SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[x] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND
(Name of Registrant as Specified in Its Charter)
______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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JOHN HANCOCK TAX-ADVANTAGED DIVIDEND INCOME FUND PROXY Q&A
For Internal Use Only. Do Not Distribute.
Q: WHAT ARE THE PROPOSALS SHAREHOLDERS ARE BEING ASKED TO VOTE?
A: The proxy each shareholder received contains the following proposals:
(1) To elect Mr. Carlin and Mr. Cunningham as Trustees to serve until their
respective successors are duly elected and qualified.
(2) To eliminate the fund's policy of investing at least 25% of its net assets
in securities issued by financial services corporations.
(3) To modify the fund's utilities sector concentration policy to permit
investments in foreign utilities corporations.
Q: WHY IS IT SO IMPORTANT THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE BOARD'S
TWO NOMINEES?
A: The fund has received written notice from a dissident shareholder stating an
intention to nominate a slate of two individuals for election as Trustees at the
meeting. The Board has nominated Messrs. Carlin and Cunningham as the current
nominees for election by the common shareholders. Messrs. Carlin and Cunningham
are highly qualified and experienced in overseeing closed-end funds. They have
a proven track record of protecting the long-term interests of all stockholders.
They actively supported each of the actions listed below (see steps taken to
reduce discount), and have been vigilant in monitoring compliance with the
investment mandate and the benefits to common shareholders from the preferred
stock. Thanks to the continued leadership of the existing Board, the net
expense ratio paid by Fund shareholders is consistently below the median of its
peers. We urge shareholders to vote for these nominees on the GOLD proxy card
that accompanies the proxy statement and not to execute a proxy card in favor of
any other persons.
Please do not send back any white card you receive, even to vote against the
dissident shareholder.
Q: WHAT IS THE DISSIDENT CANDIDATE'S GOAL IN TRYING TO UNSEAT OUR TRUSTEES?
A: These dissidents seem singularly intent on temporarily reducing the market
discount to NAV by conducting a large tender offer that your Board believes
would allow speculative short-term traders to exit their positions at the
expense of long-term investors and may jeopardize the Fund's ability to sustain
its current attractive, tax-advantaged distribution rate.
Your Board believes that the Fund's operations and investment policies should
remain focused on pursuing sustainable tax-advantaged returns for all investors,
rather than short-term windfalls that benefit hedge funds and other short-term
investors. Your Board does not believe that dissident's interests align with
those of long-term Fund investors.
Q: WHAT IS THE DISSIDENT CANDIDATE'S STRATEGY?
A: Western Investment, a hedge fund, would like your Board to authorize a self
tender for 25% to 30% of the Fund at 95% of its NAV. This one-time self tender
would likely increase the trading price of shares only for a brief time - long
enough for Western Investment to reap a sizable short-term profit on a
derivative position in 614,360 Fund shares that will expire on May 5, 2008 and
on the additional ownership position that the hedge funds acquired just before
this proxy contest began
One of the dissident candidates manages hedge funds that acquired most of their
Fund shares just before the proxy contest was launched, through a complicated
series of purchases and sales. This hedge fund manager also holds a large
leveraged derivatives position in the Fund's shares. This is not the first
closed-end fund against which this hedge fund manager has initiated a proxy
contest shortly after acquiring a sizeable stake. HTD was never designed as a
vehicle for speculative short-term trading purposes.
One of the dissident candidates reports no registered fund board experience and
the other reports less than a year's experience on the board of a competitor
fund, which could even conflict with services to your Fund.
Western Investment has not criticized the existing Board's oversight of
investment mandates, compliance, performance, expense management, or other
matters. Instead, Western Investment has made only one proposal and seemingly
seeks the election of the dissidents to promote that proposal.
Q: HOW WOULD THE DISSIDENT'S PROPOSAL OF A SELF TENDER ADVERSELY AFFECT THE
FUND?
A: Your Board believes that a 25% to 30% self tender will not create a
sustainable discount reduction, but will adversely affect long-term investors
who would shoulder the disruptive effects and costs of the forced liquidation of
over a quarter of the Fund's investments to pay for the self tender. This is
also likely to present potentially significant adverse tax consequences for
common shareholders in a Fund that is designed to be tax-advantaged. A self
tender that significantly shrinks the size of the Fund can lead to less
diversification, decreased economies of scale, higher expense ratios, and forced
changes to the Fund's leverage and investment strategies.
