UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number 811- 05908

 

John Hancock Premium Dividend Fund
(Exact name of registrant as specified in charter)

 

601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)

 

Salvatore Schiavone, Treasurer

 

601 Congress Street

 

Boston, Massachusetts 02210

 

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 617-663-4497

 

Date of fiscal year end: October 31
Date of reporting period: July 31, 2016

 

 



ITEM 1. SCHEDULE OF INVESTMENTS




John Hancock

Premium Dividend Fund


Quarterly portfolio holdings 7/31/16

jhnq_logo.jpg


Fund's investmentsPremium Dividend Fund



                                                     
  As of 7-31-16 (unaudited)  
              Shares     Value  
  Preferred securities 96.7% (66.2% of Total investments)     $795,053,067  
  (Cost $724,573,500)  
  Consumer staples 2.4%     20,126,438  
  Food and staples retailing 2.4%  
  Ocean Spray Cranberries, Inc., Series A, 6.250% (S)           224,250     20,126,438  
  Energy 4.2%     34,160,000  
  Oil, gas and consumable fuels 4.2%  
  Kinder Morgan, Inc., 9.750%           700,000     34,160,000  
  Financials 53.3%     438,133,766  
  Banks 29.6%  
  Bank of America Corp., 6.375% (Z)           980,000     25,401,599  
  Bank of America Corp., 6.625% (Z)           360,000     9,594,000  
  Bank of America Corp., Depositary Shares, Series D, 6.204% (Z)           630,000     16,298,100  
  Barclays Bank PLC, Series 3, 7.100%           192,500     4,951,100  
  Barclays Bank PLC, Series 5, 8.125%           360,000     9,410,400  
  BB&T Corp., 5.625% (Z)           770,000     20,266,400  
  BB&T Corp. (Callable 11-1-17), 5.200% (Z)           205,000     5,336,150  
  BB&T Corp. (Callable 6-1-18), 5.200%           110,000     2,933,700  
  Citigroup, Inc. (6.875% to 11-15-23, then 3 month LIBOR + 4.130%) (Z)           137,223     4,085,129  
  Citigroup, Inc. (7.125% to 9-30-23, then 3 month LIBOR + 4.040%) (Z)           195,650     5,885,152  
  Citigroup, Inc., Depositary Shares, Series AA, 8.125% (Z)           338,830     9,663,432  
  JPMorgan Chase & Co., 5.450% (Z)           490,000     12,666,500  
  JPMorgan Chase & Co., 5.500% (Z)           200,000     5,178,000  
  JPMorgan Chase & Co., 6.100% (Z)           650,000     17,621,500  
  JPMorgan Chase & Co., 6.300% (Z)           245,000     6,715,450  
  JPMorgan Chase & Co., 6.700% (Z)           35,000     976,150  
  Santander Holdings USA, Inc., Series C, 7.300%           500,000     12,975,000  
  The PNC Financial Services Group, Inc., 5.375% (Z)           180,000     4,685,400  
  The PNC Financial Services Group, Inc. (6.125% to 5-1-22, then 3 month LIBOR + 4.067%)           311,600     9,447,712  
  U.S. Bancorp, 5.150% (Z)           500,000     13,530,000  
  U.S. Bancorp (6.000% to 4-15-17, then 3 month LIBOR + 4.861%) (Z)           10,000     260,300  
  U.S. Bancorp (6.500% to 1-15-22, then 3 month LIBOR + 4.468%) (Z)           351,000     10,765,170  
  Wells Fargo & Company, 6.000% (Z)           205,000     5,600,600  
  Wells Fargo & Company, 8.000% (Z)           1,017,000     28,730,250  
  Capital markets 16.4%  
  Deutsche Bank Contingent Capital Trust II, 6.550%           287,000     7,209,440  
  Deutsche Bank Contingent Capital Trust III, 7.600%           662,000     17,006,780  
  Morgan Stanley, 6.625% (Z)           842,557     23,086,062  
  Morgan Stanley (6.375% to 10-15-24, then 3 month LIBOR + 3.708%) (Z)           249,227     6,980,848  
  Morgan Stanley (7.125% to 10-15-23, then 3 month LIBOR + 4.320%) (Z)           300,000     9,048,000  
  State Street Corp., 5.250% (Z)           1,015,000     26,704,650  
  State Street Corp., 6.000% (Z)           80,000     2,243,200  
  State Street Corp. (5.900% to 3-15-24, then 3 month LIBOR + 3.108%) (Z)           25,000     735,750  
  The Bank of New York Mellon Corp., 5.200% (Z)           442,000     11,682,060  
  The Goldman Sachs Group, Inc., 5.950%           920,000     23,800,400  
  The Goldman Sachs Group, Inc., Series B, 6.200%           250,000     6,570,000  
  Consumer finance 3.9%  
  Capital One Financial Corp., 6.200% (Z)           80,000     2,198,400  

