defa14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §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)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined): |
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Proposed maximum aggregate value of transaction: |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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FOR IMMEDIATE RELEASE
Contact:
Kimberley Dietrich
(617) 663-4217
kdietrich@jhancock.com
John Hancock Tax-Advantaged Dividend Income Fund Announces
Increased Monthly Distributions, Share Repurchase Program
and Capital Gains Distributions
BOSTON, December 4, 2007 John Hancock Tax-Advantaged Dividend Income Fund (NYSE: HTD) announced
today that its Board of Trustees, in evaluating strategic options to enhance shareholder value and
potentially decrease the discount of the Funds common shares, has approved the following measures
to be implemented:
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An increased distribution level pursuant to a newly adopted level distribution
policy |
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A common share repurchase plan |
Increased Distribution Amount and Level Distribution Policy
Increased Distribution Level. The Board of Trustees of the Fund authorized an increase in the
Funds monthly distribution, effective with the December distribution as described below. The new
distribution will be $0.125 per share, which represents a 29.3% increase over the current
distribution of $0.0967. On an annualized basis, the new distribution level equates to a NAV
distribution rate of 7.07% and a market value distribution rate of 8.04% based on the Funds net
asset value of $21.22 and closing share price of $18.65 on December 3, 2007. This action increases
the Funds distribution rate significantly above many of its peers. As of October 31, 2007, this
new rate would have placed the fund in the top third of its Lipper peer group of Value Funds.
Because the NAV of the Fund and the market price of its shares will vary, the monthly distribution,
which is based on a level dollar amount, may represent more or less than these annualized
distribution rates at any point in time. See Level Distribution Policy below regarding the
components, including return of capital, which may be included in distributions paid out at the new
increased level.
Level Distribution Policy. The Board of Trustees of the Fund also approved a level
distribution policy whereby the Fund will pay a fixed monthly distribution to common shareholders
in the above amount. The Funds level distribution policy and the amount paid out
under such policy is subject to regular review by the Board of Trustees to determine whether it
continues to be in the best interests of the Fund and its shareholders. There can be no assurance
that the level distribution policy will be maintained in the future or maintained at its current
level.
The distributions are to be made from current income, supplemented by realized long-term
capital gains, to the extent permitted by law, realized short-term capital gains and, to the extent
necessary, return of capital. The composition of distributions under this policy may vary because
it may be materially impacted by future realized capital gains and income from holdings. As
required under the Investment Company Act of 1940, the Fund will provide a notice indicating the
sources of each distribution to shareholders at the time of distribution that does not consist
solely of net income. The notice would be for informational sources only and the amounts indicated
in such notices likely will differ from the ultimate federal income tax characterization of
distributions reported to shareholders on Form 1099 Div after year-end. Shareholders should expect
that distributions may include return of capital unless and until the Fund receives exemptive
relief permitting it to make regular distributions of long-term capital gain (as described below).
Investors should understand that a return of capital is not a distribution of income or gains from
the Fund.
SEC Exemptive Relief. In January, 2007, in a proactive effort to enhance flexibility to
adjust the Funds distribution policy in accordance with changing circumstances and shareholder
interests, the Fund filed an application with the SEC for an exemptive order. If obtained, the
order would allow the Fund to include long-term capital gains in monthly distributions to
shareholders. Currently, funds may distribute long-term capital gains only twice per year with
limited exceptions. Funds that have received this type of exemptive relief are allowed to include
long-term capital gains in periodic distributions made throughout the year, along with net
investment income and/or return of capital. This exemptive relief could allow the Fund to reduce or
eliminate the inclusion of capital included in monthly distributions under the level distribution
policy, although there is no guarantee that it would do so. There can be no assurance as to whether
or when the SEC would grant this order, or as to the conditions to which any order would be
subject.
Board Considerations. The Board of Trustees periodically evaluates the options available to
enhance shareholder value and potentially reduce the discount between the market price of the
Funds shares and the NAV. Although there is no guarantee that the increased level distributions
will significantly increase the market price or reduce the discount, experience suggests a
correlation between the distribution rate and the discount at which the Fund shares trade. In
addition to the potential positive impact higher level distribution payments may have on the Funds
market price and premium/discount trends, in setting the new distribution level, the Board also
considered the Funds current financial condition, including its income generating investments and
total return performance as well as the rates of distributions being paid by funds in the Funds
peer group.
Share Repurchase Plan
As a further result of its periodic review of the options available to enhance shareholder
value and potentially reduce the discount between the market price of the Funds shares and the
NAV, the Board of Trustees authorized a share repurchase plan whereby the Fund may purchase in the
open market up to 10% of its outstanding common shares commencing effective immediately through
December 31, 2008. The share repurchase program is intended to increase the Funds NAV per share
of the Funds remaining common shares. It could also have the benefit of providing additional
liquidity in the trading of the common shares.
There is no assurance that the Fund will purchase shares at any specific discount levels or in
any specific amounts. The Funds repurchase activity will be disclosed in its shareholder report
for the relevant fiscal period. There is no assurance that the market price of the Funds shares,
either absolutely or relative to net asset value, will increase as a result of any share
repurchases. The Fund uses leverage, which involves risk and may increase the volatility of the
Funds net asset value.