Q: WHAT STEPS HAS THE BOARD TAKEN IN REDUCING THE DISCOUNT?
A: While market discounts are common among closed-end funds, your Board has
taken several steps to narrow the discount with strategies that it believes
benefit all shareholders including:
o Managed distribution plan that enhances a fund's regular distribution
rate by including long-term capital gains can reduce the market discount.
A fund must obtain an exemptive order from the SEC to adopt such a plan.
The SEC announced that it would begin accepting applications for such
orders on December 1, 2006. Less than a week later, your Board approved
filing an application. Unfortunately, despite your Board's proactivity,
over fourteen months later, the SEC still has not granted any orders.
o For at least the past year, the Board has been exploring ways to enhance
yield, including asking management to study investment strategy changes.
This dialogue led the Board to propose the two strategy changes described
in the Fund's proxy statement (see proposals 2 & 3). Another strategy
change to increase the Fund's ability to invest in foreign securities has
already been approved.
o The Board has adopted a new level distribution plan that increases
regular distributions without the need for an SEC order (on an annualized
basis, the increased distributions are expected to qualify for the
maximum 15% Federal income tax rate and equate to a NAV distribution rate
of 8.39% and a market value distribution rate of 8.92% based on the
Fund's February 29, 2008 NAV and market value; these rates will vary over
time). An 8% distribution taxed at 15% is comparable to a 10%
distribution taxed at the maximum Federal rate.
o The Board has introduced an open-market share repurchase program. The
plan allows the Fund to purchase, in the open market, up to 10% of its
outstanding common shares through December 31, 2008. The share
repurchase program is intended to increase the Fund's NAV per share of
the Fund's remaining common shares. It could also have the benefit of
providing additional liquidity in the trading of the common shares.
Q: HAS THE DISCOUNT NARROWED SINCE IMPLEMENTING THESE CHANGES?
A: Yes, since these steps were announced, the discount has narrowed from 12.83%
as of December 4, 2007 to 7.52% as of March 5, 2008.
Additional HTD Proxy Proposals
Q: WHAT IS THE BENEFIT OF ELIMINATING THE FUND'S FINANCIAL SERVICES CORPORATIONS
CONCENTRATION?
A: The fund currently "concentrates" (i.e., invests at least 25% of its net
assets) in securities issued by U.S. corporations in the financial services
sector.
Fund management proposes that this concentration policy be eliminated, which
would increase the fund's investment flexibility. Management believes that this
proposed change will not affect the fund's investment objective of providing a
high level of after-tax total return from dividend income and capital
appreciation.
Fund management believes and the Board agrees that the elimination of the
financial sector concentration policy will benefit the fund and its
shareholders. Elimination of this requirement will give the fund's portfolio
management team additional flexibility to buy and sell securities for the fund
that the team feels will benefit the fund, rather than to meet minimum
thresholds. This restriction inhibits the team's ability to pursue investment
opportunities with strong yield potential in more favorable sectors. The
recommended change will provide an opportunity to enhance the yield and overall
performance of the fund. To the extent that the fund's distribution rate and
investment performance improve, market demand for the fund's common shares may
increase, which may help reduce the trading discount in these shares.
By eliminating the concentration policy with respect to investing in financial
services corporations, the fund would reduce its exposure to this market sector,
thereby reducing its risk of loss attributable to a general decline in the value
of securities issued by these corporations. Conversely, the fund would also
reduce its ability to gain from a general increase in the value of such
securities.
Q: WHAT IS THE BENEFIT OF MODIFYING THE FUND'S UTILITIES SECTOR CONCENTRATION
POLICY TO PERMIT INVESTMENT IN FOREIGN CORPORATIONS?
A: The fund currently concentrates its investments in securities issued by U.S.
corporations in the utilities sector. Fund management proposes that this
concentration policy be revised to remove the reference to "U.S.," thereby
permitting the fund to satisfy the policy by investing in both U.S. and foreign
utilities corporations, rather than only U.S. corporations. In the Adviser's
view, this would increase the fund's investment flexibility. Although modifying
the utilities sector concentration policy would permit greater investment in
foreign utilities corporations, the fund would not be required to do so.
