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)
101 Huntington Avenue, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip code)
Susan S. Newton, Secretary
101 Huntington Avenue
Boston, Massachusetts 02199
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-375-1702
Date of fiscal year end: December 31
Date of reporting period: December 31, 2004
ITEM 1. REPORT TO SHAREHOLDERS.
JOHN HANCOCK
Tax-Advantaged Dividend Income Fund
12.31.2004
Annual 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 James A. Shepherdson, Chief Executive Officer, 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 12
Trustees & officers
page 24
For more information
page 29
Dear Fellow Shareholders,
The stock market advanced for the second straight year, largely on the wings
of a strong post-election rally that produced solid returns for the major
indexes in 2004. For much of the year, the market was fairly dull, moving
mostly sideways as investors worried about higher interest rates,
sky-rocketing oil prices, the tight presidential election and the war in
Iraq. With the election over and oil prices moderating, investors felt more
confident, and the broad Standard & Poor's 500 Index wound up returning
10.88% for the year. The Dow Jones Industrial Average returned 5.40% and a
late and strong rally in technology stocks helped the Nasdaq Composite Index
move from a negative stance in October to finish the year with a 9.15%
return. Despite the Federal Reserve's five hikes in short-term interest
rates, bonds still turned in positive results, with the Lehman Brothers
Aggregate Bond Index up 4.34%.
The way this year has played out in the financial markets serves as a good
reminder of why keeping a long-term perspective is such a critical element
of successful investing. Getting caught up in the day-to-day twists and
turns of the market -- and trying to act on them -- can wreak havoc with
your portfolio and derail progress toward meeting your overall financial
objectives.
Since no one can predict the market's moves, the best way to reach your
goals is to stay invested and stick to your plan. Investing should be a
marathon, not a sprint. Do not try to time the market, and make sure you
work with your investment professional to ensure that your portfolio remains
properly diversified to meet your long-term objectives. For example, after
several years of dominance, small-cap stocks and value stocks could now
represent higher percentages of your portfolio than you may want. If you are
comfortable with your financial plan, it becomes easier to ride out the
market's daily ups and downs. It could also provide you with a greater
chance of success over time.
Sincerely,
/S/ JAMES A. SHEPHERDSON
James A. Shepherdson,
Chief Executive Officer
This commentary reflects the CEO's views as of December 31, 2004. 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 period
* Demand for high quality and high income fueled utility and financial
common stocks, as well as preferred securities.
* Utility stocks performed best, as fundamental improvement lifted the
group.
* Financial stocks were mixed due to varying conditions among subsectors.
[Bar chart with heading "John Hancock Tax-Advantaged Dividend Income Fund."
Under the heading is a note that reads "Fund performance from commencement
of operations on February 27, 2004 through December 31, 2004." The chart is
scaled in increments of 5% with -10% at the bottom and 15% at the top. The
first bar represents the fund's 12.85% Net asset value. The second bar
represents the fund's -5.47% Market Value. A note below the chart reads "The
total return for the Fund is at net asset value with all distributions
reinvested. The performance data contained within this material represents
past performance, which does not guarantee future results."]
Top 10 issuers
2.8% Bank of America Corp.
2.4% NSTAR
2.3% Regions Financial Corp.
2.3% Ameren Corp.
2.2% KeySpan Corp.
2.1% Dominion Resources, Inc.
2.1% Royal Bank of Scotland Group Plc
2.1% DTE Energy Co.
2.1% Progress Energy, Inc.
2.0% KeyCorp.
As a percentage of net assets plus the value of preferred shares on December
31, 2004.
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
Utility and financial common stocks -- the two primary areas of emphasis of
John Hancock Tax-Advantaged Dividend Income Fund -- turned in impressive
results from the commencement of operations of the Fund on February 27, 2004
through December 31, 2004. Utility common stocks led the way, fueled by a
combination of the group's fundamental improvement -- evidenced by reduced
debt levels, improved balance sheets and the sale or closure of money-losing
unregulated subsidiaries -- and strong investor demand for high-quality
income-producing stocks. Investors' appetite for income also helped
financial stocks, although subsector returns were mixed. Regional banks,
diversified banks and real estate investment trusts (REITs) all performed
well, as investors sought more conservative safe-haven sectors with high
dividends and stable earnings throughout much of the period. Regional banks
also were bolstered by an upswing in mergers, while the more
market-sensitive names, such as trust banks and brokers, struggled until the
market's late-year rally. Many insurance stocks were hit hard toward the end
of the period by charges of bid rigging and price fixing against the most
prominent insurance broker, Marsh & McLennan. The performance of preferred
stocks -- a secondary focus of the Fund -- also was quite good during the
year, fueled in large measure by favorable supply and demand conditions.
"Utility and financial
common stocks...turned in
impressive results..."
Fund performance
From its commencement of operations on February 27, 2004 through December
31, 2004, John Hancock Tax-Advantaged Dividend Income Fund returned 12.85%
at net asset value and -5.47% 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.
2
Over the same period, the Standard & Poor's 500 Index returned 7.39% and the
average closed-end value fund returned 11.29% at net asset value, according
to Lipper, Inc.
[Photos of Greg Phelps, James Schmidt, Mark Maloney and Lisa Welch flush
right at top of page.]
