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 E. Ouellette, Senior Counsel 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: | February 28, 2007 |
ITEM 1. SCHEDULE OF INVESTMENTS
John Hancock
Preferred Income Fund III
Securities owned by the Fund on
February 28, 2007 (unaudited)
Interest | Maturity | Credit | Par value | ||||
Issuer, description | rate | date | rating (A) | (000) | Value | ||
Bonds 7.93% | $85,903,154 | ||||||
| |||||||
(Cost $84,311,749) | |||||||
Automobile Manufacturers 0.20% | 2,210,888 | ||||||
| |||||||
Ford Motor Co., | |||||||
Note | 7.450% | 07-16-31 | CCC+ | $2,755 | 2,210,888 | ||
Consumer Finance 0.31% | 3,308,007 | ||||||
| |||||||
General Motors Acceptance Corp., | |||||||
Bond | 8.000 | 11-01-31 | BB+ | 3,000 | 3,308,007 | ||
Electric Utilities 3.58% | 38,737,970 | ||||||
| |||||||
Black Hills Corp., | |||||||
Note | 6.500 | 05-15-13 | BBB- | 15,000 | 15,243,075 | ||
DPL, Inc., | |||||||
Sr Note | 6.875 | 09-01-11 | BBB- | 5,036 | 5,358,646 | ||
Entergy Gulf States, Inc., | |||||||
1st Mtg Bond | 6.200 | 07-01-33 | BBB+ | 15,000 | 14,741,745 | ||
Kentucky Power Co., | |||||||
Sr Note, Ser D | 5.625 | 12-01-32 | BBB | 3,565 | 3,394,504 | ||
Gas Utilities 1.19% | 12,936,533 | ||||||
| |||||||
Southern Union Co., | |||||||
Jr Sub Note Ser A (P) | 7.200 | 11-01-66 | BB | 12,900 | 12,936,533 | ||
Integrated Oil & Gas 0.52% | 5,607,595 | ||||||
| |||||||
Amerada Hess Corp., | |||||||
Note | 7.125 | 03-15-33 | BBB- | 5,000 | 5,607,595 | ||
Multi-Utilities 1.10% | 11,918,685 | ||||||
| |||||||
DTE Energy Co., | |||||||
Sr Note | 6.375 | 04-15-33 | BBB- | 7,500 | 7,918,185 | ||
TECO Energy, Inc., | |||||||
Note | 7.000 | 05-01-12 | BB | 3,810 | 4,000,500 | ||
Oil & Gas Refining & Marketing | 1.03% | 11,183,476 | |||||
| |||||||
Valero Energy Corp., | |||||||
Note | 7.500 | 04-15-32 | BBB | 9,500 | 11,183,476 |
Page 1
John Hancock
Preferred Income Fund III
Securities owned by the Fund on
February 28, 2007 (unaudited)
Credit | Par value | ||||||
Issuer, description, maturity date | rating (A) | (000) | Value | ||||
Capital preferred securities 8.68% | $94,030,678 | ||||||
| |||||||
(Cost $96,849,120) | |||||||
Diversified Banks 3.16% | 34,249,200 | ||||||
| |||||||
Credit Agricole Preferred Funding Trust, | |||||||
7.00%, 1/29/49 | A | $9,000 | 9,124,200 | ||||
Lloyds TSB Bank Plc, 6.90%, 11-29-49 | |||||||
(United Kingdom) | A+ | 25,000 | 25,125,000 | ||||
Electric Utilities 0.70% | 7,594,500 | ||||||
| |||||||
DPL Capital Trust II, 8.125%, 09-01-31 | BB+ | 6,225 | 7,594,500 | ||||
Gas Utilities 1.29% | 13,954,616 | ||||||
| |||||||
KN Capital Trust I, 8.56%, Ser B, 04-15-27 | B- | 8,735 | 8,875,913 | ||||
KN Capital Trust III, 7.63%, 04-15-28 | B- | 4,960 | 5,078,703 | ||||
Integrated Telecommunication Services 1.38% | 14,923,740 | ||||||
| |||||||
TCI Communications Financing Trust III, | |||||||
9.65%, 03-31-27 | BBB- | 14,210 | 14,923,740 | ||||
Investment Banking & Brokerage 0.93% | 10,088,000 | ||||||
| |||||||
HBOS Capital Funding L.P., 6.85%, | |||||||
03-29-49 (United Kingdom) | A | 10,000 | 10,088,000 | ||||
