UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANIES |
Investment Company Act file number 811- 21287
John Hancock Preferred Income Fund III (Exact name of registrant as specified in charter) |
601 Congress Street, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip code) |
Alfred P. Ouellette, Senior Attorney and Assistant Secretary
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4324
Date of fiscal year end: | May 31 |
Date of reporting period: | August 31, 2006 |
ITEM 1. SCHEDULE OF INVESTMENTS
John Hancock | |||||
Preferred Income Fund III | |||||
Securities owned by the Fund on | |||||
August 31, 2006 (unaudited) | |||||
Interest | Maturity | Credit | Par value | ||
Issuer, description | rate (%) | date | rating (A) | ($000) | Value |
| |||||
Bonds 6.61% | $70,736,494 | ||||
(Cost $71,403,221) | |||||
Automobile Manufacturers 0.20% | 2,162,675 | ||||
| |||||
Ford Motor Co., | |||||
Note | 7.450 | 07-16-31 | B+ | 2,755 | 2,162,675 |
Consumer Finance | 3,032,070 | ||||
| |||||
General Motors Acceptance Corp., | |||||
Bond | 8.000 | 11-01-31 | BB | 3,000 | 3,032,070 |
Electric Utilities 3.53% | 37,782,335 | ||||
| |||||
Black Hills Corp., | |||||
Note | 6.500 | 05-15-13 | BBB- | 15,000 | 15,111,735 |
DPL, Inc., | |||||
Sr Note | 6.875 | 09-01-11 | BB | 5,036 | 5,277,874 |
Entergy Gulf States, Inc., | |||||
1st Mtg Bond | 6.200 | 07-01-33 | BBB+ | 15,000 | 14,117,115 |
Kentucky Power Co., | |||||
Sr Note, Ser D | 5.625 | 12-01-32 | BBB | 3,565 | 3,275,611 |
Integrated Oil & Gas 0.51% | 5,459,755 | ||||
| |||||
Amerada Hess Corp., | |||||
Note | 7.125 | 03-15-33 | BBB- | 5,000 | 5,459,755 |
Multi-Utilities 1.06% | 11,293,500 | ||||
| |||||
DTE Energy Co., | |||||
Sr Note | 6.375 | 04-15-33 | BBB- | 7,500 | 7,373,962 |
TECO Energy, Inc., | |||||
Note | 7.000 | 05-01-12 | BB | 3,810 | 3,919,538 |
Oil & Gas Refining & Marketing 1.03% | 11,006,159 | ||||
| |||||
Valero Energy Corp., | |||||
Note | 7.500 | 04-15-32 | BBB- | 9,500 | 11,006,159 |
Credit | Par value | ||||
Issuer, description, maturity date | rating (A) | ($000) | Value | ||
Capital preferred securities 8.63% | $92,350,188 | ||||
(Cost $96,844,716) | |||||
Diversified Banks 3.21% | 34,322,500 | ||||
| |||||
Credit Agricole Preferred Funding Trust, | |||||
7.00%, 01-29-49 | A | 9,000 | 9,135,000 | ||
Lloyds TSB Bank Plc, 6.90%, 11-29-49 (United | |||||
Kingdom) | A+ | 25,000 | 25,187,500 |
Page 1
John Hancock | |||
Preferred Income Fund III | |||
Securities owned by the Fund on | |||
August 31, 2006 (unaudited) | |||
Electric Utilities 0.62% | 6,629,625 | ||
| |||
DPL Capital Trust II, 8.125%, 09-01-31 | BB- | 6,225 | 6,629,625 |
Gas Utilities 1.22% | 13,106,001 | ||
| |||
KN Capital Trust I, 8.56%, Ser B, 04-15-27 | BB+ | 8,735 | 8,560,300 |
KN Capital Trust III, 7.63%, 04-15-28 | BB+ | 4,960 | 4,545,701 |
Integrated Telecommunication Services 1.41% | 15,112,065 | ||
| |||
TCI Communications Financing Trust III, | |||
9.65%, 03-31-27 | BBB- | 14,210 | 15,112,065 |
Investment Banking & Brokerage 0.94% | 10,025,000 | ||
| |||
HBOS Capital Funding L.P., 6.85%, 03-29-49 | |||
(United Kingdom) | A | 10,000 | 10,025,000 |
Multi-Utilities 0.90% | 9,577,121 | ||
| |||
Dominion Resources Capital Trust I, 7.83%, | |||
12-01-27 | BB+ | 9,097 | 9,577,121 |