Utility stocks shine
Many of our utility common stock holdings were our best performers for the
period. Among the best was NSTAR, the parent company of Boston Edison. The
company's stock benefited from a combination of favorable developments,
including the company's decision to increase its dividend and split its
stock, and its ability to continue to grow earnings, thanks to good cost
controls and robust economic conditions in its service territory. Public
Service Enterprise Group also performed well, thanks to a proposed takeover
by Exelon Corp., which propelled its stock price higher. The Fund also
enjoyed the strong returns posted by ONEOK, a diversified energy company
involved in oil and gas production, natural gas processing, gathering,
storage and transmission in the mid-continent areas of the United States. It
benefited from a well-executed business strategy and its ability to pass on
price increases in the wake of higher commodity prices. DTE Energy also
performed well, partly because of its attractive dividend and partly due to
the favorable resolution of a major utility rate case in its home state of
Michigan. Another top gainer was TECO Energy, buoyed by a combination of
above-average growth in its customer base and its ability to put the
problems associated with its merchant energy plants behind it.
"Many of our utility common stock
holdings were our best performers
for the period."
Merger banks boost results
Among our financial holdings, Bank of America, which merged with FleetBoston
late last year, was one of our top performers. The stock was buoyed by the
bank's ability to post solid earnings results, its announcement of a stock
split and a large increase in its quarterly dividends. Another merger stock
that did well was JPMorgan Chase, which acquired Bank One Corp. Regional
bank BB&T also posted strong gains as its above-average loan growth helped
it post record profits. On the flip side, headline and regulatory risk
worked against Citigroup, which had problems in several of its overseas
units.
3
[Table at top left-hand side of page entitled "Top five industry groups 1."
The first listing is Electric utilities 31%, the second is Regional banks
15%, the third is Multi-utilities & unregulated power 14%, the fourth is Gas
utilities 12% and the fifth is Diversified banks 10%.]
Tax-advantaged securities lead preferred stock group
Given expectations that the 2003 tax reform bill would be made permanent
because of the re-election of President Bush and the larger Republican
majority in both the House and Senate, tax-advantaged preferred stocks were
in heavy demand and turned in good gains as a result during the period. One
example was Southern Union, which benefited from investors' expectations
that the company would receive a credit-rating upgrade. In the financial
sector, our preferred holdings in Bear Stearns did well thanks to the
combination of its attractive dividend and the strong financial performance
of the company.
[Pie chart at middle of page with heading "Portfolio diversification 1." The
chart is divided into three sections (from top to right): Common stocks 76%,
Preferred stocks 23% and Short-term investments & other 1%.]
Outlook
In our view, the late 2004 decline in oil prices and reports of better
economic data suggest that the Fed will continue on a measured path to raise
short-term interest rates. Although the rate hikes that were enacted
throughout 2004 haven't yet hurt the prices of preferred stocks, it's
possible that potentially higher long-term interest rates could dampen their
performance over the near term. As for utility stocks, we wouldn't be
altogether surprised if they are poised for a breather or even a pullback
over the short term given their rapid and recent impressive gains. Over the
longer term, however, there are a couple of factors we believe will continue
to work in favor of both preferred and utility common stocks. Making
permanent the recently reduced dividend tax rate and
4
[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 Public
Service Enterprise followed by an up arrow with the phrase "Takeover by
larger utility boosts price." The second listing is Bank of America followed
by an up arrow with the phrase "Earnings growth, stock split, dividend hike
fuel stock." The third listing is Citigroup followed by a down arrow with
the phrase "Regulatory concerns surrounding overseas units hurt equity
price."]
strong demand from an aging American population potentially more intent
on shifting assets to high-quality income-producing securities should
provide some support for the group even if long-term bond yields rise. We
remain optimistic about the prospects for financial stocks. We expect the
group to navigate fairly well in a rising interest rate environment, and may
continue to see outperformance from the group if the economic recovery
remains sluggish.
"Over the longer term...there are
a couple of factors we believe will
continue to work in favor of both
preferred and utility common stocks."
This commentary reflects the views of the portfolio management team through
the end of the Fund's period discussed in this report. The managers'
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 December 31, 2004.
5
FINANCIAL STATEMENTS
FUND'S
INVESTMENTS
Securities owned
by the Fund on
December 31, 2004
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 109.06% $940,012,928
(Cost $863,642,492)
Diversified Banks 10.77% 92,806,160
Bank of America Corp. 730,000 34,302,700
Comerica, Inc. 296,000 18,061,920
U.S. Bancorp. 647,000 20,264,040
Wachovia Corp. 230,000 12,098,000
Wells Fargo & Co. 130,000 8,079,500
Electric Utilities 34.94% 301,209,819
Alliant Energy Corp. 50,000 1,430,000
Ameren Corp. 561,100 28,133,554
American Electric Power Co., Inc. 335,500 11,521,070
Black Hills Corp. 454,000 13,928,720
CH Energy Group, Inc. 368,100 17,687,205
Cinergy Corp. 539,100 22,442,733
Consolidated Edison, Inc. 525,100 22,973,125
Empire District Electric, Co. (The) 428,400 9,716,112
Entergy Corp. 10,000 675,900
FPL Group, Inc. 9,000 672,750
Great Plains Energy, Inc. 67,000 2,028,760
NSTAR 538,000 29,202,640
OGE Energy Corp. 884,800 23,456,048
Pinnacle West Capital Corp. 230,000 10,214,300
Progress Energy, Inc. 569,600 25,768,704
Scottish Power Plc, American Depositary Receipt (United Kingdom) 610,000 19,007,600
Southern Co. (The) 593,400 19,890,768
Westar Energy, Inc. 425,000 9,719,750
WPS Resources Corp. 373,000 18,635,080
Xcel Energy, Inc. 775,000 14,105,000
See notes to
financial statements.
