Certified Annual Shareholder Report for Management Investment Companies (n-csr)

Date : 12/23/2019 @ 3:44PM
Source : Edgar (US Regulatory)
Stock : John Hancock Premium Dividend Fund (PDT)
Quote : 12.22  0.0 (0.00%) @ 9:00AM
John Hancock Premium Div... share price Chart

Certified Annual Shareholder Report for Management Investment Companies (n-csr)

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 811-05908

John Hancock Premium Dividend Fund
(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: 617-663-4497

Date of fiscal year end:       October 31
     
     
Date of reporting period: October 31, 2019



ITEM 1. REPORTS TO STOCKHOLDERS.




John Hancock

Premium Dividend Fund

Ticker: PDT
Annual report 10/31/19

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the fund's shareholder reports such as this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the transfer agent or from your financial intermediary. Instead, the reports will be made available on our website, and you will be notified by mail each time a report is posted and be provided with a website link to access the report.

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you do not need to take any action. You may elect to receive shareholder reports and other communications electronically by calling the transfer agent, Computershare, at 800-852-0218, by going to "Communication Preferences" at computershare.com/investor, or by contacting your financial intermediary.

You may elect to receive all reports in paper, free of charge, at any time. You can inform the transfer agent or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions listed above. Your election to receive reports in paper will apply to all funds held with John Hancock Investment Management or your financial intermediary.

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Managed distribution plan

The fund has adopted a managed distribution plan (Plan). Under the Plan, the fund makes monthly distributions of an amount equal to $0.0975 per share, which will be paid monthly until further notice. The fund may make additional distributions (i) for purposes of not incurring federal income tax on investment company taxable income and net capital gain, if any, not included in such regular distributions and (ii) for purposes of not incurring federal excise tax on ordinary income and capital gain net income, if any, not included in such regular monthly distributions.

The Plan provides that the Board of Trustees of the fund may amend the terms of the Plan or terminate the Plan at any time without prior notice to the fund's shareholders. The Plan is subject to periodic review by the fund's Board of Trustees.

You should not draw any conclusions about the fund's investment performance from the amount of the fund's distributions or from the terms of the Plan. The fund's total return at NAV is presented in the Financial highlights.

With each distribution that does not consist solely of net investment income, the fund will issue a notice to shareholders and an accompanying press release that will provide detailed information regarding the amount and composition of the distribution and other related information. The amounts and sources of distributions reported in the notice to shareholders are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the fund's investment experience during the remainder of its 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. The fund may at times distribute more than its net investment income and net realized capital gains; therefore, a portion of your distribution may result in a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital does not necessarily reflect the fund's investment performance and should not be confused with "yield" or "income."


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A message to shareholders

Dear shareholder,

It was a volatile time for stock investors in the United States during the 12 months ended October 31, 2019, although many segments of the market delivered attractive absolute returns for the period. Uncertainty surrounding trade with China, the impeachment inquiry against President Trump, and the broader health of the global economy led to some dramatic swings in performance. Investors, who had generally shunned riskier assets in the final months of 2018, regained their risk appetites in the first half of 2019. Despite setbacks in May and August, the markets closed the period on record highs. Against this backdrop, the U.S. Federal Reserve pivoted from raising short-term interest rates to an easing stance, cutting interest rates three times in the latter half of the period.

While the economic fundamentals in the United States appear fairly solid, with a strong labor market and a confident consumer base, there are sure to be patches of market turbulence as the year goes on, particularly if the likelihood of a recession is perceived to increase. As always, your best resource in unpredictable markets is your financial advisor, who can help position your portfolio so that it's sufficiently diversified to 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,

ANDREWARNOTT_SIG.JPG

Andrew G. Arnott
President and CEO,
John Hancock Investment Management
Head of Wealth and Asset Management,
United States and Europe

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
Premium Dividend Fund

Table of contents

     
2   Your fund at a glance
5   Manager's discussion of fund performance
7   Fund's investments
14   Financial statements
18   Financial highlights
19   Notes to financial statements
30   Report of independent registered public accounting firm
31   Tax information
32   Additional information
35   Continuation of investment advisory and subadvisory agreements
42   Trustees and Officers
46   More information

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       1


Your fund at a glance

INVESTMENT OBJECTIVE


The fund seeks to provide high current income, consistent with modest growth of capital.

AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/19 (%)


JHP2A_AATRBAR.JPG

The blended index is 70% ICE Bank of America Merrill Lynch Preferred Stock DRD Eligible Index and 30% S&P 500 Utilities Index.

The ICE Bank of America Merrill Lynch Preferred Stock DRD Eligible Index consists of investment-grade fixed-rate U.S. dollar-denominated preferred securities and fixed-to-floating-rate securities. The index includes securities having a minimum remaining term of at least one year, Dividend Received Deduction (DRD) eligible preferred stock and senior debt.

The S&P 500 Utilities Index is a capitalization-weighted index that consists of companies in the S&P 500 Index that are primarily involved in water, electrical power, and natural gas distribution industries.

It is not possible to invest directly in an index. Index figures do not reflect expenses or sales charges, 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 be augmented 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.

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       2


PERFORMANCE HIGHLIGHTS OVER THE LAST TWELVE MONTHS


Income-producing securities delivered strong returns for the period

Thanks largely to a drop in interest rates, preferred securities and utility common stocks rallied strongly.

Security selection helped boost the fund's performance.

Many of the fund's largest holdings across a number of industry sectors—particularly utilities—helped drive returns.

An interest-rate hedge was the key detractor

The fund's holdings in U.S. Treasury futures contracts detracted from performance as interest rates declined.

PORTFOLIO COMPOSITION AS OF 10/31/19 (%)


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ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       3


SECTOR COMPOSITION AS OF 10/31/19 (%)


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A note about 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. There is no guarantee prior distribution levels will be maintained, and distributions may include a substantial return of capital. The value of a company's equity securities is subject to changes in its financial condition and overall market and economic conditions. Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if an issuer, grantor, or counterparty is unable or unwilling to make principal, interest, or settlement payments. Investments in higher-yielding, lower-rated securities are subject to a higher risk of default. An issuer of securities held by the fund may default, have its credit rating downgraded, or otherwise perform poorly, which may affect fund performance. Liquidity—the extent to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. The fund's use of leverage creates additional risks, including greater volatility of the fund's NAV, market price, and returns. There is no assurance that the fund's leverage strategy will be successful. The fund will normally invest at least 25% of its managed assets in securities of companies in the utilities industry. Such an investment focus makes the fund more susceptible to factors adversely affecting the utilities industry than a more broadly diversified fund. Sector investing is subject to greater risks than the market as a whole. Derivatives transactions, such as hedging and other strategic transactions, may increase a fund's volatility and could produce disproportionate losses, potentially more than the fund's principal investment. Cybersecurity incidents 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 fund securities may negatively affect performance.

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       4


Manager's discussion of fund performance

How would you describe the investment backdrop during the 12 months ended October 31, 2019?

Income-producing securities generally posted very strong gains during the past year, helped largely by an increasingly favorable interest-rate backdrop. In early 2019, there was a dovish shift in tone from global monetary policy makers that many investors hoped would lead the U.S. Federal Reserve (Fed) to make cuts in interest rates during the second half of this year. That's exactly what happened as the Fed cut rates by a quarter point each in July, September, and October amid some signs of a slowdown in global economic growth and muted inflation pressures.

Against this backdrop, preferred securities and utility common stocks—two of the fund's biggest areas of emphasis among income-producing securities—rallied strongly. At the same time, demand for both preferreds and utilities—whose yields still outshone most other income-oriented securities—increased, further bolstering their prices.

Which elements of the fund's positioning helped and hurt results?

The fund's sizable weighting in the utilities sector was a key driver of performance, with some of the portfolio's largest holdings in the group performing particularly well. On top of falling interest rates, utility securities were boosted by better investor enthusiasm for the group given their attractive yields and valuations. Furthermore,

         
TOP 10 ISSUERS
AS OF 10/31/19 (%)
  COUNTRY COMPOSITION
AS OF 10/31/19 (%)
CenterPoint Energy, Inc. 5.0   United States 86.4
Dominion Energy, Inc. 4.6   United Kingdom 5.5
PPL Corp. 4.0   Canada 3.9
Morgan Stanley 3.5   France 2.9
DTE Energy Company 3.2   Other countries 1.3
Duke Energy Corp. 3.0   TOTAL 100.0
BNP Paribas SA 2.9      
Interstate Power & Light Company 2.7      
The Southern Company 2.6      
JPMorgan Chase & Co. 2.5      
TOTAL 34.0      
As a percentage of total investments.   As a percentage of total investments.
Cash and cash equivalents are not included.    

