| 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 Schaivone | |
| 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, 2013 |
ITEM 1. SCHEDULE OF INVESTMENTS
Premium Dividend Fund
As of 7-31-13 (Unaudited)
| Shares | Value | |
| Preferred Securities 98.8% (65.2% of Total Investments) | $721,197,673 | |
|
| ||
| (Cost $719,502,386) | ||
| Consumer Staples 2.8% | 20,231,565 | |
|
| ||
| Food & Staples Retailing 2.8% | ||
| Ocean Spray Cranberries, Inc., Series A, 6.250% (S) | 224,250 | 20,231,565 |
| Energy 0.8% | 6,238,050 | |
|
| ||
| Oil, Gas & Consumable Fuels 0.8% | ||
| Apache Corp., Series D, 6.000% (Z) | 136,500 | 6,238,050 |
| Financials 55.8% | 407,185,412 | |
|
| ||
| Capital Markets 8.6% | ||
| State Street Corp., 5.250% (Z) | 1,045,000 | 24,891,900 |
| The Bank of New York Mellon Corp., 5.200% (Z) | 480,000 | 10,704,000 |
| The Goldman Sachs Group, Inc., 5.950% (Z) | 721,000 | 17,448,200 |
| The Goldman Sachs Group, Inc., Series B, 6.200% (Z) | 386,630 | 9,658,017 |
| Commercial Banks 17.4% | ||
| Barclays Bank PLC, Series 3, 7.100% (Z) | 192,500 | 4,851,000 |
| Barclays Bank PLC, Series 5, 8.125% (Z) | 310,000 | 7,886,400 |
| BB&T Corp., (Callable 11-1-17), 5.200% | 105,000 | 2,363,550 |
| BB&T Corp., (Callable 6-1-18), 5.200% (Z) | 255,000 | 5,811,450 |
| BB&T Corp., 5.625% | 762,610 | 17,875,578 |
| PNC Financial Services Group, Inc., 5.375% | 175,000 | 4,137,000 |
| PNC Financial Services Group, Inc. (6.125% to 5-1-22, then 3 | ||
| month LIBOR + 4.067%) (Z) | 311,600 | 8,179,500 |
| Santander Finance Preferred SA Unipersonal, Series 10, 10.500% | ||
| (Z) | 259,600 | 6,918,340 |
| Santander Holdings USA, Inc., Series C, 7.300% | 500,000 | 12,610,000 |
| U.S. Bancorp, 5.150% (Z) | 640,000 | 14,777,600 |
| U.S. Bancorp (6.000% to 4-15-17, then 3 month LIBOR + 4.861%) | 160,000 | 4,264,000 |
| U.S. Bancorp (6.500% to 1-15-22, then 3 month LIBOR + 4.468%) | 324,500 | 8,742,030 |
| Wells Fargo & Company, 8.000% (Z) | 1,017,000 | 28,872,630 |
| Consumer Finance 6.6% | ||
| HSBC Finance Corp., Depositary Shares, Series B, 6.360% | 444,200 | 11,042,812 |
| HSBC USA, Inc., 2.858% | 308,400 | 15,176,364 |
| SLM Corp., Series A, 6.970% (Z) | 445,500 | 21,718,125 |
| Diversified Financial Services 17.1% | ||
| Bank of America Corp., 6.375% (Z) | 1,150,000 | 28,750,000 |
| Bank of America Corp., 6.625% (Z) | 360,000 | 9,424,800 |
| Bank of America Corp., Depositary Shares, Series D, 6.204% | 931,647 | 23,198,010 |
| Citigroup, Inc., 8.125% | 338,830 | 10,059,863 |
| Deutsche Bank Capital Funding Trust VIII, 6.375% | 82,500 | 2,051,775 |
| Deutsche Bank Contingent Capital Trust II, 6.550% (Z) | 287,000 | 7,232,400 |
| Deutsche Bank Contingent Capital Trust III, 7.600% (Z) | 662,000 | 17,648,920 |
| JPMorgan Chase & Company, 5.450% (Z) | 315,000 | 7,232,400 |
| JPMorgan Chase & Company, 5.500% | 830,000 | 19,114,900 |
| Insurance 4.7% | ||
| MetLife, Inc., Series B, 6.500% | 1,104,547 | 27,823,539 |
| 1 |
Premium Dividend Fund
