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 811-23418
John Hancock GA Mortgage Trust
(Exact name of registrant as specified in charter)
197 Clarendon Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
Heidi Knapp
Treasurer
197 Clarendon Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-572-6231
Date of fiscal year end: | December 31 | |
Date of reporting period: | June 30, 2020 |
ITEM 1. REPORTS TO STOCKHOLDERS.
John Hancock GA Mortgage Trust
Semi-Annual Report
June 30, 2020
John Hancock GA Mortgage Trust
June 30, 2020
Table of Contents | |
Portfolio summary | 1 |
Portfolio of investments | 2 |
Statement of assets and liabilities | 4 |
Statement of operations | 5 |
Statement of changes in net assets | 6 |
Statement of cash flows | 7 |
Financial highlights | 8 |
Notes to financial statements | 9 |
More information | 15 |
John Hancock GA Mortgage Trust
Portfolio summary 6-30-20 (unaudited)
Portfolio Composition as of 6-30-20 (%) | |
Commercial mortgage loans | 96.0 |
U.S. Government and Agency obligations | 2.2 |
Short-term investments and other | 1.8 |
As a percentage of net assets. | |
Top 10 Issuers as of 6-30-20 (%) | |
POP 3 Ravinia LLC | 11.0 |
Regent Garden Associates LLC | 10.3 |
One Biscayne Tower LLC | 9.5 |
Downtown Woodinville LLC | 5.8 |
Voyager RV Resort MHC | 3.6 |
5021 St. LLC | 3.3 |
LB PCH Associates LLC | 2.9 |
Delphi Investors LLC | 2.8 |
5001 St. LLC | 2.8 |
THF Greengate Development LP | 2.8 |
TOTAL | 54.8 |
As a percentage of net assets. | |
Cash and cash equivalents are not included. |
1
John Hancock GA Mortgage Trust
Portfolio of investments 6-30-20 (unaudited)
Rate (%) | Maturity date | Par value^ | Value | ||||||
Commercial mortgage loans (A) 96.0% | $ | 1,251,656,018 | |||||||
(Cost $1,114,561,739) | |||||||||
1360 Summitridge Rs LLC | 3.500 | 09-01-30 | 4,500,000 | 4,549,725 | |||||
1635 Divisadero Medical Building LLC | 3.950 | 06-01-30 | 6,345,410 | 6,774,741 | |||||
1635 Divisadero Medical Building LLC | 6.000 | 06-01-30 | 12,260,970 | 15,278,885 | |||||
192 Investors LLC | 3.750 | 08-01-29 | 17,000,000 | 19,174,980 | |||||
5001 St. LLC | 4.390 | 09-01-40 | 29,121,986 | 36,498,585 | |||||
5021 St. LLC | 4.390 | 09-01-40 | 33,975,650 | 42,581,682 | |||||
Accord/Pac Members LLC | 3.500 | 10-01-40 | 9,000,000 | 9,037,620 | |||||
Bandicoot LLC | 2.950 | 06-01-30 | 15,000,000 | 15,677,400 | |||||
Beverly West Square Associates LP | 5.560 | 12-01-30 | 9,328,248 | 11,463,670 | |||||
BW Logan LLC | 6.370 | 04-01-28 | 3,760,571 | 4,550,366 | |||||
Capri Apartments LLC | 3.360 | 04-01-30 | 6,500,000 | 7,074,925 | |||||
Columbia Cochran Commons LLC | 5.790 | 03-01-24 | 4,226,943 | 4,840,991 | |||||
Corp. Center West Associates LLC | 3.650 | 04-01-35 | 12,500,000 | 13,737,250 | |||||