6
FINANCIAL STATEMENTS
Issuer Shares Value
Gas Utilities 14.70% $126,728,996
Atmos Energy Corp. 756,200 20,682,070
KeySpan Corp. 647,400 25,539,930
NiSource, Inc. 467,700 10,654,206
Northwest Natural Gas Co. 325,000 10,965,500
Peoples Energy Corp. 557,000 24,480,150
Piedmont Natural Gas Co., Inc. 180,000 4,183,200
Vectren Corp. 689,900 18,489,320
WGL Holdings, Inc. 380,500 11,734,620
Integrated Oil & Gas 0.88% 7,561,440
ChevronTexaco Corp. 144,000 7,561,440
Integrated Telecommunication Services 2.59% 22,337,752
SBC Communications, Inc. 670,000 17,265,900
Verizon Communications, Inc. 125,200 5,071,852
Multi-Utilities & Unregulated Power 18.46% 159,094,773
Dominion Resources, Inc. 385,000 26,079,900
DTE Energy Co. 485,000 20,918,050
Duke Energy Corp. 533,400 13,511,022
Energy East Corp. 396,000 10,565,280
National Fuel Gas Co. 456,000 12,923,040
ONEOK, Inc. 821,100 23,335,662
Public Service Enterprise Group, Inc. 454,700 23,539,819
Puget Energy, Inc. 707,000 17,462,900
SCANA Corp. 257,500 10,145,500
TECO Energy, Inc. 40,000 613,600
Other Diversified Financial Services 2.33% 20,080,698
Citigroup, Inc. 187,000 9,009,660
JPMorgan Chase & Co. 283,800 11,071,038
Regional Banks 21.71% 187,109,550
AmSouth Bancorp. 775,000 20,072,500
BB&T Corp. 495,000 20,814,750
Colonial BancGroup, Inc. (The) 275,000 5,838,250
F.N.B. Corp. 190,000 3,868,400
First Horizon National Corp. 290,000 12,501,900
FirstMerit Corp. 365,000 10,398,850
Hudson United Bancorp. 195,000 7,679,100
KeyCorp 749,000 25,391,100
National City Corp. 505,000 18,962,750
See notes to
financial statements.
7
FINANCIAL STATEMENTS
Issuer Shares Value
Regional Banks (continued)
PNC Financial Services Group 370,000 $21,252,800
Regions Financial Corp. 795,000 28,294,050
Susquehanna Bancshares, Inc. 275,000 6,861,250
Whitney Holding Corp. 115,000 5,173,850
Thrifts & Mortgage Finance 2.68% 23,083,740
People's Bank 150,000 5,833,500
Washington Mutual, Inc. 408,000 17,250,240
Credit
Issuer, description rating (A) Shares Value
Preferred stocks 32.81% $282,808,876
(Cost $282,564,323)
Consumer Finance 0.16% 1,391,500
SLM Corp., 6.97%, Ser A BBB+ 24,200 1,391,500
Diversified Banks 3.31% 28,540,850
Abbey National Plc, 7.375%, Depositary Shares,
Ser B (United Kingdom) A- 93,100 2,560,250
Royal Bank of Scotland Group Plc, 5.75%,
Ser L (United Kingdom) A 1,060,000 25,980,600
Electric Utilities 9.55% 82,262,920
Alabama Power Co., 5.20% BBB+ 276,700 6,709,975
Alabama Power Co., 5.30% (Class A) BBB+ 213,000 5,237,670
Carolina Power & Light Co., $5.44 BB+ 111,493 10,703,328
Connecticut Light & Power Co., $3.24, Ser 68G BBB- 12,500 650,391
Connecticut Light & Power Co., 5.28%, Ser 1967 BBB- 18,294 862,677
Connecticut Light & Power Co., 6.56%, Ser 1968 BBB- 7,224 377,229
Duquesne Light Co., 6.50% BB+ 210,000 11,025,000
Entergy Arkansas, Inc., $1.96 BB+ 150,466 3,771,054
Entergy Arkansas, Inc., 4.56% BB+ 9,388 701,753
Entergy Arkansas, Inc., 4.56%, Ser 1965 BB+ 9,818 733,895
Entergy Arkansas, Inc., $6.08 Ba1 9,808 977,429
Entergy Gulf States, Inc., $7.56 BB 28,422 2,771,145
Entergy Louisiana, Inc., 5.16% Ba1 12,044 1,030,139
Entergy Mississippi, Inc., 4.92% Ba2 7,884 642,793
FPL Group Capital Trust I, 5.875% BBB+ 348,200 8,642,324
Interstate Power & Light Co., 7.10%, Ser C BBB- 20,600 566,500
Interstate Power & Light Co., 8.375%, Ser B BBB- 233,000 7,805,500
Monongahela Power Co., $7.73, Ser L B- 33,143 3,281,157
See notes to
financial statements.
