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: |
July 31, 2023 |
ITEM 1. REPORTS TO STOCKHOLDERS.
Annual report
John Hancock
Preferred Income Fund II
Closed-end fixed income
Ticker: HPF
July 31, 2023
A message to shareholders
Dear shareholder,
Bonds posted mixed results for
the 12 months ended July 31, 2023, as inflation remained a key factor. Rates remained high, but showed signs of cooling by period end, allowing the U.S. Federal Reserve and other central banks to slow their pace of
monetary tightening and fostering hopes that they could be tapering the pace of the current rate-hiking cycle. Other factors affecting bond market performance included a liquidity crisis in the regional banking
sector and government wrangling about the federal debt ceiling.
U.S. bond yields moved broadly
higher, with short- and intermediate-term bond yields rising the most. On a sector basis, U.S. Treasury securities and residential mortgage-backed securities declined the most, while high-yield corporate bonds posted
positive returns, reflecting signs of improving economic growth late in the period.
In these uncertain times, your
financial professional can assist with positioning your portfolio so that it’s sufficiently diversified to help meet your long-term objectives and to withstand the inevitable bouts of market volatility along the
way.
On behalf of everyone at John
Hancock Investment Management, I’d like to take this opportunity to welcome new shareholders and thank existing shareholders for the continued trust you’ve placed in us.
Sincerely,
Kristie M. Feinberg
Head of Wealth and Asset
Management,
United States and Europe
Manulife Investment Management
President and CEO,
John Hancock Investment Management
This commentary reflects the CEO’s views as
of this report’s period end and are subject to change at any time. Diversification does not guarantee investment returns and does not eliminate risk of loss. All investments entail risks, including the possible
loss of principal. For more up-to-date information, you can visit our website at jhinvestments.com.
John Hancock
Preferred Income Fund II
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 1
|
INVESTMENT OBJECTIVE
The fund seeks to provide a high
level of current income consistent with preservation of capital. The fund’s secondary investment objective is to provide growth of capital to the extent consistent with its primary objective.
AVERAGE ANNUAL TOTAL RETURNS AS OF
7/31/2023 (%)
The Intercontinental Exchange
(ICE) Bank of America (BofA) U.S. All Capital Securities Index tracks all fixed-to floating-rate, perpetual callable and capital securities of the ICE BofA U.S. Corporate Index.
It is not possible to invest
directly in an index. Index figures do not reflect expenses, which would result in lower returns.
The performance data contained
within this material represents past performance, which does not guarantee future results.
Investment returns and principal
value will fluctuate and a shareholder may sustain losses. Further, the fund’s performance at net asset value (NAV) is different from the fund’s performance at closing market price because the closing
market price is subject to the dynamics of secondary market trading. Market risk may increase when shares are purchased at a premium to NAV or sold at a discount to NAV. Current month-end performance may be higher or
lower than the performance cited. The fund’s most recent performance can be found at jhinvestments.com or by calling 800-852-0218.
| 2
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
PERFORMANCE HIGHLIGHTS OVER THE
LAST TWELVE MONTHS
Preferred
securities declined
Like most
interest-rate-sensitive investments, preferreds declined as investor demand for them faltered in response to rising interest rates.
The fund posted a
loss for the period
The fund produced
a negative return and underperformed a comparative index, the ICE BofA U.S. All Capital Securities Index.
Holding positions
in failed banks hurt fund performance
Owning shares in
banking firms that failed or came close to failing affected returns.
PORTFOLIO COMPOSITION AS OF
7/31/2023 (% of total investments)
QUALITY COMPOSITION AS OF
7/31/2023 (% of total investments)
Ratings are from Moody’s
Investors Service, Inc. If not available, we have used S&P Global Ratings. In the absence of ratings from these agencies, we have used Fitch Ratings, Inc. “Not rated” securities are those with no
ratings available from these agencies. All ratings are as of 7-31-23 and do not reflect subsequent downgrades or upgrades, if any.
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 3
|
SECTOR COMPOSITION AS OF 7/31/2023
(% of total investments)
| 4
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
Management’s discussion of fund
performance
How would you describe the
investment backdrop during the 12 months ended July 31, 2023, and how did the fund perform?
Preferred securities, like most
interest-rate-sensitive investments, notably declined throughout much of the period as investor demand for them faltered in response to rising interest rates and the failure of a few U.S. regional banks. That said,
preferreds regained some ground late in the period when investors began to anticipate the slowing of rate hikes and, contrary to earlier fears, a national banking crisis failed to materialize. Against this backdrop,
the fund produced a negative return and underperformed a comparative index.
What detracted and contributed from
relative performance?
Owning Silicon Valley Bank, which
failed in March 2023, and PacWest Bancorp, which came close to failing during the period, detracted. We sold the fund’s holdings in Silicon Valley Bank and PacWest Bancorp prior to period end. Additionally,
security selection in communications companies, led by holdings in Lumen Technologies, Inc. and U.S. Cellular Corp., detracted as well. We sold the fund’s holdings in Lumen Technologies prior to period end. The
communications sector lagged the comparative index amid concern about the increasingly intense competition among providers of cellular, cable, internet, and other communications services.
| TOP 10 ISSUERS AS OF 7/31/2023 (% of total investments)
|
| Bank of America Corp.
| 5.1
|
| Algonquin Power & Utilities Corp.
| 4.7
|
| Citigroup, Inc.
| 3.8
|
| Wells Fargo & Company
| 3.7
|
| The PNC Financial Services Group, Inc.
| 3.6
|
| Morgan Stanley
| 3.6
|
| NiSource, Inc.
| 3.3
|
| Energy Transfer LP
| 3.1
|
| NextEra Energy, Inc.
| 3.0
|
| Edison International
| 2.8
|
| TOTAL
| 36.7
|
| Cash and cash equivalents are not included.
|
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 5
|
The fund’s use of derivatives
contracts added the most value versus the comparative index. Early on, investments in interest-rate hedges on short U.S. Treasury futures boosted performance as rates rose. Later, owning interest-rate swaps was a
performance tailwind since these derivatives helped reduce the cost of leverage. From a sector perspective, an underweight allocation to bank securities, which posted some of the weakest returns the past year, added
value.
Security selection and an
overweight in the energy sector were also beneficial, particularly an exposure to high-quality midstream energy companies such as Energy Transfer LP, which outpaced the index. Elsewhere within the energy sector, an
out-of-index position in exploration and production company BP PLC was another of the fund’s positive performers, driven largely by rising oil prices. We sold the fund’s holdings in BP PLC prior to period
end. An overweight allocation to the utilities sector also added value. Key contributors in this category included an out-of-index position in The AES Corp., Edison International, and Integrys Holding, Inc.
Can you tell us about a change to
the portfolio management team?
Effective December 31, 2022,
Bradley L. Lutz left the management team.
The views expressed in
this report are exclusively those of the portfolio management team at Manulife Investment Management (US) LLC, and are subject to change. They are not meant as investment advice. Please note that the holdings
discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current
and future portfolio holdings are subject to risk.
| 6
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
TOTAL RETURNS FOR THE PERIOD
ENDED JULY 31, 2023
| Average annual total returns (%)
| Cumulative total returns (%)
|
|
| 1-Year
| 5-Year
| 10-Year
| 5-year
| 10-Year
|
| At Net asset value
| -6.66
| 1.52
| 5.31
| 7.81
| 67.70
|
| At Market price
| -7.39
| 2.30
| 5.98
| 12.02
| 78.76
|
| ICE BofA U.S. All Capital Securities Index
| -1.85
| 2.38
| 4.39
| 12.46
| 53.64
|
| Blended Index
| -2.17
| 1.97
| 3.73
| 10.23
| 44.19
|
Performance figures assume all
distributions have been reinvested.
The returns reflect past results
and should not be considered indicative of future performance. Investment returns and principal value will fluctuate and a shareholder may sustain losses. Further, the fund’s performance at net asset value (NAV)
is different from the fund’s performance at closing market price because the closing market price is subject to the dynamics of secondary market trading. Market risk may be augmented when shares are purchased at
a premium to NAV or when shares need to be sold at a discount to NAV. Current month-end performance may be higher or lower than the performance cited. The fund’s most recent performance can be found at
jhinvestments.com or by calling 800-852-0218.
The performance table above and
the chart on the next page do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares. The fund’s performance results reflect any applicable fee waivers
or expense reductions, without which the expenses would increase and results would have been less favorable.
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 7
|
This chart shows what happened to a
hypothetical $10,000 investment in John Hancock Preferred Income Fund II for the periods indicated, assuming all distributions were reinvested. For comparison, we’ve shown the same investment in a blended index
and a separate index.
The Intercontinental Exchange
(ICE) Bank of America (BofA) U.S. All Capital Securities Index tracks all fixed-to floating-rate, perpetual callable and capital securities of the ICE BofA U.S. Corporate Index.
The Blended Index comprises 65%
ICE BofA U.S. All Capital Securities Index and 35% Bloomberg Investment Grade Utilities Index.
It is not possible to invest
directly in an index. Index figures do not reflect expenses, which would result in lower returns.
The returns reflect past results
and should not be considered indicative of future performance.
| 8
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
AS OF
7-31-23
|
|
|
|
| Shares
| Value
|
| Preferred securities (A) 89.1% (55.2% of Total investments)
|
|
| $290,785,467
|
| (Cost $333,903,512)
|
|
|
|
|
|
| Communication services 5.3%
|
|
|
| 17,443,757
|
| Diversified telecommunication services 1.0%
|
|
|
|
|
| Qwest Corp., 6.750%
|
|
|
| 220,000
| 3,247,200
|
| Media 0.3%
|
|
|
|
|
| Paramount Global, 5.750%
|
|
|
| 50,000
| 1,142,500
|
| Wireless telecommunication services 4.0%
|
|
|
|
|
| Telephone & Data Systems, Inc., 6.000%
|
|
|
| 222,100
| 3,091,632
|
| Telephone & Data Systems, Inc., 6.625%
|
|
|
| 211,250
| 3,257,475
|
| U.S. Cellular Corp., 5.500%
|
|
|
| 105,000
| 1,515,150
|
| U.S. Cellular Corp., 5.500%
|
|
|
| 110,000
| 1,584,000
|
| U.S. Cellular Corp., 6.250%
|
|
|
| 220,000
| 3,605,800
|
| Consumer discretionary 0.9%
|
|
|
| 2,910,550
|
| Broadline retail 0.9%
|
|
|
|
|
| Qurate Retail, Inc., 8.000%
|
|
|
| 73,500
| 2,631,300
|
| QVC, Inc., 6.250%
|
|
|
| 25,000
| 279,250
|
| Energy 1.2%
|
|
|
| 3,940,500
|
| Oil, gas and consumable fuels 1.2%
|
|
|
|
|
| NuStar Logistics LP, 12.304% (3 month CME Term SOFR + 6.996%) (B)(C)
|
|
|
| 150,000
| 3,940,500
|
| Financials 48.5%
|
|
|
| 158,096,443
|
| Banks 19.6%
|
|
|
|
|
| Bank of America Corp., 4.250% (B)
|
|
|
| 134,925
| 2,490,716
|
| Bank of America Corp., 6.450% (6.450% to 8-28-23, then 3 month LIBOR + 1.327%) (B)
|
|
|
| 110,000
| 2,779,700
|
| Bank of America Corp., 7.250% (B)
|
|
|
| 7,000
| 8,526,000
|
| Citigroup Capital XIII, 12.001% (3 month CME Term SOFR + 6.632%) (B)(C)
|
|
|
| 265,000
| 7,682,350
|
| Citigroup, Inc., 7.125% (7.125% to 9-30-23, then 3 month CME Term SOFR + 4.302%) (B)
|
|
|
| 300,564
| 7,652,359
|
| Fifth Third Bancorp, 6.000% (B)
|
|
|
| 150,000
| 3,673,500
|
| Fulton Financial Corp., 5.125% (B)
|
|
|
| 113,025
| 1,876,780
|
| Huntington Bancshares, Inc., Series J, 6.875% (6.875% to 4-15-28, then 5 Year CMT + 2.704%)
|
|
|
| 123,150
| 2,940,206
|
| KeyCorp, 5.650%
|
|
|
| 116,625
| 2,409,473
|
| Pinnacle Financial Partners, Inc., 6.750%
|
|
|
| 86,350
| 2,030,089
|
| Regions Financial Corp., 4.450%
|
|
|
| 146,100
| 2,505,615
|
| Synovus Financial Corp., 8.862% (3 month LIBOR + 3.352%) (C)
|
|
|
| 154,500
| 3,777,525
|
| Wells Fargo & Company, 4.750%
|
|
|
| 248,875
| 4,753,513
|
| SEE NOTES TO FINANCIAL STATEMENTS
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 9
|
|
|
|
|
| Shares
| Value
|
| Financials (continued)
|
|
|
|
|
| Banks (continued)
|
|
|
|
|
| Wells Fargo & Company, 7.500% (B)
|
|
|
| 7,500
| $8,842,425
|
| WesBanco, Inc., 6.750% (6.750% to 11-15-25, then 5 Year CMT + 6.557%)
|
|
|
| 93,000
| 2,165,970
|
| Capital markets 6.6%
|
|
|
|
|
| Brookfield Finance, Inc., 4.625% (B)
|
|
|
| 158,548
| 2,690,560
|
| Morgan Stanley, 6.375% (6.375% to 10-15-24, then 3 month LIBOR + 3.708%) (B)
|
|
|
| 125,000
| 3,127,500
|
| Morgan Stanley, 6.500% (B)
|
|
|
| 208,450
| 5,430,123
|
| Morgan Stanley, 6.875% (6.875% to 1-15-24, then 3 month LIBOR + 3.940%) (B)
|
|
|
| 99,875
| 2,556,800
|
| Morgan Stanley, 7.125% (7.125% to 10-15-23, then 3 month LIBOR + 4.320%) (B)
|
|
|
| 306,572
| 7,728,680
|
| Consumer finance 1.2%
|
|
|
|
|
| Navient Corp., 6.000%
|
|
|
| 200,341
| 3,828,517
|
| Financial services 1.4%
|
|
|
|
|
| Federal National Mortgage Association, Series S, 8.250% (D)
|
|
|
| 75,000
| 159,750
|
| KKR Group Finance Company IX LLC, 4.625% (B)
|
|
|
| 178,625
| 3,252,761
|
| National Rural Utilities Cooperative Finance Corp., 5.500% (B)
|
|
|
| 46,175
| 1,108,662
|
| Insurance 19.7%
|
|
|
|
|
| AEGON Funding Company LLC, 5.100% (B)
|
|
|
| 267,925
| 5,685,369
|
| American Equity Investment Life Holding Company, 6.625% (6.625% to 9-1-25, then 5 Year CMT + 6.297%) (B)
|
|
|
| 131,750
| 3,056,600
|
| American Financial Group, Inc., 5.125% (B)(E)
|
|
|
| 123,850
| 2,595,896
|
| American International Group, Inc., 5.850% (B)(E)
|
|
|
| 207,000
| 5,121,180
|
| Athene Holding, Ltd., 7.750% (7.750% to 12-30-27, then 5 Year CMT + 3.962%) (B)
|
|
|
| 293,775
| 7,306,184
|
| Athene Holding, Ltd., Series A, 6.350% (6.350% to 6-30-29, then 3 month LIBOR + 4.253%) (B)
|
|
|
| 270,000
| 5,775,300
|
| Brighthouse Financial, Inc., 6.600% (B)(E)
|
|
|
| 306,687
| 6,995,530
|
| Enstar Group, Ltd., 7.000% (7.000% to 9-1-28, then 3 month LIBOR + 4.015%)
|
|
|
| 77,850
| 1,852,830
|
| Lincoln National Corp., 9.000% (B)(E)
|
|
|
| 220,450
| 5,996,240
|
| Reinsurance Group of America, Inc., 7.125% (7.125% to 10-15-27, then 5 Year CMT + 3.456%) (B)
|
|
|
| 282,950
| 7,283,133
|
| RenaissanceRe Holdings, Ltd., 4.200% (B)
|
|
|
| 169,000
| 3,050,450
|
| The Allstate Corp., 7.375% (B)
|
|
|
| 89,800
| 2,410,232
|
| The Phoenix Companies, Inc., 7.450%
|
|
|
| 216,500
| 3,669,675
|
| Unum Group, 6.250%
|
|
|
| 137,500
| 3,308,250
|
| 10
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
| SEE NOTES TO FINANCIAL STATEMENTS
|
|
|
|
|
| Shares
| Value
|
| Industrials 1.1%
|
|
|
| $3,729,678
|
| Trading companies and distributors 1.1%
|
|
|
|
|
| WESCO International, Inc., 10.625% (10.625% to 6-22-25, then 5 Year CMT + 10.325%)
|
|
|
| 137,525
| 3,729,678
|
| Real estate 2.8%
|
|
|
| 9,187,171
|
| Health care REITs 1.2%
|
|
|
|
|
| Diversified Healthcare Trust, 5.625%
|
|
|
| 304,095
| 4,011,013
|
| Hotel and resort REITs 1.0%
|
|
|
|
|
| Pebblebrook Hotel Trust, 6.375%
|
|
|
| 160,450
| 3,136,798
|
| Office REITs 0.5%
|
|
|
|
|
| Vornado Realty Trust, 5.400%
|
|
|
| 116,600
| 1,818,960
|
| Specialized REITs 0.1%
|
|
|
|
|
| Public Storage, 4.625% (B)
|
|
|
| 10,000
| 220,400
|
| Utilities 29.3%
|
|
|
| 95,477,368
|
| Electric utilities 6.9%
|
|
|
|
|
| Duke Energy Corp., 5.750%
|
|
|
| 194,675
| 4,913,597
|
| NextEra Energy Capital Holdings, Inc., 5.650% (B)
|
|
|
| 3,725
| 94,578
|
| NextEra Energy, Inc., 6.219% (B)(E)
|
|
|
| 46,250
| 2,289,375
|
| NextEra Energy, Inc., 6.926% (B)
|
|
|
| 177,150
| 8,101,070
|
| NSTAR Electric Company, 4.780% (B)(E)
|
|
|
| 15,143
| 1,351,513
|
| SCE Trust III, 5.750% (5.750% to 3-15-24, then 3 month LIBOR + 2.990%)
|
|
|
| 79,650
| 1,871,775
|
| SCE Trust VI, 5.000%
|
|
|
| 191,500
| 3,789,785
|
| Gas utilities 1.5%
|
|
|
|
|
| South Jersey Industries, Inc., 5.625% (B)
|
|
|
| 188,875
| 2,455,375
|
| UGI Corp., 7.250%
|
|
|
| 35,700
| 2,389,401
|
| Independent power and renewable electricity producers1.8%
|
|
|
|
|
| The AES Corp., 6.875%
|
|
|
| 69,600
| 5,957,064
|
| Multi-utilities 19.1%
|
|
|
|
|
| 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
| 10,408,839
|
| CMS Energy Corp., 5.625% (B)(E)
|
|
|
| 187,515
| 4,622,245
|
| CMS Energy Corp., 5.875% (B)(E)
|
|
|
| 272,225
| 6,664,068
|
| DTE Energy Company, Series E, 5.250% (B)
|
|
|
| 160,000
| 3,830,400
|
| Integrys Holding, Inc., 6.000% (6.000% to 8-1-23, then 3 month LIBOR + 3.220%)
|
|
|
| 237,872
| 5,827,864
|
| NiSource, Inc., 6.500% (6.500% to 3-15-24, then 5 Year CMT + 3.632%) (B)(E)
|
|
|
| 338,000
| 8,534,500
|
| SEE NOTES TO FINANCIAL STATEMENTS
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 11
|
|
|
|
|
| Shares
| Value
|
| Utilities (continued)
|
|
|
|
|
| Multi-utilities (continued)
|
|
|
|
|
| NiSource, Inc., 7.750% (B)(E)
|
|
|
| 88,100
| $9,073,419
|
|
|
| Sempra, 5.750% (B)
|
|
|
| 270,000
| 6,574,500
|
| Common stocks 3.1% (1.9% of Total investments)
|
|
| $9,967,755
|
| (Cost $13,457,386)
|
|
|
|
|
|
| Communication services 0.9%
|
|
|
| 2,806,318
|
| Diversified telecommunication services 0.9%
|
|
|
|
|
| Verizon Communications, Inc. (B)
|
|
|
| 82,345
| 2,806,318
|
| Utilities 2.2%
|
|
|
| 7,161,437
|
| Multi-utilities 2.2%
|
|
|
|
|
| Algonquin Power & Utilities Corp.
