Form N-Q JOHN HANCOCK PREFERRED For: Oct 31
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E-mailUNITED 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 811-21287
John Hancock Preferred Income Fund III
(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: | July 31 |
| Date of reporting period: | October 31, 2018 |
ITEM 1. SCHEDULE OF INVESTMENTS
John Hancock
Preferred Income Fund III
| Fund’s investments |
| Shares | Value | ||||
| Preferred securities 125.5% (81.6% of Total investments) | $707,383,162 | ||||
| (Cost $718,541,731) | |||||
| Communication services 10.8% | 61,133,821 | ||||
| Diversified telecommunication services 3.1% | |||||
| Qwest Corp., 6.125% | 20,000 | 428,200 | |||
| Qwest Corp., 6.500% | 141,033 | 3,111,188 | |||
| Qwest Corp., 6.750% | 330,000 | 7,632,900 | |||
| Qwest Corp., 6.875% (A) | 98,793 | 2,390,791 | |||
| Verizon Communications, Inc., 5.900% (A) | 148,000 | 3,766,600 | |||
| Wireless telecommunication services 7.7% | |||||
| Telephone & Data Systems, Inc., 6.875% (A) | 473,000 | 11,801,350 | |||
| Telephone & Data Systems, Inc., 7.000% (A)(B) | 415,000 | 10,478,750 | |||
| United States Cellular Corp., 6.950% (A)(B) | 673,431 | 16,849,244 | |||
| United States Cellular Corp., 7.250% (A)(B) | 184,994 | 4,674,798 | |||
| Consumer staples 2.0% | 11,407,500 | ||||
| Food and staples retailing 2.0% | |||||
| Ocean Spray Cranberries, Inc., 6.250% (C) | 135,000 | 11,407,500 | |||
| Energy 0.9% | 5,182,800 | ||||
| Oil, gas and consumable fuels 0.9% | |||||
| Enbridge, Inc., Series B (6.375% to 4-15-23, then 3 month LIBOR + 3.593%) | 210,000 | 5,182,800 | |||
| Financials 51.6% | 290,588,098 | ||||
| Banks 28.8% | |||||
| Bank of America Corp., 6.500% (A) | 145,100 | 3,731,972 | |||
| Bank of America Corp., 6.625% | 41,120 | 1,061,307 | |||
| Barclays Bank PLC, 8.125% | 415,000 | 10,532,700 | |||
| BB&T Corp. (Callable 12-3-18), 5.200% (A)(B) | 662,500 | 15,919,875 | |||
| BB&T Corp., 5.625% (A) | 302,325 | 7,364,637 | |||
| Citigroup Capital XIII (3 month LIBOR + 6.370%), 8.890% (D) | 17,000 | 449,990 | |||
| Citigroup, Inc., 6.875% | 25,000 | 641,250 | |||
| Citigroup, Inc. (7.125% to 9-30-23, then 3 month LIBOR + 4.040%) (A) | 616,412 | 16,803,391 | |||
| First Republic Bank, 7.000% | 95,000 | 2,402,550 | |||
| JPMorgan Chase & Co., 6.100% (A) | 105,000 | 2,656,500 | |||
| JPMorgan Chase & Co., 6.125% (A) | 1,030,000 | 25,997,200 | |||
| JPMorgan Chase & Co., 6.300% (A) | 125,000 | 3,170,000 | |||
| JPMorgan Chase & Co., 6.700% (A) | 30,000 | 757,500 | |||
| MB Financial, Inc., 6.000% | 145,000 | 3,651,100 | |||
| Regions Financial Corp., 6.375% (A)(B) | 144,408 | 3,654,966 | |||
| Synovus Financial Corp. (6.300% to 6-21-23, then 3 month LIBOR + 3.352%) | 211,500 | 5,403,825 | |||
| The PNC Financial Services Group, Inc., 5.375% | 40,000 | 986,800 | |||
| The PNC Financial Services Group, Inc. (6.125% to 5-1-22, then 3 month LIBOR + 4.067%) (A) | 210,000 | 5,533,500 | |||
| U.S. Bancorp (6.500% to 1-15-22, then 3 month LIBOR + 4.468%) (A)(B) | 888,000 | 23,984,880 | |||