As of 7-31-13 (Unaudited)
| Shares | Value | |
| Financials (continued) | ||
|
| ||
| Principal Financial Group, Inc., Series B (6.518% to 6-30-35, then | ||
| higher of 10 year Constant Maturity Treasury (CMT), or 30 year | ||
| CMT or 3 month LIBOR + 2.100%) | 55,000 | $1,397,000 |
| Prudential PLC, 6.750% (Z) | 180,103 | 4,448,544 |
| W.R. Berkley Corp., 5.625% | 40,000 | 851,200 |
| Real Estate Investment Trusts 1.4% | ||
| Senior Housing Properties Trust, 5.625% (Z) | 300,000 | 6,537,000 |
| Ventas Realty LP, 5.450% | 50,000 | 1,110,940 |
| Wachovia Preferred Funding Corp., Series A, 7.250% | 90,500 | 2,375,625 |
| Industrials 0.2% | 1,214,000 | |
|
| ||
| Machinery 0.2% | ||
| Stanley Black & Decker, Inc., 5.750% | 50,000 | 1,214,000 |
| Telecommunication Services 6.1% | 44,287,050 | |
|
| ||
| Diversified Telecommunication Services 3.9% | ||
| Qwest Corp., 6.125% | 97,500 | 2,197,650 |
| Qwest Corp., 7.375% (Z) | 1,021,000 | 25,882,350 |
| Wireless Telecommunication Services 2.2% | ||
| Telephone & Data Systems, Inc., 6.625% (Z) | 285,000 | 7,139,250 |
| Telephone & Data Systems, Inc., 6.875% (Z) | 170,000 | 4,350,300 |
| United States Cellular Corp., 6.950% (Z) | 185,000 | 4,717,500 |
| Utilities 33.1% | 242,041,596 | |
|
| ||
| Electric Utilities 30.0% | ||
| Alabama Power Company, 5.200% (Z) | 1,180,000 | 29,500,000 |
| Baltimore Gas & Electric Company, Series 1993, 6.700% | 20,250 | 2,053,478 |
| Baltimore Gas & Electric Company, Series 1995, 6.990% | 134,000 | 13,630,319 |
| Duke Energy Corp., 5.125% (Z) | 150,000 | 3,460,500 |
| Duquesne Light Company, 6.500% | 519,900 | 26,566,890 |
| Entergy Arkansas, Inc., 6.450% | 350,000 | 8,815,625 |
| Entergy Mississippi, Inc., 6.250% | 667,000 | 16,737,565 |
| Gulf Power Co, 5.600% | 50,000 | 4,926,170 |
| HECO Capital Trust III, 6.500% | 181,000 | 4,778,400 |
| Interstate Power & Light Company, 5.100% (Z) | 1,208,000 | 27,796,080 |
| NextEra Energy Capital Holdings, Inc., 5.125% (Z) | 216,000 | 4,644,000 |
| NextEra Energy Capital Holdings, Inc., 5.700% (Z) | 180,000 | 4,222,800 |
| NSTAR Electric Company, 4.250% | 13,347 | 1,244,608 |
| NSTAR Electric Company, 4.780% | 100,000 | 9,950,000 |
| PPL Capital Funding, Inc., 5.900% (Z) | 1,160,000 | 26,668,400 |
| SCE Trust I, 5.625% | 45,000 | 1,025,550 |
| SCE Trust II, 5.100% (Z) | 1,295,000 | 27,492,850 |
| Union Electric Company, 3.700% | 12,262 | 915,851 |
| Virginia Electric & Power Company, 6.980% | 45,500 | 4,605,510 |
| Multi-Utilities 3.1% | ||
| BGE Capital Trust II, 6.200% | 616,000 | 15,486,240 |
| DTE Energy Company, 5.250% (Z) | 183,000 | 4,271,220 |
| DTE Energy Company, 6.500% | 126,000 | 3,249,540 |
| 2 |
Premium Dividend Fund
As of 7-31-13 (Unaudited)
| Shares | Value | |
| Common Stocks 52.1% (34.4% of Total Investments) | $380,364,135 | |
|
| ||
| (Cost $290,905,051) | ||
| Energy 7.6% | 55,911,600 | |
|
| ||
| Oil, Gas & Consumable Fuels 7.6% | ||
| BP PLC, ADR (Z) | 100,000 | 4,144,000 |
| Chevron Corp. (Z) | 70,000 | 8,812,300 |