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       5


investors reacted favorably to utilities' reassurance of solid earnings growth going forward. Individual contributors in this space included Entergy Corp., American Electric Power Company, Inc., and Eversource Energy, among the fund's best-performing holdings during the period. Among financial holdings, Ares Management Corp. posted notable gains as the company's late-2018 conversion to a corporation structure led to more ownership of its common stock among institutional and individual investors.

In contrast, the fund's position in U.S. Treasury futures—which were used to offset higher interest rates—was the biggest detractor from performance as interest rates declined significantly during the period. The fund's exposure to the energy sector also detracted as oil prices trended lower amid news of slowing global economic growth. Individual energy detractors included oil and gas producer BP PLC.

What were some key aspects of your portfolio activity?

Some of the more notable transactions were our sales of utility common stocks, the proceeds of which we most often redeployed into more attractively valued mandatory convertible preferred securities. For example, we sold some common stock holdings in CenterPoint Energy, Inc. and added to the convertible preferred securities of the company. We also bought preferred shares of Dominion Energy, Inc. We added selectively in the energy space, emphasizing buying more shares of pipeline companies such as The Williams Companies, Inc.

MANAGED BY


   
  JOSEPHBOZOYAN.JPG Joseph H. Bozoyan, CFA
On the fund since 2015
Investing since 1993
  BRADLUTZ.JPG Brad Lutz, CFA
On the fund since 2017
Investing since 1992

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The views expressed in this report are exclusively those of Joseph H. Bozoyan, CFA, 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.
ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       6


Fund’s investments  
AS OF 10-31-19
        Shares Value
Preferred securities 80.3% (53.1% of Total investments)     $613,886,043
(Cost $584,883,753)          
Communication services 2.9%       22,221,350
Diversified telecommunication services 0.3%        
Qwest Corp., 6.125%       107,500 2,655,250
Wireless telecommunication services 2.6%        
Telephone & Data Systems, Inc., 5.875%       100,000 2,503,000
Telephone & Data Systems, Inc., 6.625%       285,000 8,031,300
Telephone & Data Systems, Inc., 6.875%       170,000 4,318,000
United States Cellular Corp., 6.950%       185,000 4,713,800
Consumer staples 2.5%       19,285,500
Food and staples retailing 2.5%        
Ocean Spray Cranberries, Inc., 6.250% (A)       224,250 19,285,500
Energy 0.8%       5,766,600
Oil, gas and consumable fuels 0.8%        
Enbridge, Inc., Series B (6.375% to 4-15-23, then 3 month LIBOR + 3.593%) (B)(C)       210,000 5,766,600
Financials 25.6%       196,117,217
Banks 11.5%        
BB&T Corp. (Callable 12-3-19), 5.200%       110,000 2,808,300
BB&T Corp. (Callable 3-1-20), 5.200%       130,000 3,321,500
Citigroup, Inc. (7.125% to 9-30-23, then 3 month LIBOR + 4.040%) (B)(C)       240,650 6,942,753
JPMorgan Chase & Co., 5.450%       490,000 12,269,600
JPMorgan Chase & Co., 6.100%       650,000 16,679,000
Synovus Financial Corp. (6.300% to 6-21-23, then 3 month LIBOR + 3.352%) (B)(C)       188,000 4,985,760
The PNC Financial Services Group, Inc., 5.375%       180,000 4,656,600
The PNC Financial Services Group, Inc. (6.125% to 5-1-22, then 3 month LIBOR + 4.067%)       311,600 8,472,404
U.S. Bancorp, 5.150%       500,000 12,720,000
U.S. Bancorp (6.500% to 1-15-22, then 3 month LIBOR + 4.468%)       351,000 9,603,360
Wells Fargo & Company, 6.000%       205,000 5,217,250
Capital markets 10.5%        
Morgan Stanley (6.375% to 10-15-24, then 3 month LIBOR + 3.708%)       249,227 7,015,740
Morgan Stanley, 6.625%       842,557 21,459,927
Morgan Stanley (7.125% to 10-15-23, then 3 month LIBOR + 4.320%) (B)(C)       430,025 12,500,827
7 JOHN HANCOCK PREMIUM DIVIDEND FUND |ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS

 

        Shares Value
Financials (continued)        
Capital markets (continued)        
State Street Corp., 5.250%       1,005,000 $25,557,150
State Street Corp., 6.000%       80,000 2,032,000
State Street Corp. (5.900% to 3-15-24, then 3 month LIBOR + 3.108%)       25,000 690,000
The Bank of New York Mellon Corp., 5.200%       442,000 11,301,940
Consumer finance 1.1%        
Capital One Financial Corp., 6.000%       136,000 3,482,960
Capital One Financial Corp., 6.250%       87,047 2,204,901
Capital One Financial Corp., 6.700%       112,650 2,856,804
Insurance 2.5%        
Athene Holding, Ltd., Series A (6.350% to 6-30-29, then 3 month LIBOR + 4.253%) (B)(C)       284,213 7,989,227
Prudential Financial, Inc., 5.750%       50,000 1,297,000
Prudential PLC, 6.750%       150,000 4,017,000
W.R. Berkley Corp., 5.625%       240,351 6,035,214
Industrials 0.5%       3,492,450
Machinery 0.5%        
Stanley Black & Decker, Inc., 5.750%       135,000 3,492,450
Information technology 2.3%       17,328,320
Semiconductors and semiconductor equipment 2.3%        
Broadcom, Inc., 8.000% (C)       16,000 17,328,320
Real estate 3.2%       24,794,224
Equity real estate investment trusts 3.2%        
American Homes 4 Rent, Series D, 6.500%       100,000 2,679,000
Crown Castle International Corp., 6.875% (C)       6,500 8,094,125
Digital Realty Trust, Inc., 6.625% (B)(C)       18,275 486,663
Senior Housing Properties Trust, 5.625%       554,690 13,534,436
Utilities 42.5%       324,880,382
Electric utilities 18.6%        
Duke Energy Corp., 5.125%       192,458 4,878,810
Duke Energy Corp., 5.750%       160,000 4,464,000
Interstate Power & Light Company, 5.100%       1,204,700 31,394,482
NextEra Energy Capital Holdings, Inc., 5.125%       185,000 4,654,600
NSTAR Electric Company, 4.250%       13,347 1,322,554
NSTAR Electric Company, 4.780%       100,000 10,500,000
PPL Capital Funding, Inc., 5.900%       1,150,320 29,252,638
SCE Trust II, 5.100% (B)(C)       1,097,000 24,945,780
The Southern Company, 6.250% (B)(C)       155,000 4,090,450
SEE NOTES TO FINANCIAL STATEMENTS ANNUAL REPORT |JOHN HANCOCK PREMIUM DIVIDEND FUND 8

 

        Shares Value
Utilities (continued)        
Electric utilities (continued)        
The Southern Company, 6.750% (C)       485,000 $25,782,600
Union Electric Company, 3.700%       12,262 1,122,465
Gas utilities 2.4%        
South Jersey Industries, Inc., 7.250% (C)       259,200 13,219,200
Spire, Inc., 5.900% (B)(C)       183,775 4,972,952
Multi-utilities 21.5%        
Algonquin Power & Utilities Corp. (6.200% to 7-1-24, then 3 month LIBOR + 4.010%)       300,000 8,331,000
Algonquin Power & Utilities Corp. (6.875% to 10-17-23, then 3 month LIBOR + 3.677%)       571,150 15,963,643
CenterPoint Energy, Inc., 7.000% (C)       950,000 48,450,000
Dominion Energy, Inc., 7.250% (C)       314,850 33,755,069
DTE Energy Company (Callable 12-3-19), 5.250%       184,987 4,706,069
DTE Energy Company, 6.250%       237,000 12,034,860
Integrys Holding, Inc. (6.000% to 8-1-23, then 3 month LIBOR + 3.220%)       352,044 9,681,210
NiSource, Inc. (6.500% to 3-15-24, then 5 Year CMT + 3.632%)       250,000 6,927,500
Sempra Energy, 5.750%       45,000 1,192,500
Sempra Energy, 6.750% (C)       200,000 23,238,000
Common stocks 53.5% (35.4% of Total investments)     $408,996,311
(Cost $278,615,549)          
Communication services 4.0%       30,761,650
Diversified telecommunication services 4.0%        
AT&T, Inc. (B)(C)       485,000 18,667,650
Verizon Communications, Inc. (B)(C)       200,000 12,094,000
Consumer staples 1.0%       7,492,480
Tobacco 1.0%        
Philip Morris International, Inc. (B)(C)       92,000 7,492,480
Energy 13.7%       104,749,300
Oil, gas and consumable fuels 13.7%        
BP PLC, ADR       675,950 25,625,265
Enbridge, Inc. (B)(C)       281,200 10,238,492
Kinder Morgan, Inc.       819,001 16,363,640
ONEOK, Inc.       410,000 28,630,298
Royal Dutch Shell PLC, ADR, Class A       125,421 7,270,655
The Williams Companies, Inc. (B)(C)       745,000 16,620,950
9 JOHN HANCOCK PREMIUM DIVIDEND FUND |ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS

 

        Shares Value
Financials 1.9%       $14,193,600
Capital markets 1.9%        
Ares Management Corp., Class A       480,000 14,193,600
Utilities 32.9%       251,799,281
Electric utilities 22.7%        
Alliant Energy Corp.       329,000 17,548,860
American Electric Power Company, Inc. (B)(C)       200,000 18,878,000
Avangrid, Inc. (B)(C)       381,500 19,094,075
Duke Energy Corp.       270,000 25,450,200
Entergy Corp. (B)(C)       60,000 7,288,800
Eversource Energy       263,264 22,045,727
FirstEnergy Corp. (B)(C)       250,000 12,080,000
OGE Energy Corp. (B)(C)       400,000 17,224,000
Pinnacle West Capital Corp.       50,000 4,706,000
PPL Corp. (B)(C)       505,000 16,912,450
Xcel Energy, Inc. (B)(C)       200,000 12,702,000
Multi-utilities 10.2%        
Black Hills Corp. (B)(C)       200,000 15,766,000
Dominion Energy, Inc. (B)(C)       240,000 19,812,000
DTE Energy Company       160,000 20,371,200
National Grid PLC, ADR       164,166 9,582,369
NiSource, Inc.       440,000 12,337,600
    
  Rate (%) Maturity date   Par value^ Value
Corporate bonds 15.4% (10.2% of Total investments)     $117,899,382
(Cost $110,435,540)          
Communication services 0.4%       2,871,679
Wireless telecommunication services 0.4%        
Vodafone Group PLC (7.000% to 1-4-29, then 5 Year U.S. Swap Rate + 4.873%) (B)(C) 7.000 04-04-79   2,480,000 2,871,679
Consumer discretionary 1.3%       10,083,673
Automobiles 1.3%        
General Motors Financial Company, Inc. (6.500% to 9-30-28, then 3 month LIBOR + 3.436%) (B)(C)(D) 6.500 09-30-28   10,046,000 10,083,673
Energy 0.6%       4,301,920
Oil, gas and consumable fuels 0.6%        
Enbridge, Inc. (6.250% to 3-1-28, then 3 month LIBOR + 3.641%) (B)(C) 6.250 03-01-78   4,000,000 4,301,920
SEE NOTES TO FINANCIAL STATEMENTS ANNUAL REPORT |JOHN HANCOCK PREMIUM DIVIDEND FUND 10

 

  Rate (%) Maturity date   Par value^ Value
Financials 11.3%       $86,831,485
Banks 11.3%        
Bank of America Corp. (5.875% to 3-15-28, then 3 month LIBOR + 2.931%) (B)(C)(D) 5.875 03-15-28   4,500,000 4,947,525
BNP Paribas SA (7.000% to 8-16-28, then 5 Year U.S. Swap Rate + 3.980%) (A)(B)(C)(D) 7.000 08-16-28   15,590,000 17,538,750
BNP Paribas SA (7.375% to 8-19-25, then 5 Year U.S. Swap Rate + 5.150%) (C)(D) 7.375 08-19-25   14,400,000 16,272,000
Citizens Financial Group, Inc. (6.000% to 7-6-23, then 3 month LIBOR + 3.003%) (B)(C)(D) 6.000 07-06-23   18,000,000 18,900,000
Citizens Financial Group, Inc. (6.375% to 4-6-24, then 3 month LIBOR + 3.157%) (C)(D) 6.375 04-06-24   2,500,000 2,656,250
HSBC Holdings PLC (6.500% to 3-23-28, then 5 Year U.S. ISDAFIX + 3.606%) (B)(C)(D) 6.500 03-23-28   10,000,000 10,587,500
Huntington Bancshares, Inc. (5.700% to 4-15-23, then 3 month LIBOR + 2.880%) (B)(C)(D) 5.700 04-15-23   3,000,000 3,093,210
Lloyds Banking Group PLC (7.500% to 6-27-24, then 5 Year U.S. Swap Rate + 4.760%) (B)(C)(D) 7.500 06-27-24   9,750,000 10,676,250
Wells Fargo & Company (5.900% to 6-15-24, then 3 month LIBOR + 3.110%) (B)(C)(D) 5.900 06-15-24   2,000,000 2,160,000
Utilities 1.8%       13,810,625
Electric utilities 0.2%        
Southern California Edison Company (6.250% to 2-1-22, then 3 month LIBOR + 4.199%) (B)(C)(D) 6.250 02-01-22   1,750,000 1,710,625
Multi-utilities 1.6%        
CenterPoint Energy, Inc. (6.125% to 9-1-23, then 3 month LIBOR + 3.270%) (C)(D) 6.125 09-01-23   9,000,000 9,562,500
NiSource, Inc. (5.650% to 6-15-23, then 5 Year CMT + 2.843%) (B)(C)(D) 5.650 06-15-23   2,500,000 2,537,500
    
  Yield* (%) Maturity date   Par value^ Value
Short-term investments 2.0% (1.3% of Total investments)     $15,395,000
(Cost $15,395,000)          
U.S. Government Agency 1.7%       12,723,000
Federal Agricultural Mortgage Corp. Discount Note 1.500 11-01-19   2,261,000 2,261,000
Federal Home Loan Bank Discount Note 1.500 11-01-19   10,462,000 10,462,000
    
11 JOHN HANCOCK PREMIUM DIVIDEND FUND |ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS

 

        Par value^ Value
Repurchase agreement 0.3%         2,672,000
Repurchase Agreement with State Street Corp. dated 10-31-19 at 0.550% to be repurchased at $2,672,041 on 11-1-19, collateralized by $2,700,000 U.S. Treasury Notes, 1.875% due 1-31-22 (valued at $2,725,769, including interest)       2,672,000 2,672,000
Total investments (Cost $989,329,842) 151.2%       $1,156,176,736
Other assets and liabilities, net (51.2%)       (391,700,483)
Total net assets 100.0%         $764,476,253
    
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund unless otherwise indicated.
^All par values are denominated in U.S. dollars unless otherwise indicated.
Security Abbreviations and Legend
ADR American Depositary Receipt
CMT Constant Maturity Treasury
ISDAFIX International Swaps and Derivatives Association Fixed Interest Rate Swap Rate
LIBOR London Interbank Offered Rate
(A) 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.
(B) All or a portion of this security is on loan as of 10-31-19, and is a component of the fund's leverage under the Liquidity Agreement.
(C) All or a portion of this security is pledged as collateral pursuant to the Liquidity Agreement. Total collateral value at 10-31-19 was $438,181,471. A portion of the securities pledged as collateral were loaned pursuant to the Liquidity Agreement. The value of securities on loan amounted to $240,877,698.
(D) Perpetual bonds have no stated maturity date. Date shown as maturity date is next call date.
* Yield represents either the annualized yield at the date of purchase, the stated coupon rate or, for floating rate securities, the rate at period end.
SEE NOTES TO FINANCIAL STATEMENTS ANNUAL REPORT |JOHN HANCOCK PREMIUM DIVIDEND FUND 12

 

DERIVATIVES
FUTURES
Open contracts Number of
contracts
Position Expiration
date
Notional
basis^
Notional
value^
Unrealized
appreciation
(depreciation)
10-Year U.S. Treasury Note Futures 860 Short Dec 2019 $(113,034,426) $(112,055,312) $979,114
            $979,114
^ Notional basis refers to the contractual amount agreed upon at inception of open contracts; notional value represents the current value of the open contract.
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 96,000,000 USD Fixed 2.136% USD 3 Month LIBOR BBA(a) Semi Annual Quarterly Oct 2022 $(1,768,306) $(1,768,306)
                $(1,768,306) $(1,768,306)
    
(a) At 10-31-19, the 3 month LIBOR was 1.902%.
    