| Wells Fargo & Company, 6.000% (A)(B) | 650,000 | 16,568,500 | |||
| Wells Fargo & Company (6.625% to 3-15-24, then 3 month LIBOR + 3.690%) (A) | 388,450 | 10,686,260 | |||
| Western Alliance Bancorp, 6.250% | 20,000 | 495,200 | |||
| Capital markets 9.5% | |||||
| Deutsche Bank Contingent Capital Trust II, 6.550% | 13,800 | 346,932 | |||
| Morgan Stanley, 6.625% (A) | 170,000 | 4,341,800 | |||
| Morgan Stanley (6.375% to 10-15-24, then 3 month LIBOR + 3.708%) (A) | 170,000 | 4,450,600 | |||
| Morgan Stanley (6.875% to 1-15-24, then 3 month LIBOR + 3.940%) | 130,000 | 3,485,300 | |||
| 2 | JOHN HANCOCK PREFERRED INCOME FUND III | QUARTERLY REPORT | SEE NOTES TO FUND'S INVESTMENTS |
| Shares | Value | ||||
| Financials (continued) | |||||
| Capital markets (continued) | |||||
| Morgan Stanley (7.125% to 10-15-23, then 3 month LIBOR + 4.320%) | 692,953 | $18,896,828 | |||
| State Street Corp., 5.250% (A) | 65,000 | 1,561,950 | |||
| State Street Corp., 6.000% (A)(B) | 795,000 | 20,208,900 | |||
| Consumer finance 2.5% | |||||
| Capital One Financial Corp., 6.200% (A) | 257,181 | 6,560,687 | |||
| Capital One Financial Corp., 6.700% (A) | 52,650 | 1,366,268 | |||
| Navient Corp., 6.000% (A) | 295,208 | 5,977,962 | |||
| Insurance 10.7% | |||||
| Aegon NV, 6.375% (A) | 354,054 | 8,957,566 | |||
| Aegon NV, 6.500% (A) | 330,000 | 8,424,900 | |||
| Assurant, Inc., 6.500% | 15,000 | 1,584,750 | |||
| Prudential Financial, Inc., 5.750% (A) | 150,000 | 3,730,500 | |||
| Prudential PLC, 6.500% (A) | 85,943 | 2,200,141 | |||
| RenaissanceRe Holdings, Ltd., Series C, 6.080% | 15,000 | 380,999 | |||
| The Hartford Financial Services Group, Inc. (7.875% to 4-15-22, then 3 month LIBOR + 5.596%) | 61,882 | 1,701,136 | |||
| The Phoenix Companies, Inc., 7.450% (A) | 574,500 | 9,575,019 | |||
| Unum Group, 6.250% | 155,000 | 3,882,750 | |||
| W.R. Berkley Corp., 5.625% (A) | 868,205 | 20,020,807 | |||
| Thrifts and mortgage finance 0.1% | |||||
| Federal National Mortgage Association, Series S, 8.250% (E) | 80,000 | 478,400 | |||
| Industrials 2.3% | 13,104,000 | ||||
| Machinery 2.3% | |||||
| Stanley Black & Decker, Inc., 5.750% (A)(B) | 525,000 | 13,104,000 | |||
| Real estate 14.4% | 80,870,834 | ||||
| Equity real estate investment trusts 14.4% | |||||
| American Homes 4 Rent, Series D, 6.500% | 30,000 | 717,600 | |||
| American Homes 4 Rent, Series E, 6.350% | 35,000 | 827,050 | |||
| American Homes 4 Rent, Series F, 5.875% | 175,450 | 3,912,535 | |||
| American Homes 4 Rent, Series G, 5.875% | 155,000 | 3,428,600 | |||
| Crown Castle International Corp., Series A, 6.875% (A) | 24,500 | 25,590,598 | |||
| Digital Realty Trust, Inc., 6.350% | 921 | 23,734 | |||
| Digital Realty Trust, Inc., 6.625% | 10,900 | 286,016 | |||
| Digital Realty Trust, Inc., 7.375% | 40,134 | 1,023,016 | |||
| Federal Realty Investment Trust, Series C, 5.000% (A) | 110,000 | 2,604,800 | |||
| Kimco Realty Corp., 6.000% (A) | 421,815 | 10,511,630 | |||
| Public Storage, 5.200% (A) | 255,000 | 5,826,750 | |||
| Public Storage, 5.375% | 21,275 | 497,622 | |||
