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 811-21202 |
| John Hancock Preferred Income Fund II |
| (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) 543-9634 | |
Date of fiscal year end: | July 31 |
Date of reporting period: | January 31, 2023 |
ITEM 1. REPORTS TO STOCKHOLDERS.
Manulife Investment Management
John Hancock Investment Management
Head of Wealth and Asset Management,
United States and Europe
SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 1 |
2 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT |
SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 3 |
TOP 10 ISSUERS AS OF 1/31/2023 (% of total investments) | |
Bank of America Corp. | 4.8 |
Algonquin Power & Utilities Corp. | 4.0 |
Morgan Stanley | 3.8 |
NiSource, Inc. | 3.2 |
Wells Fargo & Company | 3.2 |
The PNC Financial Services Group, Inc. | 2.8 |
Energy Transfer LP | 2.8 |
Citigroup, Inc. | 2.6 |
NextEra Energy, Inc. | 2.6 |
Athene Holding, Ltd. | 2.5 |
TOTAL | 32.3 |
Cash and cash equivalents are not included. |
4 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT |
Shares | Value | ||||
Preferred securities (A) 85.4% (54.7% of Total investments) | $314,182,063 | ||||
(Cost $347,304,894) | |||||
Communication services 6.1% | 22,547,310 | ||||
Diversified telecommunication services 1.3% | |||||
Qwest Corp., 6.750% | 220,000 | 4,613,400 | |||
Media 0.4% | |||||
Paramount Global, 5.750% | 50,000 | 1,642,000 | |||
Wireless telecommunication services 4.4% | |||||
Telephone & Data Systems, Inc., 6.000% | 222,100 | 3,846,772 | |||
Telephone & Data Systems, Inc., 6.625% | 211,250 | 4,087,688 | |||
U.S. Cellular Corp., 5.500% | 105,000 | 1,947,750 | |||
U.S. Cellular Corp., 5.500% | 110,000 | 2,058,100 | |||
U.S. Cellular Corp., 6.250% | 220,000 | 4,351,600 | |||
Consumer discretionary 1.0% | 3,840,600 | ||||
Internet and direct marketing retail 1.0% | |||||
Qurate Retail, Inc., 8.000% | 73,500 | 3,461,850 | |||
QVC, Inc., 6.250% (B) | 25,000 | 378,750 | |||
Energy 2.5% | 9,014,700 | ||||
Oil, gas and consumable fuels 2.5% | |||||
Enbridge, Inc., 6.375% (6.375% to 4-15-23, then 3 month LIBOR + 3.593%) (B) | 210,000 | 5,254,200 | |||
NuStar Logistics LP, 11.526% (3 month LIBOR + 6.734%) (B)(C) | 150,000 | 3,760,500 | |||
Financials 45.6% | 167,644,386 | ||||
Banks 20.6% | |||||
Bank of America Corp., 4.250% | 134,925 | 2,610,799 | |||
Bank of America Corp., 6.450% (6.450% to 12-15-66, then 3 month LIBOR + 1.327%) (B) | 110,000 | 2,821,500 | |||
Bank of America Corp., 7.250% (B) | 7,000 | 8,709,400 | |||
Citigroup Capital XIII, 11.184% (3 month LIBOR + 6.370%) (C) | 265,000 | 7,610,800 | |||
Citigroup, Inc., 7.125% (7.125% to 9-30-23, then 3 month LIBOR + 4.040%) (B)(D) | 300,564 | 7,646,348 | |||
Fifth Third Bancorp, 6.000% (B) | 150,000 | 3,748,500 | |||
First Republic Bank, 4.000% (B) | 185,000 | 3,381,800 | |||
First Republic Bank, 4.500% (B)(D) | 84,700 | 1,681,295 | |||
First Republic Bank, 4.700% (B) | 147,325 | 3,120,344 | |||
Fulton Financial Corp., 5.125% (B) | 113,025 | 2,390,479 | |||
PacWest Bancorp, 7.750% (7.750% to 9-1-27, then 5 Year CMT + 4.820%) | 227,825 | 5,896,111 | |||
Pinnacle Financial Partners, Inc., 6.750% | 140,000 | 3,592,400 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 5 |
Shares | Value | ||||
Financials (continued) | |||||
Banks (continued) | |||||
Synovus Financial Corp., 6.300% (6.300% to 6-21-23, then 3 month LIBOR + 3.352%) (B)(D) | 164,500 | $4,096,050 | |||
Wells Fargo & Company, 6.625% (6.625% to 3-15-24, then 3 month LIBOR + 3.690%) (B) | 269,225 | 6,824,854 | |||
Wells Fargo & Company, 7.500% (B)(D) | 7,500 | 9,434,925 | |||
WesBanco, Inc., 6.750% (6.750% to 11-15-25, then 5 Year CMT + 6.557%) | 93,000 | 2,352,900 | |||
Capital markets 6.3% | |||||
Brookfield Finance, Inc., 4.625% (B) | 95,000 | 1,808,800 | |||
Morgan Stanley, 6.375% (6.375% to 10-15-24, then 3 month LIBOR + 3.708%) (B) | 125,000 | 3,195,000 | |||
Morgan Stanley, 6.500% (B)(D) | 208,450 | 5,428,038 | |||
