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 811-21416
John Hancock Tax-Advantaged Dividend Income Fund
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip code)
Alfred P. Ouellette
Senior Attorney and Assistant Secretary
601 Congress Street
Boston, Massachusetts 02110
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-663-4324
Date of fiscal year end: December 31
Date of reporting period: June 30, 2005
ITEM 1. REPORT TO SHAREHOLDERS.
JOHN HANCOCK
Tax-Advantaged
Dividend Income Fund
6.30.2005
Semiannual Report
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS."]
[A photo of Keith F. Hartstein, President and Chief Executive Officer of
John Hancock Funds, LLC flush left next to first paragraph.]
CEO CORNER
Table of contents
Your fund at a glance
page 1
Managers' report
page 2
Fund's investments
page 6
Financial statements
page 11
For more information
page 29
To Our Shareholders,
I am pleased to be writing to you as the new President and Chief Executive
Officer of John Hancock Funds, LLC, following the departure of James A.
Shepherdson to pursue other opportunities. In addition, on July 25, 2005,
your fund's Board of Trustees appointed me to the roles of President and
Chief Executive Officer of your fund.
As a means of introduction, I have been involved in the mutual fund industry
since 1985. I have been with John Hancock Funds for the last 15 years, most
recently as executive vice president of retail sales and marketing and a
member of the company's executive and investment committees. In my former
capacity, I was responsible for all aspects of the distribution and
marketing of John Hancock Funds' open-end and closed-end mutual funds.
Outside of John Hancock, I have served as Chairman of the Investment Company
Institute (ICI) Sales Force Marketing Committee since September 2003.
It is an exciting time to be at John Hancock Funds, and I am grateful for
the opportunity to lead and shape its future growth. With the acquisition of
John Hancock by Manulife Financial Corporation in April 2004, we are
receiving broad support toward the goal of providing our shareholders with
excellent investment opportunities and a more complete lineup of choices for
the discerning investor.
As you may have read, John Hancock recently entered into an agreement with
GMO, a Boston-based institutional money manager, to acquire eight of their
mutual funds. In addition, we are in the process of adding five "Lifestyle
Portfolio" funds-of-funds that blend multiple fund offerings from internal
and external money managers to create a broadly diversified asset allocation
portfolio. Look for more information about these exciting additions to the
John Hancock family of funds in your fourth quarter shareholder newsletter.
Although there has been a change in executive-level management, rest assured
that the one thing that never wavers is John Hancock Funds' commitment to
placing the needs of shareholders above all else. We are all dedicated to
the task of working with you and your financial advisors to help you reach
your long-term financial goals.
Sincerely,
/S/ Keith F. Hartstein
Keith F. Hartstein,
President and Chief Executive Officer
This commentary reflects the CEO's views as of June 30, 2005. They are
subject to change at any time.
YOUR FUND
AT A GLANCE
The Fund seeks to
provide a high level
of after-tax total
return from divi-
dend income and
capital appreciation.
To meet its objec-
tives, the Fund
normally invests at
least 80% of its
assets in dividend-
paying common and
preferred securities
that the Adviser
believes are eligible
to pay dividends
that qualify for U.S.
taxation rates
applicable to long-
term capital gains,
which currently are
taxed at a maximum
rate of 15%.
Over the last six months
* Dividend-paying securities posted good gains, fueled by strong investor
demand.
* Utility common stocks and preferred stocks performed best, driven in part
by strong demand for high-quality and high income-producing investments.
* Financial stocks were lackluster, dogged by rising interest rates.
[Bar chart with heading "John Hancock Tax-Advantaged Dividend Income Fund."
Under the heading is a note that reads "Fund performance for the six months
ended June 30, 2005." The chart is scaled in increments of 5% with 0% at
the bottom and 10% at the top. The first bar represents the 6.34% net asset
value of the Fund. The second bar represents the 4.47% market value of the
Fund. The third bar represents the 6.38% yield on closing market price. The
first note below the chart reads "The total returns for the Fund include
all distributions reinvested. The performance data contained within this
material represents past performance, which does not guarantee future
results." The second note below the chart reads "The yield on closing
market price is calculated by dividing the current annualized distribution
per share by the closing market price."]
Top 10 issuers
2.6% NSTAR
2.6% Bank of America Corp.
2.4% Ameren Corp.
2.2% Dominion Resources, Inc.
2.2% KeySpan Corp.
2.2% Public Service Enterprise Group, Inc.
2.2% DTE Energy Co.
2.1% Regions Financial Corp.
2.1% ONEOK Inc.
2.0% Royal Bank of Scotland Group Plc
As a percentage of net assets plus the value of preferred shares on June 30,
2005.
1
BY GREGORY K. PHELPS, JAMES K. SCHMIDT, CFA, MARK T. MALONEY, AND
LISA A. WELCH FOR THE PORTFOLIO MANAGEMENT TEAM
MANAGERS'
REPORT
JOHN HANCOCK
Tax-Advantaged Dividend Income Fund
Dividend-paying securities posted strong gains for the six-month period
ended June 30, 2005. Utility common stocks were the clear victors during the
past six months, and ended the period as one of the overall stock market's
best-performing industry groups. There was robust investor demand for
utility common stocks due to their high dividend payouts, which were very
attractive in a period when fixed-income investments offered investors low
interest rates. Additionally, investors became increasingly bullish on the
group in response to utility companies' strides to reduce their debt levels
and improve their balanced sheets. Utility commons really surged in the
final month of the period, due to the announcement of planned mergers of
several large well-known players, which fueled speculation that more merger
and acquisition activity was on the horizon. Preferred stocks also benefited
from strong demand from yield-hungry investors seeking refuge from the
overall stock market's lackluster returns and volatility. Financial stocks
significantly lagged utility common stocks and preferred stocks, primarily
due to the rising interest rate environment and by a flattening yield curve,
as short-term rates rose faster than those at the longer end.
"Dividend-paying securities
posted strong gains for the
six-month period ended
June 30, 2005."
Performance
For the six months ended June 30, 2005, John Hancock Tax-Advantaged Dividend
Income Fund returned 6.34% at net asset value and 4.47% at market value. The
difference in the Fund's net asset value (NAV) performance and its market
performance stems from the fact that the market share price is subject to
the dynamics of secondary market trading, which could cause it to trade at a
discount or premium to the Fund's NAV share price at any time. Over the same
six-month period, the Standard & Poor's 500 Index returned --0.81% and the
average closed-end value fund returned 3.06% at net asset value, according
to Lipper, Inc.
2
Chart-topping utility common stocks
Given the sector's overall strength, it's not surprising that many of the
Fund's utility common stock holdings were our best performers during the
year. Among the best was NSTAR, which transmits and delivers electricity to
customers in eastern and central Massachusetts. It was also powered by
company-specific developments, including the settlement of a contentious
strike, the company's effecting a two-for-one stock split and continued
financial improvement. Other chart toppers were Cinergy Corp., which
performed well throughout the year and then got an added kick from the news
that Duke Energy would acquire the company, and Scottish Power, which was
boosted on a planned acquisition of the company's largest subsidiary by
Berkshire Hathaway. Public Service Enterprise Group did well in response to
expectations that its planned acquisition by Exelon would proceed fairly
quickly. Utility companies with oil and gas operations also fared well as
the price of energy skyrocketed, with holdings such as Black Hills Corp.,
National Fuel Gas and ONEOK Inc. each posting impressive stock price gains.