| Public Storage, 5.875% (A) | 30,000 | 760,800 | |||
| Senior Housing Properties Trust, 5.625% (A)(B) | 889,832 | 19,389,439 | |||
| Ventas Realty LP, 5.450% (A) | 229,859 | 5,470,644 | |||
| Utilities 43.5% | 245,096,109 | ||||
| Electric utilities 21.8% | |||||
| Alabama Power Company, 5.000% (A) | 219,975 | 5,492,776 | |||
| Duke Energy Corp., 5.125% (A)(B) | 956,300 | 22,377,420 | |||
| Entergy Louisiana LLC, 5.250% (A) | 253,587 | 6,048,050 | |||
| HECO Capital Trust III, 6.500% | 228,100 | 5,999,030 | |||
| Interstate Power & Light Company, 5.100% (A) | 207,514 | 5,306,133 | |||
| NextEra Energy Capital Holdings, Inc., 5.125% (A) | 190,000 | 4,335,800 | |||
| NextEra Energy, Inc., 6.123% (A)(B) | 375,000 | 21,750,000 | |||
| SEE NOTES TO FUND'S INVESTMENTS | QUARTERLY REPORT | JOHN HANCOCK PREFERRED INCOME FUND III | 3 |
| Shares | Value | ||||
| Utilities (continued) | |||||
| Electric utilities (continued) | |||||
| PPL Capital Funding, Inc., 5.900% (A)(B) | 1,016,981 | $25,363,506 | |||
| SCE Trust II, 5.100% (A)(B) | 634,400 | 13,607,880 | |||
| SCE Trust III (5.750% to 3-15-24, then 3 month LIBOR + 2.990%) (A)(B) | 120,000 | 3,015,600 | |||
| The Southern Company, 6.250% (A) | 380,000 | 9,724,200 | |||
| Gas utilities 1.5% | |||||
| South Jersey Industries, Inc., 7.250% | 169,700 | 8,532,516 | |||
| Multi-utilities 20.2% | |||||
| Algonquin Power & Utilities Corp. (6.875% to 10-17-23, then 3 month LIBOR + 3.677%) | 406,450 | 10,372,604 | |||
| CenterPoint Energy, Inc., 7.000% | 209,000 | 10,370,580 | |||
| CMS Energy Corp., 5.625% (A) | 235,000 | 5,663,500 | |||
| Dominion Energy, Inc., 6.750% (A) | 781,166 | 37,456,910 | |||
| DTE Energy Company, 5.250% (A)(B) | 647,000 | 15,204,500 | |||
| DTE Energy Company, 5.250% (A) | 200,000 | 4,580,000 | |||
| DTE Energy Company, 6.000% (A) | 100,550 | 2,608,267 | |||
| DTE Energy Company, 6.500% | 200,700 | 10,703,331 | |||
| Integrys Holding, Inc. (6.000% to 8-1-23, then 3 month LIBOR + 3.220%) (A) | 296,303 | 7,469,799 | |||
| Sempra Energy, 6.000% | 54,000 | 5,354,640 | |||
| Sempra Energy, 6.750% | 37,700 | 3,759,067 | |||
| Common stocks 10.5% (6.8% of Total investments) | $59,024,633 | ||||
| (Cost $53,881,207) | |||||
| Communication services 0.8% | 4,231,200 | ||||
| Diversified telecommunication services 0.8% | |||||
| CenturyLink, Inc. (A) | 205,000 | 4,231,200 | |||
| Energy 9.7% | 54,793,433 | ||||
| Oil, gas and consumable fuels 9.7% | |||||
| BP PLC, ADR (A) | 358,000 | 15,526,460 | |||
| Kinder Morgan, Inc. | 614,860 | 10,464,910 | |||
| ONEOK, Inc. (A)(B) | 230,000 | 15,088,000 | |||
| Royal Dutch Shell PLC, ADR, Class A (A)(B) | 217,029 | 13,714,063 | |||
| Rate (%) | Maturity date | Par value^ | Value | ||
| Corporate bonds 17.1% (11.1% of Total investments) | $96,197,699 | ||||
| (Cost $98,638,659) | |||||
| Consumer discretionary 1.8% | 10,381,250 | ||||
| Automobiles 1.8% | |||||
| General Motors Financial Company, Inc. (6.500% to 9-30-28, then 3 month LIBOR + 3.436%) (A)(F) | 6.500 | 09-30-28 | 11,000,000 | 10,381,250 | |