Other Diversified Financial Services 0.33% | 3,577,876 | ||
| |||
JPM Capital Trust I, 7.54%, 01-15-27 | A- | 3,447 | 3,577,876 |
Issuer | Shares | Value | |
Common stocks 4.30% | $46,072,920 | ||
(Cost $33,950,446) | |||
Electric Utilities 0.78% | 8,363,468 | ||
| |||
FPL Group, Inc. | 129,000 | 5,734,050 | |
Scottish Power Plc, American Depositary | |||
Receipt (ADR) (United Kingdom) | 55,555 | 2,629,418 | |
Gas Utilities 0.31% | 3,351,342 | ||
| |||
ONEOK, Inc. | 87,571 | 3,351,342 | |
Independent Power Producers & Energy Traders 1.67% | 17,889,810 | ||
| |||
TXU Corp. | 270,198 | 17,889,810 | |
Multi-Utilities 1.54% | 16,468,300 | ||
| |||
CH Energy Group, Inc. | 20,600 | 1,011,872 | |
DTE Energy Co. | 281,516 | 11,750,478 | |
TECO Energy, Inc. | 235,000 | 3,705,950 |
Page 2
John Hancock | |||
Preferred Income Fund III | |||
Securities owned by the Fund on | |||
August 31, 2006 (unaudited) | |||
Credit | |||
Issuer, description | rating (A) | Shares | Value |
| |||
Preferred stocks 80.38% | $860,026,983 | ||
(Cost $884,295,022) | |||
Agricultural Products 1.45% | 15,532,978 | ||
| |||
Ocean Spray Cranberries, Inc., 6.25%, | |||
Ser A (S) | BB+ | 195,000 | 15,532,978 |
Asset Management & Custody Banks 0.38% | 4,052,888 | ||
| |||
BNY Capital V, 5.95%, Ser F | A- | 170,361 | 4,052,888 |
Automobile Manufacturers 2.34% | 24,985,316 | ||
| |||
Ford Motor Co., 7.50% | B+ | 761,385 | 14,161,761 |
General Motors Corp., 7.25%, Ser 07-15-41 | B- | 50,641 | 904,448 |
General Motors Corp., 7.375%, Ser 05-15-48 | Caa1 | 558,194 | 9,919,107 |
Broadcasting & Cable TV 0.29% | 3,077,833 | ||
| |||
Comcast Corp., 7.00% | BBB+ | 119,900 | 3,077,833 |
Consumer Finance 2.40% | 25,721,462 | ||
| |||
Ford Motor Credit Co., 7.60% | Ba3 | 25,000 | 552,250 |
HSBC Finance Corp., 6.36%, Depositary Shares, | |||
Ser B | A | 250,000 | 6,385,000 |
HSBC Finance Corp., 6.875% | AA- | 636,118 | 16,240,093 |
SLM Corp., 6.00% | A | 64,195 | 1,533,619 |
SLM Corp., 6.97%, Ser A | BBB+ | 18,800 | 1,010,500 |
Diversified Banks 7.22% | 77,286,300 | ||
| |||
BAC Capital Trust II, 7.00% | A | 94,600 | 2,377,298 |
BAC Capital Trust III, 7.00% | A | 22,000 | 558,580 |
BAC Capital Trust IV, 5.875% | A | 411,400 | 9,709,040 |
Fleet Capital Trust VII, 7.20% | A | 76,004 | 1,931,262 |
Royal Bank of Scotland Group Plc, 5.75%, | |||
Ser L (United Kingdom) | A | 960,000 | 23,116,800 |
Santander Finance Preferred SA Unipersonal, | |||
6.41%, Ser 1 (Spain) | A- | 100,000 | 2,525,000 |
USB Capital IV, 7.35% | A | 59,100 | 1,491,093 |
USB Capital V, 7.25% | A | 60,700 | 1,544,208 |
USB Capital VIII, 6.35%, Ser 1 | A | 269,700 | 6,661,590 |
USB Capital X, 6.50% | A | 85,000 | 2,117,350 |
Wachovia Preferred Funding Corp., 7.25%, Ser A | A- | 674,800 | 18,867,408 |
Wells Fargo Capital Trust IV, 7.00% | A+ | 177,800 | 4,461,002 |
Wells Fargo Capital Trust VII, 5.85% | A+ | 81,700 | 1,925,669 |
Electric Utilities 11.93% | 127,599,503 | ||
| |||
Cleveland Electric Financing Trust I, 9.00% | BB+ | 27,400 | 709,386 |
Consolidated Edison, Inc., $5.00, Ser A | BBB+ | 30,000 | 2,617,500 |
Consolidated Edison, Inc., 7.25% | A2 | 56,000 | 1,440,880 |
DTE Energy Trust II, 7.50% | BB+ | 36,600 | 934,398 |
Entergy Mississippi, Inc., 7.25% | A- | 113,668 | 2,904,217 |
Page 3
John Hancock | |||
Preferred Income Fund III | |||
