
Alternative Asset Allocation
Alternative Risk Premia
Diversified Macro
Infrastructure
Multi-Asset Absolute Return
Seaport Long/Short
|
The fund's investment objectives, risks, charges, and expenses are
included in the prospectus and should be considered carefully before
investing. For a prospectus, contact your financial professional,
call John Hancock Investment Management at 800-852-0218, or visit the
fund's website at jhinvestments.com. Please read the prospectus
carefully before investing or sending money.
The John Hancock funds are distributed by John Hancock Investment
Management Distributors LLC. Member FINRA SIPC.
|
|
|
|
|
ASSET ALLOCATION
Balanced
Multi-Asset High Income
Multi-Index Lifetime Portfolios
Multi-Index Preservation Portfolios
Multimanager Lifestyle Portfolios
Multimanager Lifetime Portfolios
Retirement Income 2040
EXCHANGE-TRADED FUNDS
John Hancock Multifactor Consumer Discretionary ETF
John Hancock Multifactor Consumer Staples ETF
John Hancock Multifactor Developed International ETF
John Hancock Multifactor Emerging Markets ETF
John Hancock Multifactor Energy ETF
John Hancock Multifactor Financials ETF
John Hancock Multifactor Healthcare ETF
John Hancock Multifactor Industrials ETF
John Hancock Multifactor Large Cap ETF
John Hancock Multifactor Materials ETF
John Hancock Multifactor Media and
Communications ETF
John Hancock Multifactor Mid Cap ETF
John Hancock Multifactor Small Cap ETF
John Hancock Multifactor Technology ETF
John Hancock Multifactor Utilities ETF
|
|
ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE FUNDS
ESG All Cap Core
ESG Core Bond
ESG International Equity
ESG Large Cap Core
CLOSED-END FUNDS
Financial Opportunities
Hedged Equity & Income
Income Securities Trust
Investors Trust
Preferred Income
Preferred Income II
Preferred Income III
Premium Dividend
Tax-Advantaged Dividend Income
Tax-Advantaged Global Shareholder Yield
|
John Hancock Multifactor ETF shares are bought and sold at market
price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and
are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Investment Management
Distributors LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock
in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does
not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock
Multifactor ETFs.
John Hancock Investment Management
A trusted brand
John Hancock Investment Management is a premier asset manager
with a heritage of financial stewardship dating back to 1862. Helping
our shareholders pursue their financial goals is at the core of
everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We serve investors globally through a unique multimanager approach:
We search the world to find proven portfolio teams with specialized
expertise for every strategy we offer, then we apply robust investment
oversight to ensure they continue to meet our uncompromising
standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide
a diverse set of investments backed by some of the world's best
managers, along with strong risk-adjusted returns across asset classes.
John Hancock Investment Management LLC
200 Berkeley Street
n Boston, MA 02116-5010
n 800-225-5291
n jhinvestments.com
|
|
|
|
MF1291587
|
P8A 7/20
9/2020
|
ITEM 2. CODE OF ETHICS.
As of the end of the period, July 31, 2020, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the “Senior Financial Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Peter S. Burgess is the audit committee financial expert and is “independent”, pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant(s) for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant(s) in connection with statutory and regulatory filings or engagements amounted to $50,115 for the fiscal year ended July 31, 2020 and $44,779 for the fiscal year ended July 31, 2019. These fees were billed to the registrant and were approved by the registrant’s audit committee.
(b) Audit-Related Services
Audit related fees 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 that provides ongoing services to the registrant ("control affiliates") amounted to $5 for the fiscal year ended July 31, 2020 and $5 for the fiscal year ended July 31, 2019.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant(s) for the tax compliance, tax advice and tax planning (“tax fees”) amounted to $3,837 for the fiscal year ended July 31, 2020 and $3,837 for the fiscal year ended July 31, 2019. The nature of 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
The all other fees billed to the registrant for products and services provided by the principal accountant were $89 for the fiscal year ended July 31, 2020 and $84 for the fiscal year ended July 31, 2019. The nature of the services comprising the all other fees was mainly tax consulting work. These fees were approved by the registrant’s audit committee.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust’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 trust’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 $25,000 per instance/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per instance/per fund are subject to specific pre-approval by the Audit Committee.
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 July 31, 2020, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant(s) for services rendered to the registrant and rendered to the registrant's control affiliates for each of the last two fiscal years of the registrant were $1,510,492 for the fiscal year ended July 31, 2020 and $998,470 for the fiscal year ended July 31, 2019.
(h) The audit committee of the registrant has considered the non-audit services provided by the registrant’s principal accountant(s) to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant(s)' independence.
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:
Peter S. Burgess – Chairman
Charles L. Bardelis
James M. Oates
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
See attached exhibit “Proxy Voting Policies and Procedures”.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Information about the portfolio managers
Management Biographies
Below is a list of the Manulife Investment Management (US) LLC (“Manulife IM (US)”) portfolio managers who share joint responsibility for the day-to-day investment management of the Fund. It provides a brief summary of their business careers over the past five years. Information is provided as of July 31, 2020.