Morgan Stanley, 6.875% (6.875% to 1-15-24, then 3 month LIBOR + 3.940%) (B) | 99,875 | 2,518,848 | |||
Morgan Stanley, 7.125% (7.125% to 10-15-23, then 3 month LIBOR + 4.320%) (B) | 405,472 | 10,315,208 | |||
Consumer finance 1.1% | |||||
Navient Corp., 6.000% (B)(D) | 200,341 | 4,080,946 | |||
Insurance 17.5% | |||||
AEGON Funding Company LLC, 5.100% (B) | 267,925 | 6,068,501 | |||
American Equity Investment Life Holding Company, 6.625% (6.625% to 9-1-25, then 5 Year CMT + 6.297%) (B) | 131,750 | 3,387,293 | |||
American Financial Group, Inc., 5.125% (B) | 123,850 | 2,885,705 | |||
American International Group, Inc., 5.850% (B) | 207,000 | 5,249,520 | |||
Athene Holding, Ltd., 7.750% (7.750% to 12-30-27, then 5 Year CMT + 3.962%) | 283,775 | 7,488,822 | |||
Athene Holding, Ltd., Series A, 6.350% (6.350% to 6-30-29, then 3 month LIBOR + 4.253%) (B) | 270,000 | 6,876,900 | |||
Brighthouse Financial, Inc., 6.600% (B) | 306,687 | 7,976,929 | |||
Lincoln National Corp., 9.000% | 220,450 | 6,337,938 | |||
Reinsurance Group of America, Inc., 7.125% (7.125% to 10-15-27, then 5 Year CMT + 3.456%) (B) | 282,950 | 7,537,788 | |||
RenaissanceRe Holdings, Ltd., 4.200% (B) | 169,000 | 3,072,420 | |||
The Phoenix Companies, Inc., 7.450% | 216,500 | 3,875,350 | |||
Unum Group, 6.250% | 137,500 | 3,455,375 | |||
Thrifts and mortgage finance 0.1% | |||||
Federal National Mortgage Association, Series S, 8.250% (E) | 75,000 | 166,500 | |||
Health care 1.5% | 5,489,240 | ||||
Health care equipment and supplies 1.5% | |||||
Becton, Dickinson and Company, 6.000% (B) | 109,000 | 5,489,240 |
6 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Shares | Value | ||||
Industrials 1.0% | $3,740,680 | ||||
Trading companies and distributors 1.0% | |||||
WESCO International, Inc., 10.625% (10.625% to 6-22-25, then 5 Year CMT + 10.325%) | 137,525 | 3,740,680 | |||
Real estate 3.9% | 14,255,007 | ||||
Equity real estate investment trusts 3.9% | |||||
Diversified Healthcare Trust, 5.625% (B) | 657,520 | 8,646,388 | |||
Pebblebrook Hotel Trust, 6.375% | 160,450 | 3,383,891 | |||
Vornado Realty Trust, 5.400% | 116,600 | 2,224,728 | |||
Utilities 23.8% | 87,650,140 | ||||
Electric utilities 4.6% | |||||
Duke Energy Corp., 5.750% | 179,675 | 4,632,022 | |||
NextEra Energy Capital Holdings, Inc., 5.650% | 3,725 | 95,956 | |||
NextEra Energy, Inc., 6.219% (B) | 100,400 | 4,808,156 | |||
NextEra Energy, Inc., 6.926% (B)(D) | 90,800 | 4,353,860 | |||
NSTAR Electric Company, 4.780% (B) | 15,143 | 1,298,512 | |||
SCE Trust III, 5.750% (5.750% to 3-15-24, then 3 month LIBOR + 2.990%) (B) | 79,475 | 1,776,266 | |||
Gas utilities 1.9% | |||||
South Jersey Industries, Inc., 5.625% (B) | 188,875 | 2,982,336 | |||
Spire, Inc., 7.500% | 26,000 | 1,344,200 | |||
UGI Corp., 7.250% | 28,200 | 2,579,454 | |||
Independent power and renewable electricity producers1.4% | |||||
The AES Corp., 6.875% (B) | 54,100 | 5,401,344 | |||
Multi-utilities 15.9% | |||||
Algonquin Power & Utilities Corp., 6.200% (6.200% to 7-1-24, then 3 month LIBOR + 4.010%) (B) | 290,000 | 6,728,000 | |||
Algonquin Power & Utilities Corp., 6.875% (6.875% to 10-17-23, then 3 month LIBOR + 3.677%) (B) | 420,050 | 10,480,248 | |||
CMS Energy Corp., 5.625% (B) | 187,515 | 4,631,621 | |||
CMS Energy Corp., 5.875% (B) | 65,000 | 1,634,750 | |||
DTE Energy Company, Series E, 5.250% (B) | 160,000 | 3,968,000 | |||
Integrys Holding, Inc., 6.000% (6.000% to 8-1-23, then 3 month LIBOR + 3.220%) (B)(D) | 237,872 | 5,815,970 | |||
NiSource, Inc., 6.500% (6.500% to 3-15-24, then 5 Year CMT + 3.632%) (B) | 338,000 | 8,629,140 | |||
NiSource, Inc., 7.750% (B)(D) | 93,100 | 9,826,705 | |||
Sempra Energy, 5.750% (B) | 270,000 | 6,663,600 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 7 |
Shares | Value | ||||
Common stocks 2.8% (1.8% of Total investments) | $10,219,233 | ||||
(Cost $18,414,798) | |||||
Communication services 0.2% | 787,500 | ||||
Diversified telecommunication services 0.2% | |||||