Monthly Dividend Declaration and Year-End Capital Gains Distribution
John Hancock Tax-Advantaged Dividend Income Fund declared its increased monthly dividend and
year-end capital gains distribution today as follows:
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Declaration Date:
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December 4, 2007 |
Ex Date:
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December 11, 2007 |
Record Date:
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December 13, 2007 |
Payable Date:
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December 31, 2007 |
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Type of Distribution |
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Per Share |
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Monthly Dividend* |
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$ |
0.12500 |
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Annual long-term capital gain |
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$ |
0.32459 |
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Annual short-term capital gain |
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$ |
0.26488 |
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Total |
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$ |
0.71447 |
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* |
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Monthly dividend under new level distribution policy consists of current income, supplemented by
realized long-term capital gains, to the extent permitted by law, realized short-term capital gains
and, to the extent necessary, return of capital. |
About Manulife Financial and John Hancock
John Hancock Funds, the mutual fund business unit of John Hancock Financial Services, offers a
broad array of investment products, including open-end and closed-end funds, privately managed
accounts, 529 plans and retirement accounts to retail and institutional investors. As of September
30, 2007, investors entrusted John Hancock Funds with more than $59 billion in assets. Additional
information about John Hancock Funds can be found on the website: http://www.jhfunds.com.
John Hancock is a unit of Manulife Financial Corporation, a leading Canadian-based financial
services group serving millions of customers in 19 countries and territories worldwide. Operating
as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States,
the Company offers clients a diverse range of financial protection products and wealth
management services through its extensive network of employees, agents and distribution partners.
Funds under management by Manulife Financial and its subsidiaries were Cdn$399 billion (US$400.5
billion) as of September 30, 2007. Manulife Financial Corporation trades as MFC on the TSX, NYSE
and PSE, and under 0945 on the SEHK. Manulife Financial can be found on the Internet at
www.manulife.com.
The John Hancock unit, through its insurance companies, comprises one of the largest life insurers
in the United States. John Hancock offers a broad range of financial products and services,
including life insurance, fixed and variable annuities, mutual funds, 401(k) plans, long term care
insurance, college savings, and other forms of business insurance.
# #
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Factual Stock Report | March 1, 2008 | NYS Symbol: HTD
John Hancock Tax-Advantaged Dividend Income Fund
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Asset Class
Closed-end Exchange Traded Fund
Summary This closed-end fund seeks to provide a high level of after-tax total return from dividends and
capital gains by investing mainly in the utilities and financial services sectors.
Key Fund Statistics (Source S&P, company reports)
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Price as of Feb 29, 2008 |
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$ |
16.81 |
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52-Wk Range |
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$ |
21.75-16.18 |
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Dividend Rate/Share |
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$ |
1.50 |
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Yield(%) |
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8.92 |
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Net Asset Value (NAV) |
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$ |
17.87 |
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Premium/Discount(%) |
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-5.9 |
% |
Net Assets, Com.(M) |
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1,299.90 |
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Market Capitalization(M) |
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$ |
707.314 |
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Beta |
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0.65 |
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Common Shares Outstg.(M) |
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42.1 |
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Preferred Stock (M) |
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380.11 |
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Preferred Shares Outstg.(000) |
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15.00 |
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Annualized Total Return: (%)
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1-Mo |
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-45.2 |
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1-Yr |
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-7.4 |
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6-Mo |
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-8.1 |
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5-Yr |
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Price Performance
Key Growth Rates and Averages
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Past Growth Rate (%) |
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1 Yr |
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3 Yrs |
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5 Yrs |
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Total Investment Income |
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14.88 |
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NA |
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NA |
Net Investment Income |
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17.38 |
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NA |
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NA |
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Ratio Analysis (Annual Avg.) |
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Price/NAV |
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0.89 |
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0.87 |
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NA |
Net Investment |
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6.76 |
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6.28 |
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NA |
Income/Net Assets (%) |
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Expenses/Net Assets (%) |
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1.00 |
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0.99 |
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NA |
Dividend Data (Dates: mm/dd Payment Date: mm/dd/yy)
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Amount |
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Date |
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Ex-Div. |
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Stk. of |
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Payment |
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($) |
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Decl. |
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Date |
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Record |
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Date |
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0.589 |
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12/04 |
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12/11 |
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12/13 |
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12/31/07 |
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0.125 |
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12/04 |
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12/11 |
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12/13 |
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12/31/07 |
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0.125 |
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01/02 |
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01/10 |
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01/14 |
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01/31/08 |
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0.125 |
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02/01 |
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02/08 |
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02/12 |
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02/29/08 |
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Dividends have been paid since 2004. Source: Company reports.
S&P Financial Writer Kevin Hempstead
Fund Overview November 27, 2007
The funds top 10 holdings at October 31, 2007 were: ONEOK, Inc., 3.12%; Regions Financial, 2.91%;
NSTAR, 2.90%; Spectra Energy Corp., 2.74%; Bank of America, 2.68%; OGE Energy, 2.61%; Integrys
Energy Group, 2.60%; BP Plc, 2.43%; Ameren, 2.31%; and DTE Energy, 2.30%.
Total investment income for the six months ended June 30, 2007, amounted to $31.2 million. Total
expenses were $4.7 million, and absorbed 15% of total investment income; net investment income was
$26.5 million ($0.43 per share, after preferred dividends). The net realized and unrealized loss on
investments was $17.8 million ($0.42). For the six months ended June 30, 2007, the fund returned
0.33% at net asset value, -1.16% at market value..