[Photos of Greg Phelps, Jim Schmidt, Mark Maloney and Lisa Welch, flush
right at top of page.]
Preferred-stock holdings: leaders and laggards
Among our preferred-stock holdings, Monongahela Power Co., a subsidiary of
utility holding company Alleghany Energy, was one of our top performers. It
benefited from improving financial results, prompting a major ratings agency
to upgrade Monongahela's credit rating. On the flip side were our holdings
in Lehman Brothers, which tread water during the period because they carried
yields below that offered by newly issued securities, which muted demand for
the securities.
"...many of the Fund's utility com
mon stock holdings also were our
best performers during the year."
Financials: mixed bag
Banks with limited exposure to the mortgage business and better commercial
loan growth performed relatively well for the period, including Colonial
BancGroup and Whitney Holding Corp. The detractors typically were companies
that had earnings disappointments or lowered guidance on future earnings,
such as JPMorgan Chase & Co.
3
Supply glut = opportunity
In the final months of the period, there was a glut of newly issued
preferred stocks, as companies rushed to lock in low interest rates. That
influx of supply temporarily weighed on preferred-stock prices and afforded
us the opportunity to buy some attractively valued tax-advantaged issues
with relatively high coupons. Among our purchases was Entergy Mississippi,
an electric utility company with an improving credit profile and insurance
giant MetLife, which carried coupons of 6.25% and 6.50%, respectively.
[Table at top left-hand side of page entitled "Industry distribution1." The
first listing is Electric utilities 33%, the second is Regional banks 14%,
the third is Multi-utilities & unregulated power 14%, the fourth is Gas
utilities 12%, the fifth is Diversified banks 9%, the sixth is Other
diversified financial services 4%, the seventh is Investment banking &
brokerage 3%, the eighth is Oil & gas exploration & production 3%, the
ninth is Thrifts & mortgage finance 2%, the tenth is Integrated
telecommunication services 2%, the eleventh is Multi-line insurance 2% and
the twelfth is Integrated oil & gas 1%.]
[Pie chart at middle of page with heading "Portfolio diversification1." The
chart is divided into three sections (from top to left): Common stocks 77%,
Preferred stocks 22% and Short-term investments & other 1%.]
Outlook
After chalking up substantial gains over the past two years, the utilities
sector has shown no signs of retreat. Utilities continue to reap the
benefits of their efforts to repair their balance sheets, improve cash
flows, whittle down debts and return to their core competencies by shedding
non-regulated business. And with utilities looking to consolidate and cut
costs, we believe that more merger and acquisition activity is likely, which
we expect to provide a good underpinning for utility stocks. In addition,
there is the strong possibility that unfavorable federal regulation that has
dogged the industry may be repealed. Finally, there remains a strong
appetite for dividends, with utility stocks being a primary beneficiary of
that trend.
4
That said, given their strong recent gains, some moderation in utility stock
performance is likely in the cards. Given our forecast for slowing economic
conditions and ongoing strong demand for dividend-paying securities, we
believe that preferred stocks may have the wind at their backs in the months
to come. As for financial stocks, history shows that the performance of the
group improves as we approach the end of an interest rate hike cycle. At the
end of the period, financial stocks as a group were moderately undervalued
on a price-to-book or price-earnings basis when compared to historic norms.
[Table at top of page entitled "SCORECARD." The header for the left column
is "INVESTMENT" and the header for the right column is "PERIOD'S
PERFORMANCE ...AND WHAT'S BEHIND THE NUMBERS." The first listing is NSTAR
followed by an up arrow with the phrase "Investors cheer improving
financial results, strike settlement, stock split." The second listing is
Cinergy followed by an up arrow with the phrase "Rallies on news that Duke
Energy plans to acquire it." The third listing is Lehman Brothers followed
by a down arrow with the phrase "Low coupon unattractive amid higher-coupon
new issues."]
"...there remains a strong appetite for
dividends, with utility stocks being a
primary beneficiary of that trend."
This commentary reflects the views of the portfolio management team through
the end of the Fund's period discussed in this report. The team's statements
reflect their own opinions. As such, they are in no way guarantees of future
events, and are not intended to be used as investment advice or a
recommendation regarding any specific security. They are also subject to
change at any time as market and other conditions warrant.
1 As a percentage of the Fund's portfolio on June 30, 2005.
5
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
June 30, 2005
(unaudited)
This schedule is divided into three main categories: common stocks,
preferred stocks and short-term investments. Common stocks and preferred
stocks are further broken down by industry group. Short-term investments,
which represent the Fund's cash position, are listed last.
Issuer Shares Value
Common stocks 109.44% $970,535,745
(Cost $878,663,233)
Diversified Banks 10.00% 88,709,900
Bank of America Corp. 730,000 33,295,300
Comerica, Inc. 296,000 17,108,800
U.S. Bancorp. 647,000 18,892,400
Wachovia Corp. 230,000 11,408,000
Wells Fargo & Co. 130,000 8,005,400
Electric Utilities 36.70% 325,432,797
Alliant Energy Corp. 50,000 1,407,500
Ameren Corp. 561,100 31,028,830
American Electric Power Co., Inc. 335,500 12,369,885
Black Hills Corp. 454,000 16,729,900
CH Energy Group, Inc. 373,600 18,168,168
Cinergy Corp. 539,100 24,162,462
Consolidated Edison, Inc. 525,100 24,595,684
Empire District Electric Co. (The) 428,400 10,264,464
Great Plains Energy, Inc. 67,000 2,136,630
NSTAR 1,086,000 33,481,380
OGE Energy Corp. 884,800 25,606,112
Pinnacle West Capital Corp. 230,000 10,223,500
Progress Energy, Inc. 569,600 25,768,704
Scottish Power Plc, American Depositary Receipt (United Kingdom) 610,000 21,716,000
Southern Co. (The) 593,400 20,573,178
Westar Energy, Inc. 425,000 10,212,750
WPS Resources Corp. 373,000 20,981,250
Xcel Energy, Inc. 820,000 16,006,400
Gas Utilities 15.45% 137,001,253
Atmos Energy Corp. 756,200 21,778,560
KeySpan Corp. 690,647 28,109,333
See notes to
financial statements.