2SEE NOTES TO FUND'S INVESTMENTS


Premium Dividend Fund

                                                     
              Shares     Value  
  Financials  (continued)        
  Consumer finance  (continued)  
  Capital One Financial Corp., 6.700% (Z)           105,000     $3,008,250  
  Capital One Financial Corp., 6.250%           81,196     2,210,155  
  Capital One Financial Corp., 6.000% (Z)           100,000     2,612,000  
  SLM Corp., Series A, 6.970%           445,500     22,275,000  
  Insurance 1.6%  
  Aegon NV, 6.500%           75,000     1,990,500  
  Prudential Financial, Inc., 5.750% (Z)           50,000     1,341,000  
  Prudential PLC, 6.750%           175,000     4,739,000  
  W.R. Berkley Corp., 5.625%           190,377     4,911,727  
  Real estate investment trusts 1.8%  
  Senior Housing Properties Trust, 5.625%           510,000     13,086,600  
  Ventas Realty LP, 5.450%           63,000     1,716,750  
  Health care 1.9%     15,540,000  
  Pharmaceuticals 1.9%  
  Teva Pharmaceutical Industries, Ltd., 7.000%           17,500     15,540,000  
  Industrials 0.4%     3,561,300  
  Machinery 0.4%  
  Stanley Black & Decker, Inc., 5.750%           135,000     3,561,300  
  Telecommunication services 6.1%     50,328,785  
  Diversified telecommunication services 3.7%  
  Qwest Corp., 6.125%           107,500     2,765,975  
  Qwest Corp., 7.375%           1,021,000     26,403,060  
  Verizon Communications, Inc., 5.900% (Z)           60,000     1,677,000  
  Wireless telecommunication services 2.4%  
  Telephone & Data Systems, Inc., 5.875%           100,000     2,590,000  
  Telephone & Data Systems, Inc., 6.625%           285,000     7,652,250  
  Telephone & Data Systems, Inc., 6.875%           170,000     4,426,800  
  United States Cellular Corp., 6.950%           185,000     4,813,700  
  Utilities 28.4%     233,202,778  
  Electric utilities 23.8%  
  Duke Energy Corp., 5.125%           180,000     4,770,000  
  Entergy Arkansas, Inc., 6.450%           650,000     17,582,500  
  Entergy Mississippi, Inc., 6.250%           667,000     17,515,420  
  Gulf Power Company, 5.600%           52,400     5,429,730  
  HECO Capital Trust III, 6.500%           181,000     4,879,760  
  Interstate Power & Light Company, 5.100%           1,340,000     37,051,000  
  NextEra Energy Capital Holdings, Inc., 5.125%           185,000     4,808,150  
  NextEra Energy Capital Holdings, Inc., 5.700% (Z)           320,000     8,432,000  
  NSTAR Electric Company, 4.250%           13,347     1,311,343  
  NSTAR Electric Company, 4.780%           100,000     10,200,000  
  PPL Capital Funding, Inc., 5.900%           1,450,320     38,825,066  
  SCE Trust I, 5.625%           265,000     6,972,150  
  SCE Trust II, 5.100%           1,208,500     31,807,720  
  The Southern Company, 6.250%           155,000     4,340,000  
  Union Electric Company, 3.700%           12,262     1,217,770  