8
FINANCIAL STATEMENTS
Credit
Issuer, description rating (A) Shares Value
Electric Utilities (continued)
Northern Indiana Public Service Co., 4.50% BB+ 28,863 $2,317,159
Northern Indiana Public Service Co., 4.88% BB+ 7,616 663,068
Ohio Edison Co., 4.56% BB 15,325 1,222,169
Pennsylvania Power Co., 7.75% BB 9,500 955,047
Union Electric Co., $4.50 BBB 10,370 824,415
Wisconsin Power & Light Co., 4.50% BBB 4,600 392,840
Xcel Energy, Inc., $4.08, Ser B BB+ 66,070 5,080,783
Xcel Energy, Inc., $4.56, Ser G BB+ 53,700 4,317,480
Gas Utilities 3.29% 28,384,075
El Paso Tennessee Pipeline Co., 8.25%, Ser A CCC- 300,000 15,271,890
KeySpan Corp., 8.75%, Conv A3 27,500 1,434,675
Southern Union Co., 7.55% BB+ 417,800 11,677,510
Investment Banking & Brokerage 5.09% 43,825,145
Bear Stearns Cos., Inc. (The), 5.49%, Depositary Shares, Ser G BBB 249,800 12,614,900
Bear Stearns Cos., Inc. (The), 5.72%, Depositary Shares, Ser F BBB 126,700 6,566,861
Bear Stearns Cos., Inc. (The), 6.15%, Depositary Shares, Ser E BBB 64,900 3,433,210
Lehman Brothers Holdings, Inc., 5.67%, Depositary Shares, Ser D BBB+ 56,000 2,856,000
Lehman Brothers Holdings, Inc., 5.94%, Depositary Shares, Ser C BBB+ 256,160 13,102,584
Lehman Brothers Holdings, Inc., 6.50%, Depositary Shares, Ser F BBB+ 193,500 5,251,590
Multi-Line Insurance 0.63% 5,457,867
ING Groep N.V., 6.20% (Netherlands) A- 109,100 2,767,867
ING Groep N.V., 7.05% (Netherlands) A- 100,000 2,690,000
Multi-Utilities & Unregulated Power 1.65% 14,207,553
Avista Corp., $6.95, Ser K BB- 40,383 4,174,593
DTE Energy Co., 8.75%, Conv BBB- 187,000 4,875,090
Public Service Electric & Gas Co., 5.05%, Ser D BB+ 12,160 1,082,240
Public Service Electric & Gas Co., 5.28%, Ser E BB+ 21,930 1,995,630
South Carolina Electric & Gas Co., 6.52% Baa1 20,000 2,080,000
Oil & Gas Exploration & Production 4.11% 35,449,232
Anadarko Petroleum Corp., 5.46%, Depositary Shares, Ser B BBB- 50,000 4,978,125
Apache Corp., 5.68%, Depositary Shares, Ser B BBB 50,000 5,239,065
Devon Energy Corp., 6.49%, Ser A BB+ 150,000 15,548,445
Nexen, Inc., 7.35% (Canada) BB+ 359,584 9,683,597
Other Diversified Financial Services 3.46% 29,857,251
ABN AMRO Capital Funding Trust V, 5.90% A 140,000 3,430,000
ABN AMRO Capital Funding Trust VII, 6.08% A 950,000 23,835,500
See notes to
financial statements.
9
FINANCIAL STATEMENTS
Credit
Issuer, description rating (A) Shares Value
Other Diversified Financial Services (continued)
General Electric Capital Corp., 6.10% AAA 38,100 $998,601
J.P. Morgan Chase Capital XI, 5.875%, Ser K A- 65,000 1,593,150
Reinsurance 0.31% 2,673,440
RenaissanceRe Holdings Ltd., 6.08%, Ser C (Bermuda) BBB+ 112,000 2,673,440
Thrifts & Mortgage Finance 1.25% 10,759,043
Fannie Mae, 4.75%, Ser M AA- 20,000 826,000
Fannie Mae, 5.10%, Ser E AA- 24,300 1,211,963
Fannie Mae, 5.125%, Ser L AA- 124,000 5,303,480
Fannie Mae, 5.375%, Ser I AA- 76,800 3,417,600
Interest Maturity Credit Par value
Issuer, description rate date rating (A) (000) Value
Short-term investments 2.45% $21,100,000
(Cost $21,098,828)
Government U.S. Agency 2.45% 21,100,000
Federal Home Loan Bank, Disc Note 1.00% 01-03-05 AAA $21,100 21,100,000
Total investments 144.32% $1,243,921,804
Other assets and liabilities, net (44.32%) ($381,978,537)
Total net assets 100.00% $861,943,267
(A) Credit ratings are unaudited and 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
PORTFOLIO
CONCENTRATION
December 31, 2004
(unaudited)
This table shows the
Fund's investments,
aggregated by
various industries.
Industry distribution Value as a percentage of Fund's total investments
-------------------------------------------------------------------------------
Consumer finance 0.11%
Diversified banks 9.76
Electric utilities 30.83
Gas utilities 12.47
Integrated oil & gas 0.61
Integrated telecommunication services 1.80
Investment banking & brokerage 3.52
Multi-line insurance 0.44
Multi-utilities & unregulated power 13.93
Oil & gas exploration & production 2.85
Other diversified financial services 4.01
Regional banks 15.04
Reinsurance 0.21
Thrifts & mortgage finance 2.72
Short-term investments 1.70
Total investments 100.00%
See notes to
financial statements.