6
FINANCIAL STATEMENTS
Issuer Shares Value
Gas Utilities (continued)
NiSource, Inc. 497,700 $12,308,121
Northwest Natural Gas Co. 325,000 12,428,000
Peoples Energy Corp. 585,200 25,432,792
Piedmont Natural Gas Co., Inc. 180,000 4,323,600
Vectren Corp. 689,900 19,820,827
WGL Holdings, Inc. 380,500 12,800,020
Integrated Oil & Gas 0.91% 8,052,480
ChevronTexaco Corp. 144,000 8,052,480
Integrated Telecommunication Services 2.88% 25,553,678
SBC Communications, Inc. 670,000 15,912,500
Verizon Communications, Inc. 279,050 9,641,178
Multi-Utilities & Unregulated Power 18.33% 162,577,816
Dominion Resources, Inc. 385,000 28,255,150
DTE Energy Co. 485,000 22,683,450
Duke Energy Corp. 533,400 15,857,982
Energy East Corp. 406,000 11,765,880
National Fuel Gas Co. 466,000 13,472,060
ONEOK, Inc. 821,100 26,808,915
Public Service Enterprise Group, Inc. 454,700 27,654,854
Puget Energy, Inc. 185,000 4,325,300
SCANA Corp. 257,500 10,997,825
TECO Energy, Inc. 40,000 756,400
Other Diversified Financial Services 2.10% 18,668,826
Citigroup, Inc. 187,000 8,645,010
JPMorgan Chase & Co. 283,800 10,023,816
Regional Banks 20.43% 181,133,475
AmSouth Bancorp. 775,000 20,150,000
BB&T Corp. 495,000 19,785,150
Colonial BancGroup, Inc. (The) 275,000 6,066,500
F.N.B. Corp. 190,000 3,733,500
First Horizon National Corp. 315,000 13,293,000
FirstMerit Corp. 365,000 9,530,150
Hudson United Bancorp. 195,000 7,039,500
KeyCorp 749,000 24,829,350
National City Corp. 505,000 17,230,600
PNC Financial Services Group, Inc. 370,000 20,150,200
Regions Financial Corp. 795,000 26,934,600
See notes to
financial statements.
7
FINANCIAL STATEMENTS
Issuer Shares Value
Regional Banks (continued)
Susquehanna Bancshares, Inc. 275,000 $6,762,250
Whitney Holding Corp. 172,500 5,628,675
Thrifts & Mortgage Finance 2.64% 23,405,520
People's Bank 225,000 6,804,000
Washington Mutual, Inc. 408,000 16,601,520
Credit
Issuer, description rating (A) Shares Value
Preferred stocks 31.34% $277,884,062
(Cost $278,158,518)
Consumer Finance 0.58% 5,135,305
HSBC Finance Corp., 6.36%, Depositary Shares, Ser B BBB+ 150,000 3,754,695
SLM Corp., 6.97%, Ser A BBB+ 24,200 1,380,610
Diversified Banks 3.19% 28,274,280
Abbey National Plc, 7.375%, Depositary Shares,
Ser B (United Kingdom) A- 93,100 2,495,080
Royal Bank of Scotland Group Plc, 5.75%, Ser L
(United Kingdom) A 1,060,000 25,779,200
Electric Utilities 9.94% 88,127,841
Alabama Power Co., 5.20% BBB+ 276,700 6,909,199
Alabama Power Co., 5.30% (Class A) BBB+ 213,000 5,338,312
Carolina Power & Light Co., $5.44 BB+ 111,493 10,591,835
Connecticut Light & Power Co., $3.24, Ser 68G BBB- 20,686 1,073,086
Connecticut Light & Power Co., 5.28%, Ser 1967 BBB- 18,294 963,294
Connecticut Light & Power Co., 6.56%, Ser 1968 BBB- 7,224 377,002
Duquesne Light Co., 6.50% BB+ 227,000 11,826,700
Entergy Arkansas, Inc., $1.96 BB+ 150,466 3,775,764
Entergy Arkansas, Inc., 4.56% BB+ 9,388 837,292
Entergy Arkansas, Inc., 4.56%, Ser 1965 BB+ 9,818 875,643
Entergy Arkansas, Inc., $6.08 Ba1 11,057 1,220,071
Entergy Gulf States, Inc., $7.56 BB+ 28,422 2,846,463
Entergy Louisiana, Inc., 5.16% Ba1 12,982 1,321,32
Entergy Mississippi, Inc., 4.92% Ba2 8,190 794,942
Entergy Mississippi, Inc., 6.25% BB+ 167,500 4,213,680
FPL Group Capital Trust I, 5.875% BBB+ 318,200 7,923,180
Interstate Power & Light Co., 7.10%, Ser C BBB- 20,600 566,500
Interstate Power & Light Co., 8.375%, Ser B BBB- 233,000 7,782,200
Monongahela Power Co., $7.73, Ser L B 33,143 3,330,872
See notes to
financial statements.
8
Credit
Issuer, description rating (A) Shares Value
Electric Utilities (continued)
Northern Indiana Public Service Co., 4.50% BB+ 28,863 $2,588,650
Northern Indiana Public Service Co., 4.88% BBB 7,971 775,180
Ohio Edison Co., 4.56% BB 15,325 1,279,638
Union Electric Co., $4.50 BBB 10,370 846,711
Wisconsin Power & Light Co., 4.50% BBB 4,600 396,060
Xcel Energy, Inc., $4.08, Ser B BB+ 66,070 5,318,635
Xcel Energy, Inc., $4.56, Ser G BB+ 53,700 4,355,607
Gas Utilities 1.25% 11,113,480
Southern Union Co., 7.55% BB+ 417,800 11,113,480
Investment Banking & Brokerage 4.13% 36,626,517
Bear Stearns Cos., Inc. (The), 5.49%, Depositary Shares, Ser G BBB 251,800 12,549,712
Bear Stearns Cos., Inc. (The), 6.15%, Depositary Shares, Ser E BBB 64,900 3,342,350
Lehman Brothers Holdings, Inc., 5.67%, Depositary Shares, Ser D BBB+ 56,000 2,772,000
Lehman Brothers Holdings, Inc., 5.94%, Depositary Shares, Ser C BBB+ 256,260 12,941,130
Lehman Brothers Holdings, Inc., 6.50%, Depositary Shares, Ser F BBB+ 193,500 5,021,325
Multi-Line Insurance 2.52% 22,375,003
ING Groep N.V., 6.20% (Netherlands) A- 109,100 2,763,503
ING Groep N.V., 7.05% (Netherlands) A- 100,000 2,615,000
MetLife, Inc., 6.50%, Ser B BBB 675,000 16,996,500
Multi-Utilities & Unregulated Power 1.60% 14,195,926
Avista Corp., $6.95, Ser K BB- 40,383 4,159,449
DTE Energy Co., 8.75%, Conv BBB- 187,000 4,714,270
Public Service Electric & Gas Co., 5.05%, Ser D BB+ 12,860 1,204,339
Public Service Electric & Gas Co., 5.28%, Ser E BB+ 21,930 2,077,868
South Carolina Electric & Gas Co., 6.52% Baa1 20,000 2,040,000
Oil & Gas Exploration & Production 3.98% 35,274,420
Anadarko Petroleum Corp., 5.46%, Depositary Shares, Ser B BBB- 50,000 4,934,375
Apache Corp., 5.68%, Depositary Shares, Ser B BBB 50,000 5,182,815
Devon Energy Corp., 6.49%, Ser A BB+ 150,000 15,675,000
Nexen, Inc., 7.35% (Canada) BB+ 359,584 9,482,230
Other Diversified Financial Services 3.25% 28,787,690
ABN AMRO Capital Funding Trust V, 5.90% A 140,000 3,406,200
ABN AMRO Capital Funding Trust VII, 6.08% A 950,000 23,607,500
General Electric Capital Corp., 6.10% AAA 21,100 546,490
JPMorgan Chase Capital XI, 5.875%, Ser K A- 50,000 1,227,500
See notes to
financial statements.