| Energy 1.5% | 8,541,170 | ||||
| Oil, gas and consumable fuels 1.5% | |||||
| Enbridge, Inc. (6.250% to 3-1-28, then 3 month LIBOR + 3.641%) | 6.250 | 03-01-78 | 1,000,000 | 936,170 | |
| Energy Transfer Operating LP (3 month LIBOR + 3.018%) (A)(B)(D) | 5.361 | 11-01-66 | 9,000,000 | 7,605,000 | |
| Financials 10.8% | 60,582,788 | ||||
| Banks 7.5% | |||||
| Barclays PLC (7.750% to 9-15-23, then 5 Year U.S. Swap Rate + 4.842%) (F) | 7.750 | 09-15-23 | 7,809,000 | 7,791,039 | |
| BNP Paribas SA (7.375% to 8-19-25, then 5 Year U.S. Swap Rate + 5.150%) (F) | 7.375 | 08-19-25 | 1,750,000 | 1,798,125 | |
| Citizens Financial Group, Inc. (6.000% to 7-6-23, then 3 month LIBOR + 3.003%) (F) | 6.000 | 07-06-23 | 3,750,000 | 3,712,500 | |
| Citizens Financial Group, Inc. (6.375% to 4-6-24, then 3 month LIBOR + 3.157%) (F) | 6.375 | 04-06-24 | 5,500,000 | 5,499,368 | |
| 4 | JOHN HANCOCK PREFERRED INCOME FUND III | QUARTERLY REPORT | SEE NOTES TO FUND'S INVESTMENTS |
| Rate (%) | Maturity date | Par value^ | Value | ||
| Financials (continued) | |||||
| Banks (continued) | |||||
| HSBC Holdings PLC (6.500% to 3-23-28, then 5 Year U.S. ISDAFIX + 3.606%) (A)(F) | 6.500 | 03-23-28 | 8,500,000 | $7,979,375 | |
| Huntington Bancshares, Inc. (5.700% to 4-15-23, then 3 month LIBOR + 2.880%) (F) | 5.700 | 04-15-23 | 2,000,000 | 1,960,000 | |
| Lloyds Banking Group PLC (7.500% to 6-27-24, then 5 Year U.S. Swap Rate + 4.760%) (F) | 7.500 | 06-27-24 | 8,000,000 | 8,070,000 | |
| The Royal Bank of Scotland Group PLC (8.000% to 8-10-25, then 5 Year U.S. Swap Rate + 5.720%) (F) | 8.000 | 08-10-25 | 3,175,000 | 3,276,203 | |
| Wells Fargo & Company (5.900% to 6-15-24, then 3 month LIBOR + 3.110%) (A)(F) | 5.900 | 06-15-24 | 2,000,000 | 2,004,940 | |
| Capital markets 1.3% | |||||
| Credit Suisse Group AG (7.250% to 9-12-25, then 5 Year U.S. Swap Rate + 4.332%) (C)(F) | 7.250 | 09-12-25 | 3,150,000 | 3,114,563 | |
| Credit Suisse Group AG (7.500% to 7-17-23, then 5 Year U.S. Swap Rate + 4.600%) (C)(F) | 7.500 | 07-17-23 | 4,330,000 | 4,405,775 | |
| Consumer finance 0.9% | |||||
| Discover Financial Services (5.500% to 10-30-27, then 3 month LIBOR + 3.076%) (F) | 5.500 | 10-30-27 | 5,000,000 | 4,725,000 | |
| Insurance 1.1% | |||||
| MetLife, Inc. (5.875% to 3-15-28, then 3 month LIBOR + 2.959%) (A)(F) | 5.875 | 03-15-28 | 5,000,000 | 4,987,500 | |
| Prudential Financial, Inc. (5.700% to 9-15-28, then 3 month LIBOR + 2.665%) | 5.700 | 09-15-48 | 1,300,000 | 1,258,400 | |
| Utilities 3.0% | 16,692,491 | ||||
| Electric utilities 0.6% | |||||
| Southern California Edison Company (6.250% to 2-1-22, then 3 month LIBOR + 4.199%) (A)(F) | 6.250 | 02-01-22 | 3,000,000 | 3,090,000 | |
| Multi-utilities 2.4% | |||||
| CenterPoint Energy, Inc. (6.125% to 9-1-23, then 3 month LIBOR + 3.270%) (A)(F) | 6.125 | 09-01-23 | 8,500,000 | 8,574,375 | |
| Dominion Energy, Inc. (5.750% to 10-1-24, then 3 month LIBOR + 3.057%) (A)(B) | 5.750 | 10-01-54 | 3,000,000 | 3,067,716 | |
| NiSource, Inc. (5.650% to 6-15-23, then 5 Year CMT + 2.843%) (C)(F) | 5.650 | 06-15-23 | 2,000,000 | 1,960,400 | |