|
|
|
| 242,350
| 7,161,437
|
|
|
|
| Rate (%)
| Maturity date
|
| Par value^
| Value
|
| Corporate bonds 65.0% (40.2% of Total investments)
|
|
| $212,029,044
|
| (Cost $232,083,760)
|
|
|
|
|
|
| Communication services 2.2%
|
|
|
| 7,189,480
|
| Media 1.7%
|
|
|
|
|
| Paramount Global (6.375% to 3-30-27, then 5 Year CMT + 3.999%)
| 6.375
| 03-30-62
|
| 6,700,000
| 5,523,815
|
| Wireless telecommunication services 0.5%
|
|
|
|
|
| SoftBank Group Corp. (6.875% to 7-19-27, then 5 Year ICE Swap Rate + 4.854%) (F)
| 6.875
| 07-19-27
|
| 1,714,000
| 1,665,665
|
| Consumer discretionary 2.7%
|
|
|
| 8,666,975
|
| Automobiles 2.7%
|
|
|
|
|
| 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
| 2,256,850
|
| General Motors Financial Company, Inc. (6.500% to 9-30-28, then 3 month LIBOR + 3.436%) (B)(E)(F)
| 6.500
| 09-30-28
|
| 7,239,000
| 6,410,125
|
| Consumer staples 0.2%
|
|
|
| 623,100
|
| Food products 0.2%
|
|
|
|
|
| Land O’ Lakes, Inc. (B)(F)(G)
| 8.000
| 07-16-25
|
| 670,000
| 623,100
|
| Energy 7.5%
|
|
|
| 24,515,307
|
| Oil, gas and consumable fuels 7.5%
|
|
|
|
|
| Enbridge, Inc. (7.375% to 10-15-27, then 5 Year CMT + 3.708%) (B)(E)
| 7.375
| 01-15-83
|
| 4,193,000
| 4,147,040
|
| Enbridge, Inc. (7.625% to 10-15-32, then 5 Year CMT + 4.418%) (B)
| 7.625
| 01-15-83
|
| 2,500,000
| 2,526,003
|
| Energy Transfer LP (6.625% to 2-15-28, then 3 month LIBOR + 4.155%) (F)
| 6.625
| 02-15-28
|
| 6,500,000
| 5,151,250
|
| 12
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
| SEE NOTES TO FINANCIAL STATEMENTS
|
|
| Rate (%)
| Maturity date
|
| Par value^
| Value
|
| Energy (continued)
|
|
|
|
|
| Oil, gas and consumable fuels (continued)
|
|
|
|
|
| Energy Transfer LP (7.125% to 5-15-30, then 5 Year CMT + 5.306%) (F)
| 7.125
| 05-15-30
|
| 6,000,000
| $5,269,807
|
| Energy Transfer LP (3 month CME Term SOFR + 3.279%) (B)(C)
| 8.317
| 11-01-66
|
| 8,050,000
| 6,416,239
|
| Transcanada Trust (5.600% to 12-7-31, then 5 Year CMT + 3.986%) (B)(E)
| 5.600
| 03-07-82
|
| 1,193,000
| 1,004,968
|
| Financials 40.0%
|
|
|
| 130,445,579
|
| Banks 31.2%
|
|
|
|
|
| Bank of America Corp. (5.875% to 3-15-28, then 3 month CME Term SOFR + 3.193%) (B)(E)(F)
| 5.875
| 03-15-28
|
| 6,096,000
| 5,684,825
|
| Bank of America Corp. (6.125% to 4-27-27, then 5 Year CMT + 3.231%) (B)(E)(F)
| 6.125
| 04-27-27
|
| 5,750,000
| 5,711,475
|
| Bank of America Corp. (6.500% to 10-23-24, then 3 month CME Term SOFR + 4.436%) (B)(E)(F)
| 6.500
| 10-23-24
|
| 1,636,000
| 1,628,638
|
| Barclays PLC (7.750% to 9-15-23, then 5 Year U.S. Swap Rate + 4.842%) (F)
| 7.750
| 09-15-23
|
| 2,202,000
| 2,194,733
|
| Barclays PLC (8.000% to 6-15-24, then 5 Year CMT + 5.672%) (B)(F)
| 8.000
| 06-15-24
|
| 1,935,000
| 1,905,356
|
| Barclays PLC (8.000% to 3-15-29, then 5 Year CMT + 5.431%) (B)(E)(F)
| 8.000
| 03-15-29
|
| 2,240,000
| 2,083,200
|
| BNP Paribas SA (7.750% to 8-16-29, then 5 Year CMT + 4.899%) (B)(E)(F)(G)
| 7.750
| 08-16-29
|
| 2,450,000
| 2,438,730
|
| Citigroup, Inc. (7.375% to 5-15-28, then 5 Year CMT + 3.209%) (F)
| 7.375
| 05-15-28
|
| 4,525,000
| 4,604,188
|
| Citizens Financial Group, Inc. (6.375% to 4-6-24, then 3 month CME Term SOFR + 3.419%) (F)
| 6.375
| 04-06-24
|
| 6,000,000
| 5,325,038
|
| CoBank ACB (4.250% to 1-1-27, then 5 Year CMT + 3.049%) (B)(E)(F)
| 4.250
| 01-01-27
|
| 3,900,000
| 3,110,102
|
| CoBank ACB (6.450% to 10-1-27, then 5 Year CMT + 3.487%) (B)(E)(F)
| 6.450
| 10-01-27
|
| 4,250,000
| 4,020,813
|
| Comerica, Inc. (5.625% to 7-1-25, then 5 Year CMT + 5.291%) (F)
| 5.625
| 07-01-25
|
| 4,250,000
| 3,773,904
|
| Huntington Bancshares, Inc. (5.625% to 7-15-30, then 10 Year CMT + 4.945%) (F)
| 5.625
| 07-15-30
|
| 3,500,000
| 3,206,305
|
| JPMorgan Chase & Co. (4.600% to 2-1-25, then 3 month CME Term SOFR + 3.125%) (B)(E)(F)
| 4.600
| 02-01-25
|
| 3,926,000
| 3,710,070
|
| JPMorgan Chase & Co. (6.750% to 2-1-24, then 3 month CME Term SOFR + 4.042%) (B)(F)
| 6.750
| 02-01-24
|
| 667,000
| 666,583
|
| KeyCorp (5.000% to 9-15-26, then 3 month CME Term SOFR + 3.868%) (F)
| 5.000
| 09-15-26
|
| 2,618,000
| 2,099,713
|
| Lloyds Banking Group PLC (7.500% to 6-27-24, then 5 Year U.S. Swap Rate + 4.760%) (B)(E)(F)
| 7.500
| 06-27-24
|
| 6,000,000
| 5,847,000
|
| 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
| 5,375,664
|
| SEE NOTES TO FINANCIAL STATEMENTS
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 13
|
|
| Rate (%)
| Maturity date
|
| Par value^
| Value
|
| Financials (continued)
|
|
|
|
|
| Banks (continued)
|
|
|
|
|
| The Bank of Nova Scotia (8.625% to 10-27-27, then 5 Year CMT + 4.389%) (B)(E)
| 8.625
| 10-27-82
|
| 5,240,000
| $5,449,373
|
| The PNC Financial Services Group, Inc. (6.000% to 5-15-27, then 5 Year CMT + 3.000%) (B)(E)(F)
| 6.000
| 05-15-27
|
| 5,965,000
| 5,506,501
|
| The PNC Financial Services Group, Inc. (6.200% to 9-15-27, then 5 Year CMT + 3.238%) (B)(E)(F)
| 6.200
| 09-15-27
|
| 7,031,000
| 6,767,338
|
| The PNC Financial Services Group, Inc. (6.250% to 3-15-30, then 7 Year CMT + 2.808%) (B)(E)(F)
| 6.250
| 03-15-30
|
| 6,000,000
| 5,486,533
|
| The PNC Financial Services Group, Inc. (3 month CME Term SOFR + 3.940%) (B)(C)(F)
| 8.977
| 11-01-23
|
| 1,330,000
| 1,337,293
|
| The Toronto-Dominion Bank (8.125% to 10-31-27, then 5 Year CMT + 4.075%) (B)(E)
| 8.125
| 10-31-82
|
| 7,867,000
| 8,081,769
|
| 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
| 1,979,400
|
| Wells Fargo & Company (7.625% to 9-15-28, then 5 Year CMT + 3.606%) (F)
| 7.625
| 09-15-28
|
| 3,758,000
| 3,863,750
|
| Capital markets 1.9%
|
|
|
|
|
| The Charles Schwab Corp. (4.000% to 6-1-26, then 5 Year CMT + 3.168%) (B)(E)(F)
| 4.000
| 06-01-26
|
| 3,000,000
| 2,678,220
|
| The Charles Schwab Corp. (4.000% to 12-1-30, then 10 Year CMT + 3.079%) (B)(E)(F)
| 4.000
| 12-01-30
|
| 2,700,000
| 2,114,744
|
| The Charles Schwab Corp. (5.000% to 6-1-27, then 5 Year CMT + 3.256%) (B)(E)(F)
| 5.000
| 06-01-27
|
| 1,475,000
| 1,330,737
|
| Consumer finance 1.0%
|
|
|
|
|
| Discover Financial Services (6.125% to 6-23-25, then 5 Year CMT + 5.783%) (F)
| 6.125
| 06-23-25
|
| 3,400,000
| 3,263,166
|
| Insurance 5.9%
|
|
|
|
|
| Enstar Finance LLC (5.750% to 9-1-25, then 5 Year CMT + 5.468%) (B)(E)
| 5.750
| 09-01-40
|
| 3,000,000
| 2,618,089
|
| Markel Group, Inc. (6.000% to 6-1-25, then 5 Year CMT + 5.662%) (F)
| 6.000
| 06-01-25
|
| 4,000,000
| 3,886,297
|
| MetLife, Inc. (5.875% to 3-15-28, then 3 month CME Term SOFR + 3.221%) (B)(E)(F)
| 5.875
| 03-15-28
|
| 5,277,000
| 5,143,882
|
| 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
| 3,263,125
|
| SBL Holdings, Inc. (7.000% to 5-13-25, then 5 Year CMT + 5.580%) (B)(E)(F)(G)
| 7.000
| 05-13-25
|
| 6,890,000
| 4,289,025
|
| Utilities 12.4%
|
|
|
| 40,588,603
|
| Electric utilities 6.7%
|
|
|
|
|
| Edison International (5.000% to 12-15-26, then 5 Year CMT + 3.901%) (B)(E)(F)
| 5.000
| 12-15-26
|
| 2,790,000
| 2,410,480
|
| Edison International (5.375% to 3-15-26, then 5 Year CMT + 4.698%) (F)
| 5.375
| 03-15-26
|
| 7,500,000
| 6,656,093
|
| 14
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
| SEE NOTES TO FINANCIAL STATEMENTS
|
|
| Rate (%)
| Maturity date
|
| Par value^
| Value
|
| Utilities (continued)
|
|
|
|
|
| Electric utilities (continued)
|
|
|
|
|
| Emera, Inc. (6.750% to 6-15-26, then 3 month LIBOR + 5.440%) (B)
| 6.750
| 06-15-76
|
| 2,490,000
| $2,421,444
|
| NextEra Energy Capital Holdings, Inc. (5.650% to 5-1-29, then 3 month LIBOR + 3.156%) (B)(E)
| 5.650
| 05-01-79
|
| 5,500,000
| 5,116,245
|
| NRG Energy, Inc. (10.250% to 3-15-28, then 5 Year CMT + 5.920%) (F)(G)
| 10.250
| 03-15-28
|
| 5,445,000
| 5,276,715
|
| Independent power and renewable electricity producers2.8%
|
|
|
|
|
| Vistra Corp. (7.000% to 12-15-26, then 5 Year CMT + 5.740%) (F)(G)
| 7.000
| 12-15-26
|
| 2,440,000
| 2,171,600
|
| Vistra Corp. (8.000% to 10-15-26, then 5 Year CMT + 6.930%) (B)(E)(F)(G)
| 8.000
| 10-15-26
|
| 7,250,000
| 6,937,888
|
| Multi-utilities 2.9%
|
|
|
|
|
| CenterPoint Energy, Inc. (6.125% to 9-1-23, then 3 month LIBOR + 3.270%) (F)
| 6.125
| 09-01-23
|
| 5,342,000
| 5,234,616
|
| CMS Energy Corp. (4.750% to 3-1-30, then 5 Year CMT + 4.116%) (B)(E)
| 4.750
| 06-01-50
|
| 3,500,000
| 3,075,922
|
|
|
| Dominion Energy, Inc. (4.350% to 1-15-27, then 5 Year CMT + 3.195%) (F)
| 4.350
| 01-15-27
|
| 1,500,000
| 1,287,600
|
| Capital preferred securities (H) 2.8% (1.8% of Total investments)
|
|
| $9,239,532
|
| (Cost $10,678,500)
|
|
|
|
|
|
| Financials 1.2%
|
|
|
| 4,079,502
|
| Insurance 1.2%
|
|
|
|
|
| MetLife Capital Trust IV (7.875% to 12-15-37, then 3 month LIBOR + 3.960%) (B)(E)(G)
| 7.875
| 12-15-37
|
| 3,900,000
| 4,079,502
|
| Utilities 1.6%
|
|
|
| 5,160,030
|
| Multi-utilities 1.6%
|
|
|
|
|
| Dominion Resources Capital Trust III (B)(E)
| 8.400
| 01-15-31
|
| 5,000,000
| 5,160,030
|
|
|
|
|
| Yield (%)
|
| Shares
| Value
|
| Short-term investments 1.4% (0.9% of Total investments)
|
|
| $4,725,071
|
| (Cost $4,725,841)
|
|
|
|
|
|
| Short-term funds 1.4%
|
|
|
|
| 4,725,071
|
| John Hancock Collateral Trust (I)
| 5.2927(J)
|
| 472,743
| 4,725,071
|
|
|
| Total investments (Cost $594,848,999) 161.4%
|
|
|
| $526,746,869
|
| Other assets and liabilities, net (61.4%)
|
|
|
| (200,473,133)
|
| Total net assets 100.0%
|
|
|
|
| $326,273,736
|
| 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.
|
| SEE NOTES TO FINANCIAL STATEMENTS
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 15
|
| Security Abbreviations and Legend
|
| CME
| Chicago Mercantile Exchange
|
| 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 7-31-23 was $330,679,869. A portion of the securities pledged as
collateral were loaned pursuant to the Credit Facility Agreement. The value of securities on loan amounted to $170,609,411.
|
| (C)
| Variable rate obligation. The coupon rate shown represents the rate at period end.
|
| (D)
| Non-income producing security.
|
| (E)
| All or a portion of this security is on loan as of 7-31-23, and is a component of the fund’s leverage under the Credit Facility Agreement.
|
| (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 7-31-23.
|
| 16
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
| SEE NOTES TO FINANCIAL STATEMENTS
|
DERIVATIVES
SWAPS
| Interest rate swaps
|
Counterparty (OTC)/
Centrally cleared
| Notional
amount
| Currency
| Payments
made
| Payments
received
| Fixed
payment
frequency
| Floating
payment
frequency
| Maturity
date
| Unamortized
upfront
payment
paid
(received)
| Unrealized
appreciation
(depreciation)
| Value
|
| Centrally cleared
| 104,000,000
| USD
| Fixed 3.662%
| USD SOFR Compounded OIS(a)
| Semi-Annual
| Quarterly
| May 2026
| —
| $2,498,827
| $2,498,827
|
| Centrally cleared
| 51,500,000
| USD
| Fixed 3.473%
| USD SOFR Compounded OIS(a)
| Semi-Annual
| Quarterly
| May 2026
| —
| 1,508,148
| 1,508,148
|
|
|
|
|
|
|
|
|
| —
| $4,006,975
| $4,006,975
|
| (a)
| At
7-31-23, the overnight SOFR was 5.310%.
|
| Derivatives Currency Abbreviations
|
| USD
| U.S. Dollar
|
| Derivatives Abbreviations
|
| OIS
| Overnight Index Swap
|
| OTC
| Over-the-counter
|
| SOFR
| Secured Overnight Financing Rate
|
At 7-31-23, the aggregate cost of
investments for federal income tax purposes was $596,776,282. Net unrealized depreciation aggregated to $66,022,438, of which $6,784,235 related to gross unrealized appreciation and $72,806,673 related to gross
unrealized depreciation.
See Notes to financial statements
regarding investment transactions and other derivatives information.
| SEE NOTES TO FINANCIAL STATEMENTS
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 17
|
STATEMENT OF ASSETS AND
LIABILITIES 7-31-23
| Assets
|
|
| Unaffiliated investments, at value (Cost $590,123,158)
| $522,021,798
|
| Affiliated investments, at value (Cost $4,725,841)
| 4,725,071
|
| Total investments, at value (Cost $594,848,999)
| 526,746,869
|
| Receivable for centrally cleared swaps
| 2,746,279
|
| Dividends and interest receivable
| 3,854,884
|
| Receivable for investments sold
| 2,660,097
|
| Other assets
| 721,911
|
| Total assets
| 536,730,040
|
| Liabilities
|
|
| Due to custodian
| 2,568,089
|
| Credit facility agreement payable
| 206,700,000
|
| Interest payable
| 1,042,974
|
| Payable to affiliates
|
|
| Accounting and legal services fees
| 23,248
|
| Trustees’ fees
| 715
|
| Other liabilities and accrued expenses
| 121,278
|
| Total liabilities
| 210,456,304
|
| Net assets
| $326,273,736
|
| Net assets consist of
|
|
| Paid-in capital
| $434,707,815
|
| Total distributable earnings (loss)
| (108,434,079)
|
| Net assets
| $326,273,736
|
|
|
| Net asset value per share
|
|
| Based on 21,497,600 shares of beneficial interest outstanding - unlimited number of shares authorized with
no par value
| $15.18
|
| 18
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
| SEE NOTES TO FINANCIAL STATEMENTS
|
STATEMENT OF OPERATIONS For the year ended 7-31-23
| Investment income
|
|
| Dividends
| $23,118,713
|
| Interest
| 14,692,366
|
| Dividends from affiliated investments
| 383,544
|
| Less foreign taxes withheld
| (93,845)
|
| Total investment income
| 38,100,778
|
| Expenses
|
|
| Investment management fees
| 4,087,169
|
| Interest expense
| 10,357,713
|
| Accounting and legal services fees
| 74,268
|
| Transfer agent fees
| 23,802
|
| Trustees’ fees
| 48,187
|
| Custodian fees
| 46,719
|
| Printing and postage
| 47,801
|
| Professional fees
| 120,665
|
| Stock exchange listing fees
| 23,963
|
| Other
| 21,694
|
| Total expenses
| 14,851,981
|
| Less expense reductions
| (43,172)
|
| Net expenses
| 14,808,809
|
| Net investment income
| 23,291,969
|
| Realized and unrealized gain (loss)
|
|
| Net realized gain (loss) on
|
|
| Unaffiliated investments
| (28,901,850)
|
| Affiliated investments
| 670
|
| Futures contracts
| 2,207,454
|
| Swap contracts
| (220,987)
|
|
| (26,914,713)
|
| Change in net unrealized appreciation (depreciation) of
|
|
| Unaffiliated investments
| (26,071,068)
|
| Affiliated investments
| (770)
|
| Futures contracts
| 521,132
|
| Swap contracts
| 4,211,630
|
|
| (21,339,076)
|
| Net realized and unrealized loss
| (48,253,789)
|
| Decrease in net assets from operations
| $(24,961,820)
|
| SEE NOTES TO FINANCIAL STATEMENTS
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 19
|
STATEMENTS OF CHANGES IN NET
ASSETS
|
| Year ended
7-31-23
| Year ended
7-31-22
|
| Increase (decrease) in net assets
|
|
|
| From operations
|
|
|
| Net investment income
| $23,291,969
| $28,859,902
|
| Net realized gain (loss)
| (26,914,713)
| 7,179,657
|
| Change in net unrealized appreciation (depreciation)
| (21,339,076)
| (62,722,176)
|
| Decrease in net assets resulting from operations
| (24,961,820)
| (26,682,617)
|
| Distributions to shareholders
|
|
|
| From earnings
| (26,085,599)
| (28,924,437)
|
| From tax return of capital
| (5,728,710)
| (2,814,322)
|
| Total distributions
| (31,814,309)
| (31,738,759)
|
| Fund share transactions
|
|
|
| Issued pursuant to Dividend Reinvestment Plan
| 944,963
| 805,915
|
| Total decrease
| (55,831,166)
| (57,615,461)
|
| Net assets
|
|
|
| Beginning of year
| 382,104,902
| 439,720,363
|
| End of year
| $326,273,736
| $382,104,902
|
| Share activity
|
|
|
| Shares outstanding
|
|
|
| Beginning of year
| 21,437,953
| 21,396,527
|
| Issued pursuant to Dividend Reinvestment Plan
| 59,647
| 41,426
|
| End of year
| 21,497,600
| 21,437,953
|
| 20
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
| SEE NOTES TO FINANCIAL STATEMENTS
|
STATEMENT OF CASH FLOWS For the year ended 7-31-23
|
|
|
| Cash flows from operating activities
|
|
| Net decrease in net assets from operations
| $(24,961,820)
|
| Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating
activities:
|
|
| Long-term investments purchased
| (159,461,704)
|
| Long-term investments sold
| 163,921,880
|
| Net purchases and sales of short-term investments
| 901,829
|
| Net amortization of premium (discount)
| 1,317,842
|
| (Increase) Decrease in assets:
|
|
| Receivable for centrally cleared swaps
| (2,735,594)
|
| Collateral held at broker for futures contracts
| 890,000
|
| Dividends and interest receivable
| (293,621)
|
| Receivable for investments sold
| (1,076,291)
|
| Other assets
| (686,399)
|
| Increase (Decrease) in liabilities:
|
|
| Payable for futures variation margin
| (70,306)
|
| Payable for investments purchased
| (5,211,250)
|
| Interest payable
| 546,399
|
| Payable to affiliates
| 7,641
|
| Other liabilities and accrued expenses
| (21,927)
|
| Net change in unrealized (appreciation) depreciation on:
|
|
| Investments
| 26,071,838
|
| Net realized (gain) loss on:
|
|
| Investments
| 28,901,180
|
| Proceeds received as return of capital
| 66,204
|
| Net cash provided by operating activities
| $28,105,901
|
| Cash flows provided by (used in) financing activities
|
|
| Distributions to shareholders
| $(30,869,346)
|
| Increase in due to custodian
| 2,568,089
|
| Net cash used in financing activities
| $(28,301,257)
|
| Net decrease in cash
| $(195,356)
|
| Cash at beginning of year
| $195,356
|
| Cash at end of year
| —
|
| Supplemental disclosure of cash flow information:
|
|
| Cash paid for interest
| $(9,811,314)
|
| Noncash financing activities not included herein consists of reinvestment of distributions
| $944,963
|
| SEE NOTES TO FINANCIAL STATEMENTS
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 21
|
| Period ended
| 7-31-23
| 7-31-22
| 7-31-21
| 7-31-20
| 7-31-19
|
| Per share operating performance
|
|
|
|
|
|
| Net asset value, beginning of period
| $17.82
| $20.55
| $18.12
| $21.09
| $21.13
|
| Net investment income1
| 1.09
| 1.35
| 1.39
| 1.40
| 1.34
|
| Net realized and unrealized gain (loss) on investments
| (2.25)
| (2.60)
| 2.52
| (2.85)
| 0.30
|
| Total from investment operations
| (1.16)
| (1.25)
| 3.91
| (1.45)
| 1.64
|
| Less distributions
|
|
|
|
|
|
| From net investment income
| (1.21)
| (1.35)
| (1.35)
| (1.41)
| (1.40)
|
| From tax return of capital
| (0.27)
| (0.13)
| (0.13)
| (0.11)
| (0.28)
|
| Total distributions
| (1.48)
| (1.48)
| (1.48)
| (1.52)
| (1.68)
|
| Net asset value, end of period
| $15.18
| $17.82
| $20.55
| $18.12
| $21.09
|
| Per share market value, end of period
| $15.85
| $18.80
| $22.00
| $18.46
| $23.67
|
| Total return at net asset value (%)2,3
| (6.66)
| (6.31)
| 22.52
| (7.07)
| 8.26
|
| Total return at market value (%)2
| (7.39)
| (7.72)
| 28.74
| (15.65)
| 20.70
|
| Ratios and supplemental data
|
|
|
|
|
|
| Net assets, end of period (in millions)
| $326
| $382
| $440
| $387
| $450
|
| Ratios (as a percentage of average net assets):
|
|
|
|
|
|
| Expenses before reductions
| 4.39
| 1.84
| 1.63
| 2.36
| 2.98
|
| Expenses including reductions4
| 4.38
| 1.82
| 1.62
| 2.35
| 2.97
|
| Net investment income
| 6.89
| 7.05
| 7.18
| 7.20
| 6.60
|
| Portfolio turnover (%)
| 30
| 22
| 30
| 34
| 35
|
| Senior securities
|
|
|
|
|
|
| Total debt outstanding end of period (in millions)
| $207
| $207
| $204
| $193
| $238
|
| Asset coverage per $1,000 of debt5
| $2,578
| $2,849
| $3,155
| $3,006
| $2,890
|
| 1
| Based on average daily shares outstanding.
|
| 2
| Total return based on net asset value reflects changes in the fund’s net asset value during each period. Total return based on market value reflects changes in market value.
Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested.
|
| 3
| Total returns would have been lower had certain expenses not been reduced during the applicable periods.
|
| 4
| Expenses including reductions excluding interest expense were 1.32%, 1.20%, 1.22%, 1.25% and 1.26% for the periods ended 7-31-23, 7-31-22, 7-31-21, 7-31-20 and 7-31-19,
respectively.
|
| 5
| Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 7). As debt outstanding changes, the level of
invested assets may change accordingly. Asset coverage ratio provides a measure of leverage.
|
| 22
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
| SEE NOTES TO FINANCIAL STATEMENTS
|
Notes to financial statements
Note 1—Organization
John Hancock Preferred Income Fund
II (the fund) is a closed-end management investment company organized as a Massachusetts business trust and registered under the Investment Company Act of 1940, as amended (the 1940 Act).
Note 2—Significant accounting policies
The financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial
statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring
after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting
policies of the fund:
Security valuation. Investments are stated at value as of the scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 P.M., Eastern Time. In case of emergency or other
disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the
NYSE pursuant to the Advisor’s Valuation Policies and Procedures.
In order to value the securities,
the fund uses the following valuation techniques: Equity securities, including exchange-traded or closed-end funds, are typically valued at the last sale price or official closing price on the exchange or principal
market where the security trades. In the event there were no sales during the day or closing prices are not available, the securities are valued using the last available bid price. Investments by the fund in open-end
mutual funds, including John Hancock Collateral Trust (JHCT), are valued at their respective NAVs each business day. Debt obligations are typically valued based on evaluated prices provided by an independent pricing
vendor. Independent pricing vendors utilize matrix pricing, which takes into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, as well as broker supplied prices. Swaps are generally valued using evaluated prices obtained from an independent pricing vendor.
In certain instances, the Pricing
Committee of the Advisor 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 Pricing Committee following procedures established by the Advisor and adopted by the
Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready
market for such securities existed.
The fund uses a three tier hierarchy
to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities,
including registered investment companies. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment
speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities
valued using significant unobservable inputs when market prices are not readily available or reliable, including the Advisor’s 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
|
| ANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II
| 23
|
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, 2023, by major security category or type:
|
| Total
value at
7-31-23
| Level 1
quoted
price
| Level 2
significant
observable
inputs
| Level 3
significant
unobservable
inputs
|
| Investments in securities:
|
|
|
|
|
| Assets
|
|
|
|
|
| Preferred securities
|
|
|
|
|
| Communication services
| $17,443,757
| $17,443,757
| —
| —
|
| Consumer discretionary
| 2,910,550
| 2,910,550
| —
| —
|
| Energy
| 3,940,500
| 3,940,500
| —
| —
|
| Financials
| 158,096,443
| 151,486,562
| $6,609,881
| —
|
| Industrials
| 3,729,678
| 3,729,678
| —
| —
|
| Real estate
| 9,187,171
| 9,187,171
| —
| —
|
| Utilities
| 95,477,368
| 85,842,616
| 9,634,752
| —
|
| Common stocks
| 9,967,755
| 9,967,755
| —
| —
|
| Corporate bonds
| 212,029,044
| —
| 212,029,044
| —
|
| Capital preferred securities
| 9,239,532
| —
| 9,239,532
| —
|
| Short-term investments
| 4,725,071
| 4,725,071
| —
| —
|
| Total investments in securities
| $526,746,869
| $289,233,660
| $237,513,209
| —
|
| Derivatives:
|
|
|
|
|
| Assets
|
|
|
|
|
| Swap contracts
| $4,006,975
| —
| $4,006,975
| —
|
The fund holds liabilities for which
the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2023, the liability for the fund’s Credit facility agreement on the Statement of assets and liabilities is
categorized as Level 2 within the disclosure hierarchy.
Real estate investment trusts. The fund may invest in real estate investment trusts (REITs). Distributions from REITs may be recorded as income and subsequently characterized by the REIT at the end of their fiscal year
as a reduction of cost of investments and/or as a realized gain. As a result, the fund will estimate the components of distributions from these securities. Such estimates are revised when the actual components of the
distributions are known.
Security transactions and related
investment income. Investment security transactions are accounted for on a trade date plus one basis for daily NAV calculations. However, for financial reporting purposes, investment transactions are
reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a
non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Dividend income
is recorded on ex-date, except for dividends of certain foreign securities where the dividend may not be known until after the ex-date. In those cases, dividend income, net of withholding taxes, is recorded when the
fund becomes aware of the dividends. Non-cash dividends, if any, are recorded at the fair market value of the securities received.
| 24
| JOHN HANCOCK Preferred Income Fund II | ANNUAL REPORT
|
|
Distributions received on securities that represent
a tax return of capital and/or capital gain, if any, are recorded as a reduction of cost of investments and/or as a realized gain, if amounts are estimable. Gains and losses on securities sold are determined on the
basis of identified cost and may include proceeds from litigation.
Foreign taxes. The fund may be subject to withholding tax on income, capital gains or repatriations imposed by certain countries, a portion of which may be recoverable. Foreign taxes are accrued based
upon the fund’s understanding of the tax rules and rates that exist in the foreign markets in which it invests. Taxes are accrued based on gains realized by the fund as a result of certain foreign security
sales. In certain circumstances, estimated taxes are accrued based on unrealized appreciation of such securities. Investment income is recorded net of foreign withholding taxes.
Overdrafts. Pursuant to the custodian agreement, the fund’s custodian may, in its discretion, advance funds to the fund to make properly authorized payments. When such payments result in an
overdraft, the fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian may have a lien, security interest or security entitlement in any
fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to
a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund’s relative net assets. Expense estimates are
accrued in the period to which they relate and adjustments are made when actual amounts are known.
Statement of cash flows. A Statement of cash flows is presented when a fund has a significant amount of borrowing during the period, based on the average total borrowing in relation to total assets, or when a
certain percentage of the fund’s investments is classified as Level 3 in the fair value hierarchy. Information on financial transactions that have been settled through the receipt and disbursement of cash is
presented in the Statement of cash flows. The cash amount shown in the Statement of cash flows is the amount included in the fund’s Statement of assets and liabilities and represents the cash on hand at the
fund’s custodian and does not include any short-term investments or collateral on derivative contracts, if any.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income
tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, as
of July 31, 2023, the fund has a short-term capital loss carryforward of $6,987,361 and a long-term capital loss carryforward of $35,424,280 available to offset future net realized capital gains. These carryforwards
do not expire.
As of July 31, 2023, the fund had no
uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of
three years.
Distribution of income and
gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund generally declares and pays dividends monthly. Capital gain
distributions, if any, are typically distributed annually.
The tax character of distributions
for the years ended July 31, 2023 and 2022 was as follows:
|
| July 31, 2023
| July 31, 2022
|
| Ordinary income
| $26,085,599
| $28,924,437
|
| Return of capital
| 5,728,710
| 2,814,322
|
| Total
| $31,814,309
| $31,738,759
|
|
| ANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II
| 25
|
As of July 31, 2023, there were no
distributable earnings on a tax basis.
Such distributions and distributable
earnings, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in the fund’s
financial statements as a return of capital.
Capital accounts within the
financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent
period. Book-tax differences are primarily attributable to amortization and accretion on debt securities, derivative transactions and contingent payment debt instruments.
Note 3—Derivative instruments
The fund may invest in derivatives
in order to meet its investment objective. Derivatives include a variety of different instruments that may be traded in the over-the-counter (OTC) market, on a regulated exchange or through a clearing facility. The
risks in using derivatives vary depending upon the structure of the instruments, including the use of leverage, optionality, the liquidity or lack of liquidity of the contract, the creditworthiness of the counterparty
or clearing organization and the volatility of the position. Some derivatives involve risks that are potentially greater than the risks associated with investing directly in the referenced securities or other
referenced underlying instrument. Specifically, the fund is exposed to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise honor
its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction.
Certain derivatives are traded or
cleared on an exchange or central clearinghouse. Exchange-traded or centrally-cleared transactions generally present less counterparty risk to a fund than OTC transactions. The exchange or clearinghouse stands between
the fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the exchange or clearinghouse and the clearing member.
Centrally-cleared swap contracts are
subject to clearinghouse rules, including initial and variation margin requirements, daily settlement of obligations and the clearinghouse guarantee of payments to the broker. There is, however, still counterparty
risk due to the potential insolvency of the broker with respect to any margin held in the brokers’ customer accounts. While clearing members are required to segregate customer assets from their own assets, in
the event of insolvency, there may be a shortfall in the amount of margin held by the broker for its clients. Collateral or margin requirements for centrally-cleared derivatives are set by the broker or applicable
clearinghouse. Margin for centrally-cleared transactions is detailed in the Statement of assets and liabilities as Receivable/Payable for centrally-cleared swaps. Securities pledged by the fund for centrally-cleared
transactions, if any, are identified in the Fund’s investments.
Futures. A futures contract is a contractual agreement to buy or sell a particular currency or financial instrument at a pre-determined price in the future. Futures are traded on an exchange and
cleared through a central clearinghouse. Risks related to the use of futures contracts include possible illiquidity of the futures markets and contract prices that can be highly volatile and imperfectly correlated to
movements in the underlying financial instrument and potential losses in excess of the amounts recognized on the Statement of assets and liabilities. Use of long futures contracts subjects the fund to the risk of loss
up to the notional value of the futures contracts. Use of short futures contracts subjects the fund to unlimited risk of loss.
Upon entering into a futures
contract, the fund is required to deposit initial margin with the broker in the form of cash or securities. The amount of required margin is set by the broker and is generally based on a percentage of the contract
value. The margin deposit must then be maintained at the established level over the life of the contract. Cash that has been pledged by the fund, if any, is detailed in the Statement of assets and liabilities as
Collateral held at broker for futures contracts. Securities pledged by the fund, if any, are identified in the Fund’s investments. Subsequent payments, referred to as variation margin, are made or received by
the fund periodically and are based on changes in the market value of open futures contracts. Futures contracts are marked-to-market daily and unrealized gain or loss is recorded by the fund. When the contract is
closed, the fund records a realized
| 26
| JOHN HANCOCK Preferred Income Fund II | ANNUAL REPORT
|
|
gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was closed.
During the year ended July 31, 2023,
the fund used futures contracts to manage against changes in interest rates. The fund held futures contracts with USD notional values ranging up to $54.5 million, as measured at each quarter end. There were no open
futures contracts as of July 31, 2023.
Swaps. Swap agreements are agreements between the fund and a counterparty to exchange cash flows, assets, foreign currencies or market-linked returns at specified intervals. Swap agreements are
privately negotiated in the OTC market (OTC swaps) or may be executed on a registered commodities exchange (centrally cleared swaps). Swaps are marked-to-market daily and the change in value is recorded as a component
of unrealized appreciation/depreciation of swap contracts. The value of the swap will typically impose collateral posting obligations on the party that is considered out-of-the-money on the swap.
Upfront payments made/received by
the fund, if any, are amortized/accreted for financial reporting purposes, with the unamortized/unaccreted portion included in the Statement of assets and liabilities. A termination payment by the counterparty or the
fund is recorded as realized gain or loss, as well as the net periodic payments received or paid by the fund.
Entering into swap agreements
involves, to varying degrees, elements of credit, market and documentation risk that may provide outcomes that produce losses in excess of the amounts recognized on the Statement of assets and liabilities. Such risks
involve the possibility that there will be no liquid market for the swap, or that a counterparty may default on its obligation or delay payment under the swap terms. The counterparty may disagree or contest the terms
of the swap. In addition to interest rate risk, market risks may also impact the swap. The fund may also suffer losses if it is unable to terminate or assign outstanding swaps or reduce its exposure through offsetting
transactions.
Interest rate swaps. Interest rate swaps represent an agreement between the fund and a counterparty to exchange cash flows based on the difference between two interest rates applied to a notional amount. The
payment flows are usually netted against each other, with the difference being paid by one party to the other. The fund settles accrued net interest receivable or payable under the swap contracts at specified, future
intervals.
During the year ended July 31, 2023,
the fund used interest rate swap contracts to manage against changes in the credit facility agreement interest rates. The fund held interest rate swaps with total USD notional amounts ranging up to $155.5 million, as
measured at each quarter end.
Fair value of derivative instruments
by risk category
The table below summarizes the fair
value of derivatives held by the fund at July 31, 2023 by risk category:
| Risk
| Statement of assets
and liabilities
location
| Financial
instruments
location
| Assets
derivatives
fair value
| Liabilities
derivatives
fair value
|
| Interest rate
| Swap contracts, at value1
| Interest rate swaps
| $4,006,975
| —
|
| 1
| Reflects cumulative value of swap contracts. Receivable/payable for centrally cleared swaps, which includes value and margin, are shown separately on the Statement of assets and
liabilities.
|
|
| ANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II
| 27
|
Effect of derivative instruments on
the Statement of operations
The table below summarizes the net
realized gain (loss) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended July 31, 2023:
|
| Statement of operations location - Net realized gain (loss) on:
|
| Risk
| Futures contracts
| Swap contracts
| Total
|
| Interest rate
| $2,207,454
| $(220,987)
| $1,986,467
|
The table below summarizes the net
change in unrealized appreciation (depreciation) included in the net increase (decrease) in net assets from operations, classified by derivative instrument and risk category, for the year ended July 31, 2023:
|
| Statement of operations location - Change in net unrealized appreciation (depreciation) of:
|
| Risk
| Futures contracts
| Swap contracts
| Total
|
| Interest rate
| $521,132
| $4,211,630
| $4,732,762
|
Note 4—Guarantees and indemnifications
Under the fund’s
organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund
enters into contracts with service providers that contain general indemnification clauses. The fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made
against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 5—Fees and transactions with affiliates
John Hancock Investment Management
LLC (the Advisor) serves as investment advisor for the fund. The Advisor is an indirect, principally owned subsidiary of John Hancock Life Insurance Company (U.S.A.), which in turn is a subsidiary of Manulife
Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor, equivalent on an annual basis, to 0.75% of the
fund’s average daily managed assets including any assets attributable to the Credit Facility Agreement (see Note 7) (collectively, managed assets). The Advisor has a subadvisory agreement with Manulife
Investment Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed
to waive a portion of its management fee and/or reimburse expenses for certain funds of the John Hancock group of funds complex, including the fund (the participating portfolios). This waiver is based upon aggregate
net assets of all the participating portfolios. The amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. During the
year ended July 31, 2023, this waiver amounted to 0.01% of the fund’s average daily net assets. This arrangement expires on July 31, 2025, unless renewed by mutual agreement of the fund and the Advisor based
upon a determination that this is appropriate under the circumstances at that time.
The expense reductions described
above amounted to $43,172 for the year ended July 31, 2023.
Expenses waived or reimbursed in the
current fiscal period are not subject to recapture in future fiscal periods.
The investment management fees,
including the impact of the waivers and reimbursements as described above, incurred for the year ended July 31, 2023, were equivalent to a net annual effective rate of 0.74% of the fund’s average daily managed
assets.
| 28
| JOHN HANCOCK Preferred Income Fund II | ANNUAL REPORT
|
|
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, compliance, accounting and
recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These accounting and legal services fees incurred, for
the year ended July 31, 2023, amounted to an annual rate of 0.01% of the fund’s average daily managed assets.
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. These Trustees receive from the fund and the other John Hancock closed-end funds an annual
retainer. In addition, Trustee out-of-pocket expenses are allocated to each fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 6—Leverage risk
The fund utilizes a Credit Facility
Agreement (CFA) to increase its assets available for investment. When the fund leverages its assets, shareholders bear the expenses associated with the CFA and have potential to benefit or be disadvantaged from the
use of leverage. The Advisor’s fee is also increased in dollar terms from the use of leverage. Consequently, the fund and the Advisor may have differing interests in determining whether to leverage the
fund’s assets. Leverage creates risks that may adversely affect the return for the holders of shares, including:
| •
|
the likelihood of greater volatility of NAV and market price of shares;
|
| •
|
fluctuations in the interest rate paid for the use of the CFA;
|
| •
|
increased operating costs, which may reduce the fund’s total return;
|
| •
|
the potential for a decline in the value of an investment acquired through leverage, while the fund’s obligations under such leverage remains fixed; and
|
| •
|
the fund is more likely to have to sell securities in a volatile market in order to meet asset coverage or other debt compliance requirements.
|
To the extent the income or capital
appreciation derived from securities purchased with funds received from leverage exceeds the cost of leverage, the fund’s return will be greater than if leverage had not been used; conversely, returns would be
lower if the cost of the leverage exceeds the income or capital appreciation derived.
In addition to the risks created by
the fund’s use of leverage, the fund is subject to the risk that it would be unable to timely, or at all, obtain replacement financing if the CFA is terminated. Were this to happen, the fund would be required to
de-leverage, selling securities at a potentially inopportune time and incurring tax consequences. Further, the fund’s ability to generate income from the use of leverage would be adversely affected.
Note 7—Credit Facility Agreement
The fund has entered into a Credit
Facility Agreement (CFA) with a subsidiary of BNP Paribas (BNP) that allows it to borrow up to $238.0 million (maximum facility amount) and to invest the borrowings in accordance with its investment practices.
The fund pledges a portion of its
assets as collateral to secure borrowings under the CFA. Such pledged assets are held in a special custody account with the fund’s custodian. The amount of assets required to be pledged by the fund is determined
in accordance with the CFA. The fund retains the benefits of ownership of assets pledged to secure borrowings under the CFA. Effective January 1, 2023, interest charged is at the rate of OBFR (overnight bank funding
rate) plus 0.75% and is payable monthly. Prior to January 1, 2023, interest was charged at a rate of one month LIBOR (London Interbank Offered Rate) plus 0.70%. As of July 31, 2023, the fund had borrowings of
$206,700,000 at an interest rate of 6.07%, which are reflected in the Credit facility agreement payable on the Statement of assets and liabilities. During the year ended July 31, 2023, the average borrowings under the
CFA and the effective average interest rate were $206,700,000 and 5.01%, respectively.
The fund is required to pay a
commitment fee equal to 0.60% on any unused portion of the maximum facility amount, only for days on which the aggregate outstanding amount of the loans under the CFA is less than 80% of the maximum facility amount.
For the year ended July 31, 2023, there were no commitment fees incurred by the
|
| ANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II
| 29
|
fund.
The fund may terminate the CFA with
30 days’ notice. If certain asset coverage and collateral requirements, minimum net assets or other covenants are not met, the CFA could be deemed in default and result in termination. Absent a default or
facility termination event, BNP generally is required to provide the fund with 360 days’ notice prior to terminating or amending the CFA.
The fund has an agreement with BNP
that allows BNP to borrow a portion of the pledged collateral (Lent Securities) in an amount not to exceed the lesser of: (i) outstanding borrowings owed by the fund to BNP or (ii) 33 1/3% of the fund’s total
assets. The fund can designate any security within the pledged collateral as ineligible to be a Lent Security and can recall any of the Lent Securities. The fund also has the right to apply and set-off an amount equal
to 100% of the then-current fair market value of such Lent Securities against the current borrowings under the CFA in the event that BNP fails to timely return the Lent Securities and in certain other circumstances.
In such circumstances, however, the fund may not be able to obtain replacement financing required to purchase replacement securities and, consequently, the fund’s income generating potential may decrease. Even
if the fund is able to obtain replacement financing, it might not be able to purchase replacement securities at favorable prices. Income earned from Lent Securities of $14,677 for the year ended July 31, 2023 is
recorded as a component of interest income on the Statement of operations.
Due to the discontinuation of LIBOR,
as discussed in Note 8, the CFA was amended to remove LIBOR as the reference rate for interest and to replace LIBOR with an alternative reference rate for interest mutually agreed upon by the fund and BNP, however,
there remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate and the potential effect of a transition away from LIBOR on the fund and/or BNP cannot yet be fully
determined.