9
Credit
Issuer, description rating (A) Shares Value
Reinsurance 0.30% $2,693,600
RenaissanceRe Holdings Ltd., 6.08%, Ser C (Bermuda) BBB+ 112,000 2,693,600
Thrifts & Mortgage Finance 0.60% 5,280,000
Fannie Mae, 5.125%, Ser L AA- 120,000 5,280,000
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Short-term investments 0.69% $6,100,000
(Cost $6,100,000)
Government U.S. Agency 0.69% 6,100,000
Federal Home Loan Bank,
Disc Note 2.500% 07-01-05 AAA $6,100 6,100,000
Total investments 141.47% $1,254,519,807
Other assets and liabilities, net 1.38% $12,266,901
Fund preferred shares, at value (42.85%) ($380,000,000)
Total net assets 100.00% $886,786,708
(A) Credit ratings are rated by Moody's Investors Service where Standard &
Poor's ratings are not available.
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 net assets of the Fund.
See notes to
financial statements.
10
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
June 30, 2005
(unaudited)
This Statement
of Assets and
Liabilities is the
Fund's balance
sheet. It shows
the value of
what the Fund
owns, is due
and owes. You'll
also find the net
asset value for each
common share.
Assets
Investments, at value (cost $1,162,921,751) $1,254,519,807
Cash 69,532
Cash segregated for futures contracts 247,500
Receivable for investments sold 13,114,790
Dividends receivable 3,318,722
Other assets 9,193
Total assets 1,271,279,544
Liabilities
Payable for investments purchased 4,266,294
Payable for futures variation margin 67,030
Payable to affiliates
Management fees 19,133
Other 28,360
Other payables and accrued expenses 46,397
Total liabilities 4,427,214
Auction Preferred Shares (APS), including
accrued dividends, unlimited number of
shares of beneficial interest authorized
with no par value, 15,200 shares issued,
liquidation preference of $25,000 per share 380,065,622
Net assets
Common shares capital paid-in 798,628,966
Accumulated net realized gain on investments
and financial futures contracts 733,286
Net unrealized appreciation of investments and
financial futures contracts 90,966,291
Distributions in excess of net investment income (3,541,835)
Net assets applicable to common shares $886,786,708
Net asset value per common share
Based on 42,077,487 shares of beneficial interest
outstanding -- unlimited number of shares authorized
with no par value $21.08
See notes to
financial statements.
11
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
June 30, 2005
(unaudited) 1
This Statement
of Operations
summarizes the
Fund's investment
income earned and
expenses incurred
in operating the
Fund. It also shows
net gains (losses)
for the period
stated.
Investment income
Dividends $30,456,801
Interest 157,451
Total investment income 30,614,252
Expenses
Investment management fees 4,577,429
APS auction fees 489,509
Accounting and legal services fees 149,655
Custodian fees 103,287
Miscellaneous 100,870
Federal excise tax 73,641
Printing 61,968
Trustees' fees 33,545
Professional fees 32,442
Registration and filing fees 27,679
Transfer agent fees 18,749
Total expenses 5,668,774
Less expense reductions (1,220,648)
Net expenses 4,448,126
Net investment income 26,166,126
Realized and unrealized gain (loss)
Net realized gain (loss) on
Investments 14,144,551
Financial futures contracts (113,755)
Change in net unrealized appreciation (depreciation) of
Investments 14,981,895
Financial futures contracts (642,710)
Net realized and unrealized gain 28,369,981
Distribution to APS (5,279,308)
Increase in net assets from operations $49,256,799
1 Semiannual period from 1-1-05 through 6-30-05.
See notes to
financial statements.
12
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
These Statements
of Changes in Net
Assets show how
the value of the
Fund's net assets
has changed
during the last
two periods. The
difference reflects
earnings less
expenses, any
investment
gains and losses,
distributions, if
any, paid to
shareholders and
the net of Fund
share transactions.
Period Period
ended ended
12-31-04 1 6-30-05 2
Increase in net assets
From operations
Net investment income $40,282,604 $26,166,126
Net realized gain (loss) (12,611,373) 14,030,796
Change in net unrealized
appreciation (depreciation) 76,627,106 14,339,185
Distributions to APS (4,363,999) (5,279,308)
Increase in net assets resulting
from operations 99,934,338 49,256,799
Distributions to common shareholders
From net investment income (36,620,037) (24,413,358)
From Fund share transactions 798,628,966 --
Net assets
Beginning of period -- 861,943,267
End of period 3 $861,943,267 $886,786,708
1 Commencement of operations period from 2-27-04 through 12-31-04.
2 Semiannual period from 1-1-05 through 6-30-05. Unaudited.
3 Includes distributions in excess of net investment income of $15,295 and
$3,541,835, respectively.
See notes to
financial statements.
13
FINANCIAL HIGHLIGHTS
FINANCIAL
HIGHLIGHTS
COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share has
changed since the end of the previous period.
Period ended 12-31-04 1 6-30-05 2
Per share operating performance
Net asset value, beginning of period $19.10 3 $20.48
Net investment income 4 1.14 0.62
Net realized and unrealized gain on investments 1.54 0.69
Distributions to APS (0.29) (0.13)
Total from investment operations 2.39 1.18
Less distributions to common shareholders
From net investment income (0.87) (0.58)
Capital charges
Offering costs related to common shares (0.02) --
Offering costs and underwriting discounts related to APS (0.12) --
Net asset value, end of period $20.48 $21.08
Per share market value, end of period $17.99 $18.19
Total return at market value 5,6 (%) (5.47) 7,8 4.47 8
Ratios and supplemental data
Net assets applicable to common shares, end of period (in millions) $862 $887
Ratio of expenses to average net assets 9 (%) 0.95 10 1.05 10
Ratio of adjusted expenses to average net assets 11 (%) 1.23 10 1.34 10
Ratio of net investment income to average net assets 12 (%) 6.11 10 6.20 10
Portfolio turnover (%) 42 17
Senior securities
Total value of APS outstanding (in millions) $380 $380
Involuntary liquidation preference per unit (in thousands) $25 $25
Average market value per unit (in thousands) $25 $25
Asset coverage per unit 13 $79,542 $83,064
See notes to
financial statements.