The adviser has contractually agreed to limit the funds annual management fee to 0.55% of the
funds average daily managed assets until the fifth anniversary of the commencement of the funds
operations, 0.60% of such assets in the sixth year, 0.65% of such assets in the seventh year, and
0.70% of average daily managed assets in the eighth year. After the eighth year, the adviser will
no longer waive a portion of the management fee.
Under normal market conditions, HTD invests at least 80% of its assets in dividend-paying common
and preferred securities that the adviser believes at the time of acquisition are eligible to pay
dividends which, for individual shareholders, qualify for U.S. federal income taxation at rates
applicable to long-term capital gains (currently taxed at a maximum rate of 15%). The fund may
invest the remainder of its assets in other equity and fixed income securities, the income from
which does not qualify for such tax treatment.
At October 31, 2007, the top holdings by industry classification were: utilities, 54.85%;
financials, 27.45%; energy, 10.48%; telecommunication services, 4.21%; materials, 0.59%;
industrials, 0.44%; and consumer discretionary, 0.29%.
Net Investment Income/Net Asset Value
Net Investment Income/Share ($)
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2007 |
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2006 |
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2005 |
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2004 |
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2003 |
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2002 |
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1Q |
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2Q |
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0.43 |
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0.59 |
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0.49 |
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0.32 |
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3Q |
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4Q |
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Year |
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1.04 |
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0.93 |
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0.85 |
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Net Asset Value/Share ($) |
1Q |
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23.17 |
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20.26 |
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19.85 |
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19.00 |
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2Q |
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22.33 |
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20.37 |
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21.08 |
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18.10 |
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3Q |
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21.86 |
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21.78 |
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20.85 |
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19.07 |
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4Q |
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22.90 |
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19.93 |
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20.48 |
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Fiscal year ended Dec. 31.
Top Holdings as of 10/31/07
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% |
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ONEOK |
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3.12 |
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Regions Financial |
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2.91 |
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NSTAR |
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2.90 |
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Spectra Energy |
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2.74 |
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Bank of America |
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2.68 |
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OGE Energy |
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2.61 |
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Integrys Energy |
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2.60 |
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BP Plc |
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2.43 |
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Ameren Corp. |
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2.31 |
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DTE Energy |
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2.30 |
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All of the views expressed in this research report accurately reflect our quantitative research
models regarding any and all of the subject securities or issuers. No part of our compensation was,
is, or will be, directly or indirectly, related to the specific recommendations or views expressed
in this research report. This report is for information purposes and should not be considered a
solicitation to buy or sell any security. Neither S&P nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. S&P receives compensation from the issuer or
an agent thereof for initiating coverage, and for distribution including licensed redistribution of
this report, and/or for inclusion in other S&P publications, generally in amounts up to U.S.
$14,175 per year. Redistribution is prohibited without written permission.
Redistribution or reproduction is prohibited without written permission. Copyright © 2008 The
McGraw-Hill Companies, Inc.
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Factual Stock Report | March 1, 2008 | NYS Symbol: HTD
John Hancock Tax-Advantaged Dividend Income Fund
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Fund Objective November 27, 2007
John Hancock Tax-Advantaged Dividend Income Fund is a diversified closed-end management investment
company that seeks to provide a high level of after-tax total return from dividend income and
capital gains. The fund commenced operations on February 27, 2004.
At October 31, 2007, the funds asset mix was divided as follows: common stocks, 70.79%; preferred
stocks, 22.88%; depository receipts, 4.61%; short-term, 1.45%; and foreign stock, 0.27%.
Under normal market conditions, HTD invests at least 80% of its assets 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 (currently taxed at a maximum rate of 15%). The fund may
invest the remainder of its assets in other equity and fixed income securities, the income from
which does not qualify for such tax treatment.
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.
The fund has an investment management contract with John Hancock Advisers, LLC, a wholly owned
subsidiary of John Hancock Financial Services, Inc., a subsidiary of Manulife Financial Corp. Under
the investment management contract, the fund pays a daily management fee to the adviser at an
annual rate of 0.75% of the funds average daily net asset value and the value attributable to the Auction Preferred Shares.
The adviser has contractually agreed to limit the funds management fee to 0.55% of the funds
average daily managed assets until the fifth anniversary of the commencement of the funds
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. After the eighth year, the adviser will
no longer waive a portion of the management fee.
The total value of the funds preferred stock was $380 million at June 30, 2007.
At October 31, 2007, the funds top sector holdings were: utilities, 54.85%; financials, 27.45%;
energy, 10.48%; telecommunication services, 4.21%; materials, 0.59%; industrials, 0.44%; and
consumer discretionary, 0.29%.
Fund Performance (Feb 29, 2008)
In the past 30 trading days, HTDs shares have increased 0.66%, compared to a rise of 0.41% in the
S&P 500. Average trading volume for the past five days was 77,440 shares, compared with the 40-day
moving average of 95,593 shares.