Derivatives Currency Abbreviations
USD U.S. Dollar
    
Derivatives Abbreviations
BBA The British Banker's Association
LIBOR London Interbank Offered Rate
OTC Over-the-counter
At 10-31-19, the aggregate cost of investments for federal income tax purposes was $990,930,511. Net unrealized appreciation aggregated to $164,457,033, of which $179,923,451 related to gross unrealized appreciation and $15,466,418 related to gross unrealized depreciation.
See Notes to financial statements regarding investment transactions and other derivatives information.
13 JOHN HANCOCK PREMIUM DIVIDEND FUND |ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS

 

Financial statements  
STATEMENT OF ASSETS AND LIABILITIES 10-31-19

Assets  
Unaffiliated investments, at value (Cost $989,329,842) $1,156,176,736
Receivable for centrally cleared swaps 860,652
Cash 140,777
Collateral held at broker for futures contracts 1,152,982
Dividends and interest receivable 3,477,424
Other assets 28,555
Total assets 1,161,837,126
Liabilities  
Payable for futures variation margin 698,750
Liquidity agreement 383,700,000
Payable for investments purchased 11,850,000
Interest payable 827,805
Payable to affiliates  
Administrative services fees 97,295
Trustees' fees 567
Other liabilities and accrued expenses 186,456
Total liabilities 397,360,873
Net assets $764,476,253
Net assets consist of  
Paid-in capital $598,386,672
Total distributable earnings (loss) 166,089,581
Net assets $764,476,253
 
Net asset value per share  
Based on 48,583,189 shares of beneficial interest outstanding - unlimited number of shares authorized with no par value $15.74
SEE NOTES TO FINANCIAL STATEMENTS ANNUAL REPORT |JOHN HANCOCK PREMIUM DIVIDEND FUND 14

 

STATEMENT OF OPERATIONS For the year ended  10-31-19

Investment income  
Dividends $49,588,467
Interest 7,287,661
Less foreign taxes withheld (237,751)
Total investment income 56,638,377
Expenses  
Investment management fees 8,535,837
Interest expense 11,502,824
Administrative services fees 1,110,926
Transfer agent fees 117,914
Trustees' fees 44,901
Custodian fees 79,217
Printing and postage 311,302
Professional fees 87,831
Stock exchange listing fees 47,174
Other 24,695
Total expenses 21,862,621
Less expense reductions (81,687)
Net expenses 21,780,934
Net investment income 34,857,443
Realized and unrealized gain (loss)  
Net realized gain (loss) on  
Unaffiliated investments and foreign currency transactions 32,597,585
Futures contracts (8,664,119)
Swap contracts 415,329
  24,348,795
Change in net unrealized appreciation (depreciation) of  
Unaffiliated investments 73,101,241
Futures contracts (557,689)
Swap contracts (5,346,228)
  67,197,324
Net realized and unrealized gain 91,546,119
Increase in net assets from operations $126,403,562
15 JOHN HANCOCK PREMIUM DIVIDEND FUND |ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS

 

STATEMENTS OF CHANGES IN NET ASSETS  

  Year ended
10-31-19
Year ended
10-31-18
Increase (decrease) in net assets    
From operations    
Net investment income $34,857,443 $41,357,803
Net realized gain 24,348,795 14,465,705
Change in net unrealized appreciation (depreciation) 67,197,324 (51,639,098)
Increase in net assets resulting from operations 126,403,562 4,184,410
Distributions to shareholders    
From earnings (58,438,580) (82,443,242)
Total distributions (58,438,580) (82,443,242)
Fund share transactions    
Issued pursuant to Dividend Reinvestment Plan 1,505,561 2,245,456
Total increase (decrease) 69,470,543 (76,013,376)
Net assets    
Beginning of year 695,005,710 771,019,086
End of year $764,476,253 $695,005,710
Share activity    
Shares outstanding    
Beginning of year 48,489,036 48,343,935
Issued pursuant to Dividend Reinvestment Plan 94,153 145,101
End of year 48,583,189 48,489,036
SEE NOTES TO FINANCIAL STATEMENTS ANNUAL REPORT |JOHN HANCOCK PREMIUM DIVIDEND FUND 16

 

STATEMENT OF CASH FLOWS For the year ended   10-31-19

   
Cash flows from operating activities  
Net increase in net assets from operations $126,403,562
Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities:  
Long-term investments purchased (203,181,086)
Long-term investments sold 236,982,288
Net purchases and sales in short-term investments (13,149,561)
Net amortization of premium (discount) 85,717
(Increase) Decrease in assets:  
Receivable for futures variation margin 295,616
Receivable for centrally cleared swaps 319,639
Collateral held at broker for futures contracts (249,982)
Dividends and interest receivable 59,891
Receivable for investments sold 40,927
Other assets 9,842
Increase (Decrease) in liabilities:  
Payable for futures variation margin 698,750
Payable for investments purchased 11,850,000
Interest payable (133,750)
Payable to affiliates 4,986
Other liabilities and accrued expenses 31,786
Net change in unrealized (appreciation) depreciation on:  
Investments (73,101,241)
Net realized (gain) loss on:  
Investments (32,597,524)
Proceeds received as return of capital 2,567,839
Net cash provided by operating activities $56,937,699
Cash flows provided by (used in) financing activities  
Distributions to shareholders $(56,933,019)
Net cash used in financing activities $(56,933,019)
Net increase in cash $4,680
Cash at beginning of year $136,097
Cash at end of year $140,777
Supplemental disclosure of cash flow information:  
Cash paid for interest $(11,636,574)
Noncash financing activities not included herein consists of reinvestment distributions: $(1,505,561)
17 JOHN HANCOCK PREMIUM DIVIDEND FUND |ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS

 

Financial highlights  
Period ended 10-31-19 10-31-18 10-31-17 10-31-16 10-31-15
Per share operating performance          
Net asset value, beginning of period $14.33 $15.95 $16.17 $15.14 $15.43
Net investment income1 0.72 0.85 1.11 0.98 0.97
Net realized and unrealized gain (loss) on investments 1.89 (0.77) 0.14 1.16 (0.21)
Total from investment operations 2.61 0.08 1.25 2.14 0.76
Less distributions          
From net investment income (1.17) (1.17) (1.17) (0.97) (0.89)
From net realized gain (0.03) (0.53) (0.30) (0.14) (0.20)
Total distributions (1.20) (1.70) (1.47) (1.11) (1.09)
Anti-dilutive impact of repurchase plan 2,3 0.04 3
Net asset value, end of period $15.74 $14.33 $15.95 $16.17 $15.14
Per share market value, end of period $17.69 $15.65 $16.97 $14.96 $13.68
Total return at net asset value (%)4,5 18.52 0.19 8.26 14.83 6.18
Total return at market value (%)4 22.04 2.84 24.50 17.58 8.29
Ratios and supplemental data          
Net assets, end of period (in millions) $764 $695 $771 $781 $733
Ratios (as a percentage of average net assets):          
Expenses before reductions 3.01 2.80 2.28 1.95 1.86
Expenses including reductions6 3.00 2.79 2.27 1.94 1.85
Net investment income 4.79 5.75 7.00 6.14 6.38
Portfolio turnover (%) 18 24 14 19 15
Senior securities          
Total debt outstanding end of period (in millions) $384 $384 $384 $384 $384
Asset coverage per $1,000 of debt7 $2,992 $2,811 $3,009 $3,035 $2,909
    
1 Based on average daily shares outstanding.
2 Less than $0.005 per share.
3 The repurchase plan was completed at an average repurchase price of $13.27 and $13.41 for 105,700 and 1,218,436 shares for the periods ended 10-31-16 and 10-31-15, respectively.
4 Total return based on net asset value reflects changes in the fund’s net asset value during each period. Total return based on market value reflects changes in market value. Each figure assumes that distributions from income, capital gains and tax return of capital, if any, were reinvested.
5 Total returns would have been lower had certain expenses not been reduced during the applicable periods.
6 Expenses including reductions excluding interest expense were 1.41%, 1.44%, 1.45, 1.40% and 1.41% for the periods ended 10-31-19, 10-31-18, 10-31-17, 10-31-16 and 10-31-15, respectively.
7 Asset coverage equals the total net assets plus borrowings divided by the borrowings of the fund outstanding at period end (Note 8). As debt outstanding changes, the level of invested assets may change accordingly. Asset coverage ratio provides a measure of leverage.
SEE NOTES TO FINANCIAL STATEMENTS ANNUAL REPORT |JOHN HANCOCK Premium Dividend Fund 18

 