11
FINANCIAL STATEMENTS
ASSETS AND
LIABILITIES
December 31, 2004
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 $1,167,305,643) $1,243,921,804
Cash 46,824
Cash segregated for futures contracts 212,500
Dividends receivable 3,028,783
Other assets 3,404
Total assets 1,247,213,315
Liabilities
Payable for investments purchased 5,119,389
Payable for futures variation margin 66,405
Payable to affiliates
Management fees 18,686
Other 26,024
Other payables and accrued expenses 24,249
Total liabilities 5,254,753
Auction Preferred Shares (APS), at value, unlimited
number of shares of beneficial interest authorized
with no par value, 15,200 shares issued, liquidation
preference of $25,000 per share 380,015,295
Net assets
Common shares capital paid-in 798,628,966
Accumulated net realized loss on investments
and financial futures contracts (13,297,510)
Net unrealized appreciation of investments
and financial futures contracts 76,627,106
Distributions in excess of net investment income (15,295)
Net assets applicable to common shares $861,943,267
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 $20.48
See notes to
financial statements.
12
FINANCIAL STATEMENTS
OPERATIONS
For the period ended
December 31, 2004 1
This Statement
of Operations
summarizes the
Fund's investment
income earned
and expenses
incurred in operat-
ing the Fund. It also
shows net gains
(losses) for the
period stated.
Investment income
Dividends $45,662,993
Interest 907,585
Total investment income 46,570,578
Expenses
Investment management fees 6,854,440
APS auction fees 518,463
Accounting and legal services fees 231,890
Custodian fees 158,982
Miscellaneous 157,359
Professional fees 57,445
Organizational costs 43,000
Transfer agent fees 41,634
Printing 35,841
Trustees' fees 16,696
Registration and filing fees 75
Total expenses 8,115,825
Less expense reductions (1,827,851)
Net expenses 6,287,974
Net investment income 40,282,604
Realized and unrealized gain (loss)
Net realized loss on
Investments (11,617,447)
Financial futures contracts (993,926)
Change in net unrealized appreciation of
Investments 76,616,161
Financial futures contracts 10,945
Net realized and unrealized gain 64,015,733
Distribution to APS (4,363,999)
Increase in net assets from operations $99,934,338
1 Commencement of operations period from 2-27-04 through 12-31-04.
See notes to
financial statements.
13
FINANCIAL STATEMENTS
CHANGES IN
NET ASSETS
This Statement of
Changes in Net
Assets shows how
the value of the
Fund's net assets
has changed since
inception of the
Fund. The dif-
ference reflects
earnings less
expenses, any
investment
gains and losses,
distributions,
if any, paid to
shareholders and
the net of Fund
share transactions.
Period
ended
12-31-04 1
Increase in net assets
From operations
Net investment income $40,282,604
Net realized loss (12,611,373)
Change in net unrealized appreciation 76,627,106
Distributions to APS (4,363,999)
Increase in net assets resulting
from operations 99,934,338
Distributions to common shareholders
From net investment income (36,620,037)
From Fund share transactions 798,628,966
Net assets
End of period 2 $861,943,267
1 Commencement of operations period from 2-27-04 through 12-31-04.
2 Includes distributions in excess of net investment income of $15,295.
See notes to
financial statements.
14
FINANCIAL HIGHLIGHTS
FINANCIAL
HIGHLIGHTS
COMMON SHARES
The Financial Highlights show how the Fund's net asset value for a share
has changed since the commencement of operations of the Fund.
Period ended 12-31-04 1
Per share operating performance
Net asset value, beginning of period $19.10 2
Net investment income 3 1.14
Net realized and unrealized gain on investments 1.54
Distributions to APS (0.29)
Total from investment operations 2.39
Less distributions to common shareholders
From net investment income (0.87)
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
Per share market value, end of period $17.99
Total return at market value 4,5 (%) (5.47) 6
Ratios and supplemental data
Net assets applicable to common shares, end of period (in millions) $862
Ratio of expenses to average net assets 7 (%) 0.95 8
Ratio of adjusted expenses to average net assets 9 (%) 1.23 8
Ratio of net investment income to average net assets 10 (%) 6.11
Portfolio turnover (%) 42
Senior securities
Total value of APS outstanding (in millions) $380
Involuntary liquidation preference per unit (in thousands) $25
Average market value per unit (in thousands) $25
Asset coverage per unit 11 $79,542
1 Commencement of operations period from 2-27-04 through 12-31-04.
2 Reflects the deduction of a $0.90 per share sales load.
3 Based on the average of the shares outstanding.
4 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.
5 Total return would have been lower had certain expenses not been reduced
during the period shown.
6 Not annualized.
7 Ratio calculated on the basis of expenses relative to the average net
assets of common shares. Without the exclusion of preferred shares, the
annualized ratio of expenses would have been 0.69%.
8 Annualized.
9 Ratio 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 period shown. Without the exclusion of preferred
shares, the adjusted annualized ratio of expenses would have been 0.89%.
10 Ratio 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 ratio of net investment income would have been
4.42%.
11 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
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 sizes of the funds.
Organization expense
and offering costs
Expenses incurred in connection with the organization of the Fund, which
amounted to $43,000, have been borne by the Fund. Offering costs of $854,726
related to common shares and offering costs of $396,310 incurred in
connection with the preferred shares were charged to the Fund's capital
paid-in.
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
16
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 opening or realizing the benefits
of closing out financial futures positions because of position limits or
limits on daily price fluctuation 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 December 31, 2004, the Fund had deposited $212,500 in a
segregated account to cover margin requirements on open financial futures
contracts.