Fund Financials Fiscal Year Ended Dec. 31
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Per Share Data ($) |
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2006 |
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2005 |
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2004 |
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2003 |
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2002 |
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2001 |
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2000 |
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1999 |
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1998 |
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1997 |
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Net Asset Value |
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22.90 |
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19.93 |
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20.48 |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
Year End Price |
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20.32 |
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16.81 |
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17.99 |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
Premium/Discount(%) |
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-12.60 |
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-15.65 |
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-12.16 |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
Dividends:Investment Income |
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1.16 |
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1.16 |
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0.87 |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
Dividends:Capital Gains |
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0.53 |
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0.09 |
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Nil |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
Portfolio Turnover |
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41 |
% |
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24 |
% |
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42 |
% |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
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NA |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Analysis (Million $) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Income |
|
|
69.0 |
|
|
|
60.1 |
|
|
|
46.6 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Net Investment Income:Total |
|
|
60.2 |
|
|
|
51.3 |
|
|
|
40.3 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Net Investment Income:Per Share |
|
|
1.04 |
|
|
|
0.93 |
|
|
|
0.85 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Realized Capital Gains:Total |
|
|
22.9 |
|
|
|
17.1 |
|
|
|
-12.6 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Realized Capital Gains:Per Share |
|
|
0.55 |
|
|
|
0.41 |
|
|
|
-0.30 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Net Investment Income/Net Assets |
|
|
6.76 |
|
|
|
5.97 |
|
|
|
6.11 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Expenses to:Net Assets |
|
|
1.00 |
|
|
|
1.03 |
|
|
|
0.95 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Expenses to:Investment Income |
|
|
16.5 |
|
|
|
18.8 |
|
|
|
13.5 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet & Other Financial Data
(Million $) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets |
|
|
964 |
|
|
|
838 |
|
|
|
862 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
1 Year Total Return on NAV |
|
|
25.7 |
% |
|
|
4.44 |
% |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Change S&P 500 |
|
|
15.8 |
|
|
|
4.91 |
|
|
|
10.9 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Change Bonds AAA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Cost of Investments |
|
|
1,167 |
|
|
|
1,165 |
|
|
|
1,167 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Market Value of Investments |
|
|
1,341 |
|
|
|
1,215 |
|
|
|
1,244 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Net Asset Distribution:Net Cash |
|
|
-39.1 |
|
|
|
-45.9 |
|
|
|
-44.3 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Net Asset Distribution:Short Term
Obligations |
|
|
0.5 |
|
|
|
2.3 |
|
|
|
2.5 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Net Asset Distribution:Bonds & Preferred |
|
|
30.4 |
|
|
|
42.9 |
|
|
|
32.8 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Net Asset Distribution:Common Stock |
|
|
108 |
|
|
|
111 |
|
|
|
109 |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
% Net Asset Distribution:Other Investment |
|
Nil |
|
|
Nil |
|
|
Nil |
|
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
|
NA |
Data as orig reptd.; bef. results of disc opers/spec. items. Per share data adj. for stk. divs.;
EPS diluted. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. UR-Under Review.
Office: 101 Huntington Avenue, Boston, MA 02199.
Telephone: 800-225-0218.
Website: http://www.jhfunds.com
Chrmn: R.R. Dion
Pres & CEO: K.F. Hartstein
CFO: J.G. Vrysen
Treas: G.M. Shone
Secy & Chief Lgl Officer: T.M. Kinzler
Board Members: J. R. Boyle, J. F. Carlin, R. P.
Chapman, Jr., W. H. Cunningham, R. R. Dion, C. L.
Ladner, J. A. Moore, P. M. Peterson, S. R. Pruchansky
Auditor: PricewaterhouseCoopers
Founded: 2003
Domicile: Massachusetts
Employees: 0
Redistribution or reproduction is prohibited without written permission. Copyright © 2008 The
McGraw-Hill Companies, Inc.
|
|
|
Factual Stock Report | March 1, 2008 | NYS Symbol: HTD
John Hancock Tax-Advantaged Dividend Income Fund
|
|
|
|
Glossary
Alternative Minimum Tax Bond
Certain types of municipal bonds whose income is subject to the alternative minimum tax. AMT bonds
include those issued to finance such private purpose activities as industrial redevelopment and
sports stadium construction.
Average Coupon
The coupon of each position in a mortage pool or other debt instrument portfolio weighted by the
size of the position to compute an average coupon for the pool.
Average Effect Maturity: for a Bond Fund
The average of the effective maturity dates of the fixed-income securities in the funds holdings.
Effective maturity takes into account the possibility that it may be called by the issuer before
its stated maturity date.
Capital Appreciation Fund
A mutual fund that seeks maximum capital appreciation by investing primarily in stocks with greater
than average risk.
Capital Gain Distribution
A payment to fund shareholders of net capital gains realized on the sale of the funds securities.
The net asset value of the fund is reduced by the amount of the distribution. These amounts are
usually paid out once a year in December.
Coupon Rate
The interest rate that an issuer promises to pay over the life of a debt security, such as a bond,
expressed as a percentage of face value.
Credit Rating
An evaluation of the creditworthiness of a debt security by an independent rating service.
Duration
A mathematical measure of the price sensitivity of a bond funds portfolio to changes in interest
rates. Duration is stated in years; the shorter the duration, the less price variability you can
expect in the funds price per share.
Duration Adjusted for Portfolio Leverage
A measure of the funds net asset value volatility in reaction to interest rate movements, adjusted
for the use of borrowed money to increase investing power. The use of leverage results in greater
duration.