Securities owned by the Fund on | |||
August 31, 2006 (unaudited) | |||
FPC Capital I, 7.10%, Ser A | BB+ | 746,700 | 18,794,439 |
FPL Group Capital Trust I, 5.875% | BBB+ | 490,000 | 11,515,000 |
Georgia Power Capital Trust V, 7.125% | BBB+ | 156,100 | 3,978,989 |
Georgia Power Co., 6.00%, Ser R | A | 730,000 | 18,023,700 |
Great Plains Energy, Inc., 8.00%, Conv | BBB- | 685,400 | 16,792,300 |
HECO Capital Trust III, 6.50% | BBB- | 130,000 | 3,313,700 |
Interstate Power & Light Co., 7.10%, Ser C | BBB- | 354,900 | 9,116,494 |
Interstate Power & Light Co., 8.375%, Ser B | Baa3 | 54,500 | 1,648,625 |
Northern States Power Co., 8.00% | BBB- | 84,550 | 2,191,536 |
PPL Electric Utilities Corp., 6.25%, | |||
Depositary Shares | BBB | 130,000 | 3,331,250 |
PPL Energy Supply, LLC, 7.00% | BBB | 547,370 | 13,963,409 |
Southern California Edison Co., 6.00% | BBB- | 30,000 | 2,921,250 |
Southern California Edison Co., 6.125% | BBB- | 20,000 | 1,966,250 |
Virginia Power Capital Trust, 7.375% | BB+ | 447,600 | 11,436,180 |
Gas Utilities 3.33% | 35,620,012 | ||
| |||
Laclede Capital Trust I, 7.70% | BBB+ | 82,000 | 2,077,880 |
Southern Union Co., 7.55%, Ser A | BB+ | 449,000 | 11,651,550 |
Southwest Gas Capital II, 7.70% | BB | 810,250 | 20,953,065 |
Vectren Utility Holdings, Inc., 7.25% | A- | 37,100 | 937,517 |
Hotels, Resorts & Cruise Lines 0.28% | 3,014,812 | ||
| |||
Hilton Hotels Corp., 8.00% | BB | 118,600 | 3,014,812 |
Integrated Telecommunication Services 2.61% | 27,909,843 | ||
| |||
Telephone & Data Systems, Inc., 6.625% | A- | 462,900 | 11,317,905 |
Telephone & Data Systems, Inc., 7.60%, Ser A | A- | 492,976 | 12,373,698 |
Verizon New England, Inc., 7.00%, Ser B | A3 | 166,400 | 4,218,240 |
Investment Banking & Brokerage 9.35% | 100,068,348 | ||
| |||
Fleet Capital Trust IX, 6.00% | A | 469,200 | 11,354,640 |
Goldman Sachs Group, Inc., 6.20%, Ser B | A- | 240,000 | 6,165,600 |
Lehman Brothers Holdings Capital Trust III, | |||
6.375%, Ser K | A- | 793,400 | 19,866,736 |
Lehman Brothers Holdings, Inc., 5.67%, | |||
Depositary Shares, Ser D | A- | 142,500 | 6,904,125 |
Merrill Lynch Preferred Capital Trust III, | |||
7.00% | A- | 417,017 | 10,642,274 |
Merrill Lynch Preferred Capital Trust IV, | |||
7.12% | A- | 232,700 | 5,966,428 |
Merrill Lynch Preferred Capital Trust V, 7.28% | A- | 373,700 | 9,660,145 |
Morgan Stanley Capital Trust III, 6.25% | A- | 764,025 | 18,550,527 |
Morgan Stanley Capital Trust IV, 6.25% | A- | 393,925 | 9,702,373 |
Morgan Stanley Capital Trust VI, 6.60% | A- | 50,000 | 1,255,500 |
Life & Health Insurance 5.24% | 56,073,268 | ||
| |||
Lincoln National Capital VI, 6.75%, Ser F | A- | 304,000 | 7,776,320 |
MetLife, Inc., 6.50%, Ser B | BBB | 1,108,850 | 28,331,117 |
Phoenix Cos., Inc. (The), 7.45% | BBB | 531,949 | 13,362,559 |
PLC Capital Trust IV, 7.25% | BBB+ | 141,400 | 3,595,802 |
PLC Capital Trust V, 6.125% | BBB+ | 83,300 | 1,949,220 |
Prudential Plc, 6.50% (United Kingdom) | A- | 41,500 | 1,058,250 |
Page 4
John Hancock | |||
Preferred Income Fund III | |||
Securities owned by the Fund on | |||
August 31, 2006 (unaudited) | |||
Multi-Line Insurance 3.86% | 41,289,379 | ||
| |||
Aegon NV, 6.375% (Netherlands) | A- | 241,265 | 6,026,800 |
Aegon NV, 6.50% (Netherlands) | A- | 138,850 | 3,490,689 |
ING Groep NV, 7.05% (Netherlands) | A | 603,970 | 15,304,600 |
