John Hancock Funds
Approval of Audit, Audit-Related, Tax and Other Services
Policy Statement
December 2003
Table of Contents
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Approval of Audit, Audit-Related, Tax and Other Services
Provided by the Independent Auditor
Section I - Policy Purpose and Applicability
Section II - Policy Summary
Section III - Policy Detail
John Hancock Funds
Approval of Audit, Audit-Related, Tax and Other Services
Provided by the Independent Auditor
Section I - Policy Purpose and Applicability
John Hancock Funds recognize the importance of maintaining the independence of
our outside auditors. We believe that maintaining independence is a shared
responsibility involving management, the audit committee and the independent
auditors.
The Funds recognize that the independent audit firm: 1) possesses knowledge of
the Funds, 2) is able to incorporate certain services into the scope of its
audit, thereby avoiding redundant work, cost and disruption of Fund personnel
and processes, and 3) has expertise that has value to the Funds. As a result,
there are situations where it is desirable to utilize the audit firm for
services in addition to the annual audit. Consequently, this policy, which is
intended to comply with Rule 210.2-01(C)(7), sets forth guidelines and
procedures to be followed by the Funds when retaining the independent audit firm
to perform audit, audit-related tax and other services under those
circumstances, while also maintaining independence.
Approval of a service in accordance with these policies for a Fund shall also
constitute approval for any other Fund whose pre-approval is required pursuant
to Rule 210.2-01(c)(7)(ii).
In addition to the procedures set forth in this policy, any non-audit services
that may be provided consistently with Rule 210.2-01 may be approved by the
Audit Committee itself and any pre-approval that may be waived in accordance
with Rule 210.2-01(c)(7)(i)(C) is hereby waived.
John Hancock Funds
Approval of Audit, Audit-Related, Tax and Other Services
Provided by the Independent Auditor
Section II - Policy Summary
Four categories of services have been defined by the Funds within the policy to
provide a consistent, efficient and practical framework for assessment,
decision-making, approval and reporting. Following is a summary of the key
provisions of the policy (see Section III for the Policy Detail):
I. Audit Services - specified services directly related to performing the
independent audit of the Funds.
o Consistent with current practice, management will submit to the Audit
Committee for pre-approval the scope and estimated fees associated
with the current year audit at the appropriate Audit Committee
meeting.
II. Audit-Related Services - specified services that are related extensions of
audit services and are logically performed by the auditors.
o Individual project/services included on the pre-approved list (see
Section III) are pre-approved in an amount per year/per Fund up to
$50,000.
o Additional services exceeding the specified pre-approved limits, or
adding service types to the pre-approved list, require specific Audit
Committee approval.
III. Tax Services - specified services related to tax matters. Using PwC & D&T
for these matters creates efficiencies, minimizes disruption, or preserves
confidentiality.
o Individual project/service included on the pre-approved list are
pre-approved in an amount per year/per Fund up to $50,000 for
individual projects.
o Additional services exceeding the specified pre-approved limits, or
adding service types to the pre-approved list, requires specific Audit
Committee approval.
IV. Other Services - (a) "Synergistic": specified services for which utilizing
PwC and D&T creates efficiencies, minimizes disruption, or preserves
confidentiality, or (b) "Unique Qualifications": specified services for
which management has determined that PwC and D&T possesses unique or
superior qualifications to provide these services.
o Individual project/service included on the pre-approved list) are
pre-approved in an amount per year/per Fund up to $10,000 for
individual projects.
o Additional services exceeding the specified pre-approved limits, or
adding service types to the pre-approved list, requires specific Audit
Committee approval.
"Restricted" Non-Audit Services - includes nine specific restricted services
identified in Rule 210.2-01(c)(4).
o These services may not be performed by PwC and D&T, with the exception
of the certain services (see prohibited services on page 7) that may
be permitted if they would not be subject to audit at the Fund's level
by the firm providing the service.
John Hancock Funds
Approval of Audit, Audit-Related, Tax and Other Services
Provided by the Independent Auditor
Section III - Policy Detail
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Service Service Category Specific Pre-Approved Audit Committee Audit Committee
Category Description Service Subcategories Approval Policy Reporting Policy
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I. Audit Services Services that are directly o Accounting research o "One-time" pre-approval o A summary of all such
related to performing the assistance (e.g. new for the audit period for services and related
independent audit of the products, securities, all pre-approved fees reported at each
Funds and investment specific service regularly scheduled
strategies) subcategories Audit Committee meeting.
o SEC consultation,
registration statements,
and reporting
o Tax accrual related
matters (e.g. review of
tax qualifications and
distributions)
o Implementation of new
accounting standards
o Compliance letters (e.g.
rating agency letters)
o Regulatory reviews and
assistance regarding
financial matters
o Semi-annual reviews (if
requested)
o Comfort letters for
closed end offerings
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II. Audit-Related Services which are not o AICPA attest and o "One-time" pre-approval o A summary of all such
Services prohibited under Rule agreed-upon procedures for the fund fiscal year services and related
210.2-01(C)(4) (the (e.g. fund mergers, within a specified fees (including
"Rule")and are related liquidation procedures dollar limit of $50,000 comparison to specified
extensions of the audit and related comfort for all pre-approved dollar limits) reported
services support the letters and review of specific service at each regularly
audit, or use the preferred Shares' Basic subcategories scheduled Audit
knowledge/expertise gained Maintenance Report) Committee meeting.