Exchange Type
ASE American Stock Exchange; NNM Nasdaq National Market; NSC Nasdaq SmallCap; NYSE New York
Stock Exchange; BB OTC Bulletin Board; OT -Over-the-Counter; TO Toronto Stock Exchange.
Expense Ratio
The percentage of the funds average net assets used to pay fund expenses. The expense ratio takes
into account management fees, administrative fees, and any 12b-1 fees.
Fund Net Assets
The total value of a funds securities, cash, and other holdings, minus any outstanding debts.
Income Fund
A mutual fund that seeks current income rather than growth of capital. Income funds typically
invest in bonds and/or high-yielding stocks.
Interest Expense
Includes all interest expense on short-or-long-term debt.
Investment Income
Total investment income before interest expense and after bond discount/premium.
Investments Cost
The original cost of the funds investments.
Investments Market
The price, at which the funds investments could be sold, based on current trading prices or other
approximation.
Leverage
A method to potentially generate a higher level of income, which typically involves the issuance of
preferred stock by the fund that pays lower rates to buy long-term bonds offering higher interest
rates.
Management Fee
The amount a mutual fund pays to its investment advisor for the investment management associated
with overseeing the funds portfolio.
Municipal Bond
An IOU issued by a state, city or other municipality to finance public works such as the
construction of roads or schools. The interest is usually free from federal income tax and may be
free from state and local taxes as well.
Net Asset Value
A primary measure used by investors to evaluate closed-end funds. The value of fund assets, less
liabilities, divided by the number of shares outstanding.
Net Assets
The total value of a funds securities, cash and other holdings, minus any outstanding debts.
Net Gain/Loss from Investments
The sum of both the realized and unrealized gains and losses in the income statement.
Other Expenses
Net expenses excluding management fee, interest expense and waivers/reimbursements.
Other Liabilities
Total liabilities less borrowings.
Portfolio Turnover
A measure of the trading activity in a funds portfolio of investments, that is, how often
securities are bought and sold by the fund.
Premium/Discount
The percentage by which a stock trades, above or below the NAV.
Share Price
The market price at which a funds shares are traded on an exchange. Closed-end fund shares trade
in the stock market based on investor demand. Therefore, the fund may trade at a price higher or
lower than its NAV.
Tax Equivalent Yield
The yield that must be earned on a taxable investment in order to equal the yield of the fund on an
after-tax basis. The taxable equivalent yield is based on the funds dividend yield on the date
indicated and the specified tax rate.
Total Return
The return on your investment, which takes into account the change in price plus dividends or
interest you receive.
Undistributed Net Investment Income
The life-to-date balance of a funds net investment income less distributions of net investment
income.
Unrealized Depreciation/Amortization
The decline in value of assets still being held.
Waivers/Reimbursements
Includes custodian fee credits, management fee waivers and other expense reimbursements.
Weighted Average Maturity of Portfolio Holdings
For a bond fund or defined portfolio, the average of the stated maturity dates of the fixed-income
securities in the fund, weighted by the size of the bond principal balances.
Redistribution or reproduction is prohibited without written permission. Copyright ©2008 The
McGraw-Hill Companies, Inc.
March 6, 2008
John Hancock Closed-End Funds Auction Preferred Shares (APS) Questions & Answers
In response to recent developments in the APS market, we would like to help you understand the
reason for the disruptions, the impact on closed-end funds and how John Hancock is responding.
The following Q&A is intended to explain how closed-end funds use APS and answer
some questions you may have about the current market environment.
Frequently Asked Questions:
Q: What is the difference between open-end and closed-end funds?
A: Closed-end investment companies differ from open-end mutual funds in several critical ways.
Among other things, a closed-end
fund generally issues a fixed number of common shares in a one-time underwritten public offering.
The launch of a new closedend
fund is substantially similar to the initial public offering of an operating company in this
regard.
Unlike open-end mutual funds, common shares of closed funds are not redeemable by shareholders.
Like the common stock of
a conventional public company, the common shares trade exclusively on a secondary market, most
typically a national securities
exchange. The common shares of John Hancock closed-end funds currently all trade on the New York
Stock Exchange. Hence, an
investor who wants to buy or sell closed-end fund common shares generally must place purchase and
sale orders through a broker
or other qualified intermediary who then executes the transaction on the open market at prices
determined by the supply and
demand in the market at that time.
Q: What is a leveraged closed-end fund?
A: As described above, a closed-end fund raises its initial capital through the initial public
offering of its common shares. The
proceeds from this offering are then invested by the closed-end funds management company in
accordance with the funds
investment objective and policies. In the case of a leveraged closed-end fund, additional capital
is raised by means of a second
underwritten public offering of preferred shares of the fund.
Q: What are auction preferred shares (APS)?
A: Auction preferred shares (APS) are preferred stock whose dividend resets at regular intervals at
a Dutch auction. Dutch auctions
are commonly used alternatives to traditional pricing mechanisms. Many other types of preferred
stock and debt securities also
trade in an auction process. Like common shares of closed-end funds, APS have no redemption rights,
which would enable holders
to sell them directly back to the fund either on demand or at periodic intervals. When auctions are
used to determine APS dividend
rates, existing shareholders declare whether they intend to sell or hold their shares, while buyers
declare the dividend rate at which
they wish to purchase shares and in what quantity. For an auction to be successful, the number of
shares bid on must meet or
exceed the number of shares being offered for sale.