14
Notes to Financial Highlights
1 Commencement of operations period from 2-27-04 through 12-31-04.
2 Semiannual period from 1-1-05 through 6-30-05. Unaudited.
3 Reflects the deduction of a $0.90 per share sales load.
4 Based on the average of the shares outstanding.
5 Assumes dividend reinvestment.
6 Total returns would have been lower had certain expenses not been reduced
during the periods shown.
7 Assumes dividend reinvestment and a purchase at $20.01 per share on the
inception date and a sale at the current market price on the last day of the
period.
8 Not annualized.
9 Ratios calculated on the basis of expenses relative to the average net
assets of common shares. Without the exclusion of preferred shares, the
annualized ratios of expenses would have been 0.69% and 0.73%, respectively.
10 Annualized.
11 Ratios calculated on the basis of expenses relative to the average net
assets of common shares that does not take into consideration expense
reductions during the periods shown. Without the exclusion of preferred
shares, the adjusted annualized ratios of expenses would have been 0.89% and
0.93% for the periods ended 12-31-04 and 12-31-05, respectively.
12 Ratios calculated on the basis of net investment income relative to the
average net assets of common shares. Without the exclusion of preferred
shares, the annualized ratios of net investment income would have been 4.42%
and 4.29% for the periods ended 12-31-04 and 12-31-05, respectively.
13 Calculated by subtracting the Fund's total liabilities from the Fund's
total assets and dividing that amount by the number of APS outstanding as of
the applicable 1940 Act Evaluation Date, which may differ from the financial
reporting date.
See notes to
financial statements.
15
NOTES TO
STATEMENTS
Unaudited
Note A
Accounting policies
John Hancock Tax-Advantaged Dividend Income Fund (the "Fund") is a
diversified closed-end management investment company registered under the
Investment Company Act of 1940.
Significant accounting policies
of the Fund are as follows:
Valuation of investments
Securities in the Fund's portfolio are valued on the basis of market
quotations, valuations provided by independent pricing services or at fair
value as determined in good faith in accordance with procedures approved by
the Trustees. Short-term debt investments which have a remaining maturity of
60 days or less may be valued at amortized cost, which approximates market
value. The Fund determines the net asset value of the common shares each
business day.
Investment transactions
Investment transactions are recorded as of the date of purchase, sale or
maturity. Net realized gains and losses on sales of investments are
determined on the identified cost basis.
Expenses
The majority of expenses are directly identifiable to an individual fund.
Expenses that are not readily identifiable to a specific fund are allocated
in such a manner as deemed equitable, taking into consideration, among other
things, the nature and type of expense and the relative size of the funds.
Financial futures contracts
The Fund may buy and sell financial futures contracts. Buying futures tends
to increase the Fund's exposure to the underlying instrument. Selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund's instruments. At the time the Fund enters into
financial futures contracts, it is required to deposit with its custodian a
specified amount of cash or U.S. government securities, known as "initial
margin," equal to a certain percentage of the value of the financial futures
contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities exchange
on which it trades. Subsequent payments to and from the broker, known as
"variation margin," are made on a daily basis as the market price of the
financial futures contract fluctuates. Daily variation margin adjustments
arising from this "mark to market" are recorded by the Fund as unrealized
gains or losses.
When the contracts are closed, the Fund recognizes a gain or loss. Risks of
entering into financial futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the contracts
may not correlate with changes in the value of the underlying securities. In
addition, the Fund could be prevented from
16
opening or realizing the benefits of closing out financial futures positions
because of position limits or limits on daily price fluctuations imposed by
an exchange.
For federal income tax purposes, the amount, character and timing of the
Fund's gains and/or losses can be affected as a result of financial futures
contracts. On June 30, 2005, the Fund had deposited $247,500 in a segregated
account to cover margin requirements on open financial futures contracts.
The Fund had the following financial futures contracts open on June 30, 2005:
NUMBER OF APPRECIATION/
OPEN CONTRACTS CONTRACTS POSITION EXPIRATION (DEPRECIATION)
- -------------------------------------------------------------------------------
U.S. Treasury 10-year Note 300 Short Sep 05 ($647,493)
U.S. Treasury 10-year Note 30 Short Sep 05 $15,728
($631,765)
Federal income taxes
The Fund qualifies 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.
Dividends, interest
and distributions
Dividend income on investment securities is recorded on the ex-dividend date
or, in the case of some foreign securities, on the date thereafter when the
Fund identifies the dividend. Interest income on investment securities is
recorded on the accrual basis. Foreign income may be subject to foreign
withholding taxes, which are accrued as applicable.
The Fund records distributions to shareholders from net investment income
and net realized gains, if any, on the ex-dividend date. During the year
ended December 31, 2004, the tax character of distributions paid was as
follows: ordinary income $40,984,036.
Such distributions, on a tax basis, are determined in conformity with income
tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Distributions in excess of tax
basis earnings and profits, if any, are reported in the Fund's financial
statements as a return of capital.
Use of estimates
The preparation of these financial statements, in accordance with accounting
principles generally accepted in the United States of America, incorporates
estimates made by management in determining the reported amount of assets,
liabilities, revenues and expenses of the Fund. Actual results could differ
from these estimates.
Note B
Management fee and
transactions with
affiliates and others
The Fund has an investment management contract with John Hancock Advisers,
LLC (the"Adviser"), a wholly owned subsidiary of John Hancock Financial
Services, Inc. Under the investment management contract, the Fund pays a
daily management fee to the Adviser at an annual rate of 0.75% of the Fund's
average daily net asset value and the value attributable to the Auction
Preferred Shares (collectively, "managed assets").
The Adviser has contractually agreed to limit the Fund's management fee to
the following: 0.55% of the Fund's average daily managed assets until the
fifth anniversary of the commencement of the Fund's operations, 0.60% of
such assets in the sixth year, 0.65% of such assets in the seventh year and
0.70% of average daily managed assets in the eighth year.
17
Accordingly, the expense reductions related to the reduction in the
management fee amounted to $1,220,648 for the period ended June 30, 2005.
After the eighth year, the Adviser will no longer waive a portion of the
management fee.
The Fund has an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Fund. The compensation for the period
amounted to $149,655. The Fund also paid the Adviser the amount of $16,453
for certain compliance costs, included in the miscellaneous expenses.
The compensation of unaffiliated Trustees is borne by the Fund. The
unaffiliated Trustees may elect to defer, for tax purposes, their receipt of
this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Fund makes investments into other John Hancock funds,
as applicable, to cover its liability for the deferred compensation.
Investments to cover the Fund's deferred compensation liability are recorded
on the Fund's books as an other asset. The deferred compensation liability
and the related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investments, as well as
any unrealized gains or losses. The Deferred Compensation Plan investments
had no impact on the operations of the Fund.
The Fund is listed for trading on the New York Stock Exchange ("NYSE") and
has filed with the NYSE its chief executive officer certification regarding
compliance with the NYSE's listing standards. The Funds also files with the
Securities and Exchange Commission the certification of its chief executive
officer and chief accounting officer required by Section 302 of the
Sarbanes-Oxley Act.