The Fund had the following financial futures contracts open on December 31,
2004:
NUMBER OF APPRECIATION/
OPEN CONTRACTS CONTRACTS POSITION EXPIRATION (DEPRECIATION)
------------------------------------------------------------------------------
U.S. Treasury 10-year Note 125 Short March 05 $43,070
U.S. Treasury 10-year Note 125 Short March 05 (32,125)
------------------------------------------------------------------------------
$10,945
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 iden ti fies 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. For the year ended
December 31, 2004, the tax character of distributions paid was as follows:
ordinary income $40,984,036. As of December 31, 2004, the components of
distributable earnings on a tax basis included $2,958,880 of undistributed
ordinary income.
Such distributions and distributable earnings, 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
17
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. Accord ingly, the
expense reductions related to the reduction in the management fee amounted
to $1,827,851 for the period ended December 31, 2004. 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 $231,890. The Fund also paid the Adviser the amount of
$116 for certain publishing services, included in the printing fees.
Mr. James A. Shepherdson is a director and officer of the Adviser, as well
as affiliated Trustee of the Fund, and is compensated by the Adviser. 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 Compen
sation 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.
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
Shares Amount
Shares sold 42,077,487 $803,680,0022
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
1 Commencement of operations period from 2-27-04 through 12-31-04.
2 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 of 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 has been charged to
capital paid-in of common shares.
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). Dividend rates on APS ranged
from 1.15% to 2.70% during the period ended December 31, 2004. 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 December 31, 2004, aggregated $1,554,572,324 and $396,748,061,
respectively.
The cost of investments owned on December 31, 2004, including short-term
investments, for federal income tax purposes, was $1,183,551,089. Gross
unrealized appreciation and depreciation of investments aggregated
$83,308,596 and $22,937,881, respectively, resulting in net unrealized
appreciation of $60,370,715. 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.
Note E
Reclassification
of accounts
During the period ended December 31, 2004, the Fund reclassified amounts to
reflect an increase in accumulated net realized loss on investments of
$686,137, and an increase in distributions in excess of net investment
income of $686,137. This represents the amounts necessary to report these
balances on a tax basis, excluding certain temporary differences, as of
December 31, 2004. Additional adjustments may be needed in subsequent
reporting periods. These reclassifications, which have no impact on the net
asset value of the Fund, are primarily attributable to certain differences
in the computation of distributable income and capital gains under federal
tax rules versus accounting principles generally accepted in the United
States of America and book and tax differences in accounting for deferred
compensation. The calculation of net investment income per share in the
Fund's Financial Highlights excludes these adjustments.
19
AUDITORS'
REPORT
Report of Deloitte
& Touche LLP,
Independent
Registered Public
Accounting Firm
To Board of Trustees and the Shareholders of
John Hancock Tax-Advantaged Dividend Income Fund
We have audited the accompanying statement of assets and liabilities of
John Hancock Tax-Advantaged Dividend Income Fund (the "Fund"), including
the schedule of investments, as of December 31, 2004, and the related
statements of operations, the statement of changes in net assets and the
financial highlights for the period from the commencement of operations on
February 27, 2004 through December 31, 2004. These financial statements
and financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes consideration of internal control
over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2004, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
John Hancock Tax-Advantaged Dividend Income Fund as of December 31, 2004,
the results of its operations, the changes in its net assets and the
financial highlights for the period from the commencement of operations
February 27, 2004 through December 31, 2004, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 18, 2005
20
TAX
INFORMATION
Unaudited
For federal income tax purposes, the following information is furnished with
respect to the distributions of the Fund, if any, paid during its taxable
year ended December 31, 2004.
With respect to the ordinary dividends paid by the Fund for the fiscal year
ended December 31, 2004, 97.84% of the dividends qualifies for the corporate
dividends-received deduction.
The Fund hereby designates the maximum amount allowable of its net taxable
income as qualified dividend income as provided in the Jobs and Growth Tax
Relief Reconciliation Act of 2003. This amount will be reflected on Form
1099-DIV for the calendar year 2004.
Shareholders will be mailed a 2004 U.S. Treasury Department Form 1099-DIV in
January 2005. This will reflect the total of all distributions that are
taxable for the calendar year 2004.
21
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.
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 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.
22
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
payment 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.
23
TRUSTEES
& OFFICERS
This chart provides information about the Trustees and Officers who oversee
your John Hancock fund. Officers elected by the Trustees manage the
day-to-day operations of the Fund and execute policies formulated by the
Trustees.
Independent Trustees
Name, age Number of
Position(s) held with Fund Trustee John Hancock
Principal occupation(s) and other of Fund funds overseen
directorships during past 5 years since 1 by Trustee
Charles L. Ladner, 2 Born: 1938 2004 49
Independent Chairman (since 2004); Chairman and Trustee, Dunwoody
Village, Inc. (retirement services) (until 2003); Senior Vice President and
Chief Financial Officer, UGI Corporation (public utility holding company)
(retired 1998); Vice President and Director for AmeriGas, Inc. (retired
1998); Director of AmeriGas Partners, L.P. (until 1997) (gas distribution);
Director, EnergyNorth, Inc. (until 1995); Director, Parks and History
Association (since 2001).
James F. Carlin, Born: 1940 2004 49
Director and Treasurer, Alpha Analytical Inc. (analytical laboratory) (since
1985); Part Owner and Treasurer, Lawrence Carlin Insurance Agency, Inc.