It is important to note that neither the Funds nor John Hancock exercise control over the auction
rate market. The market
is mediated by the auction agent who is compensated for their services regardless of whether or not
an auction is successful.
However, the functioning of the market is entirely a product of investor interest (i.e., supply and
demand) communicated through
the brokers that have entered into agreements to participate in these markets, as well as the
willingness and ability of such brokers
to assist in supporting these markets by investment of their own capital.
Continued
Q: What are the special risks considerations associated with APS?
A: The risk associated with both preferred shares and auctions are outlined in your funds
prospectus.
The following paragraphs are both excerpts from the John Hancock Tax-Advantaged Dividend Income
Fund (HTD) closed-end
prospectus:
Risks of investing in the Preferred Shares include:
THE PRIMARY RISKS
|
|
If an Auction fails you may not be able to sell some or all of your APS and the Fund is not
obligated to redeem your APS if the
Auction fails. |
|
|
|
Because of the nature of the market for APS, you may receive less than the price you paid for
your shares if you sell them outside
of the Auction, especially when market interest rates are rising. |
|
|
|
A rating agency could downgrade the rating assigned to the APS, which could affect liquidity. |
|
|
|
The Fund may be forced to redeem APS to meet regulatory or rating agency requirements or may
voluntarily redeem the APS in
certain circumstances. |
|
|
|
In certain circumstances, the Fund may not earn sufficient income from its investments to pay
dividends on the APS. |
|
|
|
If interest rates rise, the value of the Funds investment portfolio generally will decline,
reducing the asset coverage for the APS. |
AUCTION RISK
The dividend rate for the APS normally is set through an Auction process. In the Auction, Existing
Holders of APS may indicate the
dividend rate at which the Existing Holders would be willing to hold or sell their APS or purchase
additional APS. The Auction also
provides liquidity for the sale of APS. An Auction fails if there are more APS offered for sale
than there are buyers. You may not be
able to sell your APS at an Auction if the Auction fails. Also, if you place Bid Orders, orders to
retain shares at an Auction only at
a specified dividend rate and that rate exceeds the rate set at the Auction, you will not retain
your APS. Additionally, if you buy
APS or elect to retain APS without specifying a dividend rate below which you would not wish to buy
or continue to hold those
APS, you could receive a lower rate of return on your shares than the market rate. Finally, the
Dividend Period for the APS may
be changed by the Fund, subject to certain conditions with notice to the holders of APS, which
could also affect the liquidity of
your investment.
Q: What has recently happened with APS?
A: As a result of the recent issues with the credit markets, an imbalance of buyers and sellers of
APS auctions (including those
of several John Hancock closed-end funds) has resulted. This is an industry-wide issue impacting
nearly all auction rate
securities and impacting many leveraged closed-end funds. Recent auctions have failed because of
liquidity issues (i.e.,
there were more shares offered for sale than there were bids to buy shares), not because of credit
quality concerns. The liquidity
problems may have arisen because some broker-dealers who customarily placed bids for their own
accounts in auctions did not
place bids in recent failed auctions. However, broker-dealers are not, and never have been, legally
required to bid in an auction.
Q: What happens when an auction fails?
A: It is important to note that a failed auction for a closed-end funds APS is not a default
on the security. Preferred shareholders
continue to receive dividends at the maximum rate as noted below. Any bids in the auction to
newly purchased shares that are
filled will be allocated on a pro rata basis among the shareholders who wished to sell. Preferred
shareholders who sought to sell
shares, to the extent they were unable to do so, will continue to hold their shares. They may offer
their shares at the next scheduled
auction, subject to the same risk that the subsequent auction may not attract sufficient demand for
a successful auction to occur.
The auction process calls for the fund to pay a maximum rate for the entire series, not just the
unsold shares. This rate is intended
in part to compensate would-be sellers for the gap in liquidity. In the case of John Hancocks APS,
the maximum rate is the higher
of 125 bps over or 125% of the 30-day commercial paper benchmark rate, except in the case of the
Patriot Premium Dividend II
Fund, which has a maximum rate of the higher of 150 bps over or 150% of a two-month LIBOR.
Q: Which JH closed-end funds have been affected?
A: Tax-Advantaged Dividend Income (HTD) Investors Trust (JHI)
Preferred Income (HPI) Income Securities Trust (JHS)
Preferred Income II (HPF) Patriot Premium Dividend II (PDT)
Preferred Income III (HPS)
Continued
Q: What is the impact on common shareholders of closed-end funds that use APS?
A: There has been no immediate negative impact on common shareholders of John Hancock closed-end
funds. Our leveraged
closed-end fund common shareholders continue to benefit from an attractive spread between the
short-term rates our funds
are paying on APS and the returns our funds are earning on the securities they hold.
However, one potential implication of the auction failures for common shareholders is that the cost
of financing a funds leverage
may be higher than it would have been if those costs were determined through a successful auction
process. This means that
common shareholder earnings would be marginally lower than the earnings the common shares would
have otherwise earned.
If these difficulties persist for an extended period of time, the funds may need to find
alternative methods of financing the funds
leverage or otherwise alter the funds financing plan.