Lumen Technologies, Inc. (B) | 150,000 | 787,500 | |||
Energy 1.1% | 3,856,728 | ||||
Oil, gas and consumable fuels 1.1% | |||||
Equitrans Midstream Corp. (B) | 198,446 | 1,438,728 | |||
The Williams Companies, Inc. (B) | 75,000 | 2,418,000 | |||
Utilities 1.5% | 5,575,005 | ||||
Multi-utilities 1.5% | |||||
Algonquin Power & Utilities Corp. | 206,100 | 5,575,005 | |||
Rate (%) | Maturity date | Par value^ | Value | ||
Corporate bonds 61.5% (39.4% of Total investments) | $225,969,227 | ||||
(Cost $241,891,310) | |||||
Communication services 2.0% | 7,435,284 | ||||
Media 1.6% | |||||
Paramount Global (6.375% to 3-30-27, then 5 Year CMT + 3.999%) | 6.375 | 03-30-62 | 6,700,000 | 5,845,549 | |
Wireless telecommunication services 0.4% | |||||
SoftBank Group Corp. (6.875% to 7-19-27, then 5 Year ICE Swap Rate + 4.854%) (B)(F) | 6.875 | 07-19-27 | 1,714,000 | 1,589,735 | |
Consumer discretionary 2.5% | 9,085,778 | ||||
Automobiles 2.5% | |||||
General Motors Financial Company, Inc. (5.700% to 9-30-30, then 5 Year CMT + 4.997%) (F) | 5.700 | 09-30-30 | 2,500,000 | 2,312,500 | |
General Motors Financial Company, Inc. (6.500% to 9-30-28, then 3 month LIBOR + 3.436%) (F) | 6.500 | 09-30-28 | 7,239,000 | 6,773,278 | |
Consumer staples 0.2% | 629,800 | ||||
Food products 0.2% | |||||
Land O’ Lakes, Inc. (B)(F)(G) | 8.000 | 07-16-25 | 670,000 | 629,800 | |
Energy 6.9% | 25,281,790 | ||||
Oil, gas and consumable fuels 6.9% | |||||
Enbridge, Inc. (7.375% to 10-15-27, then 5 Year CMT + 3.708%) (B)(D) | 7.375 | 01-15-83 | 4,193,000 | 4,200,203 | |
Energy Transfer LP (6.625% to 2-15-28, then 3 month LIBOR + 4.155%) (F) | 6.625 | 02-15-28 | 6,500,000 | 5,428,670 | |
Energy Transfer LP (7.125% to 5-15-30, then 5 Year CMT + 5.306%) (F) | 7.125 | 05-15-30 | 4,500,000 | 4,110,750 |
8 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Rate (%) | Maturity date | Par value^ | Value | ||
Energy (continued) | |||||
Oil, gas and consumable fuels (continued) | |||||
Energy Transfer LP (3 month LIBOR + 3.018%) (B)(C) | 7.457 | 11-01-66 | 8,050,000 | $6,482,767 | |
MPLX LP (6.875% to 2-15-23, then 3 month LIBOR + 4.652%) (B)(D)(F) | 6.875 | 02-15-23 | 3,000,000 | 3,000,900 | |
Transcanada Trust (5.600% to 12-7-31, then 5 Year CMT + 3.986%) (B)(D) | 5.600 | 03-07-82 | 2,300,000 | 2,058,500 | |
Financials 40.6% | 149,368,520 | ||||
Banks 28.7% | |||||
Bank of America Corp. (5.875% to 3-15-28, then 3 month LIBOR + 2.931%) (B)(D)(F) | 5.875 | 03-15-28 | 6,096,000 | 5,836,920 | |
Bank of America Corp. (6.125% to 4-27-27, then 5 Year CMT + 3.231%) (B)(D)(F) | 6.125 | 04-27-27 | 5,750,000 | 5,755,750 | |
Bank of America Corp. (6.500% to 10-23-24, then 3 month LIBOR + 4.174%) (B)(F) | 6.500 | 10-23-24 | 1,636,000 | 1,644,118 | |
Barclays PLC (7.750% to 9-15-23, then 5 Year U.S. Swap Rate + 4.842%) (B)(F) | 7.750 | 09-15-23 | 1,102,000 | 1,093,702 | |
Barclays PLC (8.000% to 6-15-24, then 5 Year CMT + 5.672%) (B)(F) | 8.000 | 06-15-24 | 1,935,000 | 1,927,744 | |
Barclays PLC (8.000% to 3-15-29, then 5 Year CMT + 5.431%) (B)(D)(F) | 8.000 | 03-15-29 | 2,240,000 | 2,249,296 | |
BNP Paribas SA (7.750% to 8-16-29, then 5 Year CMT + 4.899%) (B)(D)(F)(G) | 7.750 | 08-16-29 | 2,450,000 | 2,535,750 | |
Citizens Financial Group, Inc. (6.375% to 4-6-24, then 3 month LIBOR + 3.157%) (F) | 6.375 | 04-06-24 | 6,000,000 | 5,747,400 | |
CoBank ACB (4.250% to 1-1-27, then 5 Year CMT + 3.049%) (B)(D)(F) | 4.250 | 01-01-27 | 5,500,000 | 4,813,378 | |
CoBank ACB (6.450% to 10-1-27, then 5 Year CMT + 3.487%) (B)(D)(F) | 6.450 | 10-01-27 | 4,250,000 | 4,290,994 | |
Comerica, Inc. (5.625% to 7-1-25, then 5 Year CMT + 5.291%) (F) | 5.625 | 07-01-25 | 4,250,000 | 4,166,427 | |
Huntington Bancshares, Inc. (5.625% to 7-15-30, then 10 Year CMT + 4.945%) (F) | 5.625 | 07-15-30 | 3,500,000 | 3,437,703 | |
JPMorgan Chase & Co. (4.600% to 2-1-25, then SOFR + 3.125%) (B)(D)(F) | 4.600 | 02-01-25 | 6,500,000 | 6,110,000 | |