Fund management believes and the Board agrees that the proposed modification of
the utilities sector concentration policy will benefit the fund and its
shareholders. Management believes that this proposed change will not affect the
fund's investment objective of providing a high level of after-tax total return
from dividend income and capital appreciation. Under the fund's current policy,
investments in foreign securities do not count toward the fund's required
minimum concentration in utilities corporations. This restriction inhibits the
team's ability to pursue investment opportunities with strong yield potential in
more favorable foreign markets. Removing the reference to U.S. corporations will
give the fund's portfolio management team additional flexibility, allowing
foreign investments to qualify for the fund's concentration policy with respect
to utilities.
Q: HOW WILL THE HTD'S CURRENT CONCENTRATION POLICY CHANGE WITH RESPECT TO
PROPOSALS TWO & THREE?
The current investment policy language reads as follows:
The fund intends to concentrate its investments in securities issued by U.S.
corporations in the related groups of industries comprising each of the
utilities sector and the financial services sector and will be subject to
certain risks due to such emphasis.
SCENARIO #1- IF SHAREHOLDERS APPROVE BOTH PROPOSAL TWO AND PROPOSAL THREE: The
fund's overall industry concentration policy will be revised as follows:
The fund intends to concentrate its investments in securities issued by
corporations in the related group of industries comprising the utilities sector
and will be subject to certain risks due to such emphasis.
SCENARIO #2 - IF SHAREHOLDERS APPROVE PROPOSAL TWO BUT NOT PROPOSAL THREE: The
fund's concentration policy will be revised as follows:
The fund intends to concentrate its investments in securities issued by U.S.
corporations in the related groups of industries comprising the utilities sector
and will be subject to certain risks due to such emphasis.
SCENARIO #3 - IF SHAREHOLDERS DO NOT APPROVE PROPOSAL TWO BUT APPROVE PROPOSAL
THREE: The fund's concentration policy will be revised as follows:
The fund intends to concentrate its investments in securities issued by
corporations in the related groups of industries comprising each of the
utilities sector (all corporations) and the financial services sector (U.S.
corporations only) and will be subject to certain risks due to such emphasis.
SCENARIO #4 - IF SHAREHOLDERS APPROVE NEITHER PROPOSAL TWO NOR PROPOSAL THREE:
The fund's overall industry concentration policy will remain the same.
Q: HOW DO SHAREHOLDERS VOTE?
A: If a shareholder holds shares in a brokerage or bank account (in "street
name"), their broker or bank cannot vote their shares this year (as it has in
past routine annual meetings) unless they complete, sign and return the GOLD
proxy voting form. If the shareholder holds shares in "street name", they can
also vote by telephone at 1-800-454-8683 or internet at www.proxyvote.com (the
shareholders should please consult the GOLD proxy card and the materials they
receive from their broker or bank for further information).
Shareholders must NOT send back any white card they receive, even to vote
against the dissident slate. Doing so will cancel any prior vote cast for our
current Board. Shareholders must return only the GOLD proxy card.
If a shareholder hold shares directly in their own name, they must vote by
either executing the GOLD proxy card or voting at the meeting in person.
Q: WHO SHOULD SHAREHOLDERS CALL IF THEY HAVE QUESTIONS ABOUT VOTING THE PROXY?
A: If shareholders have questions about voting the proxy or instructing their
bank or broker how to vote on their behalf, they should contact the proxy
solicitor, The Altman Group, Inc. toll-free at 1-866-745-0264.
Q: IF A SHAREHOLDER HAS ALREADY VOTED, CAN THEY CHANGE THEIR VOTE?
A: If a shareholder has already returned a white proxy card, they have the
right to change their vote. The shareholders can still support their Board by
returning a GOLD proxy card. Only the latest dated proxy card will count.
If a shareholder wants to revoke a proxy, they may do so before it is exercised
at the meeting by filing a written notice of revocation with the fund, by
returning a signed proxy with a later date before the meeting or, if attending
the meeting and voting in person, by notifying the fund's secretary at any time
before their proxy is voted.
The contact information is as follows:
Thomas M. Kinzler, Secretary and Chief Legal Officer
John Hancock Tax-Advantaged Dividend Income Fund
601 Congress Street, Boston, Massachusetts 02210-2805
For Internal Use Only. PROXY Q&A 03/08
Do Not Distribute.