Note C
Fund share transactions
This listing illustrates the number of Fund common shares sold, offering
costs and underwriting discount charged to capital paid-in and the number of
common shares outstanding at the end of the period, along with the
corresponding dollar value.
Period ended 12-31-04 1 Period ended 6-30-05 2
Shares Amount Shares Amount
Shares sold 42,077,487 $803,680,002 3 42,077,487 $798,628,966
Offering cost related to
common shares -- (854,726) -- --
Offering costs and
underwriting discount
related to Auction
Preferred Shares -- (4,196,310) -- --
Net increase 42,077,487 $798,628,966 42,077,487 $798,628,966
1 Commencement of operations period from 2-27-04 through 12-31-04.
2 Semiannual period from 1-1-05 through 6-30-05. Unaudited.
3 Net of $0.90 per share sales load of the initial offering price of $20.00
per share.
18
Auction preferred shares
The Fund issued a total of 15,200 Auction Preferred Shares (3,800 shares of
Series M, 3,800 shares of Series W, 3,800 shares of Series TH and 3,800
shares of Series F) (collectively, the "APS") on May 3, 2004, in a public
offering. The underwriting discount of $3,800,000 and offering costs of
$396,310 incurred in connection with the preferred shares and offering costs
of $854,726 related to common shares were charged to capital paid-in of
common shares during the period ended December 31, 2004.
Dividends on the APS, which accrue daily, are cumulative at a rate that was
established at the offering of the APS and has been reset every 7 days
thereafter by an auction (except for the Series TH, which reset its rate on
October 28, 2004, at which time the Fund elected a Special Dividend Payment
of 182 days for the subsequent distributions). During the period ended June
30, 2005, dividend rates on APS ranged as follows: Series M from 2.25% to
3.22%, Series W from 2.19% to 3.30%, Series TH from 2.45% to 3.70% and
Series F from 2.15% to 3.20%. Accrued dividends on APS are included in the
value of APS on the Fund's Statement of Assets and Liabilities.
The APS are redeemable at the option of the Fund, at a redemption price
equal to $25,000 per share, plus accumulated and unpaid dividends on any
dividend payment date. The APS are also subject to mandatory redemption at a
redemption price equal to $25,000 per share, plus accumulated and unpaid
dividends, if the Fund is in default on its asset coverage requirements with
respect to the APS as defined in the Fund's by-laws. If the dividends on the
APS shall remain unpaid in an amount equal to two full years' dividends, the
holders of the APS, as a class, have the right to elect a majority of the
Board of Trustees. In general, the holders of the APS and the common
shareholders have equal voting rights of one vote per share, except that the
holders of the APS, as a class, vote to elect two members of the Board of
Trustees, and separate class votes are required on certain matters that
affect the respective interests of the APS and common shareholders.
Note D
Investment
transactions
Purchases and proceeds from sales or maturities of securities, other than
short-term securities and obligations of the U.S. government, during the
period ended June 30, 2005, aggregated $208,351,585 and $211,881,201,
respectively.
The cost of investments owned on June 30, 2005, including short-term
investments, for federal income tax purposes, was $1,176,748,136. Gross
unrealized appreciation and depreciation of investments aggregated
$91,229,305 and $13,457,634, respectively, resulting in net unrealized
appreciation of $77,771,671. The difference between book basis and tax basis
net unrealized appreciation of investments is attributable primarily to the
tax deferral of losses on certain sales of securities.
19
Investment
objective
and policy
The Fund's investment objective is to provide a high level of after-tax
total return from dividend income and capital appreciation.
Under normal market conditions, the Fund will invest at least 80% of its
assets (net assets plus borrowings for investment purposes) in
dividend-paying common and preferred securities that the Adviser believes at
the time of acquisition are eligible to pay dividends which, for individual
shareholders, qualify for U.S. federal income taxation at rates applicable
to long-term capital gains, which currently are taxed at a maximum rate of
15% ("tax-advantaged dividends"). Tax-advantaged dividends generally include
dividends from domestic corporations and dividends from foreign corporations
that meet certain specified criteria. The Fund generally can pass the tax
treatment of tax-advantaged dividends it receives through to its common
shareholders.
Dividends and
distributions
During the period ended June 30, 2005, dividends from net investment income
totaling $0.5802 per share were paid to common shareholders. The dates of
payments and the amounts per share are as follows:
PAYMENT INCOME
DATE DIVIDEND
- --------------------------------------------
January 31, 2005 $0.0967
February 28, 2005 0.0967
March 31, 2005 0.0967
April 29, 2005 0.0967
May 31, 2005 0.0967
June 30, 2005 0.0967
Dividend
reinvestment plan
The Fund offers its shareholders a Dividend Reinvestment Plan (the "Plan"),
which offers the opportunity to earn compounded yields. Each holder of
common shares will automatically have all distributions of dividends and
capital gains reinvested by Mellon Investor Services, as Plan Agent for the
common shareholders (the "Plan Agent"), unless an election is made to
receive cash. Holders of common shares who elect not to participate in the
Plan will receive all distributions in cash, paid by check and mailed
directly to the shareholder of record (or, if the common shares are held in
street or other nominee name, then to the nominee) by the Plan Agent, as
dividend-disbursing agent. Shareholders whose shares are held in the name of
a broker or a nominee should contact the broker or nominee to determine
whether and how they may participate in the Plan.
If the Fund declares a dividend payable either in common shares or in cash,
non-participants will receive cash and participants in the Plan will receive
the equivalent in common shares. If the market price of the common shares on
the payment date of the dividend is equal to, or exceeds, their net asset
value as determined on the payment date, participants will be issued common
shares (out of authorized but unissued shares) at a value equal to the
higher of net asset value or 95% of the market price. If the net asset value
exceeds the market price of the common shares at such time, or if the Board
of Trustees declares a dividend payable only in cash, the Plan Agent will,
as agent for Plan participants, buy shares in the open market, on the New
York Stock Exchange or elsewhere, for the participants' accounts. Such
purchases will be made promptly after the payable date for such dividend
and, in any event, prior to the next ex-dividend date after such date,
except where necessary to comply with federal securities laws. If, before
the Plan Agent has completed its purchases, the market price exceeds the net
asset value of the common shares, the average per share purchase price paid
by the Plan Agent may exceed the net asset value of the common shares,
resulting in the acquisition of fewer shares than if the dividend had been
paid in shares issued by the Fund.
Each participant will pay a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's
20
open market purchases in connection with the reinvestment of dividends and
distributions. The cost per share of the shares purchased for each
participant's account will be the average cost, including brokerage
commissions, of any shares purchased on the open market, plus the cost of
any shares issued by the Fund. There will be no brokerage charges with
respect to common shares issued directly by the Fund. There are no other
charges to participants for reinvesting dividends or capital gain
distributions.