JPMorgan Chase & Co. (6.750% to 2-1-24, then 3 month LIBOR + 3.780%) (B)(F) | 6.750 | 02-01-24 | 667,000 | 673,723 | |
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 | 6,000,000 | 5,955,540 | |
M&T Bank Corp. (3.500% to 9-1-26, then 5 Year CMT + 2.679%) (F) | 3.500 | 09-01-26 | 7,200,000 | 6,048,000 | |
SVB Financial Group (4.100% to 2-15-31, then 10 Year CMT + 3.064%) (F) | 4.100 | 02-15-31 | 4,500,000 | 3,341,250 | |
SVB Financial Group (4.700% to 11-15-31, then 10 Year CMT + 3.064%) (F) | 4.700 | 11-15-31 | 6,700,000 | 5,125,500 | |
The Bank of Nova Scotia (8.625% to 10-27-27, then 5 Year CMT + 4.389%) | 8.625 | 10-27-82 | 2,490,000 | 2,651,252 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 9 |
Rate (%) | Maturity date | Par value^ | Value | ||
Financials (continued) | |||||
Banks (continued) | |||||
The PNC Financial Services Group, Inc. (3.400% to 9-15-26, then 5 Year CMT + 2.595%) (B)(D)(F) | 3.400 | 09-15-26 | 2,800,000 | $2,387,000 | |
The PNC Financial Services Group, Inc. (6.000% to 5-15-27, then 5 Year CMT + 3.000%) (B)(D)(F) | 6.000 | 05-15-27 | 5,965,000 | 5,934,579 | |
The PNC Financial Services Group, Inc. (6.200% to 9-15-27, then 5 Year CMT + 3.238%) (B)(D)(F) | 6.200 | 09-15-27 | 7,031,000 | 7,033,109 | |
The PNC Financial Services Group, Inc. (3 month LIBOR + 3.678%) (B)(C)(F) | 8.118 | 05-01-23 | 1,330,000 | 1,333,324 | |
The Toronto-Dominion Bank (8.125% to 10-31-27, then 5 Year CMT + 4.075%) (B)(D) | 8.125 | 10-31-82 | 7,867,000 | 8,348,854 | |
U.S. Bancorp (3.700% to 1-15-27, then 5 Year CMT + 2.541%) (B)(D)(F) | 3.700 | 01-15-27 | 5,735,000 | 5,010,956 | |
Wells Fargo & Company (5.900% to 6-15-24, then 3 month LIBOR + 3.110%) (B)(F) | 5.900 | 06-15-24 | 2,000,000 | 1,957,500 | |
Capital markets 3.7% | |||||
The Bank of New York Mellon Corp. (3.750% to 12-20-26, then 5 Year CMT + 2.630%) (B)(D)(F) | 3.750 | 12-20-26 | 2,550,000 | 2,215,440 | |
The Charles Schwab Corp. (4.000% to 6-1-26, then 5 Year CMT + 3.168%) (B)(D)(F) | 4.000 | 06-01-26 | 4,000,000 | 3,685,600 | |
The Charles Schwab Corp. (4.000% to 12-1-30, then 10 Year CMT + 3.079%) (B)(D)(F) | 4.000 | 12-01-30 | 2,700,000 | 2,322,675 | |
The Charles Schwab Corp. (5.000% to 6-1-27, then 5 Year CMT + 3.256%) (B)(D)(F) | 5.000 | 06-01-27 | 2,475,000 | 2,388,375 | |
The Charles Schwab Corp. (5.375% to 6-1-25, then 5 Year CMT + 4.971%) (B)(F) | 5.375 | 06-01-25 | 3,100,000 | 3,075,820 | |
Consumer finance 2.2% | |||||
American Express Company (3.550% to 9-15-26, then 5 Year CMT + 2.854%) (B)(D)(F) | 3.550 | 09-15-26 | 5,500,000 | 4,866,399 | |
Discover Financial Services (6.125% to 6-23-25, then 5 Year CMT + 5.783%) (F) | 6.125 | 06-23-25 | 3,400,000 | 3,370,591 | |
Diversified financial services 0.7% | |||||
Enstar Finance LLC (5.750% to 9-1-25, then 5 Year CMT + 5.468%) (B)(D) | 5.750 | 09-01-40 | 3,000,000 | 2,688,900 | |
Insurance 5.3% | |||||
Markel Corp. (6.000% to 6-1-25, then 5 Year CMT + 5.662%) (F) | 6.000 | 06-01-25 | 4,000,000 | 3,990,000 | |
MetLife, Inc. (5.875% to 3-15-28, then 3 month LIBOR + 2.959%) (B)(D)(F) | 5.875 | 03-15-28 | 5,277,000 | 5,237,423 | |
SBL Holdings, Inc. (6.500% to 11-13-26, then 5 Year CMT + 5.620%) (F)(G) | 6.500 | 11-13-26 | 5,750,000 | 4,406,225 | |
SBL Holdings, Inc. (7.000% to 5-13-25, then 5 Year CMT + 5.580%) (B)(D)(F)(G) | 7.000 | 05-13-25 | 6,890,000 | 5,711,303 |
10 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Rate (%) | Maturity date | Par value^ | Value | ||
Utilities 9.3% | $34,168,055 | ||||
Electric utilities 5.4% | |||||
Duke Energy Corp. (3.250% to 1-15-27, then 5 Year CMT + 2.321%) (B)(D) | 3.250 | 01-15-82 | 3,350,000 | 2,737,146 | |
Edison International (5.000% to 12-15-26, then 5 Year CMT + 3.901%) (F) | 5.000 | 12-15-26 | 2,790,000 | 2,480,561 | |
Edison International (5.375% to 3-15-26, then 5 Year CMT + 4.698%) (F) | 5.375 | 03-15-26 | 7,500,000 | 7,006,355 | |
Emera, Inc. (6.750% to 6-15-26, then 3 month LIBOR + 5.440% to 6-15-46, then 3 month LIBOR + 6.190%) (B) | 6.750 | 06-15-76 | 2,490,000 | 2,445,512 | |