SEE NOTES TO FUND'S INVESTMENTS3


Premium Dividend Fund

                                                     
              Shares     Value  
  Utilities  (continued)        
  Multi-utilities 4.6%  
  Baltimore Gas & Electric Company, Series 1993, 6.700%           20,250     $2,085,750  
  BGE Capital Trust II, 6.200%           690,000     18,222,900  
  DTE Energy Company, 5.250%           235,000     6,063,000  
  DTE Energy Company, 6.500%           180,000     4,698,000  
  Integrys Holding, Inc. (6.000% to 8-1-23, then 3 month LIBOR + 3.220%)           255,000     6,990,519  
  Common stocks 48.9% (33.5% of Total investments)     $401,688,874  
  (Cost $267,820,642)  
  Energy 9.3%     76,809,831  
  Oil, gas and consumable fuels 9.3%  
  BP PLC, ADR     177,000     6,088,800  
  Chevron Corp.     67,000     6,866,160  
  ConocoPhillips     90,000     3,673,800  
  Kinder Morgan, Inc.     262,000     5,326,460  
  Royal Dutch Shell PLC, ADR, Class A     356,144     18,444,698  
  Spectra Energy Corp. (L)(Z)     1,012,230     36,409,913  
  Telecommunication services 2.9%     23,514,900  
  Diversified telecommunication services 2.9%  
  AT&T, Inc. (L)(Z)     300,000     12,987,000  
  Verizon Communications, Inc. (L)(Z)     190,000     10,527,900  
  Utilities 36.7%     301,364,143  
  Electric utilities 19.9%  
  Alliant Energy Corp.     800,000     32,200,000  
  American Electric Power Company, Inc. (L)(Z)     200,000     13,860,000  
  Avangrid, Inc. (L)(Z)     381,500     17,220,910  
  Duke Energy Corp. (L)(Z)     285,000     24,393,150  
  Eversource Energy (L)(Z)     405,000     23,688,450  
  FirstEnergy Corp. (L)(Z)     301,450     10,526,634  
  OGE Energy Corp. (L)(Z)     430,000     13,833,100  
  Pinnacle West Capital Corp.     50,000     3,943,500  
  PPL Corp.     240,000     9,050,400  
  The Southern Company     75,000     4,012,500  
  Xcel Energy, Inc. (L)(Z)     240,000     10,555,200  
  Gas utilities 2.0%  
  Atmos Energy Corp. (L)(Z)     80,000     6,383,200  
  ONE Gas, Inc.     42,500     2,760,800  
  Questar Corp. (L)(Z)     280,000     7,047,600  
  Multi-utilities 14.8%  
  Black Hills Corp.     220,000     13,870,999  
  CenterPoint Energy, Inc. (L)(Z)     1,065,000     25,474,800  
  Dominion Resources, Inc. (L)(Z)     240,000     18,724,800  
  DTE Energy Company (L)(Z)     250,000     24,380,000  
  National Grid PLC, ADR     235,000     17,025,750  
  NiSource, Inc.     440,000     11,290,400  
  Vectren Corp.     215,000     11,121,950  

4SEE NOTES TO FUND'S INVESTMENTS


Premium Dividend Fund

                                                     
        Yield * (%)    Maturity date     Par value^     Value  
  Short-term investments 0.5% (0.3% of Total investments)     $3,901,000  
  (Cost $3,901,000)  
  U.S. Government Agency 0.3%     2,682,000  
  Federal Home Loan Bank Discount Note     0.150     08-01-16     2,682,000     2,682,000  
              Par value^     Value  
  Repurchase agreement 0.2%     $1,219,000  
  Repurchase Agreement with State Street Corp. dated 7-29-16 at 0.030% to be repurchased at $1,219,003 on 8-1-16, collateralized by $1,235,000 Federal National Mortgage Association, 1.985% due 9-29-21 (valued at $1,245,806, including interest)           1,219,000     1,219,000  
  Total investments (Cost $996,295,142)† 146.1%     $1,200,642,941  
  Other assets and liabilities, net (46.1%)     ($379,042,756 )
  Total net assets 100.0%     $821,600,185  

                                                     
  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.  
  Key to Security Abbreviations and Legend  
  ADR     American Depositary Receipts  
  LIBOR     London Interbank Offered Rate  
  (L)     A portion of this security is on loan as of 7-31-16, and is a component of the fund's leverage under the Liquidity Agreement. The value of securities on loan amounted to $230,670,766.  
  (S)     These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration.  
  (Z)     All or a portion of this security is pledged as collateral pursuant to the Liquidity Agreement. Total collateral value at 7-31-16 was $529,074,196.  
  *     Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end.  
      At 7-31-16, the aggregate cost of investment securities for federal income tax purposes was $997,409,971. Net unrealized appreciation aggregated to $203,232,970, of which $212,189,561 related to appreciated investment securities and $8,956,591 related to depreciated investment securities.  

SEE NOTES TO FUND'S INVESTMENTS5


Notes to Fund's investments (unaudited)

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 may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures. The time at which shares and transactions are priced and until which orders are accepted may vary to the extent permitted by the Securities and Exchange Commission and applicable regulations.

In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are typically valued at the last sale price or official closing price on the exchange or principal market where the security was acquired or most likely will be sold. 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. Swaps are valued using evaluated prices obtained from an independent pricing vendor. Futures contracts are valued at settlement prices, which are the official closing prices published by the exchange on which they trade.