ING Groep NV, 7.20% (Netherlands) | A | 641,000 | 16,467,290 |
Multi-Utilities 6.71% | 71,787,383 | ||
| |||
Aquila, Inc., 7.875% | B2 | 218,707 | 5,458,927 |
Avista Corp., $6.95, Ser K | BB- | 138,517 | 13,990,217 |
BGE Capital Trust II, 6.20% | BBB- | 668,928 | 15,913,797 |
DTE Energy Trust I, 7.80% | BB+ | 202,800 | 5,191,680 |
PNM Resources, Inc., 6.75%, Conv | BBB- | 273,199 | 14,069,748 |
PSEG Funding Trust II, 8.75% | BB+ | 462,275 | 12,222,551 |
Public Service Electric & Gas Co., 5.05%, | |||
Ser D | BB+ | 30,000 | 2,760,000 |
TECO Capital Trust I, 8.50% | B | 85,845 | 2,180,463 |
Oil & Gas Exploration & Production 4.20% | 44,885,851 | ||
| |||
Apache Corp., 5.68%, Depositary Shares, Ser B | BBB | 27,500 | 2,703,594 |
Chesapeake Energy Corp., 6.25%, Conv (G) | B+ | 6,330 | 1,699,605 |
Devon Energy Corp., 6.49%, Ser A | BB+ | 25,250 | 2,577,868 |
Nexen, Inc., 7.35% (Canada) | BB+ | 1,494,079 | 37,904,784 |
Other Diversified Financial Services 9.08% | 97,187,111 | ||
| |||
ABN AMRO Capital Funding Trust V, 5.90% | A | 867,400 | 20,635,446 |
ABN AMRO Capital Funding Trust VI, 6.25% | A | 353,900 | 8,996,138 |
Citigroup Capital VII, 7.125% | A | 28,042 | 704,976 |
Citigroup Capital VIII, 6.95% | A | 241,200 | 6,128,892 |
Citigroup Capital IX, 6.00% | A | 264,800 | 6,437,288 |
Citigroup Capital X, 6.10% | A | 720,000 | 17,791,200 |
General Electric Capital Corp., 5.875% | AAA | 325,930 | 7,845,135 |
General Electric Capital Corp., 6.10% | AAA | 94,747 | 2,345,936 |
JPMorgan Chase Capital XI, 5.875%, Ser K | A- | 1,030,000 | 24,205,000 |
JPMorgan Chase Capital XIV, 6.20%, Ser N | A- | 25,000 | 614,500 |
JPMorgan Chase Capital XVI, 6.35% | A- | 60,000 | 1,482,600 |
Real Estate Investment Trusts 5.00% | 53,534,232 | ||
| |||
Duke Realty Corp., 6.50%, Depositary Shares, | |||
Ser K | BBB | 151,600 | 3,706,620 |
Duke Realty Corp., 6.60%, Depositary Shares, | |||
Ser L | BBB | 118,500 | 2,909,175 |
Duke Realty Corp., 6.625%, Depositary Shares, | |||
Ser J | BBB | 638,100 | 15,697,260 |
Kimco Realty Co., 6.65%, Depositary Shares, | |||
Ser F | BBB+ | 384,750 | 9,772,650 |
Public Storage, Inc., 6.18%, Depositary | |||
Shares, Ser D | BBB+ | 20,000 | 473,400 |
Public Storage, Inc., 6.50%, Depositary | |||
Shares, Ser W | BBB+ | 450,000 | 11,074,500 |
Public Storage, Inc., 7.50%, Depositary | |||
Shares, Ser V | BBB+ | 184,530 | 4,755,338 |
Page 5
John Hancock | |||||
Preferred Income Fund III | |||||
Securities owned by the Fund on | |||||
August 31, 2006 (unaudited) | |||||
Public Storage, Inc., 7.625%, Depositary | |||||
Shares, Ser T | BBB+ | 25,500 | 648,720 | ||
Public Storage, Inc., 8.00%, Depositary | |||||
Shares, Ser R | BBB+ | 177,100 | 4,496,569 | ||
Regional Banks 2.47% | 26,442,550 | ||||
| |||||
National Commerce Capital Trust II, 7.70% | A- | 86,800 | 2,227,288 | ||
PFGI Capital Corp., 7.75% | A | 926,900 | 24,215,262 | ||
Reinsurance 0.27% | 2,840,994 | ||||
| |||||
RenaissanceRe Holdings Ltd., 6.08%, Ser C | |||||
(Bermuda) | BBB | 127,800 | 2,840,994 | ||
Specialized Finance 0.49% | 5,289,150 | ||||
| |||||
CIT Group, Inc., 6.35%, Ser A | BBB+ | 70,000 | 1,802,500 | ||
Repsol International Capital Ltd., 7.45%, | |||||
Ser A (Cayman Islands) | BB+ | 137,000 | 3,486,650 | ||
Thrifts & Mortgage Finance 1.19% | 12,736,930 | ||||