from the audit procedures o Specific approval is
as a foundation to o Technology control needed to exceed the
complete the project. In assessments pre-approved dollar
most cases, if the limit for these services
Audit-Related Services are o Financial reporting (see general Audit
not performed by the Audit control assessments Committee approval
firm, the scope of the policy below for details
Audit Services would o Enterprise security on obtaining specific
likely increase. The architecture assessment approvals)
Services are typically
well-defined and governed o Attestation related to o Specific approval is
by accounting professional compliance under needed to utilize PwC &
standards (AICPA, SEC, (AIMR-PPS) standards. D&T for Audit-Related
etc.) Services not denoted as
"pre-approved" to the
left, or to add a
specific service
subcategory as
"pre-approved"
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Section III - Policy Detail, continued
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Service Service Category Specific Pre-Approved Audit Committee Audit Committee
Category Description Service Subcategories Approval Policy Reporting Policy
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III. Tax Services Services which are not o Tax planning and support o "One-time" pre-approval o A summary of all such
prohibited by the Rule, if for the fund fiscal year services and related
fund management determines o Tax controversy within a specified fees (including
that utilizing PwC and D&T assistance dollar limit of $50,000 comparison to specified
to provide these services for individual projects dollar limits) reported
creates significant o Tax compliance, tax at each regularly
synergy in the form of returns, excise tax o Specific approval is scheduled Audit
efficiency, minimized returns and support needed to exceed the Committee meeting
disruption, or the ability pre-approved dollar
to maintain a desired o Tax opinions limits for these
level of confidentiality. services (see general
o Tax research assistance Audit Committee approval
(e.g. new products, policy below for details
securities and on obtaining specific
investment strategies) approvals)
o Withholding tax filing o Specific approval is
needed to utilize PwC &
D&T for tax services not
denoted as pre-approved
to the left, or to add a
specific service
subcategory as
"pre-approved"
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Section III - Policy Detail, continued
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Service Service Category Specific Pre-Approved Audit Committee Audit Committee
Category Description Service Subcategories Approval Policy Reporting Policy
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IV. Other Services Services which are not o Business Risk Management o "One-time" pre-approval o A summary of all such
prohibited by the Rule, if support for the fund fiscal year services and related
a. Synergistic, Fund management determines within a specified fees (including
unique that utilizing PwC or D&T o Other control and dollar limit ($10,000 comparison to specified
qualifications to provide these services regulatory compliance for individual projects dollar limits) reported
creates significant projects for all pre-approved at each regularly
synergy in the form of specific service scheduled Audit
efficiency, minimized subcategories Committee meeting
disruption, the ability to
maintain a desired level o Specific approval is
of confidentiality, or needed to exceed the
where PwC or D&T posses pre-approved dollar
unique or superior limits for these
qualifications to provide services (see general
these services, resulting Audit Committee approval
in superior value and policy below for details
results for the Fund. on obtaining specific
approvals)
o Specific approval is
needed to utilize PwC or
D&T for "Synergistic" or
"Unique Qualifications"
Other Services not
denoted as pre-approved
to the left, or to add a
specific service
subcategory as
"pre-approved"
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Section III - Policy Detail, continued
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Service Service Category Specific Prohibited Audit Committee Audit Committee
Category Description Service Subcategories Approval Policy Reporting Policy
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Prohibited Services which result in 1. Bookkeeping or other o These services are not o A summary of all
Services the auditors losing services related to the to be performed with the services and related
independence status under accounting records or exception of the (*) fees reported at each
the Rule. financial statements of services (see regularly scheduled
the audit client* subcategories 1 through Audit Committee meeting
5 on the left), that may will serve as continual
2. Financial information be permitted if they confirmation that has
systems design and would not be subject to not provided any
implementation* audit procedures at the restricted services.
audit client (as defined
3. Appraisal or valuation in Rule 2-01(f)(4))
services, fairness* level by the firm
opinions, or providing the service.
contribution-in-kind
reports
4. Actuarial services
(i.e., setting
actuarial reserves
versus actuarial audit
work)*
5. Internal audit
outsourcing services*
6. Management functions or
human resources
7. Broker or dealer,
investment advisor, or
investment banking
services
8. Legal services and
expert services
unrelated to the audit
9. Any other service that
the Public Company
Accounting Oversight
Board determines, by
regulation, is
impermissible
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General Audit Committee Approval Policy:
o Management will continue to evaluate all individual projects on a monthly
basis, and all individual projects greater than $50,000 are evaluated and
approved by the Fund's CFO prior to the engagement letter being signed and the
project starting
o For all projects, management and PwC and D&T will each make an assessment to
determine that any proposed projects will not impair independence.
o Potential services will be classified into the four non-restricted service
categories and the "Approval of Audit, Audit-Related, Tax and Other Services"
Policy above will be applied. Any services outside the specific pre-approved
service subcategories set forth above must be specifically approved by the
Audit Committee.
o At each regularly scheduled Audit Committee meeting, the Audit Committee shall
review a report summarizing the services by service category, including fees,
provided by the Audit firm as set forth in the above policy.
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