Joseph H. Bozoyan, CFA
Portfolio Manager
Managing Director and Senior Investment Analyst, Intrinsic Value Team,
Manulife Investment Management (US) LLC (2014–2015)
Director and Senior Investment Manager, Intrinsic Value Team,
Manulife Investment Management (US) LLC (2011–2014)
Began business career in 1993
Managed the fund since 2015
Bradley L. Lutz, CFA
Portfolio Manager, Manulife Investment Management (US) LLC since 2017
Managing Director and Senior Investment Analyst, Manulife Investment Management (US) LLC (2002-2017)
Began business career in 1993
Managed the fund since 2017
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 July 31, 2020. For purposes of the table, “Other Pooled Investment Vehicles” may include investment partnerships and group trusts, and “Other Accounts” may include separate accounts for institutions or individuals, insurance company general or separate accounts, pension funds and other similar institutional accounts.
|
Portfolio Manager Name
|
Other Accounts Managed By The Portfolio Manager
|
|
Joseph H. Bozoyan, CFA
|
Other Registered Investment Companies: Approximately $3.53 billion
|
|
|
Other Pooled Investment Vehicles: Approximately $501.74 million
|
|
|
Other Accounts: 0
|
|
Bradley L. Lutz, CFA
|
Other Registered Investment Companies: Approximately $3.53 billion
|
|
|
Other Pooled Investment Vehicles: $454.95 million
|
|
|
Other Accounts: Approximately $296.90 million
|
Number and value of accounts within the total accounts that are subject to a performance-based advisory fee: None.
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 pattern could 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 an annual investment bonus plan as well as customary benefits that are offered generally to all full-time employees of the Subadvisor. 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.
|
|
|
|
|
●
|
Investment Bonus Plan. Only investment professionals are eligible to participate in the Investment Bonus Plan. Under the plan, investment professionals are eligible for an annual bonus. 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- and 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.
|
|
|
|
|
●
|
The Profitability of the Subadvisor: The profitability of the Subadvisor and its parent company are also considered in determining bonus awards.
|
|
|
|
|
●
|
Non-Investment Performance: 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.
|
|
|
|
|
●
|
Options and Stock Grants. A limited number of senior investment professionals may receive options to purchase shares of Manulife Financial stock. Generally, such option would permit the investment professional to purchase a set amount of stock at the market price on the date of grant. The option can be exercised for a set period (normally a number of years or until termination of employment) and the investment professional would exercise the option if the market value of Manulife Financial stock increases. Some investment professionals may receive restricted stock grants, where the investment professional is entitled to receive the stock at no or nominal cost, provided that the stock is forgone if the investment professional’s employment is terminated prior to a vesting date.
|
|
|
|
|
●
|
Deferred Incentives. Investment professionals may receive deferred incentives which are fully invested in strategies managed by the team/individuals as well as other Manulife Asset Management strategies.
|
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. For purposes of these tables, “similarly managed accounts” include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the Fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the Fund.
|
|
|
Range of Beneficial
|
|
|
Range of Beneficial
|
Ownership in Similarly
|
|
Portfolio Manager
|
Ownership in the Fund
|
Managed Accounts
|
|
Joseph H. Bozoyan,
|
|
|
|
CFA
|
$10,001-$50,000
|
$10,001-$50,000
|
|
Bradley L. Lutz, CFA
|
$10,001-$50,000
|
$10,001-$50,000
|
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached "John Hancock Funds – Nominating and Governance Committee Charter".
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the 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 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Fund did not participate directly in securities lending activities. See Note 7 to financial statements in Item 1.
ITEM 13. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b)(1) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Proxy Voting Policies and Procedures are attached.
(c)(2) Submission of Matters to a Vote of Security Holders is attached. See attached "John Hancock Funds - Governance Committee Charter".
(c)(3) Registrant’s notice to shareholders pursuant to Registrant’s exemptive order granting an exemption from Section 19(b) of the Investment Company Act of 1940, as amended and Rule 19b-1 thereunder regarding distributions made pursuant to the Registrant’s Managed Distribution Plan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Preferred Income Fund
|
By:
|
/s/ Andrew Arnott
|
|
|
Andrew Arnott
|
|
|
President
|
|
|
|
|
Date:
|
September 16, 2020
|
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/ Andrew Arnott
|
|
|
Andrew Arnott
|
|
|
President
|
|
|
|
Date:
|
September 16, 2020
|
|
|
|
By:
|
/s/ Charles A. Rizzo
|
|
|
Charles A. Rizzo
|
|
|
Chief Financial Officer
|
|
|
|
Date:
|
September 16, 2020
|
John Hancock Preferred I... (NYSE:HPI)
Historical Stock Chart
From Jun 2024 to Jul 2024
John Hancock Preferred I... (NYSE:HPI)
Historical Stock Chart
From Jul 2023 to Jul 2024