Multi-Utilities 0.89% | 9,645,876 | ||||||
| |||||||
Dominion Resources Capital Trust I, | |||||||
7.83%,12-01-27 | BB+ | 9,097 | 9,645,876 | ||||
Other Diversified Financial Services 0.33% | 3,574,746 | ||||||
| |||||||
JPM Capital Trust I, 7.54%, 01-15-27 | A | 3,447 | 3,574,746 | ||||
Issuer | Shares | Value | |||||
Common stocks 3.06% | $33,143,309 | ||||||
| |||||||
(Cost $24,145,076) | |||||||
Electric Utilities 0.78% | 8,433,069 | ||||||
| |||||||
Great Plains Energy, Inc. | 271,247 | 8,433,069 | |||||
Independent Power Producers & Energy Traders 1.59% | 17,199,000 | ||||||
| |||||||
TXU Corp. | 260,000 | 17,199,000 | |||||
Integrated Oil & Gas 0.24% | 2,594,674 | ||||||
| |||||||
BP Plc, American Depositary Receipt (ADR) | |||||||
(United Kingdom) | 42,094 | 2,594,674 |
Page 2
John Hancock
Preferred Income Fund III
Securities owned by the Fund on
February 28, 2007 (unaudited)
Multi-Utilities 0.45% | 4,916,566 | ||||||
| |||||||
CH Energy Group, Inc. | 20,600 | 975,616 | |||||
TECO Energy, Inc. | 235,000 | 3,940,950 | |||||
Credit | |||||||
Issuer, description | rating (A) | Shares | Value | ||||
Preferred stocks 78.54% | $850,527,078 | ||||||
| |||||||
(Cost $859,900,331) | |||||||
Agricultural Products 1.47% | 15,886,416 | ||||||
| |||||||
Ocean Spray Cranberries, Inc., 6.25%, | |||||||
Ser A (S) | BB+ | 195,000 | 15,886,416 | ||||
Automobile Manufacturers 2.49% | 26,996,267 | ||||||
| |||||||
Ford Motor Co., 7.50% | CCC+ | 761,385 | 14,732,800 | ||||
General Motors Corp., 7.25%, Ser 07-15-41 | B- | 50,641 | 1,015,858 | ||||
General Motors Corp., 7.375%, Ser 05-15-48 | Caa1 | 558,194 | 11,247,609 | ||||
Broadcasting & Cable TV 1.69% | 18,297,210 | ||||||
| |||||||
Comcast Corp., 7.00% | BBB+ | 119,900 | 3,103,012 | ||||
Comcast Corp., 7.00%, Ser B | BBB+ | 587,556 | 15,194,198 | ||||
Consumer Finance 2.38% | 25,728,912 | ||||||
| |||||||
Ford Motor Credit Co., 7.60% | B1 | 25,000 | 552,500 | ||||
HSBC Finance Corp., 6.36%, Depositary | |||||||
Shares, Ser B | A | 250,000 | 6,477,500 | ||||
HSBC Finance Corp., 6.875% | AA- | 636,118 | 16,163,758 | ||||
SLM Corp., 6.00% | A | 64,195 | 1,538,754 | ||||
SLM Corp., 6.97%, Ser A | BBB+ | 18,800 | 996,400 | ||||
Diversified Banks 5.93% | 64,269,926 | ||||||
| |||||||
BAC Capital Trust II, 7.00% | A+ | 94,600 | 2,382,974 | ||||
BAC Capital Trust III, 7.00% | A+ | 22,000 | 554,400 | ||||
BAC Capital Trust IV, 5.875% | A+ | 131,400 | 3,175,938 | ||||
Royal Bank of Scotland Group Plc, 5.75%, | |||||||
Ser L (United Kingdom) | A | 960,000 | 23,328,000 | ||||
Santander Finance Preferred SA, | |||||||
Unipersonal, 6.41%, Ser 1 (Spain) | A | 100,000 | 2,508,000 | ||||
USB Capital VIII, 6.35%, Ser 1 | A+ | 269,700 | 6,764,076 | ||||
USB Capital X, 6.50% | A+ | 85,000 | 2,153,900 | ||||
Wachovia Preferred Funding Corp., 7.25%, | |||||||
Ser A | A | 674,800 | 18,941,636 | ||||
Wells Fargo Capital Trust IV, 7.00% | AA- | 177,800 | 4,461,002 |
Page 3
John Hancock
Preferred Income Fund III
Securities owned by the Fund on
February 28, 2007 (unaudited)
Electric Utilities 10.65% | 115,344,077 | ||||||
| |||||||
Cleveland Electric Financing Trust I, | |||||||