Note 8—LIBOR Discontinuation Risk
LIBOR is a measure of the average
interest rate at which major global banks can borrow from one another. Following allegations of rate manipulation and concerns regarding its thin liquidity, in July 2017, the U.K. Financial Conduct Authority, which
regulates LIBOR, announced that it will stop encouraging banks to provide the quotations needed to sustain LIBOR. The ICE Benchmark Administration Limited, the administrator of LIBOR, ceased publishing most liquid US
LIBOR maturities on June 30, 2023. The 1-, 3- and 6-month USD LIBOR maturities will continue to be published based on a synthetic methodology through September 30, 2024. It is expected that market participants,
such as the fund and BNP, transitioned to the use of alternative reference or benchmark rates prior to the applicable LIBOR publication cessation date. Additionally, although regulators have encouraged the development
and adoption of alternative rates, such as the Secured Overnight Financing Rate (SOFR), the future utilization of LIBOR or of any particular replacement rate remains uncertain.
Although the transition process away
from LIBOR became increasingly well-defined in advance of the discontinuation dates, the impact on the transition away from LIBOR referenced financial instruments remains uncertain. Market participants have adopted
financial instruments referencing LIBOR to include fallback provisions and other measures that contemplated the discontinuation of LIBOR or other similar market disruption events, but neither the effect of the
transition process nor the viability of such measures is known. Further, uncertainty and risk remain regarding the willingness and ability of issuers and lenders to include alternative rates and revised provisions in
new and existing contracts or instruments. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International Swaps and Derivatives Association, Inc. launched a protocol to incorporate
fallback provisions. However, there are obstacles to converting certain longer term securities and transactions to a new benchmark or benchmarks and the effectiveness of one alternative reference rate versus
multiple alternative reference rates in new or existing financial instruments and products has not been determined. Certain proposed replacement rates to LIBOR, such as SOFR, which is a broad measure of secured
overnight US Treasury repo rates, are materially different from LIBOR, and changes in the applicable spread for financial instruments transitioning away from LIBOR will need to be made to accommodate the differences.
Furthermore, the risks associated with the discontinuation of LIBOR and transition to replacement rates may be exacerbated if an orderly transition to an
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| JOHN HANCOCK Preferred Income Fund II | ANNUAL REPORT
|
|
alternative reference rate is not completed in a
timely manner.
LIBOR’s deterioration may
adversely affect the liquidity and/or market value of securities that use LIBOR as a benchmark interest rate. The use of an alternative reference rate may result in increases to the interest paid by the fund
pursuant to the CFA and, therefore, may adversely affect the fund’s performance.
Note 9—Purchase and sale of securities
Purchases and sales of securities,
other than short-term investments, amounted to $159,461,704 and $163,921,880, respectively, for the year ended July 31, 2023.
Note 10—Industry or sector risk
The fund may invest a large
percentage of its assets in one or more particular industries or sectors of the economy. If a large percentage of the fund’s assets are economically tied to a single or small number of industries or sectors of
the economy, the fund will be less diversified than a more broadly diversified fund, and it may cause the fund to underperform if that industry or sector underperforms. In addition, focusing on a particular industry
or sector may make the fund’s NAV more volatile. Further, a fund that invests in particular industries or sectors is particularly susceptible to the impact of market, economic, regulatory and other factors
affecting those industries or sectors.
Commercial banks, savings and loan
associations, and holding companies of the foregoing are especially subject to adverse effects of volatile interest rates, concentrations of loans in particular industries, and significant competition. Banks and
financial services companies could suffer losses if interest rates rise or economic conditions deteriorate.
Note 11—Investment in affiliated underlying funds
The fund may invest in affiliated
underlying funds that are managed by the Advisor and its affiliates. Information regarding the fund’s fiscal year to date purchases and sales of the affiliated underlying funds as well as income and capital
gains earned by the fund, if any, is as follows:
|
|
|
|
|
|
|
| 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
| 472,743
| —
| $153,524,827
| $(148,799,656)
| $670
| $(770)
| $383,544
| —
| $4,725,071
|
Note 12—New accounting pronouncement
In March 2020, the Financial
Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU), ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional, temporary relief with respect to the financial reporting of
contracts subject to certain types of modifications due to the planned discontinuation of the LIBOR and other IBOR-based reference rates as of the end of 2021. In January 2021 and December 2022, the FASB issued
ASU No. 2021-01 and ASU No. 2022-06, with further amendments to Topic 848. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the
period March 12, 2020 through December 31, 2024. Management expects that the adoption of the guidance will not have a material impact to the financial statements.
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| ANNUAL REPORT | JOHN HANCOCK Preferred Income Fund II
| 31
|
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees and
Shareholders of John Hancock Preferred Income Fund II
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities, including the fund’s investments, of John Hancock Preferred Income Fund II (the "Fund") as of July 31, 2023, the related statements of operations and cash flows for the year
ended July 31, 2023, the statements of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes, and the financial highlights for each of the five years in the
period ended July 31, 2023 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as
of July 31, 2023, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended July 31, 2023 and the financial highlights for
each of the five years in the period ended July 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of July 31, 2023 by correspondence with the custodian and brokers. We believe that our audits provide a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 26, 2023
We have served as the auditor of one
or more investment companies in the John Hancock group of funds since 1988.
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| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
(Unaudited)
For federal income tax purposes, the
following information is furnished with respect to the distributions of the fund, if any, paid during its taxable year ended July 31, 2023.
The fund reports the maximum amount
allowable of its net taxable income as eligible for the corporate dividends-received deduction.
The fund reports the maximum amount
allowable of its net taxable income as qualified dividend income as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The fund reports the maximum amount
allowable as Section 163(j) Interest Dividends.
The fund reports the maximum amount
allowable of its Section 199A dividends as defined in Proposed Treasury Regulation §1.199A-3(d).
Eligible shareholders will be mailed
a 2023 Form 1099-DIV in early 2024. This will reflect the tax character of all distributions paid in calendar year 2023.
Please consult a tax advisor regarding
the tax consequences of your investment in the fund.
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| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 33
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Investment objective, principal
investment strategies, and principal risks
Unaudited
Investment Objective
The fund’s primary investment
objective is to provide a high level of current income, consistent with preservation of capital. The fund’s secondary investment objective is to provide growth of capital to the extent consistent with its
primary investment objective. The fund seeks to achieve its objectives by investing in securities that, in the opinion of the Advisor, may be undervalued relative to similar securities in the marketplace.
Principal Investment Strategies
Under normal market conditions, the
fund invests at least 80% of its assets (net assets plus borrowings for investment purposes) in preferred stocks and other preferred securities, including convertible preferred securities. This is a non-fundamental
policy and may be changed by the Board of Trustees of the fund provided that shareholders are provided with at least 60 days prior written notice of any change as required by the rules under the 1940 Act. The fund
intends to invest primarily in fully taxable preferred securities. The fund’s portfolio of preferred securities may include both fixed rate and adjustable rate securities. The allocation of the fund’s
assets in various types of preferred, debt and equity securities may vary from time to time depending upon the Advisor’s assessment of market conditions.
The fund will invest at least 50% of
its total assets in preferred securities and other fixed-income securities that are rated investment grade (i.e., at least Baa by a nationally recognized statistical rating organization such as Moody’s Investors
Service, Inc. (“Moody’s”) or BBB by Standard & Poor’s Ratings Services (“S&P”)), or in unrated securities determined by the Advisor to be of comparable credit quality. The
fund may invest up to 50% of its total assets in preferred securities and other fixed income securities rated below investment grade (rated below Baa by Moody’s or below BBB by S&P), or in comparable unrated
securities. Below investment grade securities must be rated B or higher by either S&P or Moody’s or determined to be of comparable quality.These investment policies are based on credit quality ratings at the
time of acquisition.
The Advisor seeks to produce
superior results by focusing on the business cycle and individual security fundamentals and less so on interest rate and duration. In structuring the portfolio, the Advisor seeks to add investment value in two
ways:
| •
| 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
|
The fund may invest in corporate
bonds, common stock, securities issued by the U.S. government or its related agencies, real estate investment trusts (“REITs”) and money market instruments. The fund may invest up to 20% of its total
assets in securities of corporate and governmental issuers located outside the United States that are traded or denominated in U.S. dollars. The fund may invest up to 20% of its assets in illiquid securities
including, but not limited to, restricted securities, securities that may be resold pursuant to Rule 144A under the Securities Act of 1933, as amended, but that are deemed to be illiquid, and repurchase agreements
with maturities in excess of seven days. The fund concentrates its investments in securities of issuers in the industries composing the utilities sector, which includes telecommunication companies, meaning that the
fund will invest 25% or more of its total assets in the industries composing the utilities sector. The fund may also invest in derivatives such as credit default swaps, futures, options, swaps, reverse repurchase
agreements and options on futures.
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| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
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The fund may issue preferred shares
or debt obligations to establish leverage, to the extent permitted by the 1940 Act. The fund generally will not issue preferred shares or borrow unless the Advisor expects that the fund will achieve a greater return
on such borrowed funds than the additional costs the fund incurs as a result of such borrowing. The fund may also engage in reverse repurchase agreements and invest in derivatives to establish investment leverage or
for temporary purposes.
Principal Risks
As is the case with all
exchange-listed closed-end funds, shares of this fund may trade at a discount or a premium to the fund’s net asset value (NAV). An investment in the fund is subject to investment and market risks, including the
possible loss of the entire principal invested.
The fund’s main risks are
listed below in alphabetical order, not in order of importance.
Changing distribution level &
return of capital risk. There is no guarantee prior distribution levels will be maintained, and distributions may include a substantial tax return of capital. A return of capital is the return of all or a portion
of a shareholder’s investment in the fund. For the fiscal year ended July 31, 2023, the fund’s aggregate distributions included a return of capital of $0.27 per share, or 18.01% of aggregate
distributions, which could impact the tax treatment of a subsequent sale of fund shares.
Concentration risk. Because the fund may focus on one or more industries or sectors of the economy, its performance depends in large part on the performance of those industries or sectors. As a result, the
value of an investment may fluctuate more widely since it is more susceptible to market, economic, political, regulatory, and other conditions and risks affecting those industries or sectors than a fund that invests
more broadly across industries and sectors.
Credit and counterparty risk. The issuer or guarantor of a fixed-income security, the counterparty to an over-the-counter derivatives contract, or a borrower of fund securities may not make timely payments or otherwise
honor its obligations. U.S. government securities are subject to varying degrees of credit risk depending upon the nature of their support. A downgrade or default affecting any of the fund’s securities could
affect the fund’s performance.
Cybersecurity and operational
risk. Cybersecurity breaches may allow an unauthorized party to gain access to fund assets, customer data, or proprietary information, or cause a fund or its service providers to suffer data
corruption or lose operational functionality. Similar incidents affecting issuers of a fund’s securities may negatively impact performance. Operational risk may arise from human error, error by third parties,
communication errors, or technology failures, among other causes.
Economic and market events risk. Events in the U.S. and global financial markets, including actions taken by the U.S. Federal Reserve or foreign central banks to stimulate or stabilize economic growth, may at times result
in unusually high market volatility, which could negatively impact performance. Reduced liquidity in credit and fixed-income markets could adversely affect issuers worldwide. Banks and financial services companies
could suffer losses if interest rates rise or economic conditions deteriorate.
As a result of continued political
tensions and armed conflicts, including the Russian invasion of Ukraine commencing in February of 2022, the extent and ultimate result of which are unknown at this time, the United States and the EU, along with the
regulatory bodies of a number of countries, have imposed economic sanctions on certain Russian corporate entities and individuals, and certain sectors of Russia’s economy, which may result in, among other
things, the continued devaluation of Russian currency, a downgrade in the country’s credit rating, and/or a decline in the value and liquidity of Russian securities, property or interests. These sanctions could
also result in the immediate freeze of Russian securities and/or funds invested in prohibited assets, impairing the ability of a fund to buy, sell, receive or deliver those securities and/or assets. These sanctions or
the threat of additional sanctions could also result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. The United States and other
nations or international
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 35
|
organizations may also impose additional economic
sanctions or take other actions that may adversely affect Russia-exposed issuers and companies in various sectors of the Russian economy. Any or all of these potential results could lead Russia’s economy into a
recession. Economic sanctions and other actions against Russian institutions, companies, and individuals resulting from the ongoing conflict may also have a substantial negative impact on other economies and
securities markets both regionally and globally, as well as on companies with operations in the conflict region, the extent to which is unknown at this time. The United States and the EU have also imposed similar
sanctions on Belarus for its support of Russia’s invasion of Ukraine. Additional sanctions may be imposed on Belarus and other countries that support Russia. Any such sanctions could present substantially
similar risks as those resulting from the sanctions imposed on Russia, including substantial negative impacts on the regional and global economies and securities markets.
A widespread health crisis such as a
global pandemic could cause substantial market volatility, exchange trading suspensions and closures, and affect fund performance. For example, the novel coronavirus pandemic (COVID-19) has resulted and may continue
to result in significant disruptions to global business activity and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls, and
supply chain disruptions, among others. The impact of a health crisis and other epidemics and pandemics that may arise in the future, could affect the global economy in ways that cannot necessarily be foreseen at the
present time. A health crisis may exacerbate other preexisting political, social, and economic risks. Any such impact could adversely affect the fund’s performance, resulting in losses to your investment.
Equity securities risk. The price of equity securities may decline due to changes in a company’s financial condition or overall market conditions. Securities the manager believes are undervalued may never
realize their full potential value, and in certain markets value stocks may underperform the market as a whole.
ESG integration risk. The manager considers ESG factors that it deems relevant or additive, along with other material factors and analysis, when managing the fund. The portion of the fund’s investments
for which the manager considers these ESG factors may vary, and could increase or decrease over time. In certain situations, the extent to which these ESG factors may be applied according to the manager’s
integrated investment process may not include U.S. Treasuries, government securities, or other asset classes. ESG factors may include, but are not limited to, matters regarding board diversity, climate change
policies, and supply chain and human rights policies. Incorporating ESG criteria and making investment decisions based on certain ESG characteristics, as determined by the manager, carries the risk that the fund may
perform differently, including underperforming, funds that do not utilize ESG criteria, or funds that utilize different ESG criteria. Integration of ESG factors into the fund’s investment process may result in
the manager making different investments for the fund than for a fund with a similar investment universe and/or investment style that does not incorporate such considerations in its investment strategy or processes,
and the fund’s investment performance may be affected. Because ESG factors are one of many considerations for the fund, the manager may nonetheless include companies with low ESG characteristics or exclude
companies with high ESG characteristics in the fund’s investments.
Fixed-income securities risk. A rise in interest rates typically causes bond prices to fall. The longer the average maturity or duration of the bonds held by a fund, the more sensitive it will likely be to
interest-rate fluctuations. An issuer may not make all interest payment or repay all or any of the principal borrowed. Changes in a security’s credit qualify may adversely affect fund performance. Increases in
real interest rates generally cause the price of inflation-protected debt securities to decrease.
Foreign securities risk. Less information may be publicly available regarding foreign issuers, including foreign government issuers. Foreign securities may be subject to foreign taxes and may be more volatile than
U.S. securities. Currency fluctuations and political and economic developments may adversely impact the value of foreign securities. If applicable, depositary receipts are subject to most of the risks associated with
investing in foreign securities directly because the value of a depositary receipt is dependent upon the market price of the underlying foreign equity security. Depositary receipts are also subject to liquidity
risk.
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| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
Hedging, derivatives, and other
strategic transactions risk. Hedging, derivatives, and other strategic transactions may increase a fund’s volatility and could produce disproportionate losses, potentially more than the fund’s principal
investment. Risks of these transactions are different from and possibly greater than risks of investing directly in securities and other traditional instruments. Under certain market conditions, derivatives could
become harder to value or sell and may become subject to liquidity risk (i.e., the inability to enter into closing transactions). Derivatives and other strategic transactions that the fund intends to utilize include:
credit default swaps, futures contracts, options, and swaps, reverse repurchase agreements and options on futures. Futures contracts, options, and swaps generally are subject to counterparty risk. In addition, swaps
may be subject to interest-rate and settlement risk, and the risk of default of the underlying reference obligation. An event of default or insolvency of the counterparty to a reverse repurchase agreement could result
in delays or restrictions with respect to the fund’s ability to dispose of the underlying securities. In addition, a reverse repurchase agreement may be considered a form of leverage and may, therefore, increase
fluctuations in the fund’s NAV.
Illiquid and restricted
securities risk. Illiquid and restricted securities may be difficult to value and may involve greater risks than liquid securities. Illiquidity may have an adverse impact on a particular security’s
market price and the fund’s ability to sell the security.
Leveraging risk. Issuing preferred shares or using derivatives may result in a leveraged portfolio. Leveraging long exposures increases a fund’s losses when the value of its investments declines.
Some derivatives have the potential for unlimited loss, regardless of the size of the initial investment. The fund also utilizes a Credit Facility Agreement to increase its assets available for investment. See
“Note 6 —Leverage risk” above.
LIBOR discontinuation risk. The publication of the London Interbank Offered Rate (LIBOR), which many debt securities, derivatives and other financial instruments have used or continue to use as the reference or
benchmark rate for interest rate calculations, was discontinued for certain maturities on December 31, 2021, and ceased publishing the remaining and most liquid U.S. LIBOR maturities on June 30, 2023 on a
representative basis. The 1-,3- and 6-month USD LIBOR maturities will continue to be published based on a synthetic methodology through September 30, 2024 and are permitted to be used in all legacy contracts except
cleared derivatives. The transition process away from LIBOR may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates, and the eventual use of an alternative
reference rate may adversely affect the fund’s performance. In addition, the usefulness of LIBOR may deteriorate in the period leading up to its discontinuation, which could adversely affect the liquidity or
market value of securities that use LIBOR.
Liquidity risk. The extent (if at all) to which a security may be sold or a derivative position closed without negatively impacting its market value may be impaired by reduced market activity or
participation, legal restrictions, or other economic and market impediments. Widespread selling of fixed-income securities to satisfy redemptions during periods of reduced demand may adversely impact the price or
salability of such securities.
Lower-rated and high-yield
fixed-income securities risk. Lower-rated and high-yield fixed-income securities (junk bonds) are subject to greater credit quality risk, risk of default, and price volatility than higher-rated fixed-income securities,
may be considered speculative, and can be difficult to resell.
Preferred and convertible securities
risk. Preferred stock dividends are payable only if declared by the issuer’s board. Preferred stock may be subject to redemption provisions. The market values of convertible securities
tend to fall as interest rates rise and rise as interest rates fall. Convertible preferred stock’s value can depend heavily upon the underlying common stock’s value.
Real estate investment trust
risk. REITs, pooled investment vehicles that typically invest in real estate directly or in loans collateralized by real estate, carry risks associated with owning real estate, including the
potential for a decline in value due to economic or market conditions.
Real estate securities risk. Securities of companies in the real estate industry carry risks associated with owning real estate, including the potential for a decline in value due to economic or market
conditions.
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| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 37
|
U.S. Government agency
obligations risk. U.S. government-sponsored entities such as Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Banks,
although chartered or sponsored by Congress, are not funded by congressional appropriations and the debt securities that they issue are neither guaranteed nor issued by the U.S. government. Such debt securities are
subject to the risk of default on the payment of interest and/or principal, similar to the debt securities of private issuers. The maximum potential liability of the issuers of some U.S. government obligations may
greatly exceed their current resources, including any legal right to support from the U.S. government. Although the U.S. government has provided financial support to Fannie Mae and Freddie Mac in the past, there can
be no assurance that it will support these or other government-sponsored entities in the future.
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| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
ADDITIONAL INFORMATION
Unaudited
The fund is a closed-end,
diversified management investment company, common shares of which were initially offered to the public on November 29, 2002 and are publicly traded on the New York Stock Exchange (the NYSE).
Dividends and distributions
During the year ended July 31, 2023,
distributions from net investment income totaling $1.2151 per share and tax return of capital totalling $0.2669 per share were paid to shareholders. The dates of payments and the amounts per share were as follows:
| Payment Date
| Income Distributions
|
| 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
|
| February 28, 2023
| 0.1235
|
| March 31, 2023
| 0.1235
|
| April 28, 2023
| 0.1235
|
| May 31, 2023
| 0.1235
|
| June 30, 2023
| 0.1235
|
| July 31, 2023
| 0.1235
|
| Total
| $1.4820
|
Dividend reinvestment plan
The fund’s Dividend
Reinvestment Plan (the Plan) provides that distributions of dividends and capital gains are automatically reinvested in common shares of the fund by Computershare Trust Company, N.A. (the Plan Agent). Every
shareholder holding at least one full share of the fund is entitled to participate in the Plan. In addition, every shareholder who became a shareholder of the fund after June 30, 2011, and holds at least one full
share of the fund will be automatically enrolled in the Plan. Shareholders may withdraw from the Plan at any time and shareholders who do not participate in the Plan will receive all distributions in cash.
If the fund declares a dividend or
distribution payable either in cash or in common shares of the fund and the market price of shares on the payment date for the distribution or dividend equals or exceeds the fund’s net asset value per share
(NAV), the fund will issue common shares to participants at a value equal to the higher of NAV or 95% of the market price. The number of additional shares to be credited to each participant’s account will be
determined by dividing the dollar amount of the distribution or dividend by the higher of NAV or 95% of the market price. If the market price is lower than NAV, or if dividends or distributions are payable only in
cash, then participants will receive shares purchased by the Plan Agent on participants’ behalf on the NYSE or otherwise on the open market. If the market price exceeds NAV before the Plan Agent has completed
its purchases, the average per share purchase price may exceed NAV, resulting in fewer shares being acquired than if the fund had issued new shares.
There are no brokerage charges with
respect to common shares issued directly by the fund. However, whenever shares are purchased or sold on the NYSE or otherwise on the open market, each participant will pay a pro rata portion of brokerage trading fees,
currently $0.05 per share purchased or sold. Brokerage trading fees will be deducted from amounts to be invested.
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| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 39
|
The reinvestment of dividends and
net capital gains distributions does not relieve participants of any income tax that may be payable on such dividends or distributions.