NextEra Energy Capital Holdings, Inc. (5.650% to 5-1-29, then 3 month LIBOR + 3.156%) (B)(D) | 5.650 | 05-01-79 | 5,500,000 | 5,248,215 | |
Independent power and renewable electricity producers2.6% | |||||
Vistra Corp. (7.000% to 12-15-26, then 5 Year CMT + 5.740%) (F)(G) | 7.000 | 12-15-26 | 2,440,000 | 2,281,400 | |
Vistra Corp. (8.000% to 10-15-26, then 5 Year CMT + 6.930%) (F)(G) | 8.000 | 10-15-26 | 7,250,000 | 7,106,813 | |
Multi-utilities 1.3% | |||||
CenterPoint Energy, Inc. (6.125% to 9-1-23, then 3 month LIBOR + 3.270%) (F) | 6.125 | 09-01-23 | 342,000 | 336,443 | |
CMS Energy Corp. (4.750% to 3-1-30, then 5 Year CMT + 4.116%) (B)(D) | 4.750 | 06-01-50 | 3,500,000 | 3,183,110 | |
Dominion Energy, Inc. (4.350% to 1-15-27, then 5 Year CMT + 3.195%) (F) | 4.350 | 01-15-27 | 1,500,000 | 1,342,500 | |
Capital preferred securities (H) 2.6% (1.7% of Total investments) | $9,619,123 | ||||
(Cost $10,678,500) | |||||
Financials 1.2% | 4,289,992 | ||||
Insurance 1.2% | |||||
MetLife Capital Trust IV (7.875% to 12-15-37, then 3 month LIBOR + 3.960%) (B)(D)(G) | 7.875 | 12-15-37 | 3,900,000 | 4,289,992 | |
Utilities 1.4% | 5,329,131 | ||||
Multi-utilities 1.4% | |||||
Dominion Resources Capital Trust III (B)(D) | 8.400 | 01-15-31 | 5,000,000 | 5,329,131 | |
Yield (%) | Shares | Value | |||
Short-term investments 3.7% (2.4% of Total investments) | $13,716,589 | ||||
(Cost $13,714,914) | |||||
Short-term funds 3.7% | 13,716,589 | ||||
John Hancock Collateral Trust (I) | 4.3787(J) | 1,371,961 | 13,716,589 |
Total investments (Cost $632,004,416) 156.0% | $573,706,235 | ||||
Other assets and liabilities, net (56.0%) | (205,940,962) | ||||
Total net assets 100.0% | $367,765,273 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 11 |
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 | |
CMT | Constant Maturity Treasury |
ICE | Intercontinental Exchange |
LIBOR | London Interbank Offered Rate |
SOFR | Secured Overnight Financing Rate |
(A) | Includes preferred stocks and hybrid securities with characteristics of both equity and debt that pay dividends on a periodic basis. |
(B) | All or a portion of this security is pledged as collateral pursuant to the Credit Facility Agreement. Total collateral value at 1-31-23 was $359,590,716. A portion of the securities pledged as collateral were loaned pursuant to the Credit Facility Agreement. The value of securities on loan amounted to $167,294,463. |
(C) | Variable rate obligation. The coupon rate shown represents the rate at period end. |
(D) | All or a portion of this security is on loan as of 1-31-23, and is a component of the fund’s leverage under the Credit Facility Agreement. |
(E) | Non-income producing security. |
(F) | Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date. |
(G) | 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. |
(H) | Includes hybrid securities with characteristics of both equity and debt that trade with, and pay, interest income. |
(I) | Investment is an affiliate of the fund, the advisor and/or subadvisor. |
(J) | The rate shown is the annualized seven-day yield as of 1-31-23. |
12 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Assets | |
Unaffiliated investments, at value (Cost $618,289,502) | $559,989,646 |
Affiliated investments, at value (Cost $13,714,914) | 13,716,589 |
Total investments, at value (Cost $632,004,416) | 573,706,235 |
Cash | 99,988 |
Dividends and interest receivable | 3,766,217 |
Other assets | 21,253 |
Total assets | 577,593,693 |
Liabilities | |
Credit facility agreement payable | 206,700,000 |
Payable for investments purchased | 2,097,855 |
Interest payable | 902,418 |
Payable to affiliates | |
Accounting and legal services fees | 22,219 |
Trustees’ fees | 327 |
Other liabilities and accrued expenses | 105,601 |
Total liabilities | 209,828,420 |
Net assets | $367,765,273 |
Net assets consist of | |
Paid-in capital | $440,004,572 |
Total distributable earnings (loss) | (72,239,299) |