9.00% | BB+ | 27,400 | 711,852 | ||||
Consolidated Edison, Inc., $5.00, Ser A | BBB+ | 30,000 | 2,760,000 | ||||
Consolidated Edison, Inc., 7.25% | A- | 56,000 | 1,428,000 | ||||
DTE Energy Trust II, 7.50% | BB+ | 36,600 | 950,502 | ||||
Entergy Mississippi, Inc., 7.25% | A- | 113,668 | 2,865,570 | ||||
FPC Capital I, 7.10%, Ser A | BB+ | 746,700 | 18,742,170 | ||||
FPL Group Capital Trust I, 5.875% | BBB+ | 490,000 | 11,941,300 | ||||
Georgia Power Capital Trust V, 7.125% | BBB+ | 156,100 | 3,963,379 | ||||
Georgia Power Co., 6.00%, Ser R | A | 730,000 | 18,359,500 | ||||
HECO Capital Trust III, 6.50% | BBB- | 130,000 | 3,513,900 | ||||
Interstate Power & Light Co., 7.10%, Ser C | BBB- | 354,900 | 9,793,040 | ||||
Interstate Power & Light Co., 8.375%, | |||||||
Ser B | Baa2 | 54,500 | 1,723,563 | ||||
Northern States Power Co., 8.00% | BBB- | 84,550 | 2,181,390 | ||||
PPL Electric Utilities Corp., 6.25%, | |||||||
Depositary Shares | BBB | 130,000 | 3,440,944 | ||||
PPL Energy Supply, LLC, 7.00% | BBB | 633,770 | 16,471,682 | ||||
Southern California Edison Co., 6.00%, | |||||||
Ser C | BBB- | 30,000 | 3,084,375 | ||||
Southern California Edison Co., 6.125% | BBB- | 20,000 | 2,066,250 | ||||
Virginia Power Capital Trust, 7.375% | BB+ | 447,600 | 11,346,660 | ||||
Gas Utilities 3.21% | 34,783,958 | ||||||
| |||||||
Laclede Capital Trust I, 7.70% | BBB+ | 82,000 | 2,107,400 | ||||
Southern Union Co., 7.55%, Ser A | BB | 449,000 | 11,682,980 | ||||
Southwest Gas Capital II, 7.70% | BB | 810,250 | 20,993,578 | ||||
Hotels, Resorts & Cruise Lines 0.28% | 3,024,300 | ||||||
| |||||||
Hilton Hotels Corp., 8.00% | BB+ | 118,600 | 3,024,300 | ||||
Integrated Telecommunication Services 2.63% | 28,460,238 | ||||||
| |||||||
Telephone & Data Systems, Inc., 6.625% | BBB- | 480,000 | 11,870,400 | ||||
Telephone & Data Systems, Inc., 7.60%, | |||||||
Ser A | BBB- | 492,976 | 12,408,206 | ||||
Verizon New England, Inc., 7.00%, Ser B | A3 | 166,400 | 4,181,632 |
Page 4
John Hancock
Preferred Income Fund III
Securities owned by the Fund on
February 28, 2007 (unaudited)
Investment Banking & Brokerage 9.37% | 101,444,590 | ||||
| |||||
Fleet Capital Trust IX, 6.00% | A+ | 469,200 | 11,608,008 | ||
Goldman Sachs Group, Inc., 6.20%, Ser B | A | 240,000 | 6,264,000 | ||
Lehman Brothers Holdings Capital Trust | |||||
III, 6.375%, Ser K | A- | 793,400 | 19,946,076 | ||
Lehman Brothers Holdings, Inc., 5.67%, | |||||
Depositary Shares, Ser D | A- | 142,500 | 7,182,000 | ||
Merrill Lynch Preferred Capital Trust | |||||
III, 7.00% | A | 417,017 | 10,633,933 | ||
Merrill Lynch Preferred Capital Trust IV, | |||||
7.12% | A | 232,700 | 5,987,371 | ||
Merrill Lynch Preferred Capital Trust V, | |||||
7.28% | A | 373,700 | 9,686,304 | ||
Morgan Stanley Capital Trust III, 6.25% | A- | 764,025 | 18,978,381 | ||
Morgan Stanley Capital Trust IV, 6.25% | A- | 393,925 | 9,887,517 | ||
Morgan Stanley Capital Trust VI, 6.60% | A- | 50,000 | 1,271,000 | ||
Life & Health Insurance 5.45% | 59,004,624 | ||||
| |||||
Lincoln National Capital VI, 6.75%, Ser F | A- | 304,000 | 7,788,480 | ||