Notes to financial statements  
Note 1Organization
John Hancock Premium Dividend Fund (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 2Significant 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 fund'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. Debt obligations are typically valued based on the 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. Futures contracts are typically valued at last traded price on the exchange on which they trade. Swaps are generally valued using evaluated prices obtained from an independent pricing vendor.
In certain instances, the Pricing Committee may determine to value equity securities using prices obtained from another exchange or market if trading on the exchange or market on which prices are typically obtained did not open for trading as scheduled, or if trading closed earlier than scheduled, and trading occurred as normal on another exchange or market.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund's Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities, 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
19 JOHN HANCOCK Premium Dividend Fund |ANNUAL REPORT  

 

valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund's own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
The following is a summary of the values by input classification of the fund's investments as of October 31, 2019, by major security category or type:
  Total
value at
10-31-19
Level 1
quoted
price
Level 2
significant
observable
inputs
Level 3
significant
unobservable
inputs
Investments in securities:        
Assets        
Preferred securities        
Communication services $22,221,350 $22,221,350
Consumer staples 19,285,500 $19,285,500
Energy 5,766,600 5,766,600
Financials 196,117,217 196,117,217
Industrials 3,492,450 3,492,450
Information technology 17,328,320 17,328,320
Real estate 24,794,224 16,700,099 8,094,125
Utilities 324,880,382 303,576,707 21,303,675
Common stocks 408,996,311 408,996,311
Corporate bonds 117,899,382 117,899,382
Short-term investments 15,395,000 15,395,000
Total investments in securities $1,156,176,736 $974,199,054 $181,977,682
Derivatives:        
Assets        
Futures $979,114 $979,114
Liabilities        
Swap contracts (1,768,306) $(1,768,306)
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund's custodian, or for tri-party repurchase agreements, collateral is held at a third-party custodian bank in a segregated account for the benefit of the fund. The collateral amount is marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. Collateral received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, assets and liabilities resulting from repurchase agreements are not offset in the Statement of assets and liabilities.
  ANNUAL REPORT |JOHN HANCOCK Premium Dividend Fund 20

 

In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay claims resulting from close-out of the transactions.
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 the 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. 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.
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 the 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.
Foreign investing. Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on the value of securities is reflected as a component of the realized and unrealized gains (losses) on investments. Foreign investments are subject to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
Funds that invest internationally generally carry more risk than funds that invest strictly in U.S. securities. Risks can result from differences in economic and political conditions, regulations, market practices (including higher transaction costs), accounting standards and other factors.
Foreign taxes. The fund may be subject to withholding tax on income, capital gains or repatriation taxes 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.
21 JOHN HANCOCK Premium Dividend Fund |ANNUAL REPORT  

 

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.
As of October 31, 2019, 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.
Managed distribution plan. The fund has adopted a managed distribution plan (Plan) on September 29, 2014. Under the current Plan, the fund makes monthly distributions of an amount equal to $0.0975 per share, which will be paid monthly until further notice.
Distributions under the Plan may consist of net investment income, net realized capital gains and, to the extent necessary, return of capital. Return of capital distributions may be necessary when the fund’s net investment income and net capital gains are insufficient to meet the minimum distribution. In addition, the fund may also make additional distributions for the purpose of not incurring federal income and excise taxes.
The Board of Trustees may terminate or reduce the amount paid under the Plan at any time. The termination or reduction may have an adverse effect on the market price of the fund’s shares.
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 under the managed distribution plan described above. Capital gain distributions, if any, are typically distributed annually.
The tax character of distributions for the years ended October 31, 2019 and 2018 was as follows:
  October 31, 2019 October 31, 2018
Ordinary income $36,251,213 $44,845,980
Long-term capital gains 22,187,367 37,597,262
Total $58,438,580 $82,443,242
As of October 31, 2019, the components of distributable earnings on a tax basis consisted of $1,628,892 of undistributed long-term capital gains.
  ANNUAL REPORT |JOHN HANCOCK Premium Dividend Fund 22

 

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 wash sale loss deferrals, characterization of distributions, contingent payment debt instruments and derivative transactions.
Note 3Derivative 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. 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 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
23 JOHN HANCOCK Premium Dividend Fund |ANNUAL REPORT  

 

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. Payable for futures variation margin is included on the Statement of assets and liabilities. When the contract is closed, the fund records a realized 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 October 31, 2019, the fund used futures contracts to manage against anticipated interest rate changes. The fund held futures contracts with USD notional values ranging from $101.9 million to $112.1 million, as measured at each quarter end.
Swaps. Swap agreements are agreements between the fund and 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 are 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 October 31, 2019, the fund used interest rate swap contracts to manage against anticipated interest rate changes. The notional values at the period end are representative of the fund's exposure throughout the period. No new interest rate swap positions were entered into or closed during the year ended October 31, 2019.
Fair value of derivative instruments by risk category
The table below summarizes the fair value of derivatives held by the fund at October 31, 2019 by risk category:
Risk Statement of
assets and
liabilities location
Financial
instruments
location
Assets
derivatives
fair value
Liabilities
derivatives
fair value
Interest rate Receivable/payable for futures variation margin Futures 1 $979,114
Interest rate Swap contracts, at value Interest rate swaps2 $(1,768,306)
      $979,114 $(1,768,306)
  ANNUAL REPORT |JOHN HANCOCK Premium Dividend Fund 24

 

1 Reflects cumulative appreciation/depreciation on futures as disclosed in Fund's investments. Only the year end variation margin is separately disclosed on the Statement of assets and liabilities.
2 Reflects cumulative value of swap contracts. Receivable/payable for centrally cleared swaps, which includes value and margin, and swap contracts at value, which represents OTC swaps, are shown separately on the Statement of assets and liabilities.
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 October 31, 2019:
  Statement of operations location - Net realized gain (loss) on:
Risk Futures contracts Swap contracts Total
Interest rate $(8,664,119) $415,329 $(8,248,790)
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 October 31, 2019:
  Statement of operations location - Change in net unrealized appreciation (depreciation) of:
Risk Futures contracts Swap contracts Total
Interest rate $(557,689) $(5,346,228) $(5,903,917)
Note 4Guarantees 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 5Fees and transactions with affiliates
John Hancock Investment Management LLC (the Advisor) serves as investment advisor for the fund. The Advisor is an indirect, wholly owned subsidiary of Manulife Financial Corporation (MFC). Prior to June 28, 2019, the Advisor was known as John Hancock Advisers, LLC.
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 0.50% of the fund’s average daily managed assets (net assets plus borrowing under the Liquidity Agreement) (see Note 8). In addition, the fund pays to the Advisor 5.00% of the fund’s daily gross income, which amounted to $2,981,469 for the year ended October 30, 2019. The Advisor has a subadvisory agreement with Manulife Investment Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. Prior to May 7, 2019, Manulife Investment Management (US) LLC was known as John Hancock Asset Management, a division of Manulife Asset Management (US) LLC. 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
25 JOHN HANCOCK Premium Dividend Fund |ANNUAL REPORT  

 

fund. During the year ended October 31, 2019, this waiver amounted to 0.01% of the fund’s average daily net assets. This arrangement expires on July 31, 2021, 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 $81,687 for the year ended October 31, 2019.
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 October 31, 2019, were equivalent to a net annual effective rate of 0.76% of the fund's average daily managed net assets.
Administrative services. The fund has an administrative agreement with the Advisor under which the Advisor oversees the custodial, auditing, valuation, accounting, legal, compliance, stock transfer and dividend disbursing services and other operational activities and maintains fund communications with shareholders. The fund pays the Advisor a monthly administration fee at an annual rate of 0.10% of the fund’s average weekly 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 6Fund share transactions
On December 17, 2014, the Board of Trustees approved a share repurchase plan, which is subsequently reviewed and approved by the Board of Trustees each year in December. Under the current share repurchase plan, the fund may purchase in the open market, up to 10% of its outstanding common shares as of December 31, 2018. The current share repurchase plan will remain in effect between January 1, 2019 and December 31, 2019.
During the years ended October 31, 2019 and 2018, the fund had no activities under the repurchase program. Shares repurchased and corresponding dollar amounts, if any, are included on the Statements of changes in net assets. The anti-dilutive impacts of these share repurchases are included on the Financial highlights.
Note 7Leverage risk
The fund utilizes a Liquidity Agreement (LA) to increase its assets available for investment. When the fund leverages its assets, shareholders bear the expenses associated with the LA 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 LA;
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.
  ANNUAL REPORT |JOHN HANCOCK Premium Dividend Fund 26

 