| ConocoPhillips | 155,000 | 10,053,300 |
| Royal Dutch Shell PLC, ADR | 100,000 | 6,835,000 |
| Spectra Energy Corp. (Z) | 400,000 | 14,396,000 |
| Total SA, ADR (Z) | 220,000 | 11,671,000 |
| Materials 0.4% | 2,828,000 | |
|
| ||
| Metals & Mining 0.4% | ||
| Freeport-McMoRan Copper & Gold, Inc. (Z) | 100,000 | 2,828,000 |
| Telecommunication Services 4.4% | 31,955,050 | |
|
| ||
| Diversified Telecommunication Services 4.4% | ||
| AT&T, Inc. (Z) | 415,000 | 14,637,050 |
| Verizon Communications, Inc. (Z) | 350,000 | 17,318,000 |
| Utilities 39.7% | 289,669,485 | |
|
| ||
| Electric Utilities 19.5% | ||
| American Electric Power Company, Inc. (Z) | 200,000 | 9,270,000 |
| Duke Energy Corp. (Z) | 275,000 | 19,525,000 |
| Entergy Corp. | 222,000 | 14,985,000 |
| FirstEnergy Corp. (Z) | 620,000 | 23,603,400 |
| Northeast Utilities (Z) | 550,000 | 24,425,500 |
| OGE Energy Corp. | 460,000 | 17,204,000 |
| The Southern Company | 95,000 | 4,259,800 |
| UIL Holdings Corp. (Z) | 280,000 | 11,435,200 |
| Xcel Energy, Inc. (Z) | 590,000 | 17,670,500 |
| Gas Utilities 1.5% | ||
| AGL Resources, Inc. (Z) | 110,550 | 5,062,085 |
| Atmos Energy Corp. (Z) | 100,000 | 4,424,000 |
| ONEOK, Inc. | 24,000 | 1,270,800 |
| Multi-Utilities 18.7% | ||
| Alliant Energy Corp. (Z) | 400,000 | 21,188,000 |
| Black Hills Corp. (Z) | 200,000 | 10,610,000 |
| Dominion Resources, Inc. (Z) | 195,000 | 11,565,450 |
| DTE Energy Company (Z) | 335,000 | 23,684,500 |
| Integrys Energy Group, Inc. (Z) | 235,000 | 14,758,000 |
| National Grid PLC, ADR | 210,000 | 12,513,900 |
| NiSource, Inc. | 445,000 | 13,670,400 |
| Public Service Enterprise Group, Inc. | 120,000 | 4,054,800 |
| TECO Energy, Inc. | 925,000 | 16,344,750 |
| Vectren Corp. (Z) | 220,000 | 8,144,400 |
| 3 |
Premium Dividend Fund
As of 7-31-13 (Unaudited)
| Par value | Value | |
| Short-Term Investments 0.6% (0.4% of Total Investments) | $4,839,000 | |
|
| ||
| (Cost $4,839,000) | ||
| Repurchase Agreement 0.6% | 4,839,000 | |
|
| ||
| Repurchase Agreement with State Street Corp. dated 7-31-13 at | ||
| 0.010% to be repurchased at $4,839,001 on 8-1-13, collateralized | ||
| by $4,950,000 U.S. Treasury Note, 0.875% due 4-30-17 (valued at | ||
| $4,939,174, including interest) | 4,839,000 | 4,839,000 |
| Total investments (Cost $1,015,246,437)† 151.5% | $1,106,400,808 | |
|
| ||
| Other assets and liabilities, net (51.5%) | ($376,256,046) | |
|
| ||
| Total net assets 100.0% | $730,144,762 | |
|
| ||
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the Fund.
ADR American Depositary Receipts
LIBOR London Interbank Offered Rate
(I) Non-income producing security.
(S) This security is exempt from registration under Rule 144A of the Securities Act of 1933. The security may be resold, normally to qualified institutional buyers, in transactions exempt from registration.
(Z) All or a portion of this security is segregated as collateral pursuant to the Committed Facility Agreement. Total collateral value at 7-31-13 was $553,555,464.