MetLife, Inc., 6.50%, Ser B | BBB | 1,108,850 | 29,417,791 | ||
Phoenix Cos., Inc. (The), 7.45% | BBB | 554,449 | 13,988,748 | ||
PLC Capital Trust IV, 7.25% | BBB+ | 141,400 | 3,598,630 | ||
PLC Capital Trust V, 6.125% | BBB+ | 83,300 | 2,057,510 | ||
Prudential Plc, 6.50% (United Kingdom) | A- | 83,500 | 2,153,465 | ||
Movies & Entertainment 1.89% | 20,528,564 | ||||
| |||||
Viacom Inc., 6.85% (Class B) | BBB | 821,800 | 20,528,564 | ||
Multi-Line Insurance 3.83% | 41,447,017 | ||||
| |||||
Aegon NV, 6.375% (Netherlands) | A- | 241,265 | 6,161,908 | ||
Aegon NV, 6.50% (Netherlands) | A- | 150,850 | 3,839,133 | ||
ING Groep NV, 7.05% (Netherlands) | A | 603,970 | 15,183,806 | ||
ING Groep NV, 7.20% (Netherlands) | A | 641,000 | 16,262,170 | ||
Multi-Utilities 7.00% | 75,784,710 | ||||
| |||||
Aquila, Inc., 7.875% | B2 | 266,707 | 6,689,012 | ||
Avista Corp., $6.95, Ser K | BB- | 129,860 | 13,050,930 | ||
BGE Capital Trust II, 6.20% | BBB- | 786,528 | 19,403,646 | ||
DTE Energy Trust I, 7.80% | BB+ | 229,400 | 5,794,644 | ||
PNM Resources, Inc., 6.75%, Conv | BBB- | 305,999 | 16,077,187 | ||
PSEG Funding Trust II, 8.75% | BB+ | 462,275 | 11,986,791 | ||
Public Service Electric & Gas Co., 5.05%, | |||||
Ser D | BB+ | 30,000 | 2,782,500 | ||
Oil & Gas Exploration & Production 3.94% | 42,662,349 | ||||
| |||||
Chesapeake Energy Corp., 6.25%, Conv (G) | B+ | 7,330 | 1,891,140 | ||
Devon Energy Corp., 6.49%, Ser A | BB+ | 25,250 | 2,567,609 | ||
Nexen, Inc., 7.35% (Canada) | BB+ | 1,494,079 | 38,203,600 |
Page 5
John Hancock
Preferred Income Fund III
Securities owned by the Fund on
February 28, 2007 (unaudited)
Other Diversified Financial Services 7.57% | 81,953,800 | ||||||
| |||||||
ABN AMRO Capital Funding Trust V, 5.90% | A | 665,400 | 16,235,760 | ||||
ABN AMRO Capital Funding Trust VI, 6.25% | A | 353,900 | 8,996,138 | ||||
Citigroup Capital VII, 7.125% (G) | A+ | 28,042 | 706,658 | ||||
Citigroup Capital VIII, 6.95% | A+ | 241,200 | 6,119,244 | ||||
Citigroup Capital X, 6.10% | A+ | 720,000 | 17,942,400 | ||||
DB Capital Funding VIII, 6.375% | A | 228,500 | 5,895,300 | ||||
JPMorgan Chase Capital XI, 5.875%, Ser K | A | 985,000 | 23,925,650 | ||||
JPMorgan Chase Capital XIV, 6.20%, Ser N | A | 25,000 | 624,250 | ||||
JPMorgan Chase Capital XVI, 6.35% | A | 60,000 | 1,508,400 | ||||
Real Estate Investment Trusts 3.63% | 39,301,828 | ||||||
| |||||||
Duke Realty Corp., 6.50%, Depositary | |||||||
Shares, Ser K | BBB | 151,600 | 3,812,740 | ||||
Duke Realty Corp., 6.60%, Depositary | |||||||
Shares, Ser L | BBB | 118,500 | 2,998,050 | ||||
Duke Realty Corp., 6.625%, Depositary | |||||||
Shares, Ser J | BBB | 638,100 | 16,048,215 | ||||
Public Storage, Inc., 6.18%, Depositary | |||||||
Shares, Ser D | BBB+ | 20,000 | 493,200 | ||||
Public Storage, Inc., 6.50%, Depositary | |||||||
Shares, Ser W | BBB+ | 450,000 | 11,227,500 | ||||
Public Storage, Inc., 7.50%, Depositary | |||||||
Shares, Ser V | BBB+ | 184,530 | 4,722,123 | ||||
Regional Banks 2.23% | 24,099,400 | ||||||
| |||||||
PFGI Capital Corp., 7.75% | A | 926,900 | 24,099,400 | ||||
Reinsurance 0.28% | 3,085,092 | ||||||
| |||||||