The use of securities lending to obtain leverage in the fund’s investments may subject the fund to greater risk of loss than would reinvestment of collateral in short term highly rated investments.
In addition to the risks related to 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 LA 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 8Liquidity Agreement
The fund has entered into a Liquidity Agreement with State Street Bank and Trust Company (SSB) that allows it to borrow or otherwise access up to $383,700,000 (maximum facility amount) through a line of credit, securities lending and reverse repurchase agreements. The amounts outstanding at October 31, 2019 are shown in the Statement of assets and liabilities as the Liquidity agreement.
The fund pledges its assets as collateral to secure obligations under the LA. The fund retains the risks and rewards of the ownership of assets pledged to secure obligations under the LA and makes these assets available for securities lending and reverse repurchase transactions with SSB acting as the fund’s authorized agent for these transactions. All transactions initiated through SSB are required to be secured with cash collateral received from the securities borrower (the Borrower) or cash is received from the reverse repurchase agreement (Reverse Repo) counterparties. Securities lending transactions will be secured with cash collateral in amounts at least equal to 100% of the market value of the securities utilized in these transactions. Cash received by SSB from securities lending or Reverse Repo transactions is credited against the amounts borrowed under the line of credit.
Upon return of securities by the Borrower or Reverse Repo counterparty, SSB will return the cash collateral to the Borrower or proceeds from the Reverse Repo, as applicable, which will eliminate the credit against the line of credit and will cause the drawdowns under the line of credit to increase by the amounts returned. Income earned on the loaned securities is retained by SSB, and any interest due on the reverse repurchase agreements is paid by SSB.
SSB has indemnified the fund for certain losses that may arise if the Borrower or a Reverse Repo Counterparty fails to return securities when due. With respect to securities lending transactions, upon a default of the securities borrower, SSB uses the collateral received from the Borrower to purchase replacement securities of the same issue, type, class and series. If the value of the collateral is less than the purchase cost of replacement securities, SSB is responsible for satisfying the shortfall but only to the extent that the shortfall is not due to any of the fund’s losses on the reinvested cash collateral. Although the risk of the loss of the securities is mitigated by receiving collateral from the Borrower or proceeds from the Reverse Repo counterparty and through SSB indemnification, the fund could experience a delay in recovering securities or could experience a lower than expected return if the Borrower or Reverse Repo counterparty fails to return the securities on a timely basis.
Under normal circumstances, interest charged is at the rate of one month LIBOR (London Interbank Offered Rate) plus 0.625% and is payable monthly on the aggregate balance of the drawdowns outstanding under the LA. As of October 31, 2019, the fund had an aggregate balance of $383,700,000 at an interest rate of 2.41%, which is reflected in the Liquidity agreement on the Statement of assets and liabilities. During the year ended October 31, 2019, the average balance of the LA and the effective average interest rate were $383,700,000 and 3.00%, respectively.
The fund may terminate the LA with 60 days’ notice. If certain asset coverage and collateral requirements, or other covenants are not met, the LA could be deemed in default and result in termination. Absent a default or facility termination event, SSB is required to provide the fund with 360 days’ notice prior to terminating the LA.
27 JOHN HANCOCK Premium Dividend Fund |ANNUAL REPORT  

 

Due to the anticipated discontinuation of LIBOR, as discussed in Note 9, the LA may be 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 SSB. 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 the LA cannot yet be fully determined.
Note 9LIBOR Discontinuation Risk
The LA utilizes LIBOR as the reference or benchmark rate for interest rate calculations. 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 after 2021. This event will likely cause LIBOR to cease to be published. Before then, it is expected that market participants such as the fund and SSB will transition to the use of different reference or benchmark rates. However, although regulators have suggested alternative rates, there is currently no definitive information regarding the future utilization of LIBOR or of any replacement rate.
It is uncertain what impact the discontinuation of LIBOR will have on the use of LIBOR as a reference rate in the LA. It is expected that market participants will amend financial instruments referencing LIBOR, such as the LA, to include fallback provisions and other measures that contemplate 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. In addition, 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. As market participants transition away from LIBOR, LIBOR's usefulness may deteriorate, which could occur prior to the end of 2021. The transition process may lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates. 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, or the transition process to an alternative reference rate, may result in increases to the interest paid by the fund pursuant to the LA and, therefore, may adversely affect the fund's performance.
Note 10Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $203,181,086 and $236,982,288, respectively, for the year ended October 31, 2019.
Note 11Industry or sector risk
The fund generally invests 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. Financial services companies can be hurt by economic declines, changes in interest rates, regulatory and market impacts.
  ANNUAL REPORT |JOHN HANCOCK Premium Dividend Fund 28

 

Note 12New accounting pronouncement
In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2017-08, Premium Amortization on Purchased Callable Debt Securities, which shortens the premium amortization period for purchased non contingently callable debt securities. The standard is effective for annual periods beginning after December 15, 2018 and interim periods within those fiscal years. Management has performed an analysis and has determined that the ASU will not have a material impact to the fund.
29 JOHN HANCOCK Premium Dividend Fund |ANNUAL REPORT  

 

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of John Hancock Premium Dividend Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the Fund’s investments, of John Hancock Premium Dividend Fund (the "Fund") as of October 31, 2019, the related statements of operations and cash flows for the year ended October 31, 2019, the statements of changes in net assets for each of the two years in the period ended October 31, 2019, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2019 (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 October 31, 2019, 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 October 31, 2019 and the financial highlights for each of the five years in the period ended October 31, 2019 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 October 31, 2019 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
December 13, 2019
We have served as the auditor of one or more investment companies in the John Hancock group of funds since 1988.
  ANNUAL REPORT |JOHN HANCOCK PREMIUM DIVIDEND FUND 30

 

Tax information (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 October 31, 2019.
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 paid $22,187,367 in long term capital gain 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 2019 Form 1099-DIV in early 2020. This will reflect the tax character of all distributions paid in calendar year 2019.
Please consult a tax advisor regarding the tax consequences of your investment in the fund.
31 JOHN HANCOCK PREMIUM DIVIDEND FUND |ANNUAL REPORT  

ADDITIONAL INFORMATION


Unaudited

Investment objective and policy

The fund is a closed-end, diversified management investment company, common shares of which were initially offered to the public on December 15, 1989, and are publicly traded on the New York Stock Exchange (the NYSE). The fund's investment objective is to provide high current income, consistent with modest growth of capital. The fund will pursue its objective by investing in a diversified portfolio comprised primarily of dividend paying preferred securities and common equity securities. The fund utilizes a liquidity agreement to increase its assets available for investments.

Under normal circumstances, the fund will invest at least 80% of its assets in dividend paying securities. The fund will notify shareholders at least 60 days prior to any change in this 80% investment policy.

Dividends and distributions

During the year ended October 31, 2019, distributions from net investment income totaling $1.1700 per share and distributions from capital gains totaling $0.0342 per share were paid to shareholders. The dates of payments and the amounts per share were as follows:

   
Payment date Income distributions
November 30, 2018 $0.0975
December 20, 2018 0.0975
January 31, 2019 0.0975
February 28, 2019 0.0975
March 29, 2019 0.0975
April 30, 2019 0.0975
May 31, 2019 0.0975
June 28, 2019 0.0975
July 31, 2019 0.0975
August 30, 2019 0.0975
September 30, 2019 0.0975
October 31, 2019 0.0975
Total $1.1700

   
Payment date Additional distributions
December 20, 2018 0.0342
Total $1.2042

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

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       32


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.

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

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       33


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.

Effective November 1, 2013, the Plan was revised to provide that Computershare Trust Company, N.A. no longer provides mail loss insurance coverage when shareholders mail their certificates to the fund's administrator.

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:

Regular Mail:
Computershare
P.O. Box 505000
Louisville, KY 40233

Registered or Overnight Mail:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202

If your shares are held with a brokerage firm, you should contact that firm, bank or other nominee for assistance.

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       34


Continuation of Investment Advisory and Subadvisory Agreements


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 Premium Dividend Fund (the fund) of the Advisory Agreement (the Advisory Agreement) with John Hancock Investment Management, LLC (the Advisor, formerly John Hancock Advisers, LLC) and the Subadvisory Agreement (the Subadvisory Agreement) with Manulife Investment Management (US) LLC (the Subadvisor, formerly John Hancock Asset Management a division of Manulife Asset Management (US) LLC). The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 23-26, 2019 in-person meeting at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 28-30, 2019.

Approval of Advisory and Subadvisory Agreements

At in-person meetings held on June 23-26, 2019, the Board, including the Trustees who are not parties to any Agreement or considered to be interested persons of the fund under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), 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 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

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       35


and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.