| Yield* (%) | Maturity date | Par value^ | Value | ||
| Short-term investments 0.7% (0.5% of Total investments) | $4,051,000 | ||||
| (Cost $4,051,000) | |||||
| U.S. Government Agency 0.7% | 3,878,000 | ||||
| Federal Home Loan Bank Discount Note | 2.050 | 11-01-18 | 3,878,000 | 3,878,000 | |
| Par value^ | Value | ||||
| Repurchase agreement 0.0% | 173,000 | ||||
| Repurchase Agreement with State Street Corp. dated 10-31-18 at 1.050% to be repurchased at $173,005 on 11-1-18, collateralized by $180,000 U.S. Treasury Notes, 2.625% due 6-15-21 (valued at $180,622, including interest) | 173,000 | 173,000 | |||
| Total investments (Cost $875,112,597) 153.8% | $866,656,494 | ||||
| Other assets and liabilities, net (53.8%) | (303,037,885) | ||||
| Total net assets 100.0% | $563,618,609 | ||||
| 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 |
| ISDAFIX | International Swaps and Derivatives Association Fixed Interest Rate Swap Rate |
| LIBOR | London Interbank Offered Rate |
| SEE NOTES TO FUND'S INVESTMENTS | QUARTERLY REPORT | JOHN HANCOCK PREFERRED INCOME FUND III | 5 |
| (A) | All or a portion of this security is pledged as collateral pursuant to the Credit Facility Agreement. Total collateral value at 10-31-18 was $613,452,616. A portion of the securities pledged as collateral were loaned pursuant to the Credit Facility Agreement. The value of securities on loan amounted to $260,821,949. |
| (B) | All or a portion of this security is on loan as of 10-31-18, and is a component of the fund's leverage under the Credit Facility Agreement. |
| (C) | 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. |
| (D) | Variable rate obligation. The coupon rate shown represents the rate at period end. |
| (E) | Non-income producing security. |
| (F) | Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date. |
| * | 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. |
| United States | 87.0% |
| United Kingdom | 6.4% |
| Netherlands | 3.6% |
| Canada | 1.9% |
| Other countries | 1.1% |
| TOTAL | 100.0% |
| 6 | JOHN HANCOCK PREFERRED INCOME FUND III | QUARTERLY REPORT | SEE NOTES TO FUND'S INVESTMENTS |
| Open contracts | Number
of contracts |
Position | Expiration
date |
Notional
basis* |
Notional
value* |
Unrealized
appreciation (depreciation) |
| 10-Year U.S. Treasury Note Futures | 680 | Short | Dec 2018 | $(81,752,646) | $(80,537,500) | $1,215,146 |
| $1,215,146 |
| 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 | 77,000,000 | USD | Fixed 2.136% | USD 3 Month LIBOR BBA(a) | Semi-Annual | Quarterly | Oct 2022 | — | $2,869,791 | $2,869,791 |
| — | $2,869,791 | $2,869,791 | ||||||||
| (a) | At 10-31-18, the 3 month LIBOR was 2.559% |
| Derivatives Currency Abbreviations | |
| USD | U.S. Dollar |
| Derivatives Abbreviations | |
| BBA | The British Banker's Association |
| LIBOR | London Interbank Offered Rate |
| SEE NOTES TO FUND'S INVESTMENTS | QUARTERLY REPORT | JOHN HANCOCK PREFERRED INCOME FUND III | 7 |
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.