Creekside at Amherst Apartments LLC | 3.380 | 09-01-31 | 11,824,469 | 12,994,382 | |||||
Delphi Investors LLC | 3.900 | 12-01-24 | 34,031,039 | 37,097,916 | |||||
Downtown Woodinville LLC | 3.830 | 06-01-29 | 65,000,000 | 75,130,250 | |||||
Edgewater Partnership LP | 6.500 | 04-01-25 | 3,000,654 | 1,497,747 | |||||
FPACP3 Greenville LLC | 3.440 | 03-01-30 | 8,950,000 | 9,600,844 | |||||
Gadberry Courts LP | 3.330 | 05-01-32 | 7,088,490 | 7,330,350 | |||||
GALTG Partners LP | 6.850 | 07-01-25 | 18,248,429 | 22,649,585 | |||||
Gateway MHP, Ltd. | 3.950 | 07-01-29 | 9,837,434 | 11,147,092 | |||||
Joliet Hillcrest Shopping Center LLC | 3.700 | 06-01-25 | 10,957,774 | 11,816,425 | |||||
KIR Torrance LP | 3.375 | 10-01-22 | 22,946,142 | 24,293,310 | |||||
LB PCH Associates LLC | 4.140 | 10-01-25 | 29,684,082 | 33,227,471 | |||||
LB PCH Associates LLC | 4.680 | 10-01-25 | 4,349,719 | 4,824,404 | |||||
Manoa Shopping Center Associates LP | 7.060 | 03-01-30 | 7,231,757 | 9,391,304 | |||||
National City Plaza | 4.110 | 03-01-35 | 8,600,000 | 9,323,002 | |||||
Olympic Mills Commerce Center LLC | 4.060 | 03-01-36 | 12,318,190 | 14,539,283 | |||||
One Biscayne Tower LLC | 3.260 | 08-01-26 | 115,000,000 | 123,519,200 | |||||
Pademelon LLC | 3.000 | 06-01-30 | 6,000,000 | 6,179,580 | |||||
Parc Center Drive Joint Venture | 5.480 | 02-01-32 | 2,689,906 | 3,302,559 | |||||
PIRET NC Property LP | 3.400 | 07-01-25 | 29,100,000 | 31,262,712 | |||||
Platypus LLC | 2.950 | 06-01-30 | 4,000,000 | 4,191,480 | |||||
Plaza Inv. LP | 3.910 | 05-01-26 | 29,515,284 | 33,139,465 | |||||
POP 3 Ravinia LLC | 4.460 | 01-01-42 | 115,500,000 | 142,826,144 | |||||
Regent Garden Associates LLC | 3.250 | 03-10-35 | 124,588,511 | 134,622,870 | |||||
Rose Gardens Senior LP | 3.330 | 05-01-32 | 8,885,572 | 9,188,748 | |||||
Silverado Ranch Centre LLC | 7.500 | 06-01-30 | 6,990,300 | 9,007,211 | |||||
Spring Park Apartments | 3.440 | 10-01-31 | 17,100,000 | 18,355,824 | |||||
St. Indian Ridge LLC | 6.590 | 08-01-29 | 6,087,095 | 7,538,928 | |||||
Stony Island Plaza | 3.620 | 10-01-34 | 5,700,000 | 6,092,901 | |||||
Styertowne Shopping Center LLC | 6.060 | 03-01-24 | 14,969,564 | 17,259,010 | |||||
Sunnyside Marketplace LLC Deed of Trust Note | 3.420 | 04-01-30 | 7,476,027 | 7,951,876 | |||||
The Links at Rainbow Curve LP | 4.300 | 10-01-22 | 16,925,160 | 18,109,074 | |||||
THF Greengate Development LP | 6.320 | 10-01-25 | 29,641,422 | 36,253,830 | |||||
Tivoli Orlando Associates, Ltd. | 6.750 | 10-01-27 | 12,816,487 | 16,548,391 | |||||
Tualatin Industrial Invest LLC | 3.580 | 09-01-29 | 12,500,000 | 13,750,625 | |||||
Valley Square I LP | 5.490 | 02-01-26 | 16,800,786 | 16,781,297 |
The accompanying notes are an integral part of the financial statements.