Shareholders participating in the
Plan may buy additional shares of the fund through the Plan at any time in amounts of at least $50 per investment, up to a maximum of $10,000, with a total calendar year limit of $100,000. Shareholders will be charged
a $5 transaction fee plus $0.05 per share brokerage trading fee for each order. Purchases of additional shares of the fund will be made on the open market. Shareholders who elect to utilize monthly electronic fund
transfers to buy additional shares of the fund will be charged a $2 transaction fee plus $0.05 per share brokerage trading fee for each automatic purchase. Shareholders can also sell fund shares held in the Plan
account at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor. The Plan Agent will mail a check (less applicable brokerage
trading fees) on settlement date. Pursuant to regulatory changes, effective September 5, 2017, the settlement date is changed from three business days after the shares have been sold to two business days after the
shares have been sold. If shareholders choose to sell shares through their stockbroker, they will need to request that the Plan Agent electronically transfer those shares to their stockbroker through the Direct
Registration System.
Shareholders participating in the
Plan may withdraw from the Plan at any time by contacting the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor. Such termination will be effective
immediately if the notice is received by the Plan Agent prior to any dividend or distribution record date; otherwise, such termination will be effective on the first trading day after the payment date for such
dividend or distribution, with respect to any subsequent dividend or distribution. If shareholders withdraw from the Plan, their shares will be credited to their account; or, if they wish, the Plan Agent will sell
their full and fractional shares and send the shareholders the proceeds, less a transaction fee of $5 and less brokerage trading fees of $0.05 per share. If a shareholder does not maintain at least one whole share of
common stock in the Plan account, the Plan Agent may terminate such shareholder’s participation in the Plan after written notice. Upon termination, shareholders will be sent a check for the cash value of any
fractional share in the Plan account, less any applicable broker commissions and taxes.
Shareholders who hold at least one
full share of the fund may join the Plan by notifying the Plan Agent by telephone, in writing or by visiting the Plan Agent’s website at www.computershare.com/investor. If received in proper form by the Plan
Agent before the record date of a dividend, the election will be effective with respect to all dividends paid after such record date. If shareholders wish to participate in the Plan and their shares are held in the
name of a brokerage firm, bank or other nominee, shareholders should contact their nominee to see if it will participate in the Plan. If shareholders wish to participate in the Plan, but their brokerage firm, bank or
other nominee is unable to participate on their behalf, they will need to request that their shares be re-registered in their own name, or they will not be able to participate. The Plan Agent will administer the Plan
on the basis of the number of shares certified from time to time by shareholders as representing the total amount registered in their name and held for their account by their nominee.
Experience under the Plan may
indicate that changes are desirable. Accordingly, the fund and the Plan Agent reserve the right to amend or terminate the Plan. Participants generally will receive written notice at least 90 days before the effective
date of any amendment. In the case of termination, participants will receive written notice at least 90 days before the record date for the payment of any dividend or distribution by the fund.
All correspondence or requests for
additional information about the Plan should be directed to Computershare Trust Company, N.A., at the address stated below, or by calling 800-852-0218, 201-680-6578 (For International Telephone Inquiries) and
800-952-9245 (For the Hearing Impaired (TDD)).
Shareholder communication and
assistance
If you have any questions concerning
the fund, we will be pleased to assist you. If you hold shares in your own name and not with a brokerage firm, please address all notices, correspondence, questions or other communications regarding the fund to the
transfer agent at:
| 40
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
Regular Mail:
Computershare
P.O. Box 43006
Providence, RI 02940-3078
Registered or Overnight Mail:
Computershare
150 Royall Street, Suite 101
Canton, MA 02021
If your shares are held with a
brokerage firm, you should contact that firm, bank or other nominee for assistance.
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| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 41
|
SHAREHOLDER MEETING
The Fund held its Annual Meeting
of Shareholders on Monday, February 21, 2023. The following proposal was considered by the shareholders:
THE PROPOSAL PASSED ON FEBRUARY 21,
2023
Proposal: To elect one (1) Trustee (Noni L. Ellison) to serve for a 1-year term ending at the 2024 Annual Meeting of Shareholders. To elect two (2) Trustees (Dean C. Garfield and Patricia
Lizarraga) to serve for a 2-year term ending at the 2025 Annual Meeting of Shareholders, and to elect six (6) Trustees (James R. Boyle, William H. Cunningham, Grace K. Fey, Paul Lorentz, Hassell H. McClellan, and
Gregory A. Russo) to serve for a 3-year term ending at the 2026 Annual Meeting of Shareholders.
|
| Total votes
for the nominee
| Total votes withheld
from the nominee
|
| Independent Trustees
|
|
|
| James R. Boyle
| 14,851,923.052
| 546,187.018
|
| William H. Cunningham
| 14,784,520.052
| 613,590.018
|
| Noni L. Ellison
| 14,638,313.052
| 759,797.018
|
| Grace K. Fey
| 14,646,927.052
| 751,183.018
|
| Dean C. Garfield
| 14,824,452.052
| 573,658.018
|
| Patricia Lizarraga
| 14,649,174.052
| 748,936.018
|
| Hassell H. McClellan
| 14,739,168.052
| 658,942.018
|
| Gregory A. Russo
| 14,827,113.052
| 570,997.018
|
| Non-Independent Trustees
|
|
|
| Paul Lorentz
| 14,863,240.052
| 534,870.018
|
Trustees whose term of office
continued after the Annual Meeting of Shareholders because they were not up for election were: Andrew G. Arnott, Deborah C. Jackson, Steven R. Pruchansky, and Frances G. Rathke.
| 42
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
EVALUATION OF ADVISORY AND
SUBADVISORY AGREEMENTS BY THE BOARD OF TRUSTEES
This section describes the
evaluation by the Board of Trustees (the Board) of John Hancock Preferred Income Fund II (the fund) of the Advisory Agreement (the Advisory Agreement) with John Hancock Investment Management LLC (the Advisor) and the
Subadvisory Agreement (the Subadvisory Agreement) with Manulife Investment Management (US) LLC (the Subadvisor). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior
to the June 26-29, 2023 meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at a meeting held on May 30 - June 1,
2023. The Trustees who are not “interested persons” of the Trust as defined by the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees) also met separately to evaluate and
discuss the information presented, including with counsel to the Independent Trustees and a third-party consulting firm.
Approval of Advisory and Subadvisory
Agreements
At meetings held on June 26-29,
2023, the Board, including the Trustees who are not parties to any Agreement or considered to be interested persons of the fund under the 1940 Act, reapproved for an annual period the continuation of the Advisory
Agreement between the fund and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory
Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense
information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and other pertinent information, such as the
market premium and discount information, and, with respect to the Subadvisor, comparative performance information for comparably managed accounts, as applicable, and other information provided by the Advisor and the
Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor’s revenues and costs of
providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given
to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board noted that the evaluation process with respect to the Advisor and the Subadvisor is an
ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board (including its various committees) at prior meetings with respect to the services
provided by the Advisor and the Subadvisor to the fund, including quarterly performance reports prepared by management containing reviews of investment results and prior presentations from the Subadvisor with respect
to the fund. The information received and considered by the Board in connection with the May and June meetings and throughout the year was both written and oral. The Board noted the affiliation of the Subadvisor with
the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor’s affiliates. The
Board considered the Advisory Agreement and the Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Advisor and Subadvisor in providing services to
the fund.
Throughout the process, the Board
asked questions of and requested additional information from management. The Board is assisted by counsel for the fund and the Independent Trustees are also separately assisted by independent legal counsel throughout
the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed
the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
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| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
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|
Approval of Advisory Agreement
In approving the Advisory Agreement
with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends
prevailing generally in the economy, the securities markets, and the industry) and did not treat any single factor as determinative, and each Trustee may have attributed different weights to different factors. The
Board’s conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board’s ongoing regular review of fund performance and operations
throughout the year.
Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the
Advisor relating to its operations and personnel, descriptions of its organizational and management structure, and information regarding the Advisor’s compliance and regulatory history, including its Form ADV.
The Board also noted that on a regular basis it receives and reviews information from the fund’s Chief Compliance Officer (CCO) regarding the fund’s compliance policies and procedures established pursuant
to Rule 38a-1 under the 1940 Act. The Board observed that the scope of services provided by the Advisor, and of the undertakings required of the Advisor in connection with those services, including maintaining and
monitoring its own and the fund’s compliance programs, risk management programs, liquidity management programs, derivatives risk management programs, and cybersecurity programs, had expanded over time as a
result of regulatory, market and other developments. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision
of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers. The Board also considered the
significant risks assumed by the Advisor in connection with the services provided to the fund including entrepreneurial risk in sponsoring new funds and ongoing risks including investment, operational, enterprise,
litigation, regulatory and compliance risks with respect to all funds.
The Board also considered the
differences between the Advisor’s services to the fund and the services it provides to other clients that are not closed-end funds, including, for example, the differences in services related to the regulatory
and legal obligations of closed-end funds.
In considering the nature, extent,
and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor’s management and the quality of the performance of the Advisor’s duties, through
Board meetings, discussions and reports during the preceding year and through each Trustee’s experience as a Trustee of the fund and of the other funds in the John Hancock group of funds complex (the John
Hancock Fund Complex).
In the course of their deliberations
regarding the Advisory Agreement, the Board considered, among other things:
| (a)
| the skills and competency with which the Advisor has in the past managed the fund’s affairs and its subadvisory relationship, the Advisor’s oversight and monitoring of the Subadvisor’s investment
performance and compliance programs, such as the Subadvisor’s compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the
Advisor’s timeliness in responding to performance issues;
|
| (b)
| the background, qualifications and skills of the Advisor’s personnel;
|
| (c)
| the Advisor’s compliance policies and procedures and its responsiveness to regulatory changes and fund industry developments;
|
| 44
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
| (d)
| the Advisor’s administrative capabilities, including its ability to supervise the other service providers for the fund, as well as the Advisor’s oversight of any securities lending activity, its
monitoring of class action litigation and collection of class action settlements on behalf of the fund, and bringing loss recovery actions on behalf of the fund;
|
| (e)
| the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund;
|
| (f)
| the Advisor’s initiatives intended to improve various aspects of the fund’s operations and investor experience with the fund; and
|
| (g)
| the Advisor’s reputation and experience in serving as an investment advisor to the fund and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety
of investments.
|
The Board concluded that the Advisor
may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In considering the fund’s performance, the Board noted that it reviews at its regularly scheduled meetings information about the fund’s performance results. In connection with
the consideration of the Advisory Agreement, the Board:
| (a)
| reviewed information prepared by management regarding the fund’s performance;
|
| (b)
| considered the comparative performance of an applicable benchmark index;
|
| (c)
| considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data;
|
| (d)
| took into account the Advisor’s analysis of the fund’s performance; and
|
| (e)
| considered the fund’s share performance and premium/discount information.
|
The Board noted that while it found
the data provided by the independent third party generally useful it recognized its limitations, including in particular that the data may vary depending on the end date selected and the results of the performance
comparisons may vary depending on the selection of the peer group. The Board noted that, based on its net asset value, the fund outperformed its benchmark index for the five- and ten-year periods ended December 31,
2022 and underperformed its benchmark index for the one- and three-year periods ended December 31, 2022. The Board also noted that, based on its net asset value, the fund underperformed its peer group median for the
one-, three-, five- and ten-year periods ended December 31, 2022. The Board took into account management’s discussion of the factors that contributed to the fund’s performance for the benchmark index for
the one- and three-year periods and relative to its peer group median for the one-, three-, five- and ten-year periods, including the impact of past and current market conditions on the fund’s strategy and
management’s outlook for the fund. The Board concluded that the fund’s performance is being monitored and reasonably addressed, where appropriate.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of fund data, including, among other data, the fund’s contractual and net management fees
(and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund in light of the nature, extent and quality of the
management and advisory and subadvisory services provided by the Advisor and the Subadvisor. The Board considered the fund’s ranking within a smaller group of peer funds chosen by the independent third-party
provider, as well as the fund’s ranking within a broader group of funds. In comparing the fund’s contractual and net management fees to those of comparable funds, the Board noted that such fees include
both advisory and administrative costs.
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 45
|
The Board also took into account the
impact of leverage on fund expenses. The Board took into account the management fee structure, including that management fees for the fund were based on the fund’s total managed assets, which are attributable to
common stock and borrowings.
The Board noted that net management
fees and net total expenses for the fund are lower than the peer group median. The Board also noted that the contractual fee waiver and/or expense reimbursement reduces certain expenses of the fund.
The Board took into account
management’s discussion with respect to the overall management fee, the fees of the Subadvisor, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee, in each case
in light of the services rendered for those amounts and the risks undertaken by the Advisor. The Board also noted that the Advisor pays the subadvisory fee. In addition, the Board took into account that management had
agreed to implement an overall fee waiver across the complex, including the fund, which is discussed further below. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged
by the Advisor or one of its advisory affiliates to other clients (including other funds in the John Hancock Fund Complex) having similar investment mandates, if any. The Board considered any differences between the
Advisor’s and Subadvisor’s services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable in
light of the nature, extent and quality of the services provided to the fund under the Advisory Agreement.
Profitability/Fall out benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor’s relationship
with the fund, the Board:
| (a)
| reviewed financial information of the Advisor;
|
| (b)
| reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund;
|
| (c)
| received and reviewed profitability information with respect to the John Hancock Fund Complex as a whole and with respect to the fund;
|
| (d)
| received information with respect to the Advisor’s allocation methodologies used in preparing the profitability data and considered that the Advisor hired an independent third-party consultant to provide an
analysis of the Advisor’s allocation methodologies;
|
| (e)
| considered that the Advisor also provides administrative services to the fund pursuant to an administrative services agreement;
|
| (f)
| noted that the fund’s Subadvisor is an affiliate of the Advisor;
|
| (g)
| noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund;
|
| (h)
| noted that the subadvisory fees for the fund are paid by the Advisor;
|
| (i)
| considered the Advisor’s ongoing costs and expenditures necessary to improve services, meet new regulatory and compliance requirements, and adapt to other challenges impacting the fund industry; and
|
| (j)
| considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the risks that it assumes as Advisor, including
entrepreneurial, operational, reputational, litigation and regulatory risk.
|
Based upon its review, the Board
concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the fund was reasonable and not excessive.
| 46
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
Economies of scale. In considering the extent to which the fund may realize any economies of scale and whether fee levels reflect these economies of scale for the benefit of the fund shareholders, the Board
noted that the fund has a limited ability to increase its assets as a closed-end fund. The Board took into account management’s discussions of the current advisory fee structure, and, as noted above, the
services the Advisor provides in performing its functions under the Advisory Agreement and in supervising the Subadvisor.
The Board also considered potential
economies of scale that may be realized by the fund as part of the John Hancock Fund Complex. Among them, the Board noted that the Advisor has contractually agreed to waive a portion of its management fee and/or
reimburse expenses for certain funds of the John Hancock Fund Complex, including the fund (the participating portfolios). This waiver is based on the aggregate net assets of all the participating portfolios. The
amount of the reimbursement is calculated daily and allocated among all the participating portfolios in proportion to the daily net assets of each fund. The Board also considered the Advisor’s overall operations
and its ongoing investment in its business in order to expand the scale of, and improve the quality of, its operations that benefit the fund. The Board noted that although the fund does not have breakpoints in its
contractual management fee, its net management fee and total expenses are each below the peer group median. The Board determined that the management fee structure for the fund was reasonable.
Approval of Subadvisory Agreement
In making its determination with
respect to approval of the Subadvisory Agreement, the Board reviewed:
| (1)
| information relating to the Subadvisor’s business, including current subadvisory services to the fund (and other funds in the John Hancock Fund Complex);
|
| (2)
| the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and
|
| (3)
| the subadvisory fee for the fund and to the extent available, comparable fee information prepared by an independent third party provider of fund data.
|
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor’s Form ADV, as well as took
into account information presented throughout the past year. The Board considered the Subadvisor’s current level of staffing and its overall resources, as well as received information relating to the
Subadvisor’s compensation program. The Board reviewed the Subadvisor’s history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the
Subadvisor’s investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor’s compliance program and any disciplinary history. The Board
also considered the Subadvisor’s risk assessment and monitoring process. The Board reviewed the Subadvisor’s regulatory history, including whether it was involved in any regulatory actions or
investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its
operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the fund’s CCO and his staff conduct regular, periodic compliance reviews with the
Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with
the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the
Subadvisor’s investment process and philosophy. The Board took into account that the Subadvisor’s responsibilities include the development and maintenance of an investment program for the fund that is
consistent with the fund’s investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance
controls related to performance of these services. The Board also received information with respect to the Subadvisor’s brokerage policies and practices, including with respect to best execution and soft
dollars.
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 47
|
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the
Subadvisory Agreement are paid by the Advisor and not the fund. The Board also considered any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered
other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor’s relationship with the fund, such as the opportunity to provide advisory services to additional funds in
the John Hancock Fund Complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays subadvisory fees to the Subadvisor. As noted above, the Board also considered the
fund’s subadvisory fee as compared to similarly situated investment companies deemed to be comparable to the fund as included in the report prepared by the independent third party provider of fund data, to the
extent available. The Board noted that the limited size of the Lipper peer group was not sufficient for comparative purposes. The Board also took into account the subadvisory fee paid by the Advisor to the Subadvisor
with respect to the fund and compared them to fees charged by the Subadvisor to manage other subadvised portfolios and portfolios not subject to regulation under the 1940 Act, as applicable.
Subadvisor performance. As noted above, the Board considered the fund’s performance as compared to the fund’s peer group and the benchmark index and noted that the Board reviews information about the
fund’s performance results at its regularly scheduled meetings. The Board noted the Advisor’s expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the
Subadvisor. The Board was mindful of the Advisor’s focus on the Subadvisor’s performance. The Board also noted the Subadvisor’s long-term performance record for similar accounts, as
applicable.
The Board’s decision to
approve the Subadvisory Agreement was based on a number of determinations, including the following:
| (1)
| the Subadvisor has extensive experience and demonstrated skills as a manager;
|
| (2)
| the performance of the fund is being monitored and reasonably addressed, where appropriate; and
|
| (3)
| the subadvisory fees are reasonable in relation to the level and quality of services being provided under the Subadvisory Agreement.
|
***
Based on the Board’s
evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the
Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement
for an additional one-year period.
| 48
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
This chart
provides information about the Trustees and Officers who oversee your John Hancock fund. Officers elected by the Trustees manage the day-to-day operations of the fund and execute policies formulated by the
Trustees.
| Independent Trustees
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
| Trustee
of the
Trust
since1
| Number of John
Hancock funds
overseen by
Trustee
|
| Hassell H. McClellan,2 Born: 1945
| 2012
| 186
|
| Trustee and Chairperson of the Board
|
|
|
| Director/Trustee, Virtus Funds (2008-2020); Director, The Barnes Group (2010-2021); Associate Professor, The Wallace E. Carroll School of Management,
Boston College (retired 2013). Trustee (since 2005) and Chairperson of the Board (since 2017) of various trusts within the John Hancock Fund Complex.
|
| James R. Boyle, Born: 1959
| 2015
| 183
|
| Trustee
|
|
|
| Board Member, United of Omaha Life Insurance Company (since 2022). Board Member, Mutual of Omaha Investor Services, Inc. (since 2022). Foresters
Financial, Chief Executive Officer (2018–2022) and board member (2017–2022). Manulife Financial and John Hancock, more than 20 years, retiring in 2012 as Chief Executive Officer, John Hancock and Senior
Executive Vice President, Manulife Financial. Trustee of various trusts within the John Hancock Fund Complex (2005–2014 and since 2015).
|
| William H. Cunningham,3 Born: 1944
| 2002
| 184
|
| Trustee
|
|
|
| Professor, University of Texas, Austin, Texas (since 1971); former Chancellor, University of Texas System and former President of the University of
Texas, Austin, Texas; Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000). Trustee of various trusts within the John Hancock Fund Complex (since 1986).
|
| Noni L. Ellison,* Born: 1971
| 2022
| 183
|
| Trustee
|
|
|
| Senior Vice President, General Counsel & Corporate Secretary, Tractor Supply Company (rural lifestyle retailer) (since 2021); General Counsel,
Chief Compliance Officer & Corporate Secretary, Carestream Dental, L.L.C.(2017–2021); Associate General Counsel & Assistant Corporate Secretary, W.W. Grainger, Inc. (global industrial supplier)
(2015–2017); Board Member, Goodwill of North Georgia, 2018 (FY2019)–2020 (FY2021); Board Member, Howard University School of Law Board of Visitors (since 2021); Board Member, University of Chicago Law
School Board of Visitors (since 2016); Board member, Children’s Healthcare of Atlanta Foundation Board (2021–present). Trustee of various trusts within the John Hancock Fund Complex (since 2022).
|
| Grace K. Fey, Born: 1946
| 2012
| 186
|
| Trustee
|
|
|
| Chief Executive Officer, Grace Fey Advisors (since 2007); Director and Executive Vice President, Frontier Capital Management Company
(1988–2007); Director, Fiduciary Trust (since 2009). Trustee of various trusts within the John Hancock Fund Complex (since 2008).
|
| Dean C. Garfield,* Born: 1968
| 2022
| 183
|
| Trustee
|
|
|
| Vice President, Netflix, Inc. (since 2019); President & Chief Executive Officer, Information Technology Industry Council (2009–2019); NYU School of Law Board of
Trustees (since 2021); Member, U.S. Department of Transportation, Advisory Committee on Automation (since 2021); President of the United States Trade Advisory Council (2010–2018); Board Member, College for Every
Student (2017–2021); Board Member, The Seed School of Washington, D.C. (2012–2017). Trustee of various trusts within the John Hancock Fund Complex (since 2022).
|
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 49
|
| Independent Trustees (continued)
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
| Trustee
of the
Trust
since1
| Number of John
Hancock funds
overseen by
Trustee
|
| Deborah C. Jackson, Born: 1952
| 2008
| 185
|
| Trustee
|
|
|
| President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, Amwell Corporation (since 2020); Board of Directors,
Massachusetts Women’s Forum (2018-2020); Board of Directors, National Association of Corporate Directors/New England (2015-2020); Chief Executive Officer, American Red Cross of Massachusetts Bay
(2002–2011); Board of Directors of Eastern Bank Corporation (since 2001); Board of Directors of Eastern Bank Charitable Foundation (since 2001); Board of Directors of Boston Stock Exchange (2002–2008);
Board of Directors of Harvard Pilgrim Healthcare (health benefits company) (2007–2011). Trustee of various trusts within the John Hancock Fund Complex (since 2008).