Net assets | $367,765,273 |
Net asset value per share | |
Based on 21,469,409 shares of beneficial interest outstanding - unlimited number of shares authorized with no par value | $17.13 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 13 |
Investment income | |
Dividends | $11,739,030 |
Interest | 7,146,561 |
Dividends from affiliated investments | 180,471 |
Less foreign taxes withheld | (43,067) |
Total investment income | 19,022,995 |
Expenses | |
Investment management fees | 2,115,279 |
Interest expense | 4,512,639 |
Accounting and legal services fees | 33,784 |
Transfer agent fees | 11,994 |
Trustees’ fees | 32,056 |
Custodian fees | 28,703 |
Printing and postage | 26,724 |
Professional fees | 58,545 |
Stock exchange listing fees | 12,110 |
Other | 11,152 |
Total expenses | 6,842,986 |
Less expense reductions | (22,281) |
Net expenses | 6,820,705 |
Net investment income | 12,202,290 |
Realized and unrealized gain (loss) | |
Net realized gain (loss) on | |
Unaffiliated investments | 2,389,237 |
Affiliated investments | 2,846 |
Futures contracts | 2,207,454 |
Swap contracts | (216,779) |
4,382,758 | |
Change in net unrealized appreciation (depreciation) of | |
Unaffiliated investments | (16,269,564) |
Affiliated investments | 1,675 |
Futures contracts | 521,132 |
Swap contracts | 204,655 |
(15,542,102) | |
Net realized and unrealized loss | (11,159,344) |
Increase in net assets from operations | $1,042,946 |
14 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Six months ended 1-31-23 (unaudited) | Year ended 7-31-22 | |
Increase (decrease) in net assets | ||
From operations | ||
Net investment income | $12,202,290 | $28,859,902 |
Net realized gain | 4,382,758 | 7,179,657 |
Change in net unrealized appreciation (depreciation) | (15,542,102) | (62,722,176) |
Increase (decrease) in net assets resulting from operations | 1,042,946 | (26,682,617) |
Distributions to shareholders | ||
From earnings | (15,895,584)1 | (28,924,437) |
From tax return of capital | — | (2,814,322) |
Total distributions | (15,895,584) | (31,738,759) |
Fund share transactions | ||
Issued pursuant to Dividend Reinvestment Plan | 513,009 | 805,915 |
Total decrease | (14,339,629) | (57,615,461) |
Net assets | ||
Beginning of period | 382,104,902 | 439,720,363 |
End of period | $367,765,273 | $382,104,902 |
Share activity | ||
Shares outstanding | ||
Beginning of period | 21,437,953 | 21,396,527 |
Issued pursuant to Dividend Reinvestment Plan | 31,456 | 41,426 |
End of period | 21,469,409 | 21,437,953 |
1 | A portion of the distributions may be deemed a tax return of capital at the fiscal year end. |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 15 |
Cash flows from operating activities | |
Net increase in net assets from operations | $1,042,946 |
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: | |
Long-term investments purchased | (83,409,214) |
Long-term investments sold | 92,055,464 |
Net purchases and sales of short-term investments | (8,085,068) |
Net amortization of premium (discount) | 322,715 |
(Increase) Decrease in assets: | |
Receivable for centrally cleared swaps | 10,685 |
Collateral held at broker for futures contracts | 890,000 |
Dividends and interest receivable | (204,954) |
Receivable for investments sold | 1,583,806 |
Other assets | 14,259 |
Increase (Decrease) in liabilities: | |
Payable for futures variation margin | (70,306) |
Payable for investments purchased | (3,113,395) |
Interest payable | 405,843 |
Payable to affiliates | 6,224 |
Other liabilities and accrued expenses | (37,604) |
Net change in unrealized (appreciation) depreciation on: | |
Investments | 16,267,889 |
Net realized (gain) loss on: | |
Investments | (2,392,083) |
Net cash provided by operating activities | $15,287,207 |
Cash flows provided by (used in) financing activities | |
Distributions to shareholders | $(15,382,575) |
Net cash used in financing activities | $(15,382,575) |
Net decrease in cash | $(95,368) |