Participants 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 Web site at www.melloninvestor.com. Such withdrawal will be
effective immediately if received not less than ten days prior to a dividend
record date; otherwise, it will be effective for all subsequent dividend
record dates. When a participant withdraws from the Plan or upon termination
of the Plan, as provided below, certificates for whole common shares
credited to his or her account under the Plan will be issued and a cash pay
ment will be made for any fraction of a share credited to such account.
The Plan Agent maintains each shareholder's account in the Plan and
furnishes monthly written confirmations of all transactions in the accounts,
including information needed by the shareholders for personal and tax
records. The Plan Agent will hold common shares in the account of each Plan
participant in non-certificated form in the name of the participant. Proxy
material relating to the shareholders' meetings of the Fund will include
those shares purchased, as well as shares held pursuant to the Plan.
The reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable or required to be
withheld on such dividends or distributions. Participants under the Plan
will receive tax information annually. The amount of dividend to be reported
on the 1099-DIV should be: (1) in the case of shares issued by the Fund, the
fair market value of such shares on the dividend payment date and (2) in the
case of shares purchased by the Plan Agent in the open market, the amount of
cash used by the Plan Agent to purchase shares in the open market, including
the amount of cash allocated to brokerage commissions paid on such
purchases.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of
the change sent to all shareholders of the Fund at least 90 days before the
record date for the dividend or distribution. The Plan may be amended or
terminated by the Plan Agent after at least 90 days' written notice to all
shareholders of the Fund. All correspondence or additional information
concerning the Plan should be directed to the Plan Agent, Mellon Bank, N.A.,
c/o Mellon Investor Services, P.O. Box 3338, South Hackensack, NJ 07606-1938
(Telephone: 1-800-852-0218).
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:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Telephone: 1-800-852-0218
If your shares are held with a brokerage firm, you should contact that firm,
bank or other nominee for assistance.
21
Shareholder meeting
On March 2, 2005, the Annual Meeting of the Fund was held to elect five
Trustees and to ratify the actions of the Trustees in selecting independent
auditors for the Fund.
Proxies covering 41,825,690 shares of beneficial interest were voted at the
meeting. The common shareholders elected the following Trustees to serve
until their respective successors are duly elected and qualified, with the
votes tabulated as follows:
WITHHELD
FOR AUTHORITY
- -------------------------------------------------------------------
James F. Carlin 41,469,089 342,286
William H. Cunningham 41,475,285 336,090
Richard P. Chapman, Jr. 41,465,452 345,923
James A. Shepherdson* 41,481,981 329,394
* Mr. James A. Shepherdson resigned effective July 15, 2005.
The preferred shareholders elected Patti McGill Peterson to serve as the
Fund's Trustee until her successor is duly elected and qualified, with the
votes tabulated as follows: 14,258 FOR, 0 AGAINST, 57 WITHHELD.
The common and preferred shareholders ratified the Trustees' selection of
Deloitte & Touche LLP as the Fund's independent auditor for the fiscal year
ending December 31, 2005, with votes tabulated as follows: 41,484,857 FOR,
141,984 AGAINST and 198,849 ABSTAINING.
22
Board Consideration
of and Continuation
of Investment
Advisory Agreement
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act")
requires the Board of Trustees (the "Board") of John Hancock Tax-Advantaged
Dividend Income Fund (the "Fund"), including a majority of the Trustees who
have no direct or indirect interest in the investment advisory agreement and
are not "interested persons" of the Fund, as defined in the 1940 Act (the
"Independent Trustees"), annually to review and consider the continuation of
the investment advisory agreement (the "Advisory Agreement") with John
Hancock Advisers, LLC (the "Adviser") for the Fund.
At meetings held on May 19-20 and June 6-7, 2005, the Board, including the
Independent Trustees considered the factors and reached the conclusions
described below relating to the selection of the Adviser and the
continuation of the Advisory Agreement. During such meetings, the Board's
Contracts/Operations Committee and the Independent Trustees also met in
executive sessions with their independent legal counsel. In evaluating the
Advisory Agreement, the Board, including the Contracts/Operations Committee
and the Independent Trustees, reviewed a broad range of information
requested for this purpose by the Independent Trustees, including but not
limited to the following: (i) the investment performance of the Fund and a
broader universe of relevant funds (the "Universe") selected by Lipper Inc.
("Lipper"), an independent provider of investment company data, for a range
of periods, (ii) advisory and other fees incurred by, and the expense ratios
of, the Fund and a peer group of comparable funds selected by Lipper (the
"Peer Group"), (iii) the advisory fees of comparable portfolios of other
clients of the Adviser, (iv) the Adviser's financial results and condition,
including its and certain of its affiliates' profitability from services
performed for the Fund, (v) breakpoints in the Fund's and the Peer Group's
fees and a study undertaken at the direction of the Independent Trustees as
to the allocation of the benefits of economies of scale between the Fund and
the Adviser, (vi) the Adviser's record of compliance with applicable laws
and regulations, with the Fund's investment policies and restrictions, and
with the Fund's Code of Ethics and the structure and responsibilities of the
Adviser's compliance department, (vii) the background and experience of
senior management and investment professionals, and (viii) the nature, cost
and character of advisory and non-investment management services provided by
the Adviser and its affiliates.
Nature, Extent and Quality of Services
The Board considered the ability of the Adviser, based on its resources,
reputation and other attributes, to attract and retain qualified investment
professionals, including research, advisory, and supervisory personnel. The
Board further considered the compliance programs and compliance records of
the Adviser. In addition, the Board took into account the administrative
services provided to the Fund by the Adviser and its affiliates.
Based on the above factors, together with those referenced below, the Board
concluded that, within the context of its full deliberations, the nature,
extent and quality of the investment advisory services provided to the Fund
by the Adviser were sufficient to support renewal of the Advisory Agreement.
Fund Performance
The Board noted that the Fund had less than one full year of operational
history, and considered the performance results for the Fund since its
inception through December 31, 2004. The Board also considered these
23
results in comparison to the performance of the Universe, as well as the
Fund's benchmark index. Lipper determined the Universe for the Fund. The
Board reviewed with a representative of Lipper the methodology used by
Lipper to select the funds in the Universe and the Peer Group.
The Board noted that the performance of the Fund was not appreciably below
the median and average performance of its Universe for the time period under
review. The Board also noted that the Fund performed lower than the Dow
Jones Utility Average Index, the Fund's benchmark index, as did the
Universe. The Board recognized the short operational history of the Fund and
indicated its intent to continue to monitor the Fund's performance trends.
Investment Advisory Fee
Rates and Expenses
The Board reviewed and considered the contractual investment advisory fee
rate payable by the Fund to the Adviser for investment advisory services
(the "Advisory Agreement Rate"). The Board noted the fee waiver arrangement
applicable to the Advisory Agreement Rate and considered the Advisory
Agreement Rate after taking the waivers into account (the "Net Advisory
Rate"). The Board received and considered information comparing the Advisory
Agreement Rate and Net Advisory Rate with the advisory fees for the Peer
Group. The Board noted that the Advisory Agreement Rate and Net Advisory
Rate were lower than the median rate of the Peer Group, and reasonable in
relation to the services provided.