2
John Hancock GA Mortgage Trust
Portfolio of investments 6-30-20 (unaudited)
Rate (%) | Maturity date | Par value^ | Value | |||||||
Villages at Clear Springs Apartments | 3.340 | 10-01-29 | 15,000,000 | $16,030,050 | ||||||
Voyager RV Resort MHC | 4.100 | 06-01-29 | 41,273,122 | 46,848,295 | ||||||
WG Opelousas LA LLC | 7.290 | 05-01-28 | 1,484,996 | 1,920,457 | ||||||
White Oak Subsidiary LLC | 4.900 | 07-01-24 | 8,444,267 | 9,666,575 | ||||||
White Oak Subsidiary LLC | 8.110 | 07-01-24 | 13,651,844 | 17,242,962 | ||||||
Windsor Place Apartments | 3.530 | 02-01-32 | 9,200,000 | 9,876,384 | ||||||
Woodlane Place Townhomes LLC | 2.900 | 05-05-35 | 9,982,544 | 10,230,410 | ||||||
Woods I LLC | 3.100 | 07-01-30 | 7,500,000 | 7,854,975 | ||||||
U.S. Government and Agency obligations 2.2% | $29,229,985 | |||||||||
(Cost $28,688,957) | ||||||||||
U.S. Government 2.2% | 29,229,985 | |||||||||
U.S. Treasury | ||||||||||
Note | 1.500 | 02-15-30 | 24,000,000 | 25,941,563 | ||||||
Note | 1.625 | 08-15-29 | 1,800,000 | 1,963,688 | ||||||
Note | 1.750 | 11-15-29 | 1,200,000 | 1,324,734 | ||||||
Yield* | ||||||||||
(%) | Maturity date | Par value^ | Value | |||||||
Short-term investments 2.6% | $33,604,633 | |||||||||
(Cost $33,604,710) | ||||||||||
U.S. Government 1.0% | 13,499,014 | |||||||||
U.S. Treasury Bill | 0.120 | 07-28-20 | 9,000,000 | 8,999,106 | ||||||
U.S. Treasury Bill | 0.133 | 07-07-20 | 4,500,000 | 4,499,908 | ||||||
Yield (%) | Shares | Value | ||||||||
Short-term funds 1.6% | 20,105,619 | |||||||||
State Street Institutional U.S. Government Money Market Fund, Premier | ||||||||||
Class | 0.1158(B) | 20,105,619 | 20,105,619 | |||||||
Total investments (Cost $1,176,855,406) 100.8% | $ | 1,314,490,636 | ||||||||
Other assets and liabilities, net (0.8%) | (10,566,895 | ) | ||||||||
Total net assets 100.0% | $ | 1,303,923,741 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund.
^All par values are denominated in U.S. dollars unless otherwise indicated.
Security Abbreviations and Legend | |
(A) | Securities are valued using significant unobservable inputs and are classified as Level 3 in the fair value hierarchy. Refer to Note 2 to the financial statements. |
(B) | The rate shown is the annualized seven-day yield as of 6-30-20. |
* | 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. |
At 6-30-20, the aggregate cost of investments for federal income tax purposes was $1,176,855,406. Net unrealized appreciation aggregated to $137,635,230, of which $139,996,758 related to gross unrealized appreciation and $2,361,528 related to gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
3
Financial statements
John Hancock GA Mortgage Trust
Statement of assets and liabilities 6-30-20 (unaudited)
Assets | ||
Unaffiliated investments, at value (Cost $1,176,855,406) | $ | 1,314,490,636 |
Interest receivable | 3,803,382 | |
Other assets | 33,866 | |
Total assets | 1,318,327,884 | |
Liabilities | ||
Payable for investments purchased | 13,500,000 | |
Payable to affiliates | ||
Investment management fees | 696,663 | |
Accounting and legal services fees | 22,070 | |
Trustees’ fees | 959 | |
Other liabilities and accrued expenses | 184,451 | |
Total liabilities | 14,404,143 | |
Net assets | $ | 1,303,923,741 |
Net assets consist of | ||
Paid-in capital | $ | 1,236,570,959 |
Total distributable earnings (loss) | 67,352,782 | |
Net assets | $ | 1,303,923,741 |
Net asset value per share | ||
Based on 60,298,743 shares of beneficial interest outstanding - unlimited number of shares authorized with no | ||
par value | $21.62 |
The accompanying notes are an integral part of the financial statements.
4
John Hancock GA Mortgage Trust
Statement of operations for the six months ended 6-30-20 (unaudited)
Investment income | ||
Interest | $ | 21,359,358 |
Other income | 495,194 | |
Total investment income | 21,854,552 | |
Expenses | ||
Investment management fees | 1,375,418 | |
Accounting and legal services fees | 93,793 | |
Transfer agent fees | 20,917 | |
Trustees’ fees | 44,418 | |
Custodian fees | 107,544 | |
Mortgage servicing fees | 42,050 | |
Professional fees | 217,660 | |
Other | 29,940 | |
Total expenses | 1,931,740 | |
Net investment income | 19,922,812 | |
Realized and unrealized gain (loss) | ||
Net realized gain (loss) on | ||
Unaffiliated investments | 4,481,760 | |
4,481,760 | ||
Change in net unrealized appreciation (depreciation) of | ||
Unaffiliated investments | 65,390,174 | |
65,390,174 | ||
Net realized and unrealized gain | 69,871,934 | |
Increase in net assets from operations | $ | 89,794,746 |
The accompanying notes are an integral part of the financial statements.