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 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 valued based on the evaluated prices provided by an independent pricing vendor or from broker-dealers. Independent pricing vendors utilize matrix pricing which takes into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, as well as broker supplied prices. Swaps are valued using evaluated prices obtained from an independent pricing vendor. Futures contracts are typically 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 October 31, 2018, by major security category or type:
| Total value at 10-31-18 |
Level 1 quoted price |
Level 2 significant observable inputs |
Level 3 significant unobservable inputs |
||
| Investments in securities: | |||||
| Assets | |||||
| Preferred securities | |||||
| Communication services | $61,133,821 | $61,133,821 | — | — | |
| Consumer staples | 11,407,500 | — | $11,407,500 | — | |
| Energy | 5,182,800 | 5,182,800 | — | — | |
| Financials | 290,588,098 | 281,013,079 | 9,575,019 | — | |
| Industrials | 13,104,000 | 13,104,000 | — | — | |
| Real estate | 80,870,834 | 55,280,236 | 25,590,598 | — | |
| Utilities | 245,096,109 | 231,627,280 | 13,468,829 | — | |
| Common stocks | 59,024,633 | 59,024,633 | — | — | |
| Corporate bonds | 96,197,699 | — | 96,197,699 | — | |
| Short-term investments | 4,051,000 | — | 4,051,000 | — | |
| Total investments in securities | $866,656,494 | $706,365,849 | $160,290,645 | — | |
| Derivatives: | |||||
| Assets | |||||
| Futures | $1,215,146 | $1,215,146 | — | — | |
| Swap contracts | 2,869,791 | — | $2,869,791 | — | |
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. 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 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.
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 October 31, 2018, the fund used futures contracts to manage against anticipated interest rate changes.
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). 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 October 31, 2018, the fund used interest rate swaps to manage against anticipated interest rate changes.
For additional information on the fund's significant accounting policies, please refer to the fund's most recent semiannual or annual shareholder report.
More information
| How to contact us | ||
| Internet | www.jhinvestments.com | |
| 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 |
| P12Q1 | 10/18 | |
| This report is for the information of the shareholders of John Hancock Preferred Income Fund III. | 12/18 |
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 Preferred Income Fund III
| By: | /s/ Andrew Arnott |
| Andrew Arnott | |
| President | |
| Date: | December 18, 2018 |
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: | December 18, 2018 |
| By: | /s/ Charles A. Rizzo |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Date: | December 18, 2018 |
CERTIFICATION
I, Andrew Arnott, certify that:
1. I have reviewed this report on Form N-Q of John Hancock Preferred Income Fund III;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | December 18, 2018 | /s/ Andrew Arnott | |
| Andrew Arnott | |||
| President | |||
CERTIFICATION
I, Charles A. Rizzo, certify that:
1. I have reviewed this report on Form N-Q of John Hancock Preferred Income Fund III;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | December 18, 2018 | /s/ Charles A. Rizzo | |
| Charles A. Rizzo | |||
| Chief Financial Officer | |||
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