The Board received and considered information regarding the Fund's total
operating expense ratio and its various components, including contractual
advisory fees, actual advisory fees, non-management fees, transfer agent
fees and custodian fees, including and excluding investment-related
expenses. The Board also considered comparisons of these expenses to the
Peer Group and the Universe. The Board noted that the total operating
expense ratio of the Fund was lower than the Peer Group's and Universe's
median total operating expense ratio.
The Adviser also discussed the Lipper data and rankings, and other relevant
information, for the Fund. Based on the above-referenced considerations and
other factors, the Board concluded that the Fund's overall expense results
and performance supported the re-approval of the Advisory Agreement.
Profitability
The Board received and considered a detailed profitability analysis of the
Adviser based on the Advisory Agreement, as well as on other relationships
between the Fund and the Adviser and its affiliates. The Board concluded
that, in light of the costs of providing investment management and other
services to the Fund, the profits and other ancillary benefits reported by
the Adviser were not unreasonable.
Economies of Scale
The Board received and considered general information regarding economies of
scale with respect to the management of the Fund, including the Fund's
ability to appropriately benefit from economies of scale under the Fund's
fee structure. The Board recognized the inherent limitations of any analysis
of economies of scale, stemming largely from the Board's understanding that
most of the Adviser's costs are not specific to individual Funds, but rather
are incurred across a variety of products and services.
The Board observed that the Advisory Agreement did not offer breakpoints.
However, the Board considered the limited relevance of economies of scale in
the context of a closed-end fund that, unlike an open-end fund, does not
continuously offer its shares, and concluded that the fees were fair and
equitable based on relevant factors, including the Fund's total expenses
ranking relative to its Peer Group.
24
Information About
Services to Other Clients
The Board also received information about the nature, extent and quality of
services and fee rates offered by the Adviser to its other clients,
including other registered investment companies, institutional investors and
separate accounts. The Board concluded that the Advisory Agreement Rate was
not unreasonable, taking into account fee rates offered to others by the
Adviser and giving effect to differences in services covered by such fee
rates.
Other Benefits to
the Adviser
The Board received information regarding potential "fall-out" or ancillary
benefits received by the Adviser and its affiliates as a result of the
Adviser's relationship with the Fund. Such benefits could include, among
others, benefits directly attributable to the relationship of the Adviser
with the Fund and benefits potentially derived from an increase in the
business of the Adviser as a result of its relationship with the Fund (such
as the ability to market to shareholders other financial products offered by
the Adviser and its affiliates).
The Board also considered the effectiveness of the Adviser's and the Fund's
policies and procedures for complying with the requirements of the federal
securities laws, including those relating to best execution of portfolio
transactions and brokerage allocation.
Other Factors and
Broader Review
As discussed above, the Board reviewed detailed materials received from the
Adviser as part of the annual re-approval process under Section 15(c) of the
1940 Act. The Board also regularly reviews and assesses the quality of the
services that the Fund receives throughout the year. In this regard, the
Board reviews reports of the Adviser at least quarterly, which include,
among other things, a detailed portfolio review, detailed fund performance
reports and compliance reports. In addition, the Board meets with portfolio
managers and senior investment officers at various times throughout the
year.
After considering the above-described factors and based on its deliberations
and its evaluation of the information described above, the Board concluded
that approval of the continuation of the Advisory Agreement for the Fund was
in the best interest of the Fund and its shareholders. Accordingly, the
Board unanimously approved the continuation of the Advisory Agreement.
25
26
27
28
For more information
The Fund's proxy voting policies, procedures and records are available
without charge, upon request:
By phone On the Fund's Web site On the SEC's Web site
1-800-225-5291 www.jhfunds.com/proxy www.sec.gov
Trustees
Charles L. Ladner, Chairman*
James F. Carlin
Richard P. Chapman, Jr.*
William H. Cunningham
Ronald R. Dion
Dr. John A. Moore*
Patti McGill Peterson*
Steven R. Pruchansky
*Members of the Audit Committee
Officers
Keith F. Hartstein
President and
Chief Executive Officer
William H. King
Vice President and Treasurer
Francis V. Knox, Jr.
Vice President and
Chief Compliance Officer
Investment adviser
John Hancock Advisers, LLC
601 Congress Street
Boston, MA 02210-2805
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Transfer agent and
dividend disburser
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Transfer agent for APS
Deutsche Bank Trust
Company Americas
280 Park Avenue
New York, NY 10017
Legal counsel
Wilmer Cutler Pickering
Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
Stock symbol
Listed New York Stock
Exchange:
HTD
For shareholder assistance
refer to page 21
How to contact us
Internet www.jhfunds.com
Mail Regular mail:
Mellon Investor Services
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Phone Customer service representatives 1-800-852-0218
Portfolio commentary 1-800-344-7054
24-hour automated information 1-800-843-0090
TDD line 1-800-231-5469
A listing of month-end portfolio holdings is available on our Web site,
www.jhfunds.com. A more detailed portfolio holdings summary is available on
a quarterly basis 60 days after the fiscal quarter on our Web site or upon
request by calling 1-800-225-5291, or on the Securities and Exchange
Commission's Web site, www.sec.gov.
29
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.
A tag line below reads "JOHN HANCOCK FUNDS."]
1-800-852-0218
1-800-843-0090 EASI-Line
1-800-231-5469 (TDD)
www.jhfunds.com
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PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
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P13SA 6/05
8/05
ITEM 2. CODE OF ETHICS.
As of the end of the period, June 30, 2005, 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.
The code of ethics was amended effective February 1, 2005 to address new
Rule 204A-1 under the Investment Advisers Act of 1940 and to make other
related changes.
The most significant amendments were:
(a) Broadening of the General Principles of the code to cover compliance
with all federal securities laws.
(b) Eliminating the interim requirements (since the first quarter of 2004)
for access persons to preclear their personal trades of John Hancock mutual
funds. This was replaced by post-trade reporting and a 30 day hold
requirement for all employees.
(c) A new requirement for "heightened preclearance" with investment
supervisors by any access person trading in a personal position worth
$100,000 or more.
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 at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
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 "John Hancock Funds
- - Administration Committee Charter" and "John Hancock Funds - 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 registrant's most recent
fiscal half-year (the registrant's second fiscal half-year in the case of
an annual report) that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. 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) 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) Submission of Matters to a Vote of Security Holders is attached. See
attached "John Hancock Funds - Administration Committee Charter" and "John
Hancock Funds - Governance Committee Charter".
(c)(2) Contact person at the registrant.
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 Tax-Advantaged Dividend Income Fund
By: /s/ Keith F. Hartstein
------------------------------
Keith F. Hartstein
President and Chief Executive Officer
Date: August 29, 2005
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: August 29, 2005
By: /s/ William H. King
------------------------------
William H. King
Vice President and Treasurer
Date: August 29, 2005