5
John Hancock GA Mortgage Trust
Statement of changes in net assets
Six months | Period ended | |||||||
ended 6-30-20 | 12-31-191 | |||||||
(unaudited) | ||||||||
Increase (decrease) in net assets | ||||||||
From operations | ||||||||
Net investment income | $19,922,812 | $31,709,914 | ||||||
Net realized gain | 4,481,760 | 4,417,727 | ||||||
Change in net unrealized appreciation (depreciation) | 65,390,174 | 72,245,056 | ||||||
Increase in net assets resulting from operations | 89,794,746 | 108,372,697 | ||||||
Distributions to shareholders | ||||||||
From net investment income and net realized gain | (93,004,179 | )2 | (38,107,756 | ) | ||||
Total distributions | (93,004,179 | ) | (38,107,756 | ) | ||||
From fund share transactions | ||||||||
Fund shares issued | 100,000,000 | 1,136,868,233 | ||||||
Total increase | 96,790,567 | 1,207,133,174 | ||||||
Net assets | ||||||||
Beginning of period | 1,207,133,174 | — | ||||||
End of period | $1,303,923,741 | $1,207,133,174 | ||||||
Share activity | ||||||||
Shares outstanding | ||||||||
Beginning of period | 55,767,276 | — | ||||||
Shares issued | 4,531,467 | 55,767,276 | ||||||
End of period | 60,298,743 | 55,767,276 |
1 | Period from 1-11-19 (commencement of operations) to 12-31-19. |
2 | A portion of the distributions may be deemed a tax return of capital at the fiscal year end. |
The accompanying notes are an integral part of the financial statements.
6
John Hancock GA Mortgage Trust
Statement of cash flows for the six months ended 6-30-20 (unaudited)
Cash flows from operating activities | |||
Net increase in net assets from operations | $89,794,746 | ||
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities: | |||
Long-term investments purchased | (228,798,434 | ) | |
Long-term investments sold | 162,740,286 | ||
Net purchases and sales in short-term investments | 155,702,303 | ||
Net amortization of premium (discount) | 309,890 | ||
(Increase) Decrease in assets: | |||
Interest receivable | (402,296 | ) | |
Other assets | (31,897 | ) | |
Increase (Decrease) in liabilities: | |||
Payable for investments purchased | (166,440,349 | ) | |
Payable to affiliates | 55,087 | ||
Other liabilities and accrued expenses | (53,223 | ) | |
Net change in unrealized (appreciation) depreciation on: | |||
Investments | (65,390,174 | ) | |
Net realized (gain) loss on: | |||
Investments | (4,481,760 | ) | |
Net cash used in operating activities | $(56,995,821 | ) | |
Cash flows provided by (used in) financing activities | |||
Distributions to shareholders | $(93,004,179 | ) | |
Fund shares issued | 150,000,000 | ||
Net cash flows provided by financing activities | $56,995,821 | ||
Cash at beginning of period | $— | ||
Cash at end of period | $— |
The accompanying notes are an integral part of the financial statements.
7
John Hancock GA Mortgage Trust
Financial highlights
Period ended | 6-30-201 | 12-31-192 | ||||
Per share operating performance | ||||||
Net asset value, beginning of period | $21.65 | $20.00 | ||||
Net investment income3 | 0.34 | 0.67 | ||||
Net realized and unrealized gain (loss) on | ||||||
investments | 1.17 | 1.74 | ||||
Total from investment operations | 1.51 | 2.41 | ||||
Less distributions | ||||||
From net investment income | (1.54 | )4 | (0.65 | ) | ||
From net realized gain | — | (0.11 | ) | |||
Total distributions | (1.54 | ) | (0.76 | ) | ||
Net asset value, end of period | $21.62 | $21.65 | ||||
Total return (%) | 7.52 | 5 | 12.12 | 5 | ||
Ratios and supplemental data | ||||||
Net assets, end of period (in millions) | $1,304 | $1,207 | ||||
Ratios (as a percentage of average net | ||||||
assets): | ||||||
Expenses before reductions | 0.32 | 6 | 0.40 | 6 | ||
Expenses including reductions | 0.32 | 6 | 0.40 | 6 | ||
Net investment income | 3.18 | 6 | 3.27 | 6 | ||
Portfolio turnover (%) | 13 | 47 |
1 | Six months ended 6-30-20. Unaudited. |
2 | Period from 1-11-19 (commencement of operations) to 12-31-19. |
3 | Based on average daily shares outstanding. |
4 | A portion of the distributions may be deemed a tax return of capital at the fiscal year end. |
5 | Not annualized. |
6 | Annualized. |
The accompanying notes are an integral part of the financial statements.