RenaissanceRe Holdings Ltd., 6.08%, Ser C | |||||||
(Bermuda) | BBB | 127,800 | 3,085,092 | ||||
Specialized Finance 0.49% | 5,324,850 | ||||||
| |||||||
CIT Group, Inc., 6.35%, Ser A | BBB+ | 70,000 | 1,838,200 | ||||
Repsol International Capital Ltd., 7.45%, | |||||||
Ser A (Cayman Islands) | BB+ | 137,000 | 3,486,650 | ||||
Thrifts & Mortgage Finance 0.79% | 8,573,310 | ||||||
| |||||||
Abbey National Plc, 7.375% (United | |||||||
Kingdom) | A+ | 339,000 | 8,573,310 | ||||
Wireless Telecommunication Services 1.34% | 14,525,640 | ||||||
| |||||||
United States Cellular Corp., 7.50% | BBB- | 565,200 | 14,525,640 |
Page 6
John Hancock
Preferred Income Fund III
Securities owned by the Fund on
February 28, 2007 (unaudited)
Interest | Maturity | Credit | Par value | ||||
Issuer, description | rate | date | rating (A) | (000) | Value | ||
Short-term investments 1.79% | $19,400,000 | ||||||
| |||||||
(Cost $19,400,000) | |||||||
Government U.S. Agency 1.79% | 19,400,000 | ||||||
| |||||||
Federal Home Loan Bank, | |||||||
Discount Note | 5.14 | 03-01-07 | AAA | $19,400 | 19,400,000 | ||
Total investments (Cost $1,084,606,276) 100.00% | $1,083,004,219 |
Page 7
John Hancock
Preferred Income Fund III
Footnotes to Schedule of Investments
February 28, 2007 (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.
(P) Represents rate in effect on February 28, 2007.
(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 $15,886,416 or 1.47% of the Fund's net assets as of February 28, 2007.
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 February 28, 2007, including short-term investments, was $1,084,606,276. Gross unrealized appreciation and depreciation of investments aggregated $27,239,109 and $28,841,166, respectively, resulting in net unrealized depreciation of $1,602,057.
Footnotes to Schedule of Investments - Page 1
John Hancock
Preferred Income Fund III
Financial futures contracts
February 28, 2007 (unaudited)
Number of | ||||||
Open contracts | contracts | Position | Expiration | Depreciation | ||
| ||||||
U.S. 10-Year Treasury Note | 1,100 | Short | Jun 07 | $863,451 |
Financial futures contracts
John Hancock
Preferred Income Fund III
Interest rate swap contracts
February 28, 2007 (unaudited)
Rate type | |||||||
|
|||||||
Notional | Payments made | Payments received | Termination | ||||
amount | by Fund | by Fund | date | Appreciation | |||
| |||||||
$35,000,000 | 4.00% | (a) | 3-month LIBOR | Apr 09 | $717,610 | ||
| |||||||
(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 accounting officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Separate certifications for the registrant's principal executive officer and principal accounting officer, as required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Preferred Income Fund III
By: /s/ Keith F. Hartstein
-------------------------------------
Keith F. Hartstein
President and
Chief Executive Officer
Date: April 30, 2007
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: April 30, 2007
By: /s/ John G. Vrysen
-------------------------------------
John G. Vrysen
Chief Financial Officer
Date: April 30, 2007