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 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;
ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       36


(c) the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and fund industry developments;
(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 underperformed its benchmark index for the one-year period and outperformed its benchmark index for the three-, five- and ten-year periods ended December 31, 2018. The Board also noted that, based on its net asset value, the fund outperformed its peer group average for the one-, three- and five-year periods and underperformed its peer group average for the ten-year period ended December 31, 2018. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the benchmark index for the three-, five- and ten-year periods and to the peer group for the one-, three-, and five-year periods. The Board concluded that the fund's performance has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index.

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

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       37


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.

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 total expenses for the fund are higher than the peer group median.

The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the overall management fee and 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 on a cost basis 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
ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       38


(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 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.

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 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. 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.

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

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       39


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.

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 received information and took into account 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 fund's performance, based on net asset value, has generally been in line with or outperformed the historical performance of comparable funds and the fund's benchmark index; 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

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       40


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.
ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       41


Trustees and Officers

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, Born: 1945 2012 207
Trustee and Chairperson of the Board
Director/Trustee, Virtus Funds (since 2008); Director, The Barnes Group (since 2010); 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.

     
Charles L. Bardelis,2 Born: 1941 2012 207
Trustee
Director, Island Commuter Corp. (marine transport). Trustee of various trusts within the John Hancock Fund Complex (since 1988).

     
James R. Boyle, Born: 1959 2015 207
Trustee
Chief Executive Officer, Foresters Financial (since 2018); Chairman and Chief Executive Officer, Zillion Group, Inc. (formerly HealthFleet, Inc.) (healthcare) (2014-2018); Executive Vice President and Chief Executive Officer, U.S. Life Insurance Division of Genworth Financial, Inc. (insurance) (January 2014-July 2014); Senior Executive Vice President, Manulife Financial, President and Chief Executive Officer, John Hancock (1999-2012); Chairman and Director, John Hancock Investment Management LLC, John Hancock Investment Management Distributors LLC, and John Hancock Variable Trust Advisers LLC (2005-2010). Trustee of various trusts within the John Hancock Fund Complex (2005-2014 and since 2015).

     
Peter S. Burgess,2 Born: 1942 2012 207
Trustee
Consultant (financial, accounting, and auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999); Director, Lincoln Educational Services Corporation (since 2004); Director, Symetra Financial Corporation (2010-2016); Director, PMA Capital Corporation (2004-2010). Trustee of various trusts within the John Hancock Fund Complex (since 2005).

     
William H. Cunningham, Born: 1944 1995 207
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; Chairman (since 2009) and Director (since 2006), Lincoln National Corporation (insurance); Director, Southwest Airlines (since 2000); former Director, LIN Television (2009-2014). Trustee of various trusts within the John Hancock Fund Complex (since 1986).

     
Grace K. Fey, Born: 1946 2012 207
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).

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       42


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 207
Trustee
President, Cambridge College, Cambridge, Massachusetts (since 2011); Board of Directors, Massachusetts Women's Forum (since 2018); Board of Directors, National Association of Corporate Directors/New England (since 2015); Board of Directors, Association of Independent Colleges and Universities of Massachusetts (2014-2017); 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 American Student Assistance Corporation (1996-2009); 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).

     
James M. Oates,2 Born: 1946 2012 207
Trustee
Managing Director, Wydown Group (financial consulting firm) (since 1994); Chairman and Director, Emerson Investment Management, Inc. (2000-2015); Independent Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services company) (1997-2011); Director, Stifel Financial (since 1996); Director, Investor Financial Services Corporation (1995-2007); Director, Connecticut River Bancorp (1998-2014); Director/Trustee, Virtus Funds (since 1988). Trustee (since 2004) and Chairperson of the Board (2005-2016) of various trusts within the John Hancock Fund Complex.

     
Steven R. Pruchansky, Born: 1944 1992 207
Trustee and Vice Chairperson of the Board
Managing Director, Pru Realty (since 2017); Chairman and Chief Executive Officer, Greenscapes of Southwest Florida, Inc. (since 2014); 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.

     
Gregory A. Russo, Born: 1949 2008 207
Trustee
Director and Audit Committee Chairman (since 2012), and Member, Audit Committee and Finance Committee (since 2011), 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); Vice Chairman, Risk & Regulatory Matters, KPMG LLP (KPMG) (2002-2006); Vice Chairman, Industrial Markets, KPMG (1998-2002); Chairman and Treasurer, Westchester County, New York, Chamber of Commerce (1986-1992); Director, Treasurer, and Chairman of Audit and Finance Committees, Putnam Hospital Center (1989-1995); Director and Chairman of Fundraising Campaign, United Way of Westchester and Putnam Counties, New York (1990-1995). Trustee of various trusts within the John Hancock Fund Complex (since 2008).

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       43


Non-Independent Trustees3

     
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 207
President and Non-Independent Trustee
Head of Wealth and Asset Management, United States and Europe, for John Hancock and Manulife (since 2018); Executive Vice President, John Hancock Financial Services (since 2009, including prior positions); Director and Executive Vice President, John Hancock Investment Management LLC (since 2005, including prior positions); Director and Executive Vice President, John Hancock Variable Trust Advisers LLC (since 2006, including prior positions); President, John Hancock Investment Management Distributors LLC (since 2004, including prior positions); President of various trusts within the John Hancock Fund Complex (since 2007, including prior positions). Trustee of various trusts within the John Hancock Fund Complex (since 2017).

     
Marianne Harrison, Born: 1963 2018 207
Non-Independent Trustee
President and CEO, John Hancock (since 2017); President and CEO, Manulife Canadian Division (2013-2017); Member, Board of Directors, CAE Inc. (since 2019); Member, Board of Directors, MA Competitive Partnership Board (since 2018); Member, Board of Directors, American Council of Life Insurers (ACLI) (since 2018); Member, Board of Directors, Communitech, an industry-led innovation center that fosters technology companies in Canada (2017-2019); Member, Board of Directors, Manulife Assurance Canada (2015-2017); Board Member, St. Mary's General Hospital Foundation (2014-2017); Member, Board of Directors, Manulife Bank of Canada (2013-2017); Member, Standing Committee of the Canadian Life & Health Assurance Association (2013-2017); Member, Board of Directors, John Hancock USA, John Hancock Life & Health, John Hancock New York (2012-2013). Trustee of various trusts within the John Hancock Fund Complex (since 2018).

Principal officers who are not Trustees

   
Name, year of birth
Position(s) held with fund
Principal occupation(s)
during past 5 years
Officer
of the
Trust
since
Francis V. Knox, Jr., Born: 1947 2005
Chief Compliance Officer
Vice President, John Hancock Financial Services (since 2005); Chief Compliance Officer, various trusts within the John Hancock Fund Complex, John Hancock Investment Management LLC, and John Hancock Variable Trust Advisers LLC (since 2005).

   
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 PREMIUM DIVIDEND FUND       44


Principal officers who are not Trustees (continued)

   
Name, year of birth
Position(s) held with fund
Principal occupation(s)
during past 5 years
Officer
of the
Trust
since
Christopher (Kit) Sechler, Born: 1973 2018
Chief Legal Officer and Secretary
Vice President and Deputy Chief Counsel, John Hancock Investments (since 2015); Assistant Vice President and Senior Counsel (2009-2015), John Hancock Investment Management; Chief Legal Officer and Secretary of various trusts within the John Hancock Fund Complex (since 2018); Assistant Secretary of John Hancock Investment Management LLC and John Hancock Variable Trust Advisers LLC (since 2009).

The business address for all Trustees and Officers is 200 Berkeley Street, Boston, Massachusetts 02116-5023.

1 Mr. Boyle, Mr. Cunningham, Ms. Fey, Mr. McClellan and Mr. Russo serve as Trustees for a term expiring in 2020; Mr. Bardelis, Mr. Burgess and Ms. Harrison serve as Trustees for a term expiring in 2021; Mr. Arnott, Ms. Jackson, Mr. Oates and Mr. Pruchansky serve as Trustees for a term expiring in 2022; Mr. Boyle has served as Trustee at various times prior to date listed in the table.
2 Member of the Audit Committee.
3 The Trustee is a Non-Independent Trustee due to current or former positions with the Advisor and certain of its affiliates.
ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       45


More information

   

Trustees

Hassell H. McClellan, Chairperson
Steven R. Pruchansky, Vice Chairperson
Andrew G. Arnott
Charles L. Bardelis*
James R. Boyle
Peter S. Burgess*
William H. Cunningham
Grace K. Fey
Marianne Harrison
Deborah C. Jackson
James M. Oates*
Gregory A. Russo

Officers

Andrew G. Arnott
President

Francis V. Knox, Jr.
Chief Compliance Officer

Charles A. Rizzo
Chief Financial Officer

Salvatore Schiavone
Treasurer

Christopher (Kit) Sechler
Secretary and Chief Legal Officer

Investment advisor

John Hancock Investment Management LLC

Subadvisor

Manulife Investment Management (US) LLC

Portfolio Managers

Joseph H. Bozoyan, CFA
Brad Lutz, 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: PDT

* Member of the Audit Committee
† Non-Independent Trustee

For shareholder assistance refer to page  6

       
  You can also contact us:
  800-852-0218
jhinvestments.com

Regular mail:

Computershare
P.O. Box 505000
Louisville, KY 40233

Express mail:

Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202

The fund's proxy voting policies and procedures, as well as the fund's 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.