8
John Hancock GA Mortgage Trust
Notes to financial statements 6-30-20 (unaudited)
1. Organization
John Hancock GA Mortgage Trust (the fund) is a Delaware statutory trust that is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a closed-end, non-diversified management investment company. The investment objective of the fund is to generate current income, and to a lesser extent, capital appreciation.
The fund is only offered to “accredited investors” within the meaning of Regulation D under the Securities Act of 1933 (the 1933 Act), non-U.S. investors within the meaning of Regulation S under the 1933 Act, and other investors eligible to invest in a private placement.
2. Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are valued at the end of each month at a minimum. The fund invests primarily in mortgage loans that do not have readily ascertainable market prices. Assets that are not publicly traded or whose market prices 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. In connection with that determination, portfolio valuations will be prepared in accordance with the fund’s valuation policy using proprietary models. In certain instances, valuations may be obtained from independent valuation firms.
Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which observable market prices exist and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other inputs used in estimating discount rates.
For mortgage investments, the fund uses proprietary valuation models, which are developed from recognized US GAAP valuation approaches under ASC 820. Some or all of the significant inputs into these models may be unobservable and are derived either from observable market prices or rates or are estimated based on unobservable assumptions. Valuation models that employ significant unobservable inputs require a higher degree of management judgment and estimation in the determination of fair value. Management judgment and estimation are usually required for the selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued, determination of the probability of counterparty default and prepayments and selection of appropriate discount rates.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund’s own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
9
John Hancock GA Mortgage Trust
Notes to financial statements 6-30-20 (unaudited)
Mortgage investments are measured at fair value based on the present value of the expected cash flows of the mortgage. There are no quoted prices in active markets. Assumptions and inputs used in the valuation of mortgage investments include prepayment estimates, determination of the discount rate based on the risk-free interest rate adjusted for credit risk (including estimation of probability of default), liquidity and any other adjustments that the manager believes that a third-party market participant would take into account in pricing a transaction. Mortgage investment valuations rely primarily on the use of significant unobservable inputs, including credit assumptions, which require significant judgment and, accordingly, are classified as Level 3.
Other 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. Other debt obligations are generally classified as Level 2.
Investments in open-end mutual funds are valued at their respective net asset values each business day and are generally classified as Level 1.
The following is a summary of the values by input classification of the fund’s investments as of June 30, 2020 by major security category or type:
Level 2 | Level 3 | |||||||||||
Total | Significant | Significant | ||||||||||
value at | Level 1 | observable | unobservable | |||||||||
6-30-20 | quoted price | inputs | inputs | |||||||||
Investments in securities: | ||||||||||||
Assets | ||||||||||||
Commercial mortgage loans | $ | 1,251,656,018 | — | — | $ | 1,251,656,018 | ||||||
U.S. Government and Agency obligations | 29,229,985 | — | $ | 29,229,985 | — | |||||||
Short-term investments | 33,604,633 | $ | 20,105,619 | 13,499,014 | — | |||||||
Total investments in securities | $ | 1,314,490,636 | $ | 20,105,619 | $ | 42,728,999 | $ | 1,251,656,018 |
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value. There were no transfers into or out of Level 3 during the period.