Q: Was this due to any credit quality issues with the funds?
A: No, each of our funds preferred shares continue to have AAA/AA credit ratings from one or more
nationally recognized statistical
rating organizations: Moodys and/or Standard & Poors. The failed auctions involving closed-end
funds do not appear to be a credit
quality issue. These auction failures were across several asset classes and structures and involved
numerous issuers, many of which
have extremely strong credit quality. Please keep in mind that our closed-end funds APS rely on
their asset coverage and their
underlying portfolio credit quality and diversification of the collateral for their credit ratings.
They are evaluated by independent
ratings agencies who have been reviewing such shares and their underlying asset coverage for nearly
20 years.
Q: Will I be able to sell my shares in the secondary market?
A: Broker-dealer auction desks may try to facilitate secondary market trades away from the auction
process, though there is no
obligation to make a market bid to furnish liquidity. Such a secondary market, if it does
materialize, may be thin and may not provide
shareholders the degree of liquidity they are seeking. Sellers in the secondary market may receive
less than the par value share price.
Q: What if I want to sell my APS shares at the next scheduled auction?
A: We cannot predict what will happen with upcoming auctions. Current indications are that
liquidity pressure and auction
market displacements will continue for at least the near term. If a particular auction fails to
attract sufficient demand, all investors
in that funds APS will receive the maximum rate dividend as allowed by each closed-end fund. This
maximum rate is intended to
be attractively above comparable rates for successful auctions of closed-end fund preferred shares,
although the maximum rates
have been only slightly higher than the reset rates for recent successful auctions. Please click
here to view the updated auction rates.
Q: Can bids be placed for rates higher than the maximum rate?
A: No, they are capped at the maximum rate, which is calculated on the day of the applicable
auction. If that auction fails, the
maximum rate determined on that date remains in effect until the next scheduled auction.
Q: Ive read about
statements posted in the New York Times made by Western Investment LLC that suggest
a common share tender offer proposal could solve the APS liquidity issue for the
Tax-Advantaged Dividend Income Fund (HTD), is this accurate?
A: The suggestion being made by Western Investment LLC does not solve the auction shares liquidity problem. Western is interested in a short-term liquidity event that they can leverage to make a quick profit at the expense of long-term shareholders. They have a history of attempting to do this, moving from one closed-end fund to the next.
It is important that investors not be mislead by these suggestions. The suggestion of a tender offer does not solve the liquidity problem for all APS shareholders and potentially does not provide a solution for any APS shareholders.
The Board of Directors for all John Hancock closed-end funds are actively reviewing solutions to the lack of liquidity in the APS auction market that are in the best interest of all APS and all common shareholders.
Q: What is the industry doing to address this issue?
A: Industry participants are considering a variety of options to respond to the needs of preferred
and common shareholders, but the
focus appears to currently be centered on two options:
|
|
Restructuring APS with other forms of leverage, and/or |
|
|
|
Making them eligible for investment by money market funds. |
Other options such as buying back and retiring APS (i.e. deleveraging) have been considered but may
not be practical given that
they favor one class of shareholder over another. Currently, industry members are consulting with
the U.S. Securities and Exchange
Commission (SEC), the Investment Company Institute (ICI) and Wall Street leaders for input on the
most appropriate course of action.
Q: How is John Hancock responding to this issue?
A: John Hancock continues to monitor overall developments and actively work to help restore
liquidity to the APS holders. Along
with other market participants, each of whom is facing exactly the same issue, we are focusing
significant resources on the issue
and we are having ongoing dialog with Wall Street. The funds board of trustees have been informed
of these on-going issues
and continue to be actively involved in discussions regarding the options available. Any final
decisions regarding the APS will be
reviewed by the board prior to implementation. In the interim, those shareholders will continue to
earn an attractive rate of interest
on their APS holdings.
Q: Who do I contact if I have any further questions?
A: Please call 1-800-225-5291, Monday through Friday, between 9:00 a.m. and 7:00 p.m., Eastern
Time.