|
| Steven R. Pruchansky, Born: 1944
| 2002
| 183
|
| Trustee and Vice Chairperson of the Board
|
|
|
| Managing Director, Pru Realty (since 2017); Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (2014-2020); Director and
President, Greenscapes of Southwest Florida, Inc. (until 2000); Member, Board of Advisors, First American Bank (until 2010); Managing Director, Jon James, LLC (real estate) (since 2000); Partner, Right Funding, LLC
(2014-2017); Director, First Signature Bank & Trust Company (until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell Building Corp. (until 1991). Trustee (since 1992), Chairperson of the Board
(2011–2012), and Vice Chairperson of the Board (since 2012) of various trusts within the John Hancock Fund Complex.
|
| Frances G. Rathke,3 Born: 1960
| 2020
| 183
|
| Trustee
|
|
|
| Director, Audit Committee Chair, Oatly Group AB (plant-based drink company) (since 2021); Director, Audit Committee Chair and Compensation Committee
Member, Green Mountain Power Corporation (since 2016); Director, Treasurer and Finance & Audit Committee Chair, Flynn Center for Performing Arts (since 2016); Director and Audit Committee Chair, Planet Fitness
(since 2016); Chief Financial Officer and Treasurer, Keurig Green Mountain, Inc. (2003-retired 2015). Trustee of various trusts within the John Hancock Fund Complex (since 2020).
|
| Gregory A. Russo, Born: 1949
| 2008
| 183
|
| Trustee
|
|
|
| Director and Audit Committee Chairman (2012-2020), and Member, Audit Committee and Finance Committee (2011-2020), NCH Healthcare System, Inc. (holding company for
multi-entity healthcare system); Director and Member (2012-2018), and Finance Committee Chairman (2014-2018), The Moorings, Inc. (nonprofit continuing care community); Global Vice Chairman, Risk & Regulatory
Matters, KPMG LLP (KPMG) (2002–2006); Vice Chairman, Industrial Markets, KPMG (1998–2002). Trustee of various trusts within the John Hancock Fund Complex (since 2008).
|
| 50
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
| Non-Independent Trustees4
|
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s) and other
directorships during past 5 years
| Trustee
of the
Trust
since1
| Number of John
Hancock funds
overseen by
Trustee
|
| Andrew G. Arnott, Born: 1971
| 2017
| 184
|
| Non-Independent Trustee
|
|
|
| Global Head of Retail for Manulife (since 2022); Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife
(2018-2023); Director and Chairman, John Hancock Investment Management LLC (since 2005, including prior positions); Director and Chairman, John Hancock Variable Trust Advisers LLC (since 2006, including prior
positions); Director and Chairman, John Hancock Investment Management Distributors LLC (since 2004, including prior positions); President of various trusts within the John Hancock Fund Complex (2007-2023, including
prior positions). Trustee of various trusts within the John Hancock Fund Complex (since 2017).
|
| Paul Lorentz,† Born: 1968
| 2022
| 183
|
| Non-Independent Trustee
|
|
|
| Global Head, Manulife Wealth and Asset Management (since 2017); General Manager, Manulife, Individual Wealth Management and Insurance (2013–2017); President,
Manulife Investments (2010–2016). Trustee of various trusts within the John Hancock Fund Complex (since 2022).
|
| Principal officers who are not Trustees
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s)
during past 5 years
| Current
Position(s)
with the
Trust
since
|
| Kristie M. Feinberg, Born: 1975
| 2023
|
| President
|
|
| Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (since 2023); CFO and Global Head of Strategy, Manulife
Investment Management (2021-2023, including prior positions); CFO Americas & Global Head of Treasury, Invesco, Ltd., Invesco US (2019-2020, including prior positions); Senior Vice President, Corporate Treasurer
and Business Controller, Oppenheimer Funds (2001-2019, including prior positions); President of various trusts within the John Hancock Fund Complex (since 2023).
|
| Charles A. Rizzo, Born: 1957
| 2007
|
| Chief Financial Officer
|
|
| Vice President, John Hancock Financial Services (since 2008); Senior Vice President, John Hancock Investment Management LLC and John Hancock Variable
Trust Advisers LLC (since 2008); Chief Financial Officer of various trusts within the John Hancock Fund Complex (since 2007).
|
| Salvatore Schiavone, Born: 1965
| 2010
|
| Treasurer
|
|
| Assistant Vice President, John Hancock Financial Services (since 2007); Vice President, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers
LLC (since 2007); Treasurer of various trusts within the John Hancock Fund Complex (since 2007, including prior positions).
|
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 51
|
| Principal officers who are not Trustees (continued)
|
|
Name, year of birth
Position(s) held with fund
Principal occupation(s)
during past 5 years
| Current
Position(s)
with the
Trust
since
|
| Christopher (Kit) Sechler, Born: 1973
| 2018
|
| Secretary and Chief Legal Officer
|
|
| Vice President and Deputy Chief Counsel, John Hancock Investment Management (since 2015); Assistant Vice President and Senior Counsel
(2009–2015), John Hancock Investment Management; Assistant Secretary of John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2009); Chief Legal Officer and Secretary of
various trusts within the John Hancock Fund Complex (since 2009, including prior positions).
|
| Trevor Swanberg, Born: 1979
| 2020
|
| Chief Compliance Officer
|
|
| Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2020); Deputy Chief Compliance Officer, John Hancock
Investment Management LLC and John Hancock Variable Trust Advisers LLC (2019–2020); Assistant Chief Compliance Officer, John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC
(2016–2019); Vice President, State Street Global Advisors (2015–2016); Chief Compliance Officer of various trusts within the John Hancock Fund Complex (since 2016, including prior positions).
|
The business
address for all Trustees and Officers is 200 Berkeley Street, Boston, Massachusetts 02116-5023.
The Fund does
not make available copies of its Statement of Additional Information because the Fund’s shares are not continuously offered and the Statement of Additional Information has not been updated since the Fund’s
last public offering, therefore the information contained in the Statement of Additional Information may be outdated.
| 1
| Ms. Ellison and Ms. Rathke serve as Trustees for a term expiring in 2024; Mr. Arnott, Mr. Garfield, Ms. Jackson, Ms. Lizarraga, and Mr. Pruchansky serve as Trustees for a term expiring in 2025; Mr.
Boyle, Dr. Cunningham, Ms. Fey, Mr. Lorentz, Dr. McClellan and Mr. Russo serve as Trustees for a term expiring in 2026; Mr. Boyle has served as Trustee at various times prior to date listed in the table.
|
| 2
| Member of the Audit Committee as of September 26, 2023.
|
| 3
| Member of the Audit Committee.
|
| 4
| The Trustee is a Non-Independent Trustee due to current or former positions with the Advisor and certain of its affiliates.
|
| *
| Appointed to serve as Independent Trustee effective as of September 20, 2022.
|
| †
| Appointed to serve as Non-Independent Trustee effective as of September 20, 2022.
|
| 52
| JOHN HANCOCK PREFERRED INCOME FUND II | ANNUAL REPORT
|
|
Trustees
Hassell H. McClellan, Chairpersonπ
Steven R. Pruchansky, Vice Chairperson
Andrew G. Arnott†
James R. Boyle
William H. Cunningham*
Grace K. Fey
Noni L. Ellison^
Dean C. Garfield^
Deborah C. Jackson
Patricia Lizarraga*,^,§
Paul Lorentz‡
Frances G. Rathke*
Gregory A. Russo
Officers
Kristie M. Feinberg#
President
Charles A. Rizzo
Chief Financial Officer
Salvatore Schiavone
Treasurer
Christopher (Kit) Sechler
Secretary and Chief Legal Officer
Trevor Swanberg
Chief Compliance Officer
Investment advisor
John Hancock Investment Management
LLC
Subadvisor
Manulife Investment Management (US)
LLC
Portfolio Managers
Joseph H. Bozoyan, CFA
James Gearhart, CFA
Jonas Grazulis, CFA
Caryn E. Rothman, CFA
Custodian
State Street Bank and Trust
Company
Transfer agent
Computershare Shareowner Services,
LLC
Legal counsel
K&L Gates LLP
Independent registered public
accounting firm
PricewaterhouseCoopers LLP
Stock symbol
Listed New York Stock Exchange:
HPF
π Member of the Audit Committee as of September 26, 2023.
† Non-Independent Trustee
* Member of the Audit Committee
^ Appointed to serve as Independent Trustee effective as of September 20, 2022.
§ Effective September 21, 2023, Ms. Lizarraga is no longer a Trustee.
‡ Appointed to serve as Non-Independent Trustee effective as of September 20, 2022.
# Effective June 29, 2023.
The fund’s proxy
voting policies and procedures, as well as the fund proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at
sec.gov or on our website.
All of the fund’s
holdings as of the end of the third month of every fiscal quarter are filed with the SEC on Form N-PORT within 60 days of the end of the fiscal quarter. The fund’s Form N-PORT filings are available on our
website and the SEC’s website, sec.gov.
We make this information
on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-852-0218.
The report is certified
under the Sarbanes-Oxley Act, which requires closed-end funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in
all material respects.
| 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
|
|
| ANNUAL REPORT | JOHN HANCOCK PREFERRED INCOME FUND II
| 53
|
John Hancock family of funds
U.S. EQUITY FUNDS
Blue Chip Growth
Classic Value
Disciplined Value
Disciplined Value Mid Cap
Equity Income
Financial Industries
Fundamental All Cap Core
Fundamental Large Cap Core
Mid Cap Growth
New Opportunities
Regional Bank
Small Cap Core
Small Cap Growth
Small Cap Value
U.S. Global Leaders Growth
U.S. Growth
INTERNATIONAL EQUITY FUNDS
Disciplined Value International
Emerging Markets
Emerging Markets Equity
Fundamental Global Franchise
Global Environmental
Opportunities
Global Equity
Global Shareholder Yield
Global Thematic Opportunities
International Dynamic Growth
International Growth
International Small Company
FIXED-INCOME FUNDS
Bond
California Municipal Bond
Emerging Markets Debt
Floating Rate Income
Government Income
High Yield
High Yield Municipal Bond
Income
Investment Grade Bond
Money Market
Municipal Opportunities
Opportunistic Fixed Income
Short Duration Bond
Short Duration Municipal
Opportunities
Strategic Income Opportunities
ALTERNATIVE FUNDS
Alternative Asset Allocation
Diversified Macro
Infrastructure
Multi-Asset Absolute Return
Real Estate Securities
Seaport Long/Short
The fund’s
investment objectives, risks, charges, and expenses are included in the prospectus and should be considered carefully before investing. For a prospectus, contact your financial professional, call John Hancock
Investment Management at 800-852-0218, or visit the fund’s website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
The John Hancock funds are
distributed by John Hancock Investment Management Distributors LLC. Member FINRA SIPC.
EXCHANGE-TRADED FUNDS
John Hancock Corporate Bond ETF
John Hancock International High
Dividend ETF
John Hancock Mortgage-Backed
Securities ETF
John Hancock Multifactor Developed
International ETF
John Hancock Multifactor Emerging
Markets ETF
John Hancock Multifactor Large Cap
ETF
John Hancock Multifactor Mid Cap
ETF
John Hancock Multifactor Small Cap
ETF
John Hancock Preferred Income
ETF
John Hancock U.S. High Dividend
ETF
ASSET ALLOCATION/TARGET DATE FUNDS
Balanced
Multi-Asset High Income
Lifestyle Blend Portfolios
Lifetime Blend Portfolios
Multimanager Lifestyle
Portfolios
Multimanager Lifetime Portfolios
Preservation Blend Portfolios
ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE FUNDS
ESG Core Bond
ESG International Equity
ESG Large Cap Core
CLOSED-END FUNDS
Asset-Based Lending
Financial Opportunities
Hedged Equity & Income
Income Securities Trust
Investors Trust
Preferred Income
Preferred Income II
Preferred Income III
Premium Dividend
Tax-Advantaged Dividend Income
Tax-Advantaged Global Shareholder
Yield
John Hancock ETF shares are bought
and sold at market price (not NAV), and are not individually redeemed from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by
Foreside Fund Services, LLC, and are subadvised by Manulife Investment Management (US) LLC or Dimensional Fund Advisors LP. Foreside is not affiliated with John Hancock Investment Management Distributors LLC, Manulife
Investment Management (US) LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP
receives compensation from John Hancock in connection with licensing rights to the John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no representation as to
the advisability of investing in, John Hancock Multifactor ETFs.
A trusted brand
John Hancock Investment Management
is a premier asset manager
with a heritage of financial stewardship dating back to 1862. Helping
our shareholders pursue their financial goals is at the core of everything
we do. It’s why we support the role of professional financial advice
and operate with the highest standards of conduct and integrity.
A better way to invest
We serve investors globally through
a unique multimanager approach:
We search the world to find proven portfolio teams with specialized
expertise for every strategy we offer, then we apply robust investment
oversight to ensure they continue to meet our uncompromising
standards and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset
management enables us to provide
a diverse set of investments backed by some of the world’s best
managers, along with strong risk-adjusted returns across asset classes.
“A trusted brand” is
based on a survey of 6,651 respondents conducted by Medallia between 3/18/20 and 5/13/20.
John Hancock Investment Management
LLC, 200 Berkeley Street, Boston, MA 02116-5010, 800-225-5291, jhinvestments.com
Manulife Investment Management, the
Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by its affiliates under license.
9/23
ITEM 2. CODE OF ETHICS.
As of the end of the period, July 31, 2023, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Chief Executive Officer, Chief Financial Officer and Treasurer (respectively, the principal executive officer, the principal financial officer and the principal accounting officer, the "Covered Officers"). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Frances G. Rathke is the audit committee financial expert and is "independent", pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the principal accountant(s) for the audit of the registrant's annual financial statements or services that are normally provided by the accountant(s) in connection with statutory and regulatory filings or engagements amounted to $55,552 for the fiscal year ended July 31, 2023 and $54,196 for the fiscal year ended July 31, 2022. These fees were billed to the registrant and were approved by the registrant's audit committee.
(b) Audit-Related Services
Audit-related fees for assurance and related services by the principal accountant are billed to the registrant or to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser ("control affiliates") that provides ongoing services to the registrant amounted to $5 for the fiscal year ended July 31, 2023 and $212 for the fiscal year ended July 31, 2022. The nature of the services provided was related to a software licensing fee and servicer provided internal controls reviews.
(c) Tax Fees
The aggregate fees billed for professional services rendered by the principal accountant(s) for the tax compliance, tax advice and tax planning ("tax fees") amounted to $5,253 for the fiscal year ended July 31, 2023 and $4,110 for the fiscal year ended July 31, 2022. The nature of the services comprising the tax fees was the review of the registrant's tax returns and tax distribution requirements. These fees were billed to the registrant and were approved by the registrant's audit committee.
(d) All Other Fees.
The nature of the services comprising all other fees is advisory services provided to the investment manager. These fees were approved by the registrant's audit committee. All other fees billed to the registrant for products and services provided by the principal accountant were $0 for the fiscal year ended July 31, 2023 and $362 for the fiscal year ended July 31, 2022.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The trust's Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm (the "Auditor") relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust's Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of audit-related and non-audit services by
the Auditor. The policies and procedures require that any audit-related and non-audit service provided by the Auditor and any non-audit service provided by the Auditor to a fund service provider that relates directly to the operations and financial reporting of a fund are subject to approval by the Audit Committee before such service is provided. Audit-related services provided by the Auditor that are expected to exceed $25,000 per instance/per fund are subject to specific pre-approval by the Audit Committee. Tax services provided by the Auditor that are expected to exceed $30,000 per instance/per fund are subject to specific pre-approval by the Audit Committee.
All audit services, as well as the audit-related and non-audit services that are expected to exceed the amounts stated above, must be approved in advance of provision of the service by formal resolution of the Audit Committee. At the regularly scheduled Audit Committee meetings, the Committee reviews a report summarizing the services, including fees, provided by the Auditor.
(e)(2) Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
Audit-Related Fees, Tax Fees and All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
(f)According to the registrant's principal accountant, for the fiscal year ended July 31, 2023, the percentage of hours spent on the audit of the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons who were not full-time, permanent employees of principal accountant was less than 50%.
(g)The aggregate non-audit fees billed by the registrant's accountant(s) for services rendered to the registrant and rendered to the registrant's control affiliates for each of the last two fiscal years of the registrant were $1,452,111 for the fiscal year ended July 31, 2023 and $1,125,962 for the fiscal year ended July 31, 2022.
(h)The audit committee of the registrant has considered the non-audit services provided by the registrant's principal accountant(s) to the control affiliates and has determined that the services that were not pre-approved are compatible with maintaining the principal accountant(s)' independence.
(i)Not applicable
(j)Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee comprised of independent trustees. The members of the audit committee are as follows:
Frances G. Rathke – Chairperson
Peter S. Burgess – Retired effective December 31, 2022
William H. Cunningham
Patricia Lizarraga, effective September 20, 2022 - September 21, 2023
Hassell H. McClellan, effective September 26, 2023
ITEM 6. SCHEDULE OF INVESTMENTS.
(a)Not applicable.
(b)Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED- END MANAGEMENT INVESTMENT COMPANIES.
See attached exhibit "Proxy Voting Policies and Procedures".
ITEM 8.
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Information about the portfolio managers
Management Biographies
Below is a list of the Manulife Investment Management (US) LLC ("Manulife IM (US)") portfolio managers who share joint responsibility for the day-to-day investment management of the Fund. It provides a brief summary of their business careers over the past five years. The information provided is as of the filing date of this N-CSR.
Joseph H. Bozoyan, CFA
Portfolio Manager
Managing Director and Senior Investment Analyst, Intrinsic Value Team,
Manulife Investment Management (US) LLC (2014–2015)
Director and Senior Investment Manager, Intrinsic Value Team,
Manulife Investment Management (US) LLC (2011–2014)
Began business career in 1993
Managed the fund since 2015
James Gearhart, CFA
Managing Director and Associate Portfolio Manager
Manulife Investment Management (US) LLC since 2022
Began business career in 2011
Managed the Fund since 2022
Jonas Grazulis, CFA
Managing Director and Associate Portfolio Manager
Manulife Investment Management (US) LLC since 2022
Began business career in 2011
Managed the Fund since 2022
Caryn E. Rothman, CFA
Managing Director and Portfolio Manager
Manulife Investment Management (US) LLC since 1996
Began business career in 1996
Managed the Fund since 2022
Other Accounts the Portfolio Managers are Managing
The table below indicates for each portfolio manager information about the accounts over which the portfolio manager has day-to-day investment responsibility. All information on the number of accounts and total assets in the table is as of July 31, 2023. For purposes of the table, "Other Pooled Investment Vehicles" may include investment partnerships and group trusts, and "Other Accounts" may include separate accounts for institutions or individuals, insurance company general or separate accounts, pension funds and other similar institutional accounts.
|
AGER NAME
|
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGER
|
|
Joseph H. Bozoyan, CFA
|
Other Registered Investment Companies: Approximately $3.6 billion – 5 accounts
|
|
|
Other Pooled Investment Vehicles: Approximately $267 million – 2 accounts
|
|
|
Other Accounts: Approximately $37 million – 1 account
|
|
|
|
|
James Gearhart, CFA
|
Other Registered Investment Companies: Approximately $4.9 billion – 7 accounts
|
|
|
Other Pooled Investment Vehicles: Approximately $3,139 million – 12 accounts
|
|
|
Other Accounts: Approximately $37 million – 1 account
|
|
Jonas Grazulis, CFA
|
Other Registered Investment Companies: Approximately $4.9 billion – 7 accounts
|
|
|
Other Pooled Investment Vehicles: Approximately $3,139 million – 12 accounts
|
|
|
Other Accounts: Approximately $37 million – 1 account
|
|
Caryn E. Rothman, CFA
|
Other Registered Investment Companies: Approximately $5 billion – 8 accounts
|
|
|
Other Pooled Investment Vehicles: Approximately $3,799 million – 14 accounts
|
|
|
Other Accounts: Approximately $324 million – 4 accounts
|
|
|
|
Number and value of accounts within the total accounts that are subject to a performance-based advisory fee: None .
Conflicts of Interest. When a portfolio manager is responsible for the management of more than one account, the potential arises for the portfolio manager to favor one account over another. The principal types of potential conflicts of interest that may arise are discussed below. For the reasons outlined below, the Fund does not believe that any material conflicts are likely to arise out of a portfolio manager's responsibility for the management of the Fund as well as one or more other accounts. The Advisor and Subadvisor have adopted procedures that are intended to monitor compliance with the policies referred to in the following paragraphs. Generally, the risks of such conflicts of interests are increased to the extent that a portfolio manager has a financial incentive to favor one account over another. The Advisor and Subadvisor have structured their compensation arrangements in a manner that is intended to limit such potential for conflicts of interests. See "Compensation of Portfolio Managers" below.
•A portfolio manager could favor one account over another in allocating new investment opportunities that have limited supply, such as initial public offerings and private placements. If, for example, an initial public offering that was expected to appreciate in value significantly shortly after the offering was allocated to a single account, that account may be expected to have better investment performance than other accounts that did not receive an allocation on the initial public offering. The Subadvisor has policies that require a portfolio manager to allocate such investment opportunities in an equitable manner and generally to allocate such investments proportionately among all accounts with similar investment objectives.