Cash at beginning of period | $195,356 |
Cash at end of period | $99,988 |
Supplemental disclosure of cash flow information: | |
Cash paid for interest | $(4,106,796) |
Noncash financing activities not included herein consists of reinvestment of distributions | $513,009 |
16 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS |
Period ended | 1-31-231 | 7-31-22 | 7-31-21 | 7-31-20 | 7-31-19 | 7-31-18 |
Per share operating performance | ||||||
Net asset value, beginning of period | $17.82 | $20.55 | $18.12 | $21.09 | $21.13 | $21.89 |
Net investment income2 | 0.57 | 1.35 | 1.39 | 1.40 | 1.34 | 1.50 |
Net realized and unrealized gain (loss) on investments | (0.52) | (2.60) | 2.52 | (2.85) | 0.30 | (0.58) |
Total from investment operations | 0.05 | (1.25) | 3.91 | (1.45) | 1.64 | 0.92 |
Less distributions | ||||||
From net investment income | (0.74)3 | (1.35) | (1.35) | (1.41) | (1.40) | (1.68) |
From tax return of capital | — | (0.13) | (0.13) | (0.11) | (0.28) | — |
Total distributions | (0.74) | (1.48) | (1.48) | (1.52) | (1.68) | (1.68) |
Net asset value, end of period | $17.13 | $17.82 | $20.55 | $18.12 | $21.09 | $21.13 |
Per share market value, end of period | $17.35 | $18.80 | $22.00 | $18.46 | $23.67 | $21.27 |
Total return at net asset value (%)4,5 | 0.526 | (6.31) | 22.52 | (7.07) | 8.26 | 4.63 |
Total return at market value (%)4 | (3.44)6 | (7.72) | 28.74 | (15.65) | 20.70 | 2.97 |
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $368 | $382 | $440 | $387 | $450 | $450 |
Ratios (as a percentage of average net assets): | ||||||
Expenses before reductions | 3.857 | 1.84 | 1.63 | 2.36 | 2.98 | 2.52 |
Expenses including reductions8 | 3.847 | 1.82 | 1.62 | 2.35 | 2.97 | 2.50 |
Net investment income | 6.867 | 7.05 | 7.18 | 7.20 | 6.60 | 7.13 |
Portfolio turnover (%) | 15 | 22 | 30 | 34 | 35 | 24 |
Senior securities | ||||||
Total debt outstanding end of period (in millions) | $207 | $207 | $204 | $193 | $238 | $238 |
Asset coverage per $1,000 of debt9 | $2,779 | $2,849 | $3,155 | $3,006 | $2,890 | $2,889 |
1 | Six months ended 1-31-23. Unaudited. |
2 | Based on average daily shares outstanding. |
3 | A portion of the distributions may be deemed a tax return of capital at the fiscal year end. |
4 | 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. |
5 | Total returns would have been lower had certain expenses not been reduced during the applicable periods. |
6 | Not annualized. |
7 | Annualized. |
8 | Expenses including reductions excluding interest expense were 1.30% (annualized), 1.20%, 1.22%, 1.25%, 1.26% and 1.25% for the periods ended 1-31-23, 7-31-22, 7-31-21, 7-31-20, 7-31-19 and 7-31-18, respectively. |
9 | 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. |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 17 |
18 | JOHN HANCOCK Preferred Income Fund II | SEMIANNUAL REPORT |
Total value at 1-31-23 | Level 1 quoted price | Level 2 significant observable inputs | Level 3 significant unobservable inputs | |
Investments in securities: | ||||
Assets | ||||
Preferred securities | ||||
Communication services | $22,547,310 | $22,547,310 | — | — |
Consumer discretionary | 3,840,600 | 3,840,600 | — | — |
Energy | 9,014,700 | 9,014,700 | — | — |
Financials | 167,644,386 | 163,769,036 | $3,875,350 | — |
Health care | 5,489,240 | 5,489,240 | — | — |
Industrials | 3,740,680 | 3,740,680 | — | — |
Real estate | 14,255,007 | 14,255,007 | — | — |
Utilities | 87,650,140 | 79,191,458 | 8,458,682 | — |
Common stocks | 10,219,233 | 10,219,233 | — | — |
Corporate bonds | 225,969,227 | — | 225,969,227 | — |
Capital preferred securities | 9,619,123 | — | 9,619,123 | — |
Short-term investments | 13,716,589 | 13,716,589 | — | — |
Total investments in securities | $573,706,235 | $325,783,853 | $247,922,382 | — |
SEMIANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II | 19 |
20 | JOHN HANCOCK Preferred Income Fund II | SEMIANNUAL REPORT |
SEMIANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II | 21 |