John Hancock Funds, LLC
Member FINRA
601 Congress Street Boston, MA 02210-2805
1-800-225-5291 1-800-554-6713 TDD www.jhfunds.com
Not FDIC insured. May lose value. no bank guarantee. not insured by any government agency. CLQALTR 3/08
TAX-ADVANTAGED DIVERSIFIED EQUITY PEER GROUP
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
Prem/ |
|
Market |
|
Market |
|
NAV |
|
1 Year Return |
|
3 Year Return |
|
|
|
|
|
|
Inception |
|
Assets |
|
(Disc) |
|
Yield |
|
Yield |
|
Yield |
|
Market |
|
NAV |
|
Market |
|
NAV |
Fund |
|
Ticker |
|
Date |
|
($mm) |
|
(%) |
|
(%) |
|
Rank |
|
(%) |
|
(%) |
|
(%) |
|
(%) |
|
(%) |
ALPINE GLOBAL DYNAMIC DIVIDE |
|
AGD |
|
Jul-06 |
|
|
422 |
|
|
|
8.20 |
|
|
|
10.59 |
|
|
|
1 |
|
|
|
11.46 |
|
|
|
(0.07 |
) |
|
|
(2.16 |
) |
|
|
|
|
|
|
|
|
JOHN HANCOCK T/A DVD INCOME |
|
HTD |
|
Feb-04 |
|
|
752 |
|
|
|
(5.93 |
) |
|
|
8.92 |
|
|
|
3 |
|
|
|
8.39 |
|
|
|
(7.42 |
) |
|
|
(14.29 |
) |
|
|
6.80 |
|
|
|
3.50 |
|
NUVEEN TAX-ADV TOT RET STRAT |
|
JTA |
|
Jan-04 |
|
|
293 |
|
|
|
(7.92 |
) |
|
|
10.51 |
|
|
|
2 |
|
|
|
9.68 |
|
|
|
(18.94 |
) |
|
|
(12.56 |
) |
|
|
7.09 |
|
|
|
5.51 |
|
EATON VANCE TAX ADV GL DVD O |
|
ETO |
|
Apr-04 |
|
|
481 |
|
|
|
(10.49 |
) |
|
|
7.25 |
|
|
|
10 |
|
|
|
6.49 |
|
|
|
11.14 |
|
|
|
15.01 |
|
|
|
19.82 |
|
|
|
18.54 |
|
BLACKROCK DIVIDEND ACHIEVERS |
|
BDV |
|
Dec-03 |
|
|
715 |
|
|
|
(10.69 |
) |
|
|
7.68 |
|
|
|
7 |
|
|
|
6.86 |
|
|
|
(14.06 |
) |
|
|
(13.28 |
) |
|
|
(1.03 |
) |
|
|
1.42 |
|
DREMAN/CLAYMORE DVD & INCOME |
|
DCS |
|
Jan-04 |
|
|
794 |
|
|
|
(11.21 |
) |
|
|
8.38 |
|
|
|
4 |
|
|
|
7.44 |
|
|
|
(20.80 |
) |
|
|
(20.22 |
) |
|
|
0.47 |
|
|
|
(0.16 |
) |
EATON VANCE TAX-ADV DVD INC |
|
EVT |
|
Sep-03 |
|
|
2,014 |
|
|
|
(12.33 |
) |
|
|
7.54 |
|
|
|
8 |
|
|
|
6.61 |
|
|
|
(2.55 |
) |
|
|
0.58 |
|
|
|
10.76 |
|
|
|
11.18 |
|
COHEN & STEERS DIVIDEND MAJO |
|
DVM |
|
Jan-05 |
|
|
227 |
|
|
|
(12.36 |
) |
|
|
8.11 |
|
|
|
5 |
|
|
|
7.11 |
|
|
|
(17.46 |
) |
|
|
(17.89 |
) |
|
|
1.11 |
|
|
|
5.71 |
|
BLACKROCK STRAT DVD ACHV TRS |
|
BDT |
|
Mar-04 |
|
|
354 |
|
|
|
(12.48 |
) |
|
|
7.83 |
|
|
|
6 |
|
|
|
6.85 |
|
|
|
(18.93 |
) |
|
|
(16.60 |
) |
|
|
(1.92 |
) |
|
|
1.11 |
|
GABELLI DIVIDEND & INCOME TR |
|
GDV |
|
Nov-03 |
|
|
1,765 |
|
|
|
(12.56 |
) |
|
|
7.18 |
|
|
|
11 |
|
|
|
6.28 |
|
|
|
(6.64 |
) |
|
|
(4.39 |
) |
|
|
7.84 |
|
|
|
7.78 |
|
EATON VANCE T/A GL DVD INCM |
|
ETG |
|
Jan-04 |
|
|
2,013 |
|
|
|
(12.84 |
) |
|
|
7.50 |
|
|
|
9 |
|
|
|
6.54 |
|
|
|
(1.87 |
) |
|
|
2.40 |
|
|
|
12.05 |
|
|
|
12.57 |
|
AVERAGE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9.15 |
) |
|
|
8.32 |
|
|
|
|
|
|
|
7.61 |
|
|
|
(8.87 |
) |
|
|
(7.58 |
) |
|
|
6.30 |
|
|
|
6.71 |
|
Source: UBS Tax-Advantage Diversified Equity Peer Group, Bloomberg data as of February 29, 2008
HTD Weekly Discount Trends
SUBJECT: John Hancock Tax-Advantaged Dividend Income Fund (HTD)
|
I.) |
|
Review investment objective |
|
|
II.) |
|
Discuss Management and Board actions taken: |
|
a. |
|
Filed for a Managed Distribution Order in January 2007 after the SEC
moratorium on 19b exemptive applications was lifted |
|
|
b. |
|
Implemented an increased level distribution policy in December 2007 |
|
|
c. |
|
Board approved share repurchase program in December 2007 |
|
|
d. |
|
Proxy in progress for modifications to investment restrictions |
|
III.) |
|
HTD discount trends |
|
|
IV.) |
|
Review of proxy proposals |
|
a. |
|
To elect Mr. Carlin and Mr. Cunningham as Trustees to serve until their
respective successors are duly elected and qualified. |
|
|
b. |
|
To eliminate the funds policy of investing at least 25% of its net
assets in securities issued by financial services corporations. |
|
|
c. |
|
To modify the funds utilities sector concentration policy to permit
investments in foreign utilities corporations. |
|
i. |
|
Board previously approved an increase in the Funds
ability to invest in foreign securities |
|
V.) |
|
Review of letters to shareholders regarding current proxy |
|
|
VI.) |
|
Question & Answer |