| |||||
Abbey National Plc, 7.25% (United Kingdom) | A | 163,265 | 4,109,380 | ||
Abbey National Plc, 7.375% (United Kingdom) | A | 339,000 | 8,627,550 | ||
Wireless Telecommunication Services 0.29% | 3,090,840 | ||||
| |||||
United States Cellular, 7.50% | A- | 119,800 | 3,090,840 | ||
Interest | Maturity | Credit | Par value | ||
Issuer, description, maturity date | rate (%) | date | rating (A) | ($000) | Value |
| |||||
Short-term investments 0.08% | $811,000 | ||||
(Cost $811,000) | |||||
Government U.S. Agency 0.08% | 811,000 | ||||
| |||||
Federal Home Loan Bank, | |||||
Discount Note | 4.95 | 09-01-06 | AAA | 811 | 811,000 |
Total investments 100.00% | $1,069,997,585 |
Page 6
John Hancock
Preferred Income Fund III
Footnotes to Schedule of Investments
August 31, 2006 (unaudited)
(A) Credit ratings are unaudited and are rated by Moody's Investors Service where Standard & Poor's ratings are not available.
(G) Security rated internally by John Hancock Advisers, LLC.
(S) This security is exempt from registration under Rule 144A of the Securities Act of 1933. Such security may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $15,532,978 or 1.45% of the Fund's total investments as of August 31, 2006.
Parenthetical disclosure of a foreign country in the security description represents country of a foreign issuer.
The percentage shown for each investment category is the total value of that category as a percentage of the total investments of the Fund.
The cost of investments owned on August 31, 2006, including short-term investments, was $1,087,304,405. Gross unrealized appreciation and depreciation of investments aggregated $22,863,500 and $40,170,320, respectively, resulting in net unrealized depreciation of $17,306,820.
Footnotes to Schedule of Investments - Page 1
John Hancock | ||||
Preferred Income Fund III | ||||
Financial futures contracts | ||||
August 31, 2006 (unaudited) | ||||
Number of | ||||
Open contracts | contracts | Position | Expiration | Depreciation |
|
||||
U.S. 10-Year Treasury Note | 1,100 | Short | December-06 | ($506,132) |
Financial futures contracts
John Hancock | ||||
Preferred Income Fund III | ||||
Interest rate swap contracts | ||||
August 31, 2006 (unaudited) | ||||
Rate type | ||||
|
||||
Notional | Payments made | Payments received | Termination | Appreciation |
amount | by Fund | by Fund | date | |
|
||||
$35,000,000 | 4.00% (a) | 3-month LIBOR | Apr 09 | $995,494 |
|
||||
(a) Fixed rate |
Interest rate swap contracts
ITEM 2. CONTROLS AND PROCEDURES. |
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-Q, the registrant's principal executive officer and principal 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 registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Preferred Income Fund III |
By: /s/ Keith F. Hartstein ------------------------------------- Keith F. Hartstein President and Chief Executive Officer Date: October 27, 2006 |
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/ Keith F. Hartstein ------------------------------------- Keith F. Hartstein President and Chief Executive Officer Date: October 27, 2006 |
By: /s/ John G. Vrysen
-------------------------------------
John G. Vrysen
Executive Vice President and Chief Financial Officer
Date: October 27, 2006 |