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. 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 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, 2016, by major security category or type:

                                   
        Total
value at
7-31-16
    Level 1
quoted
price
    Level 2
significant
observable
inputs
    Level 3
significant
unobservable
inputs
 
  Preferred securities                          
        Consumer staples     $20,126,438         $20,126,438      
        Energy     34,160,000     $34,160,000          
        Financials     438,133,766     438,133,766          
        Health care     15,540,000     15,540,000          
        Industrials     3,561,300     3,561,300          
        Telecommunication services     50,328,785     48,651,785     1,677,000      
        Utilities     233,202,778     199,963,589     33,239,189      
  Common stocks     401,688,874     401,688,874          
  Short-term investments     3,901,000         3,901,000      
  Total investments in securities     $1,200,642,941     $1,141,699,314     $58,943,627      
  Other financial instruments:                          
  Futures     ($3,085,335 )   ($3,085,335 )        
  Interest rate swaps     (529,777 )       ($529,777 )    

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 custodian. 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 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 back claims resulting from close-out of the transactions.

Derivative instruments. The fund may invest in derivatives in order to meet its investment objectives. 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

       6


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.

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. 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. Use of long futures contracts subjects the funds to the risk of loss up to the notional value of the futures contracts. Use of short futures contracts subjects the funds to unlimited risk of loss.

During the period ended July 31, 2016, the fund used futures contracts to manage against anticipated interest rate changes. The following table summarizes the contracts held at July 31, 2016.

                                         
  Open contracts     Number of
contracts
    Position     Expiration
date
    Notional
basis
    Notional
value
    Unrealized
appreciation
(depreciation)
 
  10-Year U.S. Treasury Note Futures     860     Short     Sep 2016     ($111,334,977 )   ($114,420,312 )   ($3,085,335 )
                                      ($3,085,335 )

Notional basis refers to the contractual amount agreed upon at inception of open contracts; notional value represents the current value of the open contract.

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. Swap agreements are privately negotiated in the OTC market or may be executed on a registered commodities exchange (centrally cleared swaps). Upfront payments made/received by the fund are amortized/accreted for financial reporting purposes, with the unamortized/unaccreted portion included in the Statement of assets and liabilities. (include previous sentence only if applies) Swaps are marked-to-market daily and the change in value is recorded as unrealized appreciation/depreciation of swap contracts. 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. The value of the swap will typically impose collateral posting obligations on the party that is considered out-of-the-money on the swap.

During the period ended July 31, 2016 the fund used interest rate swaps to manage against anticipated interest rate changes. The following table summarizes the interest rate swap contracts held as of July 31, 2016.

                                         
  Counterparty     USD
notional
amount
          Payments
made by fund
    Payments
received by fund
    Maturity
date
    Market
value
 
  Morgan Stanley Capital Services     $82,000,000           Fixed 1.4625%     3 Month LIBOR (a)     Aug 2016     ($469,516 )
  Morgan Stanley Capital Services     82,000,000           Fixed 0.8750%     3 Month LIBOR (a)     Jul 2017     (60,261 )
        $164,000,000                             ($529,777 )

(a) At 7-31-16, the 3-month LIBOR rate was 0.7591%

For additional information on the fund's significant accounting policies, please refer to the fund's most recent semiannual or annual shareholder report.

       7


More information

     
How to contact us
Internet www.jhinvestments.com  
Mail Computershare
P.O. Box 30170
College Station, TX 77842-3170
 
Phone Customer service representatives
Portfolio commentary
24-hour automated information
TDD line
800-852-0218
800-344-7054
800-843-0090
800-231-5469

     
  P2Q3 07/16
This report is for the information of the shareholders of John Hancock Premium Dividend Fund.   9/16



ITEM 2. CONTROLS AND PROCEDURES.

 

(a)     Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-Q, the registrant's principal executive officer and principal accounting officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

 

(b)     There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

 

ITEM 3. EXHIBITS.

 

Separate certifications for the registrant's principal executive officer and principal accounting officer, as required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

 



SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

John Hancock Premium Dividend Fund

 

By:

/s/ Andrew G. Arnott

_________________________

Andrew G. Arnott

President

 

 

Date: September 16, 2016

 

 

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 G. Arnott

_________________________

Andrew G. Arnott

President

 

 

Date: September 16, 2016

 

 

By:

/s/ Charles A. Rizzo

_________________________

Charles A. Rizzo

Chief Financial Officer

 

 

Date: September 16, 2016