† At 7-31-13, the aggregate cost of investment securities for federal income tax purposes was $1,017,464,892. Net unrealized appreciation aggregated $88,935,916, of which $120,745,994 related to appreciated investment securities and $31,810,078 related to depreciated investment securities.
| 4 |
Premium Dividend Fund
As of 7-31-13 (Unaudited)
Notes to the Portfolio of Investments
Security valuation. Investments are stated at value as of the close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In order to value the securities, the fund uses the following valuation techniques: Equity securities held by the fund are valued at the last sale price or official closing price on the principal securities exchange on which they trade. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last quoted bid or evaluated price. Swaps are marked-to-market daily based upon values from third party vendors, which may include a registered commodities exchange, or broker quoations. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rates supplied by an independent pricing service. Certain securities traded only in the over-the-counter (OTC) market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading. Certain short-term securities are valued at amortized cost. Other portfolio securities and assets, where reliable market quotations are not 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, which include price verification procedures. 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 may result in transfers into or out of an assigned level within the disclosure hierarchy. Securities with a market value of approximately $12,312,000 at the beginning of the year were transferred from Level 2 to Level 1 during the period since quoted prices in active markets for identical securities became available.
The following is a summary of the values by input classification of the fund’s investments as of July 31, 2013, by major security category or type:
| Level 2 | Level 3 | |||||||
| Total Market | Significant | Significant | ||||||
| Value at | Level 1 Quoted | Observable | Unobservable | |||||
| 07/31/13 | Price | Inputs | Inputs | |||||
| Preferred Securities | ||||||||
| Consumer Staples | $20,231,565 | — | $20,231,565 | — | ||||
| Energy | 6,238,050 | $6,238,050 | — | — | ||||
| Financials | 407,185,412 | 391,296,872 | 15,888,540 | — | ||||
| Industrials | 1,214,000 | 1,214,000 | — | — | ||||
| Telecommunication Services | 44,287,050 | 44,287,050 | — | — | ||||
| Utilities | 242,041,596 | 185,012,588 | 57,029,008 | — | ||||
| Common Stocks | ||||||||
| Energy | 55,911,600 | 55,911,600 | — | — | ||||
| Materials | 2,828,000 | 2,828,000 | — | — | ||||
| Telecommunication Services | 31,955,050 | 31,955,050 | — | — | ||||
| Utilities | 289,669,485 | 289,669,485 | — | — | ||||
| Short-Term Investments | ||||||||
| Repurchase Agreement | 4,839,000 | — | 4,839,000 | — | ||||
|
| ||||||||
| Total Investments in Securities | $1,106,400,808 | $1,008,412,695 | $97,988,113 | — | ||||
| Other Financial Instruments: | ||||||||
| Interest Rate Swaps | ($1,366,330) | — | ($1,366,330) | — | ||||
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.
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
| 5 |
Premium Dividend Fund
As of 7-31-13 (Unaudited)
out all transactions traded under the MRA and net amounts owed. Absent an event of default, the MRA does not result in an offset of the net amounts owed. 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. Collateral received by the portfolio for repurchase agreements is disclosed in the Portfolio of investments as part of the caption related to the repurchase agreement.
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 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.
Interest rate swaps. Interest rate swaps represent an agreement between the fund and a counterparty to exchange cash flows based on the difference between two interest rates applied to a notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. The fund settles accrued net interest receivable or payable under the swap contracts at specified, future intervals.
During the period ended July 31, 2013 the fund used interest rate swaps in anticipation of rising interest rates. The following table summarizes the interest rate swap contracts held as of July 31, 2013.
| Payments | |||||
| USD Notional | Payments Made | Received by | Maturity | ||
| Counterparty | Amount | by Fund | Fund | Date | Market Value |
|
| |||||
| Morgan Stanley Capital | |||||
| Services | $82,000,000 | Fixed 1.4625% | 3 Month LIBOR (a) | Aug 2016 | ($2,196,120) |
| Morgan Stanley Capital | |||||
| Services | 82,000,000 | Fixed 0.8750% | 3 Month LIBOR (a) | Jul 2017 | $829,790 |
| Total | $164,000,000 | ($1,366,330) | |||
(a) At 7-31-13, the 3-month LIBOR rate was 0.26560%
For additional information on the funds significant accounting policies, please refer to the most recent semiannual or annual shareholder report.
| 6 |
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/ Hugh McHaffie |
| ------------------------------ | |
| Hugh McHaffie | |
| President | |
| Date: | September 19, 2013 |
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/ Hugh McHaffie |
| ------------------------------- | |
| Hugh McHaffie | |
| President | |
| Date: | September 19, 2013 |
| By: | /s/ Charles A. Rizzo |
| ------------------------------- | |
| Charles A. Rizzo | |
| Chief Financial Officer | |
| Date: | September 19, 2013 |