(since 1995); Part Owner and Vice President, Mone Lawrence Carlin Insurance
Agency, Inc. (since 1996); Director and Treasurer, Rizzo Associates
(engineering) (until 2000); Chairman and CEO, Carlin Consolidated, Inc.
(management/investments) (since 1987); Director and Partner, Proctor Carlin
& Co., Inc. (until 1999); Trustee, Massachusetts Health and Education Tax
Exempt Trust (since 1993); Director of the following: Uno Restaurant Corp.
(until 2001), Arbella Mutual (insurance) (until 2000), HealthPlan Services,
Inc. (until 1999), Flagship Healthcare, Inc. (until 1999), Carlin Insurance
Agency, Inc. (until 1999); Chairman, Massachusetts Board of Higher Education
(until 1999).
William H. Cunningham, Born: 1944 2004 49
Former Chancellor, University of Texas System and former President of the
University of Texas, Austin, Texas; Chairman and CEO, IBT Technologies
(until 2001); Director of the following: The University of Texas Investment
Management Company (until 2000), Hire.com (until 2004), STC Broadcasting,
Inc. and Sunrise Television Corp. (electronic manufacturing) (until 2001),
Symtx, Inc. (electronic manufacturing) (since 2001), Adorno/Rogers Technology,
Inc. (until 2004), Pinnacle Foods Corporation (until 2003), rateGenius (Internet
service) (until 2003), Jefferson-Pilot Corporation (diversified life insurance
company) (since 1985), New Century Equity Holdings (formerly Billing Concepts)
(until 2001), eCertain (until 2001), ClassMap.com (until 2001), Agile Ventures
(until 2001), LBJ Foundation (until 2000), Golfsmith International, Inc.
(until 2000), Metamor Worldwide (until 2000), AskRed.com (until 2001),
Southwest Airlines (since 2000) and Introgen (since 2000); Advisory Director,
24
Independent Trustees (continued)
Name, age Number of
Position(s) held with Fund Trustee John Hancock
Principal occupation(s) and other of Fund funds overseen
directorships during past 5 years since 1 by Trustee
William H. Cunningham, Born: 1944 (continued) 2004 49
Q Investments (until 2003); Advisory Director, Chase Bank (formerly Texas
Commerce Bank -- Austin) (since 1988), LIN Television (since 2002), WilTel
Communications (until 2003) and Hayes Lemmerz International, Inc.
(diversified automotive parts supply company) (since 2003).
Ronald R. Dion, Born: 1946 2004 49
Chairman and Chief Executive Officer, R.M. Bradley & Co., Inc.; Director,
The New England Council and Massachusetts Roundtable; Trustee, North
Shore Medical Center; Director, Boston Stock Exchange; Director, BJ's
Wholesale Club, Inc. and a corporator of the Eastern Bank; Trustee,
Emmanuel College.
John A. Moore, 2 Born: 1939 2004 49
President and Chief Executive Officer, Institute for Evaluating Health
Risks, (nonprofit institution) (until 2001); Chief Scientist, Sciences
International (health research) (until 2003); Principal, Hollyhouse
(consulting) (since 2000); Director, CIIT (nonprofit research) (since 2002).
Patti McGill Peterson, 2 Born: 1943 2004 49
Executive Director, Council for International Exchange of Scholars and
Vice President, Institute of International Education (since 1998);
Senior Fellow, Cornell Institute of Public Affairs, Cornell University (until
1998); Former President of Wells College and St. Lawrence University;
Director, Niagara Mohawk Power Corporation (until 2003); Director, Ford
Foundation, International Fellowships Program (since 2002); Director,
Lois Roth Endowment (since 2002); Director, Council for International
Educational Exchange (since 2003).
Steven Pruchansky, Born: 1944 2004 49
Chairman and Chief Executive Officer, Greenscapes of Southwest
Florida, Inc. (since 2000); Director and President, Greenscapes of
Southwest Florida, Inc. (until 2000); Managing Director, JonJames, LLC
(real estate) (since 2001); Director, First Signature Bank & Trust Company
(until 1991); Director, Mast Realty Trust (until 1994); President, Maxwell
Building Corp. (until 1991).
Norman H. Smith, Born: 1933 2004 47
Lieutenant General, United States Marine Corps; Deputy Chief of Staff for
Manpower and Reserve Affairs, Headquarters Marine Corps; Commanding
General III Marine Expeditionary Force/3rd Marine Division (retired 1991).
25
Non-Independent Trustees 3
Name, age Number of
Position(s) held with Fund Trustee John Hancock
Principal occupation(s) and other of Fund funds overseen
directorships during past 5 years since 1 by Trustee
James A. Shepherdson, Born: 1952 2004 49
President and Chief Executive Officer
Executive Vice President, Manulife Financial Corporation (since 2004);
Director, President and Chief Executive Officer, John Hancock Advisers, LLC
(the "Adviser") and The Berkeley Financial Group, LLC ("The Berkeley Group")
(holding company); Director, President and Chief Executive Officer, John
Hancock Funds, LLC ("John Hancock Funds"); President, Director and Chief
Executive Officer, Sovereign Asset Management Corporation ("SAMCorp");
Director, Chairman and President, NM Capital Management, Inc.; President,
John Hancock Retirement Services, John Hancock Life Insurance Company
(until 2004); Chairman, Essex Corporation (until 2004); Co-Chief Executive
Officer, MetLife Investors Group (until 2003); Senior Vice President,
AXA/Equitable Insurance Company (until 2000).