•A portfolio manager could favor one account over another in the order in which trades for the accounts are placed. If a portfolio manager determines to purchase a security for more than one account in an aggregate amount that may influence the market price of the security, accounts that purchased or sold the security first may receive a more favorable price than accounts that made subsequent transactions. The less liquid the market for the security or the greater the percentage that the proposed aggregate purchases or sales represent of average daily trading volume, the greater the potential for accounts that make subsequent purchases or sales to receive a less favorable price. When a portfolio manager intends to trade the same security for more than one account, the policies of the Subadvisor generally require that such trades be "bunched," which means that the trades for the individual accounts are aggregated and each account receives the same price. There are some types of accounts as to which bunching may not be possible for contractual reasons (such as directed brokerage arrangements). Circumstances may also arise where the trader believes that bunching the orders may
not result in the best possible price. Where those accounts or circumstances are involved, the Subadvisor will place the order in a manner intended to result in as favorable a price as possible for such client.
•A portfolio manager could favor an account if the portfolio manager's compensation is tied to the performance of that account rather than all accounts managed by the portfolio manager. If, for example, the portfolio manager receives a bonus based upon the performance of certain accounts relative to a benchmark while other accounts are disregarded for this purpose, the portfolio manager will have a financial incentive to seek to have the accounts that determine the portfolio manager's bonus achieve the best possible performance to the possible detriment of other accounts. Similarly, if the Subadvisor receives a performance-based advisory fee, the portfolio manager may favor that account, whether or not the performance of that account directly determines the portfolio manager's compensation. The investment performance on specific accounts is not a factor in determining the portfolio manager's compensation. See "Compensation of Portfolio Managers" below. Neither the Advisor nor the Subadvisor receives a performance-based fee with respect to any of the accounts managed by the portfolio managers.
•A portfolio manager could favor an account if the portfolio manager has a beneficial interest in the account, in order to benefit a large client or to compensate a client that had poor returns. For example, if the portfolio manager held an interest in an investment partnership that was one of the accounts managed by the portfolio manager, the portfolio manager would have an economic incentive to favor the account in which the portfolio manager held an interest. The Subadvisor imposes certain trading restrictions and reporting requirements for accounts in which a portfolio manager or certain family members have a personal interest in order to confirm that such accounts are not favored over other accounts.
•If the different accounts have materially and potentially conflicting investment objectives or strategies, a conflict of interest may arise. For example, if a portfolio manager purchases a security for one account and sells the same security short for another account, such trading pattern could disadvantage either the account that is long or short. In making portfolio manager assignments, the Subadvisor seeks to avoid such potentially conflicting situations. However, where a portfolio manager is responsible for accounts with differing investment objectives and policies, it is possible that the portfolio manager will conclude that it is in the best interest of one account to sell a portfolio security while another account continues to hold or increase the holding in such security.
Compensation of Portfolio Managers. The Subadvisor has adopted a system of compensation for portfolio managers and others involved in the investment process that is applied systematically among investment professionals. At the Subadvisor, the structure of compensation of investment professionals is currently composed of the following basic components: base salary and an annual investment bonus plan as well as customary benefits that are offered generally to all full- time employees of the Subadvisor. The following describes each component of the compensation package for the individuals identified as a portfolio manager for the Funds.
•Base salary. Base compensation is fixed and normally reevaluated on an annual basis. The Subadvisor seeks to set compensation at market rates, taking into account the experience and responsibilities of the investment professional.
•Investment Bonus Plan. Only investment professionals are eligible to participate in the Investment Bonus Plan. Under the plan, investment professionals are eligible for an annual bonus. The plan is intended to provide a competitive level of annual bonus
compensation that is tied to the investment professional achieving superior investment performance and aligns the financial incentives of the Subadvisor and the investment professional. Any bonus under the plan is completely discretionary, with a maximum annual bonus that may be well in excess of base salary. Payout of a portion of this bonus may be deferred for up to five years. While the amount of any bonus is discretionary, the following factors are generally used in determining bonuses under the plan:
•Investment Performance: The investment performance of all accounts managed by the investment professional over one- and three- and five-year periods are considered, and no specific benchmark is used to measure performance. With respect to fixed income accounts, relative yields are also used to measure performance.
•The Profitability of the Subadvisor: The profitability of the Subadvisor and its parent company are also considered in determining bonus awards.
•Non-Investment Performance: To a lesser extent, intangible contributions, including the investment professional's support of client service and sales activities, new fund/strategy idea generation, professional growth and development, and management, where applicable, are also evaluated when determining bonus awards.
•In addition to the above, compensation may also include a revenue component for an investment team derived from a number of factors including, but not limited to, client assets under management, investment performance, and firm metrics.
•Options and Stock Grants. A limited number of senior investment professionals may receive options to purchase shares of Manulife Financial stock. Generally, such option would permit the investment professional to purchase a set amount of stock at the market price on the date of grant. The option can be exercised for a set period (normally a number of years or until termination of employment) and the investment professional would exercise the option if the market value of Manulife Financial stock increases. Some investment professionals may receive restricted stock grants, where the investment professional is entitled to receive the stock at no or nominal cost, provided that the stock is forgone if the investment professional's employment is terminated prior to a vesting date.
•Deferred Incentives. Investment professionals may receive deferred incentives which are fully invested in strategies managed by the team/individual as well as other Manulife Asset Management strategies.
The Subadvisor also permits investment professionals to participate on a voluntary basis in a deferred compensation plan, under which the investment professional may elect on an annual basis to defer receipt of a portion of their compensation until retirement. Participation in the plan is voluntary.
Share Ownership by Portfolio Managers. For purposes of these tables, "similarly managed accounts" include all accounts that are managed (i) by the same portfolio managers that are jointly and primarily responsible for the day-to-day management of the Fund; and (ii) with an investment style, objective, policies and strategies substantially similar to those that are used to manage the Fund.
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Range of Beneficial
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Range of Beneficial
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Ownership in Similarly
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Portfolio Manager
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Ownership in the Fund
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Managed Accounts
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Joseph H. Bozoyan, CFA
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$10,001 -$50,000
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$50,001 -$100,000
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James Gearhart, CFA
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None
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$100,001-$500,000
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Jonas Grazulis, CFA
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None
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None
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Caryn E. Rothman, CFA
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None
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$1-$10,000
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ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a)The registrant has adopted procedures by which shareholders may recommend nominees to the registrant's Board of Trustees. A copy of the procedures is filed as an exhibit to this Form N-CSR. See attached "John Hancock Funds – Nominating and Governance Committee Charter".
ITEM 11. CONTROLS AND PROCEDURES.
(a)Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b)There were no changes in the registrant's internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Fund did not participate directly in securities lending activities. See Note 7 to financial statements in Item 1.
ITEM 13. EXHIBITS.
(a)(1) Code of Ethics for Covered Officers is attached.
(a)(2) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b)Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference intoany filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Proxy Voting Policies and Procedures are attached.
(c)(2) Submission of Matters to a Vote of Security Holders is attached. See attached "John Hancock Funds - Governance Committee Charter".
(c)(3) Registrant's notice to shareholders pursuant to Registrant's exemptive order granting an exemption from Section 19(b) of the Investment Company Act of 1940, as amended and Rule 19b-1 thereunder regarding distributions made pursuant to the Registrant's Managed Distribution Plan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Preferred Income II Fund
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By:
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/s/ Kristie M. Feinberg
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------------------------------
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Kristie M. Feinberg
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President
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Date:
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September 26, 2023
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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.
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By:
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/s/ Kristie M. Feinberg
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-------------------------------
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Kristie M. Feinberg
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President
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Date:
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September 26, 2023
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By:
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/s/ Charles A. Rizzo
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-------------------------------
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Charles A. Rizzo
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Chief Financial Officer
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Date:
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September 26, 2023
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JOHN HANCOCK VARIABLE INSURANCE TRUST
JOHN HANCOCK FUNDS
JOHN HANCOCK FUNDS II
JOHN HANCOCK EXCHANGE-TRADED FUND TRUST
SARBANES-OXLEY CODE OF ETHICS
FOR
PRINCIPAL EXECUTIVE, PRINCIPAL FINANCIAL OFFICER & TREASURER
I.Covered Officers/Purpose of the Code
This code of ethics (this "Code") for John Hancock Variable Insurance Trust, John Hancock Funds1, and John Hancock Funds II, John Hancock Exchange-Traded Fund Trust and, each a registered management investment company under the Investment Company Act of 1940, as amended ("1940 Act"), which may issue shares in separate and distinct series (each investment company and series thereunder to be hereinafter referred to as a "Fund"), applies to each Fund's Principal Executive Officer ("President"), Principal Financial Officer ("Chief Financial Officer") and Treasurer ("Treasurer") (the "Covered Officers" as set forth in Exhibit A) for the purpose of promoting:
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund;
compliance with applicable laws and governmental rules and regulations;
the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
accountability for adherence to the Code.
1John Hancock Funds includes the following trusts: John Hancock Financial Opportunities Fund; John Hancock Bond Trust; John Hancock California Tax-Free Income Fund; John Hancock Capital Series; John Hancock Funds III; John Hancock Income Securities Trust; John Hancock Investment Trust; John Hancock Investment Trust II; John Hancock Investors Trust; John Hancock Municipal Securities Trust; John Hancock Premium Dividend Fund ; John Hancock Preferred Income Fund; John Hancock Preferred Income Fund II; John Hancock Preferred Income Fund III; John Hancock Sovereign Bond Fund; John Hancock Strategic Series; John Hancock Tax-Advantaged Dividend Income Fund; John Hancock Tax-Advantaged Global Shareholder Yield Fund; John Hancock Hedged Equity and Income Fund; and John Hancock Collateral Trust.
Each of the Covered Officers should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
II.Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest Overview
A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between the Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the "Investment Company Act") and the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" of the Fund. Each of the Covered Officers is an officer or employee of the investment adviser or a service provider ("Service Provider") to the Fund. The Fund's, the investment adviser's and the Service Provider's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Fund and the investment adviser and the Service Provider of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund, for the investment adviser or for the Service Provider), be involved in establishing policies and implementing decisions which will have different effects on the investment adviser, the Service Provider and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if such participation is performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, it will be deemed to have been handled ethically. In addition, it is recognized by the Fund's Board of Trustees/Directors (the "Board") that the Covered Officers may also be officers or employees of one or more other investment companies covered by other Codes.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but the Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund.
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Each Covered Officer must:
not use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund;
not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than for the benefit of the Fund; and
not use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions.
Additionally, conflicts of interest may arise in other situations, the propriety of which may be discussed, if material, with the Fund's Chief Compliance Officer ("CCO"). Examples of these include:
serve as a director/trustee on the board of any public or private company;
the receipt of any non-nominal gifts;
the receipt of any entertainment from any company with which the Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety (or other formulation as the Fund already uses in another code of conduct);
any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, any sub-adviser, principal underwriter, administrator or any affiliated person thereof; and
a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership.
III.Disclosure & Compliance
Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Fund;
Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's directors and auditors, and to governmental regulators and self- regulatory organizations;
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Each Covered Officer should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Fund and the Fund's adviser or any sub-adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund; and
It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.
IV. Reporting & Accountability
Each Covered Officer must:
upon adoption of the Code (or thereafter as applicable, upon becoming an Covered Officer), affirm in writing to the Fund's CCO that he/she has received, read, and understands the Code;
annually thereafter affirm to the Fund's CCO that he/she has complied with the requirements of the Code;
not retaliate against any employee or Covered Officer or their affiliated persons for reports of potential violations that are made in good faith;
notify the Fund's CCO promptly if he/she knows of any violation of this Code (Note: failure to do so is itself a violation of this Code); and
report at least annually any change in his/her affiliations from the prior year.
The Fund's CCO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by the Principal Executive Officer will be considered by the Fund's Board or the Compliance Committee thereof (the "Committee").
The Fund will follow these procedures in investigating and enforcing this Code:
the Fund's CCO will take all appropriate action to investigate any potential violations reported to him/her;
if, after such investigation, the CCO believes that no violation has occurred, the CCO is not required to take any further action;
any matter that the CCO believes is a violation will be reported to the Board or, if applicable, Compliance Committee;
if the Board or, if applicable, Compliance Committee concurs that a violation has occurred, the Board, either upon its determination of a violation or upon
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recommendation of the Compliance Committee, if applicable, will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Service Provider or the investment adviser or its board; or a recommendation to dismiss the Registrant's Executive Officer;
the Board, or if applicable the Compliance Committee, will be responsible for granting waivers, as appropriate; and
any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.
V.Other Policies & Procedures
This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Fund, the Fund's adviser, any sub- adviser, principal underwriter or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Fund's and its investment adviser's codes of ethics under Rule 204A-1 under the Investment Advisers Act and Rule 17j-1 under the Investment Company Act, respectively, are separate requirements applying to the Covered Officers and others and are not part of this Code.
VI. Amendments
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Fund's Board, including a majority of independent directors.
VII. Confidentiality
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Fund's Board and its counsel, the investment adviser and the relevant Service Providers.
VIII. Internal Use
The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of the Fund, as to any fact, circumstance, or legal conclusion.
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Exhibit A
Persons Covered by this Code of Ethics
(As of June 29, 2023)
John Hancock Variable Insurance Trust
Principal Executive Officer and President – Kristie Feinberg
Principal Financial Officer and Chief Financial Officer – Charles Rizzo
Treasurer – Salvatore Schiavone
John Hancock Funds
Principal Executive Officer and President – Kristie Feinberg
Principal Financial Officer and Chief Financial Officer – Charles Rizzo
Treasurer – Salvatore Schiavone
John Hancock Funds II
Principal Executive Officer and President – Kristie Feinberg
Principal Financial Officer and Chief Financial Officer – Charles Rizzo
Treasurer – Salvatore Schiavone
John Hancock Exchange-Traded Trust
Principal Executive Officer and President – Kristie Feinberg
Principal Financial Officer and Chief Financial Officer – Charles Rizzo
Treasurer – Salvatore Schiavone
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CERTIFICATION
I, Kristie M. Feinberg, certify that:
1.I have reviewed this report on Form N-CSR of the John Hancock Preferred Income Fund II (the "registrant");
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 financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 period covered by this report 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: September 26, 2023 |
_/s/ Kristie M. Feinberg____________ |
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Kristie M. Feinberg |
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President |
CERTIFICATION
I, Charles A. Rizzo, certify that:
1.I have reviewed this report on Form N-CSR of the John Hancock Preferred Income Fund II (the "registrant");
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 financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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 period covered by this report 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: September 26, 2023 |
_/s/ Charles A. Rizzo__________ |
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Charles A. Rizzo |
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Chief Financial Officer |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002*
In connection with the attached Report of John Hancock Preferred Income Fund II (the "registrant") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify that, to the best of such officer's knowledge:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report.
/s/ Kristie M. Feinberg
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Kristie M. Feinberg President
Dated: September 26, 2023
/s/ Charles A. Rizzo
---------------------------------
Charles A. Rizzo
Chief Financial Officer
Dated: September 26, 2023
A signed original of this written statement, required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.
*These certifications are being furnished solely pursuant to 18 U.S.C. Section 1350 and are not being filed as part of this Form N-CSR or as a separate disclosure document.
5E: Proxy Voting Policies and Procedures for the Adviser
General Compliance Policies for Trust & Adviser
Section 5: Fiduciary Standards & Affiliated Persons Issues
Applies to |
Adviser |
Risk Theme |
Proxy Voting |
Policy Owner |
Jim Interrante |
Effective Date |
12-1-2019 |
5E. Advisers Proxy Voting Policy
Overview
The SEC adopted Rule 206(4)-6 under the Advisers Act, which requires investment advisers with voting authority to adopt and implement written policies and procedures that are reasonably designed to ensure that the investment adviser votes client securities in the best interest of clients. The procedures must include how the investment adviser addresses material conflicts that may arise between the interests of the investment adviser and those of its clients. The Advisers are registered investment advisers under the Advisers Act and serve as the investment advisers to the Funds. The Advisers generally retain one or more sub-advisers to manage the assets of the Funds, including voting proxies with respect to a Fund's portfolio securities. From time to time, however, the Advisers may elect to manage directly the assets of a Fund, including voting proxies with respect to such Fund's portfolio securities, or a Fund's Board may otherwise delegate to the Advisers authority to vote such proxies. Rule 206(4)-6 under the Advisers Act requires that a registered investment adviser adopt and implement written policies and procedures reasonably designed to ensure that it votes proxies with respect to a client's securities in the best interest of the client.
Firms are required by Advisers Act Rule 204-2(c)(2) to maintain records of their voting policies and procedures, a copy of each proxy statement that the investment adviser receives regarding client securities, a record of each vote cast by the investment adviser on behalf of a client, a copy of any document created by the investment adviser that was material to making a decision how to vote proxies on behalf of a client, and a copy of each written client request for information on how the adviser voted proxies on behalf of the client, as well as a copy of any written response by the investment adviser to any written or oral client request for information on how the adviser voted that client's proxies.
Investment companies must disclose information about the policies and procedures used to vote proxies on the investment company's portfolio securities and must file the fund's proxy voting record with the SEC annually on Form N-PX.
Pursuant thereto, the Advisers have adopted and implemented these proxy voting policies and procedures (the "Proxy Procedures").
Policy
It is the Advisers' policy to comply with Rule 206(4)-6 and Rule 204-2(c)(2) under the Advisers Act as described above. In general, the Advisers delegate proxy voting decisions to the sub-advisers managing the funds. If an instance occurs where a conflict of interest arises between the shareholders and a particular sub-adviser, however, the Adviser retains the right to influence and/or direct the conflicting proxy voting decisions.
Regulatory Requirement
Rule 206(4)-6 under the Advisers Act
Reporting
Form N-PX
Advisers will provide the Board with notice and a copy of any amendments or revisions to the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCO's annual written compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by the report.
If the Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Fund's proxy voting policies and procedures, the CCO will provide the Board with a report detailing such exceptions.
Procedure
Fiduciary Duty
The Advisers have a fiduciary duty to vote proxies on behalf of a Fund in the best interest of the Fund and its shareholders.
Voting of Proxies - Advisers
The Advisers will vote proxies with respect to a Fund's portfolio securities when authorized to do so by the Fund and subject to the Fund's proxy voting policies and procedures and any further direction or delegation of authority by the Fund's Board. The decision on how to vote a proxy will be made by the person(s) to whom the Advisers have from time to time delegated such responsibility (the "Designated Person"). The Designated Person may include the Fund's portfolio manager(s) or a Proxy Voting Committee, as described below.
When voting proxies with respect to a Fund's portfolio securities, the following standards will apply:
•The Designated Person will vote based on what it believes is in the best interest of the Fund and its shareholders and in accordance with the Fund's investment guidelines.
•Each voting decision will be made independently. To assist with the analysis of voting issues and/or to carry out the actual voting process the Designated Person may enlist the services of
(1) reputable professionals (who may include persons employed by or otherwise associated with the Advisers or any of its affiliated persons) or (2) independent proxy evaluation services such as Institutional Shareholder Services. However, the ultimate decision as to how to vote a proxy will remain the responsibility of the Designated Person.
•The Advisers believe that a good management team of a company will generally act in the best interests of the company. Therefore, the Designated Person will take into consideration as a key factor in voting proxies with respect to securities of a company that are held by the Fund the quality of the company's management. In general, the Designated Person will vote as recommended by company management except in situations where the Designated Person believes such recommended vote is not in the best interests of the Fund and its shareholders.
•As a general principle, voting with respect to the same portfolio securities held by more than one Fund should be consistent among those Funds having substantially the same investment mandates.
•The Advisers will provide the Fund, from time to time in accordance with the Fund's proxy voting policies and procedures and any applicable laws and regulations, a record of the Advisers' voting of proxies with respect to the Fund's portfolio securities.
Material Conflicts of Interest
In carrying out its proxy voting responsibilities, the Advisers will monitor and resolve potential material conflicts ("Material Conflicts") between the interests of (a) a Fund and (b) the Advisers or any of its affiliated persons. Affiliates of the Advisers include Manulife Financial Corporation and its subsidiaries. Material Conflicts may arise, for example, if a proxy vote relates to matters involving any of these companies or other issuers in which the Advisers or any of their affiliates has a substantial equity or other interest.
If the Advisers or a Designated Person become aware that a proxy voting issue may present a potential
5E. Advisers Proxy Voting Policy
Material Conflict, the issue will be referred to the Advisers' Legal Department and/or the Office of the CCO. If the Legal Department and/or the Office of the CCO, as applicable determines that a potential Material Conflict does exist, a Proxy Voting Committee will be appointed to consider and resolve the issue. The Proxy Voting Committee may make any determination that it considers reasonable and may, if it chooses, request the advice of an independent, third-party proxy service on how to vote the proxy.
Voting Proxies of Underlying Funds of a Fund of Funds
The Advisers or the Designated Person will vote proxies with respect to the shares of a Fund that are held by another Fund that operates as a Fund of Funds") in the manner provided in the proxy voting policies and procedures of the Fund of Funds (including such policies and procedures relating to material conflicts of interest) or as otherwise directed by the board of trustees or directors of the Fund of Funds.
Proxy Voting Committee(s)
The Advisers will from time to time, and on such temporary or longer-term basis as they deem appropriate, establish one or more Proxy Voting Committees. A Proxy Voting Committee shall include the Advisers' CCO and may include legal counsel. The terms of reference and the procedures under which a Proxy Voting Committee will operate will be reviewed from time to time by the Legal and Compliance Department. Records of the deliberations and proxy voting recommendations of a Proxy Voting Committee will be maintained in accordance with applicable law, if any, and these Proxy Procedures. Requested shareholder proposals or other Shareholder Advocacy must be submitted for consideration pursuant to the Shareholder Advocacy Policy and Procedures.
Voting of Proxies - SubAdvisers
In the case of proxies voted by a sub-adviser to a Fund pursuant to the Fund's proxy voting procedures, the Advisers will request the sub-adviser to certify to the Advisers that the sub-adviser has voted the Fund's proxies as required by the Fund's proxy voting policies and procedures and that such proxy votes were executed in a manner consistent with these Proxy Procedures and to provide the Advisers with a report detailing any instances where the sub-adviser voted any proxies in a manner inconsistent with the Fund's proxy voting policies and procedures. The COO of the Advisers will then report to the Board on a quarterly basis regarding the sub-adviser certification and report to the Board any instance where the sub-adviser voted any proxies in a manner inconsistent with the Fund's proxy voting policies and procedures.