ANNUAL REPORT   |   JOHN HANCOCK PREMIUM DIVIDEND FUND       46


John Hancock family of funds

 

     

DOMESTIC 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

New Opportunities

Regional Bank

Small Cap Core

Small Cap Growth

Small Cap Value

U.S. Global Leaders Growth

U.S. Quality Growth

GLOBAL AND INTERNATIONAL EQUITY FUNDS



Disciplined Value International

Emerging Markets

Emerging Markets Equity

Fundamental Global Franchise

Global Equity

Global Shareholder Yield

Global Thematic Opportunities

International Dynamic Growth

International Growth

International Small Company

 

INCOME FUNDS



Bond

California Tax-Free Income

Emerging Markets Debt

Floating Rate Income

Government Income

High Yield

High Yield Municipal Bond

Income

Investment Grade Bond

Money Market

Short Duration Bond

Short Duration Credit Opportunities

Strategic Income Opportunities

Tax-Free Bond

ALTERNATIVE AND SPECIALTY FUNDS



Absolute Return Currency

Alternative Asset Allocation

Disciplined Alternative Yield

Diversified Macro

Infrastructure

Multi-Asset Absolute Return

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.


     

ASSET ALLOCATION



Balanced

Income Allocation

Multi-Index Lifetime Portfolios

Multi-Index Preservation Portfolios

Multimanager Lifestyle Portfolios

Multimanager Lifetime Portfolios

Retirement Income 2040

EXCHANGE-TRADED FUNDS



John Hancock Multifactor Consumer Discretionary ETF

John Hancock Multifactor Consumer Staples ETF

John Hancock Multifactor Developed International ETF

John Hancock Multifactor Emerging Markets ETF

John Hancock Multifactor Energy ETF

John Hancock Multifactor Financials ETF

John Hancock Multifactor Healthcare ETF

John Hancock Multifactor Industrials ETF

John Hancock Multifactor Large Cap ETF

John Hancock Multifactor Materials ETF

John Hancock Multifactor Media and
Communications ETF

John Hancock Multifactor Mid Cap ETF

John Hancock Multifactor Small Cap ETF

John Hancock Multifactor Technology ETF

John Hancock Multifactor Utilities ETF

 

ENVIRONMENTAL, SOCIAL, AND
GOVERNANCE FUNDS



ESG All Cap Core

ESG Core Bond

ESG International Equity

ESG Large Cap Core

CLOSED-END FUNDS



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

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John Hancock Investment Management

A trusted brand

John Hancock Investment Management is a premier asset manager
representing one of America's most trusted brands, 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.

JHDIGEST_BACKCOVER-LOGO.JPG

John Hancock Investment Management Distributors LLC n Member FINRA, SIPC
200 Berkeley Street n Boston, MA 02116-5010 n 800-225-5291 n jhinvestments.com

   
MF1003877 P2A 10/19
12/19


ITEM 2. CODE OF ETHICS.

As of the end of the period, October 31, 2019, 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 “Senior Financial Officers”). A copy of the code of ethics is filed as an exhibit to this Form N-CSR.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Peter S. Burgess 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 for John Hancock Premium Dividend Fund 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 $46,697 for the fiscal year ended October 31, 2019 and $49,299 for the fiscal year ended October 31, 2018. These fees were billed to the registrant and were approved by the registrant’s audit committee.

(b) Audit-Related Services
Audit-related fees for John Hancock Premium Dividend Fund amounted to $5 for the fiscal year ended October 31, 2019 and $0 for the fiscal year ended October 31, 2018 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 that provides ongoing services to the registrant ("control affiliates"). The nature of the services comprising the audit-related services was the review of litigation related expenses. In addition, amounts billed to control affiliates for service provider internal controls reviews were $116,467 and $110,200 for the fiscal years ended October 31, 2019 and 2018, respectively.

(c) Tax Fees
The aggregate fees for John Hancock Premium Dividend Fund billed for professional services rendered by the principal accountant(s) for the tax compliance, tax advice and tax planning (“tax fees”) amounted to $3,837 for the fiscal year ended October 31, 2019 and $3,725 for the fiscal year ended October 31, 2018. 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 all other fees for John Hancock Premium Dividend Fund billed to the registrant for products and services provided by the principal accountant were $84 for the fiscal year ended October 31, 2019 and $239 for the fiscal year ended October 31, 2018 billed to control affiliates for products and services provided by the principal accountant. These fees were approved by the registrant’s audit committee.

(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 October 31, 2019, 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 $$962,139 for the fiscal year ended October 31, 2019 and $2,064,999 for the fiscal year ended October 31, 2018.

(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.

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:

Peter S. Burgess - Chairman
Charles L. Bardelis
Theron S. Hoffman

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. Information is provided as of October 31, 2019.

Joseph H. Bozoyan, CFA
Managing Director and Portfolio Manager
Manulife Investment Management (US) LLC since 2015
Began business career in 1993
Managed the Fund since 2015

Bradley Lutz, CFA
Managing Director and Portfolio Manager
Manulife Investment Management (US) LLC since 2002
Began business career in 1992
Managed the Fund since 2018

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 October 31, 2019. 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.

Registered Investment
Companies
Other Pooled
Investment Vehicles
Other Accounts
Number
of
Accounts
Total
Assets
$Million
Number
of
Accounts
Total
Assets
$Million
Number
of
Accounts
Total
Assets
$Million
Joseph H. Bozoyan, CFA 4 3,847 3 464 None None
Bradley Lutz, CFA 4 3,847 2 414 4 263

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 short-and long-term incentives. 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.
 
Incentives. Only investment professionals are eligible to participate in the short-and long-term incentive plan. Under the plan, investment professionals are eligible for an annual cash award. 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, 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.
 
Financial Performance: 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.
 
Manulife Equity Awards. 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/individuals 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.

Portfolio Manager Range of Beneficial
Ownership in the Fund
Range of Beneficial
Ownership in similarly
managed accounts
Josepn H. Bozoyan, CFA $10,001-$50,000 $10,001-$50,000
Bradley Lutz, CFA $10,001-$50,000 $10,001-$50,000

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

(a) Not applicable.
(b)


REGISTRANT PURCHASES OF EQUITY SECURITIES

Period Total number of
shares
purchased
Average price
per share
Total number of
shares
purchased as
part of publicly
announced
plans*
Maximum
number of
shares that may
yet be
purchased
under the plans*
Nov-18 - - - 4,858,319
Dec-18 - - - 4,858,319
Jan-19 - - - 4,858,319
Feb-19 - - - 4,858,319
Mar-19 - - - 4,858,319
Apr-19 - - - 4,858,319
May-19 - - - 4,858,319
Jun-19 - - - 4,858,319
Jul-19 - - - 4,858,319
Aug-19 - - - 4,858,319
Sep-19 - - - 4,858,319
Oct-19 - - - 4,858,319
Total - - -

* On December 17, 2014, the Board of Trustees approved a share repurchase program, which is subsequently reviewed and approved by the Board of Trustees each year in December. Under the share repurchase program, the Fund may purchase in the open market, up to 10% of its outstanding common shares as of December 31, 2018. The current share purchase plan will remain in effect between January 1, 2019 to December 31, 2019.

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 8 to financial statements in Item 1.


ITEM 13. EXHIBITS.

(a)(1) Code of Ethics for Senior Financial 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)(1) 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 into any 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 - Nominating and 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 Premium Dividend Fund

By: /s/ Andrew Arnott
Andrew Arnott                
President
 
Date:      December 13, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:      /s/ Andrew Arnott
Andrew Arnott
President
 
Date: December 13, 2019
 
By: /s/ Charles A. Rizzo
Charles A. Rizzo
Chief Financial Officer     
 
Date: December 13, 2019


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