Principal officers who are not Trustees
Name, age
Position(s) held with Fund Officer
Principal occupation(s) and of Fund
directorships during past 5 years since
William H. King, Born: 1952 2004
Vice President and Treasurer
Vice President and Assistant Treasurer, the Adviser; Vice President and Treasurer of each
of the John Hancock funds; Assistant Treasurer of each of the John Hancock funds (until 2001).
Susan S. Newton, Born: 1950 2004
Senior Vice President, Secretary and Chief Legal Officer
Senior Vice President, Secretary and Chief Legal Officer, SAMCorp., the Adviser and each
of the John Hancock funds, John Hancock Funds and The Berkeley Group; Director, Senior
Vice President and Secretary, NM Capital Management, Inc.
The business address for all Trustees and Officers is 101 Huntington Avenue,
Boston, Massachusetts 02199.
The Statement of Additional Information of the Fund includes additional
information about members of the Board of Trustees of the Fund and is
available, without charge, upon request, by calling 1-800-225-5291.
1 Each Trustee serves until resignation, retirement age or until his or her
successor is elected.
2 Member of Audit Committee.
3 Non-independent Trustees hold positions with the Fund's investment
adviser, underwriter and certain other affiliates.
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
Investment adviser
John Hancock Advisers, LLC
101 Huntington Avenue
Boston, MA 02199-7603
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
Independent registered
public accounting firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
Stock symbol
Listed New York Stock
Exchange:
HTD
For shareholder assistance
refer to page 23
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
PRESORTED
STANDARD
U. S. POSTAGE
PAID
MIS
P130A 12/04
2/05
ITEM 2. CODE OF ETHICS.
As of the end of the period, December 31, 2004, 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.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Charles L. Ladner is the audit committee financial expert and is
"independent", pursuant to general instructions on Form N-CSR Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees billed for professional services rendered by the
principal accountant(s) for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant(s) in
connection with statutory and regulatory filings or engagements amounted to
$32,850 for the fiscal year ended December 31, 2004, the Fund's first year
in operation (commenced operations on February 26, 2005). These fees were
billed to the registrant and were approved by the registrant's audit
committee.
(b) Audit-Related Services
There were no audit-related fees during the fiscal year ended December 31,
2004 billed to the registrant or to the registrant's investment adviser
(not including any sub-adviser whose role is primarily portfolio management
and is subcontracted with or overseen by another investment adviser), and
any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant ("control
affiliates").
(c) Tax Fees
The aggregate fees billed for professional services rendered by the
principal accountant(s) for the tax compliance, tax advice and tax planning
("tax fees") amounted to $2,250 for the fiscal year ended December 31,
2004. The nature of the services comprising the tax fees was the review of
the registrant's income tax returns and tax distribution requirements.
These fees were billed to the registrant and were approved by the
registrant's audit committee. There were no tax fees billed to the control
affiliates.
(d) All Other Fees
The all other fees billed to the registrant for products and services
provided by the principal accountant were $4,000 for the fiscal year ended
December 31, 2004. There were no other fees during the fiscal year ended
December 31, 2004 billed to control affiliates for products and services
provided by the principal accountant. The nature of the services comprising
the all other fees was related to the principal accountant's report on the
registrant's Eligible Asset Coverage. These fees were approved by the
registrant's audit committee.
(e)(1) See attachment "Approval of Audit, Audit-related, Tax and Other
Services", with the audit committee pre-approval policies and procedures.
(e)(2) There were no fees that were approved by the audit committee
pursuant to the de minimis exception for the fiscal year ended December 31,
2004 on behalf of the registrant or on behalf of the control affiliates
that relate directly to the operations and financial reporting of the
registrant.
(f) According to the registrant's principal accountant, for the fiscal year
ended December 31, 2004, the percentage of hours spent on the audit of the
registrant's financial statements for the most recent fiscal year that were
attributed to work performed by persons who were not full-time, permanent
employees of principal accountant was less than 50%.
(g) The aggregate non-audit fees billed by the registrant's accountant(s)
for services rendered to the registrant and rendered to the registrant's
control affiliates for the fiscal year of the registrant were $71,250 for
the fiscal year ended December 31, 2004.
(h) The audit committee of the registrant has considered the non-audit
services provided by the registrant's principal accountant(s) to the
control affiliates and has determined that the services that were not
pre-approved are compatible with maintaining the principal accountant(s)'
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee
comprised of independent trustees. The members of the audit committee are
as follows:
Charles L. Ladner
Dr. John A. Moore
Patti McGill Peterson
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
See attached Exhibit "Proxy Voting Policies and Procedures".
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.
(a) There were no material changes to previously disclosed John Hancock
Funds - Administration Committee Charter.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal executive officer and principal
accounting 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 accounting 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)(1) Separate certifications for the registrant's principal executive
officer and principal accounting 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) Proxy Voting Policies and Procedures are attached.
(c)(2) Approval of Audit, Audit-related, Tax and Other Services is
attached.
(c)(3) 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:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: February 17, 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:
------------------------------
James A. Shepherdson
President and Chief Executive Officer
Date: February 17, 2005
By:
------------------------------
William H. King
Vice President and Treasurer
Date: February 17, 2005