John Hancock GA Mortgage Trust | Commercial mortgage loans | ||
Balance as of 12-31-19 | $ | 1,117,091,612 | |
Purchases | 80,538,106 | ||
Sales | (8,373,001 | ) | |
Realized gain (loss) | (430,755 | ) | |
Net amortization of premium/discount | (1,781,248 | ) | |
Change in unrealized appreciation (depreciation) | 64,611,304 | ||
Balance as of 6-30-20 | $ | 1,251,656,018 | |
Change in unrealized appreciation (depreciation) at period end* | $ | 64,611,304 | |
* Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at period end. |
The valuation techniques and significant amounts of unobservable inputs used in the fair value measurement of the fund’s Level 3 securities are outlined in the table below.
10
John Hancock GA Mortgage Trust
Notes to financial statements 6-30-20 (unaudited)
Fair Value | Significant | |||||||||
at period end | Valuation technique | unobservable inputs | Input/Range | Input weighted average* | ||||||
Commercial mortgage | $1,251,656,018 | Discounted cash flow | Discount rate | 0.65%-14.47% | 2.15% | |||||
loans |
*A weighted average is an average in which each input in the grouping is assigned a weighting before summing to a single average value. The weighting of
the input is determined based on a security’s fair value as a percentage of the total fair value.
A change to unobservable inputs of the fund’s Level 3 securities as of June 30, 2020 could have resulted in changes to the fair value measurement, as follows:
Impact to Valuation | Impact to Valuation | |||
Significant Unobservable Input | if input had increased | if input had decreased | ||
Discount | Decrease | Increase |
Due to the inherent uncertainty of determining the fair value of Level 3 investments, the fair value of the investments may differ significantly from the values that would have been used had a ready market for such securities existed and may differ materially from the values that may ultimately be received or settled. Further, such investments will generally be subject to legal and other restrictions, or otherwise will be less liquid than publicly traded instruments. If the fund is required to liquidate a portfolio investment in a forced or liquidation sale, the fund might realize significantly less than the value at which such investment will have been previously been recorded. The fund’s investments will be subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded.
Commercial mortgage loans. The fund invests in commercial mortgage loans, and to a lesser extent, mezzanine loans and B-notes (to the extent permitted by the fund’s investment restrictions), which are secured by multifamily, commercial or other properties and are subject to risks of delinquency and foreclosure and risks of loss. Commercial real estate loans are generally not fully amortizing, which means that they may have a significant principal balance or balloon payment due on maturity. Full satisfaction of the balloon payment by a commercial borrower is heavily dependent on the availability of subsequent financing or a functioning sales market, as well as other factors such as the value of the property, the level of prevailing mortgage rates, the borrower’s equity in the property and the financial condition and operating history of the property and the borrower. In certain situations, and during periods of credit distress, the unavailability of real estate financing may lead to default by a commercial borrower. In addition, in the absence of any such takeout financing, the ability of a borrower to repay a loan secured by an income-producing property will depend upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Furthermore, the fund may not have the same access to information in connection with investments in commercial mortgage loans, either when investigating a potential investment or after making an investment, as compared to publicly traded securities.
Commercial mortgage loans are usually non-recourse in nature. Therefore, if a commercial borrower defaults on the commercial loan, then the options for financial recovery are limited in nature. To the extent the underlying default rates with respect to the pool or tranche of commercial real estate loans in which the fund directly or indirectly invests increase, the performance of the fund investments related thereto may be adversely affected. Default rates and losses on commercial loans will be affected by a number of factors, including global, regional and local economic conditions in the area where the properties are located, the borrower’s equity in the underlying property and/or assets and the financial circumstances of the borrower. A decline in specific real estate or credit markets may result in higher delinquencies and defaults. In the event of default, the lender will have no right to assets beyond collateral attached to the commercial mortgage loan. In certain instances, a negotiated settlement or an amendment to the terms of the commercial loan are the only options before an ultimate foreclosure on the commercial property. A foreclosure is costly and often protracted by litigation and bankruptcy restrictions. The ultimate disposition of a foreclosed property may also yield a price insufficient to cover the cost of the foreclosure process and the balance attached to the defaulted commercial loan.