The Fund Administration Department maintains procedures affecting all administration functions for the mutual funds. These procedures detail the disclosure and administration of the Trust's proxy voting records.
The Trust's Chief Legal Counsel is responsible for including, in the SAI of each Trust, information about the proxy voting of the Advisers and each sub-adviser.
Reporting to Fund Boards
The CCO of the Advisers will provide the Board with a copy of these Proxy Procedures, accompanied by a certification that represents that the Proxy Procedures have been adopted by the Advisers in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, the Advisers will provide the Board with notice and a copy of any amendments or revisions to the Procedures and will report quarterly to the Board all material changes to these Proxy Procedures.
The CCO's annual written compliance report to the Board will contain a summary of material changes to the Proxy Procedures during the period covered by the report.
If the Advisers or the Designated Person vote any proxies in a manner inconsistent with either these Proxy Procedures or a Fund's proxy voting policies and procedures, the CCO will provide the Board
with a report detailing such exceptions
Key Contacts
Investment Compliance
Escalation/Reporting Violations
All John Hancock employees are required to report any known or suspected violation of this policy to the CCO of the Funds.
Related Policies and Procedures
N/A
Document Retention Requirements
The Advisers will retain (or arrange for the retention by a third party of) such records relating to proxy voting pursuant to these Proxy Procedures as may be required from time to time by applicable law and regulations, including the following:
1.These Proxy Procedures and all amendments hereto;
2.All proxy statements received regarding Fund portfolio securities;
3.Records of all votes cast on behalf of a Fund;
4.Records of all Fund requests for proxy voting information;
5.Any documents prepared by the Designated Person or a Proxy Voting Committee that were material to or memorialized the basis for a voting decision;
6.All records relating to communications with the Funds regarding Conflicts; and
7.All minutes of meetings of Proxy Voting Committees.
The Office of the CCO, and/or the Legal Department are responsible for maintaining the documents set forth above as needed and deemed appropriate. Such documents will be maintained in the Office of the CCO, and/or the Legal Department for the period set forth in the Records Retention Schedule.
Version History
Date |
Effective Date |
Approving Party |
1 |
01-01-2012 |
|
2 |
02-01-2015 |
|
3 |
Sept. 2015 |
|
4 |
05-01-2017 |
|
5 |
12-01-2019 |
|
JOHN HANCOCK FUNDS1
NOMINATING AND GOVERNANCE COMMITTEE CHARTER
Overall Role and Responsibility
The Nominating and Governance Committee (the "Committee") of each of the Trusts shall (1) make determinations and recommendations to the Board of Trustees (the "Board") regarding issues related to (a) the composition of the Board and (b) corporate governance matters applicable to the Trustees who are not "interested persons" as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), of any of the Trusts, or of any Fund's investment adviser, subadviser or principal underwriter and who are "independent" as defined in the rules of the New York Stock Exchange ("NYSE") (the "Independent Trustees") and (2) discharge such additional duties, responsibilities and functions as are delegated to it from time to time.
Membership
The Nominating and Governance Committee (the "Committee") shall be composed of all of the Independent Trustees of the Board. One member of the Committee shall be appointed by the Board as Chair of the Committee. The chair shall be responsible for leadership of the Committee, including scheduling meetings or reviewing and approving the schedule for them, preparing agendas or reviewing and approving them before meetings, presiding over meetings of the Committee and making reports to the full Board, as appropriate.
Structure, Operations and Governance
Meetings and Actions by Written Consent. The Committee shall meet as often as required or as the Committee deems appropriate, with or without management present. Meetings may be called and notice given by the Committee chair or a majority of the members of the Committee. Members may attend meetings in person or by telephone. The Committee may act by written consent to the extent permitted by law and the Funds' governing documents. The Committee shall report to the Board on any significant action it takes not later than the next following Board meeting.
Required Vote and Quorum. The affirmative vote of a majority of the members of the Committee participating in any meeting of the Committee at which a quorum is present is necessary for the adoption of any resolution. At least a majority of the Committee members present at the meeting in person or by telephone shall constitute a quorum for the transaction of business.
1"John Hancock Funds" includes each trust and series as may be amended from time to time (each individually, a "Trust," and collectively, the "Trusts," and each series thereof, a "Portfolio" or "Fund," and collectively, the "Portfolios" or "Funds").
Delegation to Subcommittees. The Committee may delegate any portion of its authority to a subcommittee of one or more members.
Appropriate Resources and Authority. The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to retain special counsel and other advisers, experts or consultants, at the Funds' expense, as it determines necessary or appropriate to carry out its duties and responsibilities. In addition, the Committee shall have direct access to such officers of and service providers to the Funds as it deems desirable.
Review of Charter. The Committee Charter shall be approved by at least a majority of the Independent Trustees of the Trust. The Committee shall review and assess the adequacy of this Charter periodically and, where necessary or as it deems desirable, will recommend changes to the Board for its approval. The Board may amend this Charter at any time in response to recommendations from the Committee or on its own motion.
Executive Sessions. The Committee may meet privately and may invite non-members to attend such meetings. The Committee may meet with representatives of the Investment Management Services department of the Funds' advisers, internal legal counsel of the Funds' advisers, members of the John Hancock Funds Risk & Investment Operations Committee (the "RIO Committee") and with representatives of the Funds' service providers, including the subadvisers, to discuss matters that relate to the areas for which the Committee has responsibility.
Specific Duties and Responsibilities
The Committee shall have the following duties and powers, to be exercised at such times and in such manner as the Committee shall determine:
1.Except where a Trust is legally required to nominate individuals recommended by another, to identify individuals qualified to serve as Independent Trustees of the Trusts, and to consider and recommend to the full Board nominations of individuals to serve as Trustees.
2.To consider, as it deems necessary or appropriate, the criteria for persons to fill existing or newly created Trustee vacancies. The Committee shall use the criteria and principles set forth in Annex A to guide its Trustee selection process.
3.To consider and recommend changes to the Board regarding the size, structure, and composition of the Board.
4.To evaluate, from time to time, and determine changes to the retirement policies for the Independent Trustees, as appropriate.
5.To periodically review the Board's committee structure and, in collaboration with the Chairs of the various Committees, the charters of the Board's committees, and
recommend to the Board of Trustees changes to the committee structure and charters as it deems appropriate.
6.To retain and terminate any firm(s) to be used to identify or evaluate or assist in identifying or evaluating potential Independent Board nominees, subject to the Board's sole authority to approve the firm's fees and other retention terms.
7.To consider and determine the amount of compensation to be paid by the Trusts to the Independent Trustees, including the compensation of the Chair of the Board or any Vice-Chair of the Board and of Committee Chairs, and to address compensation-related matters. The Chair of the Board has been granted the authority to approve special compensation to Independent Trustees in recognition of any significant amount of additional time and service to the Trusts provided by them, subject to ratification of any such special compensation by the Committee at the next regular meeting of the Committee.
8.To coordinate and administer an annual self-evaluation of the Board, which will include, at a minimum, a review of its effectiveness in overseeing the number of Funds in the Fund complex and the effectiveness of its committee structure.
9.To review the Board Governance Procedures and recommend to the Board of Trustees changes to the Procedures as the Committee deems appropriate.
10.To report its activities to the full Board and to make such recommendations with respect to the matters described above and other matters as the Committee may deem necessary or appropriate.
Additional Responsibilities
The Committee will also perform other tasks assigned to it from time to time by the Chair of the Board or by the Board, and will report findings and recommendations to the Board, as appropriate.
Last revised: December 12, 2018
ANNEX A
The Committee may take into account a wide variety of factors in considering Trustee candidates, including (but not limited to) the criteria set forth below. The Committee may determine that a candidate who does not satisfy these criteria in one or more respects should nevertheless be considered as a nominee if the Committee finds that the criteria satisfied by the candidate and the candidate's other qualifications demonstrate the appropriate level of fitness to serve.
General Criteria
1.Nominees should have a reputation for integrity, honesty and adherence to high ethical standards, and such other personal characteristics as a capacity for leadership and the ability to work well with others.
2.Nominees should have business, professional, academic, financial, accounting or other experience and qualifications which demonstrate that they will make a valuable contribution as Trustees.
3.Nominees should have a commitment to understand the Funds, and the responsibilities of a trustee/director of an investment company and to regularly attend and participate in meetings of the Board and its committees.
4.Nominees should have the ability to understand the sometimes conflicting interests of the various constituencies of the Funds, including shareholders and the investment adviser, and to act in the interests of all shareholders.
5.Nominees should not have, nor appear to have, a conflict of interest that would impair their ability to represent the interests of all the shareholders and to fulfill the responsibilities of a trustee.
6.Nominees should have experience on corporate or other institutional bodies having oversight responsibilities.
It is the intent of the Committee that at least one Independent Trustee be an "audit committee financial expert" as that term is defined in Item 3 of Form N-CSR.
Application of Criteria to Current Trustees
The re-nomination of current Trustees should not be viewed as automatic, but should be based on continuing qualification under the criteria set forth above based on, among other things, the current Trustee's contribution to the Board and any committee on which he or she serves.
Review of Nominations
1.The Committee believes that it is in the best interests of each Trust and its shareholders to obtain highly-qualified candidates to serve as members of the Board.
2.In nominating candidates who would be Independent Trustees, the Committee believes that no particular qualities or skills nor any specific minimum qualifications or disqualifications are controlling or paramount. The Committee shall take into consideration any such factors as it deems appropriate; however, the appropriate mix of skills, expertise and attributes needed to maintain an effective board are sought in the applicant pool as part of every search the Board undertakes for new trustees, including but not limited to the diversity of thought, as well as of gender, race, ethnic background and geographic origin. These factors may also include (but are not limited to) the person's character, integrity, judgment, skill and experience with investment companies and other organizations of comparable purpose, complexity and size and subject to similar legal restrictions and oversight; the interplay of the candidate's experience with the experience of other Board members; and the extent to which the candidate would be a desirable addition to the Board and any Committees thereof. Other factors that the Committee may take into consideration include a person's availability and commitment to attend meetings and perform his or her responsibilities; whether or not the person has or had any relationships that might impair or appear to impair his or her independence, such as any business, financial or family relationships with Fund management, the investment adviser and/or any subadviser of the Funds, as applicable, Fund service providers, or their affiliates or with Fund shareholders. The Committee will strive to achieve a group that reflects a diversity of experiences in respect of industries, professions and other experiences, and that is diversified as to thought, gender, race, ethnic background and geographic origin.
3.While the Committee is solely responsible for the selection and recommendation to the Board of Independent Trustee candidates, the Committee may consider nominees recommended by any source, including shareholders, management, legal counsel and Board members, as it deems appropriate. The Committee may retain a professional search firm or a consultant to assist the Committee in a search for a qualified candidate. Any recommendations from shareholders shall be directed to the Secretary of the relevant Trust at such address as is set forth in the Trust's disclosure documents. Recommendations from management may be submitted to the Committee Chair. All recommendations shall include all information relating to such person that is required to be disclosed in solicitations of proxies for the election of Board members and as specified
in the relevant Trust's By-Laws, and must be accompanied by a written consent of the proposed candidate to stand for election if nominated for the Board and to serve if elected by shareholders.
4.Any shareholder nomination must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934 in order to be considered by the Committee. In evaluating a nominee recommended by a shareholder, the Committee, in addition to the criteria discussed above, may consider the objectives of the shareholder in submitting that nomination and whether such objectives are consistent with the interests of all shareholders. If the Board determines to include a shareholder's candidate among the slate of its designated nominees, the candidate's name will be placed on the Trust's proxy card. If the Board determines not to include such candidate among its designated nominees, and the shareholder has satisfied the requirements of Rule 14a-8, the shareholder's candidate will be treated as a nominee of the shareholder who originally nominated the candidate. In that case, the candidate will not be named on the proxy card distributed with the Trust's proxy statement.
5.As long as a current Independent Trustee continues, in the opinion of the Committee, to satisfy the criteria listed above, the Committee generally would favor the re-nomination of a current Trustee rather than a new candidate. Consequently, while the Committee will consider nominees recommended by shareholders to serve as trustees, the Committee may only act upon such recommendations if there is a vacancy on the Board, or the Committee determines that the selection of a new or additional Trustee is in the best interests of the relevant Trust. In the event that a vacancy arises or a change in Board membership is determined to be advisable, the Committee will, in addition to any shareholder recommendations, consider candidates identified by other means as discussed in this Annex A.
6.With respect to candidates for Independent Trustee, a biography of each candidate shall be acquired and shall be reviewed by counsel to the Independent Trustees and counsel to the Trust to determine the candidate's eligibility to serve as an Independent Trustee.
7.The Committee may from time to time establish specific requirements and/or additional factors to be considered for Independent Trustee candidates as it deems necessary or appropriate.
8.After its consideration of relevant factors, the Committee shall present its recommendation(s) to the full Board for its consideration.
Important information regarding your distributions
We are providing shareholders of the John Hancock Preferred Income Fund II with information concerning the portion of the distributions made for May 31, 2023, that was from a source other than net investment company book income. No action is required on your part.
The amounts and sources of distributions reported in this notice are estimates, are not being provided for tax reporting purposes and may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. The actual amounts and sources for tax reporting purposes will depend upon the Fund's investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Payable Date: |
Ticker # |
Fund Name |
|
|
CUSIP |
May 31, 2023 |
HPF |
John Hancock Preferred Income |
41013X106 |
|
|
|
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year-to-date period |
|
|
For the period 05/01/2023-05/31/2023 |
|
08/01/2022-05/31/20233 |
|
|
|
|
|
|
|
% Breakdown |
|
|
|
|
% Breakdown |
|
|
of the Total |
|
|
Current |
|
of the Current |
|
Total Cumulative |
Cumulative |
Source |
|
Distribution ($) |
Distribution |
|
Distributions ($) |
Distributions |
Estimated Net |
|
|
|
|
|
|
|
Investment Income (1) |
|
0.1089 |
|
88% |
|
0.9674 |
78% |
Estimated Return of |
|
|
|
|
|
|
|
Capital (1), (2) |
|
0.0146 |
|
12% |
|
0.2661 |
22% |
Total per common share |
|
0.1235 |
|
100% |
|
1.2335 |
100% |
|
|
|
|
|
|
|
|
(1)The amounts and sources of distributions reported above are only estimates on a book basis. These estimates may, and likely will, vary over time based on the investment activities of the Fund and changes in the value of portfolio investments. The sources of distributions may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. Investors should understand that a return of capital is not a distribution from income or gains of a Fund.
(2)On a tax basis, the estimated components of the current distribution and cumulative distribution would include an estimated return of capital of $0.0185 (15%) and $0.1850 (15%), respectively. These amounts are estimates and the actual amounts and sources for tax reporting purposes may change upon final determination of tax characteristics and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
(3)The Fund's current fiscal year began on August 1, 2022, and will end on July 31, 2023.
If you have questions or need additional information, please contact your financial professional or call the John Hancock Investment Management Closed-End Fund Information Line at 1-800-843- 0090, Monday through Friday between 8:00 a.m. and 7:00 p.m., Eastern Time.
Important information regarding your distributions
We are providing shareholders of the John Hancock Preferred Income Fund II with information concerning the portion of the distributions made for July 31, 2023, that was from a source other than net investment company book income. No action is required on your part.
The amounts and sources of distributions reported in this notice are estimates, are not being provided for tax reporting purposes and may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. The actual amounts and sources for tax reporting purposes will depend upon the Fund's investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Payable Date: |
Ticker # |
Fund Name |
|
|
CUSIP |
July 31, 2023 |
HPF |
John Hancock Preferred Income |
41013X106 |
|
|
|
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year-to-date period |
|
|
For the period 07/01/2023-07/31/2023 |
|
08/01/2022-07/31/20233 |
|
|
|
|
|
|
|
% Breakdown |
|
|
|
|
% Breakdown |
|
|
of the Total |
|
|
Current |
|
of the Current |
|
Total Cumulative |
Cumulative |
Source |
|
Distribution ($) |
Distribution |
|
Distributions ($) |
Distributions |
Estimated Net |
|
|
|
|
|
|
|
Investment Income (1) |
|
0.0227 |
|
18% |
|
1.1121 |
75% |
Estimated Return of |
|
|
|
|
|
|
|
Capital (1), (2) |
|
0.1008 |
|
82% |
|
0.3682 |
25% |
Total per common share |
|
0.1235 |
|
100% |
|
1.4803 |
100% |
|
|
|
|
|
|
|
|
(1)The amounts and sources of distributions reported above are only estimates on a book basis. These estimates may, and likely will, vary over time based on the investment activities of the Fund and changes in the value of portfolio investments. The sources of distributions may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. Investors should understand that a return of capital is not a distribution from income or gains of a Fund.
(2)On a tax basis, the estimated components of the current distribution and cumulative distribution would include an estimated return of capital of $0.0222 (18%) and $0.2665 (18%), respectively. These amounts are estimates and the actual amounts and sources for tax reporting purposes may change upon final determination of tax characteristics and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
(3)The Fund's current fiscal year began on August 1, 2022, and will end on July 31, 2023.
If you have questions or need additional information, please contact your financial professional or call the John Hancock Investment Management Closed-End Fund Information Line at 1-800-843- 0090, Monday through Friday between 8:00 a.m. and 7:00 p.m., Eastern Time.
Important information regarding your distributions
We are providing shareholders of the John Hancock Preferred Income Fund II with information concerning the portion of the distributions made for April 28, 2023, that was from a source other than net investment company book income. No action is required on your part.
The amounts and sources of distributions reported in this notice are estimates, are not being provided for tax reporting purposes and may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. The actual amounts and sources for tax reporting purposes will depend upon the Fund's investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Payable Date: |
Ticker # |
Fund Name |
|
|
CUSIP |
April 28, 2023 |
HPF |
John Hancock Preferred Income |
41013X106 |
|
|
|
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year-to-date period |
|
|
For the period 04/01/2023-04/30/2023 |
|
08/01/2022-04/30/20233 |
|
|
|
|
|
|
|
% Breakdown |
|
|
|
|
% Breakdown |
|
|
of the Total |
|
|
Current |
|
of the Current |
|
Total Cumulative |
Cumulative |
Source |
|
Distribution ($) |
Distribution |
|
Distributions ($) |
Distributions |
Estimated Net |
|
|
|
|
|
|
|
Investment Income (1) |
|
0.0343 |
|
28% |
|
0.8572 |
77% |
Estimated Return of |
|
|
|
|
|
|
|
Capital (1), (2) |
|
0.0892 |
|
72% |
|
0.2531 |
23% |
Total per common share |
|
0.1235 |
|
100% |
|
1.1103 |
100% |
|
|
|
|
|
|
|
|
(1)The amounts and sources of distributions reported above are only estimates on a book basis. These estimates may, and likely will, vary over time based on the investment activities of the Fund and changes in the value of portfolio investments. The sources of distributions may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. Investors should understand that a return of capital is not a distribution from income or gains of a Fund.
(2)On a tax basis, the estimated components of the current distribution and cumulative distribution would include an estimated return of capital of $0.0198 (16%) and $0.1776 (16%), respectively. These amounts are estimates and the actual amounts and sources for tax reporting purposes may change upon final determination of tax characteristics and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
(3)The Fund's current fiscal year began on August 1, 2022, and will end on July 31, 2023.
If you have questions or need additional information, please contact your financial professional or call the John Hancock Investment Management Closed-End Fund Information Line at 1-800-843- 0090, Monday through Friday between 8:00 a.m. and 7:00 p.m., Eastern Time.
Important information regarding your distributions
We are providing shareholders of the John Hancock Preferred Income Fund II with information concerning the portion of the distributions made for February 28, 2023, that was from a source other than net investment company book income. No action is required on your part.
The amounts and sources of distributions reported in this notice are estimates, are not being provided for tax reporting purposes and may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. The actual amounts and sources for tax reporting purposes will depend upon the Fund's investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
Payable Date: |
Ticker # |
Fund Name |
|
|
CUSIP |
February 28, 2023 |
HPF |
John Hancock Preferred Income |
41013X106 |
|
|
|
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year-to-date period |
|
|
For the period 02/01/2023-02/28/2023 |
|
08/01/2022-02/28/20233 |
|
|
|
|
|
|
|
% Breakdown |
|
|
|
|
% Breakdown |
|
|
of the Total |
|
|
Current |
|
of the Current |
|
Total Cumulative |
Cumulative |
Source |
|
Distribution ($) |
Distribution |
|
Distributions ($) |
Distributions |
Estimated Net |
|
|
|
|
|
|
|
Investment Income (1) |
|
0.1202 |
|
97% |
|
0.7025 |
81% |
Estimated Return of |
|
|
|
|
|
|
|
Capital (1), (2) |
|
0.0033 |
|
3% |
|
0.1614 |
19% |
Total per common share |
|
0.1235 |
|
100% |
|
0.8639 |
100% |
|
|
|
|
|
|
|
|
(1)The amounts and sources of distributions reported above are only estimates on a book basis. These estimates may, and likely will, vary over time based on the investment activities of the Fund and changes in the value of portfolio investments. The sources of distributions may later be determined to be from taxable net investment income, short-term gains, long-term gains (to the extent permitted by law), and return of capital. Investors should understand that a return of capital is not a distribution from income or gains of a Fund.
(2)On a tax basis, the estimated components of the current distribution and cumulative distribution would include an estimated return of capital of $0.0124 (10%) and $0.0864 (10%), respectively. These amounts are estimates and the actual amounts and sources for tax reporting purposes may change upon final determination of tax characteristics and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
(3)The Fund's current fiscal year began on August 1, 2022, and will end on July 31, 2023.
If you have questions or need additional information, please contact your financial professional or call the John Hancock Investment Management Closed-End Fund Information Line at 1-800-843- 0090, Monday through Friday between 8:00 a.m. and 7:00 p.m., Eastern Time.
John Hancock Preferred I... (NYSE:HPF)
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부터 4월(4) 2024 으로 5월(5) 2024
John Hancock Preferred I... (NYSE:HPF)
과거 데이터 주식 차트
부터 5월(5) 2023 으로 5월(5) 2024