Statement of operations location - Net realized gain (loss) on: | |||
Risk | Futures contracts | Swap contracts | Total |
Interest rate | $2,207,454 | $(216,779) | $1,990,675 |
Statement of operations location - Change in net unrealized appreciation (depreciation) of: | |||
Risk | Futures contracts | Swap contracts | Total |
Interest rate | $521,132 | $204,655 | $725,787 |
22 | JOHN HANCOCK Preferred Income Fund II | SEMIANNUAL REPORT |
• | 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. |
SEMIANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II | 23 |
24 | JOHN HANCOCK Preferred Income Fund II | SEMIANNUAL REPORT |
SEMIANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II | 25 |
Dividends and distributions | |||||||||
Affiliate | Ending share amount | Beginning value | Cost of purchases | Proceeds from shares sold | Realized gain (loss) | Change in unrealized appreciation (depreciation) | Income distributions received | Capital gain distributions received | Ending value |
John Hancock Collateral Trust | 1,371,961 | — | $89,913,840 | $(76,201,772) | $2,846 | $1,675 | $180,471 | — | $13,716,589 |
26 | JOHN HANCOCK Preferred Income Fund II | SEMIANNUAL REPORT |
• | by anticipating the broader, more gradual changes in the business cycle, and then investing in those industries and sectors that are expected to benefit from the changes |
• | by looking within those industries and sectors for issuers and companies that are undervalued and mispriced relative to the market |
SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 27 |
28 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT |
SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 29 |
30 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT |
Payment Date | Income Distributions1 |
August 31, 2022 | $0.1235 |
September 30, 2022 | 0.1235 |
October 31, 2022 | 0.1235 |
November 30, 2022 | 0.1235 |
December 30, 2022 | 0.1235 |
January 31, 2023 | 0.1235 |
Total | $0.7410 |
1A portion of the distributions may be deemed a tax return of capital at the fiscal year end. |
Computershare
P.O. Box 43006
Providence, RI 02940-3078
Computershare
150 Royall Street, Suite 101
Canton, MA 02021
SEMIANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II | 31 |
Steven R. Pruchansky, Vice Chairperson
Andrew G. Arnott†
James R. Boyle
William H. Cunningham*
Grace K. Fey
Noni L. Ellison^
Dean C. Garfield^
Marianne Harrison†
Deborah C. Jackson
Patricia Lizarraga*,^
Paul Lorentz‡
Frances G. Rathke*
Gregory A. Russo
President
Chief Financial Officer
Treasurer
Secretary and Chief Legal Officer
Chief Compliance Officer
James Gearhart, CFA
Jonas Grazulis, CFA
Caryn E. Rothman, CFA
You can also contact us: | ||
800-852-0218 | Regular mail: | Express mail: |
jhinvestments.com | Computershare P.O. Box 43006 Providence, RI 02940-3078 | Computershare 150 Royall St., Suite 101 Canton, MA 02021 |
32 | JOHN HANCOCK PREFERRED INCOME FUND II | SEMIANNUAL REPORT |
GOVERNANCE FUNDS
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.
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.
a diverse set of investments backed by some of the world’s best
managers, along with strong risk-adjusted returns across asset classes.
MF2730352 | P11SA 1/23 |
ITEM 2. CODE OF ETHICS.
Not applicable
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
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.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
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, Governance and Administration 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) Not applicable.
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 II
By: | /s/ Andrew G. Arnott |
| ------------------------------ |
| Andrew G. Arnott |
| President |
Date: | March 29, 2023 |
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: | March 29, 2023 |
By: | /s/ Charles A. Rizzo |
| -------------------------------- |
| Charles A. Rizzo |
| Chief Financial Officer |
Date: | March 29, 2023 |