11
John Hancock GA Mortgage Trust
Notes to financial statements 6-30-20 (unaudited)
In the event of any default under a mortgage or real estate loan held directly by the fund, it will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage or real estate loan, which could have a material adverse effect on the profitability of the fund. In the event of the bankruptcy of a mortgage or real estate loan borrower, the mortgage or real estate loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage or real estate loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Additionally, in the event of a default under any senior debt, the junior or subordinate lender generally forecloses on the equity, purchases the senior debt or negotiates a forbearance or restructuring arrangement with the senior lender in order to preserve its collateral.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for 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. Certain mortgage related fees, such as amendment fees and commitment fees, are recorded as Other income when earned. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Overdrafts. Pursuant to the custodian agreement, the fund’s custodian may, in its discretion, advance funds to the fund to make properly authorized payments. When such payments result in an overdraft, the fund is obligated to repay the custodian for any overdraft, including any costs or expenses associated with the overdraft. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the maximum extent permitted by law, to the extent of any overdraft.
Expenses. 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 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.
Federal income taxes. The fund intends 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 December 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.
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 quarterly. Capital gain distributions, if any, are typically distributed annually.
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John Hancock GA Mortgage Trust
Notes to financial statements 6-30-20 (unaudited)
Such distributions, 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. The final determination of tax characteristics of the fund’s distribution will occur at the end of the year and will subsequently be reported to shareholders.
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. The fund had no material book-tax differences at December 31, 2019.
3. Guarantees and indemnifications
Under the fund’s organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
4. Fees and transactions with affiliates
Manulife Investment Management Private Markets (US) LLC (the Advisor) serves as investment advisor for the fund. Prior to January 17, 2020, Manulife Investment Management Private Markets (US) LLC was known as Hancock Capital Investment Management, LLC. The fund does not have a principal underwriter. The fund has entered into a Placement Agency Agreement with John Hancock Distributors, LLC (the Distributor), an affiliate of the Advisor, to offer to sell shares of the fund. The Advisor and Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays an annual fee rate of 0.22% of average net assets, accrued daily and paid quarterly in arrears.
Accounting and legal services. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, compliance, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These accounting and legal services fees incurred for the six months ended June 30, 2020 amounted to an annual rate of 0.02% of the fund’s average net assets.
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates.
Co-investment. Pursuant to an Exemptive Order issued by the SEC on June 25, 2019, the fund is permitted to negotiate certain investments with entities with which it would be restricted from doing so under the 1940 Act, such as the Advisor and its affiliates. The fund is permitted to co-invest with affiliates if certain conditions are met. For example, the Advisor makes an independent determination of the appropriateness of the investment for the fund. Also, a “required majority” (as defined in the 1940 Act) of the fund’s independent trustees make certain conclusions in connection with a co-investment transaction as set forth in the order, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the fund and shareholders and do not involve overreaching by the fund or shareholders on the part of any person concerned and (2) the transaction is consistent with the interests of shareholders and is consistent with the fund’s investment objective and strategies. During the six months ended June 30, 2020, investments entered into by the fund pursuant to the exemptive order amounted to $51,950,000.
13
John Hancock GA Mortgage Trust
Notes to financial statements 6-30-20 (unaudited)
5. Fund share transactions
Affiliates of the fund owned 100% of shares of the fund on June 30, 2020.
6. Purchase and sale of securities
Purchases and sales of securities, other than short-term investments and U.S. Treasury obligations, amounted to $79,567,262 and $8,373,001, respectively, for the six months ended June 30, 2020. Purchases and sales of U.S. Treasury obligations aggregated $149,231,172 and $154,367,285, respectively, for the six months ended June 30, 2020.
7. Coronavirus (COVID-19) pandemic
The novel COVID-19 disease has resulted in significant disruptions to global business activity. A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange trading suspensions and closures, impact the ability to complete redemptions, and affect fund performance.
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John Hancock GA Mortgage Trust
More information
The fund’s proxy voting policies and procedures, as well as the fund proxy voting record for the most recent twelve month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov.
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 the SEC’s website, sec.gov.
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ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
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.
Not applicable at this time.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
(a) Not applicable.
(b) Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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 “Nominating, Governance and Administration 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 Registrant did not participate in securities lending activities.
ITEM 13. EXHIBITS.
(a) 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.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “Nominating, Governance and Administration Committee Charter.”
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 GA Mortgage Trust | |||
By: | /s/ Ian Roke | ||
Ian Roke | |||
President | |||
Date: | August 25, 2020 |
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/ Ian Roke | ||
Ian Roke | |||
President | |||
Date: | August 25, 2020 |
By: | /s/ Heidi Knapp | ||
Heidi Knapp | |||
Treasurer and Chief Financial Officer | |||
Date: | August 25, 2020 |